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Workers at the Indonesian unit of  Freeport McMoran Copper & Gold Inc. (FCX - Analyst Report) are expected to return to the Grasberg mine in Papua on January 20, 2012 after observing a three-month strike.   

The labor union at PT Freeport Indonesia stated that the port unit contractor PT Kuala Pelabuhan Indonesia (KPI) has agreed to reinstate about 700 workers who went on strike with no sanctions. The Union is in talks with Freeport management and mining contractors to clear sanctions imposed on an additional 500 employees.

The problems have been agreeably settled between KPI management and the union. 

The deal implies that full operations will commence at the second largest copper mine in the world following the operational disruption arising from the three-month long strike, which shook labor relations in the country.

The employees will receive a 24% increase in the first year of the new agreement and another 13% in the second year.

The strike at Grasberg mine affected Freeport’s total production and led the company to declare force majeure on exports in October, 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. Reported 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. For the fourth quarter of 2011, consolidated sales are expected to be 915 million pounds of copper, 305 thousand ounces of gold and 18 million pounds of molybdenum.

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 95 cents 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 fiscal 2011. Capital expenditures are expected to approximate $2.6 billion for full-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). The company currently retains a Zacks #4 Rank, which translates to a short-term Sell rating.

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