Freeport Expects Q2 Losses Amidst Lower Copper Prices

In the face of lowered copper prices, Freeport-McMoRan (NYSE:FCX) is bracing itself for potential losses in its Q2 results.

In a company update released Monday (July 1), Freeport stated that at the end of Q1, it expected to sell 364 million pounds of copper at an estimated price of US$2.94 per pound. However, the company noted that London Metal Exchange (LME) prices for the red metal averaged US$2.77 per pound in Q2, putting a dent in the company’s plans.

According to Freeport, the impact of the lowered copper price will see Q2 revenues drop by approximately US$85 million.

Also impacting the company’s balance sheet were gold sales, which are expected to come in around 190,000 ounces; Freeport’s April guidance had been docketed around 265,000 ounces. The company cited changes to mine sequencing in the open pit of its Grasberg asset in Indonesia, which in turn delayed access to high-grade material.

While unit net cash costs from the company’s operations in the Americas are expected to align with previous estimates, Freeport’s Indonesian costs are expected to rise due to the reduced copper and gold sales volumes. As such, the company is expecting that Q2 cash costs will be 15 percent higher than the April prediction of US$1.67 per pound of copper.

In silver lining fashion, however, the company stated that these costs would benefit from access to higher grade ore from Grasberg’s open pit in 2019’s second half.

Also being adjusted in the report was the company’s earnings before interest, taxes and depreciation (EBITDA), which Freeport anticipates being US$430 million in Q2. This comes with an expected net income loss of US$0.05 per share.

The news created a rocky day for Freeport’s share price, which dropped as much as 6.67 percent to US$10.86 on Monday; the major miner eventually rallied to a close of US$11.45. As of 11:58 a.m. EDT on Tuesday (July 2), Freeport shares were down 0.96 percent to US$11.34.

As of July 1, copper was trading at US$5,998 per tonne on the LME.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.