Freeport says Indonesia will honor contracts

Freeport says Indonesia will honor contracts

DENVER (Dow Jones): Freeport-McMoran Copper & Gold Inc. (FCX) Chief Executive James Moffett sought to dispel concerns about Indonesian political uncertainty late Tuesday, hours before Indonesia's presidential-election results were known.

Indonesia "will honor these contracts" with Freeport-McMoran, regardless of leadership outcomes, he said in a presentation at the Mining Investment Forum '99 in Denver, sponsored by the Denver Gold Group.

Wednesday, Moslem leader Abdurrahman Wahid was elected president by the parliament of Indonesia, where Freeport- McMoran's huge Grasberg gold and copper mine is located.

Moffett cited U.S. law that provides for a cessation of U.S. aid in a country that expropriates property, and he said that a move toward expropriation in Indonesia would mean that assistance from the U.S., the World Bank and the International Monetary Fund would disappear. The IMF is the best political-risk insurance in Indonesia, he said.

Moffett also said that Freeport-McMoran may eventually pay dividends to shareholders if the company has the money and cash flow to support it. "I think you have to give people something back," he said. He added that he believes in a balance of stock buyback, debt repayment and dividends.

Moffett defended Freeport-McMoran's debt load of about $3 billion as necessary to develop the potential at Grasberg.

Tuesday, Freeport-McMoran reported third-quarter earnings of 16 cents a share on revenue of $473.7 million, compared with earnings of 14 cents a share on $442.1 million a year ago.

The New Orleans company's fortunes are closely tied to copper and gold prices. For every $50-per-ounce change in the price of gold, Freeport-McMoran's net income fluctuates by $50 million, said Moffett. And for every 10-cent-per-pound change in the price of copper, its net income fluctuates by $70 million.