10 Updates

Freeport: Lower Copper And Gold Prices And Lower Copper Shipments Affect Q1 Results

Apr 25 2014, 12:58pm CDT | by

Freeport McMoran Copper released its Q1 2014 results on Thursday, 24 April. As expected, lower realized copper and gold prices as well as reduced shipments of copper and gold from its Indonesian...

Filed under: news

 
 
 

13 weeks ago

Freeport: Lower Copper And Gold Prices And Lower Copper Shipments Affect Q1 Results

Apr 25 2014, 12:58pm CDT | by

Freeport McMoran Copper released its Q1 2014 results on Thursday, 24 April. As expected, lower realized copper and gold prices as well as reduced shipments of copper and gold from its Indonesian operations negatively impacted results. The company acquired oil and gas assets in Q2 2013. Thus, an apples to apples comparison between quarterly results with the year ago period is not possible. Freeport reported revenues of $4.96 billion this quarter as compared to $4.58 billion in Q1 2013. Net income stood at $510 million this quarter as compared to $648 million in Q1 2013.
/>

Revenues from the oil and gas business stood at $1.25 billion in the first quarter. Revenues from mining operations stood at $3.72 billion this quarter as against $4.58 billion last quarter.

Freeport gave lower sales forecasts for 2014 for copper and gold as compared to its previous guidance in view of the unresolved Indonesian situation. It sounded optimistic on the possibility of a resumption on exports from the country in May. The company gave marginally higher sales forecasts for molybdenum and oil and gas for 2014 as compared to the previous guidance. The company maintained its capital expenditure target for the year.

You can check out our complete analysis for Freeport here:

Quarterly Performance

The company reported $510 million in net income this quarter as compared to $648 million in Q1 2013. As net income this year includes contribution from the oil and gas business, it is not comparable to the Q1 2013 figure. However, the company provides a breakdown between the mining and the oil and gas division at the operating income level. A comparison at this level is more suitable. Freeport reported operating income from mining operations of $878 million as against $1.43 billion in Q1 2013. The oil and gas business contributed $233 million to operating income.

The average realized price of copper stood at $3.14 per pound as against $3.51 per pound in the corresponding period last year. Copper prices are largely determined by macroeconomic factors. China is the largest consumer of copper in the world, accounting for nearly 40% of the total world consumption of copper. The prices of the metal are to a large extent influenced by Chinese demand for it. Slower economic growth in China has led to a moderation in copper prices. According to data from China?s National Bureau of Statistics growth in investment, factory output and retail sales has slowed to multi-year lows in the first two months of the year. The Chinese leadership has proposed structural reforms of the economy, shifting the emphasis from an investment and export driven growth to services and consumption led growth. Such a transformation of the Chinese economy may negatively impact Chinese demand for copper in the long run. Lower demand for copper has resulted in an oversupply situation which is likely to keep prices depressed.

Average realized gold prices stood at $1,300 per ounce as against $1,606 in Q1 2013. Gold prices have fallen sharply over the course of the last year, reacting to cues from the Federal Reserve regarding QE tapering.

First quarter consolidated copper sales stood at 871 million pounds. This was lower than sales of 954 million pounds in the corresponding period last year and the January estimate of 1 billion pounds. This is primarily as a result of 125 million pounds in deferred exports from Indonesia.

First quarter consolidated gold sales stood at 187,000 ounces. This was lower than sales of 214,000 ounces in the corresponding period last year and the January estimate of 325,000 ounces. This is primarily as a result of 140,000 in deferred exports from Indonesia.

Oil and gas sales volumes were 16.1 million barrels of oil equivalent. These were higher than January forecast values of 15.2 MMBOE due to higher production volumes from the company’s Eagle Ford assets, continuing strong performance in the Gulf of Mexico and stable production from California. Average realized prices in the first quarter were $93.76 per barrel for oil, net of $4.86 per barrel associated with payments on derivative contracts.
/>
The Indonesian Situation

A law enacted in Indonesia in 2009 banned exports of unprocessed minerals from the country with effect from January 12, 2014. The intent behind this law was to provide a boost to development of the Indonesian mineral processing industry and simultaneously increase the value of the country’s commodity exports. Though last minute changes to the export ban permitted Freeport’s copper concentrate exports, the government also imposed an export duty of 25% which will rise to 60% by 2016. Freeport contends that this violates its agreement with the Indonesian government. The company halted its exports from Indonesia in January pending negotiations with the government over these regulatory changes. Though the Indonesian government has recently displayed some leniency in its stance on the tax issue, it has still not been resolved. Freeport is yet to resume its exports of copper concentrate. Indonesia accounted for over 20% of Freeport’s consolidated copper production in 2013.
/>

As a result of the delay in obtaining approvals for resumption of exports from Indonesia, Freeport implemented changes to its operations. During Q1 2014, the milling rate at Freeport?s Indonesian operations averaged 118,000 metric tons of ore per day, which is approximately half of normal rates.

If Freeport is unable to conduct normal operations for an extended period, it intends to implement plans to reduce operating costs, defer capital expenditures and implement workforce reductions.

