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Gold/Mining/Energy : Copper - analysis -- Ignore unavailable to you. Want to Upgrade?

To: Stephen O who wrote (1256)	7/20/2005 8:31:46 PM
From: Stephen O	Read Replies (1) \| Respond to of 2131

Freeport McMorran producing less copper in 2006, 2007 according to Deutsche Bank: Deutsche Bank - Equity Research Freeport-McMoRan {Ticker : FCX.N, Closing Price: USD 38.76, Target Price: USD 34.50, Recommendation: Hold } Lower earnings and cashflow in 2006/07 remains the key issue The 2Q05 result confirmed FCX remains on track for record earnings and cashflow in 2005. However, against an approximate 30% fall in production share in copper and gold over the next 2 years, FCX will struggle to maintain earnings at current levels for 2006 and 2007, almost irrespective of the copper price. 2Q05 result 91cps Overall a better than expected result at the net income level, in-line at the EBIT level but again showed a structurally higher than expected cost base at its Grasberg operation. FCX reported 2Q05 net income of $175.2m or $0.91/share ahead of our estimate of $0.82/share. The revenue and operating result was right in-line (each +1-2% ahead of estimates). Declining production too big to ignore Earnings revisions have been slight downward adjustments for 2005-2007 and take into account slight revisions to our commodity price profile (gold price revised lower) as well as higher cost assumptions due to sustained high oil prices and higher than expected unit costs at Grasberg as seen 2Q05. With its production share for 2006/07 scheduled to decline by around 30% for both copper and gold our key concern remains what the cost profile will look like, given the high fixed cost base of Grasberg, and the higher than expected cost base 1H05. No change to $34.5/share price target