Freeport-McMoRan Copper & Gold Inc.
) reported earnings of 49 cents per share for second-quarter
2013, a decline of 33.8% from the year ago earnings of 74 cents.
But it beat the Zacks Consensus Estimate of 41 cents. Profit slid
32% year over year to $482 million, hurt by lower price.
The results include net income of 27 cents per share related
to the acquisition of Plains Exploration & Production Company
and McMoRan Exploration Co. which were completed during the
Revenues fell roughly 4.2% year over year to $4.29 billion in
the second quarter, missing the Zacks Consensus Estimate of $4.45
Consolidated sales from mines increased to 951 million pounds
of copper from 927 million pounds in the year ago quarter due to
higher sales from America and Africa. Sales from gold decreased
to 173,000 ounces of gold from 266,000 ounces in the prior-year
quarter led by lower production in Indonesia due to temporary
closure of operations following a tragic accident.
Sales of molybdenum increased to 23 million pounds in the
reported quarter from 20 million pounds in the second 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 $1.85 per pound of copper in the quarter
from $1.49 per pound a year ago, mainly attributed to lower
copper and gold volumes in Indonesia, anticipated higher mining
rates in North America and the impact of lower gold prices in net
Average realized price per ounce for gold fell to $1,322 from
$1,588 a year ago while average realized price per pound for
copper declined to $3.17 from $3.53 in the prior-year
North America Copper Mines:
Copper sales at the mine increased 3% year over year to 372
million pounds, due to increased production at the Chino mine.
Production jumped 5.4% to 349 million pounds in the reported
Copper sales of 315 million pounds rose 4.7% from the year ago
quarter mainly due to the timing of shipments. Gold sales surged
10.5% to 21,000 ounces. Copper production declined 1.6% to 299
million pounds in the reported quarter and gold production jumped
5.6% to 19,000 ounces in the quarter.
Copper sales of 158 million pounds dropped 13.7% from the year
ago quarter while production declined 19.7%. Gold sales fell
38.9% and production tumbled 43%. The decline was due to an
accident that occurred at PT Freeport Indonesia and resulted in
about 28 fatalities and 10 injuries.
That resulted in a temporary suspension of operations at the
mine. The work, when resumed, negatively affected production of
about 125 million pounds of copper and 125 thousand ounces of
gold in the second quarter of 2013.
Copper sales of 106 million pounds represents a year over year
increase of 29.3%, reflecting higher mining and milling rates
mainly related to the ramp up of the expansion project and higher
ore grades. Production increased 54.4% to 122 million pounds in
Molybdenum production of 13 million pounds in second-quarter 2013
was higher than second-quarter 2012 production of 9 million
Freeport had cash and cash equivalents of $3.3 billion as of
Jun 30, 2013, compared with $3.7 billion as of Dec 31, 2012.
Freeport had long-term debt of $21.2 billion (includes $10.5
billion of acquisition related debt, $7.5 billion assumed debt of
Plains and McMoRan Exploration and $3.6 billion of its existing
debt) as of Jun 30, 2013, compared with debt of $3.53 billion as
of Dec 31, 2012.
Freeport's operating cash flows were $1 billion in the second
quarter of 2013. Capital expenditures totaled $1.2 billion in the
reported quarter which also includes $190 million for oil and gas
operations for the period beginning Jun 1, 2013.
Acquisition of PXP and MMR
During the second quarter, Freeport completed the acquisition
of Plains and McMoRan Exploration and formed a premier U.S. based
natural resource company, and added a high quality portfolio of
U.S.-based oil and gas assets to its global mining business.
Freeport's second-quarter 2013 financial results include
Plains' operations beginning Jun 1, 2013, and McMoRan
Exploration's operations beginning Jun 4, 2013.
Freeport's sales from the recently acquired oil and gas
operations (FM O&G) totaled 5 million barrels of oil
equivalents (MMBOE) for the period from June 1, 2013, through
June 30, 2013, including 3.4 million barrels (MMBbls) of crude
oil, 7.7 billion cubic feet (Bcf) ofnatural gas and 0.3 MMBbls of
natural gas liquids (NGLs).
Cash production costs for oil and gas operations were $16.58
per barrels of oil equivalents (BOE) in Jun 2013. Capital
expenditures for FM O&G totaled $190 million during Jun
For 2013, Freeport expects consolidated sales from mines of
4.1 billion pounds of copper, 1.1 million ounces of gold, 92
million pounds of molybdenum and 35 MMBOE. For the third quarter,
consolidated sales are estimated at 1.1 billion pounds of copper,
330,000 ounces of gold, 22 million pounds of molybdenum and 15
Consolidated unit net cash costs (net of by-product credits)
for Freeport's copper mining operations are forecast to be
roughly $1.58 per pound of copper for the year 2013. Unit net
cash costs are expected to decline during the second half of 2013
and in 2014 as Freeport will gain access to higher grade ore in
Indonesia. Cash production costs per BOE are expected to be
roughly $19 per BOE in the second half of 2013.
Based on current sales volume and cost estimates Freeport's
consolidated operating cash flows are estimated to approximate
$5.8 billion for 2013. Capital expenditures are anticipated to be
about $5.5 billion for the year 2013, including $2.3 billion for
major projects at mining operations and $1.5 billion for oil and
gas operations (for the period beginning June 1, 2013).
Freeport's strategy is to reduce debt and maintain a strong
balance sheet, while investing in financially attractive projects
and providing cash returns to shareholders. The company is
working in sync with its plans and is also 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.
Moreover, the acquisitions of Plains and McMoRan Exploration
will usher in new opportunities. However, higher production cost
is a concern for Freeport.
Freeport, which is among the prominent players in the mining
industry along with
Newmont Mining Corporation
Barrick Gold Corporation
Kinross Gold Corporation
), currently retains a short-term Zacks Rank #3 (Hold).
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