Freeport-McMoRan
Copper & Gold Inc.
An Overview of Financial Performance
Buy Recommendation, November 2007
Analysis by Corrie Livesay and
Stephanie Snyder
Article Identified on Motley Fool
Wednesday's 5 Large-Cap Leaders
By Tim Beyers November 1, 2007
Each day, The Wall Street Journal publishes a list of large-cap
winners. Here are Wednesday's best:
COMPANY
Closing
Price
BlackRock (NYSE: BLK)
GlobalSantaFe (NYSE: GSF)
IAC/InterActive (Nasdaq: IACI)
Paccar (Nasdaq: PCAR)
Freeport-McMoRan (NYSE: FCX)
$206.95
$81.03
$29.46
$55.56
$117.68
CAPS Rating % Change
(out of 5)
***
*****
***
****
*****
52-Week
Range
4.69% $139.20-$207.32
4.46%
$49.40-$81.27
3.77%
$25.08-$40.99
3.23%
$38.69-$65.75
3.22% $48.85-$120.20
Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.
Company Overview
( www.fcx.com )
Freeport-McMoRan Copper & Gold, Inc., through its subsidiaries,
engages in the exploration, mining, and production of copper, gold,
and silver. It holds interests primarily in the Grasberg open pit and
the Deep Ore Zone mines in Indonesia. The company also owns
interests in the Grasberg block cave, Kucing Liar, Deep Mill Level
Zone, Ertsberg Stockwork Zone, Mill Level Zone, Big Gossan, Dom
open pit, and Dom block cave. In addition, it smelts and refines
copper concentrates, and markets the refined copper products. As
of December 31, 2006, it had 2,813,089 metric tons of proven and
probable recoverable ore reserves. Freeport-McMoRan Copper &
Gold, Inc. sells its concentrates containing copper, gold and silver
primarily to companies in Asia and Europe, and to international
trading companies. The company was founded in 1987 and is based
in Phoenix, Arizona.
Source: Yahoo.Finance.com
Worldwide Operations
FCX has a dynamic portfolio of operating, expansion and growth projects in the
copper industry and is the world’s largest producer of molybdenum. Major
projects include:






The recently completed $900 million expansion of the Cerro Verde mine in
Peru;
The development of the new $580 million Safford mine in Arizona, which is
expected to begin production in early 2008;
A project to extend the life of El Abra through sulfide leaching is expected
to begin in 2010;
The exciting Tenke Fungurume copper/cobalt project in the Democratic
Republic of Congo, which is expected to begin production in 2009;
The expansion of the DOZ underground mine in Indonesia to 80,000 metric
tons per day; and
Other developments of large-scale, high-grade underground ore bodies in
the Grasberg minerals district in Indonesia.
Key Statistics
FCX
Price
52 Week High
52 Week Low
Beta
Current P/E
Forward P/E
5 Year Est. Growth Rate
Earnings/Share
Market Cap
Source: Moneycentral.com
As of 11/06/07
$ 112.80
$ 120.20
$ 48.85
1.18
12.50
11.00
37.5%
9.17
43.06 B
Financials
Source: Finance.Google.com
News
Freeport Sells Wire and Cable Business
Thursday November 1, 6:17 pm ET Freeport Sells Wire and
Cable Business for $735 Million



PHOENIX (AP) -- Freeport-McMoRan Copper & Gold Inc. said it has
sold its international wire and cable business to General Cable
Corporation for $735 million. Phoenix-based Freeport-McMoRan, one
of the world's largest copper miners, said Wednesday it will use net
proceeds of about $620 million to help pay off debt following its
acquisition of Phelps Dodge.
The wire and cable business, known as Phelps Dodge International
Corporation, operates factories and distribution centers in 19
countries throughout Latin America, Asia and Africa.
Freeport-McMoRan said it expects to record charges of about $20
million, including $12 million to net income, for transaction and
related costs.
Some Positive News
If above-ground copper stockpiles stay
low, speculators will continue to add a risk
premium to copper’s price.
 Freeport-McMoRan has only one earnings
miss in the past 11 quarters.
 FCX is very close to opening the Safford
copper mine in SE Arizona with expected
copper volumes here in the fourth quarter.

Possible Negative News
FCX’s stock price is ultimately affected by
the prices of gold, copper, and
molybdenum.
 Investors often turn to gold as a hedge
against inflation and pull back when the
dollar gains strength and oil prices retreat.
 Copper is used primarily in the building
industry (48%). If the economy slows this
could decrease the demand for copper.

Gold and Copper Correlation
Since the beginning of the commodities bull market in 2001 copper and gold
have had a correlation of .921 which yields an r-square of 85%.
10 Year Stock Performance
Source: Moneycentral.com
Freeport McMoRan’s Year-to-Date
Performance Compared to Competitors
Source: Moneycentral.com
Comparison of
Price/Earning Ratios
Source: Smartmoney.com
Comparison of
Financial Strength & Volatility
Source: Smartmoney.com
Comparison of Key Statistics
Source: Smartmoney.com (Millions)
Comparison of
Growth Estimates
Source: Smartmoney.com
Comparison of
Profitability & Efficiency
Source: Smartmoney.com
What the Analysts Say
Source: Moneycentral.com & Finance.Yahoo.com
Insider Trading
Source: Smartmoney.com, Moneycentral.com, & Yahoo.Finance.com
What Others Think
What the Community Thinks
Total Players
1713 Outperforms
34 Underperforms
All-Stars
823 Outperforms
8 Underperforms
Wall Street
13 Outperforms
1 Underperforms
http://www.thestreet.com/video/index.html?clipId=1373_10387635&channe...
Interview posted on Wednesday. October 31, 2007
2-Stage Growth Model: FCX
Source: Smartmoney.com
Intrinsic Growth Rate
Intrinsic Growth Rate= ROE (1 – payout ratio)
 = 25.98%(1 – 32.2%)
 = 17.61%


Analysts recommended a 43.8% 5-year growth
rate so we took the average to find a growth
rate of 30.71%.
3-Stage Growth Model
3-Stage Growth Model with
Intrinsic Growth Rate Only
Relative Valuation
P/E
EPS
2007
2008
Current P/E
12.5
Low Estimate
9.83
7.59
Forward P/E
11.0
Avg. Estimate
10.27
10.76
Industry P/E
12.3
High Estimate
11.03
13.41
2007 EPS
($9.83)
2007 EPS
($10.27)
2007 EPS
($11.03)
2008 EPS
($7.59)
2008 EPS
($10.76)
2008 EPS
($13.41)
P/E
11.0
$108.13
$112.97
$121.33
$83.49
$118.36
$147.51
P/E
12.3
$120.91
$126.32
$135.66
$93.35
$132.35
$164.94
P/E
12.5
$122.88
$128.38
$137.87
$94.88
$134.50
$167.63
Scenario
Est. Return 2007
Scenario
Est. Return 2008
Worst
-1.70%
Worst
-24.10%
Expected
14.84%
Expected
20.32%
High
25.34%
High
53.39%
Recommendation
FCX is witnessing strong growth backed by
improved productivity and a strong cash
flow position.
 At the current price of $110.00, we
believe FCX to be undervalued.
 We believe that $125.00 is very obtainable
with the potential of reaching $165.00.
 We suggest purchasing FCX around
$110.00.

Questions?