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Thursday, June 24, 2010

Freeport-McMoRan (NYSE:FCX) Issued "BBB" Rating by Morningstar

Freeport-McMoRan (NYSE:FCX) is now being covered by Morningstar, and their first credit rating for the company was a "BBB."

Morningstar said, "After retiring a sizable chunk of debt in 2009 and early 2010, Freeport reported pro forma total debt of $5.1 billion at April 1. With a significant cash hoard, only modest maturities over the next five years, and preferred dividend requirements ending with the mandatory conversion of $2.875 billion in convertible preferred stock in May, Freeport has a solid liquidity profile."

The credit rating would have been higher if not for asset risks associated high-risk countries, said Morningstar. They were referring to the Freeport Grasberg mining gem in Papua, with risks of social unrest and the government seeking higher rents.

Freeport has also invested billions in the Tenke project in Congo, where risk is even higher in regard to either a incremental expropriation, or possibly even an outright one.

In other words, the risks are outside of operational control, and while the rewards are potentially high, so are the potential losses.

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