How Freeport-McMoRan’s Growth Drivers Could Change in 2017

As we noted previously in this series, 2016 was a remarkable year for Freeport-McMoRan (FCX) and other miners like Teck Resources (TCK) and Glencore (GLNCY). In this article, we’ll look at Freeport’s 2017 growth drivers.

In our view, the three key factors that could drive Freeport-McMoRan’s (FCX) 2017 performance are shown in the chart above and discussed below.

Although copper prices are comfortably off their six-year lows that they hit in January 2016, there are still lingering concerns over the sustainability of the rally. We should remember that Freeport’s earnings are sensitive to copper prices.

Movement in copper prices influences the price action of copper miners like Southern Copper (SCCO) and Turquoise Hill Resources (TRQ). Copper prices could depend on several variables that we’ll explore in the coming parts of this series.

Freeport-McMoRan needs to sign a fresh contract with the Indonesian government regarding its Grasberg mine. The current permit allows Freeport to export concentrate only until January 11, 2017.

Freeport-McMoRan’s (FCX) gold volumes in fiscal 2017 are expected to rise to ~2.8 million ounces, compared to its expected volume of ~1.3 million ounces in fiscal 2016. Gold prices could be another key driver for Freeport in 2017.

One notable exception in Freeport’s 2017 growth drivers as compared to 2016 is the absence of asset sales. The company already raised cash in 2016 by selling assets and raising fresh equity. As Freeport’s leverage ratios look much more comfortable now, the company might not look at further asset sales in 2017.

In the next article, we’ll analyze the various factors that could impact copper prices in 2017.