Freeport-McMoRan 2011 Annual Report Download - page 40

38 | FREEPORT-McMoRan COPPER & GOLD INC.
Candelaria Water. As part of our overall strategy to supply water
to the Candelaria mine, we completed construction of a pipeline
to bring water from a nearby water treatment facility. In addition,
we have completed engineering and began construction for a
desalination plant that will supply Candelaria’s longer term water
needs. e plant is expected to be completed in early 2013 at a
capital investment of approximately $300 million. Project costs
of $126 million have been incurred as of December31,2011
($120 million during 2011).
Other Matters. In fourth-quarter 2011, there was an approximate
two-month labor strike at Cerro Verde during the negotiation of a
new labor agreement. e strike did not have a signicant impact
on production, and a new three-year agreement with the union
was reached in late December 2011. Also during fourth-quarter
2011, El Abra negotiated a new four-year labor agreement with its
union, which will replace the agreement scheduled to expire in
July 2012. In December 2011, bonuses totaling $50 million were
paid to employees at Cerro Verde and El Abra pursuant to the new
labor agreements.
Operating Data. Following is summary operating data for the
South America mining operations for the years ended December 31.
2011 2010 2009
Copper (millions of recoverable pounds)
Production 1,306 1,354 1,390
Sales 1,322 1,335 1,394
Average realized price per pound $ 3.77 $ 3.68 $ 2.70
Gold (thousands of recoverable ounces)
Production 101 93 92
Sales 101 93 90
Average realized price per ounce $ 1,580 $ 1,263 $ 982
Molybdenum (millions of recoverable
pounds)
Production
a
10 7 2
SX/EW operations
Leach ore placed in stockpiles
(metric tons per day) 245,200 268,800 258,200
Average copper ore grade (percent) 0.50 0.41 0.45
Copper production (millions of
recoverable pounds) 439 504 565
Mill operations
Ore milled (metric tons per day) 189,200 188,800 181,300
Average ore grade:
Copper (percent) 0.66 0.65 0.66
Gold (grams per metric ton) 0.12 0.10 0.10
Molybdenum (percent) 0.02 0.02 0.02
Copper recovery rate (percent) 89.6 90.0 88.9
Production (recoverable):
Copper (millions of pounds) 867 850 825
Gold (thousands of ounces) 101 93 92
Molybdenum (millions of pounds) 10 7 2
a. Reflects molybdenum production from the Cerro Verde mine. Sales of molybdenum are
reflected in the Molybdenum division.
2011 compared with 2010. Copper sales volumes from our South
America mining operations totaled 1.3 billion pounds in 2011 and
2010, primarily reecting lower mining rates at El Abra as it
transitions from oxide to sulde ores, partially oset by higher ore
grades at Candelaria.
Consolidated sales volumes from our South America mines are
expected to approximate 1.3 billion pounds of copper and 100
thousand ounces of gold in 2012, slightly lower than 2011 sales.
Lower projected ore grades at Cerro Verde and Candelaria in 2012
are expected to be partly oset by higher production at El Abra.
Molybdenum production from Cerro Verde is expected to
approximate 10 million pounds in 2012.
2010 compared with 2009. Copper sales volumes from our
South America mining operations decreased to 1.3 billion pounds
in 2010, compared with 1.4 billion in 2009, primarily reecting
anticipated lower ore grades at El Abra.
Unit Net Cash Costs. Unit net cash costs per pound of copper
is a measure intended to provide investors with information about
the cash-generating capacity of our mining operations expressed
on a basis relating to the primary metal product for our respective
operations. We use this measure for the same purpose and
for monitoring operating performance by our mining operations.
is information diers from measures of performance
determined in accordance with U.S. GAAP and should not be
considered in isolation or as a substitute for measures of
performance determined in accordance with U.S. GAAP. is
measure is presented by other mining companies, although our
measure may not be comparable to similarly titled measures
reported by other companies.
Gross Profit per Pound of Copper. e following tables
summarize unit net cash costs and gross prot per pound at our
South America mining operations for the years ended December 31.
ese tables reect unit net cash costs per pound of copper under
the by-product and co-product methods as our South America
mining operations also had small amounts of molybdenum, gold
and silver sales. Refer to “Product Revenues and Production
Costs” for an explanation of the “by-product” and “co-product”
methods and a reconciliation of unit net cash costs per pound
to production and delivery costs applicable to sales reported in our
consolidated nancial statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS