The weekly drop in gold and copper miner Freeport-McMoRan (FCX) is worrisome. Gold prices are at record highs, yet this firm issued a warning about its Grasberg mine. FCX lost one-fifth of its value, closing at $35.75 last week.
In the third quarter, Freeport-McMoRan posted an unexpected copper production disruption. This disruption trend is nothing new. 5% of its production in 2014 increased to 5.7% last year. It will exceed 6% this year. This benefits the copper market, since a disruption tightens copper supply for the industry.
Political risks are higher than usual. After Indonesia faced riots, the government found ways to impose fines to raise funds or set restrictions. This might happen within the next few quarters. FCX stock is pricing those risks.
Mining in Grasberg stopped in early September. A large flow of web material blocked access. This restricted the evacuation routes for seven of its workers. Unfortunately, the company lost two members. Five members are still missing.
Analysts downgraded FCX stock last week. Scotiabank analyst Orest Wowkodaw cut the stock rating to “sector perform,” down from sector outperform. The $45 price target still suggests around $10 in share price appreciation.
Add FCX stock to the watchlist. Strong copper prices should give this beaten-up stock a lift.
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