Freeport begins shipping copper from new Congo mine
Wed Apr 22, 2009 6:20pm EDT
reuters.com
By Carole Vaporean
NEW YORK, April 22 (Reuters) - Freeport-McMoRan Copper & Gold Inc (FCX.N) began shipping the first copper cathode produced at its Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo on Wednesday.
"Today, we are looking at our first actual shipment of copper from that operation to the marketplace. The first truck shipment is leaving today. It takes an average of 20 to 30 days one way," Chief Executive Officer Richard Adkerson told analysts on a conference call.
"That involves trucking the copper cathode from the DRC to the South Africa marketplace. It's a test shipment. But we are producing copper there. We have an inventory of cathodes ready for shipment," he said.
The largest publicly traded copper producer's chief said Freeport has been shipping construction material on the same route for over a year, "It's not like we're just starting."
"But it's an important quarter for Tenke. The production team beat my own estimates about when we'd first be able to produce copper there," the CEO said.
Earlier on Wednesday, the Phoenix, Arizona-based mining company reported first-quarter profit slumped sharply and revenue dropped by more than half as the global economic downturn weakened metal demand and prices. [nN22411505]
It reported capital expenditures of $519 million for the first quarter, with nearly 50 percent related to Tenke Fungurume. The company expects capital expenditures of $1.3 billion for 2009, down from $2.7 billion in 2008.
Freeport will complete its spending at Tenke roughly by mid-2009, Adkerson said, but spending plans continue to be reviewed and may be revised based on market conditions.
He said the Phoenix, Arizona-based mining company was on schedule to ramp Tenke up to full capacity in the second half of 2009 to an annual production rate of 250 million lbs of copper and 18 million lbs of cobalt.
So far, Tenke's copper production circuit was essentially complete and Freeport was focused on completing the cobalt operation and an acid plant being built there.
Once fully ramped up, the operation's copper cost structure will be attractive at 50 cents a lb at current cobalt prices.
"Today cobalt's above $10 a lb. It's a small market and we'll be producing a lot of cobalt. But other producers in Zambia and the Congo are suspending production. If longer range prices are higher, those costs will come down substantially."
He said copper production costs could potentially fall to zero, if cobalt prices strengthen enough as a byproduct.
Discussions with the central African nation continue as part of the government's review of foreign mining contracts.
"We are continuing to work with the government on the contract review process. Progress has been made. We anticipate that this will be successfully concluded during the second quarter," said Adkerson.
Though the process took much longer than expected, he said Freeport's contract allows the company to ship product and operate its business and was enforceable under Congolese law.
"We are proceeding on the basis of that contract, which gives us the basis for what we're doing," he said.
The government's attention was diverted by violence in the Eastern provinces at the end of 2008, a change of parliament and economic challenges with the sharp drop in metals prices.
Freeport has continued to invest in social programs for the local community as well as the region's infrastructure by upgrading roads, railways and a hydropower facility.
Going forward, Adkerson said there were no constraints on expanding Tenke other than weak market demand. (Additional reporting by Steve James; Editing by Christian Wiessner) |
