Freeport McMoRan, the world’s largest listed copper miner, has reported an 8-per-cent drop in post-tax profits for the third quarter after its production was hit by strikes at its largest mine. Net income was $1.1-billion (U.S.) for the third quarter, down from $1.2-billion in the equivalent period of 2010, and earnings per share fell from $1.24 to $1.10.
The figures were above the consensus of analysts’ forecasts, which had on average predicted earnings of $1.03 per share, according to Thomson Reuters.
The strike-hit Grasberg mine in Indonesia has the largest recoverable reserves of copper and the largest single gold reserve in the world.
Arizona-based Freeport reported a 14-per-cent drop in copper production, to 947 million pounds, and an 18-per-cent drop in gold production, to 409,000 ounces, compared with the third quarter of 2010.
For the fourth quarter, it expects production to drop further, to 915 million pounds of copper and 305,000 ounces of gold.
Stronger metals prices helped lift operating cash flows 38 per cent to $1.8-billion for the third quarter.
However, with metals prices now retreating again, Freeport expects a slowdown in operating cash flows to about $1.1-billion in the final quarter of 2011.
The Indonesian government has estimated that the Grasberg strike is costing Freeport $6.7-million a day. The strike began in mid-September, and so had only a partial impact on the third-quarter figures.
A previous eight-day strike in July, by a far smaller number of workers, cut production by 35 million pounds of copper and 60,000 ounces of gold.
Grasberg, set in the remote highlands of Papua, has been the source of communal tension and deadly rivalry between Indonesian security forces competing for protection contracts and lucrative illegal gold tailings rackets.
Gun attacks killed several Freeport employees last year when buses transporting miners were targeted by unidentified assailants.
An estimated 12,000 Freeport workers are taking part in the strike, demanding an increase in their $1.50 hourly wage and improvements in their employment terms, which their union claims are the worst of all Freeport’s operations.
Freeport, which began open pit mining of gold, copper and silver in the remote mountains of eastern Indonesia in 1990, is planning to expand to deep pit operations in the near future as it discovers new mineral reserves.
The mine is nearly 10-per-cent-owned by the Indonesian government, while Freeport holds 90 per cent, and is the single largest taxpayer in the country.
Copyright The Financial Times Ltd. All rights reserved.
Follow us on Twitter: