Freeport-McMoRan Copper & Gold Inc. is studying further expansion of mining and milling operations at Morenci, the company said Thursday as it announced that its second-quarter profit more than doubled.
Phoenix-based Freeport said it has completed its project to ramp up mining rates at Morenci to 635,000 metric tons of ore per day and milling rates to about 50,000 metric tons per day, resulting in an increase of 125 million pounds of copper per year.
The company said it is "advancing a feasibility study to expand mining and milling capacity at Morenci to process additional sulfide ores identified through positive exploratory drilling over the last few years."
Such an expansion would require "significant investment" and boost milling rates to about 115,000 metric tons of ore per day, and target annual copper production of approximately 225 million pounds within three years, the company said.
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The feasibility study is expected to be completed by year's end.
Freeport said Thursday that its second-quarter earnings more than doubled as it produced and sold more copper and gold to take advantage of higher prices.
The company reported net income of $1.37 billion, or $1.43 per share, for the three months ended June 30. That compared with $649 million, or 70 cents per share, for the same period last year.
Excluding losses for extinguishing debt early, Freeport earned $1.49 per share.
Revenue increased 50.5 percent to $5.81 billion from $3.86 billion a year ago.
The results beat Wall Street estimates of $1.33 per share on sales of $5.69 billion, according to a survey by FactSet.
Freeport mines ores that are used in basic construction and manufacturing. Copper is found in wiring, cables and pipes while molybdenum is used to strengthen steel. Gold largely is sold to investors and jewelry makers.
During the second quarter, the global economy showed signs of slowing.
China, the world's biggest user of copper, reported slower industrial production in recent months. But demand is expected to remain strong as the country continues to spend "tremendous amounts" on infrastructure and housing, Freeport-McMoRan President and CEO Richard Adkerson told analysts on a conference call.
"It is supported by the fact that there's clearly a de-stocking of inventories in China, even though they're taking efforts to slow the economy down," he said.
Argus Research analyst Bill Selesky said China and the Asia-Pacific region will remain key drivers for the mining company. However, he anticipates that China will continue efforts to lower inflation, which could affect near-term demand for copper.
During the second quarter, Freeport recorded a 38 percent increase in copper prices to $4.22 per pound and a 22 percent increase in gold prices to $1,509 an ounce. Molybdenum prices slipped by 2 cents to $18.16 per pound.
Freeport capitalized on the price increases by increasing production by 4 percent for copper and 11 percent for gold.
The company said it expects sales to fall this year at its flagship Grasberg mine in Indonesia, in part because of an eight-day strike in July that temporarily halted operations. The company estimated the strike cut production by 35 million pounds of copper and 60,000 ounces of gold.
Freeport expects copper sales to be flat this year at 3.9 billion pounds. Gold sales should decline about 14 percent to 1.6 million ounces, and molybdenum will increase 15 percent to 77 million pounds. The company plans to more than double exploration spending to $250 million this year.
Besides the proposed Morenci expansion, Freeport said it plans to complete construction on a molybdenum mine in Climax, Colo., next year and build production to 20 million pounds a year by 2013.
It also is continuing long-term development of its Indonesian mine and has other projects under consideration.
During the second quarter, Freeport said it completed a $150 million project to refurbish and restart mining and milling at the Chino mine, near Silver City, N.M., where production is expected to be 100 million pounds in 2012 and 2013 and rise to 200 million pounds in 2014.
Freeport shares fell 53 cents Thursday, to close at $55.34 in trading on the New York Stock Exchange.
Did you know
Freeport-McMoRan Copper & Gold Inc. is Southern Arizona's 11th-largest employer, with 4,803 full-time-equivalent workers at the start of this year, the Star 200 survey shows.
The company's Arizona operations includes the Sierrita Mine near Green Valley, and mines at Morenci, Miami and Safford.
Includes information from The Associated Press. Star Assistant Business Editor David Wichner contributed to this report.