Gabelli research analyst Christopher Mancini discusses Freeport McMoran (NYSE:FCX) as an attractive investment as the price of copper increases.
What Stocks To Invest In When Copper Prices Increase? Freeport-McMoRan
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Copper is an industrial metal. The use of copper is tied to broad economic growth. Since the election the price of copper is up 50 cents per pound. It’s gone from $2.10 to $2.60 per pound. One great way to play the copper price is by investing in the stock Freeport McMoran. Freeport McMoran has three of the best gold mines in the world: the Morenci mine in Arizona, the Cerra Verde mine in Peru and the Grasberg mine in Indonesia. For every .10 cent change per pound Freeport McMoran will generate 370million dollars of incremental EBITDA. That incremental EBITDA and cash flow can be used to pay down Freeport McMoran’s substantial debt load of 13.5 billion dollars of net debt. So as the price of copper goes up Freeport McMoran with its large mineral endowment of copper mines will be able to pay down debt, generate cash flow and I think eventually be able to pay dividends if the copper prices does stay at this level or goes higher. So to get good exposure to the copper price Freeport is a great way to do it with world class mines, incremental cash flow and a vast copper mineral endowment.