Seeking Alpha: Turbulence In Indonesia Is Manageable For Freeport-McMoRan

For all of the attention paid to Freeport-McMoRan's (FCX) issues and challenges with the Indonesian government, it hasn't hurt the stock all that much recently. The shares are up close to 30% over the past year, trailing First Quantum (OTCPK:FQVLF), but otherwise surpassing mining equities with big copper exposure like BHP Billiton (BHP), Antofagasta (OTCPK:ANFGY), Southern Copper (SCCO), and Glencore PLC. That strikes me as a pretty rational response, as although Indonesia is still important to Freeport, that importance declines pretty sharply within a decade and Freeport still has some valuable cards of its own to play.

My basic bullishness on Freeport is predicated on a few factors. First, I think Freeport has a strong collection of copper-producing properties around the world that have offset the political/operating risks in any one location. Second, I think copper is a good place to be in the coming years. Third, I think deepwater Gulf of Mexico E&P assets are still undervalued. Last, I think there's still an "Indonesia discount" in place that overstates the actual value risks to Freeport. All in all, I think these shares should trade closer to $40.

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Turbulence In Indonesia Is Manageable For Freeport-McMoRan

Seeking Alpha: High Costs Leave Copper Mountain Mining Leveraged To Higher Prices

Costs matter in mining, but not always in the way that investors think. All things considered, it is better to have the lowest possible cost of production, but companies like Copper Mountain Mining (OTCPK:CPPMF, (CUM.TO)) with elevated costs can offer more upside when commodity prices rise. This company has done many things right, including getting its southern British Columbia mine up and running both on time and on budget, but production challenges and high costs loom as ongoing challenges. These shares aren't tremendously interesting at prevailing prices, but if copper goes on a tear, these shares should outperform the peer group.

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High Costs Leave Copper Mountain Mining Leveraged To Higher Prices

Seeking Alpha: Thompson Creek Really Has To Execute Now

A year ago, I discussed Thompson Creek (TC) as a high-risk/high-reward mining stock opportunity that was increasingly dependent on bringing its Mt. Milligan copper-gold project into production on time and on budget. As stock calls go, this one delivered more of the "high-risk" than the "high-reward", though the 15% decline in the shares since that report isn't terrible compared to the performance of other small miners like Taseko (TGB) or General Moly (GMO) over the same period.

Since that last report, Thompson Creek has started production at Mt. Milligan and molybdenum market conditions have continued to be adverse to the company's interests. As is often the case for mining companies, Thompson Creek's future depends greatly on future metal prices (which they cannot control) and future mining costs (which they can control at least to a point). I believe current copper futures prices are good enough for this stock to work, so it is now about whether the ore grades and operating efficiencies come in as expected. With a cost-focused CEO at the helm, I'm optimistic on that score and I believe there's worthwhile upside at these levels.

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Thompson Creek Really Has To Execute Now

Seeking Alpha: Taseko Hoping To Offer Its Own Copper Growth Story

One of the reasons I like First Quantum (OTCPK:FQVLF) is that I believe that company is poised to deliver excellent low-cost/high-value growth from its copper mines both already operating and on the drawing board. The same could apply to Taseko (TGB), as this BC-based Canadian miner has an existing mine with expansion capacity and a potential new mining project that could offer excellent cash costs.

Of course there is a "but", and with Taseko it's a triple-but. The first "but" is that a lot of copper mining projects are on the books now and it is going to take a real recovery in global demand to maintain prices in the face of that supply. The second "but" is that the company's current copper mine is on the high end of cash costs. The final "but" is that the company's biggest near-term expansion possibility may be derailed by wrangling over environmental and cultural issues.

Even though Taseko is in solid financial shape, the stock has gotten pummeled like most other mining companies. With that, I see significant potential opportunity here. I believe Taseko could rise 30% just on the basis of its existing mine if copper prices stay at $3/lb, and the upside could be into the $4 range (100%-plus potential) if the expansion, cost, and pricing scenarios all work out.

