Freeport-McMoRan Copper & Gold Inc. (FCX) employees finally ended their eight day long strike at massive Grasberg mine in Indonesia and resumed work. Previously, thousands of Freeport workers went on strike demanding higher wages and protesting the dismissal of their union leaders.
The strike paralyzed the output at the remote Grasberg mine, which contains the world’s largest recoverable reserves of copper and the biggest single gold reserve. It also stopped loading of metal concentrate and unloading of food and fuel at the company’s port in eastern Papua province.
The workers are demanding a wage increase of $1.80 to $15.00 per hour since the other Freeport workers around the world are paid at least $15–30 per hour.
The company is working diligently with the union and employee leadership to resolve this issue.
In April 2011, the company released its first-quarter 2011 earnings. It posted a net income of $1.5 billion or $1.57 per share in the first quarter of 2011, outshining the Zacks Consensus Estimate of $1.26 per share and the year-ago net income of $897 million or $1.00 per share.
Quarterly revenues of $5.7 million surpassed the Zacks Consensus Estimate of $5.39 million and were up 30.9% year over year.
At the Indonesia Mining division, copper sales were lower at 278 million pounds in the first quarter of 2011 versus sales of 296 million pounds in the prior-year quarter primarily due to the timing of shipments. Gold sales however approximated first-quarter 2010 sales.
In 2011, Freeport expects to sell 3.9 billion pounds of copper, 1.6 million ounces of gold and 73 million pounds of molybdenum. For the upcoming quarter, the company projects sales of 965 million pounds of copper, 365 thousand ounces of gold and 17 million pounds of molybdenum.
The company expects average copper prices of $4.25 per pound, $1,400 per ounce of gold and $15 per pound of molybdenum for fiscal year 2011.
Operating cash flows are estimated to be $8.3 billion in 2011.
Freeport expects capital expenditures of $2.5 billion in 2011, of which $1.3 billion is expected to be spent on major projects including 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. In addition, Freeport is considering additional investments at several of its sites.
Freeport has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Neutral recommendation.
The company faces stiff competition from Newmont Mining Corp. (NEM) and Southern Copper Corp. (SCCO).
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