By John W. Miller And Chelsey Dulaney 

U.S. copper miner Freeport-McMoRan Inc. reported a steep fourth-quarter loss Tuesday and reneged on a previous debt-reduction target because of falling commodity prices, but it predicted a strong rebound in copper markets after 2015.

The Phoenix-based company, which controls almost 10% of global production, said it would ramp up copper output by 26% next year. It also said it would respond to lower oil prices by curbing spending on oil-and-gas projects in its recently expanded energy business.

Freeport posted a loss of $2.85 billion, or $2.75 a share, compared with a profit of $707 million, or 68 cents a share, a year earlier. The quarter included $3.1 billion in net charges, mainly on the impairment of its oil and gas properties. Revenue fell 11% to $5.24 billion.

Despite the recent expansion into oil and gas, Freeport is still focused on copper, deriving more than 60% of its revenue from the metal, which is used for pipes and wiring and is essential to almost all economic growth.

Copper markets sagged in the fourth quarter on sluggish global demand. The average price Freeport charges customers fell 10.9% to $2.95 a pound. Oil prices sank 15.8% from a year earlier.

Chief Executive Richard Adkerson compared the current commodity-market swings to those seen in the depths of the global recession in late 2008. However, "the long-term fundamentals" of copper are strong, he said, adding that Freeport's strength is its long-term reserves. As prices go up, these will kick into high gear, generating cash flows, he said. Freeport expects to produce 5.4 billion pounds in 2016, up from 4.3 billion pounds this year.

Mr. Adkerson said that, with uncertain markets, 2015 would be a year of some adjustments. Freeport has cut its 2015 capital budget by $2 billion, mostly oil and gas related, and said it is prepared to make further cuts. The company said it is searching for outside funding for its oil and gas business as it looks to shield itself from plummeting commodity prices.

The company expanded into oil and gas with 2013 acquisitions of energy explorers McMoRan Exploration and Plains Exploration Production, in deals valued at $9 billion.

Those transactions helped inflate Freeport's debt to $19 billion at the end of 2014. The company had set a debt target of $12 billion by the end of 2016. With commodity prices at current levels, that target was now unrealistic, Mr. Adkerson said.

Lower energy prices do have one big benefit: restraining costs. Freeport said its average unit cash cost for producing copper will increase only 2 cents to $1.53 per pound this year.

Copper demand should increase 28% in the next 10 years, while production at existing mines will fall 17%, creating a need for new sources of supply, Mr. Adkerson said, citing a recent study by WoodMackenzie.

One analyst called that demand scenario too optimistic and said it would depend on growth of Chinese demand as the country transitions to a more consumption-oriented economic model. Freeport is counting on Chinese demand for copper to grow around 5%, while it could be in the low single digits, said Dan Rohr of Morningstar Inc.

Another risk for Freeport is that its two lowest cash-cost mines are in politically volatile countries--Indonesia and the Democratic Republic of Congo. In Indonesia, last year, Freeport battled with the government over export taxes. To resolve the issue, the company had to agree to help build a $2.3 billion smelter and sell a 20% stake in its local subsidiary. In the war-torn DRC, output at Freeport's Tenke Fungurume copper mine now makes up around 10% of the company's total production.

Write to John W. Miller at john.miller@wsj.com and Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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