Freeport Cuts First Quarter View - Analyst Blog
20 März 2012 - 11:30AM
Zacks
Freeport-McMoRan Copper
& Gold Inc. (FCX) has trimmed its copper and gold
sales outlook for the first quarter of 2012 following a strike at
its Grasberg mine in Indonesia. Though operations at the mine have
already started, the mine is slated to reach its full production by
the second quarter of 2012.
The mine’s production was impacted
as the strike lasted for three months last year and again started
on February 23, 2012. Freeport also anticipates that the strike
will reduce total production and sales by around 80 million pounds
of copper and 125,000 ounces of gold. This will bring down the
guidance to 795 million pounds of copper and 300,000 ounces of gold
from its previous expectation of 875 million pounds of copper and
425,000 ounces of gold, including 210 million pounds of copper and
400,000 ounces of gold from Grasberg.
Freeport’s fourth-quarter 2011
consolidated sales volume were 823 million pounds of copper and 133
thousand ounces of gold. The sales volumes in the quarter were
affected due to labor disruptions and the temporary suspension of
milling operations at Grasberg, resulting from the damage of the
concentrate and fuel pipelines.
The company reported a profit of
$640 million or 67 cents per share in the fourth quarter of 2011
versus $1.5 billion or $1.63 per share in the same quarter of 2010.
Revenues in the quarter were $4.2 billion versus $5.6 billion in
the prior-year quarter, surpassing the Zacks Consensus Estimate of
$3.8 billion.
Freeportis also conducting
exploration activities near its existing mines with a focus on
opportunities to expand reserves that will support the development
of additional future production capacity in the large minerals
districts, where it currently operates. Favorable exploration
results indicate opportunities for significant future potential
reserve additions in North and South America and in the Tenke
Fungurume minerals district.
Freeportis the world's largest
producer of molybdenum. The company has a strong balance sheet. As
of December 31, 2011, Freeport had $4.8 billion in consolidated
cash and cash equivalents and $3.5 billion in total debt.
However, higher production cost is
a concern for Freeport. Unit costs are expected to rise in each of
the company’s copper-producing segments, reflecting higher input
costs. Indonesian operations are most likely to witness the
most significant year-over-year increase on a per unit basis due to
the drop in volumes that will reduce the ability to absorb the
operation’s high fixed costs.
Freeportcompetes with
Newmont Mining Corp. (NEM) and Southern
Copper Corp. (SCCO). We are currently Neutral on Freeport,
which is in tandem with a short-term Zacks#3 Rank (Hold).
FREEPT MC COP-B (FCX): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
SOUTHERN COPPER (SCCO): Free Stock Analysis Report
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