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Zuojia (Zachary) Chen Vignesh Murali Kuralay Seitalina Yili (Eric) Xu Nov. 5 th , 2009

Zuojia (Zachary) Chen Vignesh Murali Kuralay Seitalina Yili (Eric) Xu Nov. 5 th , 2009. Company Overview. An international mining company in North America with reserves of copper , gold and molybdenum Largest and lowest cost copper producers in the US

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Zuojia (Zachary) Chen Vignesh Murali Kuralay Seitalina Yili (Eric) Xu Nov. 5 th , 2009

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  1. Zuojia (Zachary) Chen Vignesh Murali Kuralay Seitalina Yili (Eric) Xu Nov. 5th, 2009

  2. Company Overview • An international mining company in North America with reserves of copper, gold and molybdenum • Largest and lowest cost copper producers in the US • principal asset is the Grasberg minerals district in Indonesia, which contains the largest single gold reserve • World presence • two segments: mining and exploration; smelting and refining http://globalbb.onesource.com/Web/Reports/ReportMainIndustry.aspx?SicCodeID=220542&Report=ALLMARKETRESEARCHREPORTS&Process=IP&Type=GetReport&FileFormat=PDF&ReportID=62261&FileName=0199-2106-2007.pdf&VendorName=Datamonitor

  3. Industrial Analysis • The global metals and mining industry grew by 20.2% in 2007 to reach a value of $1,594.9 billion. • Sales of iron and steel : 65.1% • Asia-Pacific Markets : 62% • Trend towards concentration • FCX’s Market share in the copper industry 2007: 60% http://globalbb.onesource.com/Web/Reports/ReportMainIndustry.aspx?SicCodeID=220542&Report=ALLMARKETRESEARCHREPORTS&Process=IP&Type=GetReport&FileFormat=PDF&ReportID=62261&FileName=0199-2106-2007.pdf&VendorName=Datamonitor

  4. Competitors • Arcelor Mittal: located in Luxembourg; world's largest steel producer; 6 segments covering 5 major industries • BHP Billiton: located in Australia; two entities: BHP Billiton Limited, BHP Billiton Plc; operates through nine segments • Rio Tinto: Located in Australia; engages in exploring, mining and processing the mineral resources; operates through eight business groups http://globalbb.onesource.com/web/Reports/ReportMain.aspx?KeyID=748084&Process=CP&Report=RATIOCOMPS http://globalbb.onesource.com/web/Reports/ReportMain.aspx?KeyID=4520&Process=CP&Report=RATIOCOMPS http://finance.yahoo.com/q/ks?s=RTP

  5. Comparable Ratio Analysis

  6. SWOT 5-yr CAGR: 65.5% Expertise in both technology and production methods • Strengths: Expanding market share Geographical diversification Operational structure • Weaknesses: Poor profitability (Metal prices volatile) Limited liquidity position (1.66) • Opportunities: Increase in Demand for Molybdenum Emerging technologies • Threats: Environmental regulation (Kyoto Protocol) Foreign exchange risk Global economic slowdown http://globalbb.onesource.com/SharedScripts/Reports/FetchAR.asp?Process=CP&DocID=15363652&file=file.pdf

  7. Financial Statement Analysis • Profitability • Liquidity • Efficiency • DuPont Analysis

  8. Profitability

  9. Liquidity

  10. Efficiency

  11. Du Pont

  12. Du Pont_ adjusted

  13. Du Pont Pro Forma

  14. DCF Assumptions • Revenue • Major drivers • Quantity of copper sold and price of copper • Infrastructure demand in developing countries • Residential and Industrial development in the US • Operating Expenses • Management Strategy to reduce costs • Capital Expenditure

  15. Multiples Valuation

  16. Football Chart

  17. Correlation within present portfolio

  18. Recommendation • Price per share when we started - $ 60 • Price per share now - $ 77 • Price range using Multiples and DCF - $60- $80 • Even with very conservative growth, company will be profitable and in a financial sound position • Reduces standard deviation of the portfolio • We recommend we add this company to the watch list and reanalyze company when price is $55

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