Freeport reports Q4 Indonesian production

The following is an excerpt on Papua project of US mining giant Freeport-McMoRan Copper & Gold Inc.'s fourth quarter 2012 report released on Tuesday.

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.

Operating and Development Activities. FCX has several projects in progress in the Grasberg minerals district, primarily related to the development of large-scale, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to ramp up over several years to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016. Development of the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) is advancing. The DMLZ is expected to commence production in 2015, and the Grasberg Block Cave mine is scheduled to commence production in 2017. Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $715 million per year ($565 million per year net to PT Freeport Indonesia).

Production from the Deep Ore Zone (DOZ) underground mine averaged 51,200 metric tons of ore per day in fourth-quarter 2012, and is expected to ramp up to the design rate of 80,000 metric tons of ore per day by year-end 2013, following completion of ongoing panel repairs.

The high-grade Big Gossan underground mine, which began producing in fourth-quarter 2010, averaged 2,100 metric tons of ore per day in fourth-quarter 2012. Full rates of 7,000 metric tons of ore per day are expected in 2014.

Following is summary consolidated operating data for the Indonesia mining operations for the fourth quarters and years ended 2012 and 2011:

Indonesian Mining Operations	Three Months Ended December 31		Years Ended December 31
	2012	2011	2012	2011
Copper (million of recoverable pounds):
Production	200	68	695	846
Sales	204	50	716	846
Average realized price per pound	$ 3.59	$ 3.31	$ 3.58	$ 3.85
Gold (thousands of recoverable ounces):
Production	221	149	862	1.272
Sales	224	102	915	1.270
Average realized price per ounce	$ 1.680	$ 1.664	$ 1.664	$ 1.583
Unit net cash (credits) costs per pound of copper:
Site production and delivery, excluding adjustments	$ 2.91	$ 6.92	$ 3.12	$ 2.21
Gold and silver credits	(1.93)	(3.72)	(2.22)	(2.47)
Treatment charges	0.22	0.22	0.21	0.19
Royalties	0.13	0.15	0.13	0.16
Unit net cash (credits) costs (*)	$ 1.33	$ 3.57	$ 1.24	$ 0.09
*. Includes impacts of $66 million ($1.30 per pound of copper for fourth-quarter 2011 and $0.08 per pound of copper for the year 2011) associated with signing bonuses and other strike-related costs.*. For a reconciliation of unit net cash (credits) costs 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 website, ?www.fcx.com.?

Indonesia's fourth-quarter 2012 sales of 204 million pounds of copper and 224 thousand ounces of gold were higher than fourth-quarter 2011 sales of 50 million pounds of copper and 102 thousand ounces of gold, primarily reflecting the impact in fourth-quarter 2011 of labor related disruptions and temporary suspension of milling operations.

At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold. FCX expects sales from Indonesia to approximate 1.1 billion pounds of copper and 1.2 million ounces of gold for the year 2013, compared with 716 million pounds of copper and 915 thousand ounces of gold for the year 2012. FCX expects sales from Indonesia to increase in fourth-quarter 2013 as PT Freeport Indonesia gains access to higher ore grades and achieves the targeted ramp up in production from the DOZ mine. Approximately 33 percent of Indonesia's projected copper sales and 38 percent of projected gold sales are expected in fourth-quarter 2013.

Indonesia's unit net cash costs (including gold and silver credits) of $1.33 per pound of copper in fourth-quarter 2012 were lower than unit net cash costs of $3.57 per pound in fourth-quarter 2011 primarily reflecting higher sales volumes. Fourth-quarter 2011 costs also included $66 million, or $1.30 per pound of copper, for bonuses and other strike-related costs.

FCX estimates Indonesia's unit net cash costs (net of gold and silver credits) would approximate $0.68 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average gold price of $1,700 per ounce. Indonesia's unit net cash costs for 2013 would change by approximately $0.055 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 sales volumes, as well as average realized gold prices for the quarterly period. Indonesia's unit net cash costs for first-quarter 2013 are expected to approximate $1.57 per pound of copper and are expected to decline in future quarterly periods as volumes increase.(end of edited excerpt)