Freeport reports lower Q3 copper sales, higher gold sales
Thursday, October 26 2017 - 01:07 AM WIB
US-based Freeport McMoRan Inc reported Wednesday that copper sales from its Indonesian operations run by subsidiary PT Freeport Indonesia (PT-FI) during the third quarter (Q3) of this year totaled 258 million pounds, lower than third-quarter 2016 sales of 332 million pounds, primarily reflecting lower copper ore grades and timing of shipments.
The company said in a statement that Indonesia's consolidated gold sales of 352 thousand ounces in third-quarter 2017 were higher than third-quarter 2016 sales of 307 thousand ounces, reflecting higher gold ore grades, partly offset by timing of shipments between the third and fourth quarters of 2017.
During third-quarter 2017, PT-FI's labor productivity improved significantly following a recovery from disruptions that occurred in the first half of the year. Mining and milling rates improved throughout the quarter, and PT-FI continues to assess opportunities to advance mining of a section of high-grade material during 2018 and 2019 though open-pit mining rather than over time through the Grasberg Block Cave underground mine.
In October 2017, PT-FI and union officials commenced discussions for a new two-year labor agreement. The existing agreement will continue in effect until a new agreement is consummated.
Assuming achieving planned operating rates for fourth-quarter 2017, consolidated sales volumes from Indonesia mining are expected to approximate 1.0 billion pounds of copper and 1.6 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.
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$0.13 per pound of copper in third-quarter 2017 were lower than unit net cash costs of $0.57 per pound in third-quarter 2016, primarily reflecting higher gold and silver credits, partly offset by lower copper sales volumes.
Assuming an average gold price of $1,300 per ounce for fourth-quarter 2017 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.07 per pound of copper for the year 2017. Indonesia mining's unit net cash costs for the year 2017 would change by approximately $0.04 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.
Indonesia mining's projected sales volumes for the year 2017 are dependent on a number of factors, including operational performance, workforce productivity and the timing of shipments.
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| ? | September 30, | September 30, | |||||||||||||||||
| ? | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Copper?(millions of recoverable pounds) | ? | ? | ? | ? | |||||||||||||||
| Production | 293 | 321 | 647 | 694 | |||||||||||||||
| Sales | 258 | 332 | 630 | 702 | |||||||||||||||
| Average realized price per pound | $ 2.95 | $ 2.20 | $ 2.81 | $ 2.17 | |||||||||||||||
| Gold?(thousands of recoverable ounces) | ? | ? | ? | ? | |||||||||||||||
| Production | 412 | 301 | 992 | 637 | |||||||||||||||
| Sales | 352 | 307 | 956 | 653 | |||||||||||||||
| Average realized price per ounce | $ 1,290 | $ 1,327 | $ 1,261 | $ 1, 292 | |||||||||||||||
| Unit net cash costs per pound of coppera | ? | ? | ? | ? | |||||||||||||||
| Site production and delivery, excluding adjustments | $ 1.41b | $ 1.37 | $ 1.71b | $ 1.70 | |||||||||||||||
| Gold and silver credits | (1.80) | (1.29) | (1.98) | (1.28) | |||||||||||||||
| Treatment charges | 0.27b | 0.27 | 0.27 | 0.29 | |||||||||||||||
| Export duties | 0.08 | 0.10 | 0.10 | 0.09 | |||||||||||||||
| Royalty on metals | 0.17 | 0.12 | 0.16 | 0.12 | |||||||||||||||
| Unit net cash costs | $ 0.13 | $ 0.57 | $ 0.26 | $ 0.92 | |||||||||||||||
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 XII, which are available on FCX's website, "fcx.com."
b. Excludes fixed costs charged directly to production and delivery costs totaling?$9 million?($0.03?per pound of copper) for third-quarter 2017 and?$112 million?($0.18?per pound of copper) for first nine months of 2017 associated with workforce reductions.
Editing by Reiner Simanjuntak