Freeport-McMoRan Copper & Gold Inc. finds itself in a sweet spot that many companies would envy. Copper prices are surging, global supplies are constrained and demand for the metal is expected to remain strong in the long run.
The Phoenix global mining giant has benefited since the recession from a healthy appetite for copper from fast-growing, developing countries like China that are building out infrastructure and grids to increase electricity capacity. The metal is used in a variety of products, from construction materials to consumer electronics.
Yet there are some short-term hurdles such as European financial problems and China's efforts to curb inflation, which could slow economic growth.
In the U.S, there is still a tepid housing market, a massive budget deficit and the question of what lies ahead after the Federal Reserve's multi-billion-dollar bond-buying program ends in June.
The program triggered a strong rally in commodities prices that began in late August after Federal Reserve Chairman Ben Bernanke hinted the central bank may buy government bonds to help stimulate the economy. That caused the dollar to weaken, which made commodities more of a bargain to buyers using other currencies.
"There's a number of things to be concerned about but, despite that, copper demand is still quite strong and supply is tight," said Brian Hicks, co-manager of the U.S. Global Investors Global Resources Fund.
Freeport-McMoRan surprised Wall Street with its first-quarter net income, which jumped 67 percent as prices for copper, gold and molybdenum all rose.
The company earned $1.5 billion, or $1.57 per share, in the first three months of the year. That compared with net income of $897 million, or $1 per share, in the first quarter of 2010.
Revenue surged 31 percent to $5.71 billion.
The price Freeport-McMoRan received for copper rose 26 percent although sales fell 3.5 percent compared to the year-ago quarter because of lower sales in Indonesia and North America due to the timing of shipments.
Prices and sales rose for both gold and molybdenum, a material used to strengthen steel.
The results came in well above Wall Street's expectations. Analysts polled by FactSet predicted earnings of $1.26 a share on sales of $5.3 billion.
Argus Research analyst Bill Selesky said he was concerned with the company's higher costs for both mining operations and labor. He said Freeport-McMoRan should be "fine" as long as the markets stay healthy.
"The growth has to come from overseas," he said. "I think that's going to be what supports the (copper) market over the next six to 12 months."
Lind-Waldock senior market strategist Phillip Streible has predicted that copper prices will reach $5 a pound by year-end because of strong fundamentals and supply issues. The price is currently around $4.34 a pound, up about 5 percent in the past month. He expects a jump in demand when Japan gets rebuilding efforts under way to repair the damage from the earthquake and tsunami that struck the country in March.
For the full year, Freeport expects to sell about 3.9 billion pounds of copper. The restart of two mines and the expansion of one are expected to further boost production.
The company also declared a special stock dividend of 50 cents per share in addition to its regular dividend of 25 cents. The supplemental dividend will be paid on June 1 to shareholders as of May 15.
Shares of Freeport-McMoRan rose $1.58, or 3.1 percent, to $53.30.
Associated Press Airlines Writer Samantha Bomkamp contributed to this report.