By Jim Jelter

SAN FRANCISCO (Dow Jones) - Freeport McMoRan Copper & Gold Inc. reported Monday a fourth-quarter loss, reflecting the downward spiral in metals prices and hefty writedowns of its inventory and assets.

But the stock rallied as much as 12% in early trade as investors looked past the writedowns and other one-time charges to focus on a surprise profit from its ongoing operations, which show the company is making headway balancing costs and output to reflect the much weaker global marketplace.

For the three months ended Dec. 31, Phoenix-based Freeport (FCX) reported a loss of $13.9 billion, or $36.78 a share. It posted a net profit of $414 million, or $1.05 a share, a year earlier.

The results were weighed down by special items totaling $14 billion, or $36.84 per share. Excluding those items, the company would have reported a profit of $23 million, or 6 cents a share.

Analysts polled by FactSet had expected Freeport company to post a loss of 94 cents a share on $3.28 billion in revenue. Their estimates typically exclude one-time items.

The $14 billion worth of writedowns include marking down the value of the company's existing inventories, some of its long-lived assets, and goodwill tied to its 2007 acquisition of copper miner Phelps Dodge.

Fourth-quarter sales were down sharply at $2.07 billion, half of the $4.18 billion it reported a year ago and less than the $3.28 billion analysts had been looking for.

Behind the drop is a sharp fall in metals prices. Copper prices fell to a four-year low in December of $1.26 a pound on the London Metals Exchange. Copper had traded as high as $4 a pound earlier in the year, and averaged $3.61 a pound on the LME for the first three quarters of 2008.

The steep drop in commodity prices prompted Freeport to suspend its dividend in December. At the same time, the company announced plans to slow copper production and cut capital spending to bring its operations more closely in line with a much weaker marketplace.

"We are taking decisive actions to respond to the currently weak global economic conditions so that our company is positioned to operate on a lean, efficient and low cost basis while preserving our valuable resources and growth opportunities for the future," President and Chief Executive Richard Adkerson said in a statement accompanying the results.

The company said that because of slumping demand and its own production cutbacks, it expects to sell 3.9 billion pounds of copper in 2009, or 9% less than it estimated in October, while it sees molybdenum sales falling to 60 million pound this year, down 25% from October estimates.

Gold sales, on the other hand, are not likely to feel the impact of production cuts, and are expected to average about 2.2 million ounces in 2009 and 2010, the company said.

Freeport shares were last trading at $25.46, up 11.4% from Friday. They are down about 37% from their 52-week highs in May and down 70% from where they were trading a year ago.

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