Why Freeport-McMoRan Shares Soared Today

Shares of mining giant Freeport-McMoRan (NYSE: FCX) rose 6.7% Thursday during a trading session when many so-called "inflation plays" benefited from bounces in the commodities that underlie their businesses. In Freeport-McMoran's case, the commodity is copper. It's not only that copper stocks are subject to violent near-term fluctuations driven by sentiment -- the price of copper is too.

And the copper price certainly has moved sharply recently. From $4.80 per pound in late April, it zigzagged down to around $4.05 in May, then popped back up to $4.50 per pound as of the start of June, and then tanked to a near-term low below $3.40 per pound in July. Well, on Thursday, it bounced to $3.55 per pound, and that was enough to send Freeport-McMoran's share price higher.

The price of copper does matter to Freeport-McMoran. According to management, it's sensitive enough to shifts in the commodity that a $0.10 increase in the price per pound would add $425 million to its annual earnings -- and a $.10 per pound decrease would have the opposite effect. Moreover, management's 2022 guidance for operating cash flow of $8.6 billion is based on a price assumption of $4.75 per pound.

Source Fool.com