Freeport-McMoRan’s 2018 performance
Previously, we looked at the factors that impacted Freeport-McMoRan’s (FCX) 2017 performance. Now, let’s see what factors could impact Freeport in 2018.
Freeport and the Indonesian government are expected to reach a final solution to their long-standing impasse in 2018. While Freeport has agreed to most of the Indonesian government’s demands, the two sides are still negotiating the pricing and timing of the Grasberg divestment (RIO). Along with the agreement with the Indonesian government (EIDO), investors should also watch for any labor-related issue at the Grasberg mine. Over the last two years, the mine has faced recurring labor issues.
Along with the Indonesia issues, the markets could be watching to see how Freeport allocates capital in 2018. While debt reduction could still be the company’s priority, it might look at some growth projects after divesting its stake in the Indonesian operations.
Freeport’s earnings, like other copper miners, including Southern Copper (SCCO) and Glencore (GLEN-L), are sensitive to copper prices. Copper prices surged to a four-year high in 2017, which supported copper miners’ price actions last year. Copper prices could be a key driver of Freeport’s 2018 price action, especially after it reaches a final deal with the Indonesian government. Gold prices could be another key driver for Freeport in 2018. It expects its gold shipments to rise to 2.4 million ounces in 2018, from 1.6 million ounces in 2017.
Copper prices could be the key macro driver for Freeport in 2018. In the next part, we’ll look at copper’s 2018 outlook.