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4 Factors that Could Drive Freeport-McMoRan’s 2016 Performance


Jan. 26 2016, Updated 7:11 a.m. ET

Freeport-McMoRan’s 2016 performance

In the previous part of this series, we saw that China’s December manufacturing PMI (purchasing managers’ index) missed analysts’ expectations. In a sense, the new year started on the same negative note that drove the global equity markets in 2015—China’s slowdown.

The copper industry bore the brunt of China’s slowdown in 2015. Freeport-McMoRan (FCX), Teck Resources (TCK), Glencore (GLNCY), and Turquoise Hill Resources (TRQ) lost substantial value last year.

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In this part of the series, we’ll look at four key factors that could drive Freeport’s 2016 performance. Investors looking at a diversified exposure to the materials sector can also consider the iShares US Basic Materials ETF (IYM). Almost 12% of IYM’s holdings are invested into metals and mining companies.

Key drivers

The four key factors that could drive Freeport-McMoRan’s 2016 performance are shown in the graph above. These are:

  • Movement in copper prices: Copper prices could depend on several variables that we’ll explore in the coming parts of this series.
  • Agreement with the Indonesian government: Freeport needs to sign a fresh contract with the Indonesian government regarding its Grasberg mine.
  • How Freeport addresses its surging leverage ratios: Freeport’s debt levels have reached alarming levels.
  • The strategic path for energy assets: It’s been more than six months since Freeport first announced the IPO of its energy business. Later, the company announced other strategic paths that it is considering for the energy assets. However, we have not seen any concrete action on this front.

In the next part, we’ll explore the factors that could drive copper prices in 2016.


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