Monday, January 24, 2011

Freeport (NYSE:FCX) Weighed Down by 2011 CapEx, Costs

Even after an extraordinary quarter, Freeport-McMoRan Copper & Gold (NYSE:FCX) has taken a hit because of the opportunity surrounding copper in 2011, which they'll have to invest in heavily to increase production, which is projected to slip this year.

Capital expenditure will come in at $2.5 billion, said Freeport, whereof $1.3 billion will be targeted for major projects, including expansion at El Abra in Chile, underground development at Grasberg, and construction at their U.S.-based Climax molybdenum mine.

Costs of metal extraction is expected to rise in 2011 as well, equal to about $1.10 a pound in regard to copper. That's significantly up from $0.79 a pound in 2010.

Most of that is because of projected lower copper and gold production volumes from Freeport's flagship Grasberg mine in Indonesia.

So the combination of higher extraction costs, increased spending and lower volumes had investors a little jittery on the company in 2011. They should still do well, but it's unlikely they'll be able to come close to repeating 2010, although 2012 could be another story.

No comments: