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Metal rout forces copper major to slump  
 
FREEPORT-MCMORAN Copper & Gold Inc, the best-performing stock among North American mining companies in 2007, turned into the worst this year. Analysts say the company may not fare much better in 2009 as copper prices slump.

Freeport, the world's second-largest copper producer has fallen 79 percent, the biggest loss in the 16-member Philadelphia Gold & Silver Index and the steepest decline since the shares started trading in 1996, as copper tumbled 58 percent in New York Mercantile Exchange trading.

Chief Executive Officer Richard Adkerson spent much of 2008 planning to expand until the rout in metals forced cuts in output and jobs and halted dividend payments and share buybacks.

Freeport may have to make more cuts next year unless copper recovers because production costs are higher than metal prices for much of its North American operations, according to company data.

"Credit is still dead, inventories are still piling up and there's no demand to build anything," Chris Wang, co-founder of SYW Capital Management LLC in New York, said in an interview. "They've got to cut more at the operations and lay off people."Freeport produces two-thirds of its United States output at a cash cost of US$1.40 to US$1.60 a pound, the company said earlier this month. That means mines expected to yield 1.3 billion pounds of the metal next year, or almost a third of total output, are unprofitable at current prices.

Freeport fell 16 cents, or 0.7 percent, to US$21.57 in New York Stock Exchange trading on Wednesday.

Wang, who manages US$52 million, profited as Freeport declined because he has a short position in the stock. Short sellers borrow shares and sell them, hoping to profit by replacing the stock at lower prices. Freeport is expected to earn 44 cents a share in 2009, the average estimate of 15 analysts surveyed by Bloomberg.

Adkerson, 61, said he realized in mid-October that demand for the metal used in pipes and wires wouldn't recover soon and told managers to pare unprofitable output and costs.

"It was like driving a race car down a track as fast as you can go, coming up on a very sharp curve unexpectedly and hitting the brakes, gearing down and keeping the car on the road," Adkerson said in an interview. "We had to make changes so quickly."