Freeport-McMoRan 1Q earns surge as demand lifts copper, gold

But industry observers said investors worried about whether the slumping American housing market would slow the rush on copper, and Freeport's shares fell 55 cents to $118.13 in afternoon trading.

"There's a lot of skepticism regarding whether copper can maintain these high (price) levels that we're experiencing," said Brian Hicks, co-manager of U.S. Global Investors' Global Resources Fund in San Antonio, Texas. The fund owns Freeport shares.

Phoenix-based Freeport said first-quarter profit more than doubled one year after it bought Phelps Dodge Corp. for $26 billion. Net income rose to $1.12 billion, or $2.64 per share, in the three-month period that ended March 31, compared with $476 million, or $2.02, a year earlier.

Quarterly sales jumped to $5.67 billion from $2.25 billion.

Analysts polled by Thomson Financial had expected a profit of $2.12 per share on $4.69 billion in sales.

"Given the very strong prices for copper, gold and molybdenum, it was a great quarter for us," Freeport Chief Executive Richard C. Adkerson said in a conference call with analysts.

Molybdenum is an element that's used in steel, cast iron, and metal alloys to enhance strength, toughness, and resistence to corrosion.

Freeport's acquisition of Phelps Dodge in March 2007 made it the largest publicly traded copper company. Besides Phelps Dodge mines, Freeport operates the Grasberg mine, one of the world's largest sources of precious metals in Papua, Indonesia.

Copper remains in high demand despite the faltering U.S. housing market because China and India continue to press for more resources. A strike by mine workers in Chile, the world's primary copper-producing nation, also is boosting copper prices.

"The U.S. is a relatively small factor in the marketplace," Adkerson said in the conference call. "The market continues to be very tight globally."

The price of copper rose 27 percent and the price of gold rose 9.2 percent during the quarter on the New York Mercantile Exchange.

The company said in a statement it would "focus on maximizing current production volumes" to meet the high demand.

The company's mines posted sales in the first quarter of 911 million pounds of copper and 280,000 ounces of gold. That's down from 1 billion pounds of copper and 977,000 ounces of gold in first-quarter 2007 figures that include Phelps Dodge sales.

The company said sales volumes fell because of mining in a lower ore grade section of the Grasberg open pit during the first half of 2008. Freeport expects to continue mining the low-grade section in the second quarter, followed by a higher-grade section in the second half of 2008.

"This was a record quarter," Adkerson said. "And yet you can see from a volume standpoint, we're looking to have significantly stronger quarters in the second half of the year."

In the second quarter, Freeport expects its mines to sell 930 million pounds of copper, 225,000 ounces of gold and 18 million pounds of molybdenum. For the year, Freeport expects to sell about 4.2 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum.

The company's debt climbed to $7.6 billion as of March 31, compared with $7.2 billion as of Dec. 31. However, its consolidated cash increased to $1.8 billion on March 31, compared with $1.6 billion three months earlier.

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(This version CORRECTS RECASTS to include explanation of stock price, corrects spelling of 'Papua' sted 'Pampua' in 9th graf)