Is Freeport-McMoRan Copper & Gold Inc. (FCX) Destined for Greatness?

It would help if gold miners could reflect the continued strength of the metal they’re after. Many gold miners have fallen over the past three years after some initial optimism in 2011. Of the larger miners, few have so much as broken even on total returns for the past three years. Only Yamana Gold Inc. (NYSE:AUY) has had similar success to the underlying strength of gold itself:

Gold Price in U.S. Dollars data by YCharts.

Freeport, however, is more dependent on copper production, which is tied to the strength of industrial and construction sectors. Copper prices have risen less than gold, but Goldman Sachs Group, Inc. (NYSE:GS) envisions modest price growth in 2013. So far, we may be seeing that come to pass, as prices have been ticking up through the winter. Over the past three years, the share prices of major copper miners — with the exception of Southern Copper Corp (NYSE:SCCO) , which has been putting forth much stronger earnings growth than Freeport over the past three years — have marched in virtual lockstep with the changes in copper prices:

Copper LME Settlement Price data by YCharts.

The main driver that will shift Freeport away from this apparent reliance on copper prices is its planned acquisition of both Mcmoran Exploration Co (NYSE:MMR) and Plains Exploration & Production Company (NYSE:PXP), which would create a much more diversified natural resource company. However, it remains to be seen whether this is a good idea, or just a ploy to enrich the directors of these companies, who, as my fellow Fool David Lee Smith points out, would benefit handsomely from the acquisition. Such moves don’t do much to engender investor trust in the executives they depend on to drive returns.

The article Is Freeport-McMoRan Destined for Greatness? originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and owns shares of Freeport-McMoRan Copper & Gold.

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