Freeport-McMoRan Copper & Gold Inc.
) reported earnings of 49 cents per share for first-quarter 2014,
a decline of roughly 27.9% from the year ago earnings of 68
cents. Profit fell 21.3% year over year to $510 million, hurt by
lower copper and gold pricing.
The results include net non-cash mark-to-market gains of a penny
per share associated with crude oil and natural gas derivative
contracts. Barring that impact, earnings were 48 cents a share in
the first quarter, topping the Zacks Consensus Estimate of
Revenues rose roughly 8.8% year over year to around $4.99 billion
in the first quarter, but missed the Zacks Consensus Estimate of
Consolidated sales from mines decreased to 871 million pounds of
copper in the first quarter from 954 million pounds in the year
ago quarter. Sales of gold declined to 187,000 ounces in the
reported quarter from 214,000 ounces a year-ago.
Lower copper and gold sales volumes were due to lower volumes
from PT Freeport Indonesia (PT-FI) because of the post-January
12, 2014, restrictions on concentrate exports from Indonesia,
which resulted in a deferral of roughly 125 million pounds of
copper and 140,000 ounces of gold in the reported quarter.
Sales of molybdenum increased to 27 million pounds in the
reported quarter from 25 million pounds in the first quarter of
Consolidated average unit net cash costs (net of by-product
credits) decreased to $1.54 per pound of copper in the quarter
from $1.57 per pound a year ago.
Average realized price per ounce for gold fell to $1,300 per
ounce from $1,606 per ounce a year ago while average realized
price per pound for copper declined to $3.14 per pound of copper
from $3.51 per pound of copper in the prior-year quarter.
North America Copper Mines:
Copper sales at the mine increased 5.1% year over year to 371
million pounds and production rose 12.2% to 385 million pounds in
the reported quarter. Sales increased due to higher production at
most mines primarily because of higher ore grades. Freeport
expects copper production to be 1.7 billion pounds in 2014, up
from 1.4 billion in 2013 resulting from higher production from
Morenci following the completion of the mill expansion project.
South America Mining:
Copper sales of 307 million pounds rose 7.7% from the year ago
quarter mainly due to higher mining rates and timing of
shipments. Gold sales went up 9.5% to 23,000 ounces. Copper
production rose 5.4% to 314 million pounds in the reported
quarter and gold production remained at par year over year at
21,000 ounces in the quarter. South America mining is expected to
report sales of 1.2 billion pounds of copper in 2014.
Copper sales of 109 million pounds declined 44.9% from the year
ago quarter while production decreased 36.1% to 140 million
pounds. Gold sales decreased 15.2% to 162,000 ounces and
production declined 1.9% year over year to 208,000 ounces in the
reported quarter. Both gold and copper sales declined in the
quarter due to lower milling rates as a result of the
restrictions on concentrate exports from Indonesia.
In Jan 2014, the Indonesian government published regulations
providing that holders of contracts of work with existing
processing facilities in Indonesia could continue to export
product through Jan 12, 2017, but established new requirements
for the continued export of copper concentrates, including the
imposition of a progressive export duty on copper concentrates in
the amount of 25% in 2014, rising to 60% by mid-2016.
Copper sales of 84 million pounds represent a year over year
decline of 28.9%, reflecting timing of shipments and lower grade
ore. Production decreased 9.2% to 109 million pounds in the
quarter. The sales at the mine are expected to be about 440
million pounds of copper and 30 million pounds of cobalt in 2014.
Molybdenum production of 13 million pounds in the first quarter
was higher than first-quarter 2013 production of 12 million
pounds. Weak demand in the metallurgical sector is affecting the
business. Freeport will make requisite adjustments to its primary
molybdenum production after reviewing the market conditions.
Freeport had cash and cash equivalents of $1,378 million as of
Mar 31, 2014, compared with $9,595 million as of Mar 31, 2013.
Freeport had long-term debt of $19.8 billion as of Mar 31, 2014,
compared with $10.1 billion as of Mar 31, 2013.
Freeport's operating cash flows were $1.2 billion in the first
quarter compared with $831 million in the year ago quarter.
Capital expenditures totaled $1.6 billion in the reported quarter
including $0.7 billion for major projects at mining operations
and $0.6 billion for oil and gas operations.
Oil and Gas Operations (FMO&G)
In May and early June of 2013, Freeport completed the
acquisitions of Plains and McMoRan Exploration and formed a
premier U.S. based natural resource company collectively called
FM O&G, and added a high quality portfolio of U.S.-based oil
and gas assets to its global mining business.
In the first quarter, realized revenues for oil and gas
operations were $1.2 billion ($77.22 per barrels of oil
equivalents/BOE). Cash production costs totaled $298 million
($18.51 per BOE) in first-quarter 2014. Sales volume was 16.1
million barrels of oil equivalent (MMBOE) in the quarter, ahead
of the company's forecast of 15.3 MMBOE.
For 2014, Freeport expects consolidated sales from mines of 4.3
billion pounds of copper, 1.6 million ounces of gold, 97 million
pounds of molybdenum and 64.2 MMBOE. The estimates assume
resumption of exports from PT-FI beginning in May 2014. Till the
time PT-FI is unable to resume exports in May 2014, this would
result in a deferral of roughly 50 million pounds of copper and
80 thousand ounces of gold per month.
For the second quarter, the company expects 1.1 billion pounds of
copper, 320,000 ounces of gold, 24 million pounds of molybdenum
and 15.2 MMBOE. Consolidated unit net cash costs (net of
by-product credits) for copper mines are expected to average
$1.58 per pound of copper in second-quarter 2014 and $1.41 per
pound of copper for 2014.
The impact of price changes for the remainder of 2014 on
consolidated unit net cash costs would be roughly $0.017 per
pound for each $50 per ounce change in the average price of gold
and $0.015 per pound for each $2 per pound change in the average
price of molybdenum.
Cash production costs per BOE are expected to be around $19 per
BOE for 2014.
For 2014, capital expenditures are expected to be roughly $7
billion, including $3 billion for major projects at mining
operations and $3 billion for oil and gas operations.
Freeport aims at reducing debt by the end of 2016 using cash
flows generated above capital expenditures and other cash
requirements. The company will seek opportunities to accelerate
its deleveraging plans through potential asset sales, joint
venture transactions or other monetizations and is engaged in
discussions with a number of third parties to achieve this
Freeport currently retains a Zacks Rank #3 (Hold).
Other mining companies with favorable Zacks Rank include
General Moly, Inc.
North American Palladium Ltd.
). While both General Moly and North American Palladium hold a
Zacks Rank #1 (Strong Buy), Alcoa carries a Zacks Rank #2
ALCOA INC (AA): Free Stock Analysis Report
FREEPT MC COP-B (FCX): Free Stock Analysis
GENERAL MOLY IN (GMO): Free Stock Analysis
NORTH AM PALLAD (PAL): Free Stock Analysis
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