Freeport's Cerro Verde Q4 profit plummets on prices, output declines

Freeport McMoRan Copper & Gold's Peruvian unit said its fourth quarter 2014 profit plunged 72% due to slumping copper prices and output.

Sociedad Minera Cerro Verde posted a US$55.9mn profit compared with a US$197mn profit a year earlier, the company said in a corporate filing sent to securities regulator SMV. Sales dropped 39% to US$341mn from US$562mn a year ago.

Copper production fell 19% to 123.5Mlb from 152.8Mlb on lower ore grades and copper recovery rates, while sales declined 26% to 122.3Mlb from 164.4Mlb, the company said.

Cerro Verde, Peru's third largest copper mine, sold the metal at US$2.83/lb compared with US$3.30/lb a year earlier. Operating costs rose to US$182mn from US$151mn, while the company allocated US$35.2mn in worker bonuses, part of a four year labor accord.

"Production disappointed, once more," Credicorp Capital analyst Héctor Collantes wrote in a report. "The settlements of past provisions related to the sales of concentrates amplified the hit on revenues."

Capex rose to US$1.8bn in 2014 from US$1.1bn the previous year due to spending at its US$4.6bn expansion project.

The expansion is designed to boost concentrator capacity at Cerro Verde to 360,000t/d of ore from 120,000t/d, and provide additional annual production of approximately 600Mlb (272,155t) of copper and 15Mlb of molybdenum, starting in 2016.