Tags: Freeport | Copper | Gold

Freeport Cuts Copper, Gold Outlooks After Indonesia Strike

Thursday, 15 March 2012 12:35 PM

Freeport-McMoRan Copper & Gold Inc. lowered its copper and gold sales outlooks for the first quarter following labor-related problems at its Grasberg mine in Indonesia and said the mine would not return to full production until the second quarter.

The U.S. company said on Thursday that operations at the mine and associated mill had resumed after a temporary work stoppage on Feb. 23 and a three-month strike last year.

Freeport did not say when it would lift a force majeure at Grasberg, under which it is not bound by contractual obligations to customers.

The company's stock was up 31 cents at $38.43 in midday trading on the New York Stock Exchange. Analyst Daniel Rohr of Morningstar in Chicago attributed the rise to the likelihood that Wall Street had anticipated the lower production numbers.

"It's not like the lost tonnage is permanently lost. They can recoup it later," Rohr said, noting that the broader mining sector was up on Thursday.

Freeport estimated that total first-quarter copper production and sales would be down by about 10 percent and gold by about 30 percent.

The previous sales volume estimates for the first quarter was for 875 million pounds of copper and 425,000 ounces of gold, including 210 million pounds and 400,000 ounces from Grasberg.

Freeport said it had revised its consolidated first-quarter sales volumes to 795 million pounds of copper and 300,000 ounces of gold.

"Because of the strike last year, the production outlook for them had actually been revised down going into this year," said Patricia Mohr, a commodity market specialist at Scotia Capital.

"It's a major operation ... it's (copper price) is up a little bit on this," Mohr said. In New York, the key May COMEX copper contract was up 2.70 cents at $3.8750 per pound on Thursday.

The company operates mines in the United States, South America, Africa, and Indonesia.

In January, Freeport reported a 60 percent decline in fourth-quarter profit, largely due to last year's strike.

At that time, Chief Financial Officer Kathleen Quirk said the company estimated that it had lost 165 million pounds of copper and 170,000 ounces of gold in the fourth quarter and 235 million pounds of copper and 275,000 ounces of gold in the full year 2011.

Consolidated sales from all its mines in the fourth quarter totaled 823 million pounds of copper and 133,000 ounces of gold compared with 941 million pounds of copper and 590,000 ounces of gold in the fourth quarter of 2010.

© 2018 Thomson/Reuters. All rights reserved.

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Thursday, 15 March 2012 12:35 PM
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