Freeport-McMoRan Inc, Vale SA Get a Much-Needed Boost from Copper Surge

Freeport-McMoRan Inc (NYSE:FCX) and Vale SA (ADR) (NYSE:VALE) have been tracking copper to the upside this week

by Karee Venema

Published on Sep 9, 2015 at 3:13 PM
Updated on Jun 24, 2020 at 10:16 AM

Copper has been rallying this week, after Switzerland-based Glencore PLC announced plans to shutter two of its African copper mines. The metal got an additional boost, after data showed China's copper imports jumped 4% year-over-year. (The upside, meanwhile, is being contained, on concern over disappointing trade numbers from Beijing.) Against this backdrop, a handful of mining names are enjoying a strong start to the holiday-shortened week, including Freeport-McMoRan Inc (NYSE:FCX) and Vale SA (ADR) (NYSE:VALE).

FCX -- which lost ground last Friday on speculation the firm is exploring strategic alternatives -- is up almost 10% week-to-date at $10.65. Longer term, the shares have struggled, shedding 69% of their value year-over-year. More recently, the stock hit a 12-year low of $7.76 on Aug. 26, and is staring up at its 40-day moving average.

Despite these withstanding technical struggles, there are still pockets of optimism levied toward FCX -- which could come back to haunt the security, should it resume its longer-term downtrend. Eight of 12 analysts maintain a "buy" or better recommendation toward FCX, with not a single "sell" to be found. In other words, an additional round of downgrades could be in Freeport-McMoRan Inc's future. Plus, it would only take two sessions to cover the equity's shorted shares, leaving little in the way of sideline cash to help fuel future rally attempts.

Since bottoming at an 11-year low of $4.13 on Aug. 24, VALE has bounced 21%. This week alone, the shares have tacked on 5.7% to linger near $5. Nevertheless, the equity remains a long-term laggard, down 60% over the past 12 months.

Unlike FCX, though, skepticism is swirling around VALE. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 1.43 ranks in the 84th annual percentile. Plus, 87% of analysts maintain a "hold" or worse rating on Vale SA, while a healthy 6.7% of the stock's float is sold short.

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