Freeport-McMoRan Clears Very Low Bar

underground mining
underground mining

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported second-quarter 2013 results before markets opened this morning. The mining company reported diluted earnings per share (EPS) of $0.49 on revenues of $4.29 billion. In the same period a year ago, Freeport-McMoRan reported EPS of $0.74 and revenues of $4.48 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.41 on revenues of $4.28 billion.

While that may look pretty good, in April the consensus EPS estimate was $0.76, and just one month ago the estimate was $0.60. The rising mining costs and the lower price of gold has hit Freeport hard, and the same will be true for the other gold miners.

The company's officers said:

We are committed to our business plan of reducing debt and maintaining a strong balance sheet, while investing in financially attractive projects and providing cash returns to shareholders. We are taking measures to execute prudent capital management in an uncertain global economic environment and are committed to pursuing additional divestitures and capital cost reductions as required to maintain a strong balance sheet while preserving a strong resource position and a portfolio of assets with attractive long-term growth prospects.

Freeport-McMoRan now forecasts sales of copper in 2013 to fall from last quarter's estimate of 4.3 billion to 4.1 billion pounds. Gold sales are now expected to total 1.1 million ounces, lower than the 1.4 million ounces forecast at the end of the first quarter. The molybdenum sales forecast rose from 90 million to 92 million pounds in 2013. The company also expects to produce 35 million barrels of oil equivalent, now that its acquisitions of Plains Exploration and McMoRan Exploration are completed.

Net cash costs per pound of copper rose from $1.49 a year ago to $1.85 in the second quarter, based on current sales volumes and a price of $1,300 an ounce for gold and $10 a pound for molybdenum.

Shares are up about 2.1% at $29.77 in premarket trading this morning, in a 52-week range of $26.37 to $43.65. Prior to today's release, Thomson/Reuters had a consensus price target of around $36.10 on the company's shares.

Filed under: Commodities & Metals Tagged: FCX