Copper Miners Update FXC, BHP, RIO

on April 20 2012 9:35 AM

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), Rio Tinto plc (NYSE:RIO), Southern Copper Corp. (NYSE:SCCO), BHP Billiton plc (NYSE:BHP)

FXC, BHP, RIO, SCCO

In February Copper weighed in at about 4.60 lb, and since the prices have declined to about 3.60 lb, which is a bit better than the price at the beginning of this year.

Copper miners Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), Rio Tinto plc (NYSE:RIO), Southern Copper Corp. (NYSE:SCCO), and BHP Billiton plc (NYSE:BHP) have been producing less by design and . other reasons.

Freeport-McMoRan reported Q-1 earnings Thursday morning, and revenues are down nearly 20% from the same period a year ago, $4.6-B this year vs. $5.7-B a year ago. Copper production is down from 950-M lbs a year ago to 833-M lbs this year and unit net costs have risen from 0.79 to 1.26.

In the earnings report, the CEO said that the Company plans to increase Copper production by 25% in the next 3 or 4 yrs, and he noted Freeport's longer-term prospects:

EPS for the Quarter came in at 0.80, vs. estimates of 0.86 and year-ago EPS of 1.57. Gold production was down by 46% although the average realized price per ounce was 21% higher.

Labor problems in Indonesia get some blame for the production declines and for higher unit costs. But the Company did face higher labor costs in the Americas, and that will likely turn out to be a drag for some time to come.

Southern Copper's unit costs in Y 2011 were just 0.41 lb and the Company has said nothing yet about Q-1 production, it has not announced a date on which it plans to report earnings.

The consensus estimate for EPS is 0.59 on revenue of $1.6-B. That's above last year's actual EPS of 0.55, . Southern Copper gets nearly 77% of its total sales from Copper.

Rio Tinto published its operational review earlier this week, noting that Copper production at its Kennecott mine is down -18%, due to the lower grade ores being mined.

The Company expects the low-grade ores to persist through 1-H of the year, but is planning to mine a higher grade area later in the year. The Company also plans to shut down its smelter for 26 days in order to switch to equipment to handle the higher grade ores. The Company did not say anything about costs or sales in its operations review.

BHP Billiton released an operational review Wednesday, showing Copper production down 10% for the 1st 9 of F-Y 2012 compared to the period in F-Y 2011.

The March quarter showed a raise of 3% compared with the same period a year ago, and sequential production was flat. Copper is less important to BHP, which is the World's largest Iron Ore miner, but the Company is expanding its Copper production.

A lot of the recovery in Copper prices depends on Chinese demand, which takes about 40% of the World's Copper and is currently constrained by near-record inventories of around 3-M metric tons.

Warehouses at the London Metals Exchange are more than 50% empty which could signal a price rise.

Prices for Copper deliveries are higher for immediate delivery than they are for July delivery, a commodities market condition known as 'backwardation'.

Usually this market supports higher prices, but this time a lot depends on how fast and by how much China uses its stockpiles.

Freeport shares finished at 38.03 Down 0.26(0.68%) 52-wk range of 28.85-56.78.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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