With earnings seasons in full swing, the scorecard for which company is up and which company is down and why will be made clear to Wall Street. For copper investors, though the burning question remains whether the red metal can continue its upward trajectory of years past by shrugging off lingering doubts about the copper’s price and global demand for the metal in coming months.
The recent performance by Freeport McMoRan Copper & Gold has no doubt given a boost to the bulls. Last week, the world’s largest publicly traded copper producer reported fourth quarter earnings results that largely beat analysts’ expectations even though it had struggled through its longest mining strike most of those three months. That mixed performance has been reflected by analysts’ evaluation of the company, as some investors including BB&T Capital Markets are keeping their Buy recommendation for the company while others such as Citigroup have reiterated their Neutral rating for Freeport.
One thing is clear, the Grasberg mine strike in Indonesia from September to mid-December led to Freeport’s earnings falling nearly 60% from a year ago. However, the company beat estimates due in part to lowered projections by analysts based on the latest developments at the mine. In fact, the company lost about 165 million pounds of copper in the latest quarter due to the disruptions and copper sales from all its mines reached 823 million pounds down from 941 million pounds during the same quarter a year ago.
Meanwhile, the price of copper has been falling. Granted, copper prices rose 8 percent from a year ago in the Q4 but in 2011 overall, the price of the red metal fell 25% from the previous year. The average price for its copper was USD 3.42 per pound in the Q4 compared to USD 3.60 in the previous quarter.
Mr Richard Adkerson CEO of Freeport said that “Markets are tight worldwide the inventories have come down recently by 25% during the Q4. China continues to be strong despite concerns. Net income in the Q4 reached USD 640 million or 67 cents a share, against USD 1.5 billion or USD 1.63 a share, a year ago.
The company’s optimism is reflected in its 2012 projections, as it sees copper sales reaching 3.8 billion pounds up from 3.7 billion pounds in 2011. Output is already up for other copper producers too. Toronto based Lundin Mining for instance, reported last week that fourth quarter production rose 10% to 27,488 tonnes even though for the full year, production dropped 5% to 75,877 tonnes due to production issues at its Neves Corvo mine in Portugal.
(Sourced from copperinvestingnews.com)
