Mining company Freeport-McMoRan posted its biggest quarterly loss in company history Monday, nearly $14 billion during the fourth quarter, with the price for metals slumping amid a global economic slowdown.
But shares for the Phoenix-based company soared anyway as officials said they would cut production of copper, used in everything from housing to appliances, and molybdenum, used to make steel. Freeport's shares jumped 9.3 percent, or $2.13, to $24.94.
Freeport-McMoRan said it expects to cut copper production below its October 2008 estimate by 400 million pounds in 2009 and 800 million pounds in 2010. The company also will cut molybdenum production below its previous estimate by 20 million pounds in 2009 and 40 million pounds in 2010.
"That's not an insignificant amount of metal that they're willing to take out of production," said Victor Flores, an analyst with HSBC Global Research.
The question, Flores said, is whether Freeport-McMoRan was forced to cut production estimates, or if they're simply trying to be an industry leader by artificially depleting supplies in hopes of boosting prices for everyone.
The company reported a loss of $13.9 billion, or $36.78 per share, compared with a net income of $414 million, or $1.05 per share in the prior-year period.
The results, however, include special charges of about $14 billion, or $36.84 per share, largely due to commodity price declines and the acquisition of Phelps Dodge. Excluding special items, profit totaled $23 million, or 6 cents per share.
In the long run, however, mining companies like Freeport-McMoran will benefit from a dearth of reliable copper sources as China and other developing countries kickstart stalled building projects, said President and Chief Executive Officer Richard Adkerson.
"We certainly didn't predict what's happening now, but we knew that prices would be volatile," he said. "We have the same assets, the same mines, the same resources, the same future growth opportunities."
Analysts polled by Thomson Reuters expected a loss of $1.12 per share, on average. Analysts typically exclude one-time items, meaning the company actually beat expectations.
Revenue fell 50 percent to $2.1 billion, from $4.2 billion, but for the year, rose to $17.8 billion from $16.9 billion.
Freeport-McMoRan Copper & Gold Inc., the world's largest publicly traded copper company, has struggled as copper prices plunged more than 60 percent from July to January. Demand for copper has withered as the North American housing industry collapsed and the global recession widened to developing countries like China.
In response, Freeport-McMoRan has cut production, postponed projects and laid off thousands of miners in Arizona, New Mexico and Colorado to control costs. It limited investment when credit markets tightened.
The company also said Monday it may offer common stock worth up to $750 million to pay off debt, capital expenses and other corporate costs. The mining company said J.P. Morgan Securities Inc. will operate as its sales agent.
Chairman of the Board James R. Moffett told investors that Freeport-McMoRan would offer new stock only as a "last resort."
"We've got all kinds of other ways to work with these low prices," Moffett said.
Freeport also can lean on its massive reserves of gold, which has soared in value amid ongoing market turmoil. Gold prices spiked in the past three months to more than $900 an ounce on the New York Mercantile Exchange as investors sought the relative safety of commodities.
For the year, Freeport reported losses of $11.34 billion, or $29.72, compared with earnings of $2.73 billion, or $7.50, in 2007.
___
AP Business Writer Deborah Jian Lee in New York contributed to this report.
