Freeport-McMoRan 2013 Annual Report Download - page 47

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MANAGEMENT’S DISCUSSION AND ANALYSIS
2013 ANNUAL REPORT | 45
El Abra Sulde. We continue to evaluate a potential large-scale
milling operation at El Abra to process additional sulfide material
and to achieve higher recoveries. Exploration results at El Abra
have identified a significant sulfide resource, which could
potentially support a major mill project. Future investments will
be dependent on technical studies, economic factors and global
market conditions.
Operating Data. Following is summary operating data for our
South America mining operations for the years ended December 31.
2013 2012 2011
Copper (millions of recoverable pounds)
Production 1,323 1,257 1,306
Sales 1,325 1,245 1,322
Average realized price per pound $ 3.30 $ 3.58 $ 3.77
Gold (thousands of recoverable ounces)
Production 101 83 101
Sales 102 82 101
Average realized price per ounce $ 1,350 $ 1,673 $ 1,580
Molybdenum (millions of recoverable
pounds)
Production
a
13 8 10
SX/EW operations
Leach ore placed in stockpiles
(metric tons per day) 274,600 229,300 245,200
Average copper ore grade (percent) 0.50 0.55 0.50
Copper production
(millions of recoverable pounds) 448 457 439
Mill operations
Ore milled (metric tons per day) 192,600 191,400 189,200
Average ore grade:
Copper (percent) 0.65 0.60 0.66
Gold (grams per metric ton) 0.12 0.10 0.12
Molybdenum (percent) 0.02 0.02 0.02
Copper recovery rate (percent) 90.9 90.1 89.6
Copper production
(millions of recoverable pounds) 875 800 867
a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which
include sales of molybdenum produced at Cerro Verde.
Unit net cash costs (net of by-product credits) for our North
America copper mines increased to $1.67 per pound of copper in
2012, compared with $1.41 per pound in 2011, primarily reflecting
increased mining and milling activities and lower molybdenum
credits, partly offset by higher copper sales volumes.
South America Mining
We operate four copper mines in South America — Cerro Verde in
Peru, and El Abra, Candelaria and Ojos del Salado in Chile. We
own a 53.56 percent interest in Cerro Verde, a 51 percent interest
in El Abra, and an 80 percent interest in the Candelaria and Ojos
del Salado mining complex. All operations in South America are
consolidated in our financial statements.
South America mining includes open-pit and underground
mining, sulfide ore concentrating, leaching and SX/EW operations.
Production from our South America mines is sold as copper
concentrate or copper cathode under long-term contracts. Our
South America mines ship a portion of their copper concentrate
inventories to Atlantic Copper. In addition to copper, the
Candelaria and Ojos del Salado mines produce gold and silver,
and the Cerro Verde mine produces molybdenum concentrates.
Operating and Development Activities. Cerro Verde Expansion.
Construction activities associated with a large-scale expansion at
Cerro Verde are in progress. At December 31, 2013, engineering
was more than 90 percent complete and construction progress is
advancing on schedule. The project is expected to expand the
concentrator facilities from 120,000 metric tons of ore per day to
360,000 metric tons of ore per day and provide incremental
annual production of approximately 600 million pounds of copper
and 15 million pounds of molybdenum beginning in 2016. At
December 31, 2013, $1.5 billion had been incurred for this project
(approximately $1.0 billion during 2013), with approximately
$3.1 billion remaining to be incurred. Considering the long-term
nature and large size of the project, actual costs could vary from
these estimates.
2012 2011
By-Product Co-Product Method By-Product
Co-Product Method
Method Copper Molybdenum
a
Method Copper Molybdenum
a
Revenues, excluding adjustments $ 3.64 $ 3.64 $ 13.00 $ 3.99 $ 3.99 $ 15.72
Site production and delivery, before net noncash
and other costs shown below 1.91 1.75 6.32 1.78 1.60 6.86
By-product credits (0.36) — — (0.48) — —
Treatment charges 0.12 0.11 — 0.11 0.10 —
Unit net cash costs 1.67 1.86 6.32 1.41 1.70 6.86
Depreciation, depletion and amortization 0.26 0.24 0.48 0.21 0.20 0.39
Noncash and other costs, net 0.10 0.10 0.09 0.13 0.13 0.09
Total unit costs 2.03 2.20 6.89 1.75 2.03 7.34
Revenue adjustments, primarily for pricing on
prior period open sales 0.01 0.01 — — — —
Gross profit per pound $ 1.62 $ 1.45 $ 6.11 $ 2.24 $ 1.96 $ 8.38
Copper sales (millions of recoverable pounds) 1,347 1,347 1,244 1,244
Molybdenum sales (millions of recoverable pounds)
a
36 35
a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.