Falconbridge Limited (NYSE: FAL) is an international copper and nickel company that is engaged in the identification and development of copper and nickel mining deposits. Falconbridge is one of the world's largest producers of zinc and nickel; and a significant producer of copper, primary and fabricated aluminum, cobalt, lead, molybdenum, silver, gold and sulphuric acid. The Company is also one of the world's largest recyclers and processors of metal-bearing materials. Falconbridge conducts its activities through four operating business units: Nickel, Copper, Aluminum and Zinc.

Falconbridge's properties includes mines located in Quebec, Ontario and northern Chile. The Company also has interests in mining projects located in Argentina, Papua New Guinea, Quebec, Australia, New Caledonia, and Tanzania. Further, Falconbridge has interests in mineral deposits located in the Andes mountains in Peru and in the northern Brazil. The Company sells its products to the steel, refinery and foundry, construction, telecommunications, automotive, agricultural, and chemical industries.

The Stock's price gained 42.9% over the past 3 months; 66.7% over the past 6 months; and 175.5% over the past 12 months.  Falconbridge  is classified as a large-cap growth company. The Company's market capitalization: $8.6 billion. The Stock is rated to significantly outperform the market over the next six months. The Company was formed in June 30, 2005 with the merger of the former Falconbridge Limited and Noranda Inc. Noranda was founded in 1922 and the former Falconbridge founded in 1928.. Falconbridge's corporate headquarters are located Toronto, Canada. Approximately 14,500 people are employed at Falconbridge's operations and offices in 18 countries.

SIGNIFICANT
RECENT NEWS: Mining company Xtrata launched takeover bid for Falconbridge (MSN; 6/15/06).
                                 Inco's pending offer to acquire Falconbridge. (MSN; 6/07/06)

Sector: Basic Materials; Industry: Industrial Metals & Minerals; Ticker: FAL;  Exch: NYSE;  06/23/06 Closing Price: $49.30) 

FALCONBRIDGE LTD. - EVALUATION

Falconbridge's stock emerged as an  ACE'S selection based on the evaluation results of the criteria listed below. The evaluation results are encapsulated as one value in ASG (short for ACE'S Stock Grade). ASG is a proprietary variable that was devised by ACE'S to measure the quality of a stock for investment. Falconbridge's ASG value of 53.10 is VERY GOOD.

A. MANAGEMENTS EFFECTIVENESS - BELOW AVERAGE 
B. PRODUCTS & SERVICES, SET OF - EXCELLENT 
C. SALES - EXCELLENT 
D. CASH FLOW, FREE - EXCELLENT
E. PROFITABILITY -   GOOD 
F. PRICE-EARNINGS RATIO (P/E) -  AVERAGE
G. FINANCIAL HEALTH -   AVERAGE
H. MARKET CAPITALIZATION - AVERAGE
I. TRADED VOLUME -  AVERAGE 
J. PRICE GROWTH - EXCELLENT 

A. MANAGEMENTS EFFECTIVENESS - BELOW AVERAGE    

How well a company performs generally - in its business operations, controlling costs,  the success of its products and services in the market place, profitability, and the like - depends on its management's efficiency. Return on Equity ( ROE) is used by ACE'S as a general indication of the company's efficiency.

Falconbridge's ROE (ttm) of 24.9% is lower (by 7.70%) than the Industry's ROE of 32.6%; and higher (by 8.80%) than the S&P 500's ROE of 16.1%. (Ref.: MSN Finance\Key Ratios).

  ACE'S gives a preferential rating to a company that has a comparable or relatively higher ROE than the Industry. ACE'S rating of Falconbridge's Management's Effectiveness: BELOW AVERAGE.

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Falconbridge markets and sells selenium, tellurium dioxide, cadmium, indium, copper sulphate and nickel sulphate produced at the company's refinery in Montréal, Québec, Canada, to customers around the world.

Selenium is used as a de-colourant and colourant in glass manufacturing, a pigment for ceramics and plastics, an alloying agent for lead battery grids and specialty steels, and in animal feed, dermatological preparations and anti-dandruff shampoos.  Tellurium metal is an alloying component in specialty steels and brasses, and is used in thermo-electric components and night vision goggles. Pure tellurium dioxide is used for vulcanizing rubber.

Copper Sulphate is used in concentrating zinc ores, suppressing solar reactions with cyanide in gold mine tailings ponds, electroplating, animal feeds, fertilizer, water purification, algaecides and pesticides. Cadmiun is used primarily in the manufacture of nickel-cadmium rechargeable batteries and pigments for ceramics and plastics. Cadmium is also a
highly effective corrosion inhibitor used as an electroplated coating on steel parts in aerospace and military applications.

