Freeport-McMoRan net earnings drops 86 percent

Copper and gold miner Freeport-McMoRan Copper & Gold Inc. on Thursday reported a 86 percent drop in second-quarter net income due to poor weather and unfavorable swings in foreign exchange rates.

The New Orleans company had warned earlier this month that sales for the quarter would be lower than it had expected due to delays in tapping higher ore in its Grasberg mine in Indonesia and to extremely heavy rainfall that hindered output.

Freeport-McMoRan said net income dropped to $5.6 million, or 4 cents a share, from $36.3 million, or 25 cents a share, a year earlier.

The latest results slightly exceeded the analysts' average estimate of 3 cents a share compiled by Thomson First Call, according to Freeport-McMoRan spokesman William Collier.

During the quarter, the company took a charge of 6 cents a share for translating pension costs of a Spanish subsidiary into dollars that had weakened against the euro.

Sales fell 24 percent to $408 million from $538 million in second quarter 2001. Copper sales dropped to 350.4 million pounds from 389.8 million a year earlier, while gold sales plunged to 393,700 ounces from 813,600 ounces.

"During the second quarter, our Grasberg mine operations transitioned from the lower grade material which had been mined in recent months to higher grade ore, which we expect to mine for the next several quarters," Chief Executive James R. Moffett said in a statement.

Moffett said the company expects to benefit significantly in the second half of the year from much higher ore grades and sales volumes. "We expect the second half gold sales to be twice the first half levels, which will significantly enhance our second half results," he added.

The company said it sees third-quarter sales of about 420 million pounds of copper and 800,000 ounces of gold.

For the full year, Freeport-McMoRan forecast sales of 1.5 billion pounds of copper, up from 1.4 billion in 2001, and 2.2 million ounces of gold, down from a record 2.6 million.

Based on current pricing, the company said it expects operating cash flow of $500 million for the year, compared with $509 million in 2001. That would allow it to reduce net debt by more than $225 million.

Freeport-McMoRan's debt, net of investments but including preferred stock that must be redeemed, was $2.6 billion at June 30, down from $2.66 billion at Dec. 31 (*)