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Freeport-McMoRan Inc. (FCX - Free Report) reported net income (attributable to common stock) of 16 cents per share for third-quarter 2016, as against the year-ago loss of $3.58 per share.
Net income for the reported quarter includes net gains of $39 million, or 3 cents per share, mainly reflecting net tax credits. Barring that impact, adjusted earnings was 13 cents a share in the third quarter, missing the Zacks Consensus Estimate of 19 cents.
Revenues jumped around 14.6% year over year to $3,877 million in the reported quarter and exceeded the Zacks Consensus Estimate of $3,860 million.
Consolidated copper sales from mines (including volumes from Tenke Fungurume which is being reported as a discontinued operation) increased to 1.23 billion pounds of copper in the third quarter from 1 billion pounds in the year-ago quarter due to higher volumes from Cerro Verde. Gold sales went up to 317,000 ounces in the reported quarter from 294,000 ounces a year ago. Sales of molybdenum decreased to 16 million pounds in the reported quarter from 23 million pounds a year ago, mainly due to weak demand.
Operational Update
Consolidated average unit net cash costs (net of by-product credits including Tenke) declined to $1.14 per pound of copper from $1.52 per pound in the year-ago quarter. This is mainly attributable to higher copper sales volumes and the impact of ongoing cost-cutting initiatives.
Average realized price per ounce for gold rose to $1,327 in the quarter from $1,117 a year ago, while average realized price per pound for copper declined to $2.18 from $2.38 in the prior-year quarter.
Mining Update
North America Copper Mines: Copper sales decreased 5.2% year over year to 458 million pounds mainly due to the sale of a portion of the company’s interest in Morenci. Production fell 8.8% year over year to 455 million pounds in the reported quarter.
Freeport expects copper sales from North America to be 1.8 billion pounds in 2016, versus 2 billion pounds in 2015.
South America Mining: Copper sales of 323 million pounds soared 56% from the year-ago quarter due to Cerro Verde's expanded operations and production soared 55.4% to 317 million pounds.
South America mining is anticipated to report sales of around 1.3 billion pounds of copper in 2016, compared with sales of 871 million pounds in 2015.
Indonesia Mining: Copper sales of 332 million pounds increased a whopping 67.7% from 198 million pounds the year-ago quarter due to higher copper ore grades. Gold sales increased 7.7% to 307,000 ounces. Gold production rose 10.7% year over year to 301,000 ounces in the reported quarter.
Sales from Indonesia mining are anticipated to be about 1.2 billion pounds of copper and 1.24 million ounces of gold for 2016.
Africa Mining: Copper sales of 118 million pounds were 4.4% higher than the year-ago quarter. Sales at the mines are anticipated to be 485 million pounds of copper and 38 million pounds of cobalt for 2016.
Molybdenum: Molybdenum production was 5 million pounds in the third quarter compared with 13 million pounds in the year-ago quarter.
Financial Position
Freeport had cash and cash equivalents of $1,108 million as of Sep 30, 2016, down 375.5% from $233 million as of Sep 30, 2015. Freeport had long-term debt of $18,982 million as of Sep 30, 2016, down from $20,698 million as of Sep 30, 2015.
The company’s operating cash flows were $980 million in the third quarter and capital expenditures totaled $494 million.
In Jul 2016, Freeport started a registered at-the-market offering of up to $1.5 billion of common stock. Through Oct 24, 2016, the company has sold 33.5 million shares of its common stock for gross proceeds of $415 million.
Oil and Gas Operations (FMO&G)
In May and early Jun 2013, Freeport completed the acquisitions of Plains and McMoRan Exploration and formed a premier U.S.-based natural resource company, collectively called FM O&G. It added a high-quality portfolio of U.S.-based oil and gas assets to its global mining business.
In Oct 2015, Freeport announced that its board is undertaking a strategic review of alternatives for FM O&G. The company and its advisors are actively engaged in a process to evaluate opportunities that include a sale of assets and joint-venture arrangements which would generate cash proceeds for debt repayment.
