Why Freeport-McMoRan Shares Rose Sharply

M&A interest is heating up in the copper mining industry.

What happened

Shares of copper miner Freeport-McMoRan (FCX 0.00%) were up by more than 7% in mid-afternoon trading Thursday after an analyst named the company as a possible acquisition target.

Mergers and acquisitions are certainly hot topics right now in the mining space, with giant Rio Tinto (NYSE: RIO) recently agreeing to acquire the 49% of copper/gold miner Turquoise Hill that it doesn’t already own. Elsewhere in the sector, BHP Group recently made an unsolicited bid for Australian copper/gold miner OZ Minerals, but the target company rejected that bid in August.

Both were cases in which large mining companies were looking to acquire copper mining assets to benefit from anticipated future demand for the metal from the electric vehicle and renewable energy industries.

So what

The note released by Scotiabank analyst Orest Wowkadow and the takeover bids highlight a couple of bullish arguments for Freeport-McMoran. First, the long-term outlook for copper demand is attractive enough to encourage takeover actions. Second, the increasing difficulty of acquiring mining permits will only raise the value of miners with existing projects or development projects.

Freeport-McMoRan has copper mining assets in countries such as the U.S. and Indonesia, which are seen as more politically stable. It would be a good target for a major mining company that was looking to enter the copper market or expand its position in it.

Now what

Given Freeport’s $43 billion market cap, it’s hard to picture a bid for it coming from any company other than Glencore, BHP, or Rio Tinto. That said, the fact that mergers and acquisition activity is taking place in the industry is a positive sign about how industry experts view the long-term outlook.

Should you invest $1,000 in Freeport-McMoRan Inc. right now?

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