Freeport McMoRan's Indonesia Mine Recovers from 1st Quarter Problems

NEW YORK, Jul 19, 2012 (Dow Jones) -- Freeport McMoRan Copper & Gold Inc.'s (FCX) Indonesia operations are approaching "normal" levels after a first quarter marked by labor disruptions, chief executive Richard Adkerson said on the company's second-quarter earnings conference call.

Labor unrest at the world's third-largest open-pit copper mine, Grasberg in Indonesia, took a toll on Freeport's profitability earlier this year. A shut-down from late February to mid-March saw the company lose about 80 million pounds of copper and around 125,000 ounces of gold production, cutting first-quarter earnings by 49%.

However, operations at the open pit mine are returning to "normal" levels, Mr. Adkerson said.
"Our relationships with our workforce has improved significantly," he said, adding that the company has "made further progress to improve productivity."

"We are now in sight of completion of our mining in the pit," he said, adding that the company is set to complete open pit mining at Grasberg in 2016, moving operations underground thereafter.

The Grasberg disruptions have raised Freeport's company-wide copper-mining costs by about 30 cents a pound, Mr. Adkerson said. The cost of getting a pound of copper out of the ground, excluding company-wide costs like overhead and depreciation, are now seen at $1.47 a pound in 2012. This is up from previous forecasts of $1.43.

Freeport continues to work "cooperatively" with the Indonesian government on the review of the company's contract of work agreement and on extending that contract to 2041 from 2021, Mr. Adkerson said. He declined further details of the talks, as discussions are ongoing.