Mining Earnings Plummet (FCX, ABX, GG)

Now this is what really bad news looks like. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) reported first quarter 2009 EPS of $0.11 on net income of $43 million, compared with EPS of $2.64 and net income of $1.1 billion in the first quarter a year ago. Revenue was $2.6 billion, compared with $5.67 billion in 2008.

Analysts weren’t expecting much, and they got even less. Thomson Reuters’ estimates averaged $0.13, and revenue estimates averaged $2.69 billion. Operating income for the quarter totaled $672 million, against $2.4 billion a year ago. Expectations for Barrick Gold Corp. (NYSE:ABX), which reports next week, and Goldcorp Inc. (NYSE:GG), which reports the week after that, are not much better.

Freeport’s average realized prices fell 53% for copper, 3% for gold, and 64% for molybdenum compared with prices a year ago. The company’s chairman and its CEO touted Freeport’s “successful execution of our revised operating plans to reduce costs and capital spending.”

For all of 2009, Freeport expects to sell 3.9 billion pounds of copper, 2.3 million ounces of gold, and 50 million pounds of molybdenum. Second quarter estimates total 955 million pounds of copper, 650,000 ounces of gold, and 11 million pounds of molybdenum. That is pretty flat to the first quarter for copper and molybdenum, but anticipates an increase of over 100,000 ounces in gold sales. Capital spending for 2009 is planned at $1.3 billion, falling to $1 billion in 2010.

Gold may still be viewed as the ultimate flight to quality and as the ultimate inflation hedge.  It looks more and more as though this is yet another example that the same cannot be said about the companies which are in charge of extracting and mining gold.

Freeport shares are down about 3% in pre-market trading this morning, to $39.51. The stock’s 52-week range is $15.70-$127.24.

Paul Ausick
April 22, 2009