The main application for indium is in the production of Indium Tin Oxide (ITO), used in the production of targets for thin-film glass coatings required in flat display panels, e.g., plasma and LCD televisions, laptop computers, cell phones. Other applications of indium include solder pastes, low-temperature melting (fusible) alloys, alkaline batteries, semi-conductors and dental amalgams. Crude nickel sulphate is sold primarily as raw material feed for nickel recovery. It is not considered suitable for use in nickel plating applications.
 

  ACE'S  gives a preferential rating to a company who  have a variety of product and services  that have present and continued  utility in a broad and dynamic  market. An estimation of the latter products' utility, distinctive qualities and competitiveness would be subjective assessments. However, there is one objective data that indicates how well the subjective elements of Falconbridge's products and services are assessed and used by its target market - the company's sales.

 ACE'S rating of Falconbridge's line-up of Products & Services:  EXCELLENT

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C. SALES -  EXCELLENT 

Sales is an important indicator on how a company's products and services performs in its target market. Generally, a high sales figure is preferred than a lower figure. Also, a steady and appreciable growth in a company's total sales from one year to the next is a key indicator on how a company is able (or unable) to sustain and improve the utility of its products and services in the marketplace.

Falconbridge's annual sales was $3,865.0M in 12/2001, $3,870.0M in 12/2002, $4,657.0M in 12/2003, $6,978.0M in 12/2004 and $8,148.0M in 12/2005. Relative to 12/2001, the Company's sales increased 0.13% in 2002, 20.49% in2003, 80.54% in 2004 and 110.82% in 2005, (Ref.: MSN Money\Financials).  Falconbridge's ttm annual sales of $8,652M was 303.66% more than the Industry's  sales of $2143.4M.  Falconbridge's ttm Sales growth rate of 23.90% was 190.7% points lower than the Industry's rate of 214.60%.   (Ref.: MSN Money\Research).

  ACE'S gives a preferential rating to a company that have demonstrated the ability to sustain a high and progressively increasing level of sales  from year-to-year. Falconbridge's year-to-year annual sales - from 2001 to 2005 - have progressively increased.  In terms of sales volume, the Companies past 12 month sales is 304.0% more than the Industry. In terms of growth rate, Falconbridge's rate is lower than the Industry by 190.7% points.   ACE'S rating of Falconbridge's Sales Growth Rate: EXCELLENT.

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D. CASH FLOW, FREE -  EXCELLENT  

Cash flow is crucial to the operation and survival of companies. A company having ample ready cash ensures that creditors, employees, and others can be paid on time. Cash flow could be considered as a better measure of a business's profitability than earnings, because a company can show positive net earnings and have insufficient cash flow (that is, the company is not able to pay its debts). Cash Flow thus can be used as an indicator of a company's financial strength.

Falconbridge's cash flow during the past 5 years: $252.0M in 12/2001; $370.0M in 12/2002; $413.0M in 12/2003; $1,191.0M in 12/2004; and $1,635.0M in 12/2005.  Relative to 12/2001, the Company's cash flow increased 46.83% in 2002, 63.89% in2003, 372.62% in 2004 and 548.81% in 2005. (Ref.: MSN Money\Financials).

 ACE'S gives a preferential rating to a company that have demonstrated the ability to sustain a positive and appreciable cash flow from year-to-year. Falconbridge's year-to-year cash flow - from 2001 to 2005 - have been positive and appreciable, with an average increase of 258.04% annually.  ACE'S rating of Falconbridge's Cash Flow: EXCELLENT.

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E. PROFITABILITY -  GOOD  

Making a profit is the ultimate goal of every company. A useful gauge of a company's profitability is its net income (also referred to as "earnings").  Related to a company's outstanding shares of common stocks, the company's total earnings is transformed to "earnings per share" (or "EPS" for short). EPS is a very popular indicator of a company's profitability and a powerful variable that influences the price of a company's stock.

Falconbridge's annual Net Income, for the past 12 months, of $1,108M is 209.32% higher than the Industry's Income of $358.2M). For the past 5 years, Falconbridge's  annual Net Income are: -$58M in 12/2001; -$445.0M in 12/2002; $34.0M in 12/2003; $551.0M in 12/2004; and $888.0M in 12/2005.  Relative to 12/2001, the Company's net income increased -667.2% in 2002, 158.6% in2003, 1,050.0% in 2004 and 1,631.0% in 2005. In terms of growth, Falconbridge's Net Income have grown 125.0% during the past 12 months (vs. the Industry's 527.0% growth rate). (Refs. MSN Money\Financials\Statements; MSN Money\Wizard)

F. PRICE-EARNINGS RATIO (P/E) - AVERAGE   

A stock's Price-Earnings ratio tells us roughly how much investors are willing to pay per dollar of earnings. Price-Earnings is a ratio of a company's current share price compared to its per-share earnings. The P/E ratio is a much better indicator of the value of a stock than the market price alone.

