Freeport Q3 production and sales drop

By Peni Pedriawan

TSX-listed Freeport-McMoRan Copper & Gold Inc.(FCX) recently stated that Q3 sales from its 90.64 percent owned and wholly consolidated subsidiary PT Freeport Indonesia, operating the world's largest copper and gold mine in terms of reserves in Grasberg, Papua, has dropped significantly.

"Indonesia's third-quarter 2012 copper sales of 195 million pounds and gold sales of 178 thousand ounces were lower than third-quarter 2011 copper sales of 253 million pounds and gold sales of 384 thousand ounces, primarily reflecting anticipated lower ore grades. Third-quarter 2012 sales volumes for copper were similar to the July estimates, but gold volumes were approximately 10 percent below the July estimates because of changes to mine plans that delayed access to higher grade material, and a slower than expected ramp-up at the DOZ underground mine," the company said in a statement.

The DOZ mine averaged 48,300 metric tons of ore per day in third-quarter 2012 and is expected to ramp up to 80,000 metric tons of ore per day in 2013. A large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit, it is expected to ramp up over several years to approximately 240,000 metric tons of ore per day following the anticipated transition from Grasberg in 2016.

"Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $700 million per year, $550 million per year net to PT Freeport Indonesia," it said.

The high-grade Big Gossan underground mine, which began producing in fourth-quarter 2010, averaged 1,900 metric tons of ore per day in third-quarter 2012. Full rates of 7,000 metric tons of ore per day are expected in 2014.

FCX expects sales from Indonesia to approximate 0.7 billion pounds of copper and 0.9 million ounces of gold for the year 2012, compared with 846 million pounds of copper and 1.3 million ounces of gold for the year 2011.

Freeport's current sales estimates for 2012 are approximately 40 million pounds of copper and 45,000 ounces of gold lower than the July estimates because of mine plan changes in the Grasberg open pit, which delayed access to higher grade material, and a slower ramp-up of the DOZ mine.

FCX expects sales from Indonesia to increase in the second half of 2013 as PT Freeport Indonesia gains access to higher ore grades.

Indonesia's unit net cash costs (including gold and silver credits) of $1.65 per pound of copper in third-quarter 2012 were significantly higher than unit net cash credits of $0.48 per pound in third-quarter 2011 primarily reflecting lower sales volumes.

"FCX estimates Indonesia's average unit net cash costs (net of gold and silver credits) would approximate $1.34 per pound of copper for the year 2012, based on current sales volume and cost estimates and assuming an average gold price of $1,700 per ounce for fourth-quarter 2012," it predicted, adding that RI's unit net cash costs for 2012 would change by approximately $0.02 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 2012.

"Assuming consistent commodity price assumptions, Indonesia's unit net cash costs for future periods are expected to be lower than 2012."

Following is summary consolidated operating data for the Indonesia mining operations for the third quarters and first nine months of 2012 and 2011:

Indonesian Mining Operations	Three Months Ended September 30
	2012	2011
Copper (million of recoverable pounds):
Production	199	233
Sales	195	253
Average realized price per pound	$ 3.72	$ 3.29
Gold (thousands of recoverable ounces):		?
Production	182	357
Sales	178	384
Average realized price per ounce	$ 1,728	$ 1,695
Unit net cash (credits) costs per pound of copper:	?	?
Site production and delivery, excluding adjustments	$ 2.96	$ 1.98
Gold and silver credits	(1.66 )	(2.80 )
Treatment charges	0.22	0.18
Royalties	0.13	0.16
Unit net cash (credits) costs (*)	$ 1.65	$ (0.48 )
* For a reconciliation of unit net cash costs (credits) per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VI, which is available on FCX's website, "www.fcx.com."

Editing by Er Audy Zandri