Seeking Alpha
Mid-cap, small-cap
Profile| Send Message|
( followers)

Freeport-McMoRan (NYSE:FCX), one of the world's largest producers of copper and gold, increased its third quarter profits by 30%, prompting the company to increase its annual dividend by 67%.

For the third quarter, net income was $1.2 billion, or $2.49 per share, compared with profits of $925 million, or $2.07 per share in the prior year period. The increase was a reflection of strong production, cost performance and positive pricing of the company's key commodities, it said Thursday.

Consolidated sales from mines for the period totaled 1.1 billion pounds of copper, 497 thousand ounces of gold and 17 million pounds of molybdenum, compared with 1.0 billion pounds of copper, 706 thousand ounces of gold and 16 million pounds of molybdenum for third-quarter 2009.

The decrease in gold reflects the lower grade ores at Grasberg as a result of planned mine sequencing, whereas the slight increase in copper is due to higher copper ore grades and mill throughput in South America, as well as a higher contribution from the Tenke Fungurume mine in Africa, the company said.

Operating cash flows totaled $1.3 billion for the third quarter, net of working capital requirements totaling $636 million in the period. Consolidated unit net cash costs averaged $0.82 per pound, compared with $0.50 per pound for Q3 2009.

For the full-year, Freeport-McMoRan expects consolidated sales from mines to approximate 3.85 billion pounds of copper, 1.9 million ounces of gold and 65 million pounds of molybdenum.

"We continue to advance our future growth and expansion plans and are taking steps to increase near-term copper production in response to improved physical markets. We are highly positive about the long-term outlook for our business," said president and CEO Richard C. Adkerson and chairman James R. Moffett.

Indeed, at December 31, 2009, in addition to estimated proven and probable reserves of 104 billion pounds of copper, the company identified estimated mineralized material with incremental contained copper of an additional 122 billion pounds.

Freeport said it is aggressively pursuing opportunities to convert this mineralized material into reserves, future production volumes and cash flow.

In addition, the company is increasing near-term production at several of its mines and is currently in the midst of some major development projects, including the development of the El Abra sulfide reserves and the underground ore bodies at Grasberg. It is also advancing development activities at the Climax primary molybdenum project and currently looking to expand the concentrator capacity at its Cerro Verde mine.

To cover all these developments, Freeport's capital expenditures totaled $350 million for the third quarter, and the company expects this to approximate to $1.6 billion for the full-year, including $0.7 billion for major projects such as El Abra and Grasberg.

According to the company, capital spending programs are only expected to increase as it continues to invest in its existing portfolio.

At September 30, 2010, Freeport had $3.7 billion in cash and $4.8 billion in total debt. The company's board has opted to increase the annual shareholder dividend from $1.20 per share to $2.00 per share, or $0.50 per share on a quarterly basis.

Freeport was up almost 2% to $97.21 as of 11:01am ET on Thursday.

Disclosure: No position

Source: Freeport-McMoRan: Q3 Profits Jump, Annual Dividend Increased