* Q2 profit $1.40/shr vs. Wall St view $1.28/shr
* Revenue up to $3.86 bln on higher metal prices
* Shares rise over 2.7 percent (Adds CEO quotes; Indonesia production problem, stock move)
By Steve James
NEW YORK, July 21 (Reuters) - Miner Freeport-McMoRan Copper & Gold Inc (FCX.N) posted a better-than-expected quarterly profit on Wednesday on higher metal prices and said its order books were filling despite weakness in the U.S. economy.
Chief Executive Officer Richard Adkerson said copper markets were healthier and he outlined how Freeport was bringing back production at mines it had idled or put on hold during the recession.
But he also cut the company’s gold sales volume estimate for next year by more than 20 percent because of a “geotechnical” problem at its vast Grasberg mine in Indonesia.
“There’s still ... a lot of weakness in the U.S. economy, but overall the copper markets ... in the U.S., northern Europe, to some extent in Korea and Japan, are stronger than we’ve seen them in some time,” Adkerson said.
“And China, where everyone’s focused on the steps they’ve taken to control the growth in their economy and to try to deal with inflation, continues to be strong.”
Adkerson told Wall Street analysts that he felt “very positive” about the longer-term outlook for copper — a key metal used for wiring in the construction industry. The metal’s price rose 140 percent last year but has dropped about 8 percent this year to around $3 per pound.
“The physical markets really are stronger than economic indicators in the United States,” he said. “We see our order books filling more strongly than we have in some time.”
That optimism led the company to resume curtailed production and development activities at several projects, including its Morenci and Miami mines in Arizona and in Chile and Peru.
But he added that a geotechnical problem at Grasberg had prompted Freeport to cut its 2011 gold sales volume estimate to 1.5 million ounces from 1.9 million.
Adkerson did not elaborate but said the problem was relatively small and occurred in a section of high grade ore that was scheduled to be mined at the end of this year and into 2011. That would now be deferred for a time.
Phoenix, Arizona-based Freeport, which operates mines in North and South America, Africa and Indonesia, said net second-quarter earnings were $649 million, or $1.40 per share, compared with $588 million, or $1.38 per share, a year earlier.
Revenue rose to $3.86 billion from $3.68 billion, as the price of gold and copper both rose significantly over the year-earlier period when the global economy was in the depths of the recession.
Analysts on average were expecting earnings of $1.28 per share and revenue of $3.53 billion, according to Thomson Reuters I/B/E/S.
“It was a great quarter, certainly better than I had expected, considering copper prices have come down,” said analyst Charles Bradford, of Affiliated Research Group.
Freeport said second-quarter copper sales were 914 million pounds, higher than its estimate of 830 million pounds but lower than the 1.1 billion pounds sold in the 2009 quarter.
Consolidated gold sales of 298,000 ounces were also higher than Freeport’s estimate of 270,000 but significantly lower than second-quarter 2009 gold sales of 837,000. The drop was a result of mining of lower grade ores at Grasberg.
Consolidated molybdenum sales totaled 16 million pounds — the same as in the year-earlier quarter.
Freeport’s average selling price for copper in the second quarter was $3.06 per pound, compared with the London Metals Exchange average of $3.18. But that was still higher than last year’s realized price of $2.22.
It projects sales volumes for full-year 2010 of about 3.8 billion pounds of copper, 1.8 million ounces of gold and 63 million pounds of molybdenum. In the third quarter, it expects to sell 970 million pounds of copper, 410,000 ounces of gold and 15 million pounds of molybdenum .
Freeport’s stock rose over 4 percent on the New York Stock Exchange, but fell back and in afternoon trading was 2.7 percent higher, at $66.06.
Reporting by Steve James, editing by Gerald E. McCormick, Derek Caney and Bernard Orr