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Freeport Sees Copper Sales Decline on Lower Grade Ore (Update2)
Jan 22,2010 09:00CST
industry news

Jan. 21 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc., the world's largest publicly traded copper producer, said its sales of the metal will decline 7.3 percent this year as it processes lower ore grades and production costs rise.

Anticipated lower concentrations at the Grasberg mine in Indonesia and the El Abra mine in Chile may reduce Freeport's copper sales to 3.8 billion pounds this year from 4.1 billion in 2009, Chief Executive Officer Richard Adkerson said today on a conference call with analysts.

"We were mining in the highest-grade section that we have available to us in the Grasberg mine," Adkerson said. Comparatively lower grades at Grasberg this year "will have an impact."

Higher prices for fuel, steel and wages, particularly in South America, may boost Freeport's average copper production cost to 86 cents a pound this year from 55 cents in 2009, Adkerson said.

The company sold 4.07 billion pounds of copper in 2008.

Freeport fell $7.24, or 8.7 percent, to $76.28 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest daily decline since June 22. Freeport gained more than threefold last year.

Demand in China

Freeport is betting on new projects and expansions to benefit from a recovery in copper prices brought about by demand in China, where the government has kept economic growth intact through stimulus measures. Copper imports by China, the world's largest consumer, climbed for a second month in December to 244,013 metric tons, extending a rebound from an 11-month low, the country's customs office said today.

Freeport is investing $1.8 billion in its Tenke Fungurume project in Democratic Republic of Congo, which is set to produce 250 million pounds of copper and 18 million pounds of cobalt a year. Production at the mine began in March.

The company reported today fourth-quarter net income of $971 million, or $2.15 a share, compared with a loss of $13.9 billion, or $36.78, a year earlier. Excluding one-time items, the company earned $2.25 a share. Freeport was projected to have a profit of $1.75, the average estimate of 17 analysts surveyed by Bloomberg.

Freeport's Grasberg mine in Indonesia contains the world's largest recoverable reserves of copper and the biggest single gold reserve.

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Freeport-McMoRan Copper & Gold Inc.

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