Losses for Phelps Dodge

Vancouver — For the ninth-consecutive quarter, Phelps Dodge (PD-N) has failed to make a profit.

The world’s second-largest copper producer incurred a net loss of US$15.2 million (or US21 per share) in the second quarter, compared with a loss of US$34.3 million (US46 per share) in the corresponding period last year. The improvement is attributed, in part, to a US$4.5-million (US5-per-share) gain from the sale of wire and cable investments.

Operating income was US$25.8 million, some US$12.4 million lower than in the second quarter of 2002, when a one-time, US$20.9-million gain boosted results.

“Lacklustre copper prices continued to mirror the uncertainty of global economic conditions, and our reported results, while improved, reflected this environment,” says Phelps Dodge President Steven Whisler.

Despite an 18% rise in specialty chemical sales to US$166.1 million, overall sales for the quarter fell to US$962.2 million from US$966.8 million a year earlier. The mining division’s contribution fell to US$641.6 million from US$644.5 million.

The major produced 259,300 tons copper and 13.1 million lbs. molybdenum during the recent 3-month period, compared with 254,600 tons and 10.4 million lbs., respectively, a year earlier. Total unit costs for copper were essentially unchanged at US69 per lb.

Copper prices during the recent quarter averaged US74.4 per lb., up from US73, while average prices for molybdenum rose nearly 20%, to US$5.21 from US$4.35 per lb.

Looking ahead, the Phoenix, Ariz.-based company sees early indication of an economic recovery in the U.S. and Europe, and anticipates a global copper deficit in 2003. Phelps Dodge therefore estimates that the copper price will strengthen in the second half of the year, hitting a yearly average of US$74.7 per lb.

“It is still too early to make the call that a recovery is here,” states Arthur Miele, vice-president of marketing. “We have been in curtailed mode for six quarters now and plan to stay that way for the foreseeable future.”

On July 28, the day Phelps Dodge released its results, the COMEX benchmark September copper futures closed at US80.75 per lb. after hitting a high of US81.50. The contract’s year low is US71 per lb.