Freeport’s Cerro Verde Mine Set to Raise Output by 45%

Freeport McMoran Copper’s (NYSE:FCX) is looking forward to increase output from its $3.5 billion open-pit copper and molybdenum mining complex Cerro Verde by 45%. ^[1] The annual output of the mine is set to reach 1 billion pounds of copper. Freeport McMoran Copper has extensive copper mining and smelting operations in North and South America, Indonesia and Africa. The company competes with other miners such as Southern Copper (NYSE:PCU), Codelco and Newmont Mining (NYSE:NEM).

We currently have a Trefis price estimate of $57.60 for Freeport McMoran Copper’s stock, which is about 30% above the current market price.

Cerro Verde is an open pit copper  and molybednum mining complex in Peru. The company had undertaken a feasibility study for a large scale ore concentrator expansion, which was supposed to be completed by the second quarter 2011. The company now plans to expand the ore processing capacity from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day. The project is expected to completed by 2016 with the total capacity from the facility adding up to 1 billion pounds of copper annually.

Copper is an under-supplied commodity and its high demand from the growing Asian countries, especially China, which has led to the run up in prices in the past few years. Freeport plans to increase the production capacity across all its mines to cash in on the high market prices for the metal. As per our estimates, an incremental 600 million pounds from the Cerro Verde mines will result in approximately $2.5 billion in annual revenues for the company. We forecast that Freeport’s copper output for 2016 will be close to 1.8 billion pounds.

See our complete analysis for Freeport’s stock here.

1. FCX’s Cerro Verde To Raise Output, Dailymarkets [↩]