Copper markets stronger than for some timeCopper markets stronger than for some time - Freeport's Adkerson
Freeport-McMoRan Copper & Gold CEO Richard Adkerson feels physical metal markets are stronger than U.S. economic indicators.
Author: Dorothy Kosich
Posted: Thursday , 22 Jul 2010
RENO, NV -
Freeport-McMoRan Copper & Gold's optimism about copper and molybdenum markets has prompted the company to undertake several major development projects including re-starts of mines shuttered or projects shelved since 2008 due to the global economic crisis.
During a conference call with analysts Wednesday, Freeport-McMoRan CEO Richard Adkerson said he feels "physical markets really are stronger than economic indicators in the United States. "
"The issue of falling exchange stocks, an issue with scrap markets trucking and so forth, we see our order books filling more strongly than we have in some time," Adkerson noted.
While he acknowledged a lot of weakness in the U.S. economy, Adkerson says copper markets in the U.S., northern Europe, Korea and Japan "are stronger than we've seen them in some time."
Freeport is now restarting a mill that was moth-balled at its flagship Morenci copper mine in Arizona.
The company is also stripping mine ore and investing $40 million to restart its historical Miami operation, possibly ramping the operation up to 100 million pounds of copper production by the second half of 2011.
Construction of a $150 million sulphur burner project at Safford, Arizona that was deferred in 2008 has been resumed.
The company is also evaluating the restart of mining and milling activities at the Chino mine in New Mexico, which was also suspended in late 2008. Its restart would increase Freeport copper production by between 150 million and 200 million pounds.
A $50 million project that will expand mill capacity at the Cerro Verde mine in Peru will add 30 million pounds of copper production at what Adkerson considers to be a very low cost. "The real story there at Cerro Verde though is the opportunity for major expansion," he said. "This is a mine that is situated so that a major expansion can be undertaken in a straight forward way..."
At the El Abra mine in northern Chile, Freeport is moving forward with the $725 million Sulfolix sulphide leaching project that will extend mine life 10 years. The company is also looking at a milling expansion or a joint undertaking with a nearby Codelco mine.
Freeport is also moving along with the $500 million restart of the Climax molybdenum project. The project currently has a capacity of 30 million pounds per year which can be expanded. Adkerson noted the company is spending from $60 million to $70 million this summer at Climax "to position ourselves" to make a decision "so that we could be prepared to go in the second half of 2011."
Meanwhile, Freeport is standing firm on its projected sales outlook of 3.8 billion pounds of copper, 1.8 million ounces of gold and 63 million pounds of moly despite its mining plan changes at its Grasberg copper-gold mine in Indonesia.
Grasberg's current mine sequencing plan defers 130 million pounds of copper and 270,000 ounces of gold. "The ore is still there, will still get to the metal, it's just a question of timing," Adkerson told the analysts.
Despite the mine plan change at Grasberg, Freeport still beat its second-quarter 2010 guidance by 10%, thanks to 914 billion pounds of copper sales, gold sales of 298,000 ounces during the quarter, and molybdenum sales of 16 million pounds.
"Our copper volumes were lower," Adkerson said, "and yet because of our copper prices we were able to generate comparable earnings that we did in the second quarter of last year."
FINANCIALS
Freeport reported net income of $649 million or $1.40 per share for the second-quarter 2010, compared to net income of $588 million or $1.38/sh for the second-quarter 2009. Net income for the first half of 2010 was $1.5 billion or $3.40 per share, up from $631 million or $1.54/sh.
The company anticipates capital expenditures of $1.7 billion this year including $800 million for major projects.
As of June 30, 2010, total debt was $4.8 billion and consolidate cash was $3 billion. During the second quarter Freeport repaid $1.3 billion in debt.