Freeport McMoRan ripe for takeout, analysts say

Freeport, the world’s largest publicly traded copper miner, yesterday was valued at 3.3 times its earnings before interest, taxes, depreciation and amortization in 2013, according to analysts’ estimates compiled by Bloomberg. That was cheaper than any other base metals producer with more than $10 billion in market value and about a third less than the median.

However, analysts quoted by Bloomberg say that Freeport’s EBITDA will “rebound to an all-time high as demand recovers” next year, and could attract takeout offers from Rio Tinto, BHP Billiton or Anglo American:

“Freeport has probably the most attractive assets in the world with its copper mine in Indonesia,” Jean-Francois Comte, co-founder of Lutetia Capital, a Paris-based hedge fund that bets on mergers and acquisitions, said in a telephone interview. “Anybody who believes that would probably look at it.”

Forbes reports today that earnings expectations have dropped for Freeport’s first quarter results, expected to be announced this Thursday, dropping from 92 cents to 85 cents a share. That estimate is down 45% from a year ago when the company reported earnings of $1.57 per share.

Freeport said in March it will produce 80 million pounds less copper and 125,000 ounces less gold due to labour strife at Grasberg, the world’s largest copper and gold mine.

The strike turned violent last fall when Indonesian security forces fired on striking workers during a protest, killing one and injuring a dozen others, including seven police. Production was halted after a pipeline was sabotaged, access to the pit and underground operations were blocked and three miners were killed in an ambush.

Some 12,000 workers began a strike on 15 September and vowed to shut down the mine if hourly wages of $1.50 were not upped 8-fold.