Freeport reports Q1 Indonesian production, exploraThe following is an excerpt on Papua project of US mining giant Freeport-McMoRan Copper & Gold Inc.'s first quarter 2009 report released on Wednesday.
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.
Indonesia copper and gold sales in the first quarter of 2009 were higher than in the first quarter of 2008 as a result of mining in a higher ore-grade section of the Grasberg open pit, as planned. At the Grasberg mine, the sequencing in 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. After mining in a relatively low-grade section of the open pit in the first half of 2008, FCX is currently mining in a high-grade section which is expected to continue in 2009 and 2010.
FCX expects Indonesia sales of 1.3 billion pounds of copper and 2.2 million ounces of gold for the year 2009, compared with 1.1 billion pounds of copper and 1.2 million ounces of gold for 2008.
(a). 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 VI, which is available on FCX’s web site, www.fcx.com.
PT-FI’s unit net cash (credits) costs, including gold and silver credits, averaged a net credit of $0.15 per pound for the first quarter of 2009, compared with a net cost of $1.08 per pound for the first quarter of 2008. The lower unit net cash costs in 2009 primarily reflected higher copper and gold volumes. PT-FI’s costs also benefited from lower input costs. Unit site production and delivery costs will vary with fluctuations in production volumes because of the primarily fixed nature of PT-FI’s cost structure.
Assuming achievement of current 2009 sales estimates, average gold prices of $900 per ounce for the remainder of 2009 and revised estimates for energy, currency exchange rates and other cost factors, FCX expects PT-FI’s average unit net cash costs per pound to approximate a net credit of $0.13 per pound for 2009. Unit net cash costs for 2009 would change by approximately $0.06 per pound for each $50 per ounce change in the average price of gold for the remainder of 2009.
DEVELOPMENT AND EXPLORATION ACTIVITIES
Indonesia. PT-FI is developing its large-scale underground ore bodies located beneath and adjacent to the Grasberg open pit.
FCX is conducting exploration activities near its existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where it currently operates. Drilling activities were significantly expanded in 2008 and were successful in providing significant reserve additions in 2008 and in identifying potential additional ore adjacent to existing ore bodies. Results indicate opportunities for significant future potential reserve additions at Morenci, Sierrita and Bagdad in North America; Cerro Verde in South America and in the high potential Tenke Fungurume district.
Exploration spending will be lower in 2009, estimated to approximate $75 million, compared with $248 million in 2008. FCX will focus on analyzing exploratory data gained through the active core drilling previously undertaken.