Bloomberg reported that Freeport McMoRan Copper & Gold Inc may reinstate its dividend and increase spending on exploration after the price of the metal rose more than anticipated in 2009.
Mr Richard Adkerson CEO of Freeport McMoRan said that “Our board will have the opportunity to look at the possibility of reinstating our dividend. We are generating cash at these levels. Let’s wait a week and watch our earnings release. Freeport may buy back shares. He added that the dividend was suspended in the Q4 of 2008.
Freeport, based in Phoenix has trebled in New York trading this year on cost cuts and a doubling in the price of copper as customers in China, the largest consumer, stockpiled material and world usage was fueled by government spending packages. The company on July 21 reported Q2 earnings that beat analysts’ estimates after operating costs dropped.
Mr Adkerson said that “In terms of major restarts of curtailed production and resumption of capital spending, we’re not at that point. We’re going to continue to be cautious until we see clear indications of recovery in the US and the rest of the developed economies.”
He said that the company will increase output at copper facilities as the market improves rather than buying businesses. It will expand El Abra in Chile with government owned Codelco and make some incremental investment at Cerro Verde in Peru.
Mr Adkerson said that “When you buy a project you have to pay the seller for the value that’s there. It’s much more attractive to invest in expanding your own set of assets. The company is investing USD billion in its Tenke Fungurume project in Democratic Republic of Congo which is set to produce 250 million pounds of copper and 18 million pounds of cobalt a year.
He said that Freeport is in talks with Congo after a licensing dispute over the project and wants to work cooperatively to resolve the issue. Congo is reviewing 61 deals with mining companies to amend those deemed unfair to the state and to boost revenue as metal prices surge.
Mr Adkerson said that “We want to be responsive to the issues they raised. But at the end of the day this is a contract that was the basis for us making almost USD 2 billion of investments and we have to represent our shareholders.”
Freeport in July forecast gold sales would rise to 2.4 million ounces in 2009, revising an earlier projection of 2.3 million ounces. The company’s Grasberg mine in Indonesia contains the world’s largest recoverable reserves of copper and the biggest single gold reserve.
According to the company’s 2008 annual report, Freeport sold 1.31 million ounces of gold 2008. Sales of molybdenum, used to harden steel will increase to 56 million pounds from 50 million pounds.
(Sourced from Bloomberg)
