Completion Of Projects At Safford/Lone Star Operations To Increase Copper Volumes To 300 Million Pounds Per Year
PHOENIX, AZ - Richard Adkerson, Chairman, and Kathleen Quirk, President and Chief Executive Officer of Freeport-McMoRan Copper (FCX), said, “Our global team remained focused during the quarter on strong execution of our operating plans, enhancing productivity and cost control, and initiatives to build and advance optionality in our organic growth portfolio. Our team reached an important milestone in Indonesia during the quarter with the start of commissioning of our major new copper smelter, and we are working to execute a safe and efficient ramp-up to full capacity by the end of the year. This strategically important investment is integral to support our long-term, high-quality operations in the Grasberg minerals district. Copper pricing was strong in the second quarter. The long-term outlook for copper is supported by copper’s increasingly important role in the global economy and limited available supplies to meet growing demand. Freeport is well positioned for the future as a leading, responsible producer of copper with multiple options for future growth and an experienced and innovative team with a track record of accomplishment.”
FCX is continuing to advance a series of initiatives across its North America and South America operations to incorporate new applications, technologies and data analytics to its leaching processes. In late 2023, FCX achieved its initial annual run rate target of approximately 200 million pounds of copper. Incremental copper production from these initiatives totaled 55 million pounds in second-quarter 2024 (compared with 29 million pounds in second-quarter 2023) and 106 million pounds for the first six months of 2024 (compared with 51 million pounds for the first six months of 2023). FCX is pursuing opportunities to apply recent operational enhancements on a larger scale and is testing new innovative technology applications that have the potential for significant increases in recoverable metal beyond the current run rate.
The Company manages seven copper operations in North America: Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. It also operates a copper smelter in Miami, Arizona. In addition to copper, certain of these operations produce molybdenum concentrate, gold and silver. All of the North America operations are wholly owned, except for Morenci. FCX records its 72% undivided joint venture interest in Morenci using the proportionate consolidation method.
FCX has a potential expansion project to more than double the concentrator capacity of the Bagdad operation in northwest Arizona. Bagdad’s reserve life currently exceeds 80 years and supports an expanded operation. In late 2023, FCX completed technical and economic studies, which indicated the opportunity to construct new concentrating facilities to increase copper production by 200 to 250 million pounds per year, which is more than double Bagdad’s current annual production rate. The decision to proceed and timing of the potential expansion will take into account overall copper market conditions, availability of labor and other factors, including progress on conversion of the existing haul truck fleet to autonomous and expanding housing alternatives to support long-range plans. In parallel, FCX is advancing activities for expanded tailings infrastructure projects required under long-range plans in order to advance the potential construction timeline.
The Company is completing projects at its Safford/Lone Star operation to increase volumes to achieve 300 million pounds of copper per year from oxide ores, which reflects expansion of the initial design capacity of 200 million pounds of copper per year. Additionally, positive drilling conducted in recent years indicates a large, mineralized district with opportunities to pursue a major expansion project. FCX has commenced pre-feasibility studies for a potential significant expansion and expects to complete these studies in late 2025. The decision to proceed and timing of the potential expansion will take into account results of technical and economic studies, overall copper market conditions and other factors.
Consolidated copper sales volumes from North America of 292 million pounds in second-quarter 2024 were lower than second-quarter 2023 copper sales volumes of 339 million pounds, primarily reflecting lower ore grades and planned mill maintenance, partly offset by improved leach recovery performance. FCX continues to advance initiatives to enhance productivity and improve equipment reliability to offset declines in ore grades. North America copper sales are estimated to approximate 1.3 billion pounds for the year 2024.
In South America FCX continues operating the two copper operations: Cerro Verde in Peru (in which FCX owns a 53.56% interest) and El Abra in Chile (in which FCX owns a 51% interest). In April 2024, Cerro Verde reached a new four-year collective labor agreement (CLA) with one of its two unions and incurred nonrecurring charges of $65 million in second-quarter 2024 associated with the new CLA. Cerro Verde expects to begin negotiations with a second union group prior to the expiration of its CLA, and may incur additional charges in connection with these negotiations. At the El Abra operations in Chile, FCX has completed substantial drilling and evaluation to model a large sulfide resource that would support a potential major mill project similar to the largescale concentrator at Cerro Verde. FCX is engaged in planning for a potential submission of an environmental impact statement by year-end 2025, subject to ongoing stakeholder engagement and economic evaluations. In parallel, FCX has updated its technical studies and economic models to incorporate recent capital cost trends. FCX’s consolidated copper sales from South America operations in second-quarter 2024 approximated second-quarter 2023. Copper sales from South America operations are expected to approximate 1.2 billion pounds for the year 2024.
In Indonesia, PT-FI operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Central Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. FCX has a 48.76% ownership interest in PT-FI and manages its operations. In May export licenses expired for several exporters, including PT-FI. In second-quarter 2024, the Indonesia government issued various regulations to allow, under certain conditions, continued exports of copper concentrates and anode slimes through December 2024.
