Heavy rainfall at its Grasberg mine in Irian Jaya, Indonesia, combined with delays in reaching higher-grade ore, has forced
Grasberg did not suffer significant property damage, though the rains did hinder production and delay concentrate shipments. In the mine proper, crews were delayed in gaining access to anticipated higher-grade material, which is to be exploited over the remainder of the year.
As a result, Freeport expects to report second-quarter sales of about 350 million lbs. copper (compared with a previously projected 400 million lbs.) and about 390,000 oz. gold (previously projected to be 550,000 oz.).
For the six months ended June 30, 2002, Freeport estimates copper sales of 650 million lbs. and gold sales of 730,000 oz.
When the major releases its second-quarter financials on July 18, it does expect to have received some relief in the form of higher copper and gold prices.
Looking forward, Freeport expects significantly higher copper and gold production for the remainder of 2002 and into next year, and this increase should allow the company to meet slightly revised sales projections for 2002 of 1.5 billion lbs. copper and 2.2 million oz. gold.
The company warns that its second-quarter net income will be affected by the weakening of the U.S. dollar relative to the euro. The situation has forced Freeport to translate about 75 million euros of historical pension obligations at its Spanish subsidiary, Atlantic Copper, to a higher U.S. dollar value and to recognize a non-cash charge of US$9 million (or US6 per share) to the second-quarter net income.
During a conference call with analysts, Freeport President Richard Adkerson described the second quarter as being “a quarter of transition for us — we were moving from low-grade ore in the pit at Grasberg to our high-grade section, which is a normal part of our mining sequence.” He added: “We will have a strong second half.”
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