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No. of Recommendations: 2
Next up: Freeport McMoRan Copper & Gold (FCX)

This company is a gold and copper miner with mines in South America (Peru) and Indonesia, with some properties in Africa and North America as well. It also sells molybdenum, a component of alloys of steel.

Pluses:
     • Lots of FCF -- about $4.5 billion TTM.
     • Lots of Cu and Au reserves.
     • Lots of cash on the books, some $4.4 billion, up over $700 million in just the past 6 months.
     • Took on $7.2 billion in debt back in 2007 to help finance its purchase of Phelps Dodge. That now sits at $3.5 billion, so it's now in a net cash position.

Minuses:
     • Labor disputes in Peru and Indonesia, though Chris Barker (TMFSinchiruna and our online mining expert) says the Peruvian labor issues are yearly events.
     • Facing a tax / tariff from Indonesia on exporting unprocessed ore (along with other miners) in a bid by that government to create more processing in the country.
     • Worries about Cu and Au pricing, especially at elevated levels.

Verdict:
Definitely look at this one more closely. It's doing things right by paying down its debt so aggressively, metal prices are unlikely to drop precipitously (though if Chinese demand for Cu dries up...), and it has plenty of cash to do some nice acquisitions of some of the "junior" miners and their properties. And then there's potential for organic growth from further exploration of its own properties. Concern about prices and China demand is quite possibly the reason for the price weakness which could turn into a great opportunity.

Cheers,
Jim
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