Simon Beardsmore, mining analyst with T. Hoare, has given a thumbs-up to the long-term growth plans of Freeport McMoRan Copper & Gold (FCX-N), operator of the huge Grasberg mine in Indonesia.
“Grasberg’s ore reserve is still growing,” Beardsmore notes in a recent research report. “Every pound of copper produced during the 1990s has been replaced by seven pounds of reserves, and every ounce of gold has been replaced by eight ounces of reserves.”
Beardsmore backed his “accumulate” recommendation (made when shares traded at US$14) with other good news from Grasberg. “Reserve growth is fuelling expansion of production; we expect the Grasberg mine will be producing over 6% of the western world’s copper by 2000.” He also points out that the company’s extensive ground holdings throughout Irian Jaya provide the possibility for major discoveries.
The rosy picture is qualified by the caveat that current and future expansion plans will continue to strain Freeport’s balance sheet. “We see Rio Tinto continuing to provide project finance,” Beardsmore cautions.
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