FCX Freeport McMoRan Inc

Freeport McMoRan Copper & Gold Inc.'s (FCX) fourth-quarter earnings slumped 59% due to a strike at its Indonesia operations, and plans to enlarge the mine there will temporarily reduce the company's gold production in 2012.

The world's largest listed copper-mining company reported a second consecutive quarter hampered by a labor dispute at its Grasberg mine in Indonesia, which was resolved late in the fourth quarter. Net profit for the quarter fell to $640 million, down from $1.5 billion in the same period of 2010.

"That was the first strike of that nature in our 40-plus years of operating there," Chief Executive Richard Adkerson said on a conference call Thursday.

Despite the disruption, full-year earnings were a record $4.6 billion, exceeding the prior record of $4.3 billion set in 2010, as robust production early in 2011 and record metals prices buoyed earnings.

Freeport expects its gold sales to slip 14% to 1.2 million ounces in 2012, from 1.4 million ounces in 2011. Mining operations will shift to a lower-grade area of the Grasberg mine as the open pit is widened in 2012, and copper and gold output rates should return to normal in 2013, executives said on the conference call.

But copper production is forecast to reach 3.8 billion pounds this year, up from 3.7 billion pounds in 2011, as higher output at Freeport's operations in North and South America is expected to offset Grasberg's lower production.

"We see a tight and encouraging market for copper as we go into 2012," Adkerson said on the company's conference call.

While Europe's debt problems continue to weigh on the economic outlook, global copper inventories have tightened to around 10 days of consumption, and customers in markets like the automotive sector and U.S. residential construction have a "fairly positive outlook," Adkerson said.

The company plans to spend $4 billion on capital expenditures in 2012, up from $2.5 billion in 2011, with $2.4 billion earmarked for major development and expansion projects.

Freeport's focus on expansion comes as copper producers struggle to find new mines while existing projects face declining output, Adkerson said.

"We're spending money on capital because we have great projects" and a positive outlook on Freeport's end markets, Adkerson said.

Freeport will also look to refinance and pay down some of its debt in 2012, taking advantage of lower credit costs in today's debt markets.

"We will be looking at how much to refinance versus repay," Chief Financial Officer Kathleen Quirk said on the conference call. "We still have significant capacity for additional debt if we have uses for the cash."

Freeport has cut its debt load by 80% to $3.5 billion at the end of 2011, after amassing $17.5 billion in debt in 2007, when it acquired competitor Phelps Dodge.

-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com

(Tess Stynes contributed to this article.)

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