Freeport-McMoRan takes $14 billion writedown, stock rises

Indonesian miners work at the Grasberg open pit mine, operated by the U.S.-based Freeport-McMoran Copper & Gold, in Indonesia's Papua province April 11, 2007.

NEW YORK (Reuters) - Freeport-McMoRan Copper & Gold Inc (FCX.N) posted better-than-expected quarterly results on Monday as sales volumes increased, sending the mining company's shares up more than 9 percent.

But plummeting metal prices pushed Freeport to lower projected copper and molybdenum sales targets for both 2009 and 2010.

Freeport lowered its forecasts for copper sales volumes by 9 percent to 3.9 billion pounds for 2009 and by 17 percent to 3.8 billion pounds for 2010.

The company also cut its outlook for molybdenum production by 25 percent for 2009 and by 40 percent for 2010.

Freeport posted a mammoth net loss of $13.9 billion, or $36.78 per share, compared with a year-earlier profit of $414 million, or $1.05 per share.

But excluding special items, the company reported a profit of 6 cents a share, while Wall Street had expected a loss of $1.13, according to Reuters Estimates.

"We attribute the stronger-than-expected operating results to higher gold volumes and pricing vs. our estimates, higher molybdenum pricing, and slightly better-than-expected copper volumes," said Stifel Nicolaus analyst Paul Forward.

But Victor Flores of HSBC Securities said it was difficult to determine exactly how results compared to Wall Street estimates because of which items were included or not.

"I am happy they were conservative and did writedowns, but Wall Street likes that they cut more copper production," Flores said. "What the company was saying was: 'There are big negatives and we are not going to sit here and take it.'"

The net loss was primarily due to $14 billion in noncash charges, including writedowns of inventory values and goodwill from the acquisition of rival Phelps Dodge, the company said.

Freeport had said it expected to write off a substantial amount of the $6 billion goodwill from the Phelps Dodge purchase as noncash charges.

"Clearly we performed better than some (analysts) expected," Chief Executive Richard Adkerson told Reuters.

Earlier, on a conference call with analysts, he said the writedowns were required by accounting rules because the value of Freeport's assets, such as mineral reserves, had declined with the slump in metal prices.

In December, Freeport suspended its dividend, slashed capital expenditures by more than half and lowered copper output. It has also cut some workforces and delayed some mining operations to cut costs.

"The industry has struggled after five years of strong markets," Adkerson said on Monday, noting that new deposits of metals were becoming increasingly difficult to find.

But he expressed confidence about the long-tem outlook for copper as China and other developing countries need the metal to build up their infrastructures.

In its earnings release, Phoenix-based Freeport said revenue fell by 50 percent to $2.07 billion from $4.18 billion a year earlier as copper prices dropped from around $4 per pound last July to around $1.50 currently.

The company forecast 2009 capital expenditures of $1.3 billion, down from $2.7 billion in 2008. Of that, $600 million to $700 million will go to the Tenke Fungurume copper/cobalt project in Democratic Congo and to underground mine development in Indonesia.

Freeport shares were up 9.1 percent at $24.88 in afternoon New York Stock Exchange trade after rising as high as $26.28 earlier in the session.

(Reporting by Steve James, Euan Rocha and Carole Vaporean, editing by Dave Zimmerman and Lisa Von Ahn)