Freeport-McMoRan 2Q profit more than doubles

AP News
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Posted: Jul 21, 2011 2:22 PM
Freeport-McMoRan 2Q profit more than doubles

_ Freeport-McMoRan Copper & Gold Inc. said Thursday that second-quarter earnings more than doubled as it produced and sold more copper and gold to take advantage of higher prices.

The Phoenix mining giant also said it is stepping up plans to expand or restart operations in the next few years at some existing mines to meet stronger global demand for its materials, particularly in China.

Freeport-McMoRan reported net income of $1.37 billion, or $1.43 per share, for the three months ended June 30. That compared with $649 million, or 70 cents per share, for the same period last year.

Excluding losses extinguishing debt early, Freeport-McMoRan earned $1.49 per share.

Revenue increased 50.5 percent to $5.81 billion from $3.86 billion a year ago.

The results beat Wall Street estimates of $1.33 per share on sales of $5.69 billion, according to a survey by FactSet.

Freeport-McMoRan mines ores that are used in basic construction and manufacturing. Copper is found in wiring, cables and pipes while molybdenum is used to strengthen steel. Gold largely is sold to investors and jewelry makers.

During the second quarter, the global economy showed signs of slowing. China has implemented measures to curb inflation and slow its robust growth. National debt worries hit the U.S. and Europe, and Japan has been dealing with the aftermath of a devastating earthquake and tsunami.

China, the world's biggest user of copper, reported slower industrial production in recent months but demand is expected to remain strong as the country continues to spend "tremendous amounts" on infrastructure and housing, Freeport-McMoRan president and CEO Richard Adkerson told analysts on a conference call.

"It is supported by the fact that there's clearly a de-stocking of inventories in China, even though they're taking efforts to slow the economy down," he said.

Argus Research analyst Bill Selesky said China and the Asia-Pacific region will remain key drivers for the mining company. However, he anticipates that China will continue efforts to lower inflation, which could affect near-term demand for copper.

During the second quarter, Freeport-McMoRan recorded a 38 percent increase in copper prices to $4.22 per pound and a 22 percent increase in gold prices to $1,509 an ounce. Molybdenum prices slipped by 2 cents to $18.16 per pound.

Freeport-McMoRan capitalized on the price increases by increasing production by 4 percent for copper and 11 percent for gold.

Freeport-McMoRan said it expects sales to fall this year at its flagship Grasberg mine in Indonesia, in part because of an eight-day strike in July that temporarily halted operations. The company estimated the strike cut production by 35 million pounds of copper and 60,000 ounces of gold.

Freeport-McMoRan expects copper sales to be flat this year at 3.9 billion pounds. Gold sales should decline about 14 percent to 1.6 million ounces, and molybdenum will increase 15 percent to 77 million pounds. The company plans to more than double exploration spending to $250 million this year.

Freeport-McMoRan plans to increase production or restart operations at copper mines in Arizona and New Mexico. It plans to complete construction on a molybdenum mine in Climax, Colo., next year and build production to 20 million pounds a year by 2013. It also is continuing long-term development of its Indonesian mine and has other projects under consideration.

Shares fell 59 cents to $55.35 in afternoon trading.

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AP Business Writer Chris Kahn in New York contributed to this report.