Freeport Drops to Cheapest Since 2000, Approaches Record Low

  • Stock tumbles 39% this year, after 71% plunge in 2015
  • `We still see downside from here,' Morningstar's Rohr says

The meltdown in commodity markets is taking its toll on Freeport-McMoRan Inc., the world’s biggest publicly traded copper producer, which is trading near a record low.

Shares of the Phoenix-based company dropped as much as 15 percent on Tuesday to $3.65, the cheapest since 2000. The stock touched an all-time low of $3.375 in November of that year. The Bloomberg Commodity Index, a measure of returns for 22 components, reached a record low on Tuesday as copper and crude oil tumbled.

“Freeport gets hit particularly hard given the increased fragility of its balance sheet,” Daniel Rohr, an analyst with Morningstar Inc., said by phone from Chicago. “A lot of the corrective measures the company had outlined a while back won’t be nearly as corrective in the current price environment.”

Freeport fell 4.6 percent to close at $4.11 Tuesday in New York. The shares plunged 71 percent in 2015, and have dropped another 39 percent since the start of this year. Rohr has a price target of $2.30 on the equity.

“We still see downside from here,” Rohr said. “We do not expect a sustained recovery in copper prices from this level.”

In October, the company said it was exploring spinning off its oil and natural gas business, while a previously disclosed proposal to take the unit public remained an alternative. It also said it would cut production at its Sierrita mine in Arizona in half, because of weak copper and molybdenum prices, and was considering a full shutdown of the mine. Crude futures in New York touched the lowest since December 2003 on Tuesday, and copper fell to the lowest since 2009.

‘Deteriorating’ Outlook

“Not only does the deteriorating price environment for commodities hit Freeport’s ability to generate cash from operations, it hits Freeport’s ability to generate cash from asset sales,” Rohr said.

Freeport will be forced to consider more options to survive, according to Garrett Nelson, a Richmond, Virginia-based analyst at BB&T Capital Markets.

“They’re at the point where they’re going to have to look at some other options, whether that be asset sales, additional equity issuance, a host of other options, none of which are very appealing,” said Nelson, who has a hold rating on the stock.

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