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Taseko Hoping To Offer Its Own Copper Growth Story

Seeking Alpha: Execution And Commodity Risks Have First Quantum At An Appealing Price

Mining stocks have generally been varying shades of horrible this year, with major producers like BHP Billiton (BHP), Rio Tinto (RIO), Vale (VALE), Glencore Xstrata, and Vedanta all in the red for the last 12 months. The reasons aren't all that hard to uncover, as commodity prices have softened on weaker Chinese demand and new projects adding supply to the market. So too with First Quantum (OTCPK:FQVLF) (FM.TO), as this growing copper miner has seen its shares retreat as copper prices have fallen more than 10% in the past year.

It's not just falling copper prices hurting First Quantum. The company is looking to deliver copper production growth greater than any other major miner over the next four years, but investors are rightly concerned about the prospect of the company taking on billions more in debt to fund the development of its crown jewel Cobre Panama project. I believe that the market is undervaluing First Quantum's demonstrated ability to deliver on mining projects, and while I cannot and will not wave off the risk of further copper price erosion, I believe investors are getting enough compensation in the stock's valuation today.

For those investors looking to investigate First Quantum more thoroughly, I'd suggest doing so under the Canadian and British tickers (FM.TO and FQM.L, respectively), as the company's U.S. ADRs are of the dreaded "F" variety.

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Execution And Commodity Risks Have First Quantum At An Appealing Price

Seeking Alpha: Delays And Soft Guidance Dent HudBay, But There's Still Value Here

I wrote about HudBay (HBM) as an Alpha-Rich investment candidate back in July of this year, and with the stock up more than 20% (against 8% for the S&P 500), it has been a decent call. To be fair, though, picking a beaten-down mining stock in the summer of this year was a good move in general and investors in companies like Teck (TCK), Freeport McMoRan (FCX), and Rio Tinto (RIO) have also done pretty well over that same period.

I continue to believe that HudBay is a well-run and substantially undervalued mining company with high-value assets like Constancia (CP) and Lalor Lake (Lalor) likely to significantly increase production, revenue, and profits in the coming years. Unfortunately, while the stock has worked reasonably well, the company has seen some of the construction and development setbacks that are common to the industry. Higher costs at Lalor, cost overruns at CP, and some shuffling around of capex priorities do lead me to trim my NAV estimate for the stock, but I still believe this is a significantly undervalued stock.

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Delays And Soft Guidance Dent HudBay, But There's Still Value Here

Seeking Alpha: HudBay Minerals Almost Washed Out ... And Looking Like A Bargain

The list of mining stocks doing well over the past year is quite short, and HudBay Minerals (HBM) isn't on it. Thumped by a large-scale move of investor funds out of mining and declines in commodity metal prices, HudBay has further worried investors with its upcoming capital needs, the possibility of a dividend cut, and more general product/cost issues.

On the other hand, tough times don't last but tough companies do. Very few mining companies are looking at the sort of production growth potential that HudBay has over the next three to five years. What's more, while I don't think investors can sleep on the risk that the bottomless pit that once was China's appetite for basic materials has, in fact, found a bottom (meaning that the "super-cycle" is over), no analyst is currently projecting a long-term copper price whereat HudBay can't make money.

The valuation process for mining companies is slippery and inexact. That said, even using relatively low multiples on EBITDA, low price inputs into a NAV calculation, and the company's tangible book value suggest that these shares are undervalued. Unless you believe HudBay will actively destroy value by staying in business, these shares look at least 30% undervalued and may in fact be worth 70% to 100% more than today's price.

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HudBay Minerals Almost Washed Out ... And Looking Like A Bargain

Investopedia: Down In The Vale

As I've mentioned in other recent pieces on Investopedia, these are tough times for commodity producers as the incremental Chinese demand that pushed prices so far for so long has faded. With that, demand for steel inputs in particular (met coal and iron ore) has come into much better balance with supply and prices have weakened considerably.

