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The stock market is currently valuing Freeport-McMoRan (NYSE:FCX) at $44 billion. This represents a significant discount to FCX's true value based on its assets.

Estimated Reserves

Copper

  • 102 billion pounds
  • $3.90 per pound
  • $397 billion

Gold

  • 40 million ounces
  • $1740 per ounce
  • $70 billion

Molybdenum

  • 2.48 billion pounds
  • $14 per pound
  • $35 billion

Cobalt

  • 700 million pounds
  • $16 per pound
  • $11 billion

Silver

  • 266 million ounces
  • $34 per ounce
  • $9 billion

Based on these numbers, FCX's reserves are valued at $522 billion. However, this is not the number that should be used to calculate what FCX is worth. Rather, we need to subtract the costs involved in mining the metals. The best way to account for the expenses involved in mining is by looking at FCX's margins.

FCX operating margins currently stand at 43.77%. By applying this number to the reserve valuation ($522 billion) we find that FCX's reserves are really worth about $228 billion after mining costs. However, this is still not the final value of FCX. We still need to account for expenses such as taxes and interest payments on debt. The net profit margin will accomplish this.

FCX's net profit margin currently stands at 21.84%. By applying this number to the reserve valuation ($522 billion) we find that FCX is worth a minimum of $114 billion based on asset valuation.

There are currently just under 1 billion shares outstanding for FCX. By dividing the $114 billion by 1 billion we find that the valuation for FCX should be about $114 per share.

Conclusion

FCX is undervalued based on the valuation of its assets.

Source: Freeport-McMoRan Stock Is Worth $114 Based On Asset Valuation