Freeport-McMoRan reports third quarter earnings

October 23, 2012

Freeport-McMoRan Copper & Gold Inc. announced that its third-quarter net income slid 22 percent on lower production and sales.
The Phoenix, AZ-based company earned $824 million, or 86 cents per share, compared with $1.05 billion, or $1.10 per share a year ago.
Third-quarter earnings included a gain related to income taxes, environmental obligations and litigation reserves totaling 18 cents per share. That compares with charges of 7 cents per share a year earlier.

Excluding the one-time gains, profit was 68 cents per share. Revenue fell 15 percent to $4.42 billion, Businessweek reported.

During a conference call with analysts, Freeport-McMoRan CEO Richard Adkerson said that despite the lower earnings the company sees a positive situation in China with high demand for its copper concentrates and copper cathodes.

Adkerson noted U.S. copper demand “is being helped significantly by the automobile industry. Housing data has been more positive. And while growth in the U.S. today is certainly lower than the business community expected a year ago, we're seeing some positive aspects to copper demand in the marketplace.”

“In the context, global inventories of copper remain low. Inventories of our customers are low, and the industry is supported by ongoing supply challenges of production from existing mines as well as the challenges in developing the relatively scarce number of major new projects that the industry has available to it around the world,” he said.

Analysts, who generally exclude one-time items, expected a profit of 73 cents per share on revenue of $4.39 billion, according to FactSet.
Gold production tumbled 47 percent, sales were down by half. Cooper production slipped 1 percent, while sales fell almost 3 percent. Freeport's average realized price for both increased during the quarter.

The company was hurt during the quarter by lower ore grades in Indonesia. That offset production growth in North America and Africa. Freeport operates the world's largest copper and gold mine in Indonesia.

Indonesian operations produced 495 million lbs of copper and 641,000 oz of gold during the first nine months of this year, down from 778 million lbs of copper and 1.123 million oz of gold during the same period of last year. For the third quarter of the year, Indonesian operations yielded 199 million lbs of copper and 182,000 oz of gold, down from 233 million lbs of copper and 357,000 oz of gold during the third-quarter 2011.

Freeport-McMoRan reported company-wide production of 2.66 billion lbs of copper, 707,000 oz of gold and 61 million lbs of molybdenum during the first nine months of this year, down from 2.87 billion lbs of copper, 1.2 million oz of gold, and 65 million lbs of molybdenum reported during the first nine months of 2011.

For the third-quarter 2012, Freeport reported production of 938 million lbs of copper, 204,000 oz of gold, and 20 million lbs of moly, down from 951 million lbs of copper, 385,000 oz of gold, and 23 million lbs of molybdenum.

Adkerson said Freeport management has "seen benefits to having PT-FGI listed on the Indonesian exchange."

"We believe it would present the company in a positive way within the country in terms of the way reports are disseminated and so forth. And so we are pursuing discussions about that and believe that it would be a very positive step for us and the government will view it as positive as well," he suggested.



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