Freeport-McMoRan Copper & Gold Inc (NYSE:FCX) is a miner, smelter, and refiner of copper, gold, and molybdenum. Copper production represents over 80% of 2007 revenues, with FCX owning mining and smelting operations in North and South America, Indonesia, and Europe. The company's total proven reserves in its three primary outputs range from 17 to 28 times 2007 output, with over a billion dollars already invested in developing what are estimated to be the largest undeveloped copper and molybdenum reserves in the world.Prices for all three key outputs in the commodities markets have been at historically high levels since approximately 2004, leading to increased revenues for the company. Further increases in spot prices would lead to more positive financial effects, while any kind of downward corrections would lead to fairly elastic decreases in operating income. The no value-added products the company sells leaves it intimately vulnerable to commodity price fluctuations.
In March 2007, FCX acquired former American rival Phelps-Dodge, greatly expanding its copper output and reserves and entering the molybdenum market. Combined with existing mining holdings in Indonesia, Freeport-McMoRan is one of the world's largest mining companies.
Freeport-McMoRan itself is a holding company, operating through three main subsidiaries: Phelps-Dodge, PT-Freeport Indonesia, and Atlantic Copper. Its operating segments are involved with mining, smelting, and refining copper, gold, and molybdenum. Each subsidiary is either fully or majority-owned by FCX.
Over 3/4s of FCX's revenues come from the sale of refined copper, of which over 75% is bought by third-parties for use in construction or the manufacture of electrical appliances and industrial machinery. Worldwide copper consumption has been growing at an annualized rate of approximately 3.1% since 1990, representing a strong increase in demand for FCX's core product over the past two decades. As of the end of fiscal year 2007, Freeport-McMoRan's total proven reserves of copper amounted to over 24 times 2007’s output.
Molybdenum, with useful applications in steel alloy production, is almost wholly mined by FCX's American operations. As of the end of fiscal year 2007, Freeport-McMoRan's total proven reserves of molybdenum came to over 28 times 2007 output.
Gold, which is used in jewelry and certain sensitive electronics, is mined primarily in Indonesia by PT-Freeport. As of the end of fiscal year 2007, Freeport-McMoRan's total proven reserves of gold added up to over 17 times 2007's output.
|Operating Income (Loss)||2,177||2,869||6,555|
|Net Income (Loss)||995||1,457||2,977|
|Diluted Earnings (Loss) Per Common Share ($)||4.67||6.63||7.50|
|Total Shareholders' Equity||1,842||2,445||18,234|
|Operating Margin (%)||52.1||49.5||38.7|
|Net Profit Margin (%)||22.4||24.1||16.3|
The March 2007 acquisition of rival North American miner Phelps-Dodge was the key factor driving the noticeable jumps in FCX's revenue, shareholders' equity, and long-term debt between fiscal years 2006 and 2007.