Phelps Dodge trims quarterly losses

Vancouver — A change in the accounting of retirement benefits helped the world’s second-largest copper producer reduce its losses in the first quarter.

Phoenix-based Phelps Dodge (PD-N) lost US$15 million (or US21 per share) in the three months ended March 31, compared with the US$24.8-million (US32-a-share) loss reported a year earlier.

Contributing to the improvement was a US$9.5-million (US11-per-share) special gain after taxes, stemming from the accounting change, as well as a US5 improvement in the copper price.

Revenue between the first quarters of 2002 ad 2003 grew to US$978 million from US$918.5 million, thanks to the higher copper price, which averaged US76 per lb. in the recent 3-month period.

However, cash flow from operations slipped to US$6 million from US$110.2 million, chiefly because of legal costs associated with a Cyprus Amax lawsuit.

“Worldwide economic conditions, particularly in the manufacturing and capital-goods sectors, remain soft and sluggish,” says Phelps Dodge President J.S. Whisler. “Demand for copper has clearly stabilized but is not yet growing.”

The company’s mining division contributed US$655 million of overall revenue during the quarter, with production hitting 260,400 tons of copper, compared with 257,200 tons a year earlier. Molybdenum output also increased, to 11.5 million from 10.6 million lbs. Prices for moly increased to US$4.06 per lb. in the quarter, compared with US$2.74 per lb. a year earlier.

Copper consumption in North America and Europe remained flat, while China “continues to be the bright spot, growing at double-digit rates.”

The company projects a loss of US30-40 a share in the second quarter, based on a copper price of US73 per lb. Phelps Dodge also expects to record a US$10-million charge for taxes in the quarter.

States Whisler: “While we are positioned to reap the benefits of a sustained recovery in copper prices, that recovery is not yet apparent.”

Despite the weak demand for copper, Phelps, in partnership with Placer Dome (PDG-T), is developing technology to recover copper from chalcopyrite. In late March, the company began treating concentrate at its Bagdad copper leaching demonstration plant in Arizona. The new process, which bypasses the more traditional smelting-refining route, involves the leaching of chalcopyrite concentrates in a pressure leach vessel. The resulting copper-containing solutions are mixed with lower-grade stockpile leach solutions before being processed by solvent extraction-electrowinning.

The Bagdad plant is the first commercial facility in the world to use pressure leaching to treat chalcopyrite concentrates.

The major began building the US$40-million plant in early 2002. It is projected to produce 35 million lbs. copper cathode per year.