https://www.miningweekly.com

Freeport stock dives on threatening Indonesian mine cuts, lower guidance

Grasberg mine, Indonesia

Grasberg mine, Indonesia

Photo by Reuters

26th January 2017

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

Font size: - +

VANCOUVER (miningweekly.com) – The NYSE-listed stock of US diversified miner Freeport-McMoRan (FCX) on Wednesday nosedived after the company threatened to reduce output and cut staff at its Grasberg mine, in Indonesia.

The Phoenix, Arizona-based miner said that if it had not obtained approval to export concentrate by mid-February, it would be forced to implement measures that would see production at the massive Grasberg operation throttled to about 40% of capacity, reduce its workforce, lower costs and suspend future investments on its underground development projects and new smelter.

The Indonesian government has moved to ban concentrate exports earlier this month from the country, as it seeks to force miners to add more value domestically and export refined products, as opposed to concentrated ores. The new regulations allow the continuation of copper concentrate exports for a five-year period through to January 2022, subject to various conditions, including conversion from a contract of work to a special operating licence, commitment to complete a smelter construction in five years and payment of export duties to be determined by the Ministry of Finance.

The company confirmed that as of Wednesday, subsidiary PT Freeport Indonesia (PT-FI) had not obtained approval to export concentrate. PT-FI has requested that concentrate exports be permitted while the new licence and stability agreement are negotiated. It is also discussing the applicability of export duties and divestment requirements with government.

FCX stressed that under its contract of work, PT-FI was not required to pay export duties on concentrate or to conduct further divestments.

According to FCX, for each month of delay in obtaining approval to export, PT-FI's share of output is projected to be reduced by about 70-million pounds of copper and 100 000 oz of gold.

FCX reported consolidated sales of 4.65-billion pounds of copper, 1.1-million ounces of gold and 74-million pounds of molybdenum for the full year 2016. The company forecast lower 2017 copper output at 4.1-billion pounds of copper, but higher gold and molybdenum production at 2.2-million ounces and 92-million pounds, respectively. Its first-quarter guidance incudes one-billion pounds of copper, 460 000 oz of gold and 23-million pounds of molybdenum.

Average realised prices were $2.47/lb for copper, $1 174/oz for gold and $8.27/lb for molybdenum for fourth-quarter ended December. Average unit net cash costs were $1.20/lb of copper for the fourth-quarter and $1.26/lb for the year. Unit net cash costs are expected to average $1.06/lb of copper during 2017.

DEBT REDUCTION
At December 31, the company’s consolidated debt totalled $16-billion and consolidated cash totalled $4.2-billion, compared with consolidated debt of $20.3-billion and consolidated cash of $177-million a year earlier. The company also had no borrowings and $3.5-billion available under its revolving credit facility at year-end.

During 2016, FCX implemented initiatives to restore its balance sheet strength through raising $6.6-billion through asset sales, cash flow from operations and raising $1.5-billion in at-the-market sales of common shares to reduce consolidated debt, net of cash, by $8.4-billion.

FCX reported adjusted earnings of $0.25 a share, missing analyst forecasts calling for $0.33 a share. Revenues totalled $4.38-billion, up marginally year-over-year.

While North American stock markets rallied to record highs on Wednesday, FCX’s stock fell 7% to an intraday low of $15.81 apiece.

Edited by Creamer Media Reporter

Comments

Showroom

Werner South Africa Pumps & Equipment (PTY) LTD
Werner South Africa Pumps & Equipment (PTY) LTD

For over 30 years, Werner South Africa Pumps & Equipment (PTY) LTD has been designing, manufacturing, supplying and maintaining specialist...

VISIT SHOWROOM 
Flameblock
Flameblock

FlameBlock is a proudly South African company that engineers, manufactures and supplies fire intumescent and retardant products to the fire...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.104 0.135s - 90pq - 2rq
Subscribe Now