Freeport axes moly jobs and production

Vancouver — With the molybdenum price crashing, Freeport-Mc-MoRan Copper & Gold (FCX-n), the world’s largest moly producer, is slashing more than a hundred moly-related jobs, cutting production at its Henderson mine and suspending construction at its past-producing Climax mine.

The move follows aftershocks of a cratering moly price that in recent weeks has fallen from over US$30 per lb. to about US$9.50 per lb.

In an email, Freeport spokesman Eric Kinneberg said about 100 full-time employees would be affected by the company’s change in plans.

These changes include a 25% or 10-million-lb. cut to moly production at the Henderson mine, near Empire, Colo.

Kinneberg says that in addition to the roughly 100 pink slips the company will be handing out to full-time employees at Henderson, Freeport will drop an undisclosed number of the 150 or so contract employees at Henderson and the 450 contract employees at Climax.

Kinneberg says that while Freeport has so far not eliminated 25 full-time jobs at its Climax project, the company is reviewing staffing requirements there.

Freeport has spent US$150 million on the $500-million plan to reopen Climax, and has US$50 million more in commitments.

At presstime, Kinneberg did not know how much money the job-cutting measures would save Freeport.

In 2007, when Freeport announced plans to reopen Climax, about 100 km west of Denver, the company’s CEO Richard Adkerson called the project “financially attractive” with cash costs estimated at US$3.50 per lb.

At the time, Freeport had expected to bring Climax online in 2010, after 14 years lying dormant. With reserves there pegged at around 180 million tonnes grading 0.165% molybdenum, Freeport had planned to produce about 30 million lbs. of moly a year.

But that was when the price of moly was well over US$30 per lb. Now, with the metal fetching a third of that, Freeport is putting on the brakes.

“We are responding aggressively to the current market conditions, which have weakened dramatically in recent weeks,” Adkerson said in a statement.

In addition to cutting jobs and production at Henderson and suspending Climax, Freeport says it is assessing whether to reign in moly production at its byproduct mines.

And in a thinly veiled warning on its outlook for copper, Freeport says copper production “at certain operations may be reduced in response to market conditions.”

For the near future, Freeport will follow a wait-and-see policy.

“We have a positive long-term view for molybdenum markets and (Freeport) will be positioned to increase our production as market conditions improve,” Adkerson said.

Freeport says it could bring Climax to production within a 12-18 month timeframe.

On news of the layoffs and production cut, Freeport’s share price rose 39 to close at US$27.46.