Freeport-McMoRan Copper

1
Freeport-McMoRan Copper Gold Inc.

• An Overview of Financial Performance
• Buy Recommendation, November 2007
• Analysis by Corrie Livesay and
• Stephanie Snyder

2
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 CAPS Rating Change
  52-Week
• 
  Price (out of 5)
  Range
• BlackRock (NYSE BLK) 206.95
  4.69 139.20-207.32
• GlobalSantaFe (NYSE GSF) 81.03
  4.46 49.40-81.27
• IAC/InterActive (Nasdaq IACI) 29.46
  3.77 25.08-40.99
• Paccar (Nasdaq PCAR) 55.56
  3.23 38.69-65.75
• Freeport-McMoRan (NYSE FCX) 117.68
  3.22 48.85-120.20
• Sources The Wall Street Journal, Yahoo! Finance,
  Motley Fool CAPS.

3
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

4
Worldwide Operations

• FCX has a dynamic portfolio of operating,
  expansion and growth projects in the copper
  industry and is the worlds 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.

5
(No Transcript)
6
Key Statistics
FCX As of 11/06/07
Price 112.80
52 Week High 120.20
52 Week Low 48.85
Beta 1.18
Current P/E 12.50
Forward P/E 11.00
5 Year Est. Growth Rate 37.5
Earnings/Share 9.17
Market Cap 43.06 B
Source Moneycentral.com
7
Financials
Source Finance.Google.com
8
News

• Freeport Sells Wire and Cable BusinessThursday
  November 1, 617 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.

9
Some Positive News

• If above-ground copper stockpiles stay low,
  speculators will continue to add a risk premium
  to coppers 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.

10
Possible Negative News

• FCXs 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.

11
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. SOURCE Zeal Speculation and Investment
March 31, 2006
12
10 Year Stock Performance
Source Moneycentral.com
13
Freeport McMoRans Year-to-Date Performance
Compared to Competitors
Source Moneycentral.com
14
Comparison of Price/Earning Ratios
Source Smartmoney.com
15
Comparison of Financial Strength Volatility
Source Smartmoney.com
16
Comparison of Key Statistics
Source Smartmoney.com (Millions)
17
Comparison of Growth Estimates
Source Smartmoney.com
18
Comparison of Profitability Efficiency
Source Smartmoney.com
19
What the Analysts Say

Source Moneycentral.com Finance.Yahoo.com
20
Insider Trading
Source Smartmoney.com, Moneycentral.com,
Yahoo.Finance.com
21
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_10387635channe...
Interview posted on Wednesday. October 31, 2007
22
2-Stage Growth Model FCX
Source Smartmoney.com
23
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.

24
3-Stage Growth Model
25
3-Stage Growth Model with Intrinsic Growth Rate
Only
26
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
Worst -1.70
Expected 14.84
High 25.34
Scenario Est. Return 2008
Worst -24.10
Expected 20.32
High 53.39
27
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.

28
Questions?