Freeport-McMoRan's Profit Sinks, Delays Projects

Freeport-McMoRan Copper & Gold Inc shares slumped by 7% on Tuesday after the company posted a sharp drop in quarterly profit and said it would curtail planned mine expansions because of weaker metals prices and current economic conditions.

Freeport said it would delay expansion projects at its Serrita and Bagdad copper mines in Arizona and would push back the restart of its Miami mine in the state, cutting about $370m in planned capital costs.

The world's largest publicly traded copper producer was also seeking to defer some spending at its massive Grasberg mine in Indonesia, as well the Al Abra mine in Chile.

"We will be responsive to current market conditions by reducing costs and capital spending and curtailing high-cost operations if required. We are positive about the underlying fundamentals of the copper market and the long-term prospects for our business," chairman James Moffett and chief executive officer Richard Adkerson said in a statement.

Global economic uncertainty has resulted in a drop in commodity prices recently. At the start of the third quarter, copper was selling for $4.08 per pound, but since July, the benchmark December copper contract has plummeted, losing 32% to end the quarter at $2.76.

During the quarter, the spot price for gold went from $987 per ounce on 15 July to $736 on 11 September - a drop of 25%.

Freeport actually sold more copper - 1.016 billion pounds during the third quarter - but the average realised price fell from $3.53 in the 2007 quarter to $3.14 this year. Gold sales jumped to 307,000 ounces from 269,000 a year earlier, and the average realised price jumped to $869 from $695.

The Phoenix, Arizona-based mining company forecast full-year 2008 sales of 4.0 billion pounds of copper and 1.2 million ounces of gold - in line with its lowered estimate last month. Sales of molybdenum are expected to be slightly lower, at 74 million pounds, than the previous estimate of 75 million.

Net earnings fell to $523m, or $1.31 per share, compared with $775m, or $1.87 per share, a year earlier, the company said. Revenue fell to $4.62bn from $5.07bn.

Analysts on average were expecting earnings of $1.44 a share and revenue of $4.762bn, according to Reuters Estimates.

Last month, Freeport said it expected recent lower copper prices to reduce third-quarter net income by approximately $100m, with a $230m cut in revenue.

In September, Freeport lowered its 2008 copper and gold production outlook, due to an incident at its Grasberg mine in Indonesia, and also scaled back its forecast for full-year copper sales by 100 million pounds because of problems at its Safford and Morenci mines in Arizona.

Surging demand for copper and gold in the past few years has boosted earnings of miners and helped Freeport pay off $10bn in debt from its purchase of rival Phelps Dodge last year.

Freeport's shares were down 6.8% at $34.21 on the New York Stock Exchange on Tuesday morning, a drop of more than 73% from their May peak $127.23.

By Steve James, Reuters.