Three Questions Investors Want Answered When Freeport-McMoRan Copper & Gold Inc. (FCX) Reports

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is expected to report its second-quarter results on July 23. What’s different this time around is that it will be reporting more than copper and gold earnings because the company’s transition into oil and gas is now complete. Let’s take a look at three burning questions investors want answered when the newly combined company reports.

How is the oil and gas integration going?
On June 3, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) became more than just a mining company when it completed the final step of its $19 billion transformation into a global resource company. With that out of the way, the key for investors is to watch to see how the integration went during the first month. Because this was such a large deal, any hint that there will be integration issues will really weigh down shares.

One area to watch is production. Last quarter, the two companies it had acquired produced 137,000 barrels of oil per day and 303 million cubic feet of natural gas per day. Investors will want to see growth in both of those numbers. Overall, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has said it expects to double its production over the next five years, while tripling its cash margin by 2020. Investors need to see how the company is progressing on those aggressive goals.

What was Grasberg’s effect?
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s massive copper and gold mine in Indonesia had its production suspended after a tragic accident occurred near the mine on May 14. The mine didn’t resume operations until June 21, which had a big effect on production. Overall, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) estimated that 115 million pounds of copper and 115,000 ounces of gold production was affected. Further, about 1 million pounds of copper and 1,000 ounces of gold production per day remain suspended, for the mine isn’t back at full production. This undoubtedly had an influence on the quarter’s performance.

Grasberg mine. Source: Alfindra Primaldhi (Wikimedia Commons).

What investors will want to see is how much the production curtailment affected its quarterly earnings as well as what the future effect might be. There will be costs associated with the incident, as well as costs to ensure something like this will never happen again. Investors will need to see what effect, if any, there will be on Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s long-term profitability at Grasberg or at its other mines.