INTERVIEW: Freeport To Preserve Liquidity, Cut Capex -CEO

Despite a partial rebound in international copper prices in recent months, Freeport-Mcmoran Copper and Gold Inc. (FCX) will maintain its conservative approach and aim to build up cash levels in the face of continued economic uncertainty, the company's chief executive said Thursday.

"We're focused on preserving liquidity, which is a strategic asset right now," Freeport CEO Richard Adkerson said in an interview with Dow Jones Newswires at the 8th Annual World Copper Conference of business analysis and consultancy group CRU.

The U.S. mining company, the world's largest publicly traded copper-producing company, moved "aggressively and quickly" to curtail capital expenditures during the fourth quarter last year when copper prices plunged, Adkerson said.

The economic slowdown has seen copper prices crash to around $1.80 a pound this week from nearly $4 a pound in October. Prices had dipped to about $1.20 a pound a few months ago and rebounded slightly after China bought the metal at bargain prices to build its strategic reserves.

Freeport made across-the-board cost cuts, suspended some projects and adjusted operations at a number of mines to concentrate on extracting higher-grade ore to lower its unit costs.

The company also canceled stock dividends and generated $750 million in fresh capital through a new share issue this year.

While the measures have put Freeport on a more solid footing, the company is prepared for further belt-tightening amid the uncertain price outlook. "No one really knows" where prices may be headed, the CEO said. "We have to be prepared for whatever comes."

Among the targets of the cost cuts, the Climax molybdenum mine project in the U.S was suspended, and production at the Henderson mine in Colorado was cut by 25%.

However, Freeport is moving forward with plans to develop the Tenke Fungurume copper and cobalt mine in Congo, which should be producing at planned capacity during the second half of 2009, Adkerson said.

The company's mineral production in 2009 and 2010 is expected to be in line with the4 billion pounds it sold last year. That production level will be almost 10% lower that what was planned for 2009, and down 10% to 15% from what was planned for 2010.

Adkerson said Freeport remains confident over the long-term prospects for the sector due to demand from China and other developing nations, while prices are expected to rebound when developed economies recover.

China has been buying copper for its infrastructure development, in addition to replenishing strategic reserves. Tight world supplies of scrap copper have also led China to purchase more cathode copper.

Strong copper demand isn't expected to return until developed economies start their recovery. Until that happens, Adkerson said, "It'll require a lot of thought" before Freeport returns to a capacity-expansion phase.

Meantime, tight liquidity and credit conditions due to the economic crisis could discourage major acquisitions in the industry, Adkerson said, adding that Freeport isn't eyeing any purchases at present. "(The company) is focusing on internal growth...and has no plans to sell assets, nor buy any...but is always alert to potential opportunities," he said.

Speculation has been rife that the copper-price volatility would spur a wave of mergers and acquisitions as companies with healthy reserve levels take advantage of the opportunity posed by companies struggling with high debt levels and low metal prices.

Freeport will keep its focus on its copper business, the CEO said, in view of the metal's long-term potential and its many industrial uses, as well as increased investment demand for energy-saving vehicles such as electric cars that require significant copper use.

-By Shane Romig, Dow Jones Newswires; 54-11-4590-2438; [e-mail]