Freeport reports big jump in year’s earnings

With higher earnings and increased reserves, Freeport McMoRan Copper & Gold (NYSE) ended 1995 on a positive note.

Income from its operations in Irian Jaya, Indonesia, increased 30% for the fourth quarter; the company made US$54.3 million (or 27 cents per share), compared with US$41.6 million (20 cents per share) for the same period last year.

Income for the year jumped by 154% to US$199.5 million (98 cents per share), compared with 78.4 million (38 cents per share) in 1994.

Operating income rose by 54% for the quarter and 112% for the year. Revenue for the quarter was US$534 million and US$1.8 billion for the year.

Higher sales volumes and decreasing production costs were the main causes of the higher earnings.

Freeport’s operating subsidiary, P.T. Freeport Indonesia (PT-FI), reported record quarterly sales of 311.3 million lb. copper and 474,200 oz. gold. Daily throughput at the Grasberg operation averaged a record 126,800 tonnes.

For the year, PT-FI produced 978 million lb. copper, 1.31 million oz. gold and 2.3 million oz. silver.

Total cash production costs declined to 15 cents per lb. copper (64% below last year’s level). The drop reflects higher gold credits.

The company has made significant additions to its reserve base during the year. New reserves in the Grasberg open pit account for 200 million tonnes grading 0.42% copper, 0.16 gram gold and 1.5 grams silver.

PT-FI’s total proven and probable reserves stand at 40.3 billion lb. copper, 51.9 million oz. gold and 110.5 million oz. silver.

In January, Freeport and its partner, RTZ (NYSE), launched a feasibility study to expand daily capacity to 190,000 tonnes.

The partners are aggressively evaluating the potential in the “golden triangle” of mineralization around the Grasberg operation. Underground mining within the triangle is possible through existing tunnels and drifts.

RTZ will contribute US$30.8 million to cover exploration costs incurred by PT-FI in 1995, including US$10.6 million during the fourth quarter.

As per the partnership agreement, RTZ will cover exploration costs of up to US$100 million. Freeport is not expected to incur any exploration expenses in 1996.

Exploration within the Block B contract-of-work area and the Eastern Mining blocks continue to produce promising results.