Release: S&P assigns Freeport-McMoRan Copper & Gold 'B-' rating
Thursday, January 29 2004 - 03:22 PM WIB
"The ratings on Freeport-McMoRan reflect its ownership in one of the lowest-cost copper operations in the world and strong free cash flow generation overshadowed by the risks of operating in the Republic of Indonesia and its aggressive debt leverage, said Standard & Poor's credit analyst Dominick D'Ascoli.
Freeport-McMoRan produced approximately 1.3 billion pounds of copper and 2.5 million ounces in 2003. The company ranks as one of the world's lowest-cost copper producers, benefiting from high gold content in its copper ore and current high gold prices; low labor costs; and favorable geological conditions; which allow the company to use lower-cost open pit mining methods, rather than higher-cost underground mining methods. Freeport should be able to sustain its very low-cost position through the intermediate term, because the majority of its ore is produced from its Grasberg, Indonesia open pit mine, which is not expected to be depleted until 2015.
In 2003, cash production costs--with gold as a by-product credit--averaged a very low negative two cents per pound. With copper and gold reserves totaling 54 billion pounds and 60 million ounces, respectively, the Grasberg mining district of Indonesia is the largest copper-and gold-based deposit in the world, ensuring Freeport-McMoRan will have significant long-term, low-cost production. The company also benefits from a fair degree of vertical integration as a result of its ownership in two smelting and refining facilities, Atlantic Copper SA (100%) in Spain, and PT Smelting Co. (23%) in Gresik, Indonesia. The two smelters process approximately 50% of the mine's output.(end of release)