Workers at Freeport-McMoRan Copper & Gold's (FCX) Grasberg mine in Indonesia plan to go on strike in the coming days after talks with the company failed to resolve a pay dispute, a move that could tighten global copper supplies and lift prices.
A strike would be the second in two months at Grasberg, the world's third biggest copper mine that also has the biggest gold reserves, after the eight-day stoppage in July 2011 caused production losses and helped push copper prices to three-month highs. The strike by 8,000 workers halted ore shipments and caused a production loss of 60,000 ounces of gold and 35 million pounds (15,876 tons) of copper.
The company's union in Indonesia, which represents about 8,000 workers, have demanded a pay rise to between $17.5 to $43 per hour, down from initial demands for $30 to $200 per hour, but still above a current $1.5 to $3 per hour rate. The union had said that Freeport workers in other parts of the world get 10 times their current level.
The firm offered to double the monthly salary, but the union rejected the same.
In July 2011, Freeport released its second quarter 2011 results. The company reported a profit of $1.37 billion or $1.43 per share in the second quarter of 2011, which more than doubled from $649 million or 70 cents per share in the same quarter of 2011. The profit exceeded the Zacks Consensus Estimate by 9 cents per share.
Revenues in the quarter surged 50% to $5.81 billion, surpassing the Zacks Consensus Estimate of $5.63 billion. Consolidated sales from mines totaled 1.0 billion pounds of copper, 356,000 ounces of gold and 21 million pounds of molybdenum compared with 914 million pounds of copper, 298,000 ounces of gold and 16 million pounds of molybdenum in the second quarter of 2010.
Freeport-McMoRan’s consolidated unit net cash costs (net of by-product credits) are estimated to average $1.01 per pound of copper for 2011 based on average prices of $1,500 per ounce for gold and $15 per pound for molybdenum for the second half of 2011.
Based on the same parameters and assuming a average price of $4.25 per pound of copper, the company’s consolidated operating cash flows are estimated to exceed $8 billion for the year 2011.
The company’s capital expenditures are expected to reach $2.6 billion for 2011, including $1.4 billion for major projects and $1.2 billion for sustaining capital. Major projects for 2011 primarily include underground development activities at Grasberg, construction activities at the Climax molybdenum mine and completion of the initial phase of the sulfide ore project at El Abra.
Headquartered in Phoenix, Arizona, Freeport-McMoRan Copper & Gold Inc. is engaged in mineral exploration and development; mining and milling of copper, gold, molybdenum and silver; as well as the smelting and refining of copper concentrates.
The company conducts its operations primarily through its principal operating subsidiaries, PT Freeport Indonesia, Freeport-McMoRan Corporation (formerly Phelps Dodge) and Atlantic Copper. Its major competitors include Newmont Mining Corp. (NEM) and Southern Copper Corp. (SCCO). It currently retains a Zacks #3 Rank on its stock, which translates to a short-term rating of “Hold”.
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