U.S. producer Freeport McMoRan Copper and Gold Inc. (FCX) is taking further steps to cope with the deteriorating economic backdrop and will reduce output further at its North American operations, the company said Monday.

The reduction, which will reduce mining and crushed leach rates by a further 25% at its Morenci copper mine in Arizona, will result in a reduction in the quantity sold in 2009 to 3.9 billion pounds.

This is 9% down from 4.3 billion lbs that had been expected in October, which was revised in December to 4 billion lbs.

A further reduction in sales is expected in 2010, with Freeport cutting its forecast by a massive 17% to 3.8 billion lbs from October expectations of 4.6 billion lbs.

The cuts and revised sales estimates build on plans announced in several stages during the fourth quarter of 2008, and are expected to reduce unit site production and delivery costs by 26% compared with 2008.

The deferral of development projects and cancellation of equipment orders is expected to reduce or eliminate some $1 billion of 2009 capital expenditures.

The Tenke Fungurume copper-cobalt mine in Congo has still escaped a delay to its planned startup in the second half of 2009, but Freeport said it is continuing to assess capital costs and the timing of expenditures. Tenke is a joint venture with the Lundin Mining Corp. (LMC) and the government of Congo, through Gecamines.

Freeport has already said it is implementing a 50% reduction in the mining and stacking rates at the newly commissioned Safford mine in Arizona. The company has also reduced the mining rate at its Tyrone mine in New Mexico by around 50% and suspended mining and milling activities at the Chino mine in New Mexico.

In Peru, the company has deferred the planned incremental expansion at the copper concentrator for its Cerro Verde operation and will delay the sulfide expansion project at El Abra in Chile. In Indonesia, Freeport said it will mine high grade ores at its Grasberg mine and won't make changes to production plans for 2009.

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@dowjones.com

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