Freeport increases 2002 copper output

Freeport increases 2002 copper output

Dow Jones, Singapore

Despite a more than 20 percent slump in global benchmark copper prices since beginning of the year, PT Freeport Indonesia will go ahead with plans to increase copper production next year, the company's president director said Monday.

PT Freeport, which owns the world's largest copper and gold reserves at its Grasberg Mine in Indonesia's Irian Jaya, expects to boost output to 1.5 billion pounds of copper in concentrate in 2002 from 1.4 billion pounds this year, Adrianto Machribie told Dow Jones Newswires in an interview.

Machribie's comments come at a time when most producers are considering supply cuts as prices remain weighed down by sagging demand in a global economic slump exacerbated by the Sept. 11 attacks on the U.S.

"The events beginning Sept. 11 have obviously had a significant impact on the world economy," Machribie said. "(But) we believe the fundamentals for the long-term copper market still look good."

He didn't provide any forecasts for global copper demand or prices. But analysts predict a supply overhang of about 500,000 metric tons for this year alone and that worse is still to come.

Friday, the London Metal Exchange three-month copper price hit a fresh 33-month low at US$1,352 a metric ton, down from an August average of $1,488/ton. The contract's January average price was $1,794/ton.

Price weakness in recent months has prompted major copper producers to cut output in an effort to prop up prices. Last month, for instance, U.S.-based Phelps Dodge Corp. (PD) announced plans to cut 220,000 tons of output this year.

A rally on the LME followed Phelps Dodge's announcement but was short-lived. Phelps Dodge called on other major producers to follow its example, as its planned reduction is less than half of the current surplus.

"Of course our bottom line is impacted by lower copper prices, but because of our high-production, low-cost structure, we're able to generate significant operating cash flows despite currently low commodity prices," Machribie said. PT Freeport's net cast production costs in 2001 are expected to average less than 10 U.S. cents a pound, he added.

In the first nine months of this year, U.S.-based Freeport- McMoran Copper & Gold Inc., the parent company of PT Freeport, recorded operating cash flow of $475.1 million, up from $304.9 million in the same period last year.