In Sep 2016, Freeport entered into an agreement to sell its Deepwater GOM properties to Anadarko Petroleum Corporation for cash consideration of $2 billion (before closing adjustments) and up to $150 million in contingent payments.
Earlier this month, the company also agreed to sell its onshore California oil and gas properties to Sentinel Peak Resources California LLC for cash consideration of $592 million (before closing adjustments) and contingent consideration of up to $150 million.
In the second quarter, realized revenues for oil and gas operations were $421 million compared with $593 million in the year-ago quarter. Cash production costs totaled $180 million in the quarter. Sales volume was 12 million barrels of oil equivalent (MMBOE) in the quarter.
Guidance
For 2016, Freeport anticipates consolidated sales to be around 4.8 billion pounds of copper (including 485 million pounds for Tenke), 1.26 million ounces of gold, 73 million pounds of molybdenum. For fourth-quarter 2016, the company expects 1.3 billion pounds of copper (including 120 million pounds for Tenke), 590,000 ounces of gold, 21 million pounds of molybdenum.
Consolidated unit net cash costs (net of by-product credits) for copper mines are expected to average $1.20 per pound of copper for 2016. For 2016, capital expenditures are expected to be roughly $2.8 billion, including $1.6 billion for mining operations and $1.2 billion for oil and gas operations.
As previously announced, Freeport plans to strengthen its balance sheet and speed up its debt-reduction initiatives. Freeport expects to generate substantial cash flows over the next 18 months for debt reduction, with the successful completion of the Cerro Verde expansion and access to higher grade ore from the Grasberg mine in future quarters.
Newmont has an expected earnings growth rate of 84.2% for the current year.
New Gold has an expected earnings growth rate of 416.7% for the current year.
Pershing Gold has an expected earnings growth rate of 26.3% for the current year.
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Freeport-McMoRan's (FCX) Q3 Earnings Miss, Sales Beat
Freeport-McMoRan Inc. (FCX - Free Report) reported net income (attributable to common stock) of 16 cents per share for third-quarter 2016, as against the year-ago loss of $3.58 per share.
Net income for the reported quarter includes net gains of $39 million, or 3 cents per share, mainly reflecting net tax credits. Barring that impact, adjusted earnings was 13 cents a share in the third quarter, missing the Zacks Consensus Estimate of 19 cents.
Revenues jumped around 14.6% year over year to $3,877 million in the reported quarter and exceeded the Zacks Consensus Estimate of $3,860 million.
Consolidated copper sales from mines (including volumes from Tenke Fungurume which is being reported as a discontinued operation) increased to 1.23 billion pounds of copper in the third quarter from 1 billion pounds in the year-ago quarter due to higher volumes from Cerro Verde. Gold sales went up to 317,000 ounces in the reported quarter from 294,000 ounces a year ago. Sales of molybdenum decreased to 16 million pounds in the reported quarter from 23 million pounds a year ago, mainly due to weak demand.
Operational Update
Consolidated average unit net cash costs (net of by-product credits including Tenke) declined to $1.14 per pound of copper from $1.52 per pound in the year-ago quarter. This is mainly attributable to higher copper sales volumes and the impact of ongoing cost-cutting initiatives.
Average realized price per ounce for gold rose to $1,327 in the quarter from $1,117 a year ago, while average realized price per pound for copper declined to $2.18 from $2.38 in the prior-year quarter.
Mining Update
North America Copper Mines: Copper sales decreased 5.2% year over year to 458 million pounds mainly due to the sale of a portion of the company’s interest in Morenci. Production fell 8.8% year over year to 455 million pounds in the reported quarter.
Freeport expects copper sales from North America to be 1.8 billion pounds in 2016, versus 2 billion pounds in 2015.
South America Mining: Copper sales of 323 million pounds soared 56% from the year-ago quarter due to Cerro Verde's expanded operations and production soared 55.4% to 317 million pounds.
South America mining is anticipated to report sales of around 1.3 billion pounds of copper in 2016, compared with sales of 871 million pounds in 2015.
