Freeport reports lower Q3 sales from RI operations
Saturday, October 24 2015 - 04:55 AM WIB
US mining firm Freeport McMoRan Copper & Gold Inc, which operates the giant Grasberg mine in Papua, Indonesia, through its subsidiary PT Freeport Indonesia (PT-FI), reported lower gold and copper sales in the third quarter (Q3) of this year amid lower production volume and price.
The company said in a statement Thursday that copper sales in the third quarter of this year was 198 million pounds compared to 285 million pounds in the corresponding period of last year, while gold sales reached 285,000 ounces compared to 505,000 ounces.
Freeport said that the lower sales primarily reflected lower ore grades and El Ni?o weather conditions, ?as well as timing of shipments in third-quarter 2014 related to the lifting of export restrictions in late July 2014.?
?As a result of mill process water limitations because of continuing El Ni?o weather conditions and mill maintenance activities, PT-FI has adjusted its forecast to anticipate an approximate 15 percent reduction in fourth-quarter 2015 mill rates from the previous plan,? the statement said.
The resulting impact of these factors is a deferral of 70 million pounds of copper and 70 thousand ounces of gold from fourth-quarter 2015 to future periods. In addition, lower than forecasted mining rates in the second half of 2015 are expected to result in a deferral of high-grade ore to future periods, Freeport explained.
PT-FI expects ore grades to improve significantly in 2016 and 2017 with access to higher grade sections of the Grasberg open pit, resulting in higher production and lower unit net cash costs.
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 760 million pounds of copper and 1.2 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.
A significant portion of PT-FI's costs are fixed and unit costs vary depending on production volumes. Indonesia's unit net cash costs (including gold and silver credits) of $1.18 per pound of copper in third-quarter 2015 were higher than unit net cash costs of $0.60 per pound in third-quarter 2014, primarily reflecting lower volumes and lower gold and silver credits.
Unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $1.06 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 fourth-quarter 2015. Indonesia mining's projected unit net cash costs would change by approximately $0.03 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 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.
PT-FI is progressing negotiations with union officials to complete its biennial labor agreement for the two-year period beginning September 30, 2015.
Following is a summary of consolidated operating data for the Indonesia mining operations for the third quarters and first nine months of 2015 and 2014:
| Indonesian Mining Operations | Three Months Ended September 30 | Nine Months Ended September 30 | ||
| 2015 | 2014 | 2015 | 2014 | |
| Copper (million of recoverable pounds): | ||||
| Production | 192 | 203 | 551 | 465 |
| Sales | 198 | 258 | 549 | 484 |
| Average realized price per pound | $ 2.35 | $ 3.05 | $ 2.45 | $ 3.09 |
| ? | ||||
| Gold (thousands of recoverable ounces): | ||||
| Production | 272 | 426 | 887 | 776 |
| Sales | 285 | 505 | 891 | 802 |
| Average realized price per ounce | $ 1,117 | $ 1,219 | $ 1,149 | $ 1,248 |
| Unit net cash costs per pound of coppera | ||||
| Site production and delivery, excluding adjustments | $ 2.16 | $ 2.42 | $ 2.39 | $ 2.90 b |
| Gold and silver credits | (1.59 ) | (2.44 ) | (1.93 ) | (2.16 ) |
| Treatment charges | 0.31 | 0.25 | 0.31 | 0.25 |
| Export duties | 0.17 | 0.16 | 0.16 | 0.09 |
| Royalty on metalsc | 0.13 | 0.21 | 0.16 | 0.16 |
| Unit net cash (credits) costs | $ 1.18 | $ 0.60 | $ 1.09 | $ 1.24 |
| 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 XIV, which are available on FCX's website, "fcx.com." | ||||
| b. The first nine months of 2014 excludes fixed costs totaling $0.30 per pound of copper charged directly to cost of sales as a result of the impact of export restrictions on PT-FI's operating rates. | ||||
| c. Includes increased royalty rates of $0.06 per pound for both the third quarter and first nine months of 2015, $0.08 per pound in third-quarter 2014 and $0.04 per pound for the first nine months of 2014. | ||||
Editing by Reiner Simanjuntak