I suppose what follows could be dubbed something of a contrarian call. But isn't the objective of most investing plays to buy shares low and eventually sell them higher?

On that basis, and assuming the world's key economies don't come tumbling down, it seems that Freeport-McMoRan Copper and Gold (FCX 2.40%) has been proverbially beaten about the head and shoulders to the point where the likely direction of its shares is now northward. After all, it's hard to fathom how the next couple of years could be tougher for the Phoenix-based company than its recent past.

A dim retrospective
Let's review the bidding here. During the second half of 2011, had you decided to add Freeport to your portfolio, you might have forked over more than $45 for each share, depending on your timing. These days, those same shares are trading below $20. While that slide has clearly run counter to the direction of the equities markets, there are several identifiable reasons for its occurrence:

  • Copper prices retreated from the vicinity of $4.00 a pound to slightly above $3.00, based largely on economic sluggishness in several areas of the planet. A 25% decline in what a pound of the red metal will fetch isn't likely to benefit the world's largest publicly traded producer.
  • During the second half of 2011, workers at Freeport's huge Grasberg copper and gold mine in Papua, Indonesia, struck over wages. With a significant percentage of the approximately 24,000 employees of the mine joining the work stoppage, the facility was temporarily shuttered.
  • Last December, Freeport announced that it would buy a pair of independent U.S. oil and gas producers -- Plains Exploration and Production, and McMoRan Exploration. Both purchases, which cost about $19 billion, were closed in early June. They raised some investors' and analysts' hackles as a departure from Freeport's mining focus and considering the management-directorship overlaps that existed among the three companies.
  • In mid-May, a tragic accident at Grasberg took the lives of 28 workers and injured 10 others, again closing the facility. Open-pit production was resumed in late June, although the output of both copper and gold was significantly affected for the quarter.

Key copper considerations
With those events now passed, it appears from an analytical perspective that the key considerations in examining the new and expanded Freeport involve likely copper demand and prices, along with the benefits that are apt to accrue from the oil and gas acquisitions.

From the standpoint of global copper demand and likely price support at, say, $3.00 a pound, the key markets are China and the United States. As Freeport CEO Richard Adkerson said on his company's recent post-release call:

[W]ithin China, fundamental copper demand is really strong. It's growing at 8% to 10% a year. The downstream business is strong; scrap is short; premiums are up.

As to the market at home, he noted, "Our business in the U.S., supported by automobiles and stronger construction, is relatively strong, and longer-range supply challenges persist." For an added perspective, it's noteworthy that BHP Billiton (BHI) CEO Andrew Mackenzie noted last week that his company -- the second-largest publicly traded copper producer -- is betting on strong returns from its copper business.

Further, BHP rival Rio Tinto (RIO -0.53%) is in the process of selling an 80% stake in Australian gold and copper producer Northparkes to China Molybdenum for $820 million. That's hardly chicken feed, and it reinforces the optimism that generally pervades the copper producers.

Solid energy assets
Regarding the oil and gas additions, I view as positive the U.S. locations of all the acquired assets. The most active area, from a current basis of barrels of oil equivalent production, is the Gulf of Mexico, where the company holds a number of promising deepwater plays. It's partnering with the likes of Amarillo Petroleum (APC) there and has contracted for three drillships to evaluate its properties.

Other offshore operations occur on the Gulf of Mexico shelf and off the coast of California. Onshore, the company is active in California, in the prolific Eagle Ford play of South Texas, and in the Haynesville shale.

Fiscal fitness
One other consideration in looking at Freeport is the likelihood that management will be able to meaningfully trim the company's now debt-heavy balance sheet before its self-imposed 2016 deadline. It's noteworthy that a number of assets, including offshore shelf plays, are likely to be jettisoned in an effort to reduce spending and accelerate the debt-reduction process.

It's also worth noting that in 2007, when Freeport bought Phelps Dodge, a copper producer twice its size, its balance sheet became similarly inflated. Somewhat amazingly, however, the debt level was reduced virtually overnight.

Foolish bottom line
My feeling -- admittedly as an owner of Freeport shares -- is that the company's stock constitutes a far better buy than a sell following its last hectic two years. Nonetheless, Fools who might be inclined to add the company to their portfolios should be blessed with patience and a somewhat longer-than-usual investment time horizon.