Metals and mining powerhouse Freeport-McMoRan Copper & Gold Inc. (FCX) posted net income of $1.2 billion or $2.49 per share in the third quarter of 2010, outshining the Zacks Consensus Estimate of $2.14 per share. Year over year, earnings improved by 20%.
Quarterly revenues of $5.1 million surpassed the Zacks Consensus Estimate of $4.47 billion and were up 24% year over year. Higher metal prices drove sales and earnings in the quarter.
Sales Prices and Volumes
Averaged realized metal prices surged up and copper prices leaped 27% year over year to $3.50 per pound, increasing 5% in the first nine months of 2010 from $3.33. Gold prices jumped 28% year over year and 5% year-to-date to $1,266 per ounce, while Molybdenum prices experienced a 15% year-over-year rise to $16.06 per pound, while it dropped 2% in the nine-month period from $16.43.
However, copper sales volumes grew 8% year over year in the quarter to 1080 million pounds, while gold sales volumes plunged 30% to 497,000 ounces. Molybdenum sales volumes remained nearly flat at 17 million pounds.
Financial Review
Net cash cost per unit in the quarter increased 64% to 82 cents per pound versus 50 cents in the third quarter of 2009. Operating cash flows of $1.3 billion for third-quarter 2010 increased by a robust 48% from $2.8 billion as of September 30, 2009. Capital expenditures totaled $350 million for the third quarter of 2010. As of September 30, 2010, total debt was approximately $4.8 billion with $3.7 billion in cash. From January 1, 2010 through September 30, 2010, Freeport repaid $1.6 billion of debt.
Guidance
In 2010, Freeport expects to sell 3.85 billion pounds of copper, 1.9 million ounces of gold and 65 million pounds of molybdenum. For the upcoming quarter, the company projects sales of 895 million pounds of copper, 585 thousand ounces of gold and 15 million pounds of molybdenum. The company expects average copper prices of $3.75 per pound, $1,300 per ounce of gold and $15 per pound of molybdenum for the fourth quarter of 2010.
Operating cash flows are estimated to be $6.0 billion for the full year. However, a hypothetical $0.10 per pound change in copper prices, $10 million for each $50 per ounce change in the average price of gold and $8 million for each $2 per pound change in the average price of molybdenum would impact operating cash flows by $60 million in the fourth quarter.
Freeport expects capital expenditures of $0.7 billion in 2010, which primarily includes the sulfide ore project at El Abra, underground development activities at Grasberg, construction activities at the Climax molybdenum mine and investments in a new sulphur burner facility at Safford.
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