Freeport-McMoRan Copper & Gold Inc. (FCX): The Largest Gold Mine in the World Has Been Shut Down

What this incident does, however, is highlight one of the positive aspects of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s just-closed oil and gas acquisitions. The diversification that the two new companies will provide can help deflect some of the damage caused financially to the company in times like this. Pro forma, the combined company will only rely on mining for around 75% of its EBITDA rather than the previous 100%.

What the company is doing is transforming itself into a global resources company as opposed to a copper-focused global mining company. This is a similar model to the one espoused by BHP Billiton Limited (ADR) (NYSE:BHP). Not only does the Anglo-Australian giant have major mining operations, including the world’s largest copper mine Escondida, but it has global gas and oil operations as well. This has made the company’s profits less sensitive to the price movement of any one commodity. For example, a 10-cent-per-pound move in copper has a $200 million impact to BHP Billiton Limited (ADR) (NYSE:BHP)’s net profit after taxes. That same move in copper prices has a $275 million impact to Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s operating cash flow, which is on a smaller base.

The bottom line here is that this mine closure, while bad for Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), isn’t as bad as it could have been if the company weren’t diversifying its business into oil and gas.

The article The Largest Gold Mine in the World Has Been Shut Down originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of BHP Billiton (ADR). The Motley Fool owns shares of Freeport-McMoRan Copper & Gold.

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