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Thursday, October 14, 2010

Freeport (NYSE:FCX) Fair Value Raised by Morningstar (Nasdaq:MORN)

Morningstar (Nasdaq:MORN) said they are raising their fair value estimate for Freeport-McMoRan (NYSE:FCX) by $4 a share on the soaring price of gold.

"We are raising our fair value estimate for Freeport-McMoRan FCX by $4 per share to reflect the rapid appreciation we've seen in gold over the past few months. In contrast to our long-term price forecast for copper, which is informed by our view of the likely path of supply and demand in the coming years, we rely on the futures curve for our gold price estimate. With the yellow metal now trading at $1,374/oz in the spot market, up from a third-quarter average of $1,227/oz, the valuation implications for Freeport, which is on pace to produce 1.8 million oz this year (down from 2.6 million oz in 2009 due to mine sequencing at Grasberg), are significant," said Morningstar on their Website.

This is important because Freeport and other miners who aren't considered primarily a gold mining company, historically haven't traded at the premiums a large number of perceived pure gold miners have.

So for Freeport to have its fair value raised based on its gold assets could help the company rise in price even more, as the future of its copper business should continue add significant value to the company and its shareholders.

Concerning copper, Morningstar added, "Our higher published fair value estimate also includes the effects of the recent surge in copper prices, now at $3.81/lb in the spot market (thanks, China!), up from a third-quarter average of $3.29/lb."

Freeport is the second-largest copper producer in the world, and can produce up to 1 million ounces of gold at their Grasberg mine. They're also the No. 1 producer of Molybdenum.

Freeport was trading at $99.46, gaining $0.38, or 0.38 percent, at 1:48 PM EDT.

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