Denver — Improved ore grades and record throughput at the Grasberg copper-gold operation in Irian Jaya, Indonesia, should propel Freeport-McMoRan Copper & Gold (FCX-N) to a profitable second quarter.
Production for the three months ended June 30 is expected to exceed 410 million lbs. copper and 980,000 oz. gold.
The New Orleans-based producer could not yet give precise ore grades for the second quarter. However, copper grades were 20% higher and gold grades were 70% higher in the first quarter, due to uncharacteristically lower grades in the Grasberg pit during 2000. Throughput reached a new record of 240,000 tonnes per day.
Freeport’s share of sales, through its 86%-held operating subsidiary P.T. Freeport-Indonesia (PT-FI), should reach 390 million lbs. copper and 810,000 oz. gold. This is more than originally estimated and sets a new quarterly sales record.
Higher sales volumes helped maintain Freeport’s standing as the world’s lowest-cost copper producer. Projected cash production costs for the quarter, after gold credits, should fall to nil per lb., less than the US10-per-lb. average projected for the year.
Freeport expects second-quarter earnings to reach US25 per share at an average copper price of US70 per lb. While some of the production remains subject to final pricing, the average price could change. A 1 change in price would result in a US$1-million change in net income (or 0.7 per share).
The financial results take into account a US10-per-share hit on earnings from a 27-day scheduled shutdown in April at Freeport’s Atlantic Copper smelter in Spain.
The strong operating results allowed Freeport to repay more than US$120 million in debt from operating cash flow during the second quarter. The company repaid US$175 million in the first six months of 2001.
PT-FI’s share of sales for 2001 should reach 1.4 billion lbs. copper and 2.5 million oz. gold. This is over 100,000 oz. more than anticipated and 600,000 oz. more than the first six months of last year.
Freeport expects to release quarterly earnings on July 18.
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