Freeport-McMoRan Copper & Gold Inc. is stepping up plans to increase production at some mines and develop other projects to take advantage of higher copper prices in the improving global economy.
The mining giant said Thursday its third-quarter net income jumped as it sold more copper and molybdenum, two key metals used in industrial production. It fetched higher prices for both of those metals as well as for gold.
Freeport-McMoRan will phase in higher production at some mines, including resumption of operations at the Chino copper mine near Silver City, N.M., which were suspended during the recession.
The company also raised its annual dividend by 67 percent.
Richard Adkerson, president and CEO of Freeport-McMoRan, told analysts the company sees seeing strong markets in Europe and in China.
In the U.S. Freeport-McMoRan has benefited from sales to the automobile industry and the electronics business. "I would say in the U.S., they're (the markets are) unusually strong," Adkerson said.
For the July-September quarter, Freeport-McMoRan reported net income of $1.18 billion, or $2.49 a share, compared with $925 million, or $2.07 per share, a year earlier. Revenue increased 24 percent to $5.15 billion from $4.14 billion a year ago.
The performance beat estimates from analysts surveyed by Thomson Reuters, who predicted net income of $2.25 a share on revenue of $4.74 billion. Such estimates typically exclude one-time items.
The Phoenix company profited from a jump in copper prices driven by tight supplies. Global inventories amount to less than four weeks of consumption, which is "quite low" by historical standards, Dahlman Rose & Co. analyst Anthony Rizzuto said.
Freeport-McMoran sold 1.1 billion pounds of copper in the quarter at an average price of $3.50 per pound, compared with sales of 1 billion pounds of copper at an average price of $2.75 per pound a year ago.
It sold 17 million pounds of molybdenum, a metal used to strengthen steel, at an average price of $16.06 a pound. A year ago, molybdenum sales totaled 16 million pounds at an average realized price of $13.95 a pound. Freeport-McMoRan credited the improved sales to stronger demand from the chemicals industry.
Gold sales fell to 497,000 ounces from 706,000 ounces a year ago because lower grades were mined from the company's Indonesia operation. Yet the price jumped to $1,266 an ounce from $987 an ounce.
Analyst Rizzuto said Freeport-McMoRan achieved good cost controls, ending the quarter with cash and cash equivalents of $3.7 billion.
"One of the key challenges will be how are they going to distribute all the free cash they're going to be generating," he said. "They've got numerous projects which they can develop.but they've got to balance that with returns to shareholders as well."
Freeport-McMoRan forecast fourth-quarter sales of 895 million pounds of copper, 585,000 ounces of gold and 15 million pounds of molybdenum.
For the year, it estimated sales of 3.85 billion pounds of copper, 1.9 million ounces of gold and 65 million pounds of molybdenum.
Freeport-McMoRan shares fell 32 cents to $95.03 in afternoon trading.