Freeport-McMoRan’s Q3 2016 Earnings Review: Decline In Unit Costs Boosts Earnings As Company Prioritizes Cost And Debt Reduction

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Freeport-McMoRan reported an improvement in its Q3 earnings, with higher copper production volumes and the company’s cost reduction initiatives translating into lower unit costs and higher profits. Higher production volumes from the expanded Cerro Verde mine drove a 23% year-over-year increase in the company’s shipments, with economies of scale and the company’s cost reduction initiatives driving down unit costs by 25% year-over-year. [1] In the prevailing environment of subdued copper and oil prices, cost reduction has been the major focus area for Freeport, with the company expecting unit cash costs for copper production to decline by 22% year-over-year for the full year 2016. [1] Moreover, lower oil prices adversely impacted the results of the company’s Oil and Gas division. The company has already signed agreements for the sale of its Onshore California and Deepwater Gulf of Mexico oil and gas assets, with the proceeds of both these transactions earmarked for debt reduction. Going forward, given the unfavorable prevailing commodity pricing environment, debt reduction and cost reduction will continue to remain key focus areas for Freeport in the near term.

FCX Q3 2016 Earnings

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Freeport-McMoRan

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Notes:
  1. Freeport-McMoRan’s Q3 2016 Earnings Release, Freeport-McMoRan News Release [] []