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Equity Feature: Freeport McMoRan (FCX) a Multivitamin of Growth

Posted by nexvucapital on March 7, 2013

Question: how do we deal with having to take a multiple of separate vitamins each day?

Answer: the Multivitamin.

Question: how do we get properly positioned for the themes of growth going forward?

Answer: Freeport McMoRan (FCX).

Our two themes for global growth going forward are the resurgence of the US economy and the urbanization and industrialization of China. So how does the average investor find the right way to position for these themes? The answer is a multivitamin…

Freeport, in its own words: 

…a premier U.S.-based natural resource company with an industry leading global portfolio of mineral assets, significant oil and gas resources and a growing production
profile.

FCX’s mineral assets include the world class Grasberg minerals district in Indonesia, the large-scale
Morenci minerals district in North America, the Cerro Verde and El Abra operations in South America, the high
potential Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC) and a leading global
molybdenum business. The addition of a high quality, U.S.-focused oil and gas resource base is expected to
provide exposure to energy markets with positive fundamentals, strong margins and cash flows, exploration
leverage and financially attractive long-term investment opportunities. The combined company’s long-lived
resource base with commodities critical to the world’s economies provides enhanced opportunities to benefit from
long-term global economic growth. On a pro forma basis for 2013, approximately 74 percent of the combined
company’s estimated EBITDA (equals operating income plus depreciation, depletion, and amortization) is
expected to be generated from mining and 26 percent from oil and gas, with 48 percent of combined EBITDA
from U.S. operations.

The oil and gas assets being acquired are located in attractive onshore and offshore U.S. geologic basins.
PXP’s major assets include its established strong oil production facilities in California, a growing production profile
in the onshore Eagle Ford trend in Texas, significant production facilities and growth potential in the Deepwater
Gulf of Mexico and large onshore resources in the Haynesville natural gas trend in Louisiana. MMR is an industry
leader in the emerging shallow water ultra-deep gas trend with sizeable potential, located offshore in the shallow
waters of the Gulf of Mexico and onshore in South Louisiana. The MMR portfolio is expected to provide a large,
long-term and low cost source of natural gas production.

Freeport, in our words: 

The BHP of the USA with exposure to copper, molybdenum, oil and natural gas (oh, and gold for those who need that sorta thing but in this case the gold is free as a credit from the production of copper – nice). The domestic oil and gas component provides direct exposure to the growth in US energy.

Freeport, the chart: we draw your attention to the flag/pennant formation that has been building since the summer of 2010. Both the MACD and the Stoch RSI are at or close to turning points.

FCX Monthly - March 8 2013

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