Weak market conditions prompt Freeport-McMoRan to look for cost cuts

28th July 2015 By: Henry Lazenby - Creamer Media Deputy Editor: North America

TORONTO (miningweekly.com) – Multinational diversified miner Freeport-McMoRan has started a comprehensive review of its mining and oil and gas businesses to target significant capital spending and operating and administrative cost cuts in response to weak market conditions for its significant products.

These plans would also incorporate potential adjustments to mine plans and future copper and molybdenum production volumes to reduce costs and preserve valuable resources for expected improved future market conditions.

Freeport-McMoRan's NYSE-listed stock on Tuesday jumped as much as 11.6% to $12.69 apiece after the review was announced. The stock had lost more than half its value since the start of the year, as investors were concerned about the company’s $21-billion debt bill and a price meltdown of its copper, gold, molybdenum and oil and gas products.

The company expected to complete this review swiftly and would report its revised plans later in the current quarter.

“We are responding aggressively to [the] current market conditions affecting our primary products and to the uncertain global economic outlook. These initiatives are focused on maximising cash flow in a weak commodity environment and strengthening the company’s financial position,” senior management explained in a statement on Tuesday.

Freeport-McMoRan noted that it had made substantial progress towards completing its major mining development projects, which were expected to result in increased near-term output, lower unit costs, declining capital expenditures and growth in free cash flow over the next several quarters. Its oil and gas subsidiary had also filed a registration statement in June related to a potential initial public offering, representing a minority interest in the entity.

The company had a broad set of natural resource assets that it felt provided it with many alternatives for future actions to enhance its financial flexibility.

Being the world's largest publicly traded copper producer, Freeport-McMoRan's portfolio of assets included the Grasberg minerals district, in Indonesia, one of the world's largest copper and gold deposits, significant mining operations in the Americas, including the large-scale Morenci minerals district, in North America, and the Cerro Verde operation, in South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo. The company also held significant US oil and natural gas assets in the Deepwater Gulf of Mexico, onshore and offshore California and in the Haynesville natural gas shale, and a position in the emerging Inboard Lower Tertiary/Cretaceous natural gas trend, onshore in South Louisiana.