Freeport expects higher copper, gold sales from RI unit
Wednesday, January 27 2016 - 04:24 AM WIB
US-based Freeport McMoRan Copper & Gold Inc said that copper sales from its Indonesian subsidiary PT Freeport Indonesia (PTFI) this year is expected to jump to 1.5 billion pounds from 744 million pounds last year.
The company said in a statement Monday that gold sales from its Grasberg mine in Indonesia?s Papua province for this year is projected to increase to 1.8 million ounces from 1.22 million ounces last year.
?Sales from Indonesia mining are expected to approximate 1.5 billion pounds of copper and 1.8 million ounces of gold for the year 2016, with approximately 65 percent of copper sales and 75 percent of gold sales anticipated in the second half of the year,?the statement said.
PTFI is currently seeking extension of its six-month export permit, which expires on January 28. But as of Tuesday, the company has yet to fulfill a key requirement set by the Indonesian government for the approval of the export permit extension, Director General of Mineral and Coal Bambang Gatot Ariyono said.
Minister of Energy and Mineral Resources Sudirman Said has requested PTFI to deposit another US$530 million funds in an escrow account as proof of its commitment to develop the required US$2.3 billion copper smelter in Gresik, East Java. The company last year put down a $115 million deposit.
Elsewhere, Freeport reported Indonesia's fourth-quarter 2015 sales of 195 million pounds of copper were higher than fourth-quarter 2014 copper sales of 180 million pounds, reflecting higher operating rates. Indonesia's fourth-quarter 2015 sales of 333 thousand ounces of gold were lower than fourth-quarter 2014 gold sales of 366 thousand ounces, primarily reflecting lower ore grades.
The company said that at the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold. PTFI expects ore grades to improve significantly beginning in the second half of 2016 with access to higher grade sections of the Grasberg open pit, resulting in higher production and lower unit net cash costs.
A significant portion of PTFI's costs are fixed and unit costs vary depending on production volumes. Indonesia's unit net cash costs (including gold and silver credits) of $1.09 per pound of copper in fourth-quarter 2015 were higher than unit net cash costs of $0.58 per pound in fourth-quarter 2014, primarily reflecting lower gold and silver credits.
Unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.17 per pound of copper for the year 2016, based on current sales volume and cost estimates, and assuming an average gold price of $1,100 per ounce. Indonesia mining's unit net cash costs for the year 2016 would change by approximately $0.06 per pound for each $50 per ounce change in the average price of gold. Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on copper and gold volumes. As a result, unit net cash costs in the first half of 2016 are expected to be significantly higher than unit net cash costs in the second half of the year.
In December 2015, PTFI concluded its agreement with union officials for the biennial Collective Labor Agreement for the period from September 2015 to September 2017, Freeport said.
Following is summary consolidated operating data for the Indonesia mining operations for the fourth quarters and years ended 2015 and 2014:
| Indonesian Mining Operations | Three Months Ended December 31 |
Years Ended December 31 |
||
| 2015 | 2014 | 2015 | 2014 | |
| Copper (million of recoverable pounds): | ||||
| Production | 201 | 171 | 752 | 636 |
| Sales | 195 | 180 | 744 | 664 |
| Average realized price per pound | $ 2.14 | $ 2.86 | $ 2.33 | $ 3.01 |
| Gold (thousands of recoverable ounces): | ||||
| Production | 345 | 354 | 1,232 | 1,130 |
| Sales | 333 | 366 | 1,224 | 1,168 |
| Average realized price per ounce | $ 1,066 | $ 1,192 | $ 1,129 | $ 1,229 |
| Unit net cash costs per pound of coppera | ||||
| Site production and delivery, excluding adjustments | $ 2.40 | $ 2.37 | $ 2.39 | $ 2.76b |
| Gold and silver credits | (1.87 ) | (2.46 ) | (1.91 ) | (2.25 ) |
| Treatment charges | 0.31 | 0.27 | 0.31 | 0.26 |
| Export duties | 0.10 | 0.20 | 0.15 | 0.12 |
| Royalty on metalsc | 0.15 | 0.20 | 0.15 | 0.17 |
| Unit net cash (credits) costs | $ 1.09 | $ 0.58 | $ 1.09 | $ 1.06 |
| a. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com." | ||||
| b. The year 2014 excludes fixed costs totaling $0.22 per pound of copper charged directly to cost of sales as a result of the impact of export restrictions on PT-FI's operating rates. | ||||
| c. Includes $0.06 per pound for both the fourth quarter and year 2015, $0.08 per pound in fourth- quarter 2014 and $0.05 per pound for the year 2014, associated with PT-FI's increased royalty rates. | ||||
Editing by Reiner Simanjuntak