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But if we look at PCU in ratio with the price of copper (in US cents), we can see the effect that lower spot prices have had on the stock.

But before we launch into an analysis, let’s look at the second pair of charts. The charts below do the same for Freeport McMoRan, first with the straight stock price and second the equal ratio to spot copper.

That’s a big difference. For one reason or another, PCU has held up much better against the drop than FCX. To drive the point home here’s the last chart that ratios FCX to PCU:

For nigh on two years, PCU and FCX have (in general terms) stayed lockstep with each other, but that’s not true any more. Even though PCU has been hit hard by the downturn, FCX has been hit harder still. There are plenty of reasons to point to here, for example;

• The sudden disappearance of the potential for FCX being bought out by peers.

• FCX’s more aggressive expansion program now being curtailed

• lower operating margins at FCX (last qtr around 37% for FCX and 50% for PCU)

• PCU’s tight ownership and dividend policy encourages long-term holding, while FCX is comparatively more a hedge fund/trade vehicle

• etc

• Copper cash cost net of by products was $1.21/lb and $1.29/lb in the last two quarters; this suggests that FCX will continue as a cash flow positive operation at current prices.

• Also it will certainly benefit from lower costs going forward. The drop in fuel costs doesn’t need underlining here, but sulphuric acid prices have dropped from the stratosphere recently and will be also be a weight off the opex. A host of other examples available, from steel prices to transport costs to truck tires to payroll

• FCX has slashed its 2009 capex budget from U$2.3Bn to U$1.1Bn.

• Last week’s announcement that hit the stock so hard has got all the bad news out of the way. As noted here a couple of days ago, the panic shills have now sold their losing positions and the whole stock has the smell of capitulation around it.

• Management are no fools. They know the picture going forward and have adjusted accordingly. This company is not going bust, it’s getting leaner and meaner so suit the circumstances in which it finds itself.

• Although 70% of FCX revenues come from copper and moly, approx 30% comes from gold. Gold has weathered the downturn better than any other traded metal and will provide significant backbone to the company’s 2009 results.

• Copper will bottom at some point and (to tempt fate somewhat) it already looks oversold. $1.38/lb is the kind of price that will close mines and less efficient operations than FCX all over the world. The immediate effect remains to be seen, but you can bet your last cent that nearly all world copper mine projects that were moving towards production will be deferred indefinitely until prices pick up.

• etc