Winter Park, Florida 26/01/2016 - Freeport-McMoRan aims to accelerate its debt reduction plans and is actively engaged in discussions with third parties regarding potential asset sales.
The company is exploring options for its oil and gas business as well as several transactions involving mining assets. It expects progress on these initiatives during the first half of 2016.
"While we believe the physical copper market is essentially balanced, concerns about the global economy, and particularly the weakening of the Chinese economy, have dominated financial market sentiment and negatively impacted commodity prices, including copper," Freeport said in its quarterly earning report.
Three-month copper on the London Metal Exchange is currently trading at $4,504 per tonne, which is not far from a six-year low of $4,331.
"Current market conditions and uncertainty about the timing of economic and price recovery require Freeport to take further aggressive actions to strengthen its financial position, reduce debt and re-focus its portfolio of assets," Freeport said, adding that its strategy will focus on the copper industry.
"With its established reserves and large-scale current production base, its significant portfolio of undeveloped resources, and its global organization of highly qualified and dedicated workers and management, Freeport is well positioned to generate significant asset sale proceeds while retaining an attractive portfolio of high-quality assets," the company added.
Freeport previously announced reductions of 350 million pounds in annual copper production and 34 million pounds in annual molybdenum production to improve cash flow at low prices.
This year it expects to reduce average cash costs to $1.10 per pound of copper by 28 percent from $1.53 per pound in 2015.
"Following revisions to its mine plans, all of Freeport's copper production is cash flow positive at current spot prices, net of sustaining capital expenditures," the company said, adding that it will continue to monitor market conditions and intends to make further adjustments as required to maintain all operations as cash-flow positive.
"The Cerro Verde expansion project, which was completed in late 2015, combined with strong operating performance in North America and Africa and expected higher grades from Grasberg in the second half of 2016 are expected to enable Freeport to generate positive cash flow from its mining business in 2016 at current prices," it added.
Freeport's fourth-quarter copper sales of 1.15 billion pounds were up 18 percent year-on-year and in line with estimates. The increase primarily reflects higher volumes from North America and the Cerro Verde mine in Peru.
Freeport expects consolidated sales for 2016 of around 5.1 billion pounds of copper, 1.8 million ounces of gold and 73 million pounds of molybdenum, including 1.1 billion pounds of copper, 200,000 ounces of gold and 19 million pounds of molybdenum in the first quarter.
"Anticipated higher grades from Grasberg in the second half of 2016 are expected to result in approximately 55 percent of consolidated copper sales and 75 percent of consolidated gold sales to occur in the second half of the year," the company said.
Freeport recorded a net loss attributable to common stock of $4.1 billion ($3.47 per share) for the fourth quarter, which was slightly less than expected. For the full year, it lost $12.2 billion ($11.31 per share).
Revenue for the quarter of $3.8 billion was down from $5.2 billion a year previously and below the consensus estimate of $3.89 billion.
The company's stock price was recently up 2.92 percent at $4.05 on the New York Stock Exchange.
(Editing by Mark Shaw)