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Posts Tagged ‘Tenke Fungurume’

Freeport-McMoran profits up on copper demand

January 21, 2011 Comments off

“The accelerating bull market in copper, which is facing a stagnant supply base amid rising demand, lifted pre-tax profits at Freeport-McMoRan 46 per cent to a record $8.5bn last year. US-based Freeport, the largest publicly traded producer of the red metal, offered the first indication on Thursday of the financial bonanza that the big copper miners were enjoying. The New York-listed company published its annual results ahead of Rio Tinto, Anglo American and Xstrata, other copper miners expected to unveil similar windfalls from copper.

Freeport’s earnings per share rose 56 per cent from $5.86 last year to $9.14 in the year to December. The company closed 2010 by declaring a $1 per share special dividend that cleared $472m of excess cash from its books. Copper production slid from 3.35bn pounds in 2009 to 3.14bn pounds last year, continuing long-term stagnation that has hit the industry. Rio this week revealed it mined 16 per cent less copper year in 2010 versus the previous year.”

Source: Financial Times, January 20 2011

Observations:

  • Reuters notes that the share price of Freeport is falling behind on copper future price since February of this year.

    Reuters' analysis of FCX stock vs. copper future

  • FCX currently expects capital expenditures to approximate $2.5bln for the year 2011. Still the company is turning out a special dividend worth almost $500mln.

Implications:

  • The results of the company missed the analysts estimates, resulting in drop of the stock price. The main reason for dissatisfaction is the decrease in production to 3.14bln pounds. Production is expected to increase by over 20% in 2011. The company does not appear to have more growth options at the moment, returning excess cash back to shareholders instead of investing above the planned $2.5bln.
  • Country risk of Congo, where the Tenke Fungurume project is located, will cause the production outlook to remain uncertain. Freeport has signed a deal with the government in October that appears to be promising. However, 2011 will have to prove the stability of the deal.

©2011 | Wilfred Visser | thebusinessofmining.com

Congo resolves dispute over copper mine

October 27, 2010 Comments off

“Freeport-McMoRan, the US copper mining group, has resolved a long-standing dispute with the Democratic Republic of Congo over control of a vast copper mine by giving cash and shares to the government.

The Tenke Fungurume project, which could be ranked among the world’s top 10 new sources of copper, has been plagued by uncertainty since 2007, when Congo’s government decided to review all mining licences signed during the war in the country between 1998 and 2003.

More than a year of negotiations, thought to have involved the US government in support of Freeport, led to changes to the Tenke licence. Under the new terms, Gecamines, the state mining company, will own 20 per cent of Tenke, an increase from 17.5 per cent. Freeport will pay $30m to Congo “in six instalments after reaching certain production milestones”, as well as $5m in “surface area fees”. “

Source: Financial Times, October 26 2010

Observations:

  • The development of the deposit, staring early 2009, has not stopped during the dispute. However, full production has not yet been reached.
  • The Tenke deposit is owned by Freeport-McMoran and Lundin Mining. Furthermore Gecamines, the state-owned mining company of Congo, holds 20% of the mine’s shares.

Implications:

  • The arrangement between Freeport-McMoran and the government of Congo could be seen as a model for other land right and mining arrangements between foreign mining companies and African governments. A fee for access to the land helps the government to invest in infrastructure, while the parties both commit to the success of the project by tying the payments to production milestones and by both holding a shares of the project.

©2010 | Wilfred Visser | thebusinessofmining.com