FCX Freeport McMoRan Inc

By Chelsey Dulaney and John W. Miller 

Freeport-McMoRan Inc. on Thursday announced sweeping cuts to capital spending, copper production and employees at its U.S. mines as copper prices near six-year lows.

The reductions, which could include eliminating around 1,560 jobs, come after the Phoenix-based miner cut its oil-and-gas spending plans earlier this month and said it would review its mining operations.

Freeport, which has been struggling with the effect of weak commodity prices, said it now expects capital spending of $4 billion next year, down 29% from its July estimate of $5.6 billion.

It also said it would cut planned 2016 copper production by 150 million pounds, or by 2.8% of the 5.4 billion pounds it had forecast. The earlier 2016 forecast represented a 29% increase in production from current levels.

Like many mining companies, Freeport has suffered from a perception by investors that it had overextended itself in reacting to the commodity boom. But on Thursday, its moves were bold enough to push shares, which had plummeted 66% this year, up more than 25% in afternoon trading on the New York Stock Exchange.

The retrenchment by Freeport, which mines copper in Arizona, Latin America, Indonesia and the Democratic Republic of Congo, is significant because the company had taken one of the mining world's most bullish stances on the metal, used in pipes and wiring.

However, Freeport said on Thursday it was time to "respond aggressively to current market conditions." Copper prices are currently averaging $2.25 per pound, 27% lower than last year, and "near a six-year low," the company said.

At that level, spending would come in far below the $6.3 billion in expenditures Freeport is estimating for this year. Freeport has already pared its 2015 capital budget by about 16% since late 2014.

The 2016 forecasts include a 25% cut to mining spending and reductions in copper sales and site production, including a suspension of operations at its Miami, Ariz., mine and reductions at its Tyrone, N.M., mine.

Freeport said it expects a 10% reduction in employees and contractors at U.S. mining operations. As of Dec. 31, 2014, Freeport employed 13,200 people, along with 3,400 contractors, at its U.S. operations, according to securities filings.

The company cited recent declines in copper prices, which are nearing six-year lows, for the cuts. Freeport said it still has a positive outlook on its business, helped by limitations on copper supply.

Freeport earlier this month cut its oil-and-gas capital spending views for 2016 and 2017 by $900 million to $2 billion a year. The company maintained its expectation for $2.8 billion in spending for this year. Freeport said it also would look for strategic investors to help fund development at oil-and-gas and mining properties.

In July, after reporting its second straight quarterly loss, the company had said it was prepared to scale back operations if commodity prices didn't recover

A downturn in commodity prices has hit miners across the board. But Freeport is relatively fortunate to be mining copper and not iron ore, the key ingredient in steelmaking, which is far more oversupplied. And Freeport has managed to keep costs at most of its mines far below current copper prices, helped by lower oil prices, the strong dollar and mining in developing countries.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and John W. Miller at john.miller@wsj.com

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(END) Dow Jones Newswires

August 27, 2015 16:31 ET (20:31 GMT)

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