Updated from 7:30 a.m.

Freeport-McMoRan Copper & Gold

(FCX) - Get Report

said Wednesday it will reduce production because of sharp declines in copper and molybdenum prices and will suspend its annual dividend of $2 a share.

The company stated that "the suspension of our dividend reflects the sharp and rapid decline in copper and molybdenum prices, the dislocation of capital markets and the uncertain economic outlook."

Freeport said it plans to reduce copper production by about 200 million pounds in 2009, and slash 2010 production by about 500 million pounds from October 2008 estimates, because of a "dramatic recent shift in global economic conditions."

"We are responding aggressively to the current market conditions which have weakened dramatically in recent weeks," said the company's top officials in a press release. "These revisions to our plans will allow us to reduce operating costs and capital spending, adjust our production profile to better match market requirements and preserve our valuable resources for anticipated improved market conditions."

Freeport also said it took additional steps in November to reduce its 2009 capital expenditure budget by $1.2 billion, including $900 million for major projects.

The company also said it would suspend operations and lay off the bulk of its workers at a New Mexico mine, cut production estimates through 2010 and curb other costs as it struggles to cope with plummeting copper prices.

The layoffs come on top of about 800 jobs cut last month at its Western copper and molybdenum mines. Freeport-McMoRan, one of the world's largest copper producers, said Wednesday more steps may be taken if global economic conditions don't improve. Its shares fell 21% to a record low.

It is the latest round of job cuts for the mining industry that are now wrestling with plummeting commodity prices amid a recession.

"I think you're going to see a lot more miners take this approach," said Argus Research analyst Bill Selesky. "They basically don't know, at this point, where commodity prices are heading."

Copper prices have fallen from about $3.61 per ton at the end of September to an average of $1.69 last month. The price hit $1.63 a ton on Monday.

Prices for molybdenum, which is used to strengthen steel, have fallen from an average of about $33 per pound during the nine months ended in September to $9 per pound on Monday, the company said.

Molybdenum production in 2009 was cut to 70 million pounds from 80 million pounds and 2010 production was cut to 70 million pounds from 100 million pounds.

Besides cutting operating and administrative costs, the company also is suspending its $2 common stock dividend, which has totaled about $755 million per year.

Selesky said he expects most mining companies to cut jobs, in a rough range of about 10% industrywide.

"I think you could lump all miners regardless of what type of mineral they produce and say yes, they're all going to feel it, maybe not so much the gold miners because that seems to be the only commodity price that's held up very well under the circumstances," he said.

The layoffs announced Wednesday will occur at Freeport McMoRan's Chino mine near Hurley, N.M., where operations will be suspended. A company spokesman said 600 of the 830 jobs will be cut.

Freeport-McMoRan also will offer voluntary early retirement and a voluntary resignation incentive program to some employees. "Once these voluntary actions are completed, we will determine whether any further employment actions are appropriate," it stated.

Previously, it announced more than 800 job cuts at copper mines in Miami, Morenci, Bagdad and Sierrita in Arizona and a molybdenum mine in Henderson, Colo.

Shares of Freeport-McMoRan plunged 21%, or $4.61, to $17.21 in midday trading.

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