Freeport McMoRan Outperforms

Freeport McMoRan (FCX - Analyst Report), the large-cap global mining company, reported its third quarter earnings earlier today. The company reported earnings of $2.07 per share compared to $1.31 per share in the third quarter of 2008. This handily beat the Zacks Consensus Estimate of $1.18 per share.

The company’s performance reflects successful execution of various cost-reduction initiatives. The company is responding aggressively to the economic downturn by curtailing production levels, cutting costs, reducing exploration expenditures and deferring capital spending.

Sales volumes in the quarter were 1.0 billion pounds of copper, 706,000 ounces of gold and 16 million pounds of molybdenum, compared to 1.0 billion million pounds of copper, 307,000 ounces of gold and 19 million pounds of molybdenum in the third quarter of 2008. Consolidated gold sales were higher than the year-ago period primarily due to higher ore grades at Grasberg. However, molybdenum sales during the quarter were lower than the prior-year level due to weak demand.

Consolidated unit net costs in the quarter averaged 50 cents per pound, compared to $1.29 in the prior-year quarter. The decline in unit costs was due to lower operating rates as a result of production curtailments at its North American mining operations, higher ore grades at Grasberg and decreases in energy and other commodity-based input costs.

The company reiterated its annual cash dividend on its common stock of 60 cents per share. The Board would declare a quarterly dividend of 15 cents per share, with the initial dividend expected to be paid on February 1, 2010.

Management expects sales volumes to approximate 3.9 billion pounds of copper, 2.4 million ounces of gold and 56 million pounds of molybdenum for the full year and 910 million pounds of copper, 550,000 ounces of gold and 11 million pounds of molybdenum for the third quarter.

Copper prices remain a concern in the near-term. Copper prices are influenced by the strength of the U.S. economy and the economies of other industrialized and developing nations. Copper prices have declined sharply starting from the second half of 2009. The near-term outlook for copper remains uncertain thereby reducing the company’s earnings visibility.

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