Freeport CEO: Copper's Scarcity Drives Prices Higher
16 November 2011 - 8:02PM
Dow Jones News
Copper's scarcity leaves Freeport McMoRan Copper & Gold Inc.
(FCX) well positioned to take advantage of higher prices by
expanding existing mines, said Chief Executive Richard
Adkerson.
Adkerson was speaking at the Dahlman Rose Global Mining, Metals
and Materials conference in New York.
Copper has become increasingly scarce over the past decade,
which has limited copper-mining companies' ability to boost supply
as prices rise.
The limited number of new mines and the long time it takes to
bring on new production is "striking," Adkerson said.
Copper prices continue to trade well above the cost of
production despite ongoing problems in Europe and now questions
about demand in China, the world's top copper consumer, Adkerson
said. The copper market's strong performance comes from producers'
inability to ramp up production enough to bring prices down.
Moreover, while copper has been losing market share to plastics
in plumbing applications and to aluminum in heat transfer
applications like air conditioning, it remains the go-to material
for electrical and electronic uses. "Motors and electronics are
everywhere we look," Adkerson said, adding "copper is tough to
replace for its basic uses."
Freeport is well positioned to take advantage of this market
environment as the company's growth is dependent on expanding and
developing the company's existing resources rather than new mines.
Building new mines "in today's world that's a difficult proposition
wherever you are," Adkerson said. Freeport is spending $2 billion
on resource exploration, "almost all of it on what you'd call brown
field exploration," Adkerson said, adding "we do have some green
field exploration but we're not counting on them."
The company is facing a wage dispute at its Grasberg copper and
gold mine, the third largest copper mine in the world, in
Indonesia. Production at the Grasberg mine stalled in late October
and negotiations have been slow. Adkerson characterized Grasberg
worker wage demands as "excessive."
He said haul truck drivers at the mine earned around $20,000 a
year in addition to housing expenses and food, and the company had
offered a 35% increase.
"We want to be fair and generous ... (But) they are asking for
multiples of that ... I just don't know where those numbers are
coming from," Adkerson said.
-By Tatyana Shumsky, Dow Jones Newswires. 212 416 3095;
tatyana.shumsky@dowjones.com
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