Freeport-McMoRan Copper & Gold Inc. (FCX) reported net income of $897 million or $2.00 per share in the first quarter of 2010, beating the Zacks Consensus Estimate of $1.92 per share. Earnings improved significantly from a modest net income of $43 million, $0.11 per share in the first-quarter 2009. Revenues climbed 68% to $4.4 billion helped by surging prices of copper, gold and molybdenum.
Phoenix-based Freeport-McMoRan has been showing signs of recovery. The company’s earnings rose for the first time in the third quarter of 2009 on higher sales to China and other developing countries, as well as lower costs of production and delivery. The market for base metals like copper has improved, although global demand outside China remains weak.
Copper sales volumes were down 4% in the quarter to 960 million pounds, and sales volumes of gold were down 12% to 478,000 ounces. The decline in sales volume resulted from lower copper and gold ore grades at Grasberg due to planned mine sequencing and lower sales from the South American mines in the first quarter of 2010. However, Molybdenum sales volumes rose 70% to 17 million pounds in the quarter on improved demand in the metallurgical and chemicals sectors.
Consolidated unit net costs in the quarter averaged 81 cents per pound versus 66 cents in the first quarter of 2009. Operating cash flows totaled $1.8 billion for first-quarter 2010. Capital expenditures totaled $231 million for first-quarter 2010. As of March 31, 2010, total debt approximated $6.1 billion and consolidated cash approximated $3.8 billion. From January 1 through April 20, 2010, Freeport repaid $1.3 billion in debt.
Guidance
Freeport expects consolidated sales in 2010 to be around 3.8 billion pounds of copper, 1.8 million ounces of gold and 62 million pounds of molybdenum. For the second quarter of 2010, Freeport expects copper sales to be around 830 million pounds while gold sales are expected at 270,000 ounces. The company expects Molybdenum sales of 15 million pounds for second quarter 2010. Consolidated sales in the second half of 2010 are expected to be higher than the first half because of mine sequencing at the Grasberg mine.
Consolidated unit net cash costs are estimated to average around $0.88 per pound in 2010. Operating cash flows in 2010 are estimated to exceed $6 billion, net of $0.3 billion in working capital requirements. Freeport expects capital expenditures of about 1.7 billion in 2010.
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