Freeport reports higher sales volume from RI mine
Monday, July 27 2015 - 04:00 AM WIB
US giant Freeport McMoRan Copper & Gold Inc said that its Indonesia copper and gold mining unit PT Freeport Indonesia (PT-FI) saw higher sales volume of gold and copper in the second quarter of this year compared to the corresponding period of last year.
Freeport said in a statement last week that copper sales volume in the second quarter of this year reached 196 million pounds, a jump of 67.5 percent compared to 117 million pounds in the same three-month period ending June of last year.
Meanwhile, gold sales volume in the second quarter of this year totaled 346,000 ounces, a 156.3 percent surge from 135,000 ounces in the same period of last year.
?Indonesia's second-quarter 2015 sales of 196 million pounds of copper and 346 thousand ounces of gold were higher than second-quarter 2014 sales of 117 million pounds of copper and 135 thousand ounces of gold, primarily reflecting higher operating and recovery rates, and higher ore grades for gold. PT-FI expects ore grades to increase beginning in fourth-quarter 2015 through 2017 as high-grade sections of the Grasberg open pit are mined,? Freeport said in the statement referring to PT-FI?s giant mine in Indonesia?s Papua province.
Freeport 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. ?Sales from Indonesia mining are expected to approximate 860 million pounds of copper and 1.3 million ounces of gold for the year 2015, compared with 664 million pounds of copper and 1.2 million ounces of gold for the year 2014,? it said.
A significant portion of PT-FI's costs are fixed and unit costs vary depending on production volumes. The company said that Indonesia's unit net cash costs (including gold and silver credits) of US$0.81 per pound of copper in second-quarter 2015 were lower than unit net cash costs of $2.66 per pound in second-quarter 2014, primarily reflecting higher gold and silver credits and higher copper sales volumes, partly offset by the impact of export duties and increased royalty rates.
Unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $1.08 per pound of copper for the year 2015, based on current sales volume and cost estimates, and assuming an average gold price of $1,150 per ounce for the second half of 2015. Indonesia mining's projected unit net cash costs would change by approximately $0.05 per pound for each $50 per ounce change in the average price of gold for the second half of 2015. 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.
Meanwhile, Freeport said PT-FI has several projects in progress in the Grasberg minerals district related to the development of large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to ramp up over several years to process approximately 240,000 metric tons of ore per day following the transition from the Grasberg open pit, currently anticipated to occur in late 2017. Development of the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines is advancing to enable DMLZ to commence production in late 2015 and the Grasberg Block Cave mine to commence production in 2018. Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $0.8 billion per year ($0.7 billion per year net to PT-FI). Additionally, over the next five years, estimated aggregate capital spending for processing and power facilities to optimize the handling of underground ore is expected to average $0.3 billion per year.
?Considering the long-term nature and size of these projects, actual costs could vary from these estimates. PT-FI may reduce or defer these activities pending resolution of negotiations for an amended COW,? Freeport said.
| Indonesian Mining Operations | Three Months Ended June 30 |
Six Months Ended June 30 |
||
| 2015 | 2014 | 2015 | 2014 | |
| Copper (million of recoverable pounds): | ? | ? | ||
| Production | 205 | 122 | 359 | 262 |
| Sales | 196 | 117 | 351 | 226 |
| Average realized price per pound | $ 2.61 | $ 3.19 | $ 2.66 | $ 3.15 |
| ? | ? | |||
| Gold (thousands of recoverable ounces): | ? | ? | ||
| Production | 360 | 142 | 615 | 350 |
| Sales | 346 | 135 | 606 | 297 |
| Average realized price per ounce | $ 1,173 | $ 1,294 | $ 1,183 | $ 1,299 |
| Unit net cash (credits) costs per pound of copper: | ? | ? | ||
| Site production and delivery, excluding adjustments | $ 2.26 | $ 3.86 b | $ 2.51 | $ 3.60 b |
| Gold and silver credits | (2.13 ) | (1.57 ) | (2.11 ) | (1.85 ) |
| Treatment charges | 0.32 | 0.26 | 0.31 | 0.25 |
| Export duties | 0.18 | ? | 0.16 | ? |
| Royalties | 0.18 c | 0.11 | 0.17 c | 0.12 |
| Unit net cash (credits) costs | $ 0.81 | $ 2.66 | $ 1.04 | $ 2.12 |
| (*) 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 schedule, "Product Revenues and Production Costs," beginning on page XIV, which is available on FCX's website, "fcx.com." | ||||
Editing by Reiner Simanjuntak