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Why September Popped for Freeport-McMoRan’s Investors

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Nov. 20 2020, Updated 12:47 p.m. ET

Freeport’s investors

Freeport-McMoRan (FCX) saw extreme volatility in September 2016. Three key events impacted the stock’s September price action, which we’ll discuss these events in detail.

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Energy asset sale

On September 12, Freeport-McMoRan (FCX) announced the sale of its Deepwater Gulf of Mexico (or GOM) energy assets to Anadarko Petroleum (APC) for a cash consideration of $2 billion. FCX has been aggressively pursuing a debt reduction program this year in a bid to strengthen its balance sheet.

Among the other mining companies, Glencore (GLNCY), Teck Resources (TCK), and BHP Billiton (BHP) are also working to strengthen their respective balance sheets.

However, the energy asset sales didn’t found favor with investors, and Freeport-McMoRan saw sharp negative price action after the split. Please read How a Key Asset Sale by Freeport-McMoRan Is Backfiring to learn more about the GOM asset sale.

Plus, copper touched its quarterly closing low of $4,595 per metric ton on September 12. FCX’s quarterly closing low was $9.78 on September 15 amid lower copper prices.

Help from the Fed and OPEC

However, market sentiment started to improve after September 15. The Federal Reserve’s decision to hold its policy rates helped spur a rally in risk assets. The improved sentiment possibly triggered a short covering rally, further aiding FCX’s upward price action.

On September 28, OPEC was able to reach a deal to cut oil production. The agreement boosted market sentiments and all commodities (DBC), including copper, rallied. Positive macros helped Freeport-McMoRan (FCX) close September on a strong note. The stock gained 5.5% in September while copper prices gained almost 5% during the month.

So far in this series, we’ve looked at Freeport-McMoRan’s 3Q16 price action. In the coming parts of the series, we’ll look at the factors that could drive FCX’s 4Q16 performance.

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