Freeport Issues Operational Update, Aims To Boost Cash Flows

Freeport-McMoRan Inc. (NYSE:FCX) recently provided an operational update. The company announced that it is making progress in boosting copper and gold volumes by 30-40%, while reducing unit net cash costs of copper by 25% to around 1.30 per pound. Moreover, it is aiming to more than double its cash flows by 2021.

Freeport is focused on growing volumes from its underground orebodies in Papua, Indonesia. From Jan 1, 2020 through Mar 5, 2020, production from the Grasberg Block Cave and Deep MLZ orebodies averaged nearly 35,000 metric tons of ore per day. This marks a sequential increase of 35% from average output in fourth-quarter 2019.

Regarding the Arizona-based Lone Star project, Freeport stated that it is nearing completion and is expected to be commissioned this year. Moreover, focusing on technology initiatives and innovation are likely to improve the company’s unit cost performance and productivity.

Freeport remains focused on enhancing performance amid the potential economic impacts of the Coronavirus, market volatility and turmoil in the global oil market. The company believes that copper’s fundamental long-term view remains favorable.

Considering copper prices between $2.75 per pound and $3 per pound, Freeport expects to generate free cash flow from an average of more than $2 billion to nearly $3 billion per year in 2021 and 2022.

Additionally, the company stated that it did not witness any considerable disruptions at supply chain or product shipments since the Coronavirus outbreak. Freeport is monitoring the incident closely and is managing costs, capital expenditures and production plans during this period of uncertainty. The company’s strong liquidity position and practically no substantial near-term debt maturities are additional upsides.

Freeport’s shares have lost 28.8% in the past year compared with the industry’s 20.1% decline.

For 2020, Freeport anticipates consolidated sales volume to be nearly 3.5 billion pounds of copper, 800,000 ounces of gold and 88 million pounds of molybdenum. This projection also includes 725 million pounds of copper, 105,000 ounces of gold and 22 million pounds of molybdenum for first-quarter 2020.

Zacks Rank & Key Picks

Freeport currently carries a Zacks Rank #3 (Hold).

Few better-ranked stocks in the basic materials space are Daqo New Energy Corp (NYSE:DQ) , Newmont Corporation (NYSE:NEM) and Impala Platinum Holdings Limited (OTC:IMPUY) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected earnings growth rate of 353.7% for fiscal 2020. The company’s shares have surged 66% in the past year.

Newmont has an expected earnings growth rate of 69.7% for 2020. Its shares have returned 40.2% in the past year.

Impala Platinum has an expected earnings growth rate of 424.1% for fiscal 2020. The company’s shares have surged 84.6% in the past year.

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