Freeport McMoRan Inc, the world’s largest publicly traded copper producer, said on Friday it would cut its 2020 costs by 18 percent, or $1.3 billion, as prices for the red metal plunge due to the global spread of covid-19.
The cost cuts involve employee layoffs, delays to expansion projects and output reductions of about 400 million pounds of copper, mostly in the company’s Americas mines. The cuts also take into account a 50 percent drop in diesel prices so far this year.
The red metal is widely seen as a key barometer of economic health in part due to its use in manufacturing, which has slowed dramatically during the pandemic. Copper prices are down about 20 percent in the past year.
“What this plan will do is carry us over to brighter days for our company,” Chief Executive Richard Adkerson said on a Friday conference call with investors.
The company said the moves should help it end the year with $1.7 billion in cash if 2020 copper prices average $2.30/lb. Prices traded near $2.33/lb on Friday.
Freeport also produces gold, and prices for the yellow metal have risen about 37 percent in the past year amid the economic uncertainty, partly undergirding the cash forecast.
Shares of the Phoenix-based company rose 6 percent to $8.28 in midday Friday trading.
The company said it would also reduce 2020 capital spending by $800 million, as well as cut employee benefits and vendor services.
The miner last month suspended its quarterly dividend due to the covid-19 fallout. Adkerson said on Friday the dividend could return once market conditions improve.
Less than 50 Freeport employees have tested positive for covid-19, Adkerson said, though the company has closed a New Mexico mine due to an outbreak.
Supplies of food and other supplies at the Freeport-operated Grasberg mine – one of the world’s largest mines – in a rural part of Indonesia have not been affected by covid-19, the company said.
“Our testing and screening activities in one of the most remote places in the world are much more advanced than much of what we’re seeing today in communities in the United States,” Adkerson said.
Freeport posted an adjusted loss of 17 cents per share, while analysts expected a loss of 18 cents per share, according to IBES data from Refinitiv.
(By Ernest Scheyder and Arundhati Sarkar; Editing by Vinay Dwivedi and Jonathan Oatis)