not vested
Buy Freeport For Indonesia Gold & Copper Upside, Jefferies Says By Dimitra DeFotis
Mining giant Freeport-McMoRan (FCX) is mired in licensing negotiations at its Grasberg copper and gold mine in Indonesia, which is important in that it accounts for roughly
a third of the company’s value.Jefferies Analyst Christopher LaFemina, along with Patricia Hove and Timothy Ward, note that little progress has been made in Indonesia, where the government wants the company to convert from a contract to a special mining license.
The result could force Freeport to sell a stake to local owners at a lower valuation, build a smelter and limit its mining rights past 2021.
LaFemina maintains the company is undervalued, but says the upside will be limited until the Grasberg case is resolved; in February, Freeport said it could seek international arbitration.
Resolution is the likely outcome, he says in a fresh video and report. The Jefferies team recommends buying the shares now “for the long-term investment horizon.”
Freeport shares, trading near $13.72, are up 1.3% today, and have climbed about 55% over the past year. LaFemina concludes that compliance with Indonesia’s demands could mean a value near $17 per share, for upside of as much as 24%.
He adds that selling completely to Indonesia and possibly another party could bring $16 per share, and other options produce similar values.
Shares of some mining and commodity plays performed more than twice as well as Freeport. Vale (VALE) is up 143% over the past year and Glencore (GLNCY) is up 103%. BHP Billiton (BHP) is up 58%. Gold miners have been a more mixed bag, with Sibanye Gold (SBGL) down 34% and Barrick Gold (ABX) up 37%.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... ries-says/
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