Freeport reports lower Q1 sales from Indonesia mine
Thursday, May 11 2017 - 06:02 AM WIB
Courtesy of Freeport
US-based Freeport McMoRan Inc said that its Indonesian subsidiary PT Freeport Indonesia (PT-FI) saw lower gold and copper sales volume in the first quarter (Q1) of this year due to export restrictions launched by the Indonesian government in January.
?Indonesia's consolidated sales of 125 million pounds of copper and 177 thousand ounces of gold in first-quarter 2017 were lower than first-quarter 2016 sales of 174 million pounds of copper and 195 thousand ounces of gold, primarily reflecting the impact of regulatory restrictions on PT-FI's concentrate exports beginning on January 12, 2017, and a six-week temporary shutdown at PT Smelting, which began on January 19, 2017,? Freeport said in a statement issued last week.
PT Smelting, which absorbs about 40 percent of PT-FI?s output, operates the only copper smelter in Indonesia.
As a result of the regulatory uncertainties, PT-FI has taken actions to adjust its cost structure, reduce its workforce and slow investment in its long-term underground development projects and new smelter.
In April 2017, PT-FI received approval to resume concentrate exports. ?Assuming normal operating rates for the remainder of the year, consolidated sales volumes from Indonesia mining are expected to approximate 1.1 billion pounds of copper and 1.9 million ounces of gold for the year 2017, compared with 1.1 billion pounds of copper and 1.1 million ounces of gold for the year 2016.?
During April 2017, PT-FI experienced a high level of worker absenteeism. Union leaders have notified PT-FI of a potential strike during the month of May. ?PT-FI is working with union leaders, with the support of government officials, to encourage a safe and efficient return to normal operations for the benefit of all stakeholders.?
A significant portion of PT-FI's costs are fixed and unit costs vary depending on production volumes and other factors. Indonesia's unit net cash costs (including gold and silver credits) of US$0.82 per pound of copper in first-quarter 2017 were lower than unit net cash costs of $1.24 per pound in first-quarter 2016, primarily reflecting higher gold and silver credits and lower production costs. Indonesia's unit cash costs for first-quarter 2017 exclude $21 million ($0.17 per pound of copper) for costs charged directly to cost of sales as a result of the impact of regulatory restrictions on PT-FI's concentrate exports.
?Assuming an average gold price of $1,250 per ounce for the remainder of 2017 and achievement of current sales volume and cost estimates, unit net cash credits (net of gold and silver credits) for Indonesia mining are expected to approximate $0.10 per pound of copper for the year 2017.? Indonesia mining's unit net cash credits for the year 2017 would change by approximately $0.07 per pound for each $50 per ounce change in the average price of gold for the remainder of 2017. 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.
Indonesia mining's projected sales volumes are dependent on a number of factors, including operational performance, workforce productivity, the timing of shipments and its ability to continue to export copper concentrate, Freeport said.
Editing by Reiner Simanjuntak