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Will Analysts Warm to Freeport after Its Grasberg Resolution?

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Analysts’ ratings

Freeport-McMoRan (FCX) has received a “strong buy” rating from one analyst, while seven have “buy” or equivalent ratings on its stock. Three analysts have “sell” ratings on Freeport, while 11 have “hold” ratings.

Freeport has the highest percentage of “hold” ratings among the companies we’re covering in this series.

The stock has received a mean consensus price target of $19.33, which represents a 13.9% upside over its July 5 closing price. Glencore (GLNCY) and First Quantum Minerals (FM) are trading 36.0% and 30.0% below their consensus price targets, respectively.

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A rerating in the cards?

There was no major analyst action for Freeport last month. Wall Street analysts seem to be sitting on the sidelines as Freeport negotiates its long-term mining rights in Indonesia. Recently, some statements from Indonesia have indicated that the two sides are close to an agreement and that we could soon see a resolution to the long-pending issue.

However, the markets would like to see the fine print of the agreement before rerating Freeport. The Grasberg mine in Indonesia is a key asset for Freeport. Uncertainty over Freeport’s future in Indonesia has also taken a toll on Freeport’s valuation and price action.

Freeport has underperformed the broader metals and mining space in the first half of 2018 due to concerns about Grasberg. However, over the last few trading sessions, we’ve seen some strength in Freeport despite falling copper prices on optimism over the resolution of its Grasberg issues.

In the next article, we’ll see how analysts are rating Southern Copper (SCCO).

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