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TORONTO (miningweekly.com) – US-diversified miner Freeport-McMoRan (FCX) on Thursday again laid into its 2016 capital plans, advising that falling copper prices and lower US production levels would result in about 10% of its US jobs being terminated.
The Phoenix, Arizona-based miner trimmed its mining budget by 25%, or $700-million, reducing its total budget, including that of the oil and gas division, by 29% on July estimates to $4-billion.
The news sent the miner’s NYSE-listed stock surging 31% in early afternoon trading to $10.40 apiece.
“The steps we are taking to reduce costs and capital expenditures will strengthen our financial position during a period of weak and uncertain market conditions and preserve our large resource base for improved future market conditions," senior management said in a statement
The revised plans would see 2016 and 2017 copper output fall by about 150-million pounds a year from July estimates, mainly by slowing operating rates at several of FCX’s North American mines.
The company had in July announced a review of its operating assets and had earlier this month lopped 31% from its 2016 and 2017 capital budget for its oil and gas operations.
FCX had been weighed down by excessive debt of $20.9-billion, as at the end of June. The company’s debt swelled in 2013 when it acquired two oil and natural gas companies, as it sought to diversify its asset portfolio.
The company's revised plans in North America incorporated reductions in mining rates to reduce operating and capital costs, including suspending mining at its Miami mine (which produced 57-million pounds in 2014), a 50% reduction in mining rates at the Tyrone mine (which produced 94-million pounds in 2014) and adjustments to mining rates at other US mines.
These changes were expected to result in about 10% of FCX’s US employees and contractors losing their jobs.
Based on the revised operating plans and reductions in estimated energy and other input costs, FCX’s site production and delivery costs, before by-product credits, would average about $1.45/lb in 2016, about 20% lower than 2015 levels. Net unit costs after by-product credits would be about $1.15/lb in 2016, assuming prices of $6/lb for molybdenum and $1 150/oz for gold.
The company operated seven openpit copper mines in North America, including Morenci, Bagdad, Safford, Sierrita and Miami, in Arizona, and Chino and Tyrone, in New Mexico.
FCX, the world’s largest molybdenum producer, had also reduced planned production by 35% at its Henderson primary molybdenum mine, in Colorado, from the mine’s previous full-year guidance of 27-million pounds.
The company believed that the changes would enable it to achieve lower operating costs, greater efficiencies and preserve resources for expected improved longer-term market conditions.