Is Freeport-McMoRan’s Survival Crisis Over?



Survival crisis

Freeport-McMoRan (FCX) had a challenging time in 2016. The stock started the year on a weak note and fell to multiyear lows in the first trading week of the year. It tracked the weakness in the metals and mining sector (BHP) (SCCO). Nothing seemed to be going right for Freeport in January 2016.

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Depressed commodity prices

Last year, copper prices fell to levels that hadn’t been since the global financial crisis of 2009. Notably, copper has been on a downtrend after hitting $10,000 per metric ton at the beginning of 2011. While the entire mining sector was battling a slowdown in commodity prices, the situation was even precarious for leveraged names like Glencore (GLNCY), Teck Resources (TCK), and Freeport. Glencore made a multiyear closing low of $2.07 on September 28, 2015. Doubts surfaced about the company’s survival in what looked like a prolonged slump in commodity prices. Freeport also fell to multiyear low price levels in January 2016. The company had total debt of ~$20 billion—almost three times its market capitalization.

Series overview

Amid the survival crisis, both Freeport and Glencore announced a slew of measures to stay afloat amid the depressed commodity pricing environment. In this series, we’ll analyze how the operating environment changed for copper miners since the 2016 lows. We’ll also analyze Freeport’s different growth drivers.

Let’s start by analyzing the macro environment in the next part.


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