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Freeport-McMoRan Q1 results miss views on higher costs, lower copper prices

Published: 09:58 18 Apr 2013 EDT

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Freeport-McMoRan Copper & Gold (NYSE:FCX) Thursday reported a rise in copper production, but first-quarter profits and revenues declined on higher costs and lower realized copper prices, missing analysts’ expectations.

Shares of the company were down 0.82 per cent as at about 10 a.m. EDT, trading at $27.77.

The mineral producer reported first-quarter net income of $648 million or 68 cents per share, compared with net income of $764 million or 80 cents per share, a year earlier. 

The company said net income in the latest period included charges of $50 million or five cents per share, associated with debt extinguishment and costs associated with pending acquisitions as well as its cobalt chemical refinery acquisition last month. 

Revenue fell to $4.58 billion from $4.6 billion a year earlier.

Analysts polled by Thomson Reuters had expected per share earnings of 71 cents, on revenue of $4.64 billion.

"Our first-quarter results reflect our focus on strong and safe production, aggressive cost management and advancing financially attractive projects to grow our copper production, increase cash flows and provide strong returns for shareholders,” said chairman James R. Moffett and CEO Richard C. Adkerson in a statement.

“We also completed attractive financing transactions during the quarter, providing low-cost debt to fund the pending oil and gas acquisitions.”

Consolidated copper sales of 954 million pounds were higher than the January 2013 estimate of 940 million pounds, primarily reflecting higher production and sales from Africa, the company noted. 

First-quarter consolidated gold sales of 214 thousand ounces were lower than the previous estimate of 230 thousand ounces, mostly due to timing of shipments. Meanwhile total molybdenum sales of 25 million pounds were higher than the January estimate of 23 million pounds, primarily because of stronger sales in the metallurgical and chemical sectors, the company said.

Consolidated unit net cash costs - net of by-product credits – of $1.57 per pound of copper in the quarter were higher than cash costs of $1.26 per pound a year earlier, mostly due to lower by-product credits.

Freeport-McMoRan said that operating cash flows were $831 million, compared with $801 million a year earlier.

Excluding results of pending acquisitions, operating cash flows are estimated to approximate $5.5 billion for the year 2013, it added.

Capital expenditures stood at $805 million in the first quarter, compared with $707 million a year ago.

As at March 31, consolidated cash totalled $9.6 billion and total debt was $10.1 billion.

Looking ahead, Freeport-McMoRan said that consolidated sales from mines for the full-year 2013 are expected at about 4.3 billion pounds of copper, 1.4 million ounces of gold and 92 million pounds of molybdenum.

Unit net cash costs - net of by-product credits - for the company’s copper mining operations are expected to average $1.45 per pound of copper for the year - higher than previous estimates due to lower gold credits, the miner noted.

Capital expenditures are allotted at $4.4 billion for the year.

Freeport-McMoRan operates a portfolio of operating, expansion and growth projects in the copper industry and is the world’s largest producer of molybdenum.

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