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Chart in Focus: Freeport-McMoRan’s 2Q17 Earnings

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2Q17 earnings

Several copper miners have released their 2Q17 earnings. In this article, we’ll look at mining companies’ 2Q17 EBITDA[1. earnings before interest, tax, depreciation, and amortization] and compare their EBITDA margins.

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EBITDA

Freeport-McMoRan (FCX) posted adjusted EBITDA of $1.2 billion in 2Q17. The company posted adjusted EBITDA of $1.0 billion in 1Q17 and $966 million in 2Q16.

Teck Resources (TECK), the Canada-based diversified miner (EWC), posted adjusted EBITDA of ~$1.3 billion Canadian  (~$1.1 billion) in 2Q17. Although its 2Q17 EBITDA fell compared to 1Q17, it rose sharply compared to 2Q16. 

Southern Copper (SCCO) generated adjusted EBITDA of $707 million in 2Q17 compared to $555 million in 2Q16 and $722 million in 1Q17. While Teck Resources and Southern Copper reported sequential declines in their 2Q17 EBITDA, Freeport’s 2Q17 EBITDA rose on a yearly as well as a sequential basis.

The sequential decline in EBITDA is not surprising, as commodity prices (BHP) weakened in 2Q17 compared to the previous quarter. In Freeport’s case, higher shipments in 2Q17 as a result of the Indonesia exports ban in the previous quarter boosted its 2Q17 EBITDA.

EBITDA margin

Southern Copper reported an adjusted EBITDA margin of 46.2% in 2Q17. Freeport’s 2Q17 adjusted EBITDA margin was 31.5% while Teck Resources 2Q17 EBITDA margin stood at 47.1%. 

Freeport’s lower EBITDA margins could be partially attributed to its energy operations. Although Freeport has exited most of its energy assets, it’s still holding onto some of those assets.

With copper prices moving to higher price levels, miners are generating substantial cash flows. We’ll explore this topic in the next article.

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