Outlook

Freeport expects consolidated sales for 2014 of approximately 4.3 billion pounds of copper, 1.6 million ounces of gold, 97 million pounds of molybdenum and 64.2 MMBOE oil and gas sales. The previous forecast was for 4.43 billion pounds of copper, 1.75 million ounces of gold, 95 million pounds of molybdenum and 60.7 MMBOE oil and gas sales. The revised shipment figures assume that Freeport will be able to resume normal operations in Indonesia by May 2014. If this does not happen it would result in a deferral of approximately 50 million pounds of copper and 80 thousand ounces of gold shipments per month. However, the company management appears optimistic about resumption of normal operations in Indonesia by May.

Capital expenditures for 2014 are expected to be approximately $7 billion. This consists of $3 billion for major projects at mining operations and $3 billion for oil and gas operations. Major projects in mining operations for the year 2014 primarily include the expansions at Cerro Verde in Peru and Morenci in New Mexico, and underground development activities at Grasberg in Indonesia. Capital expenditures for oil and gas operations will majorly be incurred at the Deepwater Gulf of Mexico and Eagle Ford operations./>/>

We have a $29.33 price estimate for Freeport McMoran Copper , which represents a 13.5% discount to market prices. This will be revised shortly.

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin .

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

New Zealand All Blacks Squad Announcement
KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rej ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Se ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states las ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compens ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year invo ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) to ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

2014 Luxury Watches Have Final US Preview Before Their Release
2014 Luxury Watches Have Final US Preview Before Their Release
2014 Watch Releases From Swatch Group Brands The Breguet Madison Avenue boutique was busy June 26 with press and VIP clientele as the luxury watch brand used this date to celebrate “Tourbillon Day.” The event included...
 
 
China to produce its own 'Avatar'
Beijing, July 28 (IANS) China is preparing to produce its own 3D fantasy movie, based on romantic folklore, to make it an epic on par with the US blockbuster science-fiction movie "Avatar".
 
 
Sushma meets UML leaders, ends Nepal visit
Kathmandu, July 27 (IANS) External Affairs Minister Sushma Swaraj Sunday averted a diplomatic disaster by meeting leaders of the ruling CPN-UML just before returning to India after a three-day visit which she said was "productive" and "successful".
 
 
Nepal parliament panel okays energy deal with India
Kathmandu, July 27 (IANS) A parliamentary panel in Nepal Sunday asked the government to sign as soon as possible a "Power Trade Agreement" (PTA) with India under which New Delhi has proposed 100 percent Indian investment or joint ventures with Indian entities in the Himalayan country's power sector.
 
 
 

Latest from the Network

Brazilian soccer standings
Rio de Janeiro, July 28 (IANS) Following are the standings of the Brazilian Serie A championship after the latest round of matches Saturday and Sunday (tabulated under matches played, won, drawn, lost, goals for, goals...
Read more on Sport Balla
 
2.5 bn smartphone users globally by 2015: US report
New York, July 28 (IANS) Nearly 2.5 billion people or 35 percent of the global population is expected to use smartphones by the end of 2015, says the latest report of US-based industry tracker Strategy Analytics. The...
Read more on Celebrity Balla
 
Ronaldinho on his way out: Jo
Rio de Janeiro, July 28 (IANS) Ronaldinho has probably played his last match for Brazilian club Atletico Mineiro, according to the star's teammate and close friend Jo. The 34-year-old has not contacted anybody at the...
Read more on Sport Balla
 
CWG: Indian paddlers lose to England in men's team semis
Glasgow, July 28 (IANS) India lost 1-3 to England in the 2014 Commonwealth Games men's team table tennis semifinal and will have to be content with playing for the bronze medal against Nigeria. The country's top...
Read more on Sport Balla
 
Dolly Parton would sing own songs in biopic
Dolly Parton would perform her own songs in a movie of her life. The 'Jolene' hitmaker doesn't want an actress to have the ''pressure'' of having to match her famous vocals in a biopic, so would allow them to lip-sync...
Read more on Movie Balla
 
Twin blasts in Nigeria kill five
Abuja, July 28 (IANS) At least five people were killed in two bomb blasts in Nigeria's Kano city, a mainly Christian area, Sunday afternoon, police said. The first blast occurred under a bridge in the Sabon Gari...
Read more on Politics Balla
 
Australia gives $5 mn for Gaza relief
Sydney, July 28 (IANS) The Australian government is providing five million Australian dollars (4.7 million US dollars) in urgent humanitarian assistance to Gaza, Foreign Minister Julie Bishop announced Monday. The...
Read more on Politics Balla
 
France wants expatriates to leave Libya
Paris, July 28 (IANS) French government Sunday called on all its nationals to quit Libya, "given the deteriorating security situation" prevailing in the African country. "All our nationals are invited to get in touch...
Read more on Politics Balla
 
Israel denies responsibility for UN school attack deaths
Jerusalem, July 28 (IANS) The Israeli army Sunday denied responsibility for the deaths of 16 Palestinians during Thursday's attack on a UN school in northern Gaza. "The inquiry as well as documented footage conclude...
Read more on Politics Balla
 
India lose badminton semi-final to England 3-0
Glasgow, July 28 (IANS) India lost to England 3-0 in the semi-finals of the badminton competition at the Commonwealth Games here late Sunday night. India's men's and mixed doubles teams fought well over three games,...
Read more on Sport Balla