October 22, 2015 / 12:14 PM / 4 years ago

Freeport further cuts mining output on low prices, posts loss

TORONTO (Reuters) - U.S. miner and oil producer Freeport-McMoRan (FCX.N), under pressure from activist investor Carl Icahn and falling prices, said on Thursday it will further cut copper and molybdenum output as it posted a bigger-than-expected quarterly loss.

Trucks operate in the open-pit mine of PT Freeport's Grasberg copper and gold mine complex near Timika, in the eastern region of Papua, Indonesia, September 19, 2015. REUTERS/Muhammad Adimaja/Antara Foto

The Phoenix-based company said it remains confident in the longer-term outlook for copper, but will halve operating rates at its Sierrita mine in Arizona as prices continue to drop.

“We’re prepared to do whatever it takes - whatever it takes - to keep our operations generating positive cash flows to protect our liquidity and hold onto these assets for a better day,” Chief Executive Richard Adkerson said on a call.

Sierrita’s annual output will drop by 100 million pounds of copper and 10 million pounds of molybdenum, with full shutdown being considered. Combined with previous cuts, annual copper production is down 250 million pounds and molybdenum output down 20 million pounds.

The biggest U.S.-listed copper miner, Freeport said a primary strategic objective is “significant” reduction of its $20.7 billion debt.

Repeating that 2015 is a “bridge year”, Freeport anticipates improved cash flow in 2016 and 2017 as it winds down project spending and increases production.

“I want to be clear: after we complete these current projects, until the market warrants further investments, we’re not going to be making them,” said Adkerson.

Within six months, Freeport expects to provide more detail on plans to make its oil and gas business self-funding.

Freeport may spin off the unit to shareholders, do joint ventures, an initial public offering or further cut spending.

It branched into energy in 2013 with unpopular acquisitions of Plains Exploration and McMoRan Exploration for $9 billion.

Freeport, which has struggled to renew a long-term contract before committing $18 billion to expand its Grasberg mine in Indonesia, said it is discussing fixed royalties in talks with government.

Indonesia’s mining minister recently gave assurances the contract would extend beyond 2021, but another minister later said Freeport must first increase royalty payments to 6-7 percent from 4 percent.

Freeport reported an adjusted loss of $156 million, or 15 cents a share, lagging analysts’ expectation for an 8 cent loss.

It recorded $3.7 billion in charges, largely to reduce the carrying value of oil and gas properties.

The company cut its 2015 copper sales forecast to 4.1 billion pounds from 4.2 billion pounds, and estimated 2016 sales at 5.2 billion pounds.

Reporting by Susan Taylor; Editing by Chizu Nomiyama and Meredith Mazzilli

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