Freeport-McMoRan 2013 Annual Report Download - page 50

MANAGEMENT’S DISCUSSION AND ANALYSIS
48 | FREEPORT-McMoRan
DMLZ. The DMLZ ore body lies below the DOZ mine at the
2,590-meter elevation and represents the downward continuation
of mineralization in the Ertsberg East Skarn system and
neighboring Ertsberg porphyry. We plan to mine the ore body
using a block-cave method with production beginning in 2015.
Targeted production rates once the DMLZ mining operation
reaches full capacity are expected to approximate 80,000 metric
tons of ore per day. Drilling efforts continue to determine the
extent of this ore body. Aggregate mine development capital
costs for the DMLZ mine are expected to approximate $2.6 billion
(incurred between 2009 to 2020), with PT-FI’s share totaling
approximately $1.5 billion. Aggregate project costs totaling
$0.8 billion have been incurred through December 31, 2013
($0.3 billion during 2013).
Operating Data. Following is summary operating data for our
Indonesia mining operations for the years ended December 31.
2013 2012 2011
Operating Data, Net of Joint Venture Interest
Copper (millions of recoverable pounds)
Production 915 695 846
Sales 885 716 846
Average realized price per pound $ 3.28 $ 3.58 $ 3.85
Gold (thousands of recoverable ounces)
Production 1,142 862 1,272
Sales 1,096 915 1,270
Average realized price per ounce $ 1,312 $ 1,664 $ 1,583
100% Operating Data
Ore milled (metric tons per day):
a
Grasberg open pit 127,700 118,800 112,900
DOZ underground mine
b
49,400 44,600 51,700
Big Gossan underground mine
c
2,100 1,600 1,500
Total 179,200 165,000 166,100
Average ore grade:
Copper (percent) 0.76 0.62 0.79
Gold (grams per metric ton) 0.69 0.59 0.93
Recovery rates (percent):
Copper 90.0 88.7 88.3
Gold 80.0 75.7 81.2
Production (recoverable):
Copper (millions of pounds) 928 695 882
Gold (thousands of ounces) 1,142 862 1,444
a. Amounts represent the approximate average daily throughput processed at PT-FI’s mill
facilities from each producing mine.
b. Production from the DOZ underground mine is expected to ramp up to the design rate
of 80,000 metric tons of ore per day during 2014, pending approval of export permits as
described above.
c. Production from the Big Gossan underground mine is expected to ramp up to 7,000 metric
tons of ore per day by 2016; however, production is currently suspended pending
resolution of the export regulatory matter.
2013 compared with 2012. Indonesia’s sales volumes increased to
885 million pounds of copper and 1.1 million ounces of gold in
2013, compared with 716 million pounds of copper and 915
thousand ounces of gold in 2012, primarily reflecting higher ore
grades and increased mill rates.
expenditures and implementing workforce reductions. PT-FI may
also be required to declare force majeure under its concentrate
sales agreements.
PT-FI is also engaged in discussions with officials of the
Indonesian government on its operations, future plans and COW.
We are working with the government in its review of PT-FI’s
COW and to obtain an extension of our COW beyond 2021, as
provided under the terms of the COW. Refer to Note 13 for
further discussion.
Operating and Development Activities. We have several projects
in progress in the Grasberg minerals district related to the
development of the large-scale, long-lived, high-grade underground
ore bodies. In aggregate, these underground ore bodies are
expected to ramp up over several years to produce approximately
240,000 metric tons of ore per day following the transition from
the Grasberg open pit, currently anticipated to occur in 2017. Over
the next five years, estimated aggregate capital spending on
these projects is currently expected to average $0.9 billion per
year ($0.7 billion per year net to PT-FI). Considering the long-term
nature and large size of these projects, actual costs could vary
from these estimates.
The following provides additional information on the continued
development of the Common Infrastructure project, the Grasberg
Block Cave underground mine and development of the Deep
Mill Level Zone (DMLZ) ore body that lies below the Deep Ore Zone
(DOZ) underground mine.
Common Infrastructure and Grasberg Block Cave Mine. In 2004,
PT-FI commenced its Common Infrastructure project to provide
access to its large undeveloped underground ore bodies located
in the Grasberg minerals district through a tunnel system located
approximately 400 meters deeper than its existing underground
tunnel system. In addition to providing access to our underground
ore bodies, the tunnel system will enable PT-FI to conduct future
exploration in prospective areas associated with currently
identified ore bodies. The tunnel system was completed to the
Big Gossan terminal, and the Big Gossan mine was brought into
production in 2010. Development of the DMLZ and Grasberg Block
Cave underground mines is advancing using the Common
Infrastructure project tunnels as access.
The Grasberg Block Cave underground mine accounts for
more than 40 percent of our recoverable proven and probable
reserves in Indonesia. Production at the Grasberg Block Cave
mine is expected to commence in 2017, at the end of mining the
Grasberg open pit. Targeted production rates once the Grasberg
Block Cave mining operation reaches full capacity are expected
to approximate 160,000 metric tons of ore per day.
Aggregate mine development capital for the Grasberg Block
Cave mine and associated Common Infrastructure is expected to
approximate $5.2 billion (incurred from 2008 to 2021), with PT-FI’s
share totaling approximately $4.6 billion. Aggregate project
costs totaling $1.3 billion have been incurred through December 31,
2013 ($0.5 billion during 2013).