It didn't exactly fit the old saw about the minnow swallowing the whale, but Freeport McMoRan's
Net income for the company rose to $1.1 billion, or $2.62 a share, vs. $367 million, or $1.74 a share, in the June 2006 quarter. That, for those of you who'd rather not do the math, is right at a 200% increase on the net income line. Revenues rose 306% to $5.81 billion, compared to $1.43 billion last year.
Before acquiring Phelps Dodge in March, Freeport's biggest asset was easily its large Grasberg copper facility in Indonesia. As a combined company, it now operates Phelps' former copper and molybdenum mines in the United States and Africa. In total, those facilities yielded 1 billion pounds of copper, 913,000 ounces of gold, and 15 million pounds of molybdenum in the quarter. While gold prices were 7% higher year over year, copper prices were about flat at $3.33 a pound.
The key to Freeport's success lies in global copper demand and, hence, the prices it realizes for the metal. While those prices have remained comfortably above $3 for the past several months, that level is about three times the norm of a decade ago. But despite softness in the U.S. housing and automobile markets -- the two biggest domestic users of the metal -- increasing demand in China and other developing nations has more than offset whatever demand falloff may have occurred in the U.S.
The mining and metals industry has been a hotbed of mergers and merger speculation of late. In addition to the Freeport-Phelps combination, aluminum producer Alcoa
So Freeport McMoRan clearly represents a solid new combination operating in a continuously active and interesting industry. And despite its shares having increased about 58% in value this year, I'm convinced that the company warrants ongoing Foolish attention.
For related Foolishness:
- Freeport McMoRan: Solid Environmental Citizen
- Investing in Your Backyard: Phoenix
- Her Name Is Rio and She Dances With Alcan