UPDATE 2-Lower copper prices hurting Freeport-McMoran - CEO
(Recasts to lead with net income reduction)
By Frank Tang
DENVER, Sept 10 (Reuters) - Freeport-McMoRan Copper & Gold Inc (FCX.N) said on Wednesday it expects recent lower copper prices to reduce third-quarter net income by approximately $100 million.
The Phoenix-based mining company also said it was lowering its 2008 copper and gold production outlook, due to an incident at its vast Grasberg mine in Indonesia.
It gave no further details of the incident at the complex, where several workers were killed in a landslide in 2003.
Freeport is also confident that its giant Tenke Fungurume copper/cobalt project will move forward following discussions with the government of Democratic Republic of Congo over renegotiating terms of Freeport's contract.
In late morning trading on the New York Stock Exchange, Freeport's stock was up 3.4 percent at $67.37.
During a presentation at the Denver Gold Forum industry meeting, Chief Executive Officer Richard Adkerson said the $100 million reduction in third-quarter net income was a result of lower prices for copper, which had surged over the past four years, but have slipped almost 25 percent since early July.
At the start of the third quarter, copper was selling for above $4 per pound. But since July, the benchmark December copper contract HGZ8 has been on a steady decline, losing nearly 25 percent of its value and teetering near a 7-1/2-month low at around $3.05.
Adkerson did not elaborate on the lower income figure during his presentation but said the estimate was included in a filing with the U.S. Securities and Exchange Commission. Freeport's second-quarter net income was $947 million.
Earlier, the company said it was lowering its 2008 copper and gold production outlook, due to the incident at Grasberg.
Although the incident is not expected to affect long-term mine plans significantly, the company said access to a high-grade section of the mine will be restricted until remediation activities are completed and safe access to this mining area can be assured.
Freeport said due to the delayed access to the high-grade material, a portion of the metal expected to be mined in the second half of 2008 will be deferred to future periods.
Initial estimates indicate about 150 million pounds of copper and 200,000 ounces of gold previously expected to be mined in 2008 will be deferred to future periods.
In July, Adkerson had said drilling programs adjacent to existing ore bodies at Grasberg and in areas outside current operations were showing opportunities to add reserves.
He said Grasberg operated at rates greater than 66,000 short tons per day during the second quarter. "That's a record. We are expanding to have a sustained rate at 80,000 tons per day targeted for 2010," he added.
On the Congo project, which is believed to be one of the richest in the world, Adkerson said on Wednesday: "We have confidence that we have a good basis for going forward."
There had been questions about the miner's contract as part of the Congo's recent sweeping mine review.
The project is set for initial production during the second half of 2009.
Adkerson also told the Denver Gold Forum that Freeport estimates capital expenditures at $3 billion for 2008, $2.5 billion for 2009 and $1.3 billion for 2010.
He estimates $240 million in exploration spending for 2008, with 20 percent of that in Indonesia. (With additional reporting by Carole Vaporean and Chris Kelly in New York, editing by Gerald E. McCormick)
- Seven NATO allies to create new rapid reaction force-report
- Ukraine seeks to join NATO; defiant Putin compares Kiev to Nazis |
- U.S. authorities investigate suspected threat against Obama: reports
- Putin says Russia must strengthen its economic, military position in Arctic
- California passes 'yes-means-yes' campus sexual assault bill