Freeport-McMoRan Copper & Gold, Inc. (FCX) reported second quarter EPS of $2.62, down 23.2% year-over-year, primarily due to lower sales volumes of copper and gold because of mine sequencing at the Grasberg mine in Indonesia.

Freeport-McMoRan was able to offset the increase in costs with the help of high copper and gold prices. The company has a strong cash flow position and several growth projects in its pipeline. The merger with Phelps Dodge Corporation has positioned FCX as the second-largest copper producer and the largest publicly traded copper company globally. We maintain our positive outlook and Buy rating on the stock. Our target price of $99.75 is based on around 8.9x our 2008 EPS estimate.

Freeport-McMoRan has initiated plans for incremental expansions at the Morenci, Sierrita and Bagdad mines in Arizona and the Cerro Verde mine in Peru. The company estimates that these projects would provide incremental production ramping up to more than 200 million pounds of copper per year and 7 million pounds of molybdenum per year by 2011. The company also has other expansion projects in its pipeline.

FCX has reduced its total debt by $4.6 billion to approximately $7.4 billion at the end of 1H08 from around $12.0 billion at the end of March 2007. It plans to pay down almost two-thirds of its debt by 2009.