Freeport says Q2 production affected by workers strike
Wednesday, July 26 2017 - 03:37 AM WIB
US-based Freeport McMoRan Inc said that its Indonesian gold and copper subsidiary PT Freeport Indonesia (PT-FI) saw copper production in the second quarter (Q2) of this year was particularly was undermined by worker absenteeism which unfavorably impacted mining and milling rates.
The company, however, said in a statement on Tuesday that Indonesia's consolidated sales of 247 million pounds of copper and 427 thousand ounces of gold in the second quarter of 2017 were higher than second-quarter 2016 sales of 196 million pounds of copper and 151 thousand ounces of gold, primarily reflecting the sale of concentrate in inventory and higher ore grades, partly offset by lower mill rates.
Assuming achieving planned operating rates for the second half of 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, the statement said.
PT-FI operates the giant Grasberg gold and copper mine in Indonesia?s Papua Province.
Freeport said that beginning in mid-April 2017, PT-FI experienced a high level of worker absenteeism. During May 2017, a significant number of employees and contractors participated in an illegal strike and did not respond to PT-FI's multiple summons to return to work. As a result, these workers were deemed to have voluntarily resigned pursuant to Indonesian laws and regulations.
The company said that during second-quarter 2017, PT-FI took steps to mitigate the impacts of worker absenteeism, including producing from available mine and mill stockpiles and selling concentrate in inventory produced in first-quarter 2017. PT-FI is also taking steps to increase its workforce in order to restore normal operating rates.
Elsewhere, Freeport said that in June 2017, production from the DMLZ underground mine, which is currently being developed, was impacted by mining-induced seismic activity. Mining-induced seismic activity is not uncommon in block cave mining. To mitigate the impact of these events, PT-FI has adjusted the DMLZ mine plans while it evaluates the appropriate start-up schedule. PT-FI expects DMLZ to ramp up to full capacity of 80,000 metric tons of ore per day in 2021, but at a slower pace than previous estimates.
PT-FI is also evaluating opportunities to mine a section of high-grade ore from the Grasberg open pit in 2018 and 2019 currently planned to be mined in future periods from the Grasberg Block Cave underground mine. These plans are expected to be evaluated through the remainder of 2017.
Freeport said 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 second-quarter 2017 were lower than unit net cash costs of $1.20 per pound in second-quarter 2016, primarily reflecting higher gold and silver credits.
Assuming an average gold price of $1,250 per ounce for the second half of 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 $0.13 per pound of copper for the year 2017. Indonesia mining's unit net cash credits for the year 2017 would change by approximately $0.05 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 are dependent on a number of factors, including operational performance, workforce productivity, the timing of shipments and its ability to continue to export copper concentrate, Freeport said.
Editing by Reiner Simanjuntak