Although high-cost iron ore suppliers are looking at some tough times in the coming years, Vale's (Nasdaq:VALE) low-cost assets should serve the company well. Investors don't really want anything to do with this giant iron miner today, but patient investors who can take the risk of conditions getting even worse in the short run may like the long-term potential offered by this company.

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Investopedia: Teck Profitable, Liquid, And Maybe Too Cheap

These are ugly days in the natural resources sector as the bottomless pit that was China's appetite for mined commodities apparently had a bottom after all. Most of the well-known miners have racked up double-digit losses over the past year, and companies with outsized exposure to iron ore (like Vale (Nasdaq:VALE) metallurgical coal like Teck Resources (NYSE:TCK) have suffered even worse.

It may not be the worst time to think about Tech Resources, though. The combination of mines that are still profitable at spot prices, extensive production expansion potential, good liquidity, and global prices that are having miners contemplating production curtailment could make this an appealing time to consider this beaten-down miner, but investors need to prepared for conditions to get uglier before they turn around.

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Investopedia: With Freeport McMoRan, It's Time To Get Over It And Move On

I don't think it's an exaggeration to say that some percentage of Freeport McMoRan (NYSE:FCX) shareholders, or former shareholders, hated the company's decision to acquire Plains Exploration and McMoRan Exploration. These shares are down about 22% from the time just before the announcement, though miners like BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), and Southern Copper (NYSE:SCCO) haven't fared dramatically better in what has been a pretty unpleasant market for basic materials stocks.

With the deals done, it's time to get over the disappointment regarding the oil and gas transactions and just accept Freeport McMoRan for what it is today – an incrementally more diversified natural resources company with a hefty amount of debt and high leverage to global economic growth. Given that I do not believe that the oil & gas properties will be value-destructive (in total) from this point on and that the valuation already prices in further copper price erosion, Freeport McMoRan stock does hold some appeal at these prices.

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Seeking Alpha: Thompson Creek Walking A Very Fine Line

While a lot of investors seem to love David-versus-Goliath underdog stories, I think they too often forget a key detail - what makes that story so special is how unlikely the outcome was; normally David gets absolutely pasted and ends up either with a bunch of tubes coming out of him or in a box. In the case of a stock like Thompson Creek (TC), then, I think investors are often too willing to look past the serious operational and macro risks that go capacity expansion stories at small miners.

That grim opening probably suggests that I'm bearish on Thompson Creek Metals. In point of fact, I'm not. I think Thompson Creek is a very interesting speculation at this point. But I do believe it's important for investors considering these shares to appreciate that there are sizable risks here and a happy ending is far from guaranteed.

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Thompson Creek Walking A Very Fine Line

Investopedia: Alcoa Has Improved, But It's Still In The Aluminum Business

American aluminum giant Alcoa (NYSE:AA) deserves credit for the internal operating improvements it has made in recent times. Unfortunately, the company is still in the business of selling aluminum and aluminum products, and that has long been one of the least attractive industrial metals for investors. While Alcoa does continue to look undervalued on the basis of historical valuation norms, this stock will probably be a value trap until and unless aluminum prices start picking up.

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Investopedia: Is Another Copper Star On The Rise?

It's not all that often that the Street seems to agree on something, but there is widespread agreement among analysts and investors that Freeport McMoRan's (NYSE:FCX) bids for Plains Exploration (NYSE:PXP) and McMoRan Exploration (NYSE:MMR) are both bad ideas. Assuming they go through, then, Freeport McMoRan may find its luster as a copper play dulled. Lucky for investors, then, a new option may be on the rise.

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Investopedia: Freeport McMoRan Announces A Real Doozy

Shareholders of copper giant Freeport-McMoRan (NYSE:FCX) had been waiting a while for the company to "do something," and they certainly got their wish on Wednesday, though almost certainly not in the fashion they were expecting. While many analysts and investors had been looking for Freeport-McMoRan to announce a big move with its capital, either a sizable buyback/special dividend or further diversification in mining, almost nobody expected the big move into energy that the company announced Wednesday morning.

