Phelps Dodge takes loss in quarter (July 25, 2002)

Copper producer Phelps Dodge (PD-N) lost money in the three months ended June 30, but was able to reduce operating and overhead costs and clear off debt in the same period.

The Arizona-based company booked a loss of US$36.4 million, or US48 per share, on revenues of US$967 million. In the corresponding quarter of 2001, it posted a loss of US$110.5 million on revenues of US$1.06 billion.

Copper prices were lower during the period, with the London Metal Exchange spot price averaging US$1,610 per tonne and the New York Comex price US74 per lb. Production and sales from Phelps Dodge’s mines were significantly lower than a year ago, which also contributed to the contraction in revenue.

This quarter’s loss included a net US$12.7 million in non-recurring items. These included a pre-tax loss of US$46.5 million from an arbitration award to Plateau Mining, which in 1997 had made a claim against Cyprus Amax (which was subsequently taken over by Phelps Dodge). One-time gains balanced against the charges included a US$22.6-million gain on land sales and a US$18.3-million net tax benefit.

The company’s average cash cost of production fell to US54 per lb. (US$1,190 per tonne) for the quarter, down from US61 (US$1,345 per tonne) in the second quarter of 2001. A cost-cutting program saved about US$53 million in the quarter.

Phelps Dodge also placed 10 million common and 2 million convertible preferred shares with investment bank J.P Morgan in June, for proceeds of US$592 million. Most of that cash will be used to repurchase the company’s long-term debt.