Freeport reports higher 3Q copper, gold sales

By Romel S. Gurky

Gold and copper giant PT Freeport Indonesia (PT-FI) saw higher copper and gold sales during the third quarter (3Q) of this year, its parent US-based Freeport McMoRan Copper & Gold Inc said in a statement on Tuesday.

The company said that Indonesia's consolidated copper sales totaled 332 million pounds in third-quarter 2016, which is 67.67 percent higher than third-quarter 2015 sales of 198 million pounds, primarily reflecting higher copper ore grades.

Freeport said that third-quarter 2016 gold sales increased slightly by 7.7 percent to 307 thousand ounces compared to 285 thousand ounces in the third-quarter 2015.

But the company said that the third-quarter 2016 sales volumes were below previous estimates because of lower mining rates that affected the timing of access to higher grade ore and a deferral of production into future periods resulting from labor productivity issues and a 10-day work stoppage beginning in late September.

?At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold,? the statement said.

Consolidated sales volumes from Indonesia mining operations are expected to approximate 1.2 billion pounds of copper and 1.24 million ounces of gold for the year 2016, compared with 744 million pounds of copper and 1.2 million ounces of gold for the year 2015. Ore grades are expected to further improve in 2017 because of increased access to higher grade sections of the Grasberg open pit.

A significant portion of PT-FI's costs are fixed and unit costs vary depending on volumes and other factors. Indonesia's unit net cash costs (including gold and silver credits) of US$0.57 per pound of copper in third-quarter 2016 were lower than unit net cash costs of $1.18 per pound in third-quarter 2015, primarily reflecting higher sales volumes, partly offset by lower by-product credits.

Based on current sales volume and cost estimates, and assuming an average gold price of $1,250 per ounce for fourth-quarter 2016, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.19 per pound of copper for fourth-quarter 2016 and $0.62 per pound for the year 2016. Indonesia mining's unit net cash costs for the year 2016 would change by approximately $0.03 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 2016. Because of the fixed nature of a large portion of Indonesia mining's costs, unit costs vary from quarter to quarter depending on copper and gold volumes. Anticipated higher ore grades from the Grasberg mine are expected to result in lower unit net cash costs in fourth-quarter 2016 and for the year 2017.

Indonesia mining's projected sales volumes are dependent on a number of factors, including operational performance, the timing of shipments and approval by the Indonesian government to continue the export of copper concentrate and anode slimes.

Indonesian Mining Operations	Three Months Ended September 30,		Nine Months Ended September 30,
	2016	2015	2016	2015
Copper (million of recoverable pounds):
Production	321	192	694	551
Sales	332	198	702	549
Average realized price per pound	$ 2.20	$ 2.35	$ 2.17	$ 2.45
Gold (thousands of recoverable ounces):
Production	301	272	637	887
Sales	307	285	653	891
Average realized price per ounce	$1,327	$1,117	$1,292	$1,149
Unit net cash costs per pound of coppera
Site production and delivery, excluding adjustments	$1.37	$2.16	$1.70	$2.39
Gold and silver credits	(1.29)	(1.59 )	(1.28)	(1.93)
Treatment charges	0.27	0.31	0.29	0.31
Export duties	0.10	0.17	0.09	0.16
Royalty on metals	0.12	0.13	0.12	0.16
Unit net cash (credits) costs	$0.57	$1.18	$0.92	$ 1.09
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."

Editing by Reiner Simanjuntak