Freeport Has 2nd-Qtr Profit as Metal Production Soars<\/p>\n
Claudia Carpenter
\nBloomberg\/New York<\/p>\n
Freeport-McMoRan Copper & Gold Inc., owner of the world's
\nbiggest gold mine, had its fourth straight profitable quarter on
\nincreased output from Indonesia and higher metal prices.<\/p>\n
Second-quarter net income was US$190.4 million, or 91
\nU.S.cents a share, compared with a net loss of $38.2 million, or
\n30 U.S.cents, a year earlier, New Orleans-based Freeport said
\ntoday in a statement. Per-share results were after payment of
\npreferred dividends. Sales surged 86 percent to $902.9 million.<\/p>\n
Chief Executive Richard Adkerson boosted copper sales by 53
\npercent and gold sales by 76 percent after landslides disrupted
\nGrasberg mine operations in Indonesia two years ago. Copper
\nprices on average gained 25 percent, and gold rose 9.8 percent.
\nThe company declared a special dividend of 50 cents a share to be
\npaid Sept. 30.<\/p>\n
"Copper inventories are very low, China continues to consume
\ncopper at higher rates and the U.S. economy is doing reasonably
\nwell," Adkerson said in an interview. "Underlying fundamentals
\nare very strong."<\/p>\n
Freeport, China's Jiangxi Copper Co. and other producers are
\nbenefiting as economic growth in China and the U.S. stokes demand
\nfor electrical wires and pipes. Global copper inventories in
\nwarehouses approved by the London Metal Exchange have plunged 45
\npercent this year, to the lowest in 31 years.<\/p>\n
Freeport was forecast to earn 87 U.S.cents a share in the
\nsecond quarter, the average estimate of 14 analysts surveyed by
\nThomson Financial.<\/p>\n
Shares of Freeport rose 11 cents to $38.76 at 4:01 p.m. in New
\nYork Stock Exchange composite trading. They are up 9.7 percent in
\nthe past year.<\/p>\n
Adkerson, 59, said Freeport will generate $1.2 billion in cash
\nthis year from higher prices and output with $179.7 million spent
\non common-stock dividends in the first half. The company's
\nspecial dividend, the third since December, will be paid Sept.
\n30.<\/p>\n
"We like to see companies with excess cash flow that take that
\ncash and do things that increase shareholder value such as buying
\nback stock and paying dividends," said Ivan Feinseth, director of
\nresearch at Matrix USA Inc. in New York, who rates Freeport a
\n"strong buy."<\/p>\n
Freeport sold copper on average at $1.53 a pound, up from
\n$1.22, and its average gold prices rose to $428.23 an ounce from
\n$387.97, the company said.<\/p>\n
"Copper consumption remains higher than expected," Adkerson
\nsaid. "There are reports that the physical market for gold is
\ngood."<\/p>\n
Freeport sold 313.7 million pounds of copper, less than the
\n340 million forecast by the company at the end of the first
\nquarter. Gold sales were 616,400 ounces, below the projection of
\n650,000 ounces. Output was lower than anticipated partly because
\nof "unplanned downtime for mill maintenance," the company said.<\/p>\n
Freeport lowered its estimate of its share of production from
\nGrasberg this year to 1.47 billion pounds of copper and 2.8
\nmillion ounces of gold. The previous estimate was 1.5 billion
\npounds of copper and 2.9 million ounces of gold.<\/p>\n
Grasberg is expected to produce about 3.5 million ounces of
\ngold this year and 800,000 metric tons of copper, the second-
\nhighest after BHP Billiton Ltd.'s Escondida mine in Chile,
\nFreeport executives said in a May 16 presentation to analysts.<\/p>\n
Special Dividends<\/p>\n
"As the company continues to experience strong cash flows due
\nto the relatively high metal price environment, we believe
\nfurther dividend increases or supplemental dividends are
\npossible," BMO Nesbitt Burns analyst Victor Lazarovici said in a
\nnote to clients today.<\/p>\n
Revenue in the second quarter of 2004 was $486.3 million.<\/p>\n
Net income in the first half was $335.9 million, or $1.62 a
\nshare, compared with a net loss of $57.6 million, or 39
\nU.S.cents, a year earlier.<\/p>\n
Freeport owns almost 91 percent of Grasberg, and the
\ngovernment of Indonesia owns the rest. Freeport bought out the
\nrest of PT Indocopper Investama in 2002 after the owner, Mohamad
\n"Bob" Hasan, was unable to pay loans. PT Aneka Tambang, a gold
\nand nickel miner 65 percent owned by Indonesia's government, is
\nconsidering buying the government's 9.36 percent interest in the
\nmine, Adkerson said. Any sale would be done at a "fair market
\nvalue," he said.<\/p>",
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