Top 3 Sources of Value for Freeport-McMoran

One of the lesser known facts about Freeport McMoran Copper’s (NYSE:FCX) is that it is one of the biggest taxpayers to the Indonesian government. The company, which operates the Grasberg mine located at Papua, Indonesia - the world’s largest copper and gold mine in terms of reserves – paid $678 million in taxes to the government for its first-quarter 2011 operations alone! ^[1] In fact, the company contributed to about 2% of the country’s GDP last year. Freeport competes with other miners such as Southern Copper (NYSE:PCU), Codelco and Newmont Mining (NYSE:NEM).

Our $55.58 base price estimate for Freeport’s stock is roughly 10% above the market price.

Freeport continues to add value to all its stakeholders by investing in copper and gold mining opportunities across the globe. Below, we take a look at 3 key sources of income which contribute to Freeport’s stock value.

1) Copper business- represents 74% of the company’s stock value

Freeport’s copper business consists of its operations at mines in Indonesia, North America, South America and Africa.

Indonesian operations are concentrated at the Grasberg mine. The huge reserves at the mine make it a major strength for Freeport, as copper reserves decline across the globe.

It’s operations in South America constitute of four operating mines – Cerro Verde, Candelaria, Ojos del Salado and El Abra.

Freeport’s operations in North America constitute of six operating mines – Morenci, Sieritta, Bagdad, Safford, Miami, and Tyrone.

Freeport’s African copper operations are at the Tenke mine, and started as recently as March 2009.

2) Gold business – 19%

Freeport’s gold  operations are almost wholly concentrated in Indonesia. For 2009, FCX sold 1,863 thousand ounces of gold, of which 1,765 thousand ounces were sold from the Indonesian mines.

See the top forecasts for Freeport’s gold business

3) Molybdenum business – 5%

Freeport’s molybdenum operations are concentrated in American mines. Approximately half of FCX’s Molybdenum production comes from the Henderson Molybdenum mine. Molybdenum is used in many industries such as in steel alloy production.

See the top forecasts for Freeport’s molybdenum business

See our full analysis for Freeport McMoran

1. Freeport pays $678m to government, Jakarta Post, May 25 2011 [↩]