Freeport's Adkerson says outlook encouraging for copper this year

While Freeport-McMoRan Copper & Gold top management remains cautious about major project spending, Arizona's Miami mine and Morenci mill are both being restarted.

RENO, NV - 

Freeport-McMoRan Copper & Gold CEO Richard Adkerson says the strong performance of copper in the market place last year and the economic growth in China have created an encouraging outlook for copper this year.

Nevertheless, Adkerson told analysts Thursday during a conference call that the company's copper sales will be a bit lower this year dropping to 3.8 billion pounds due to mine sequencing at Grasberg necessitated by curtailed mining operations in North America.

"As we look forward to 2010, some of our input costs like copper costs have risen and we will have an impact on our cost performance," he cautioned. Although the lowered production volumes at Grasberg will have an impact, Adkerson stressed "when you add it all up, we end up with a very attractive, consolidated cost picture going forward particularly in relation to our copper market today where we have $3.40 copper."

CAPITAL PROJECTS

FCX's capital expenditures are estimated to be $1.7 billion this year with major project capex anticipated to be $800 million, which includes underground development at Grasberg in Indonesia and a sulfide ore project at the El Abra mine in Chile. Capex spending in 2009 totaled $1.6 billion.

While the company is continuing to defer the major projects that will require large amounts of capital, some projects are going forward. Copper production is being restarted at the Miami mine in Arizona. Freeport expects to ramp up production to 100 million pounds of copper annually by the second half of next year. The company is investing $40 million in the project.

In addition, Freeport is restarting the Morenci mill to process sulfide material now being mined. The mill was shut down in February 2009 in response to market conditions.

During the fourth-quarter 2009, Freeport purchased the Twin Buttes copper mine adjacent to its Sierrita operations in Arizona for $200 million. The company says the purchase "provides significant synergies in the Sierrita district, including the potential for expanded mining activities and access to material that can be used for Sierrita tailings and stockpile reclamation purposes."

OUTLOOK

Total projected sales volumes this year call for 3.8 billion pounds of copper, 1.8 million ounces of gold and 60 million pounds of molybdenum.

Freeport forecast South American sales this year of 1.3 billion pounds of copper and 100,000 ounces of gold, compared with 1.4 billion pounds of copper and 90,000 ounces of gold last year. Projected sales volumes in the area are lower primarily because of anticipated lower grades at the El Abra mine.

The flagship Grasberg mine in Indonesia is expected to produce 1.2 billion pounds of copper and 1.7 million ounces of gold this year, compared with 1.4 billion pounds of copper and 2.5 million ounces of gold last year. Freeport is transitioning to a lower grade section of the Grasberg pit this year. Approximately 60% of Indonesian mine production is anticipated during the second half of this year.

Meanwhile, FCX expects Tenke Fungurume to yield 240 million pounds of copper and over 20 million pounds of cobalt this year, compared with 130 million pounds of copper and 3 million pounds of cobalt in 2009. The company expects to complete a feasibility study evaluating a second phase of the mining operation by mid-year.

For 2010, Freeport anticipates 60 million ounces in molybdenum sales from its mines, up from 58 million pounds in 2009.

As of December 31, 2009, Freeport estimated consolidated recoverable proven and probable reserves of 104.2 billion pounds of copper, 37.2 million ounces of gold and 2.59 billion pounds of moly. Net reserve additions of 6.3 billion pounds of copper and 0.16 billion pounds of moly replaced 150% of 2009 copper production and 300% of 2009 moly production.

Exploration spending has been increased from $72 million in 2009 to $100 million this year with exploration activities focused on the potential in FCX's existing mineral districts.

FINANCIAL

Net income attributed to common stock for 2009 was $2.5 billion or $5.86 per share, compared with a net loss of $11.3 billion or negative $29.72/sh for 2009. Net income attributable to common stock for fourth-quarter 2009 was $971 million or $2.15/sh, compared with a net loss of $13.9 billion of negative $36.78/sh for the same quarter of 2008.

As of December 31, 2009, Freeport reported $6.3 billion in debt. Last year the company repaid $1 billion of debt.

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