Vancouver By the end of 2006, Phelps Dodge (PD-N) plans to return US$1.5 billion of its recent profits to shareholders, starting with a special dividend of US$5 per share in early December. The remaining US$1 billion will be returned to shareholders in 2006 through share re-purchases or additional dividends.
In a prepared statement, Chairman Steven Whisler said the company will “continue to evaluate opportunities to further reward shareholders” while managing resources for the long-term benefit of the company. The company has been rolling in profits during the past several years, thanks to rising metal prices, particularly for copper.
Phelps Dodge posted net profits of US$366.1 million, or US$3.61 per share, for the latest quarter ended Sept. 30, up from net income of US$292.9 million a year earlier. The latest results include after-tax, net special charges totaling US$75.8 million. Revenue in the quarter reached US$2.39 billion, up from US$1.8 billion a year earlier, while operating income was a record US$618.4 million in the quarter.
Whisler stated that the company will also use its profits for four specific priorities, namely: investing in existing businesses; improving the quality of its asset base; strengthening the balance sheet; and rewarding shareholders “meaningfully.”
The company completed a tender offer in the latest quarter for its 8.75% notes due in 2011, resulting in the retirement of long-term debt with a book value of about US$380 million. This represents about 72% of the company’s outstanding notes.
The company also arranged an agreement for debt financing of up to US$450 million for the expansion of the Cerro Verde copper mine in Peru. The latest quarter also saw progress in the company’s efforts to define terms of commercial development for the Tenke Fungurume copper-cobalt project in the Democratic Republic of Congo.
Phelps Dodge is also investing in its American operations. Earlier this year, the company announced it would spend US$210 million to restart an idled concentrator and build the ‘first-ever’ commercial-scale, copper concentrate leaching facility at its copper mine in Morenci, Arizona. Both projects are expected to be operational by 2007.
Phelps Dodge produces more than 2 billion pounds of copper annually, or about 60% of total U.S. production, from six mines in Arizona and New Mexico. The company also operates a molybdenum mine in Colorado, and several copper mines in Chile and Peru that collectively produce nearly 1 billion pounds of copper annually.
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