Freeport-McMoRan has posted its highest quarterly profits since 2014 as it seeks a deal to keep producing copper and gold from its giant Grasberg mine in Indonesia.
Aided by higher metals prices, the US miner said adjusted net income had doubled to $750m in three months to December, beating market forecasts. For 2017 as a whole, adjusted net income was $113m against a loss of $4.46bn a year earlier.
Copper, used extensively in wiring and power networks, rose 22 per cent last year and is currently trading above $7,000 a tonne, helped by a weaker dollar and accelerating global growth.
“We are continuing to make significant progress in our ongoing negotiations with the Indonesian government to restore long-term stability for our Grasberg operations,” said Freeport chief executive Richard Adkerson in a statement.
Jakarta is seeking 51 per cent local ownership of Grasberg, the world’s second biggest copper mine, as part of a broader push to take greater control of its natural resources. Freeport is willing to sell but only if it can retain a big enough stake to justify a multibillion dollar underground expansion of the mine.
The two sides spent most of last year in negotiations but failed to reach an agreement. Analysts say one way to break the impasse would be if Rio Tinto decided to sell its interest in the mine to a state-owned mining company.
If Rio was to part with its interest — the Anglo Australian miner is entitled to 40 per cent of production above agreed levels until around 2022 and 40 per cent of all output thereafter — Freeport would only need to sell a smaller portion of its 91 per cent stake.
While Rio is prepared to sell, it is not clear at what price. In Thursday’s results statement Freeport, which also operates in the US and South America, said it expected to sell 3.9bn pounds of copper in 2018 and 2.4m ounces of gold. The company did not declare a dividend.
Net debt ended the year at $8.7bn, down from $11.8bn in 2016. On a call with analysts and investors, Mr Adkerson said there “appeared to be a desire” on the part of the Rio and Jakarta to do a deal. “It’s the most likely outcome,” said Mr Adkerson, adding that he felt “comfortable the valuation will be reasonable.”
With higher copper prices boosting cash flow, Mr Adkerson said that Freeport would soon be resuming its “long-term tradition of returning cash to shareholders.”
“Freeport reported better than expected fourth-quarter results, and management noted that three way negotiations in Indonesia are progressing well, with all parties involved expecting agreement to be reached in the first half of 2018,” said Jefferies analyst Christopher LaFemina.
Source: FT.com