In general, a high P/E means high projected earnings in the future. As such, the P/E ratio could be interpreted as the reflection of the market's optimism concerning a firm's growth prospects. To determine whether a particular P/E is high or low, take into account a company's growth rates; and the P/Es of other companies in the same industry. Historically, the average P/E ratio in the market has been around 15-25.

Falconbridge has a P/E ratio of 16.52 (ttm) which is 0.15 points higher - or 0.92% greater - than the Industry's P/E of 16.37 (ttm). (Ref.: Yahoo! Finance\Competitors)

G. FINANCIAL HEALTH -  AVERAGE

The assumption of debt, i.e., financial leverage, are used by companies to finance its assets. The magnitude of the debt's expense component affects the company's net income.

A company with significantly more debt than equity is considered to be highly leveraged. A popular measure of financial leverage is the "debt/equity ratio". A higher debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This higher ratio can result in volatile or negative earnings as a result of the additional interest expense. Thus, the Debt/Equity Ratio is popularly used as a measure of a company's financial health.

Falconbridge's 0.45 Debt/Equity Ratio (latest 12 months) is 8.89% more than the Industry's Ratio of 0.45, and 57.0% less than the S&P 500's Ratio 1.14. . (Refs.: MSN Money\Ratios)

ACE'S gives a preferential rating to a company that has a comparable or relatively lower debt ratio than the Industry.  ACE'S rating of Falconbridge's  Debt Ratio: AVERAGE (COMPARABLE TO INDUSTRY AVERAGE).

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H. MARKET CAPITALIZATION -  AVERAGE  

Market Capitalization (or market cap for short) is a measure of a company's size. The market cap provides a broad gauge of the growth-versus-risk potential of a company. Historically, large caps have experienced slower growth with lower risk; whereas small caps have experienced higher growth potential, but with higher risk.

The market cap of a company is calculated by multiplying the number of its outstanding shares by the shares' current market price. There are presently six classes of Market Cap: Mega Cap, Big/Large Cap, Mid Cap, Small Cap, Micro Cap and Nano Cap. ACE'S assigns an Excellent rating to Small Cap stocks; Good to Mid Caps; Average to Big/Large Caps; and Below Average to Mega Caps.  ACE'S excludes Micro and Nano Caps in its stock picks.

Falconbridge is classified as a large cap growth  company with a market capitalization of $18,347.66M and with outstanding shares of 372.39M. (Ref.: Reuters)

 ACE'S gives a preferential rating to small and mid cap companies.  ACE'S rating of Falconbridge's  Market Cap:  AVERAGE.

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I. TRADED VOLUME -  AVERAGE  

A stock's price goes up or down based on the laws of supply and demand. Simply stated, when a stock's price goes up, there must be significant buying demand for the stock. Volume is the actual number of shares traded daily. Traded volume could be used as a gauge of the demand for a stock.

Falconbridge has an 3-month Average Daily Volume of 313,372 shares; and a 10-day Average Daily Volume of 417,025 shares.  (Refs.: Yahoo! Finance\Statistics).  ACE'S assigns an Excellent rating for +1,000,000 trading volumes; Good for 500,001-999,999 volumes; Average for 100,000 - 500,000 volumes; and Below Average for -100,000 volumes.

 ACE'S gives a preferential rating to a company that sustains a lively trade volume from week-to-week and month-to-month.  ACE'S rating of Falconbridge's  Traded Volume: AVERAGE.

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J. PRICE GROWTH - EXCELLENT  

Price growth  is the 12-month increase in the price of a stock (displayed as a percentage). As of 06/22/06, Falconbridge had a 3-month growth rate  of 44.0% (vs. the Industry's 2.3% rate), a 6-month rate of 67.9% (vs. the Industry's 2.8% rate), and  a 12-month rate of 177.5% (vs. the Industry's 23.4% rate).  (Refs.: MSN Money\Research).

ACE'S gives a preferential rating to a company that have demonstrated a solid capacity for high price growth and outperforming other stocks in the Industry.  ACE'S rating of Falconbridge's  Price Growth: EXCELLENT.

  Last modified: 07/14/08