Freeport McMoRan Outlook Neutral

Freeport McMoRan Copper & Gold Inc. (FCX) reported third quarter EPS of $1.31, a 48.0% year-over-year decline, due to higher input costs at Grasberg, lower realized copper prices, and higher-than-expected unit costs at its North American mines (Morenci and Safford). Given our lowered 2009 copper price assumption, rising LME copper inventory levels, and the deteriorating global economic environment, we project an FY09 EPS estimate of $4.34 and rate FCX
shares a Hold.

We believe management is taking the right steps to preserve the balance sheet. Freeport plans to reduce 2009 CAPEX, limit investment on certain capital projects, defer exploration expenditures, and potentially reduce production at high-cost operations. Unfortunately, we expect the current global slowdown to persist for the foreseeable future, which should keep a lid on copper prices and end-user demand. Our target price of $28.00 is based on around 6.5x our 2009 EPS estimate.

Headquartered in Phoenix, Arizona, Freeport-McMoRan Copper & Gold, Inc. is engaged in mineral exploration and development, mining and milling of copper, gold, molybdenum, and silver, as well as smelting and refining of copper concentrates. The company conducts its operations primarily through its principal operating subsidiaries, PT Freeport Indonesia, Phelps Dodge, and Atlantic Copper.

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