Freeport-McMoRan Reports Copper Sales Of 1.02 Billion Pounds
PHOENIX, AZ - Freeport-McMoRan Inc., Chairman and Chief Executive Officer, Richard C. Adkerson, said, "I am incredibly proud of our Freeport team’s stellar performance during 2021 to deliver growth in volumes, solid cost and capital management in a challenging environment and to advance our sustainability objectives. We are positioned for a bright future as a leading, responsible, long-term supplier of copper to support the global economy and the transition to clean energy. We have a clear strategy of being foremost in copper, our balance sheet is strong and the prospects for our business have never been brighter. Our team is focused on continuing strong execution and generating strong cash flows to support advancement of organic growth initiatives and increase cash returns to shareholders under our established financial policy. Our success will support value creation for all stakeholders."
In the fourth quarter copper sales of 1.02 billion pounds approximated the October 2021 estimate of 1.025 billion pounds of copper. Fourth-quarter 2021 copper sales were higher than fourth-quarter 2020 sales of 866 million pounds of copper, primarily reflecting the ramp-up of underground mining at PT-FI and higher milling rates in North America and South America. Gold sales of 395 thousand ounces were 5 percent above the October 2021 estimate of 375 thousand ounces of gold, primarily reflecting higher throughput rates. Fourth-quarter 2021 gold sales were higher than fourth-quarter 2020 sales of 293 thousand ounces, primarily reflecting the ramp-up of underground mining at PT-FI. Molybdenum sales of 19 million pounds were lower than the October 2021 estimate of 22 million pounds and fourth-quarter 2020 sales of 21 million pounds, primarily reflecting timing of shipments.
Consolidated sales volumes for the year 2022 are expected to approximate 4.3 billion pounds of copper, 1.6 million ounces of gold and 80 million pounds of molybdenum, including 970 million pounds of copper, 380 thousand ounces of gold and 20 million pounds of molybdenum in first-quarter 2022. Projected sales volumes are dependent on operational performance, weather-related conditions, timing of shipments and other factors
The Company is committed to validating all of its copper producing sites with The Copper Mark, a comprehensive assurance framework designed to demonstrate the copper industry's responsible production practices. To achieve The Copper Mark, each site is required to complete an external assurance process to assess conformance with 32 environmental, social and governance requirements. In fourth-quarter 2021, FCX achieved the Copper Mark at Bagdad. To date, FCX has a total of seven sites that have been validated (Bagdad, Morenci, Miami, El Paso, Cerro Verde, El Abra and Atlantic Copper), and has commenced The Copper Mark assessment process at four additional sites in North America, specifically Chino, Tyrone, Safford and Sierrita.
FCX has substantial reserves and future opportunities in the United States (U.S.), primarily associated with existing mining operations. Current operations at the Lone Star copper leach project, which was completed in the second half of 2020, are exceeding the initial design capacity of 200 million pounds annually and produced approximately 235 million pounds of copper in 2021. FCX continues to advance opportunities to increase Lone Star operating rates and is advancing plans to increase volumes to achieve 300 million pounds of copper per year from oxide ores. The oxide project advances the opportunity for development of the large-scale sulfide resources at Lone Star. The Company is increasing exploration in the area to support metallurgical testing and mine development planning for a potential long-term investment in a concentrator. It is also evaluating an expansion of the Bagdad operation in northwest Arizona and is engaging stakeholders. Feasibility studies to double Bagdad's operating rates are expected to commence in 2022.
The Company continues to advance initiatives to recover additional copper from its large existing leach stockpiles. There are several initiatives ongoing across FCX's Americas footprint which incorporate new applications, technologies and data analytics. Initial results are encouraging and support additional work on these emerging opportunities. FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. In addition to copper, certain of these mines produce molybdenum concentrate, gold and silver. All of the North America mining operations are wholly owned, except for Morenci, where it records 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method.
Milling rates at Cerro Verde's concentrator facilities, in Peru, averaged 376,700 metric tons of ore per day in fourth-quarter 2021 and 380,300 metric tons of ore per day for the year 2021. Subject to ongoing monitoring of COVID-19 protocols, Cerro Verde is targeting milling rates to increase to approximately 400,000 metric tons of ore per day during 2022. El Abra, in Chile, increased operating rates to pre-COVID-19 pandemic levels during 2021. Increased mining and stacking activities are expected to result in a 30 percent increase in El Abra copper production for the year 2022, compared with the year 2021. FCX continues to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher copper recoveries. El Abra's large sulfide resource could potentially support a major mill project similar to the facilities constructed at Cerro Verde in 2015. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project, and it is engaging stakeholders and preparing data required for submission of a robust permit application. The Company is continuing to monitor potential changes in regulatory and fiscal matters in Chile and will defer major investment decisions pending clarity on these matters.