Not only does the sheer size of the transactions make this a risky move for Freeport-McMoRan, but so too do the details. In buying Plains Exploration & Production (NYSE:PXP) and McMoRan Exploration (NYSE:MMR), Freeport is buying two companies that are not exactly non-controversial assets in their own right. Consequently, this looks like a pretty high-risk/high-reward transaction for this copper mining giant.

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Investopedia: BHP Billiton Hoping For A Better 2013

It's hard to imagine many metal miners who aren't glad to put this year in the rearview mirror. Worries about Chinese demand and inventory have investors worried about copper, iron ore and met coal prices, and the global economy offers little counterweight to that reliance on China. Although it's a well-run company that generally manages its capital well, BHP Billiton (NYSE:BHP) is still a prisoner of its markets - if commodities rebound in 2013, so too will the stock.

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Seeking Alpha: Fear And Noise Creating Opportunity In Freeport-McMoRan

It may sound sarcastic or cynical, but if the news flow around copper miner Freeport-McMoRan (FCX) is terrible, it's probably time to think about a good entry price. Certainly, there are worries pushing down on valuation today -- worries tied to production costs, worries tied to global growth and implied demand, and worries tied to ongoing saber-rattling from the Indonesian government. The reality, though, is that this is what it looks and sounds like when companies like this bottom out. When the news turns positive, that may just be a signal to look for the exit.

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Fear And Noise Creating Opportunity In Freeport-McMoRan

Investopedia: Thompson Creek Hopes Short-Term Pain Leads To Long-Term Gain

It takes money to make money, and that lesson is proving painful for Thompson Creek (NYSE:TC) and its investors. Higher than expected development costs for the critical Mt. Milligan project have dented management credibility, while dilutive financing has smacked the stock. Making matters worse, investors seem to be back in one of those moods where steel (the primary market for molybdenum) and copper (a major future commodity for Thompson Creek) are doomed to eternal malaise.

Thompson Creek is absolutely not a stock for the mortgage money, nor for impatient investors, but for those who believe a steel rebound is probable and want an undervalued play on a small industrial metals miner, this is a stock worth checking out.

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Investopedia: Near Tangible Book, Teck Is Worth A Look

Commodity companies can do nothing to change the sometimes-devastating cyclicality of their markets, but that same cyclicality gives investors multiple chances to play the same stocks. Right now there's a great deal of worry about global growth, and particularly growth in markets like China, Brazil and Europe. Although no investor should fool themselves about the risks involved, the fact that Teck Resources (NYSE:TCK) trades near tangible book value ought to be of interest to investors looking for potentially over-punished commodity stocks.

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http://stocks.investopedia.com/stock-analysis/2012/Near-Tangible-Book-Teck-Is-Worth-A-Look-TCK-FCX-SU-TOT0524.aspx

Seeking Alpha: Costs Rising At Freeport McMoRan, But Price Will Decide The Stock

While many analysts dutifully track production levels, cash production costs, and global inventory changes, sometimes that seems all but fatuous when it comes to stocks in the industrial materials sector. Although production disruptions and higher costs would indeed be bad for Freeport McMoRan (FCX), ultimately it's going to be the investor outlook for copper prices that moves the stock.

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Costs Rising At Freeport McMoRan, But Price Will Decide The Stock

Investopedia: Genesee & Wyoming An Uncommon Growth Story

Genesee & Wyoming (NYSE:GWR) is certainly not a regular rail story. Unlike Class 1 railroads like Union Pacific (NYSE:UNP) or Norfolk Southern (NYSE:NSC), acquisitions are a significant part of the growth story and foreign operations are key to the company's future. Also, unlike many rails, investors are willing to pay a pretty hefty multiple to own this railroad.

A Mixed End to 2011  
Genesee & Wyoming's earnings for the fourth quarter were relatively mixed. Revenue was pretty good, as reported revenue rose 24% and "same rail" revenue climbed 8%. Although carload volume was modest, yield was up nicely.

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