Investors were upset two years ago when Freeport-McMoRan Inc. (NYSE: FCX), the world’s biggest publicly traded copper miner, announced a $9 billion debt-fueled purchase of two oil and natural gas producers.

Turns out they were right to be, Bloomberg said Jan. 23.

At the time, the Phoenix-based company said the deal would help it diversify, acting as a hedge for potential downturns in their main products, copper and gold. Now, all three commodities are facing drastically reduced prices, and Freeport is struggling to right itself.

The company’s shares have fallen 38% since it announced the acquisitions of Plains Exploration & Production Co. and McMoRan Exploration Co. in December 2012. Last month, Freeport said it was reviewing its planned 2015 capital budget of $7.5 billion as oil prices continue their slide.

“Most shareholders would rather that they didn’t make that acquisition in the first place,” said Garrett Nelson, an analyst at BB&T Capital Markets. “Now they’re stuck with $19 billion of debt and it’s unclear how they going to be able to pay that down at these commodity price levels.”

Since the acquisition, copper has dropped 30% (as slowing economic growth in China curbs demand for the metal) and West Texas Intermediate crude is down 47% (as surging oil production, especially in the U.S., drives down prices).

Freeport’s total debt at the end of 2012 was about $3.5 billion. That almost tripled by the next quarter to $10.1 billion and then doubled to $20.7 billion by the end of 2013.

The company, which operates in the Americas, Africa and Indonesia, said in October it might miss its goal of reducing net debt to about $12 billion by 2016, and last month said it was reviewing its 2015 capital budget as oil prices were sliding. Eric Kinneberg, a company spokesman, on Jan. 22 declined to respond to questions about the success of the 2012 deal.

Nelson, based in Richmond, Va., said he now expects Freeport to chop more than 20% of its capital spending budget this year, with cuts in both mining and energy spending.

Rick de Los Reyes, who manages about $1.4 billion at Baltimore-based T. Rowe Price Group Inc. (NASDAQ: TROW), which owns Freeport shares, was uncomfortable with the debt the company took on to fund the deal, he said in an interview.

“Lo and behold, that’s where we are now and that’s what the problem is,” de Los Reyes said. “They’ve levered up the balance sheet but they’ve bought assets that aren’t throwing off any free cash.”

Commodities production is an expensive, capital-intensive business. For example, Freeport is in the middle of a $4.6 billion copper mine expansion in Peru. The company also plans to invest about $17 billion over time in Indonesia to develop its gold and copper mines and build a copper smelter, an executive with its local unit said Jan. 22 in Jakarta.

Oil and gas spending is likely to take a “substantial haircut,” according to Curt Woodworth, an analyst at Nomura Holdings Inc. (NYSE: NMR) in New York, said in a research note. Freeport will probably try to sell some of its less-valued energy assets this year to pay down debt, he said.

Freeport, established in a 1981 merger, operates the giant Grasberg pit in the mountains of Indonesia’s Papua province and in 2007 added other mines with the $26.5 billion purchase of Phelps Dodge Corp.

The purchase of McMoRan Exploration and Plains met with criticism. If investors wanted diversification, they could diversify their own holdings, Evy Hambro, the head of BlackRock Inc.’s (NYSE: BLK) World Mining Fund, said on a conference call organized by Freeport for the day of the announcement.

“Most transactions we’ve seen in the past, that have tried to justify themselves based on growing their size or through diversification, haven’t worked,” he said then. “Can you tell us why this is going to be different this time?” Hambro didn’t immediately reply to phone and email messages left after regular business hours at his London office Jan. 22.

BlackRock wasn’t the only investor to express concern. Earlier this month Freeport agreed to pay $137.5 million to resolve shareholder lawsuits claiming it overpaid for the two companies because of executives’ and directors’ conflicts of interest, according to filings in the Delaware Chancery Court.

At the time of the deal, Freeport chairman and co-founder Jim Bob Moffett was CEO of McMoRan, while Freeport CEO Richard Adkerson doubled as a McMoRan director and co-chairman of its board, according to disgruntled investors. They also contended that nine Freeport directors held a combined 6% stake in McMoRan at the time of the buyout.

Freeport officials “deny all allegations of wrongdoing and fault and believe that they acted properly at all times,” Kinneberg, the Freeport spokesman, said in an emailed statement on Jan. 15.

The shares were down 1.5% at $19.72 at 9:11 a.m. before the start of regular trading in New York on Jan. 23.

Adkerson and other Freeport directors also are being sued separately over the board’s decision to award the CEO more than $35 million in stock over the McMoRan and Plains buyouts.

Fourth-quarter earnings excluding one-time items will be 36 cents a share, based on the average of 19 analysts’ estimates compiled by Bloomberg, down from 84 cents a year earlier. Sales are projected to drop about 16% from a year ago, to $4.93 billion.

“The drop in copper prices and oil and gas means it’s going to be very painful,” Nelson said.