In July 2024, PT-FI was granted copper concentrate and anode slimes export licenses, which are valid through December 2024 when the full ramp-up of PT-FI’s new smelter is expected. PT-FI will continue to pay export duties on copper concentrates during the smelter ramp-up period pursuant to the Indonesia regulations. The applicable rate prescribed by current regulations is 7.5% of the export value. In May 2024, the Indonesia government issued a regulation applicable to the country’s mineral and coal industries which outlines requirements for the granting of special mining license (IUPK) extensions. The regulation provides that IUPK holders may be granted a life-of-mine extension provided certain conditions are met, including ownership of integrated downstream facilities that have entered the operational stage; domestic ownership of at least 51% and agreement with a state-owned enterprise for an additional 10% ownership; commitments for additional exploration; and increases in refining capacity approved by the Ministry of Energy and Minerals. Application for extension may be submitted at any time up to one year prior to the current IUPK expiration. PT-FI’s current IUPK provides extension rights to 2041, and PT-FI expects to apply for an extension during 2024. An extension would enable continuity of large-scale operations for the benefit of all stakeholders and provide growth options through additional resource development opportunities in the highly attractive Grasberg minerals district.
Over a multi-year investment period, PT-FI has successfully commissioned three large-scale underground mines in the Grasberg minerals district (Grasberg Block Cave, Deep Mill Level Zone and Big Gossan). Milling rates averaged 196,900 metric tons of ore per day in second-quarter 2024, which reflected reduced rates in June 2024 because of the delay in obtaining PT-FI’s export licenses. PT-FI is completing a mill recovery project with the installation of a new copper cleaner circuit, which is expected to begin
commissioning in the second half of 2024. PT-FI plans to transition its existing energy source from coal to liquefied natural gas,
which would meaningfully reduce PT-FI’s Scope 1 greenhouse gas emissions at the Grasberg minerals district. PTFI’s planned investments in a new gas-fired combined cycle facility is expected to be incurred over the next four years, at a cost of approximately $1 billion, which represents an incremental cost of $0.4 billion compared to previously planned investments to refurbish the existing coal units.
Long-term mine development activities are ongoing for PT-FI’s Kucing Liar deposit in the Grasberg minerals district, which is expected to produce over 7 billion pounds of copper and 6 million ounces of gold between 2029 and the end of 2041. An extension of PT-FI’s operating rights beyond 2041 would extend the life of the project. Pre-production development activities commenced in 2022 and are expected to continue over an approximate 10-year timeframe. Capital investments are estimated to average approximately $400 million per year over this period. At full operating rates of approximately 90,000 metric tons of ore per day, annual production from Kucing Liar is expected to approximate 560 million pounds of copper and 520 thousand ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production. Kucing Liar will benefit from substantial shared infrastructure and PT-FI’s experience and long-term success in block-cave mining.
Downstream Processing Facilities. PT-FI substantially completed construction of its new smelter in June 2024 and commenced commissioning operations. The new smelter has a capacity to process approximately 1.7 million metric tons of copper concentrate per year and is expected to begin producing copper cathodes in the coming months with ramp-up to full production targeted by year-end 2024 in line with previous expectations.
The PMR is being constructed to process gold and silver from the new smelter and PT Smelting. Construction is in progress with full production expected by year-end 2024. In December 2023, PT Smelting completed an expansion of its capacity by 30% to 1.3 million metric tons of copper concentrate per year. The project was funded by PT-FI with borrowings totaling $254 million that converted
to equity effective June 30, 2024, increasing PT-FI’s ownership in PT Smelting to 66% from 39.5%. PT-FI’s copper production of 441 million pounds in second-quarter 2024 was 9% above copper production of 406 million pounds in second-quarter 2023, primarily reflecting higher ore grades. PT-FI’s gold production of 437 thousand ounces in second-quarter 2024 was 9% below gold production of 479 thousand ounces in second-quarter 2023, primarily reflecting lower ore grades. PT-FI’s consolidated sales of 337 million pounds of copper and 356 thousand ounces of gold in second-quarter 2024 were below production during the period and lower than second quarter 2023 sales volumes, reflecting shipping delays associated with the timing of renewing its copper concentrate and anode slimes export licenses.
FCX’s wholly owned Climax and Henderson molybdenum mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the Climax and Henderson mines and at FCX’s North America copper mines and South America operations is processed at FCX’s conversion facilities. Production from the primary molybdenum operations totaled 7 million pounds of molybdenum in each of second-quarter 2024 and 2023. FCX’s consolidated molybdenum sales and average realized prices include sales of molybdenum produced at the primary molybdenum operations and at FCX’s North America copper mines and South America operations.
FCX is a leading international metals company with the objective of being foremost in copper. The Company operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX is one of the world’s largest copper producers.