Freeport-McMoRan (FCX)

[tootalljones]

Great thoughts by this poster to a terrific article, and note, his analysis is based on copper at today's price range: $3.10 u.s.

Random Itinerant, Contributor
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Another way to do the valuation, or more specifically, find the valuation for FCX in 2018-2019:
Mining companies like FCX typically (historically) trade at EV of 6-8x ebitda. FCX forecasts annual ebitda of around $7B in 2018-2019 (slide 25 of the ER presentation). With ebitda multiple of 6x this gives EV of $42B. Subtracting the current net debt of $8.7B (slide 28) implies market cap of ~$33B. With 1.45B shares in the float, this corresponds to sp of ~$23.
However, debt paydown this year is expected to reduce the net debt significantly to ~$5B by the end of the year (slide 28). Then the implied market cap is $37B, corresponding to sp of ~$26.
If China and the global economy continue to do well, and the market has confidence in the long-term sustainability of current copper prices, an expansion of the ebitda multiple to at least 7x is plausible. Then the EV is $49B. Subtracting the expected debt of ~$5B by the end of this year gives market cap of $44B and sp of ~$30.
Running the same calculation with ebitda multiple 8x (the top of the historical range) gives market cap of $51B and sp of ~$35.
So I reckon current FCX investors (myself included) can expect at least a 50% sp increase over the next year or two, along with a fat dividend that continues for many years to come...
There could be further upside if copper price increases substantially from where it trades now, but personally I'm not counting on that for the next few years at least. The impression I get from what mining companies generally are saying these days is that they want to maintain a balanced market somewhere near the current prices. Large price increases incentivize inefficient operators to enter the market, leading to the boom-busts of the past... Mining companies seem to have wised up that this isn't good for their long-term interests.

https://seekingalpha.com/article/4140908-market-ignore-freeport-mcmorans-free-cash-flow-forever