Freeport Chairman: Grasberg Not In Harm's Way In Indonesia

Published by MAC on 2005-01-18

Freeport Chairman: Grasberg Not In Harm's Way In Indonesia

By Heather Draper

Dow Jones Newswires

January 18, 2005

DENVER -- Freeport-McMoRan Copper & Gold Inc.'s (FCX) large Grasberg mining operations in Indonesia are east of the active tectonic plates in the region, the company's chairman told analysts Tuesday.

"There is very little reason to be concerned" about the Grasberg pit, Freeport Chairman James "Jim Bob" Moffett said during the company's fourth-quarter call.

Moffett said in light of the devastating earthquake and tsunami that hit southern Asia in late December, he wanted to assure shareholders that Freeport's Indonesian operations weren't in an active fault zone.

Freeport operates the giant Grasberg copper and gold mine in the politically sensitive Papua region of Indonesia. The Grasberg complex is about 3,000 miles from the fault line of recent earthquake off the coast of Banda Aceh, Indonesia.

Freeport Chief Executive Richard Adkerson told analysts that none of the company's January copper and gold shipments have been affected by the tsunami or its aftermath.

Freeport has donated cash and helped deliver medical supplies to the areas of Indonesia affected by the tsunami, Adkerson noted.

Freeport-McMoRan shares traded recently up $1.57, or 4.3%, to $38.18.

CEO Adkerson said even though the Grasberg mine is considered "mature," it continues to boost the company's copper and gold reserves.

"Today we have more copper reserves than we did five years ago and 92% of the gold reserves we had," Adkerson said. "That's remarkable...for a mine that is as mature as the Grasberg."

Freeport discovered the Grasberg copper and gold deposit in 1988.

Adkerson said the company expects to sell 1.5 billion pounds of copper in 2005 - 50% more than in 2004 - and to sell 2.9 million ounces of gold this year, double its 2004 sales.

At the company's average forecast price of $1.35 per pound of copper and $420 per ounce of gold, Freeport's operating cash flows should exceed $1.1 billion in 2005, he said.

"We expect to have a good year operationally, and the markets look very good for us," Adkerson said.

The company spent much of 2004 recovering from a mine wall accident at Grasberg in October 2003.

The collapse of a wall in the open pit mine killed eight workers. The Indonesian government then forced Freeport to suspend operations at part of the mine as restoration work was done.

Since the accident, Freeport achieved its primary goal for 2004 to restore the mine wall and resume full production of the higher-grade ores at the bottom of the pit, Adkerson said.

It was also able to speed up the processing of its insurance claim over the Grasberg accident, he said. The insurance proceeds added $48.8 million to the company's net income in the fourth quarter.

Freeport early Tuesday reported fourth-quarter net income of $227 million, or $1.08 a share, compared with net income of $2.39 million, or less than a penny a share, a year ago.

This year's results were boosted by the ability to resume full production of high-grade ores at Grasberg, the one-time insurance proceeds and high commodity prices, the company said.