Freeport income jumps $603 million

Phoenix-based Freeport-McMoRan Copper & Gold Inc. officials said Wednesday that they were confident that the strength of the copper market would support ongoing expansions at its mines.

Officials also said that although two workers were killed in a Monday accident at the company's Indonesian mines and that underground mining there had stopped, the company did not expect that to significantly affect earnings.

"We are very positive about the copper business," President and CEO Richard Adkerson said during a conference call with investors. "We are the world's largest producer. We think the world is going to need copper."


The company produced 950 million pounds of copper in the first quarter, compared with 929 million in the comparable quarter last year. Much of the increase came from ramped-up production at its Morenci mine and other North American properties.

It also produced 466,000 ounces of gold, compared with 449,000 a year ago, and 20 million pounds of molybdenum, up from 17 million. Molybdenum is a metallic element used to strengthen steel.

Freeport has been increasing production at Morenci in the past year and also is exploring increasing production from or restarting operations at its Sierrita, Bagdad, Ajo, Twin Buttes and Safford/Lone Star mines in Arizona, in addition to foreign opportunities, Adkerson said.

One option would be to expand the mill at Morenci to double the current design, he said.

"We are seeing opportunity for significant growth," he said, giving credit to the company's exploration team for identifying minerals near many of its existing operations.

Expanded mining already is taking place at its Miami mine, where the company was conducting reclamation activities. Adkerson said Freeport expected to mine as much as 100 million pounds of copper a year from the restarted Miami mine.

"The economics are extraordinarily positive there," he said.

The expanded mining activity is possible because of the high price of copper and gold and the earnings that trend is creating.

Freeport said that the company earned a first-quarter profit of $1.5 billion, or $1.57 per share, compared with $897 million, or $1 per share, in the same quarter last year.

All of its share prices have been adjusted to reflect a February stock split.

Revenue for the quarter topped $5.7 billion, compared with $4.4 billion in the comparable quarter.

The company's financial performance easily topped analysts' estimates. Freeport was expected to earn $1.26 per share on $5.3 billion in revenue.

The company sold its copper during the quarter for an average of $4.31 per pound, compared with $3.42 per pound in the same quarter last year. It sold its gold for an average of $1,399 per ounce, compared with $1,110 per ounce.

It got $18.10 per ounce of molybdenum, up from $15.09 per ounce in the same quarter last year.

The company sold less copper from its seven North American mines in the quarter despite the increased production, which officials attributed to timing of shipments.

Production dropped slightly at its South American operations and rose slightly at its Indonesian and African operations.

"Congratulations to the whole Freeport team on another great quarter," JPMorgan Equity Research analyst Michael Gambardella said. He asked how the Monday accident at the Grasberg mine in Indonesia might affect operations.

Adkerson provided more detail than had previously been released.

"I'm very sad to report that we lost two of our workers," Adkerson said.

The miners were killed when mud flowed into the underground mine, he said, blaming the accident on extremely wet conditions.

"With heavy rainfall and wet conditions at Grasberg, the risks are more pronounced at the (deep underground) mine," he said.

He said that in the 1990s, Freeport invested in robotic mining equipment to collect ore from the mine when wet conditions made it too dangerous for workers, and the company could use those robots more often following the accident.

Adkerson said that the underground portion of the mine had been shut down while government investigators review the accident. He said the shutdown should not affect the company's production significantly because the underground mine does not produce as much copper as the adjacent open pit.

"We will get to the bottom and review our procedures and do everything we can to ensure it doesn't ever happen again," he said.

Analyst Tony Rizzuto from Dahlman Rose asked if using robots more at the mine would hurt production in the long run.

"We've been using remote, robotic machines now 10 years," Adkerson said. "It is a fairly significant part of the draw points we are using them on. They have been working well. It is a bit slower than manned draw points. It is not like this is new technology."

Shares closed up $1.58, or 3.05 percent, to $53.30.

by Ryan Randazzo The Arizona Republic Apr. 21, 2011 12:00 AM



Freeport income jumps $603 million