New Freeport-McMoRan Price Targets After Tragedy Weighs on Shares
Copper prices are rising and Freeport-McMoRan shares continue to fall after fatal mining incident.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
It’s been a tragic week for global mining giant Freeport-McMoRan (FCX) . There have been two fatalities, and five miners remain missing, after a deadly "mud rush" filled one of the company’s mines in Indonesia, restricting evacuation routes for workers.
As a result, shares of Freeport-McMoRan, one of the world’s biggest mining companies, have dropped sharply. The fatal incident has restricted production at Grasberg, one of the world’s largest mines.
The Grasberg Mine
The huge Grasberg mine is located in the remote highlands of the Sudirman Mountain Range in Indonesia. The Indonesian government owns approximately 51.2% of that mine. Grasberg is managed by PT Freeport Indonesia, owner of a 48.7% stake in the mine.
Copper prices shot higher as a result of the incident, which will constrain the available supply of copper. Goldman Sachs responded by lowering its global supply forecast for copper for the second half of this year, and all of next year.
Meanwhile, Freeport-McMoRan shares have fallen from $45 to $35 in just two sessions, a decline of about 22%. The shares have fallen on heavy volume, a possible indication that large institutional investors are behind this move (arrow).
Freeport-McMoRan has also fallen through its 50-day (blue) and 200-day (red) moving averages, neither of which provided any measure of support for the stock. I’m also concerned that the stock has closed very close to its lows for the past two days. This is often a continuation signal, meaning there could be more downside ahead. .
What Price Should Investors Pay for Freeport-McMoRan?
How far could shares of Freeport-McMoRan fall? The next key level of support is $28 (black dotted line). An entry close to that level would make sense, for either a short-term trade or a long-term investment.
Analysts Are Divided
Does it make sense to buy Freeport-McMoRan on this decline? Analysts are divided. Scotiabank analyst Orest Wowkadaw downgraded the stock, lowering his price target from $55 to $45.
Meanwhile, Freeport-McMoRan received an upgrade from Bob Brackett of Bernstein, raising the stock to outperform from market perform. Brackett feels that the selling in Freeport McMoran may be overdone.
Freeport-McMoRan has been a core holding of mine for years, and I have no current plans to sell the stock. I won't be adding shares on this pullback unless the stock gets closer to that key $28 support area.
At the time of publication, Ponsi was long FCX.
