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Here's how I look at FCX. It owns 41 million ounces of gold. At $684 an ounce, the pretax in-ground value is $28 billion. Assume for illustrative purposes only that FCX mines all of its gold in one year and mining expenses are 51% of revenue (the average during 2003-2007). Thus, gross profit are $14.4 billion. Deduct $460 million for overhead (actual, 2007) and you have $14 billion of EBIT, $9 billion after-tax. Meanwhile, FCX's market value is $9.6 billion. So at $25 a share, you buy FCX's gold mine at market value and get 93 billion pounds of copper and another 2 billion pounds of molybdenum for free.

Let me start by saying I don't know much about FCX so it may well be very cheap. Heck, almost the whole market looks insanely cheap.

But I'm wondering if your 'illustrative assumption' of them mining all their gold in one year is useful. Instead I'd rather look how much they mined last year, divide the deposits by this amount and do a NPV calculation based on some discount rate and on the number of years it takes them to get it all out of the ground. That would give a closer estimate of the market-value of the gold mine (most likely quite a bit less than what you came up with).

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