Barclays Maintains an 'Overweight' on Freeport-McMoRan (FCX); 3 Reasons The Grasberg Strike Is a Positive

December 9, 2011 3:24 PM EST
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Price: $15.06 -0.86%

Rating Summary:
    12 Buy, 15 Hold, 5 Sell

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    Up: 35 | Down: 31 | New: 11
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Barclays maintains an 'Overweight' on Freeport-McMoRan (NYSE: FCX) price target of $63.00.

Barclays analyst says, "Over the past month, the #1 issue we've heard regarding FCX is the overhang from the ongoing strike and associated shutdown at the giant Grasberg operation (~30% of FCX's total EBITDA). Below (with more detail on the next page) are three reasons we think the strike is not a negative, but rather a buying opportunity given the current overhang on FCX shares stemming from the strike...1. This is an NAV story, and a labor disruption is not necessarily NAV dilutive; 2) 2. Supply-constraints are usually good for prices, and company-specific valuations are significantly more sensitive to price changes vs. volume changes; 3) 3. The potential cost-related impact to FCX's NAV is immaterial, in our view. Even if we (aggressively) assume ALL labor-related costs at Grasberg double for the life of the mine, our NAV estimate only declines ~5%."

For an analyst ratings summary and ratings history on Freeport-McMoRan click here. For more ratings news on Freeport-McMoRan click here.

Shares of Freeport-McMoRan closed at $38.34 yesterday.

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