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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (27672)	10/21/2008 9:40:30 PM
From: LoneClone	Read Replies (1) \| Respond to of 193231

Freeport-McMoRan defers expansions as falling copper gnaws at margins miningweekly.com By: Liezel Hill Published on 21st October 2008 Updated 6 hours ago TORONTO (miningweekly.com) – Arizona-based Freeport-McMoRan Copper & Gold will defer mine expansions and put off restarting at least one operation, as it adjusts to slumping commodity prices, the group confirmed on Tuesday. Copper prices have fallen from above $4/lb in May this year, to as low as $1,992/lb in New York on Tuesday as turmoil in world financial markets and recession fears stoke metal demand concerns. “It is pretty striking just how quickly this has changed,” Freeport CEO Richard Adkerson said in a conference call. The group suspended plans to restart the historic Miami copper mine, in the US, and will defer incremental expansions at the Sierrita and Bagdad mines, in Arizona. As a result, output guidance for both 2009 and 2010 have been lowered by 200-million pounds of copper a year, to 4,3-million and 4,6-million pounds respectively. Freeport will also continue to look at all its operations on an ongoing basis, and will be “making tough decisions” on capital and operating costs going forward, Adkerson said. “We are limiting our investments in certain of our growth projects, reducing our capital expenditure, we are limiting our investments in our operations to produce those marginal high-cost pounds, and we are taking steps with our financial policies to preserve our balance sheet,” he told analysts and investors. “We will be responsive to these conditions.” While copper prices were above $3/lb Freeport had enjoyed strong cashflow levels and high margins “and we were pushing our organisation all out to produce marginal volumes”. “Now we have had to change. We know how to do this and we have been prepared for it...we've all lived through this before,” Adkerson commented. However, he emphasised that the focus was on deferring investments, rather than abandoning projects altogether. “We won't be spending the capital now to pursue these [projects], but those opportunities aren't going anywhere.” For now, Freeport is still pressing ahead with its massive Tenke Fungurume project, in the Democratic Republic of Congo, which is expected to start production in 2009, and will restart its Climax molybdenum mine the following year. Expansions are also still planned at the El Abra and Cerro Verde mines, although the company is “assessing the timing” for both developments. COSTS One positive outcome from the changing market environment has been a marked reduction in operating costs, especially energy costs, which make up 25% of the group's total, Adkerson said. Diesel costs have dropped rapidly, and prices for electricity, steel, acid and other inputs are also falling. “We are analysing these... and we are taking steps internally to stop spending, to reduce costs, to take advantages of the new cost structure,” Adkerson said. “The cost structure is changing, and that will be reflected as we go forward in terms of offsetting some of the decline in the copper price.” FUNDING He also emphasised that Freeport remained well funded, and did not expect to need to raise any capital or dip into its existing $1,5-billion credit line to finance capital expenditure projects. “Our company is not financially stressed in any way, and there is no change in the long-term strategy.”