Out Fox The $treet

Last week, McMoRan Exploration (NYSE: MMR ) announced Q4 earnings that provided more of same regarding failures at the high profile Davey Jones #1 well. Considering the potential of the Davey Jones well and the famous pedigree (member of the musical group the Monkees), it can be understandable that investors ignore the other ultra-deep wells. Back in December, the leading ultra-deep Gulf of Mexico explorer accepted a buyout along with Plains more » Disclosure: Long FCX. Please review the disclaimer page for more details. 

McMoRan Exploration Co. (MMR) shares plunged on Monday after the company reported more mechanical issues with the hopefully prolific Davey Jones No. 1 well. Investors had expected results from this well over a year ago, but problems continue to frustrate all involved in this historic drilling effort. The company is attempting to lead the world in ultra-deep drilling in shallow waters off the Gulf of Mexico. It has numerous exploratory and development wells in the sub-25,000-feet zones. Investors interested in the stock should heed warnings from the CEO, Jim Bob Moffett, who was quoted in a recent Bloomberg article as saying: "People call us pioneers. Well, that's great, I guess, (though) some people say pioneers end up with arrows in their back." The huge expense to drill the Davey Jones and the shrinking liquidity levels have naturally made investors concerned about a potentially predatory financing to complete the ultra-deep drilling program. The concern was large eno...

Looking at a chart of Freeport-McMoRan (FCX) and Copper (HGA) it would appear that Goldman Sachs (GS) is a little late to the party. Not that Stone Fox isn't appreciative that GS is pushing up one of our bigger investments. The stock trades at $83 now, but was available for only $57 when July started. Where was GS then? Not to mention that the new target of $94 doesn't provide that much upside from these levels so trade on this news with caution. Copper has also seen a huge rise and is now attempting to breakout and test the recovery highs around $3.60/lb. So again GS seems to have turned bullish long after a run has begun. Now to be fair, the copper inventory situation has become a lot more bullish over the last couple of months. LME copper inventories continue to plunge on a daily basis from 520k tonnes 6 months ago to 382K tonnes today. GS comments : Goldman Sachs was active in the metals segment on Monday morning. The firm ...

Now that the US is starting to increase demand for Copper, Stone Fox Capital is intrigued to see how the market handles strong demand from both China and the US. China has become the dominant copper user by far at 40% of the global market. The US, 2nd largest market at 10%, has been weak for the last couple of years at copper still surged to $3.5/lb recently. Maybe China does slowdown it's copper growth, but what if both markets are growing at the same time? The last time the US had a strong market was in 2006 and China was much smaller back then. Interesting interview with Richard Adkerson, CEO of Freeport McMorran Copper (FCX) and Co-Chairman of McMoRan Exploration (MMR). A few interesting points: FCX recently started up operations in Arizona to supply a growing US market the proposed 40% mining tax in Australia will cause investment dislocations ( to the advantage of FCX and other miner not in Australia ) MMR doesn't operate in the deep waters of the GOM though they do drill...