Freeport to Cut Spending as It Begins Asset-Sales Process
Freeport-McMoRan Copper & Gold Inc. (FCX) is cutting spending by $1.9 billion this year and next and started a process to sell U.S. energy assets as the world’s biggest publicly traded copper miner seeks to reduce its debt.
Freeport plans to cut total borrowings to $12 billion in the next three years, the Phoenix-based company said today in a statement.
“We are taking measures to execute prudent capital management in an uncertain global economic environment,” the company said in the statement.
Freeport’s debt jumped to $21.2 billion as of June 30 from $3.52 billion a year earlier after it acquired Plains Exploration & Production Co. and McMoRan Exploration Co. for $9 billion to add oil and natural gas assets.
The company, which operates mines in the Americas, Africa and Asia, is facing lower prices for copper and gold. Freeport reduced its metals sales forecast for 2013 after an accident killed 28 people at its Grasberg mine in Indonesia in May.
Freeport rose 1.8 percent to $29.68 at 9:58 a.m. in New York.
“Shares will react favorably to this development as management appears to be cognizant of shareholders’ views,” Anthony Rizzuto, an analyst at Cowen & Co. in New York, said in a note. “This move to rein in capital spending should be well received.”
Second-quarter net income fell to $482 million, or 49 cents a share, from $710 million, or 74 cents a year earlier.
Sales dropped 4.2 percent to $4.29 billion from $4.48 billion, missing the $4.46 billion average of 13 estimates.
The average production cost per pound of copper was $1.85, more than the $1.69 average of three estimates.
Freeport halted work for more than a month at the Grasberg copper and gold mine after the deadly tunnel collapse on May 14. Shipments from the mine, Freeport’s largest, resumed this month after the Indonesian government allowed operations to restart.
The disruption lost the company about 125 million pounds of copper and 125,000 ounces of gold in the quarter, Freeport said. It now expects to sell 4.1 billion pounds of copper and 1.1 million ounces of gold this year, compared with an April 18 forecast of 4.3 billion pounds and 1.4 million ounces.
The average copper price in the quarter was $3.26 a pound for futures on the Comex in New York, 8.2 percent less than the same period of 2012.
(Freeport scheduled a conference call for 10 a.m. New York time. U.S. callers should dial 1-800-403-5770, international callers 1-706-679-8487. The pass code is 14150503.)
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