VANCOUVER (miningweekly.com) – The world's largest publicly listed copper producer Freeport-McMoRan has reported a better-than-expected headline profit for the three months ended December, as its focus on productivity, cost and capital discipline dovetailed with an improved market for copper.

The Phoenix, Arizona-based miner reported adjusted net earnings, which typically exclude special items in a period, of $750-million, or $0.51 a share, beating Wall Street analyst estimates for adjusted earnings of $0.49 a share. Freeport advised that the adjusted figure was boosted by net gains of $291-million ($0.20 a share), mainly thanks to tax benefits associated with US tax reform, and was partly offset by charges for adjustments to environmental obligations.

Net profit for the quarter was $1-billion,or $.071 a share, compared with net income of $292-million, or $0.21 a share for the comparable period a year earlier. For the full year, Freeport reported net profit of $1.8-billion, or $1.25 a share, compared with a net loss of $4.2-billion, or $3.156 a share, for 2016.

Revenues for the fourth quarter improved 15% to $5.04-billion, with full-year revenues climbing 10.6% to $16.4-billion, mainly owing to a buoyant copper price and lower unit costs.

Fourth-quarter 2017 copper sales of one-billion pounds were flat on the prior quarter and were lower than fourth-quarter 2016 sales of 1.1-billion pounds, mainly reflecting lower sales volumes in North America and at Cerro Verde, in Peru.

Gold sales for the period totalled 593 000 oz, which was lower than the October estimate of 625 000 oz, mainly reflecting lower mill rates at Freeport's 90.64%-owned PT Freeport Indonesia (PT-FI) subsidiary. Fourth-quarter 2017 gold sales were higher than fourth-quarter 2016 sales of 405 000 oz, mainly reflecting expected higher ore grades from Indonesia. Freeport also produced 24-million pounds of molybdenum in the fourth quarter, which were slightly higher than the October estimate of 23-million pounds and fourth-quarter 2016 sales of 22-million pounds.

Consolidated average unit net cash costs, net of by-product credits, for Freeport's copper mines, were $1.04/lb of copper in the fourth quarter, and lower than unit net cash costs of $1.21/lb in the fourth quarter of 2016, mainly reflecting higher by-product credits, partly offset by lower copper sales volumes and higher mining and milling costs in South America.

Commodity prices are recovering from record lows and helped blow new life into the miner's balance sheet. Freeport reported a year-on-year fourth-quarter realised price gain of 30% to $3.21/lb of copper sold. Similarly, gold prices in the same time frame improved 10% to $1 285/oz sold, while molybdenum prices improved 18% to $9.79/lb sold.

INDONESIAN MATTERS
Freeport advised that PT-FI continues to actively engage with Indonesian government officials to address regulatory changes that conflict with its contractual rights in a manner that provides long-term stability for PT-FI's operations and investment plans, and protects value for Freeport's shareholders.

Following a framework understanding reached in August 2017, Freeport and the Indonesian government have been negotiating and documenting a special licence (IUPK) and for assurances on legal and fiscal terms to provide PT-FI with long-term rights through to 2041. The IUPK would also provide that PT-FI constructs a smelter within five years of reaching a definitive agreement and includes divesting 51% of the Grasberg copper/gold mine project area to Indonesian participants, at fair market value.

Late in 2017, the Indonesian government and PT Indonesia Asahan Aluminium (Inalum), a State-owned enterprise that will lead a consortium of investors, agreed to form a special-purpose company to acquire Grasberg project area interests. Inalum is owned 100% by the Indonesian government and currently holds 9.36% of PT-FI's outstanding common stock.

The parties have a mutual objective of completing negotiations and the required documentation during the first half of 2018.
In December, the Indonesian government extended PT-FI's temporary IUPK to June 30, and PT-FI is seeking an extension of its export licence which currently expires on February 16, to enable normal operations to continue during the negotiation period. Until a definitive agreement is reached, PT-FI has reserved all rights under its current Contract of Work.

Freeport guides for 2018 sales volumes of 3.9-billion pounds of copper – 5% higher than the 2017 total of 4.2-million pounds; 2.4-million ounces of gold, which reflects an increase of 54% over full-year 2017 sales of 1.56-million ounces; and 91-million pounds of molybdenum, down 4.2% from sales of 95-million pounds in 2017.

For the first quarter, Freeport expects to sell one-billion pounds of copper, 675 000 oz of gold and 24-million pounds of molybdenum.

Freeport currently holds estimated consolidated recoverable proven and probable reserves from its mines, as at December 31, of 86.7-billion pounds of copper, 23.5-million ounces of gold and 2.84-billion pounds of molybdenum, based on price assumptions of $2/lb copper, $1 000/oz for gold and $10/lb for molybdenum.

The company's NYSE-listed stock gained 3.3% on Thursday, climbing to a new 52-week high of $20.25 a share.