841 Million Pounds Of Cu-Au Production For The Quarter
PHOENIX, AZ - Freeport-McMoRan Inc. (FCX) President and Chief Executive Officer Richard C. Adkerson said, "During 2018, our global team achieved strong operating results with an ongoing focus on safety, productivity, cost management and capital discipline. We were successful in establishing a new partnership with the Indonesian government, which protects our long-term value at Grasberg. We continued to strengthen our balance sheet, commenced development of an exciting new copper project at Lone Star in Eastern Arizona, completed important construction projects to support long-term underground mining at Grasberg and added new reserves to our portfolio to extend mine lives and enhance future growth options. As we enter 2019, our priorities are focused on achieving important milestones to ramp-up production from our large-scale underground assets in the Grasberg minerals district, continuing our focus on productivity and cost management, advancing the Lone Star project and defining future growth options from our large portfolio of reserves and resources. We remain confident in the fundamentals and long-term outlook for copper and the opportunities to deliver substantial value to shareholders from our premier portfolio of geographically diverse long-lived copper assets."
Through exploration drilling, the company has identified a significant resource at its wholly owned Lone Star project located near the Safford operation in eastern Arizona. An initial project to develop the Lone Star oxide ores commenced in first-quarter 2018, with first production expected by the end of 2020. Total capital costs, including mine equipment and pre-production stripping, are expected to approximate $850 million and will benefit from the utilization of existing infrastructure at the adjacent Safford operation. As of December 31, 2018, approximately $290 million has been incurred for this project. Initial production from the Lone Star oxide ores is expected to average approximately 200 million pounds of copper per year. The project also advances exposure to a significant sulfide resource. FCX expects to incorporate recent positive drilling and ongoing results in its future development plans.
The company reported net income attributable to common stock of $140 million in fourth-quarter 2018 and $2.3 billion for the year 2018. Fourth-quarter 2018 copper and gold production of 841 million pounds and 334 thousand ounces exceeded October 2018 sales estimates. Fourth-quarter 2018 copper and gold sales were lower than production, primarily reflecting adjustments to shipping schedules in Indonesia as a result of unscheduled maintenance at PT Smelting (PT-FI's 25-percent owned smelter and refinery in Gresik, Indonesia). Fourth-quarter 2018 copper and gold sales of 785 million pounds and 266 thousand ounces were lower than fourth-quarter 2017 sales of 1.0 billion pounds and 593 thousand ounces, primarily reflecting anticipated lower ore grades and mill rates in Indonesia.
The company operates seven open-pit copper mines in North America: Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. In addition to copper, certain of Freeport-McMoRan's North America copper mines produce molybdenum concentrate, gold and silver. All of the North America mining operations are wholly owned, except for Morenci. The company records its 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. Freeport-McMoRan has significant undeveloped reserves and resources in North America and a portfolio of potential long-term development projects.
North America's consolidated copper sales volumes was 333 million pounds in fourth-quarter. The North America copper sales are estimated to approximate 1.4 billion pounds for the year 2019, similar to the year 2018. Fourth-quarter 2018 molybdenum sales of 24 million pounds approximated both the October 2018 estimate and fourth-quarter 2017 sales.
The Cerro Verde in Peru expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. Cerro Verde's concentrator facilities have continued to perform well, with average mill throughput rates of 395,800 metric tons of ore per day in fourth-quarter 2018 and 387,600 metric tons of ore per day for the year 2018. During 2018, Cerro Verde received a modified environmental permit allowing it to operate its existing concentrator facilities at rates up to 409,500 metric tons of ore per day. At at El Abra in Chile the company continues to process additional sulfide material and to achieve higher recoveries. El Abra's large sulfide resource could potentially support a major mill project similar to facilities constructed at Cerro Verde. Technical and economic studies are being advanced to determine the optimal scope and timing for the project.
South America's consolidated copper sales volumes of 325 million pounds in fourth-quarter 2018 were higher than fourth-quarter 2017 sales of 312 million pounds, primarily reflecting timing of shipments. Sales from South America mining are expected to approximate 1.3 billion pounds of copper for the year 2019, compared with 1.25 billion pounds of copper in 2018.
