Freeport earnings surge on strong metals demand

PHOENIX — Freeport-McMoRan Copper & Gold Inc., one of the world’s biggest copper miners and parent company of the Phelps Dodge Sierrita Mine in Green Valley, said its profit more than doubled in the third quarter as revenue soared.

The mining company earned $775 million, or $1.87 per share, after preferred dividends in the July-September period, up from $351 million, or $1.67 per share, a year ago.

Quarterly revenue more than tripled to $5.07 billion, from $1.64 billion in the third quarter of 2006.

Earnings from continuing operations totaled $763 million, or $1.85 per share. Freeport-McMoRan said the results also included about 67 cents per share in charges related to one-time items. If those charges are excluded, that would amount to earnings of $2.52 a share.

Analysts surveyed by Thomson Financial, who typically exclude one-time items and discontinued operations, forecast third-quarter earnings of $2.26 on revenue of $5.12 billion.

Freeport-McMoRan said consolidated sales from its mines totaled 949 million pounds of copper, 269 thousand ounces of gold and 16 million pounds of molybdenum in the third quarter.

The company attributed its third-quarter performance to continued positive market conditions for copper, gold and molybdenum, as well as strong operating results at its North American, South American and Indonesian operations.

CEO Richard C. Adkerson said world copper supplies remain tight and prices are likely to stay high.

“With that environment, absent some significant downturn in the global economy or some issue in China, the conditions we’ve had in recent years for copper markets are likely to persist,” Adkerson said in a conference call with analysts.

For the first nine months this year, net income applicable to common stock rose to $2.36 billion, or $6.58 a share, from $970 million, or $4.64 a share, in the first nine months in 2006. Nine-month revenue rose to $12.76 billion from $4.15 billion for the first nine months of 2006.

Freeport’s stock has almost doubled since it acquired copper miner Phelps Dodge in March for $25.9 billion. As of Sept. 30, the company said it still owed $7.6 billion from the acquisition and another $1.1 billion in other debt.

If copper, gold and molybdenum prices remain stable, Freeport expects to shave off another $1.4 billion in debt by the end of the year.

Jorge Beristain, head of Americas metals and mining research for Deutsche Bank North America, said Freeport’s purchase of Phelps Dodge is proving to be a “super home run transaction.”

Beristain said that with copper prices around $3.50 per pound, Freeport has been able to aggressively pay off its debt as well as look at reopening the Climax molybdenum mine in Colorado.

“With their excess free cash flow, they’re going back and really harvesting low-lying fruit inside the company,” Beristain said.

Freeport is an investment banking client of Deutsche Bank, and Deutsche Bank owns common equity securities in Freeport.

Adkerson said Freeport also plans to open a new copper mine at Morenci this year, ahead of schedule. The mine is expected to produce 240 million pounds of copper per year.

The company sold its wire and cable business to General Cable Corp. for $735 million earlier this year.