Freeport reports Q4 Indonesian production
Friday, January 21 2011 - 01:29 AM WIB
Through its 90.64 percent owned and wholly consolidated subsidiary PT Freeport Indonesia (PT-FI), FCX operates the world?s largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia.
| Indonesian Mining Operations | Three Months Ended December 31 |
Years Ended December 31 |
||
| 2010 | 2009 | 2010 | 2009 | |
| Copper (million of recoverable pounds): | ||||
| Production | 309 | 274 | 1,222 | 1,412 |
| Sales | 295 | 269 | 1,214 | 1,400 |
| Average realized price per pound | $ 4.34 | $ 3.31 | $ 3.69 | $ 2.65 |
| Gold (thousands of recoverable ounces): | ||||
| Production | 601 | 535 | 1,786 | 2,568 |
| Sales | 565 | 528 | 1,765 | 2,543 |
| Average realized price per ounce | $ 1,399 | $ 1,116 | $ 1,271 | $ 994 |
| Unit net cash (credits) costs per pound of copper: | ? | ? | ? | ? |
| Site production and delivery, including adjustments | $ 1.55 | $ 1.36 | $ 1.53 | $ 1.05 |
| Gold and silver credits | (2.81) | (2.39) | (1.92 ) | (1.86 ) |
| Treatment charges | 0.19 | 0.24 | 0.22 | 0.22 |
| Royalties | 0.16 | 0.12 | 0.13 | 0.10 |
| Unit net cash credits (*) | $ (0.91) | $ (0.67) | $ (0.04 ) | $ (0.49 ) |
| *. For a reconciliation of unit net cash 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 VII, which is available on FCX?s web site, ?www.fcx.com.? | ||||
FCX has several attractive development projects in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and adjacent to the Grasberg open pit. PT-FI continues to evaluate economic studies and mine plans to determine the optimal transition from the Grasberg open pit to the Grasberg Block Cave, which is currently scheduled for 2016. In aggregate, these underground ore bodies are expected to ramp up to approximately 240,000 metric tons of ore per day following the anticipated depletion of the Grasberg open pit in 2016.
The Deep Ore Zone (DOZ) mine, one of the world?s largest underground mines, has been expanded to 80,000 metric tons of ore per day; and the high-grade Big Gossan mine, which began producing in the fourth quarter of 2010, is expected to reach full rates of 7,000 metric tons of ore per day by the end of 2012. A feasibility study for the Deep Mill Level Zone, which is expected to start up as the DOZ depletes, has been completed.
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. Estimated aggregate capital spending on these projects in 2010 approximated $288 million ($228 million net to PT-FI). Over the next five years, estimated aggregate capital spending is expected to average approximately $600 million ($470 million net to PT-FI) per year on underground development activities.
Indonesia reported higher copper sales in the fourth quarter of 2010, compared to the fourth quarter of 2009, primarily because of higher ore grades. Gold sales in the fourth quarter of 2010 were also higher than in the fourth quarter of 2009. At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in the timing of ore production resulting in fluctuations in quarterly and annual sales of copper and gold.
FCX expects to be mining in a lower-grade section of the Grasberg pit during 2011. As a result, Indonesia sales of 1.0 billion pounds of copper and 1.3 million ounces of gold for the year 2011 are expected to be lower than the 2010 sales of 1.2 billion pounds of copper and 1.8 million ounces of gold.
Ore grades and copper and gold sales for 2011 are expected to be higher in the second half compared to the first half with approximately 53 percent of copper and 57 percent of gold expected in the second half.
Indonesia unit site production and delivery costs were higher in the fourth quarter of 2010, compared to the fourth quarter of 2009, primarily because of higher maintenance, support and input costs, partly offset by the impact of higher volumes. The unit net cash credit of $0.91 per pound in the fourth quarter of 2010 improved from the year-ago quarter net credit of $0.67 principally because of higher gold credits.
Projected lower copper and gold volumes for 2011 and the effect of higher input costs are expected to result in a significant increase in Grasberg?s unit net cash costs compared to 2010 levels.
Assuming an average gold price of $1,350 per ounce and using current 2011 sales and cost estimates, FCX expects PT-FI?s average unit net cash costs, including gold and silver credits, to approximate $0.60 per pound for the year 2011. Unit net cash costs for 2011 would change by approximately $0.065 per pound for each $50 per ounce change in the average price of gold. Quarterly unit net cash costs will vary significantly with variations in quarterly metal sales volumes. Unit net cash costs are expected to be higher in the first half of 2011 compared to the second half. (end of edited excerpt)