Back to top

Analyst Blog

Workers at Freeport McMoran Copper & Gold Inc.’s (FCX - Analyst Report) mine in Indonesia may delay returning to work due to the pending decision on the removal of about 100 workers at a local unit. Earlier, the workers entered a deal with management to end this three-month strike. 

The workers at Freeport Indonesia’s Grasberg mine in the eastern province of Papua were supposed to gradually return to work. The strike has crippled output and exports of the world’s second-biggest copper mine.

Earlier this month, the workers had entered into a deal that they will end the three-month strike provided they were given a pay rise of 40%.

However, the agreement is at risk as the local unit, Kuala Pelabuhan Indonesia (KPI), had failed to guarantee that they will rehire the suspended workers.

According to Juarsa Oemardikarta, a senior manager corporate and administrative support at KPI, 18 workers had been sacked and another 101 temporarily suspended in September-October 2011 until further evaluation.

Grasberg workers may also stay away from the mine until there is a decision on another 473 KPI workers, who had to sign a disciplinary statement before resuming work.

The union had asked KPI to scrap the dismissal and start afresh following the recent deal to end the strike.

The strike at Grasberg mine harmed Freeport’s total production and led the firm to declare force majeure on exports in October, and thereby boosting global prices.

In October 2011, Freeport released its third-quarter earnings. The company reported a profit of $1.1 billion or $1.10 per share in the third quarter of 2011 versus $1.2 billion or $1.24 per share in the prior-year quarter. The profit missed the Zacks Consensus Estimate by 2 cents per share.

Revenues in the quarter were $5.20 billion versus $5.15 billion in the prior-year quarter, surpassing the Zacks Consensus Estimate of $5.01 billion. Consolidated sales from mines totaled 947 million pounds of copper, 409,000 ounces of gold and 19 million pounds of molybdenum compared with 1.1 billion pounds of copper, 497,000 ounces of gold and 17 million pounds of molybdenum in the third quarter of 2010.

Consolidated unit net cash costs (net of by-product credits) averaged 80 cents per pound of copper compared with 82 cents per pound in the third quarter of 2010. Operating income slumped to $2.1 billion from $2.5 billion in the year-ago quarter.

Freeport-McMoRan’s consolidated sales from mines for the year 2011 are expected to approximate 3.8 billion pounds of copper, 1.6 million ounces of gold and 78 million pounds of molybdenum, including 915 million pounds of copper, 305 thousand ounces of gold and 18 million pounds of molybdenum for fourth-quarter 2011.

Based on current 2011 sales volume and cost estimates and assuming average prices of $1,600 per ounce for gold and $14 per pound for molybdenum for fourth-quarter 2011, consolidated unit net cash costs (net of by-product credits) are estimated to average $0.95 per pound of copper for the year 2011.

Based on current 2011 sales volume and cost estimates and assuming average prices of $3.25 per pound for copper, $1,600 per ounce for gold and $14 per pound for molybdenum for fourth-quarter 2011, operating cash flows are estimated to approximate $7 billion for the year 2011. Capital expenditures are expected to approximate $2.6 billion for the year 2011, including $1.4 billion for major projects and $1.2 billion for sustaining capital.

Headquartered in Phoenix, Arizona, Freeport-McMoRan Copper & Gold Inc. is engaged in mineral exploration and development; mining and milling of copper, gold, molybdenum and silver; as well as the smelting and refining of copper concentrates.

The company conducts its operations primarily through its principal operating subsidiaries, PT Freeport Indonesia, Freeport-McMoRan Corporation (formerly Phelps Dodge) and Atlantic Copper. Its major competitors include Newmont Mining Corp. (NEM - Analyst Report) and Southern Copper Corp. (SCCO - Snapshot Report). It currently retains Zacks #4 Rank on its stock, which translates to a short-term Sell rating.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%