Freeport-McMoRan cuts molybdenum productionby Sandy Shore on Nov. 10, 2008, under Edge
DENVER – Freeport-McMoran Copper & Gold Inc. said Monday it would cut molybdenum production and lay off 14 percent of its work force at a Colorado mine, citing a 60 percent drop in price and slowing global economic conditions.
The world’s largest publicly traded copper producer also said it would delay the long-planned restart of a molybdenum mine near Leadville, Colo., and re-evaluate molybdenum produced as a byproduct at its other mines.
About 100 full-time workers at the Henderson mine west of Denver will be laid off as a result of the changes but no information was available about when that would occur, company spokesman Eric Kinneberg said. The mine had 700 employees, all non-union, at the start of the month.
Contractors also will be affected although Kinneberg had no details about how that would take effect.
Molybdenum, a metal used in strengthening steel and some chemical businesses, has enjoyed a strong market recently but the price has fallen significantly due to slowing global demand, the credit crisis and tumultuous financial markets, Phoenix-based Freeport-McMoRan said.
The price averaged $30 a pound last year and about $33 a pound in the first nine months of the year. However, since mid-October, the price has fallen from $30 a pound to $12 a pound as of Monday, the company said, citing the Metals Week Molybdenum Dealer Oxide price.
Argus Research analyst Bill Selesky said the announcement is a ripple effect of slowdowns in the steel industry. “All of it is in response to the global economic slowdown based off steel demand,” he said.
The company likely will see an impact on earnings from the announcement, Selesky said.
The 25 percent production cut will equal about 10 million pounds at the Henderson underground mine near Empire, about 40 miles west of Denver. The Climax mine, which had been expected to begin operations in 2010, will be put on hold.
In a statement, the company said it expects to restart the mine at some point. “Once a decision is made to resume construction activities, the project would be capable of starting up within a 12-18 month timeframe.”
Shares of Freeport-McMoRan rose $1.28, or 4.7 percent, to $28.38 in midday trading.