Freeport-McMoRan axes moly jobs and production

Vancouver – As the price of molybdenum tumbles Freeport-McMoRan Copper and Gold (FCX-N), the world’s largest moly producer, is slashing more than a hundred moly-related jobs, cutting moly production at its Henderson mine and suspending construction of its planned re-opening of the US$500 million Climax moly mine.

 

The move follows aftershocks of a cratering moly price that in recent weeks has fallen from over US$30 per lb. to about US$12 per lb.

 

Freeport spokesman Eric Kinneberg says in an email “changes to our plans will require us to make changes to our workforce. We estimate these changes to affect approximately 100 fulltime employees.”

 

These changes include a 25% or 10 million lbs. cut to moly production at Freeport’s Henderson mine, near Empire, Colorado.

 

Kinneberg says that in addition to the around 100 pink-slips the company will be handing out to fulltime employees at the Henderson mine, Freeport will drop an undisclosed number of the 150 or so contract employees at Henderson and the 450 contract employees at Climax.

 

Kinneberg says that while Freeport has so far not eliminated around 25 fulltime jobs at its Climax project, “We are currently reviewing staffing requirements (there).”

 

So far Freeport has spent US$150 million on Climax and has US$50 million more in commitments.

 

At presstime Kinneberg did not know how much money the job-cutting measures would save Freeport.

 

In 2007 when Freeport announced plans to re-open the Climax mine, about 100 km west of Denver, the company’s CEO Richard Adkerson called the project “financially attractive” with cash costs estimated at US$3.50 per lb.

 

At the time Freeport had expected to bring the Climax project on line in 2010 after 14 years lying dormant and produce about 30 million lbs. of moly a year. Freeport pegs its reserves there at around 180 million tonnes grading 0.165% moly.

 

But that was when the price of moly was well over US$30 per lb. Now, with it less than half that, Freeport is putting on the brakes.

 

“We are responding aggressively to the current market conditions which have weakened dramatically in recent weeks,” Adkerson says in a statement.

 

In addition to cutting jobs and production at Henderson and suspending Climax, Freeport also says it is assessing whether to reign in moly production at its by-product mines.

 

And in a thinly veiled warning on its outlook for copper Freeport says copper production “at certain operations may be reduced in response to market conditions.”

 

For the near future Freeport will follow a wait-and-see policy.“We have a positive longterm view for molybdenum markets” Adkerson says, “and (Freeport) will be positioned to increase our production as market conditions improve.”

 

Freeport says it could bring Climax up to production within a 12-18 month timeframe.

 

On news of the layoffs and production cut Freeport’s share price rose 39¢ to close at US$27.46.