Freeport production misses estimates in boost for Copper Bulls

(Bloomberg) — Freeport-McMoRan Inc., the largest publicly traded copper mine, produced less than expected last quarter, boosting prices of the metal that had pulled back from record highs.

The Phoenix-based company reported second-quarter output of £913 million, lagging the average estimate of £961 million among analysts. While Freeport repeated its annual sales forecast and production was well above a year ago, copper sales were below Freeport’s own forecast due to the timing of shipments.

The copper market is counting on Freeport to ramp up underground production in Indonesia to meet rising demand as countries recover from the pandemic and economies shift to low-carbon energy sources, which use more of the metal. While prices have fallen from a record high in May amid renewed concerns about the pandemic, Chief Executive Officer Richard Adkerson sees the market bolstered by strong long-term demand and a lack of major new projects.

Freeport said progress on underground production at its flagship Grasberg mine “continues to be on track,” a statement released Thursday said.

Copper futures were up 1.2% at 8:44 am and remain at very profitable levels above $4 a pound.

High prices and soaring manufacturing drove Freeport’s earnings up in the quarter, with adjusted earnings of 77 cents a share, compared to a consensus of 76 cents. The company said it has reduced net debt to target levels, paving the way for increased shareholder returns and investment in future growth.

During a call on Thursday, investors will eagerly await an update on Freeport’s assessments of future growth projects, such as an expansion of El Abra in Chile. Freeport said in the earnings statement that while it continues to evaluate an expansion at El Abra, it also “monitors potential changes in government fiscal affairs in Chile and will postpone major investment decisions pending clarity on these matters.”

Rising production costs are seen as one of the few headwinds to earnings growth. While net cash copper costs for the second quarter of $1.48 per pound were higher than expected due to one-time labor costs in Peru, the company expects the annual average to return to $1.35.

The company’s stock has more than doubled in the past year in one of the best performers among copper suppliers, followed by Bloomberg Intelligence. In Thursday’s premarket trading, the share was slightly lower than Wednesday’s close.

Freeport will hold a conference call at 10am

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