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Freeport-McMoRan Q2 profit drops on lower prices

Published: 09:12 23 Jul 2013 EDT

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Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) reported Tuesday that second quarter net income fell sharply from a year ago, despite $265 million of net gains tied to acquisitions, though profit still topped analysts expectations, with shares rising in premarket trade. 

The copper and gold producer reported a net profit of $482 million, or 49 cents per share, compared to $710 million, or 74 cents per share, a year ago. 

The company said the latest results included net gains of $265 million, or 27 cents per share, related to the acquisitions of Plains Exploration & Production Company in May and McMoRan Exploration Co. in June, which according to its statement, created a "premier U.S.-based natural resource company". 

The mining company's revenue was $4.29 billion compared to $4.47 billion in the year-ago quarter.

Analysts expected Freeport-McMoRan to earn 39 cents a share on sales of $4.39 billion, according to a survey by FactSet.

Sales in the second quarter included 951 million pounds of copper, 173 thousand ounces of gold, 23 million pounds of molybdenum and 5.0 million barrels of oil equivalents (MMBOE), reflecting results from Freeport-McMoRan Oil & Gas beginning June 1, 2013.

For the year, sales are expected to approximate 4.1 billion pounds of copper, 1.1 million ounces of gold, 92 million pounds of molybdenum and 35 MMBOE, the company said Tuesday. 

The copper and gold miner also said that during the quarter, it took actions to reduce or defer capital expenditures and other costs, and initiated efforts to identify potential asset sales in response to recent declines in metals prices. The price of gold shed 23 per cent in the second quarter. 

Gold output was 151,000 ounces in the latest period, down from 251,000 a year ago, while the average realized gold price declined sharply in the latest period to $1,322 an ounce, from $1,588 in the same period last year. Copper production was higher, at 909 million pounds, compared to 887 million pounds a year ago, but average realized prices dropped to $3.17 from $3.53.

"We are pleased to report our initial quarterly results following the second-quarter 2013 oil and gas acquisitions," said the company in a statement, citing chairman James R. Moffett and president and CEO Richard C. Adkerson.  

"We are committed to our business plan of reducing debt and maintaining a strong balance sheet, while investing in financially attractive projects and providing cash returns to shareholders. We are taking measures to execute prudent capital management in an uncertain global economic environment and are committed to pursuing additional divestitures and capital cost reductions as required to maintain a strong balance sheet while preserving a strong resource position and a portfolio of assets with attractive long-term growth prospects."

As a first step, the miner has trimmed its budgeted future capital expenditures, exploration and other costs by a total of $1.9 billion this year and next, and has started a process to divest certain oil and gas properties from its Gulf of Mexico Shelf area. 

In the latest three month period, capital expenditures totaled $1.2 billion, and the company said it expects to spend around $5.5 billion for the year, including $2.3 billion for major projects at mining operations and $1.5 billion for oil and gas operations.

The company had cash of $3.3 billion at quarter end, and debt of $21.2 billion. 

Shares of Freeport-McMoRan gained 1.5 per cent in premarket trade Tuesday, to $29.60. From the start of the year through to the close of market Monday, shares had dropped 14.77 per cent. 

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