FCX earnings and China stimulus trigger surge in mining stocks

Freeport-McMoRan (FCX), a leading international mining company, recently released its earnings report for the fourth quarter (Q4) of the previous year, revealing solid operational performance and financial position. 

FCX reported strong fourth-quarter earnings, surpassing expectations and demonstrating a solid financial performance. The company announced earnings of $0.27 per share, which exceeded Street estimates of $0.23 per share. Revenues for the quarter reached $5.91 billion, representing a 2.6% year-over-year increase and outpacing expectations.

The positive results were primarily driven by strong sales volumes in copper, gold, and molybdenum. Copper sales for the quarter reached 1.1 billion pounds, exceeding the October 2023 estimate by 3% and seeing a 7% year-over-year increase. Gold sales amounted to 549 thousand ounces, which were 5% lower than estimated but still 20% higher year-over- year. Molybdenum sales reached 22 million pounds, surpassing the October 2023 estimate by 10% and representing a 16% year-over-year increase. Freeport-McMoRan's impressive performance can be attributed to higher mining and milling rates at PT-FI, as well as the timing of shipments associated with the resumption of anode slimes exports at PT-FI. 

The company's strong operating performance also contributed to its success, with copper sales volumes exceeding the previous year's fourth quarter and unit net cash costs below expectations. 

In terms of financial position, Freeport-McMoRan remains solid. The company achieved a 90% completion milestone on its Indonesia smelter projects, a major expense for FCX,  and had consolidated debt of $9.4 billion at the end of 2023, along with consolidated cash and cash equivalents of $4.8 billion. Net debt totaled $3.6 billion, excluding net debt for the Indonesia smelter projects. 

Looking ahead, Freeport-McMoRan expects capital expenditures in 2024 to approximate $4.6 billion, slightly lower than the $4.8 billion spent in 2023 (CapEx for Q4 2023 totaled $1.4 billion). Capital expenditures for 2024 are estimated to be $4.6 billion, including $2.3 billion for major mining projects and $1 billion for Indonesia smelter projects.

The company anticipates sales of 4.1 billion pounds of copper in 2024, slightly below its initial outlook of 4.2 billion pounds. Average costs of copper are projected to remain stable at $1.60 per pound in 2024, similar to the previous year's figure of $1.61 per pound. 

The positive earnings report from Freeport-McMoRan led to a surge in its stock price and the stock of rival Southern Copper (SCCO). The price of copper also experienced an increase of 2.2% to $3.88 per pound, driven by China's economic stimulus measures. The recovery of China's major stock indexes and the announcement of a reduction in required bank reserves contributed to the positive sentiment in the market.

Investors reacted positively to the strong earnings report from Freeport-McMoRan, with the stock rallying more than 7% in opening trade and ultimately settling with a 5.9% gain. The stock surpassed its 50- and 200-day moving averages, indicating a potential upward trend. Freeport-McMoRan has also formed a handle with a buy point of $43.42, presenting an opportunity for investors. 

In conclusion, Freeport-McMoRan's Q4 earnings report showcases its strong financial performance, surpassing expectations and demonstrating solid sales volumes in key commodities. The company's focus on productivity gains, cost discipline, and organic growth opportunities positions it for long-term value creation. With favorable market fundamentals in the commodities sector and positive market sentiment driven by China's economic stimulus, Freeport-McMoRan is well-positioned for future growth.

$FCX(FCX)