It's no secret the carnage rippling through the precious metals market. Commodities across the board, including gold and copper, took a beating last year. This was due to a variety of influences, including the Federal Reserve tapering its stimulus programs and the resulting boost to the U.S. dollar.

As its name implies, collapsing gold and copper prices are likely to severely impact the upcoming earnings of Freeport-McMoRan Copper & Gold (NYSE:FCX). At the same time, though, Freeport is in the process of a major strategic transformation that is likely to pay off, and perhaps sooner rather than later.

Freeport not immune to industry woes
Freeport-McMoRan and its competitors are seeing significant challenges due to the devastating drops in precious metals prices last year. Profits over the first nine months of 2013 dropped 19% versus the same period in 2012, as sales collapsed due to falling metals prices. Unfortunately, the difficult conditions that marred Freeport's results over the first nine months persist.

Freeport's fourth quarter of 2013 will face difficult comparisons from the fourth quarter of 2012 in terms of metals pricing. Gold and copper were much higher in the fourth quarter 2012 than last year. Prices sunk throughout 2013, including the fourth-quarter comparisons Freeport is up against.

Cues into Freeport's near-term gold and copper results can be taken from industry peers Goldcorp (NYSE:GG), which already released a preliminary fourth-quarter report, and from Southern Copper (NYSE:SCCO). While its production keeps going strong, Goldcorp's underlying results were nevertheless clipped by what management termed "significantly lower realized metals prices" in the fourth quarter. Meanwhile, Southern Copper's net sales over the first nine months dropped 12%, primarily due to lower prices. Its realized copper prices fell 8% in the third quarter.

In the near future, look for underlying weakness to continue. Freeport is set to report fourth-quarter and full-year results later this month. Since realized prices for gold and copper are likely to be much lower than the same point last year, it's extremely likely Freeport's results will look ugly on the surface.

Despite near-term struggles, why Freeport's long-term is promising
Freeport-McMoRan still derives the bulk of its business from gold and copper mining, and as a result, there won't be anywhere for the company to hide in the fourth quarter. But, that won't last for long. Freeport is rapidly shifting its strategy to oil and gas production, which will provide a great deal of diversification to its business model. Even better, the oil and gas assets Freeport targeted are located in the most developing regions in the United States, including the Haynesville and Eagle Ford plays.

Freeport's two major acquisitions in recent years, totaling $19 billion, provide it considerable deep-water reserves in the Gulf of Mexico and access into several promising shale plays in North America. Its new oil and gas includes a huge source of natural gas production. Its investments will dramatically reorganize Freeport's business into oil and gas, and this will materialize extremely quickly. In all, it will generate 25% of its EBITDA from oil and gas production this year.

Closing thoughts: Take the long-term view
It's extremely likely Freeport-McMoRan's fourth-quarter report will show similar precious metals pricing challenges that led to poor performance through the first three quarters. Other precious metals miners confirmed this in their own fourth-quarter updates. However, it would be a mistake to miss what the future holds for Freeport. It will soon be a much different Freeport than investors have grown accustomed to.

Freeport is about to carve a significant footprint in some of the most promising oil and gas fields in the United States, and will derive a meaningful percentage of its future profits from this. As a result, Freeport will soon be a pure-play gold and copper miner in name only.

Is our "Top Stock for 2014" solid gold?