Freeport to cut US mine staff, production, and capital expenditures in response to price drop

Freeport McMoRan Copper & Gold, the Phoenix-based company with worldwide operations including 7 copper mines in Arizona, announced plans to cut the number of U.S. mine workers by 10% along with a reduction in copper production, and a ~25% reduction in capital expenditures.  This is in response to copper prices dropping to the lowest levels in more than 5 years.   [My reading is that the economic downturn in China is a major factor in the falling price of copper and other commodities. China probably consumed 45% of the world supply of copper.]

Meanwhile, Carl Icahn announced he acquired an 8.5% stake in Freeport, prompting a surge in the stock price which had dropped from $38 last year under $10 recently.   Icahn said he plant to review "executive compensation practices and capital structure as well as curtailment of the issuer's high-cost production operations."

Freeport's news release summarized the key points:

5% reduction ($700 million) in estimated 2016 Mining capital expenditures

Projected consolidated 2016 capital expenditures for Mining and Oil & Gas estimated at $4.0 billion

• 29% reduction from July 2015 estimates.

Reduction in copper sales of 150 million pounds per year in 2016e and 2017e

20% reduction in estimated 2016 unit site production and delivery costs compared with 2015e

Actions enhance outlook for Free Cash Flow generation at low prices

- See more at: http://investors.fcx.com/investor-center/news-releases/news-release-details/2015/Freeport-McMoRan-Announces-Further-Spending-Cuts-in-Response-to-Market-Conditions/default.aspx#sthash.j5lzS31C.dpuf

• 25% reduction ($700 million) in estimated 2016 Mining capital expenditures
• Projected consolidated 2016 capital expenditures for Mining and Oil & Gas estimated at $4.0 billion
• 29% reduction from July 2015 estimates.
• Reduction in copper sales of 150 million pounds per year in 2016e and 2017e
• 20% reduction in estimated 2016 unit site production and delivery costs compared with 2015e
• Actions enhance outlook for Free Cash Flow generation at low prices

For its North American mines, Freeport reported:

FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. The North America copper mining operations have substantial production capacity, flexible operating structures and long-lived reserves and resources with significant additional development potential.

FCX’s revised plans in North America incorporate reductions in mining rates to reduce operating and capital costs, including the suspension of mining operations at its Miami mine (which produced 57 million pounds in 2014), a 50% reduction in mining rates at the Tyrone mine (which produced 94 million pounds in 2014) and adjustments to mining rates at other U.S. mines. The revised plans at each of the operations incorporate the impacts of lower energy, acid and other consumables, reduced labor costs and a significant reduction in capital spending plans. These plans will continue to be reviewed and additional adjustments may be made as market conditions warrant.

These changes are expected to result in an approximate 10 percent reduction in employees and contractors at U.S. mining operations

update 9-16-15: the original posted stated a 25% reduction in production rather than capital expenditures

North America Copper Mines. FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. The North America copper mining operations have substantial production capacity, flexible operating structures and long-lived reserves and resources with significant additional development potential.
FCX’s revised plans in North America incorporate reductions in mining rates to reduce operating and capital costs, including the suspension of mining operations at its Miami mine (which produced 57 million pounds in 2014), a 50% reduction in mining rates at the Tyrone mine (which produced 94 million pounds in 2014) and adjustments to mining rates at other U.S. mines. The revised plans at each of the operations incorporate the impacts of lower energy, acid and other consumables, reduced labor costs and a significant reduction in capital spending plans. These plans will continue to be reviewed and additional adjustments may be made as market conditions warrant.
These changes are expected to result in an approximate 10 percent reduction in employees and contractors at U.S. mining operations
- See more at: http://investors.fcx.com/investor-center/news-releases/news-release-details/2015/Freeport-McMoRan-Announces-Further-Spending-Cuts-in-Response-to-Market-Conditions/default.aspx#sthash.j5lzS31C.dpuf