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  • Writer's pictureIshfaaq Peerally

FreePort-McMoran 4Q20 Earnings Analysis

FreePort-McMoran Stock Analysis

Copper Bull Market

  • Copper inventories are about 200 000 metric tons, about the same when Copper prices peaked to $4.58/lbs in January 2011

  • Copper prices still about 20% down from peak

  • Demand for Copper still rising with EV and Renewables in the West and China; and electrification and construction in the developing world

  • When economy gets out of recession, demand expected to rise

  • Supply still low → Possible supply gap

Financial Analysis

  • 866 mm lbs of Copper sold in 4Q20 and 3202 mm lbs for FY20 at $2.95 with cost of $1.88 (cash cost of $1.48)

  • Revenues of $4.5 billion vs $3.8 billion for 3Q20. FY20 revenues of $14.2 billion vs $14.4 billion in FY19

  • Net income of $0.7 billion vs $0.3 billion for 3Q20. FY20 net income of $0.6 billion vs $0.2 billion net loss in FY19

  • $9.7 billion in debt with no payment due in 2021 and 71% of it due after 2025

  • $3.7 billion in cash

  • Shift towards more gold production in comparison to Copper

  • Shift from North American mines to South American and Indonesian mines which are more profitable

    • FY20 Cash cost per lbs in Indonesia $0.43 vs $1.81 in North America

    • 25% of sales from Indonesia in FY20, expected to be 34% in FY21

    • Currency and political risks

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