Mine Employees Take Cuts in Leadville Today
As the Coronavirus snakes its way across the globe, financial markets respond causing the deadly virus to strike at the economic heart of Lake County, once again.
In a press release distributed Friday morning, April 24, Freeport-McMoRan Inc. (NYSE: FCX) announced that its first-quarter 2020 financial results have prompted a revision in their operating plans. The publicly-traded company, which owns and operates the Climax Mine atop Fremont Pass on Highway 91, states that the re-direct was in response to the global COVID-19 pandemic and the negative impact the disease was having on the global economy.
At the risk of being lost in translation, the statement means two things for Lake County:
Employee Impact: Leadville Today heard from inside sources this week that Climax Mine employees were being switched to a 7-days-on-7-days-off work schedule, ultimately cutting their hours in half. Last December, in an interview with Leadville Today, the External Communications Manager for Freeport-McMoRan, Jim Telle, was able to confirm two things from the local employer: Climax employee headcount as of December 2019 was 440 and that the (updated) projected life of the mine is 2038 (year). After Friday’s news was released to the public, LT reached out to Telle for clarification on how the company’s revision would impact the Climax Mine workers. Here’s his answer:
In response to global market conditions, Freeport-McMoRan intends to reduce production from the Climax open-pit mine by approximately 50 percent for the remainder of 2020. The Climax mine produced 17 million pounds of molybdenum in 2019. Revised operating plans for the molybdenum business also include reductions in operating costs, administrative and centralized support costs, capital spending, and implementation of a two-crew mill production schedule.
It’s worth noting that earlier this month Freeport McMoRan reported that they had suspended operations at its Chino copper mine in New Mexico because of the spread of COVID-19 among a limited number of employees. While medical confidentiality under HIPAA (Health Insurance Portability and Accountability Act of 1996) guidelines protects patients’ privacy and identity, in the press release the company reported, “FCX’s protocols have been effective in mitigating and preventing a major outbreak of COVID-19 at its operating sites. As the COVID-19 pandemic and related effects continue to evolve rapidly worldwide, FCX will continue to monitor, assess and update its COVID-19 related response, as needed.”
While safety and schedules are top priorities for staffing concerns, for present and former Climax employees whose benefit package or investment strategies include the lofty NYSE-FCX, from a portfolio point of view CEO Richard C. Adkerson reassured investors with the following message:
“Our team has substantial experience in successfully executing under volatile market conditions. I am confident that we will overcome the current challenges and ‘prove our mettle’ as we have effectively done in previous periods of economic weakness. We continue to achieve important progress in establishing large-scale, low-cost copper and gold production from our underground ore bodies at Grasberg and advance initiatives in the Americas to position FCX for significant increases in cash flows in 2021 and beyond.”
So as the people and portfolio parts of the equation continue to unfold, the property tax portion of Freeport’s new operating plan may prove to have a bigger impact on local businesses and residents who have already been under the burdensome yoke of re-assessed property values which went into effect on January 1. Those hefty bills which sent shockwaves through the Leadville business community earlier this year have now intersected with the Coronavirus creating an economic storm with some sizeable thunderheads. Climax’s 50% reduction in operations has now thrown a bit of lightning into the mix.
Property Tax: The valuation and assessment of mining properties for property tax purposes represent a complex and sometimes controversial challenge to county assessors. But make no doubt about the fact that the mining company’s new operating protocols will directly impact Lake County’s budget with a reduction in tax payments that some local analysts calculate to be nearly proportionate to their new production level, which has been cut in half.
As one of the biggest contributors to Lake County’s property tax pot, the Climax mine and its operations are directly tied to every Lake County resident’s bank account. As their operations take a downshift, so will their taxes. And what goes down on one end, will likely go up on the other, most likely, YOUR taxes. Freeport-McMoRan’s announcement is a significant event in Lake County and another example of the Coronavirus impact. It’s news that could move the notch on local budgetary belts back to the haunting, hollowed-out days of the early 1990s as revenue streams for local governments begin to see immediate flow reduction on several fronts. Certainly, there are some tough decisions ahead for Leadville and Lake County.
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Market Analysis. For more detailed market analysis, LT turns to the experts at Seeking Alpha, who continue to provide solid data about how the decisions made at Freeport-McMoRan ultimately trickle down to the Climax Mine and eventually historic Harrison Avenue. Here’s a portion of Friday’s report from Vladimir Zernov
“My main worry is the speed of the recent market rally which was based on monetary stimulus and expectations of the quick end to lockdown measures. However, it is already clear that economies will have to reopen in a gradual, careful fashion, and nobody can guarantee that the virus will not return during the next flu season which starts in autumn. Meanwhile, the market will have to deal with continuous bad economic data especially in the service – rich Western economies whose structure makes them more vulnerable to the shock from “stay-at-home” orders.”
But for now, that’s the latest business news from Leadville Today where everyone is being required to prove your mettle: to prove that one has endurance and strength of character, or the necessary skills, abilities, or traits to succeed in something.