Freeport Rides Copper Price Surge

Buoyed by the surging price of copper, Freeport McMoRan earnings sail past targets.
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(Freeport McMoRan earnings story updated to provide further detail from the company's quarterly release and conference call.)

PHOENIX (

TheStreet

) --

Freeport McMoRan

(FCX) - Get Report

exceeded Wall Street profit targets for the first quarter, its bottom line buoyed by the surging price of copper, which has more than doubled from a year ago.

Freeport, the biggest U.S.-based mining concern, said it earned $897 million, or $2 a share, in the first quarter, several orders of magnitude higher than last year's $43 million, or 11 cents a share. Analysts were looking for a per-share profit of $1.91, according to

Thomson Reuters

.

"It shows how leveraged our business is to these commodity prices," said CEO Richard Adkerson in a conference call with analysts and investors.

The company also produces gold (as a byproduct from some of its huge copper mines) and molybdenum, prices for which have risen about 20% and 30%, respectively, from the first quarter a year ago.

Freeport McMoRan's revenue rose to $4.36 billion from $2.6 billion a year ago. The top-line number missed expectations, however. Analysts were looking for revenue of about $4.5 billion.

The company also announced a dividend hike, an indication of balance sheet strength three years after Freeport subsumed

Phelps Dodge

and went many billions into debt. The dividend amounts to $1.20 a share, up from 60 cents, payable in August.

Freeport stock was nevertheless under pressure Wednesday. Midway through the session, shares of the miner were falling nearly 4.8% to $76.98 on heavier-than-average volume.

Likely that's because copper prices continued to decline on commodities exchanges in London and New York Wednesday. (Freeport shares historically move in tandem with copper.) Further moves by Chinese banking officials to stem a potential bubble in real estate has fueled worries that the nation's breakneck demand for key construction materials -- copper among them -- may lose steam later this year.

Chinese demand for copper has been almost the sole reason that copper prices have risen as much as they have since last year, boosting Freeport McMoRan's bottom line.

Adkerson addressed the issue in the morning conference call. Although Chinese imports "have been strong," he said, there has been speculation that copper stockpiles have been accumulating in warehouses in China, an inventory build that could dampen demand "later in the year," he said.

Freeport kept its volume projections for 2010 in place: 3.8 billion pounds of copper, 1.8 million ounces of gold and 62 million pounds of molybdenum.

But, said Adkerson, those are flexible targets. "We'll look for opportunities to beat those numbers and move those volumes forward," he said.

Freeport's forecast for the average selling price of each of its core metals also remained the same as earlier guidance. The company expects copper to fetch, on average, $3.50 a pound in 2010, gold $1,100 an ounce, and molybdenum $15 an ounce. That means the company expects to bring in cash flow of $6 billion in 2010.

>> Who Owns Freeport?: Bruce Kovner

Sensing a rebound, the company has started the process of ramping up production in a number of its mining regions, including the U.S. Freeport expects 2010 capital spending to reach $1.7 billion, though that number could go even higher, depending on the outcome of feasibility studies on expansion projects at a handful of its mines.

As for the first quarter, Freeport sold 960 million pounds of copper for $3.42 a pound. In the year-ago period, Freeport mined more (just over 1 billion pounds), but the price of copper has exploded since then, nearly doubling on the back of demand from China.

Freeport said the dropoff in copper volume compared to the year-ago period resulted from a planned shift in operations at its enormous Grasberg mine in Indonesia to a different spot in the pit with lower grades of ore.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.