Freeport-McMoRan is Wednesday's IBD Stock Of The Day as China's reopening supports copper prices and the mining giant revs up its Grasberg mining operations in Indonesia after landslides. FCX stock broke above a key level, offering investors an early entry point.
The copper futures price rose 1.7% to $4.17 per pound, continuing to rebound after slipping below $4 last week. Industrial metal prices rallied after China's official manufacturing index jumped to its best level in nearly 11 years. That was among a batch of data points confirming China's recovery.
China's rebound should get a further kick from fiscal stimulus expected to be announced at a key annual political gathering starting March 4.
FCX stock joined a rally among diversified mining stocks keyed to China's recovery, including BHP, Vale and Rio Tinto.
Earnings Outlook
On Feb. 12, Freeport-McMoRan said its Grasberg operations were disrupted by significant rainfall and landslides. Losing the mine's daily output of nearly 5 million pounds of copper and 5,000 ounces of gold will cause FCX to miss Q1 guidance of 900 million pounds of copper and 300,000 ounces of gold.
CEO Richard Adkerson gave an update on Monday at BMO's global metal and mining conference. He said FCX was "still getting our arms around (the impact) to let the market know for the first quarter, but it should not be significant for the year."
On Jan. 25, Freeport offered guidance for 2023 copper sales of 4.2 million pounds, flat vs. 2022. Expected gold sales of 1.7 million ounces would trail 1.8 million ounces in 2022. Unit cash costs will likely rise to $1.60 per pound of copper vs. $1.53 in Q4 and $1.50 for all of 2022.
Longer term, Freeport expects widespread copper supply deficits. Demand fueled by the green energy transition is seen outstripping the capacity of mining projects currently in development. The mining investment needed to close that gap will require higher copper prices, Freeport says.
FCX Stock Action
FCX stock surged 4.9% to 42.99 in Wednesday afternoon stock market action. The move lifted FCX stock back above its 50-day moving average, near 42.
Along with breaking above a short-term trendline, Freeport McMoRan stock flashed an early entry for investors.
FCX stock was added to SwingTrader on Wednesday.
As of this coming Friday's close, FCX stock is likely to have a new base with a 46.83 buy point, 10 cents above the Jan. 25 high.
From a broader perspective, the recent consolidation looks like a handle on a deep base that began after FCX hit a 10-year peak in March 2022.
BHP, Rio and Vale stock rose 4% to 5% intraday, but all are below their 50-day lines. Southern Copper popped 3.5% in light volume, extending a bounce from its 50-day line.
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