Freeport McMoRan (FCX) +3.8% premarket after Q3 earnings fell slightly due to lower metal prices but results beat expectations.
FCX raises FY 2013 operating cash flow guidance to ~$6B, up from prior guidance of ~$5.8B.
Q3 consolidated copper sales of 1.04B lbs. topped year-ago sales of 922M lbs., reflecting improved volumes throughout FCX's global mining operations, but fell short of its July estimate of 1.06B lbs. because of lower than expected volumes in South America.
Q3 consolidated gold sales of 305K oz. easily beat year-ago sales of 202K oz., reflecting anticipated higher ore grades in Indonesia, but were lower than the July estimate of 330K oz. due to timing of shipments in Indonesia and lower South America production.
More boardroom shakeups likely will force further restructuring and asset sales in the energy sector during the next year, and activist investors will be drawn to energy companies as long as oil and gas prices remain stable, according to bankers at a Bloomberg oil and gas conference.
Devon Energy (DVN), Freeport McMoRan (FCX) and WPX Energy (WPX) are mentioned as potential targets for activists who see a chance to speed up efforts to boost shares, buy undervalued reserves and win shareholder support for management and governance changes.
Targets may include companies where charismatic leaders or founding families are ignoring shareholders; even today, Occidental Petroleum (OXY) announced changes largely the result of shareholders ousting its longtime chairman.
Some may think gold equities are cheap given the dramatic decline in share prices, but Jefferies analyst Peter Ward "strongly" disagrees, and believes higher interest rates will be the key to force gold prices modestly lower to $1,250/oz.
Newmont Mining (NEM) is Ward's focus if investors are looking for a specific gold mining stock to sell short; it already was hit hard this week on speculation it would bid for Peru's Las Bambas copper mine.
Ward's favorite mining stock is Freeport McMoRan (FCX), seeing it as a better value than others.
He suggests a pair trade of going long the SPDR physical gold ETF (GLD) while selling short NEM, Barrick Gold (ABX), Kinross Gold (KGC) and Goldcorp (GG) in equal lots.
Deutsche Bank issuing ratings for several miners but upgrades only Barrick Gold (ABX +2.4%), to Buy from Hold with a $30 price target (from $20), taking on faith management's follow-through to respond to corporate governance concerns, cut costs, slim its portfolio and clear a path to free cash flow.
The firm downgrades Silver Standard (SSRI -2.3%) to Sell from Hold and cuts its price target to C$4.50 from C$7.50, citing what it sees as an inability to fund the Pitarrilla development without issuing equity.
Price targets are raised for Freeport McMoRan (FCX) and Teck Resources (TCK) (I, II), while they're lowered for Vale (VALE), Southern Copper (SCCO) and Coeur Mining (CDE) (I, II, III).
Freeport McMoRan (FCX) says its Tenke Fungurume copper and cobalt mine in the Democratic Republic of Congo has reduced its operating rates due to frequent electricity outages in recent weeks.
FCX says it is working with the state-owned electricity provider SNEL and the government to resolve the problems; copper and cobalt-rich Katanga province has a power shortage of more than 300 mw, and SNEL is supposed to purchase power from neighboring Zambia to make up for part of the shortfall.
FCX owns 56% of the mine, Lundin Mining (LUNMF.PK, LUNCF.PK) has a 24% stake and the rest is controlled by Congo’s state-owned mining company.
Rio Tinto (RIO) has received three bids for its majority stake in the Clermont mine in Australia's Queensland state, but all three fell short of expectations, WSJ reports.
Rio is cutting costs and seeking to sell assets including coal stakes in Australia and Mozambique and an iron ore mine in Canada, but coal assets have been hard to sell due to easing demand from China, which has resulted in a slump in coal prices.
Clermont is one of Rio's newest and largest coal operations; it was opened in 2010 and will supply up to 165M tons of thermal coal in its expected 16-year lifetime.
RIO -2.7% premarket, as mining firms are under pressure after economic data from China came in weaker than expected: VALE -2.2%, BHP -1.4%, FCX -0.9%.
Freeport McMoRan (FCX +1.1%) sports a solid gain as Barclays analyst David Gagliano suggests the company should covert to an MLP, an idea discussed at length recently with CEO Jim Flores.
"With producing oil assets backed by hedges, with longer-term U.S.-based copper projects in need of creative financing, and with the stated objective of reducing debt to a targeted level of ~$12B over the next three years, the case for an MLP with sizeable future drop-down potential from FCX is compelling," Gagliano writes.
FCX is the firm's top pick among U.S. metals and mining, citing "significantly underappreciated company-specific volume growth potential in both copper and energy."
The rush to cut costs has been felt the hardest by mining-industry suppliers, including Caterpillar (CAT -0.1%) and Joy Global (JOY +0.9%), Cowen says, because cancelling orders for new equipment is one of the easiest ways to cut costs.
Among S&P 500 mining stocks, FCX +2.9%, CNX +2.6%, NEM -0.2%.
Copper prices are rallying today, up 2.2%, fueled by a trifecta of stronger manufacturing data from China, Europe and the U.S.
Copper prices have been trending upward since June, but Paul Ausick notes production is estimated to be 167K metric tons above demand this year and rising to 408K metric tons of excess production next year, which makes virtually certain a drop in price with the only question the size of the drop.