By Tatyana Shumsky
Freeport-McMoRan Copper & Gold Inc. (FCX), the world's
largest listed copper-mining company, saw its 2012 earnings fall
35% as copper and gold output declined at its Indonesian
operations.
Freeport Chief Executive Richard Adkerson said 2012 was an
"abnormal year" for the company, with "unusually low" copper
production at its Grasberg and DOZ mines in Indonesia. About 20% of
the company's copper sales come from Indonesia.
Freeport's 2012 net income fell to $3.0 billion, or $3.19 a
share, from $4.6 billion, or $4.78 a share, a year earlier.
In Indonesia, a combination of prearranged enlarging of the mine
and issues relating to mine safety led Freeport to focus work on
the higher regions of the above-ground Grasberg pit and delay
ramping up the underground DOZ mine. That meant workers were unable
to dig into the deeper sections of the mine, which house high
copper-bearing ore.
"These were the lowest grades that we had in Grasberg in 18
years," Mr. Adkerson said.
Freeport's copper output fell to 3.65 billion pounds in 2012,
from 3.70 billion in 2011. Gold output in 2012 fell to one million
ounces from 1.4 million ounces in 2011.
The company expects to see its copper output rebound in 2013,
Mr. Adkerson said. As Grasberg operations return to normal, the
revenue from gold production should cover the cost of operating the
mine, he said.
However, Mr. Adkerson signaled that upcoming wage talks with
Indonesian workers could stymie this recovery. In 2011,
disagreements over pay halted work at the Grasberg mine for the
first time in more than 40 years of operation. Mr. Adkerson said
risks like further strikes and violence remain a worry for the
company.
The management team also took the opportunity to assuage
investors' concerns about Freeport's acquisition of two energy
companies disclosed in early December. Freeport's stock is down 12%
since the announcement, which rankled some of the company's largest
shareholders.
The board's decision to approve the purchases was driven by its
belief in the positive outlook for commodities, Mr. Adkerson said.
He added that Freeport expects to use cash generated by oil and gas
production to fund the exploration and development costs of the two
companies.
Freeport-McMoRan last month agreed to buy McMoRan Exploration
Co. (MMR) and Plains Exploration & Production Co. (PXP)--two
oil companies with which it shares close ties--for roughly $9
billion in cash and stock. The deal marked a shift for the mining
giant toward U.S. energy exploration. The transactions are expected
to close in the second quarter.
Freeport has been under some pressure to shake things up.
Profits at the company have been easing as global commodity prices
slip in large part because of slowing demand in China.
On a quarterly basis, Freeport's results beat expectations. The
company's fourth-quarter profits rose 16% to $743 million, or 78
cents a share, from $640 million, or 67 cents a share, a year
earlier. Revenue increased 8.4% to $4.51 billion.
Analysts polled by Thomson Reuters had projected earnings of 70
cents a share on revenue of $4.47 billion.
McMoRan Exploration last week posted a steeper-than-expected
decline in fourth-quarter revenue, as the natural-gas exploration
company's average daily production decreased and it swung to a
loss.
--Tess Stynes contributed to this article.
Write to Tatyana Shumsky at tatyana.shumsky@dowjones.com
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