Freeport reports Q1 Indonesian production
Friday, April 20 2012 - 12:36 AM WIB
Through its 90.64 percent owned and wholly consolidated subsidiary PT Freeport Indonesia, FCX operates the world's largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia. PT Freeport Indonesia produces copper concentrates, which contain significant quantities of gold and also silver.
FCX has several projects in progress in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016. Over the next five years, estimated aggregate capital spending on these projects is expected to average $700 million per year ($550 million per year net to PT Freeport Indonesia). Considering the long-term nature and large size of these projects, actual costs could differ materially from these estimates.
The high-grade Big Gossan mine, which began producing in fourth-quarter 2010, is expected to reach full rates of 7,000 metric tons of ore per day in 2013. Substantial progress has been made in developing infrastructure and underground workings that will enable access to the underground ore bodies. Development of the terminal infrastructure and mine access for the Grasberg Block Cave and Deep Mill Level Zone ore bodies is in progress.
Following is summary consolidated operating data for the Indonesia mining operations for the first quarters of 2012:
| Indonesian Mining Operations | Three Months Ended March 31 |
|
| 2012 | 2011 | |
| Copper (million of recoverable pounds): | ||
| Production | 123 | 284 |
| Sales | 134 | 278 |
| Average realized price per pound | $ 3.81 | $ 4.26 |
| Gold (thousands of recoverable ounces): | ||
| Production | 229 | 441 |
| Sales | 266 | 454 |
| Average realized price per ounce | $ 1,695 | $ 1,400 |
| Unit net cash (credits) costs per pound of copper: | ||
| Site production and delivery, excluding adjustments | $ 3.51 | $ 1.84 |
| Gold and silver credits | (3.51) | (2.34) |
| Treatment charges | 0.19 | 0.18 |
| Royalties | 0.14 | 0.16 |
| Unit net cash (credits) costs (*) | $ 0.33 | $ (0.16) |
| * For a reconciliation of unit net cash costs (credits) 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 VI, which is available on FCX's website, "www.fcx.com." | ||
Indonesia's first-quarter 2012 copper sales of 134 million pounds and gold sales of 266 thousand ounces were significantly lower than first-quarter 2011 copper sales of 278 million pounds and gold sales of 454 thousand ounces, primarily reflecting anticipated lower ore grades combined with work interruptions and the related temporary suspension of operations during first-quarter 2012.
The terms of a new two-year labor agreement for PT Freeport Indonesia's employees were reached in mid- December 2011 and production began ramping up following repairs to damaged concentrate and fuel pipelines, which resulted from civil unrest that occurred during the course of the approximate three-month long strike. During first-quarter 2012, PT Freeport Indonesia experienced work interruptions in connection with its efforts to resume normal operations, with an estimated impact of approximately 80 million pounds of copper and 125 thousand ounces of gold. Operations and productivity at PT Freeport Indonesia have improved recently. For the period April 1 through April 15, 2012, PT Freeport Indonesia's milling rates averaged approximately 200,000 metric tons of ore per day, compared with the first-quarter 2012 average of 114,800 metric tons of ore per day and the January 2012 forecast for the year 2012 of 224,000 metric tons of ore per day. Full operations, which are dependent on maintaining security and productivity in the workplace, are expected to be restored during second-quarter 2012.
FCX expects sales from Indonesia to approximate 800 million pounds of copper and 1.0 million ounces of gold for the year 2012, compared with 846 million pounds of copper and 1.3 million ounces of gold for the year 2011. These estimates reflect the work interruptions experienced during first-quarter 2012 and returning to normal operations at Grasberg during second-quarter 2012. Gold sales in 2012 also reflect mining in a lower grade section of the Grasberg mine in 2012, compared with 2011. At the Grasberg mine, the sequencing of mining areas with varying ore grades also causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold.
Unit net cash costs (including gold and silver credits) for Indonesia averaged a net cost of $0.33 per pound of copper in first-quarter 2012, compared to a net credit of $0.16 per pound in first-quarter 2011, primarily reflecting lower sales volumes.
FCX estimates Indonesia's average unit net cash costs (net of gold and silver credits) would approximate $1.11 per pound of copper for the year 2012, based on current sales volume and cost estimates and assuming an average gold price of $1,600 per ounce for the remainder of 2012. Compared to first-quarter 2012, unit site production and delivery costs are expected to decline for the remainder of 2012 because of higher projected copper volumes. However, unit net cash costs are expected to be higher for the remainder of 2012 because of lower gold credits. Indonesia's unit net cash costs for 2012 would change by approximately $0.05 per pound for each $50 per ounce change in the average price of gold during the remainder of 2012. Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on volumes of copper and gold sold, as well as average realized gold prices during the period. FCX expects Indonesia's unit net cash costs to decline significantly in future years, compared to the year 2012, because of higher projected copper and gold volumes. (end of edited excerpt)