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VANCOUVER (miningweekly.com) – The world’s largest publicly traded copper producer Freeport-McMoRan on Tuesday announced third-quarter results that were weaker than analyst predictions. The company says it also expects to sell less copper, gold and molybdenum in 2016.
The Phoenix-based company said it expects to sell about 4.8-billion pounds of copper and 1.26-million ounces of gold, down from its earlier estimate of 5-billion pounds of copper and 1.7-million ounces of gold. Molybdenum sales are also expected to fall to 73-million pounds, compared with its earlier forecast of 76-million pounds.
"Our actions during 2016 position us to achieve our objectives of restoring our balance sheet strength and focusing our strategy on our industry-leading portfolio of high-quality, long-lived copper assets. Our announced asset sale transactions totalling $6.6-billion, combined with significant free cash flow generation in the coming quarters, will enable us to achieve our debt reduction targets," stated president and CEO Richard Adkerson. He noted earlier this year that Freeport would aim at reducing debt to around $10-billion over the next two years.
Under pressure from activist investor Carl Icahn, Freeport has been looking at ways to reduce its $19-billion debt load as at September 30, after struggling during the copper, gold and oil price downturn. It gained its significant debt position as it acquired oil and gas assets it was now disposing of.
Freeport expanded into the oil and gas sector in 2013, having acquired Plains Exploration and McMoRan Exploration for $19-billion, including debt. The deals proved unpopular with investors owing to the big contributions to the company's heavy debt load, while oil prices at about $50/bl had declined by about 55% since 2013.
The company is cleaning up its balance sheet through asset sales, the most significant of which was the sale of its 56% interest in the Tenke Fungurume copper mine, in the Democratic Republic of Congo, for $2.65-billion. Anadarko Petroleum will buy the deepwater Gulf of Mexico assets from Freeport for $2-billion and, in October, Freeport also agreed to sell its onshore California oil and gas properties for a cash consideration of $592-million, and up to $150-million of contingent payments. The company has also stated its willingness to sell up to 20% of the company’s Indonesian subsidiary, which controls the massive Grasberg copper mine.
Freeport expects to receive $5.2-billion in gross proceeds during the current quarter, in connection with the asset sale transactions.
The company's net income attributable to shareholders was $217-million, or $0.16 a share, in the third quarter ended September 30, compared with a loss of $3.83-billion, or $3.58 a share, a year earlier.
Excluding special items, the company earned $0.13 a share, missing analysts' average estimate of $0.18 a share.
Revenue rose 14.6% year-on-year to $3.88-billion.
Consolidated average unit net cash costs, net of by-product credits for Freeport’s copper mines (including Tenke) of $1.14/lb of copper in the third quarter, were lower than unit net cash costs of $1.52/lb in the third quarter of 2015, mainly reflecting higher copper sales volumes and the impact of ongoing cost-reduction initiatives, the company stated.
Freeport’s stock gained as much as 8% in early morning trading Tuesday, changing hands at $11 a share.