Stafford-Lodestar Production Is Approaching 300 Million Pounds Of Copper Per Year
PHOENIX, AZ - Freeport-McMoRan Inc. (FCX), Chairman and CEO said, “Our company is a premier global leader in the copper industry, with large-scale, long-lived reserves and an attractive portfolio of organic growth opportunities. We are focused on executing our strategy to supply copper efficiently and responsibly to a world with growing requirements for this critically important metal. Our results in the first quarter reflect the commitment and resolve of our team to overcome challenges and enhance our foundation for long-term success. We are strongly positioned with a favorable long-term market outlook, strong balance sheet and financial strength, a high-quality asset base and an experienced and motivated team to deliver long-term value to all stakeholders."
First-quarter 2023 net income attributable to common stock of $663 million, and adjusted net income attributable to common stock of $757 million after excluding net charges totaling $94 million, primarily associated with adjustments to environmental obligations, contested tax matters and asset impairments.
The Consolidated sales volumes for the year 2023 is expected to approximate 4.1 billion pounds of copper, 1.8 million ounces of gold and 79 million pounds of molybdenum, including 1.1 billion pounds of copper, 500 thousand ounces of gold and 20 million pounds of molybdenum in second-quarter 2023. Consolidated copper and gold production volumes for the year 2023 are expected to be above consolidated sales volumes, primarily reflecting a deferral of approximately 110 million pounds of copper and 140 thousand ounces of gold from mine production under the PT Smelting tolling arrangement to be processed and sold as refined metal in future periods.
Copper sales in first quarter were 832 million pounds were 8% lower than the January 2023 estimate of 900 million pounds, primarily reflecting lower operating rates at the Grasberg minerals district associated with a significant weather event that temporarily disrupted operations during February 2023. The first quarter Gold sales of 270 thousand ounces were 10% lower than the January 2023 estimate of 300 thousand ounces, primarily associated with the significant weather event at the Grasberg minerals district. Molybdenum sales of 19 million pounds approximated the January 2023 estimate and first-quarter FCX is advancing a series of initiatives across its North America and South America operations to incorporate new applications, technologies and data analytics to its leaching processes. FCX believes these leach innovation initiatives provide opportunities to produce incremental copper from its large existing leach stockpiles. Initial results support the potential for incremental low-cost additions to FCX's production and reserve profile and FCX is targeting an annual run rate of approximately 200 million pounds of copper per year through these initiatives by the end of 2023.
At Safford/Lone Star, production from oxide ores is approaching 300 million pounds of copper per year, which reflects expansion of the initial design capacity of 200 million pounds of copper per year. FCX has conducted significant exploration drilling in the area in recent years. The positive drilling results indicate opportunities to expand production to include sulfide ores in the future. FCX is advancing metallurgical testing and mine development planning for a potential significant long-term investment for development of identified large sulfide resources.
FCX is planning an expansion to double the concentrator capacity of the Bagdad operation in northwest Arizona. FCX is conducting a feasibility study, which is expected to be completed in the second half of 2023. In parallel, FCX is advancing plans for expanded tailings infrastructure projects to support Bagdad's long-range plans. The timing of future developments will be dependent on market conditions, labor and supply chain considerations and other economic factors.
The Company 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. FCX records its 72% undivided joint venture interest in Morenci using the proportionate consolidation method.
In December 2022, heightened tensions, protests and social unrest emerged in Peru following a change in the country's political leadership. Cerro Verde operated at reduced rates from time to time during first quarter 2023. While demonstrations and road blockages subsided in recent weeks, the potential for civil unrest and disruption of commerce and supply chains continues. Cerro Verde resumed normal operations in March 2023. FCX continues to monitor the situation with a priority on safety and security.
El Abra's large sulfide resource supports a potential major mill project similar to the large-scale concentrator at Cerro Verde. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project. The Company is advancing plans to invest in water infrastructure to provide options to extend existing operations, while continuing to monitor potential changes in Chile's regulatory and fiscal matters.
In South America, FCX operates two copper mines in South America - Cerro Verde in Peru (in which FCX owns a 53.56% interest) and El Abra in Chile (in which FCX owns a 51% interest). These operations are consolidated in FCX's financial statements. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.
Over a multi-year investment period, PT-FI has successfully commissioned three large-scale block cave mines in the Grasberg minerals district (Grasberg Block Cave, Deep Mill Level Zone and Big Gossan), providing cumulative annualized production volumes of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold.
PT-FI is completing a project to install additional milling facilities, currently expected to be completed in early 2024. The project will increase milling capacity to approximately 240,000 metric tons of ore per day to provide sustained large scale production volumes. It is also advancing a mill recovery project with the installation of a new copper cleaner circuit that is expected to be completed in 2024, and is expected to provide incremental metal production of approximately 60 million pounds of copper and 40 thousand ounces of gold per year.
The 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 6 billion pounds of copper and 6 million ounces of gold between 2028 and the end of 2041. Pre-production development activities commenced in 2022 and are expected to continue over an approximate 10-year timeframe. At full operating rates of approximately 90,000 metric tons of ore per day, annual production from Kucing Liar is expected to approximate 550 million pounds of copper and 560 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.
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 additional domestic smelting capacity totaling 2 million metric tons of concentrate per year by the end of 2023 (subject to force majeure provisions). The Company is actively engaged in the following projects for additional domestic smelting capacity: 1) Construction of the Manyar smelter in Gresik, Indonesia with a capacity to process approximately 1.7 million metric tons of copper concentrate per year. Smelter construction was approximately 60% complete on March 31, 2023, and is expected to be commissioned during 2024. 2) Expansion of PT Smelting's capacity by 30% to 1.3 million metric tons of copper concentrate per year, which is expected to be completed by the end of 2023. 3) Construction of a precious metals refinery (PMR) to process gold and silver from the Manyar smelter and PT Smelting. Construction is in progress with commissioning expected during 2024.
FCX's 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 it’s existing properties in North America and South America.