Freeport-McMoRan operates PT-FI's mining operations, in which FCX owns a 48.76 percent interest. PT-FI's assets include one of the world's largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. The company completed the transaction with the Indonesian government regarding PT-FI’s long-term mining rights and share ownership. Freeport-McMoRan expects its share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to its share of anticipated future cash flows under PT-FI’s previous COW and Joint Venture.
PT-FI is currently mining the final phase of the Grasberg open pit and expects to transition to the Grasberg Block Cave (GBC) underground mine in the first half of 2019. It continues to advance several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to produce large-scale quantities of copper and gold following the transition from the Grasberg open pit. PT-FI's estimated annual capital spending on underground mine development projects is expected to average $0.7 billion per year over the next four years, net of scheduled contributions from PT Inalum. In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $0.9 billion per year through 2022, will be reflected as an investing activity in FCX's cash flow statement, and contributions from PT Inalum, which are expected to average approximately $0.17 billion per year through 2022, will be reflected as a financing activity. Considering the long-term nature and size of these projects, actual costs could vary from these estimates.
Substantial progress has been made to prepare for the transition to mining of the GBC underground mine. First undercut blasting occurred in September 2018, first drawbell blasting occurred in December 2018 and cave production is scheduled for the first half of 2019. All underground mining levels and the ore flow system are being commissioned. Production rates over the next five years are expected to ramp up to 130,000 metric tons of ore per day.
During third-quarter 2018, PT-FI commenced hydraulic fracturing activities to manage rock stresses and pre-condition the Deep Mill Level Zone (DMLZ) underground mine for large-scale production following mining induced seismic activity experienced in 2017 and 2018. Results to date have been effective in managing rock stresses and pre-conditioning the cave. PT-FI expects to commence the ramp-up of production in the DMLZ underground mine by mid-2019 and to reach full production rates of 80,000 metric tons per day in 2022. Estimates of timing of future production continue to be reviewed and may be modified as additional information becomes available.
Indonesia's consolidated sales of 127 million pounds of copper and 261 thousand ounces of gold in fourth-quarter 2018 were lower than fourth-quarter 2017 sales of 351 million pounds of copper and 584 thousand ounces of gold, primarily reflecting anticipated lower ore grades and mill rates, and a deferral of shipments in late 2018 resulting from unscheduled maintenance at PT Smelting. As PT-FI transitions mining from the open pit to underground, production is expected to be significantly lower in 2019 and 2020, compared to 2018. Metal production is expected to improve significantly by 2021 following a ramp-up period. Consolidated sales volumes from Indonesia mining are expected to approximate 0.6 billion pounds of copper and 0.8 million ounces of gold for the year 2019, compared with 1.1 billion pounds of copper and 2.4 million ounces of gold for the year 2018.
Freeport-McMoRan has two wholly owned molybdenum mines: the Henderson underground mine and the Climax open-pit mine, that are both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of molybdenum concentrate produced at the Henderson and Climax mines, as well as from FCX's North America and South America copper mines, is processed at it’s conversion facilities.
Production from the Molybdenum mines totaled 9 million pounds of molybdenum in fourth-quarter 2018 and 8 million pounds in fourth-quarter 2017.
Mining exploration activities are generally associated with existing mines, focusing on opportunities to expand reserves and resources to support development of additional future production capacity. A drilling program to further delineate the Lone Star resource continues to indicate significant additional mineralization in this district, with higher ore grades than FCX's other North America copper mines. Exploration results continue to indicate opportunities for significant future potential reserve additions in North America and South America. Exploration spending is expected to approximate $65 million for the year 2019, compared with $78 million in 2018.
The company has significant reserves, resources and future development opportunities within its portfolio of mining assets. Preliminary estimated consolidated recoverable proven and probable reserves from mines at December 31, 2018, include 119.6 billion pounds of copper, 30.8 million ounces of gold and 3.78 billion pounds of molybdenum.
Sales volumes for the year 2019 are expected to approximate 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 0.8 billion pounds of copper, 255 thousand ounces of gold and 24 million pounds of molybdenum in first-quarter 2019. As PT-FI transitions mining from the open pit to underground, its production is expected to be significantly lower in 2019 and 2020, compared to 2018. Metal production is expected to improve significantly by 2021 following a ramp-up period.
Freeport-McMoRan is a leading international mining company which operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. The company’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world's largest copper and gold deposits; and significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.
The company’s address is 333 N. Central Ave., Phoenix, AZ 85004, (602) 366-8100, www.fcx.com.