(Kitco News) - The earnings bonanza in the mining sector continues as one of the world's largest copper and gold producers reported better-than-expected third-quarter earnings, with higher metal prices offsetting rising production costs and a sharp decline in gold sales.
Tuesday, ahead of the North American equity market open, Freeport-McMoRan (NYSE: FCX) reported third-quarter revenue of $7.55 billion, beating analysts' consensus forecast of $7.4 billion by approximately 2%. Revenue increased 8.2% from $6.97 billion a year earlier.
The company reported net income attributable to shareholders of $1.17 billion, or $0.81 per share, compared with $674 million, or $0.46 per share, last year. Adjusted earnings totaled $1.28 billion, or $0.88 per share, exceeding consensus estimates of $0.82 per share.
Although higher metal prices supported Freeport's financial performance, its results highlight growing cost pressures across the mining sector, as higher energy prices and persistent inflation threaten operating margins.
Freeport reported consolidated unit net cash costs of $2.07 per pound of copper, up nearly 48% from $1.40 a year earlier. Costs were also above the company's previous forecast of $2.00 per pound.
The company attributed the increase to lower copper and gold volumes at its Grasberg mining complex in Indonesia, along with higher energy and consumables costs. Delayed gold sales also reduced by-product credits, adding further pressure to reported copper production costs.
Freeport separately reported $244 million in idle facility, recovery and restoration costs associated with the September 2025 mud rush incident at Grasberg. These expenses were excluded from its unit net cash cost figures.
The rising costs come as analysts warn that the ongoing war in Iran and disruptions to global energy supplies could undermine the mining industry's otherwise strong earnings performance.
"I think the big picture is that it's going to be very good earnings, but they'll probably miss a lot of consensus estimates," he said.
Mancini noted that while higher diesel prices have become a significant headwind, labor inflation represents an even greater challenge as companies compete for workers.
Freeport's results illustrate some of those pressures, although stronger metal prices helped offset weaker production and sales volumes.
The company reported gold production of 234,000 ounces, down from 287,000 ounces a year earlier. Gold sales fell nearly 69% to 105,000 ounces, compared with 336,000 ounces last year.
Sales also missed the company's previous guidance of 160,000 ounces, primarily because of delays in refined gold sales from Indonesia.
However, Freeport benefited from higher gold prices, with its average realized price rising nearly 21% to $4,273 an ounce, compared with $3,539 last year.
Freeport said gold production remained in line with expectations, with approximately 60,000 ounces of refined gold sales deferred into the fourth quarter.
The company expects fourth-quarter gold sales of approximately 300,000 ounces, bringing full-year sales to 649,000 ounces.
Despite the decline in gold sales, Freeport said its Grasberg recovery remains on schedule. The company expects operations to reach 80% of capacity by mid-2027 and approach full capacity by year-end.
In a statement, Kathleen Quirk, Freeport's president and CEO, highlighted the company's operational progress.
"We made continued steady progress with our Grasberg ramp-up and advanced innovative leach and technology initiatives in our Americas business to enhance performance and growth options."
Looking ahead, Freeport expects higher gold sales to improve by-product credits and ease production costs. The company forecasts consolidated unit net cash costs of $1.68 per pound in the fourth quarter, bringing its full-year average to approximately $1.90 per pound.
However, the company cautioned that its cost outlook remains vulnerable to developments in the Middle East, particularly their impact on energy and other consumable prices.
