How Could Asset Sales Impact FCX’s 2017 Copper Volumes?



Asset sales

Freeport-McMoRan (FCX) gave a guidance of 1.3 billion pounds of copper for 3Q16. However, the company’s actual copper shipments fell short by almost 100 million pounds.

During its 3Q16 earnings call, Freeport also reduced its production guidance. The company expects its 2016 copper shipments to total 4.8 billion pounds, compared to its previous guidance of 5.0 billion pounds.

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2017 copper volumes

Freeport-McMoRan’s (FCX) 2017 copper volumes are expected to fall to 4.3 billion pounds—more than 10% below its expected 2016 volumes. Lower volumes in 2017 could be attributed to Freeport’s sale of the Tenke Fungurume mine.

Freeport embarked upon an aggressive asset sales program in 2016 in a bid to raise cash to strengthen its balance sheet. However, Southern Copper (SCCO) expects its copper volumes to rise over the next few years as a result of its planned expansions.

Shipment decline could continue beyond 2017

The falling trend in Freeport-McMoRan’s (FCX) copper shipments could continue beyond 2017. Freeport’s Grasberg mine in Indonesia (EIDO) would finish the open pit operations in 2018. Rio Tinto (RIO) (TRQ) is Freeport’s partner in this mine. After 2018, the mine would have to be converted into underground operations.

According to Freeport, the mine could take five to six years to ramp up to full capacity. In the meantime, the company’s copper production could fall. For example, Freeport expects its share of copper production from the Grasberg mine to fall from ~1.5 billion pounds in 2017 to 1.0 billion pounds in 2018.

Notably, Freeport’s Grasberg mine has been grabbing headlines over the last couple of years. In the next article, we’ll explore whether Freeport’s Indonesia operations can continue to make headlines in 2017 as well.


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