Quarterly copper production at Freeport-McMoRan lost to expert forecasts
Mining company Freeport-McMoRan Inc.(FCX) produced less copper than expected last quarter at its mines in the Americas, which increased concerns about the tension of the global market, in which prices for this metal rose again to record levels.
The company’s shares sank. The world’s largest publicly traded copper mining company produced 987 million pounds of the metal in the third quarter, Freeport-McMoRan said in a statement released on Thursday. In comparison, the production volume fell short of the average analyst estimate of 1 billion pounds, according to the Bloomberg news agency.
The discrepancy with the forecasts was caused by lower than expected copper production volumes at South and North America mines. However, the Freeport-McMoRan statement does not explain why the production volume was less than market estimates.
Freeport-McMoRan shares fell 3.6% to $37.55 in New York trading, which was the most significant intraday drop in a month. According to Bloomberg Intelligence, the company’s shares have more than doubled over the past year, which is one of the best indicators among copper suppliers.
Despite Freeport-McMoRan’s lower-than-expected copper production volumes, the company posted quarterly earnings that exceeded analysts’ estimates. In contrast, higher copper prices helped significantly increase revenue and operating income compared to levels seen in the same quarter a year earlier.
The Phoenix-based mining company expects annual copper sales to reach about 3.8 billion pounds this year after recording sales of 1.03 billion pounds in Q3. “The outlook for the copper market looks exceptionally positive,” Richard S. Adkerson, the company’s chief executive officer, said in a statement.
Higher copper prices and increased production allowed Freeport-McMoRan to achieve record profits except for some expenses this year, which allowed the company to reduce debt and increase shareholder dividends and investments.
Adjusted earnings were 89 cents per share, exceeding the average estimate of 82 cents. The results of Freeport-McMoRan will be of particular interest to traders who track sharp fluctuations in copper prices after its available stocks in the warehouses of the London Metal Exchange reached the lowest level since 1974. In addition, the market is betting on increasing Freeport-McMoRan mine production in Indonesia and returning to levels before the coronavirus pandemic in Peru.
Freeport-McMoRan said that underground work at its flagship Grasberg mine continues on schedule. The near-term prospects for copper are supported by low market stocks, while the transition to low-carbon energy sources paints a rosy picture in the long term.
But global logistics problems in the shipping sector and the electricity shortage in China and Europe worsen demand forecasts for next year. Efforts to conserve energy and limit emissions in China are also a double-edged sword for mining companies, as higher smelting fees reduce profit margins.
Freeport-McMoRan’s net cash costs for copper production in the third quarter were $1.24 per pound, below the average analyst estimate of $1.30 per pound.
Freeport-McMoRan has a quarterly report conference scheduled for Friday, at which Adkerson and other executives are likely to comment on the recent rise in copper prices and a reduction in its global reserves, as well as short-term demand forecasts.
The Chief Executive may also about Freeport-McMoRan’s latest estimates of future development projects in the face of supply shortages caused by the abandonment of fossil fuels.