PT-FI operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. FCX has a 48.76 percent ownership interest in PT-FI and manages its mining operations. Under the terms of the shareholders agreement, FCX’s economic interest in PT-FI approximates 81 percent through 2022. The ramp-up of underground production at PT-FI continues to advance on schedule. Fourth-quarter 2021 highlights include: Achieved quarterly copper and gold volumes approximating 100 percent of the projected ultimate annualized levels; and 21 new drawbells were constructed at the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines, bringing cumulative open drawbells to 510. ?Combined average production from the Grasberg Block Cave and DMLZ underground mines approximated 160,800 metric tons of ore per day and PT-FI's total milling rates averaged 181,000 metric tons of ore per day. PT-FI expects milling rates to average approximately 180,000 metric tons of ore per day in 2022. The installation of additional milling facilities at PT-FI are in progress and are currently expected to be completed in 2023, which will increase milling capacity to approximately 240,000 metric tons of ore per day. Average annual production of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold for the next five years at an attractive unit net cash cost, providing significant margins and cash flows.
In October 2021, PT-FI commenced long-term mine development activities for its Kucing Liar deposit, which is expected to produce over 6 billion pounds of copper and 5 million ounces of gold over the life of the project. Similar to PT-FI's experience with large-scale, block-cave mines, pre-production development activities will occur over an approximate 10-year timeframe. At full operating rates, annual production from Kucing Liar is expected to approximate 600 million pounds of copper and 500 thousand ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production.
In connection with PT-FI’s 2018 agreement with the Indonesia government to secure the extension of its long-term mining rights, PT-FI committed to construct new domestic smelting capacity totaling 2 million metric tons of concentrate per year by December 2023. During 2020, PT-FI notified the Indonesia government of schedule delays resulting from the COVID-19 pandemic and continues to review with the government a revised schedule for satisfying its commitment. PT-FI is actively engaged in the following projects for domestic smelting activities: Construction of a new greenfield smelter in Gresik, Indonesia with a capacity to process approximately 1.7 million metric tons of copper concentrate per year; Expansion of PT Smelting's (PT-FI's 39.5-percent owned copper smelter and refinery in Gresik, Indonesia) capacity by 30 percent to 1.3 million metric tons of concentrate per year, which is expected to be completed by the end of 2023: and Construction of a precious metals refinery (PMR) to process gold and silver from the new greenfield smelter and PT Smelting at an estimated cost of $250 million.
In Colorado, FCX operates two wholly owned molybdenum mines, the Henderson underground mine and the Climax open-pit mine. Production from the molybdenum mines totaled 7 million pounds of molybdenum in fourth-quarter 2021 and 5 million pounds of molybdenum in fourth-quarter 2020. FCX plans to increase mining rates at the Climax mine in 2022 to provide options to increase volumes in response to market demand for molybdenum. The Company’s consolidated molybdenum sales and average realized prices, which include sales of molybdenum produced at the Molybdenum mines.
Mining exploration activities are primarily associated with its existing mines, focusing on opportunities to expand reserves and resources to support development of additional future production capacity. Exploration results continue to indicate opportunities for significant future potential reserve additions at our existing properties in North America and South America. Exploration expenditures for the year 2022 are expected to approximate $110 million, compared with $50 million in 2021. FCX intends to increase its exploration expenditures during 2022 primarily to advance Lone Star and other opportunities at it’s North America copper mines. The Company has long-lived reserves and a significant resource position in its existing portfolio.
FCX has significant mineral reserves, mineral resources and future development opportunities within its portfolio of mining assets. FCX's preliminary estimated consolidated recoverable proven and probable mineral reserves from its mines at December 31, 2021, include 107.2 billion pounds of copper, 27.1 million ounces of gold and 3.39 billion pounds of molybdenum. Recoverable mineral reserve volumes are those which it estimates can be economically extracted or produced at the time of the mineral reserve determination.