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Freeport earnings expected to decline

Keywords: Tags  Freeport-McMoRan Copper & Gold, Freeport, Grasberg, Dahlman Rose, Morgan Stanley, Citigroup, Plains Exploration & Production, McMoRan Exploration Suzy Waite

NEW YORK — Analysts forecast that Freeport-McMoRan Copper & Gold Inc.’s fourth-quarter earnings will be down slightly from the prior quarter, although they say that the ongoing ramp-up at its Grasberg Mine should have a positive effect.

New York-based Dahlman Rose & Co. LLC expects Freeport to report net income of 65 cents per share, while New York-based Morgan Stanley & Co. LLC forecasts 67 cents and New York-based Citigroup Inc. 70 cents.

Freeport reported net income of $824 million, or 86 cents per share, in the third quarter.

The Phoenix-based company’s fourth-quarter results likely will benefit from the ramp-up in Indonesia, analysts say.

"Progress toward achieving the full run rate at Grasberg in (the) fourth-quarter results is likely to be viewed favorably," Morgan Stanley analysts wrote. "The initial plan was to be fully ramped up by the fourth quarter, but this was pushed to 2013 due to extensive repairs required after the suspension of operations in 2011."

"Production has been artificially low because of operating issues in Indonesia, but they’re getting back to previous levels. I think production should be pretty good," an analyst told AMM. "It is hard to judge demand; stockpiles are still pretty high. But China seems like it is stabilizing."

More important, however, is the company’s recent announcement that it would acquire oil and gas producers Plains Exploration & Production Co., Houston, and McMoRan Exploration Co., New Orleans, for $9 billion (, Dec. 5).

"Unless there’s a major production or cost issue, I don’t think their fourth-quarter earnings will be a major market mover. People are much more interested in the Plains and McMoRan deal and will be (wondering) if it will go through," the analyst said.

The deals, expected to close in the second quarter, have come under intense scrutiny (, Dec. 6).

Citigroup analysts feel that the proposed deal will actually weigh down earnings, as "positives in the company’s core copper business are offset by the proposed purchase of energy assets that adds $16 billion of net debt."

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