Heather Draper, Denver – Freeport-McMoRan Copper & Gold Inc. (FCX) isn't concerned about its operations in Indonesia, despite the arrest there last week of executives from rival Newmont Mining Corp. (NEM) on pollution allegations.
"We have established environmental programs in place," Freeport-McMoRan Chief Financial Officer Kathleen Quirk told Dow Jones Newswires on the sidelines of the Denver Gold Forum on Monday. "We don't alter the ore chemically – we don't use mercury or cyanide."
Freeport-McMoRan operates the giant Grasberg copper and gold mine in the politically and environmentally sensitive Papua region of Indonesia.
Five Newmont executives were detained Wednesday, accused of polluting a bay on the island of Sulawesi with mercury and arsenic-laced waste.
Quirk said Freeport is also not concerned about expected governmental changes in Indonesia after last week's presidential elections. Former general Susilo Bambang Yudhoyono appears to have won the September 20 election, but has declined to formally claim victory until October 5, when official results are released.
"We're confident we'll be able to operate under a new government," Quirk said.
The Newmont executives' detention has exacerbated foreign investors' fears about Indonesia, which has long struggled to attract investment because of ongoing social and political unrest there.
Freeport officials have said that investor fears over its large presence in Indonesia have kept its share price undervalued compared with its peers, even in a time of high copper and gold prices.
Freeport CFO Quirk told participants at the Denver conference – an invitation-only forum for 450 fund managers, analysts and mining executives - that the company estimates its share price at around $40 is undervalued by anywhere from $4 to $19, depending on which valuation method used.
She said the company is "very optimistic" about its financial strength for the remainder of this year and for 2005 because of its strong production levels and historically high copper and gold prices.
"We expect a very strong fourth quarter and full-year 2005," Quirk said. Copper prices at over $1.35 a pound are up 70% from a year ago, she said, and gold at about $410 a troy ounce is up about $19, or 5%, from a year ago and more than 40% from September 2001. Copper makes up about 60% of Freeport's revenue, with gold comprising the remaining 40%, Quirk said.
Freeport's Grasberg operations in Indonesia were disrupted in the fourth quarter of 2003 because the walls of its open pit mine there began slipping. But the company resumed normal operations in June and is now operating its mills at their full capacity, Quirk said.