Freeport-McMoRan Copper & Gold Inc
) adjusted earnings (excluding one-time gains) of 74 cents per
share for the fourth quarter of 2012 was in line with the Zacks
Including net credits for adjustments to environmental
obligations, related legal reserves and a gain for insurance
recoveries, net income for the quarter was $743 million or 78
cents per share. This represents a 16.1% rise from the prior-year
quarter's net income of around $640 million or 67 cents per
share. The results were aided by higher copper and gold
For full-year 2012, Freeport posted net income of $3 billion
or $3.19 per share compared with $4.6 billion or $4.78 per share
in the year ago period. The results beat the Zacks Consensus
Estimate by a penny.
Revenues jumped roughly 8.4% year over year to $4.51 billion
in the fourth quarter but missed the Zacks Consensus Estimate of
$4.52 billion. Consolidated sales from mines increased to 972
million pounds of copper and 254,000 ounces of gold from 823
million pounds and 133,000 ounces, respectively, in the
Sales of molybdenum increased to 21 million pounds in the
reported quarter from 19 million pounds in the fourth quarter of
For the full year, revenues decreased 13.7% year over year to
$18.01 billion, missing the Zacks Consensus Estimate of $18.24
Consolidated average unit net cash costs (net of by-product
credits) decreased to $1.54 per pound of copper in the fourth
quarter from $1.57 per pound a year ago, mainly attributed to
increased mining costs in North and South America. Operating
income surged 4.7% to $1.36 billion from $1.3 billion in the
Copper sales at the mine decreased to 321 million pounds, down
3.6% from the year-ago quarter due to timing of shipments.
Production jumped 5% to 358 million pounds in the reported
Copper sales dropped by about 2% from the year ago to 350 million
pounds while gold sales dropped 10.3% to 26,000 ounces. Copper
production rose 3.6% to 349 million pounds in the reported
quarter. Gold production however declined 7.1% to 26,000 ounces
for the quarter.
Copper sales of 204 million pounds and gold sales of 224,000
ounces were significantly higher than the year-ago copper sales
of 50 million pounds and gold sales of 102,000 ounces. The lower
sales in 2011 for both copper and sales were due to labor
problems and temporary suspensions of milling activities.
Production of copper jumped 194.1% to 200 million pounds while
that of gold increased by 48.3% to 224,000 ounces.
Copper sales of 97 million pounds represents a year over year
increase of 16.9%, reflecting higher mining and milling rates
mainly related to the ramp up of the second phase expansion.
Production increased 27.3% to 98 million pounds in the quarter.
Consolidated molybdenum sales of 21 million pounds in
fourth-quarter 2012 were higher than fourth-quarter 2011 sales of
19 million pounds.
Freeport had cash and cash equivalents of $3.7 billion as of
December 31, 2012, compared with $4.8 billion as of December 31,
2011. However, net of non-controlling interests' share, taxes and
other costs, cash available totaled $2.7 billion. Freeport had
long-term debt of $3.52 billion as of December 31, 2012, compared
with debt of $3.53 billion as of December 31, 2011.
Freeport's operating cash flows were $1.3 billion in the
fourth quarter of 2012 compared with $746 million in the
prior-year quarter. Capital expenditures totaled $976 million in
the reported quarter compared with $785 million in the year-ago
The company, in late 2012, forged definitive merger pacts,
under which, it will buy
Plains Exploration & Production Company
McMoRan Exploration Co.
) for about $20 billion. Freeport is funding the cash portion of
the twin deal with a $9.5 billion financing from JPMorgan Chase
Bank, N.A., a unit of
JPMorgan Chase & Co.
). The transactions are expected to close in the second quarter
For 2013, Freeport expects consolidated sales from mines of
4.3 billion pounds of copper, 1.4 million ounces of gold and 90
million pounds of molybdenum. For the first quarter, consolidated
sales are estimated at 940 million pounds of copper, 230,000
ounces of gold and 23 million pounds of molybdenum. The company
forecasts that its Grasberg mine will produce higher grade ore in
late 2013 that will result in higher copper and gold production
Based on current sales volume and cost estimates and average
price assumption of $1,700 per ounce for gold and $11 per pound
for molybdenum, consolidated average unit net cash costs (net of
by-product credits) are expected to be $1.67 per pound of copper
for first-quarter 2013 and $1.35 per pound for the year 2013.
The company expects to spend $4.6 billion as capital
expenditure in 2013, which includes $2.8 billion for major
projects and $1.8 billion for sustaining capital. Freeport
estimates exploration spending of approximately $235 million in
2013 compared with $251 million in 2012.
The company remains optimistic for the long term and expects
that its copper production will rise to over 5 billion pounds
annually by 2015. Freeport intends to develop its resources in a
cost effective manner thereby ensuring benefits to its
shareholders in the long run.
Freeport is conducting explorations close to its existing
mines with a goal to boost reserves which will facilitate the
development of additional future production capacity across the
large minerals districts where it operates.
As per the company's exploration data, there are opportunities
for meaningful future reserve additions in North and South
America as well as in the Tenke Fungurume minerals district in
Congo's Katanga province. We are increasingly optimistic on
Freeport's African operations considering the potential at
However, higher production cost is a concern for Freeport.
Unit costs are expected to rise across the company's
copper-producing segments, reflecting higher input costs.
The company currently retains a short-term Zacks Rank #3
FREEPT MC COP-B (FCX): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
MCMORAN EXPLOR (MMR): Free Stock Analysis
PLAINS EXPL&PRD (PXP): Free Stock Analysis
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