Freeport-mcmoran said late Sunday that it had to cut its copper sales forecast for the first quarter of this year after flooding caused by heavy rains over the weekend shut down production at its Grasberg mine in Indonesia.
Located in Indonesia's easternmost province of Papua, Grasberg is the world's largest gold mine and second largest copper mine, typically producing close to 5m pounds of copper and 5,000 ounces of gold a day.
While there were no injuries, the mudslide damaged the Grasberg concentrate processing plant and part of the road leading to the mine, forcing the suspension of mining and mineral processing activities, and the mine is not expected to resume production before the end of the month, according to Freeport.
Freeport now expects its first-quarter sales to be lower than the 900 million pounds of copper and 300, 000 ounces of gold it forecast in January, but did not give a firm forecast.
Jefferies analyst Chris LaFemina said the Grasberg plant would be shut down for at least four weeks due to flooding, and he cut his first-quarter earnings estimate for Freeport to 9 percent, to 4 cents a share.
"This does not materially impact Freeport's investment case, but it does highlight the many operational risks that exist in the mining industry, from which even the best operators are not immune," LaFemina said ina note to clients.
Mining activity is key to keeping global copper supplies stable, and the temporary shutdown at the Grasberg gold mine is the latest to disrupt stable production in the industry.
The global copper supply picture was already grim because of the political turmoil in Peru, the world's second-largest producer of copper, accounting for about 10% of global supply, and a major exporter of zinc and silver.
Peru has been rocked by anti-government protests since the ouster of leftist President Castillo on December 7. Highways have been blocked across the country's copper-rich south, threatening production and transport of the metal.
Jefferies warned in previous reports that about 30 per cent of Peru's copper supply was at risk because of the unrest, putting upward pressure on prices.
