Phelps Dodge trims losses (July 28, 2003)

Vancouver The World’s second largest copper producer made it nine consecutive quarters without a profit by tallying yet another loss in the second quarter of 2003.

“Lackluster copper prices continued to mirror the uncertainty of global economic conditions, and our reported results, while improved, reflected this environment," says Phelps Dodges’ (PD-N) President, Steven Whisler. "However, recently copper inventories have decreased measurably, and published leading economic indicators suggest we may be poised for economic recovery.

Phelps Dodge reported a net loss of US$15.2 million, or US$0.21 per share in the latest quarter ended June 30, compared with a loss of US$34.3 million, or US$0.46 a share, in last year’s quarter. The improvement was helped by a US$4.5 million or US$0.05 per share gain from the sale of a cost-basis wire and cable investment.

Operating income came in at US$25.8 million, some US$12.4 million lower than the second quarter of 2002, when a one time US$20.9 million gain boosted results.

Despite an 18% rise in specialty chemical sales to US$166.1 million, overall sales for the quarter fell to US$962.2 million from US$966.8 million in the prior-year quarter. The mining division contributed US$641.6 million, compared to US$644.5 million in the second quarter of 2002.

The major produced 259, 300 tons of copper and 13.1 million lbs of molybdenum during the quarter, a marked increase from the 254,600 tons and 10.4 million lbs. tallied a year ago. Total unit costs came in a US$0.695 per lob of copper, basically unchanged from the US$0.698 per lb. recorded in the second quarter of 2002.

"In the unit cost is 2.5 cents for asset improvement project which includes feasibility studies, " adds Whisler "also imbedded is about 3 cents for shut downs in our curtailed facilities."

Copper prices during the quarter averaged US$74.4 cents per lb., up from US$73 cents in the year-earlier period, while average prices for molybdenum rose nearly 20% to US$5.21 from US$4.35 per lb.

Going forward, the Phoenix-based company sees early indication of an economic recovery in the U.S. and Europe and anticipates a global copper deficit in 2003. As a result, Phelps Dodge estimates that the copper price will strengthen in the second half of the year, hitting a yearly average of US$74.7 per lb..

"It is still too early to make the call that a recovery is here," states Arthur Miele, the company’s V.P. of Marketing. "So we have been in curtailed mode for six quarters now and plan to continue this curtailed stage for the foreseeable future."