Mid-Year Review: What Lies ahead for Freeport in 2016?




Freeport-McMoRan (FCX) closed at $10.67 on July 7, falling more than 2% from its previous day’s close. 2016 has been a remarkable year for Freeport-McMoRan. At the beginning of the year, few observers expected that Freeport would trade above $10. But Freeport has been defying pessimism in the commodity space and moving to higher price levels.

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Price action so far

Earlier this year, while discussing Freeport’s 2016 outlook, we noted that this year could be a challenge for the company. However, Freeport has actually been among the better-performing mining companies this year. Looking at other copper miners, we see that Southern Copper (SCCO) has lost more than 3% so far while Turquoise Hill Resources (TRQ)(RIO) has gained ~35% so far in 2016. Freeport has gained 58% year-to-date.

Freeport bears lost their shirts as the stock kept skyrocketing. Bears could only take consolation in January and May, when Freeport saw negative price action. Even the Brexit decision could only act as a small speed bump for the company, whose stock recouped most of the losses in the next few trading sessions.

Series overview

This series focuses on Freeport’s outlook for the remaining half of 2016. We’ll first see what factors drove Freeport’s price action so far in 2016. Then, we’ll explore what lies ahead for the company. We’ll also look at the outlook for copper prices. It’s important to note that, while Freeport produces other commodities, including molybdenum, gold, and energy, its earnings are most sensitive to copper prices.

Let’s begin by looking at Freeport’s performance so far in 2016.


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