Freeport Posts Loss in Q3 Following Protests in Peru

Copper producer Freeport-McMoran (NYSE:FCX) reported a drop in production and sales in Q3, caused by a transition to underground mining at Grasberg and disruptions in Peru. 

In its earnings statement, Freeport announced a net loss of US$131 million, attributable to common stock. In July, the company estimated it would sell 830 million pounds of copper for Q3, a number meant to factor in a decrease in production at its Cerro Verde mine. Freeport sold 795 million pounds. 

Even so, Richard C. Adkerson, Freeport’s president and CEO, is still optimistic about the company’s future.

“… (We) remain focused on successful execution of our plans, which would enable us to increase copper production by 30 percent, gold production by 70 percent, reduce unit net cash costs by 25 percent and more than double operating cash flows in 2021 from 2019 levels,” he said.

In July and August, anti-mining protests held up multiple copper mines in Peru for about three weeks. Freeport’s Cerro Verde mine was one of the affected mines and had its supply chain interrupted. Freeport’s copper sales suffered considerably, dropping 23.85 percent compared to 2018. 

Copper mining also suffered at the Grasberg mine in Indonesia, which is switching from open-pit to underground mining. Freeport’s other assets struggled this quarter as well.

The company’s gold sales decreased significantly from 2018, with Freeport selling 333 million pounds of gold, a stark contrast to the company’s 760 million pounds a year ago. It produced only slightly less molybdenum, putting out 21 million pounds this year as opposed to last year’s 23 million pounds.

However, some decreases weren’t unexpected. In 2018, Freeport reported that its assets would produce less in the coming years and predicted the fall in copper production at the Grasberg mine.  

With that hiccup in mind, the company had projected lower output for 2019. In the first half of the year, the company enjoyed a softer shortfall, reporting a net loss of US$72 million, a 15.29 percent increase from its prediction. 

In a note to investors, Raymond James analysts offered some concerns over the company, but were generally favorable about Freeport’s assets.

“We believe (Freeport) has excellent assets, but also has higher jurisdictional risk given Grasberg, one of its major assets, is located in Indonesia. However, we believe the recent Indonesia transaction provided greater certainty about the future cash flows from Grasberg,” the firm said. 

In New York, Freeport’s share price was trading at US$9.66 on Thursday (October 24). In London, the price of copper was US$5,572 per tonne, while gold was trading at US$1,493.20 per ounce.

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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.