Freeport McMoRan sees Congo mine producing this year

NEW YORK Mon Jan 26, 2009 4:14pm EST

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NEW YORK Jan 26 (Reuters) - Construction at Freeport McMoRan Copper & Gold's (FCX.N) mine project in war-tornDemocratic Congo is 80 percent complete and the company expects to start commercial operations after June, executives said on Monday.

They also said Freeport was hopeful the Kinshasa government's review of mining contracts will be favorable to the company that has so far invested some $1.4 billion in the Tenke Fungurume copper and cobalt project.

"We have made better progress there on physical construction that I expected, given the challenges," President and Chief Executive Officer Richard Adkerson told Reuters in a telephone interview.

"Congo faces a number of difficulties, including the problems in the east," he said, referring to a guerrilla war raging near the border with Rwanda and Uganda, some 1,000 km (620 miles) from the mine in copper-rich Katanga province.

"The country is suffering the impact of low copper and cobalt prices," Adkerson earlier told Wall Street analysts on a conference call to discuss fourth-quarter results.

Asked if Freeport was in a good position now, he said: "The government would like to see more benefits and they appreciate how fast we are living up to our commitment on development.

"I would not characterize it as leverage, we are being cooperative with the government."

He noted the contract to mine Tenke Fungurume dated from 1996 and had been renegotiated in 2005 before Kinshasa began a review process last year, aiming to overhaul 61 deals most of which were agreed during the chaos of a 1998-2003 war.

"There is no firm date for the complete review, but we expect it 'in the near future,'" said Adkerson.

"The process is unfolding and discussions are going on right now. The council of ministers is taking the lead. We'll find a way forward that both sides are happy with."

John Marsden, president of Freeport-McMoRan Mining, updated analysts about construction at the site, believed to be one of the world's richest deposits of copper and cobalt.

"Construction has advanced well on the mine and processing plant. Also the infrastructure, roads and access to the Katanga region," said Marsden, who is in charge of construction, exploration and research and development for Freeport.

"Construction is now about 80 percent complete," he said.

Commissioning of the plant, which will produce 250 million pounds of copper per year and 18 million pounds of cobalt, is expected in the second quarter, he said. "We expect commercial production to start in the second half of the year."

Adkerson declined to comment on the status of Freeport's junior partner in Tenke Fungurume, Canada's Lundin Mining, (LUN.TO) which is being acquired by HudBay Minerals (HBM.TO).

On Monday, Lundin shareholders approved the takeover but analysts believe the deal will collapse at the hands of HudBay's investors.

"We have a contract with Lundin," said Adkerson, "and their corporate situation is independent from that."

Freeport holds a 57.75 percent stake in Tenke Fungurume, Lundin has a 24.75 stake and Gecamines, the Congo government agency owns the remaining 17.5 percent. (Editing by Leslie Gevirtz)

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