Freeport-McMoRan Copper & Gold Inc., the best-performing stock among North American mining companies in 2007, turned into the worst this year. Analysts say the company may not fare much better in 2009 as copper prices slump.

Freeport, the world’s second-largest copper producer, has fallen 78 percent this year, the biggest loss in the 16-member Philadelphia Gold & Silver Index and the steepest decline since the shares started trading in 1996, as copper tumbled 57 percent in New York Mercantile Exchange trading. Analysts set a target price of $34.10 for the Phoenix-based company, a 51 percent increase from its close in New York trading today.

Chief Executive Officer Richard Adkerson spent much of 2008 planning to expand until the rout in metals forced cuts in output and jobs and halted dividend payments and share buybacks. Freeport may have to make more cuts next year unless copper recovers because production costs are higher than metal prices for much of its North American operations, according to company data.

“Credit is still dead, inventories are still piling up and there’s no demand to build anything,” Chris Wang, co-founder of SYW Capital Management LLC in New York, said in a telephone interview. “He’s got to cut more at the operations, lay off people at central offices.”

Freeport produces two-thirds of its U.S. output at a cash cost of $1.40 to $1.60 a pound, the company said earlier this month. That means mines expected to yield 1.3 billion pounds of the metal next year, or almost a third of total output, are unprofitable at current prices.

Freeport Decline

Freeport rose $1.01, or 4.7 percent, to $22.58 as of 4:15 p.m. in New York Stock Exchange trading. The shares are valued at 2.91 times earnings, compared with the average 20.63 ratio for companies in the Philadelphia index. Copper, which traded at a record $4.2605 a pound on May 5, rose 2.95 cents, or 2.3 percent, to $1.3035 a pound today and has been below $1.60 since Dec. 2.

Wang, who manages $52 million, profited as Freeport declined because he has a short position in the stock. Short sellers borrow shares and sell them, hoping to profit by replacing the stock at lower prices.

Excluding certain items, Freeport is expected to earn 44 cents a share in 2009, the average estimate of 15 analysts surveyed by Bloomberg. The shares may rise to $34.10 in 12 months, the average price target from 13 analysts.

Adkerson, 61, said he realized in mid-October that demand for the metal used in pipes and wires wouldn’t recover soon and told managers to pare unprofitable output and costs.

‘Hitting the Brakes’

“It was like driving a racecar down a track fast as you can go, full out, coming up on a very sharp curve unexpectedly and hitting the brakes, gearing down and keeping the car on the road,” Adkerson said in a Dec. 3 interview. “We had to make changes so quickly.”

Freeport said Nov. 10 it would delay restarting its Climax molybdenum mine in Colorado and Miami mine in Arizona. It also stopped repurchasing stock after buying about $500 million at an average of $79.15 each, almost four times the current level.

A month later, the company reduced its U.S. workforce by 20 percent and trimmed production plans for next year by 5 percent.

Commodity prices tumbled this year as $1 trillion of writedowns at the world’s biggest financial companies caused economies to slow, popping a bubble in raw-materials prices. The Reuters/Jefferies CRB Index, which rose 29 percent in the first half of the year, has since dropped by more than half.

Public Works

U.S. President-elect Barack Obama pledged earlier this month to boost the U.S. economy with the biggest public-works program in more than half a century. China’s government said on Nov. 9 it will spend $586 billion on an economic stimulus plan including investment in housing and infrastructure, projects that may require the copper and molybdenum that Freeport produces.

Another bright spot may be Freeport’s Grasberg mine in Indonesia, which produces gold as a byproduct. The precious metal has gained 4 percent this year as the global recession and the declining dollar increased its appeal as an alternative investment.

Freeport’s cuts, like those by Japan’s Mitsubishi Materials Corp. and Nippon Mining & Metals Co., haven’t helped copper prices recover from the worst performance in at least 21 years.

The metal may average $1.34 a pound next year, Goldman Sachs Group Inc. analysts led by Jeff Currie, head of commodities research, said in a Dec. 11 note to clients.

‘Losing Money’

“You have to have the other people come along and do what Freeport has done,” Chuck Bradford, an analyst at Soleil Securities in New York, said in a telephone interview. “A lot of the other producers have to be losing money today, and if they’re not, they’re close.”

Adkerson said he may start a third round of cuts if copper stays below $1.50 a pound. That’s looking increasingly likely because the U.S. economy is forecast to shrink 2.4 percent in the first quarter and 0.5 percent in the second, according to 59 analysts in a Bloomberg survey.

Inventories tracked by the London Metal Exchange rose 68 percent this year to 331,450 metric tons as of Dec. 24.

Find More Other News : Company, Copper Mine, Exploration, Mine Trade & Market, Mineral Exploration, Mining Finance, Mining Investment, Mining Jobs