Freeport-McMoRan Copper & Gold Inc. 's ( FCX ) adjusted earnings
(excluding one-time charges) of 73 cents per share for
first-quarter 2013 beat the Zacks Consensus Estimate by a penny but
exceeded the year ago earnings of 96 cents.
Including debt extinguishment costs for the termination of the
acquisition bridge loan facilities and acquisition costs, net
income for the quarter was $648 million, 68 cents per share. This
represents roughly 15% fall from the prior-year quarter's net
income of around $764 million or 80 cents per share. The results
were affected by higher costs and lower copper prices.
Revenues fell roughly 0.5% year over year to $4.58 billion in
the first quarter, missing the Zacks Consensus Estimate of $4.81
Consolidated sales from mines increased to 954 million pounds of
copper from 827 million pounds in the year ago quarter due to
higher production from Indonesia and Africa. Sales from gold
decreased to 214,000 ounces of gold from 288,000 ounces in the
prior-year quarter led by lower ore grades in Indonesia.
Sales of molybdenum increased to 25 million pounds in the
reported quarter from 21 million pounds in the first quarter of
2012 driven by stronger sales in the metallurgical and chemical
Consolidated average unit net cash costs (net of by-product
credits) increased to $1.57 per pound of copper in the quarter from
$1.26 per pound a year ago, mainly attributed to lower by-product
credits. Operating income declined 21.9% to $1.36 billion from
$1.73 billion in the year-ago quarter.
North America Copper Mines: Copper sales at the
mine increased 4.4% year over year to 353 million pounds, due to
increased production at the Chino mine. Production inched up 1.8%
to 343 million pounds in the reported quarter.
South America Mining: Copper sales of 285
million pounds were almost at par with the sales reported in the
year ago quarter as higher grade ore at Candelaria offset lower
grade ore at Cerro Verde. Gold sales surged 10.5% to 21,000 ounces.
Copper production rose 1.7% to 298 million pounds in the reported
quarter and gold production jumped 10.5% to 21,000 ounces in the
Indonesia Mining: Copper sales of 198 million
pounds were significantly higher than the year-ago copper sales of
134 million pounds. The lower sales in 2012 were due to labor
problems. Gold sales in the reported quarter declined 28.2% year
over year due to lower ore grades from mine sequencing.
Production of copper jumped 78% to 219 million pounds while that
of gold decreased by 7.4% 212,000 ounces.
Africa Mining: Copper sales of 118 million
pounds represents a year over year increase of 71%, reflecting
higher mining and milling rates mainly related to the ramp up of
the expansion project and higher ore grades. Production increased
50% to 120 million pounds in the quarter.
Molybdenum: Consolidated molybdenum sales of 25
million pounds in first-quarter 2013 were higher than first-quarter
2012 sales of 21 million pounds.
Freeport Cobalt: In March 2013, Freeport
acquired a large-scale cobalt chemical refinery located in Kokkola,
Finland, and the related sales and marketing business through the
newly formed and wholly consolidated Freeport Cobalt joint venture.
Freeport has a 56% ownership interest and is the operator of the
joint venture. The acquisition increases Freeport's cobalt
marketing presence, and provides direct end-market access for the
cobalt hydroxide production from the Tenke Fungurume mine.
Freeport had cash and cash equivalents of $9.60 billion as of
Mar 31, 2013, compared with $3.7 billion as of Dec 31, 2012. Cash
and cash equivalents as of Mar 31, 2013, also include net proceeds
from the Mar 2013 sale of $6.5 billion of senior notes that will be
used to fund a portion of the pending acquisitions of
Plains Exploration & Production Company ( PXP ) and
McMoRan Exploration Co. ( MMR ).
Freeport had long-term debt of $10.1 billion as of Mar 31, 2013,
including the Mar 2013 issuance of $6.5 billion of senior notes
compared with debt of $3.53 billion as of Dec 31, 2012.
Freeport's operating cash flows were $831 million in the first
quarter of 2013 compared with $801 million in the prior-year
quarter. Capital expenditures totaled $805 million in the reported
quarter compared with $707 million in the year-ago quarter.
The company, in late 2012, forged definitive merger pacts, under
which, it will buy Plains Exploration & Production Company and
McMoRan Exploration Co. for about $20 billion. During the quarter
Freeport completed $10.5 billion in debt financings related to the
acquisitions. The acquisitions are expected to close in the second
quarter of 2013.
For 2013, Freeport expects consolidated sales from mines of 4.3
billion pounds of copper, 1.4 million ounces of gold and 92 million
pounds of molybdenum. For the second quarter, consolidated sales
are estimated at 1 billion pounds of copper, 295,000 ounces of gold
and 23 million pounds of molybdenum.
The company forecasts that its Indonesia mine will produce
higher grade ore in the second half of 2013 that will result in
higher copper and gold production volumes. About 54% of 2013
consolidated copper sales volumes and 63% of consolidated gold
sales volumes are expected in the second half of 2013. As a result
of this, quarterly unit net cash costs are expected to decline
during the second half of the year.
Based on current sales volume and cost estimates and average
price assumption of $1,400 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 $1.45 per pound of copper
The company expects to spend $4.4 billion as capital expenditure
in 2013, which includes $2.6 billion for major projects and $1.8
billion for sustaining capital. Freeport estimates exploration
spending of roughly $235 million in 2013 compared with $251 million
The company remains optimistic and 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 Tenke.
Moreover, the acquisitions of Plains and McMoRan Exploration
will usher in new opportunities. However, higher production cost is
a concern for Freeport.
Freeport currently retains a short-term Zacks Rank #3
(Hold).ATLATSA RESRCS (ATL): Free Stock Analysis
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Atlatsa Resources Corporation ( ATL ), which also
belongs to the mining industry, holds a Zacks Rank #1 (Strong