Freeport-Mcmoran (FCX.US) exceeded expectations in Q2, investing $7.5 billion to expand Chilean copper mine

Freeport-Mcmoran (FCX.US) announced its second-quarter earnings after the bell, showing a strong quarter despite the copper price decline due to soft demand and global inventory buildup. The stock price, which had fallen to $43.54, rebounded to $45.27 at the time of writing. The earnings release showed that Freeport-Mcmoran had a strong quarter: non-GAAP earnings per share of $0.46, above the consensus of $0.38; revenue of $6.62bn, up 15.3% YoY and above the consensus of $6.01bn.

In terms of production, the company produced 1bn pounds of copper, 443,000 ounces of gold and 20mn tonnes of molybdenum in the quarter; sold 931mn pounds of copper, 361,000 ounces of gold and 21mn tonnes of molybdenum. The company gave an upbeat outlook for the full year, expecting to sell 4.1bn pounds of copper, 1.8mn ounces of gold and 82mn tonnes of molybdenum, with a particularly strong third quarter expected, with sales of 1bn pounds of copper, 475,000 ounces of gold and 20mn tonnes of molybdenum.

At the earnings call, CEO Kathleen Quirk announced the company's major investment plans: Freeport-Mcmoran plans to invest about $7.5bn to expand its El Abra copper mine in Chile. She noted that the project, which is expected to take 7-8 years to develop due to permitting requirements, will be submitted for an environmental impact statement by 2025 and that the company expects to continue to assess the economic situation based on market conditions but believes that the project is critical to support long-term copper demand trends.

Quirk emphasized that “we will continue to assess the economic situation based on market conditions, but we believe that this project is critical to support long-term copper demand trends.” CEO Richard Adkerson mentioned that the Chilean state-owned company Codelco is enthusiastic about the project and that the Chilean president Piñera has become more supportive of the mining industry.

Freeport-Mcmoran owns 51% of the El Abra copper mine, with the remainder owned by Codelco. According to Chilean national institution Cochilco, El Abra produced 98,400 tonnes of copper last year, making it an important asset for the company. The expansion project not only reflects Freeport-Mcmoran's confidence in the future copper market but also reflects the company's commitment to sustainable development and environmental protection.