Freeport (NYSE:FCX) Ready to Build Rail Lines to Transport Copper from Tenke Project

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) may be ready to build rail lines to transport ore from its Tenke project in Democratic Republic of Congo.

The possibility is being brought about after an agreement between the giant miner and the government of the African nation came after a 3-year battle over contract terms was resolved.

Freeport’s Chief Executive Officer Richard Adkerson said production will ultimately double at Tenke as they expand the operations there.

Tenke should produce up to 290 million pounds of copper and 18 million pounds of cobalt annually, according to Adkerson.

Revisions in the contract include the conversion of $50 million in debt into equity and pay up to $30 million in installments based on certain metrics being attained.

Concerning copper reserves, royalties of $1.2 million will be paid for each 100,000 metric tons of copper reserves above 2.5 million tons, and another $5 million for surface area fees.

BHP Billiton (NYSE:BHP) Upgraded, Up on Day

BHP Billiton (NYSE:BHP) was upgraded by a couple of companies yesterday, as copper supply appears to be shrinking, and when demand picks up, they and other copper producers will benefit strongly from it.

Raising their outlooks on BHP were Independent Research GmbH and Evolution Securities.

Evolution raised BHP's rating from "Add" to "Buy," while Independent Research GmbH raised their outlook on BHP from "Hold" to "Buy."

At 1:19 PM EDT, the miner was at $64.38, up $1.67 or 2.66%. Other miners like Teck Resources (NYSE:TCK) and Rio Tinto (NYSE:RTP) were also up today on similar copper supply news.

Freeport-McMoRan (NYSE:FCX), Southern Copper (NASDAQ:SCCO) and Copper Demand

While everyone got excited yesterday over the decision to all the yuan to float more against the U.S. dollar, it didn't take long for the market to realize it wasn't that significant, even though precious metals like copper moved up quickly, and copper-exposed companies like Freeport-McMoRan (NYSE:FCX) and Southern Copper (NASDAQ:SCCO) plunged, after the brief euphoria left the market.

Calls also drove up the price of Southern Copper yesterday. But it's highly unlikely attempts to move the stock up by 14 percent to make a profit will work, as macro-economics simply aren't going to allow that to happen, as there's nothing out there to justify that happening, even if some temporary event or story causes some short-term optimism.

Several things are working against copper, and some of them very specific to demand. There is the Chinese property market inflation worries, which China is cooling off, and which copper demand will decline. The U.S. new housing starts are plunging as well, with the tax credit eliminated, which immediately resulted in 10 percent less starts.

Finally, there's the sovereign debt crisis in Europe, which is so bad it's impossible to know or predict how long that will last, or the real depths of the crisis.

That will keep copper demand in check for an unknown period of time, and there is little if anything that will change that in the short term, and in the long term it doesn't look much better.

Those excited about the decision of the Chinese with the yuan will need to take into account the parameters imposed upon copper and other precious metals by the ongoing recession, and the global situation is tenuous at best, with demand for raw materials far less than projected not that long ago.

Until the larger economic picture improves, Freeport and Southern Copper are going to struggle to grow. The best thing to look for there is probably buying opportunities through low price-points, with a view to the long term.

Short term there isn't much happening with these and other companies which have large exposure to the copper market.

Neither of the two companies mentioned here have done much of anything in share price since October 2009, and that's unlikely to change.