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Freeport-McMoRan Swings to Net Loss In Second Quarter

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(Kitco News) - Freeport-McMoRan Inc. (NYSE: FCX) Wednesday reported that it swung to a net loss in the second quarter as copper production fell during the transition from an open pit to underground mining at the giant Grasberg mine in Indonesia.

The company said the net loss was $72 million, or a nickel per share, a turnaround from a profit of $869 million, or 59 cents, in the same quarter a year ago.

After special items, the adjusted net loss was $58 million, or 4 cents per share.

Second-quarter copper sales of 807 million pounds were in line with the April estimate of 800 million pounds, Freeport said. Higher volumes from North America and South America offset lower volume from PT Freeport Indonesia.

The company said Indonesian output of 189,000 pounds was lower than planned due to mine sequencing changes in the Grasberg open pit. PT-FI opened an additional area to extend mining in the Grasberg open pit into the third quarter 2019 and potentially longer. This delayed access to the high-grade material previously expected to be produced during the April-June period.

Meanwhile, compared to the second quarter of 2018, copper and gold sales fell due to anticipated lower mill rates and ore grades as PT-FI transitions mining from the open pit to underground. April-June copper sales of 807 pounds was down from 989 million in the year-ago period, while gold sales of 189,00 ounces was down from 676,000.

Second-quarter molybdenum sales were 24 million pounds, compared to the April estimate of 25 million pounds and second-quarter 2018 sales of 24 million pounds.

For full-year 2019, Freeport projected sales of 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 830 million pounds of copper, 230,000 ounces of gold and 25 million pounds of molybdenum in the third quarter.

The company-wide average cash cost, net of by-product credits, for Freeport’s copper mines was $1.92 per pound of copper in the second quarter. This was up from 96 cents a year ago, primarily reflecting lower sales volumes as PT-FI transitions mining from the open pit to underground.

Freeport received an average of $2.75 per pound for its copper, down from $3.08 in the same period of 2018. The average gold price was $1,351, up from $1,274. The average realized molybdenum price rose to $13.15 a pound from $12.89 a year ago.

Richard C. Adkerson, president and chief executive officer, said the underground ramp-up at Grasberg “is advancing according to plan and recent milestones are encouraging as we target increasing volumes and cash flows from the Grasberg minerals district.”

He added: “We are also progressing our Lone Star copper leach project in Arizona and remain optimistic about the long-term opportunities for this large resource.”

An initial project to develop Lone Star leachable ore began in 2018, with first production expected by the end of 2020, the company said. Initial production is expected to be around 200 million pounds of copper per year, with the potential for future expansion.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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