Last week, Freeport-McMoRan reported Q4 and full-year 2012 results. Click to view the release and the slides.

The company beat analyst estimates of $0.70 per share with $0.78 per share in earnings.

Not a bad quarter, and future prospects look pretty good. The company spent 2012 going through some lower-ore grade areas in the Grasberg (Indonesia) open pit mine, so production wasn't up to the company's usual standards, but that's going to change as it starts digging through some higher-grade ore areas over the next few years. That should increase copper and gold production at the Grasberg by more than 50% for copper and about 30% for gold, which will give a nice boost to sales and cash flow over the next few years.

Part of the benefit from this plan will be declining costs per pound produced, as more metal is produced from the same amount of ore removed. In fact, beginning next year, the net cost per pound out of Grasberg should be negative (that is, FCX gets more from selling the gold that's also mined than it costs to mine the gold plus copper).

The plans for shifting to 100% underground mining at Grasberg should start ramping up over the next few years, while the open pit is scheduled to be finished in 2016. It's just too deep and steep to go further, at that point.

The company's also been spending quite a bit in order to increase production at many of its other mines, which should help matters going forward, as well.

Looking at the market, increased auto manufacturing and home construction in the U.S. is increasing demand; there are indications that utilities are going to be working on their grids as well, attending to all the stuff that needs to be replaced from the effects of Hurricane Sandy. Europe, on the other hand, is still slow, but China, management says, is picking up again. While all this doesn't necessarily mean higher prices for copper, it should bode well for copper prices and not let the price drop too much further.

Another interesting thing of note is that most of the current capex is going to be dropping off over the next few years, so as mining volumes ramp up, capex will drop as projects finish. That's going to leave a lot of cash to reinvest elsewhere, and might be part of the reason why, I believe, the company decided to go ahead with the acquisition of the two oil exploration companies. Management said those companies throw off enough operating cash flow to fund capex, but having the additional resources of the copper mining side won't hurt.

I'm still not too happy with the purchase of McMoRan Exploration and Plains Exploration & Production. The justification of diversifying into another commodity sounds good, but the board overlap between the Freeport-McMoRan and McMoRan Exploration companies makes me think the decision wasn't 100% clean. Further, this exposes the company to the huge natural gas production area that is flooding the market right now and, until use dramatically picks up, is likely to cause natural gas to remain at very cheap levels. Deep sea oil exploration is fine, but I hope the company won't continue to pour resources down the bad well at Davy Jones that McMoRan Exploration was having so much difficulty with.

At the time of publication, Jim Mueller owned shares of Freeport-McMoRan Copper & Gold. The Motley Fool also owns shares. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.