Both Freeport-McMoRan’s (FCX) and Glencore (GLNCY) suffered from the same issues last year—falling commodity prices and higher leverage ratios (TCK). Not surprisingly, in 2015, both of these companies resorted to similar measures, such as asset sales and scrapping dividends to address investor concerns. However, while Glencore has restored its dividend, Freeport hasn’t yet.
With Freeport’s balance sheet in a much better position—in addition to copper’s recent upward price action—markets will likely expect Freeport to give a timeline for its dividend reinstatement.
Indonesia had previously banned the export of copper concentrates, and Freeport owns the Grasberg copper and gold mine in Indonesia. Notably, Rio Tinto (RIO) (TRQ) is Freeport’s partner in this mine, and so the ban would impact the company’s operations in the country.
Freeport must also sign an amended work contract with the Indonesian government. The company needs assurance from the government so that it can proceed with an investment to convert its Grasberg mine into underground operations. During Freeport’s 4Q16 earnings call, markets would await updates from Freeport on its ongoing discussions with the Indonesian government.
There are several issues that Freeport’s Indonesia operations face. You can read Market Realist’s series What Issues Does Freeport Face in Indonesia? to find out more. You might also explore Freeport-McMoRan’s 2017 Outlook: Everything You Need to Know to find out more about the stock’s key drivers.
Meanwhile, don’t forget to check out Market Realist’s Copper page for Freeport’s 4Q16 post-earnings analysis.