Indonesia Mining: Copper sales of 332 million pounds increased a whopping 67.7% from 198 million pounds the year-ago quarter due to higher copper ore grades. Gold sales increased 7.7% to 307,000 ounces. Gold production rose 10.7% year over year to 301,000 ounces in the reported quarter.
Sales from Indonesia mining are anticipated to be about 1.2 billion pounds of copper and 1.24 million ounces of gold for 2016.
Africa Mining: Copper sales of 118 million pounds were 4.4% higher than the year-ago quarter. Sales at the mines are anticipated to be 485 million pounds of copper and 38 million pounds of cobalt for 2016.
Molybdenum: Molybdenum production was 5 million pounds in the third quarter compared with 13 million pounds in the year-ago quarter.
Financial Position
Freeport had cash and cash equivalents of $1,108 million as of Sep 30, 2016, down 375.5% from $233 million as of Sep 30, 2015. Freeport had long-term debt of $18,982 million as of Sep 30, 2016, down from $20,698 million as of Sep 30, 2015.
The company’s operating cash flows were $980 million in the third quarter and capital expenditures totaled $494 million.
In Jul 2016, Freeport started a registered at-the-market offering of up to $1.5 billion of common stock. Through Oct 24, 2016, the company has sold 33.5 million shares of its common stock for gross proceeds of $415 million.
Oil and Gas Operations (FMO&G)
In May and early Jun 2013, Freeport completed the acquisitions of Plains and McMoRan Exploration and formed a premier U.S.-based natural resource company, collectively called FM O&G. It added a high-quality portfolio of U.S.-based oil and gas assets to its global mining business.
In Oct 2015, Freeport announced that its board is undertaking a strategic review of alternatives for FM O&G. The company and its advisors are actively engaged in a process to evaluate opportunities that include a sale of assets and joint-venture arrangements which would generate cash proceeds for debt repayment.
In Sep 2016, Freeport entered into an agreement to sell its Deepwater GOM properties to Anadarko Petroleum Corporation for cash consideration of $2 billion (before closing adjustments) and up to $150 million in contingent payments.
Earlier this month, the company also agreed to sell its onshore California oil and gas properties to Sentinel Peak Resources California LLC for cash consideration of $592 million (before closing adjustments) and contingent consideration of up to $150 million.
In the second quarter, realized revenues for oil and gas operations were $421 million compared with $593 million in the year-ago quarter. Cash production costs totaled $180 million in the quarter. Sales volume was 12 million barrels of oil equivalent (MMBOE) in the quarter.
Guidance
For 2016, Freeport anticipates consolidated sales to be around 4.8 billion pounds of copper (including 485 million pounds for Tenke), 1.26 million ounces of gold, 73 million pounds of molybdenum. For fourth-quarter 2016, the company expects 1.3 billion pounds of copper (including 120 million pounds for Tenke), 590,000 ounces of gold, 21 million pounds of molybdenum.
Consolidated unit net cash costs (net of by-product credits) for copper mines are expected to average $1.20 per pound of copper for 2016.
For 2016, capital expenditures are expected to be roughly $2.8 billion, including $1.6 billion for mining operations and $1.2 billion for oil and gas operations.
As previously announced, Freeport plans to strengthen its balance sheet and speed up its debt-reduction initiatives. Freeport expects to generate substantial cash flows over the next 18 months for debt reduction, with the successful completion of the Cerro Verde expansion and access to higher grade ore from the Grasberg mine in future quarters.
FREEPT MC COP-B Price, Consensus and EPS Surprise
FREEPT MC COP-B Price, Consensus and EPS Surprise | FREEPT MC COP-B Quote
Zacks Rank
Freeport currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the mining space include Newmont Mining Corp. (NEM - Free Report) , New Gold Inc. (NGD - Free Report) and Pershing Gold Corp. all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Newmont has an expected earnings growth rate of 84.2% for the current year.
New Gold has an expected earnings growth rate of 416.7% for the current year.
Pershing Gold has an expected earnings growth rate of 26.3% for the current year.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>