Freeport-McMoRan 2004 Annual Report Download - page 7

Production฀from฀PT฀Freeport฀Indonesia’s฀Deep฀Ore฀Zone฀
(DOZ)฀underground฀mine฀averaged฀43,600฀metric฀tons฀
of฀ore฀per฀day฀in฀2004.฀DOZ฀operations฀continued฀for฀a฀
second฀straight฀year฀to฀perform฀above฀design฀capacity,฀
which฀is฀being฀increased฀to฀a฀sustainable฀level฀of฀50,000฀
metric฀tons฀per฀day฀through฀a฀high-return฀capital฀project฀
to฀install฀a฀second฀underground฀crusher฀and฀additional฀
ventilation.฀The฀DOZ฀block฀cave฀mine฀is฀one฀of฀the฀world’s฀
largest฀underground฀operations.
฀ Mill฀throughput฀increased฀throughout฀2004฀as฀we฀
made฀progress฀on฀our฀waste฀removal฀efforts,฀averaging฀
185,100฀metric฀tons฀of฀ore฀per฀day฀during฀2004,฀including฀
a฀fourth-quarter฀average฀of฀approximately฀230,000฀
metric฀tons฀of฀ore฀per฀day.฀Mill฀throughput,฀which฀varies฀
depending฀on฀ore฀types฀processed,฀is฀expected฀to฀average฀
approximately฀235,000฀metric฀tons฀per฀day฀in฀2005.฀
฀ Copper฀ore฀grades฀from฀the฀PT฀Freeport฀Indonesia฀
operations฀averaged฀0.87฀percent฀for฀the฀full฀year฀2004,฀
compared฀with฀1.09฀percent฀for฀2003.฀Gold฀ore฀averaged฀
0.88฀grams฀per฀metric฀ton,฀compared฀with฀1.54฀grams฀
per฀metric฀ton฀in฀the฀previous฀year.฀Grades฀were฀higher฀
in฀the฀fourth฀quarter฀(1.17฀percent฀for฀copper฀and฀1.20฀
grams฀per฀metric฀ton฀for฀gold)฀and฀are฀expected฀to฀be฀
significantly฀higher฀in฀2005฀than฀2004฀levels.
฀ PT฀Freeport฀Indonesia’s฀unit฀net฀cash฀production฀
costs,฀including฀gold฀and฀silver฀credits,฀averaged฀$0.40฀
per฀pound฀for฀2004,฀compared฀to฀a฀net฀credit฀of฀($0.02)฀
in฀2003.฀This฀increase฀was฀primarily฀the฀result฀of฀lower฀
sales฀volumes,฀and฀to฀a฀lesser฀extent฀higher฀energy฀
costs,฀increased฀maintenance฀costs,฀the฀impact฀of฀a฀
stronger฀Australian฀dollar฀and฀increased฀treatment฀and฀
refining฀costs฀resulting฀from฀higher฀copper฀prices.฀Cash฀
production฀costs฀for฀the฀fourth฀quarter฀of฀2004฀averaged฀
$0.17฀per฀pound฀of฀copper.฀Because฀of฀the฀fixed฀nature฀
of฀most฀of฀PT฀Freeport฀Indonesia’s฀costs฀and฀the฀effect฀
of฀higher฀sales฀volumes฀in฀2005,฀PT฀Freeport฀Indonesia฀
estimates฀that฀in฀2005฀unit฀net฀cash฀production฀costs฀will฀
be฀significantly฀lower฀than฀in฀2004.฀Assuming฀an฀average฀
price฀of฀$420฀per฀ounce฀for฀gold,฀gold฀credits฀are฀expected฀
to฀essentially฀offset฀cash฀production฀costs฀for฀the฀year,฀
resulting฀in฀a฀net฀cash฀production฀cost฀of฀zero฀cents฀per฀
pound฀of฀copper.฀฀
฀ Our฀operations฀team฀continues฀its฀efforts฀to฀improve฀
productivity฀of฀our฀mining,฀milling฀and฀maintenance฀
activities.฀Programs฀are฀under฀way,฀in฀coordination฀with฀
our฀partners฀and฀contractors,฀to฀improve฀performance฀
involving฀safety,฀equipment฀availability,฀drilling฀
efficiency,฀pit฀road฀maintenance,฀logistics฀and฀other฀
areas฀that฀are฀part฀of฀our฀continual฀improvement฀and฀
operations฀excellence฀programs.฀In฀addition,฀work฀
commenced฀in฀2004฀on฀new฀portals฀and฀tunnel฀systems฀
as฀part฀of฀common฀infrastructure฀which฀will฀provide฀for฀
future฀development฀of฀underground฀operations฀and฀enable฀
us฀to฀expand฀exploratory฀drilling฀activities.
DOZ Block Cave Production:
Original Feasibility v. Actual/Projected
in thousands of metric tons per day
Original 1998 Feasibility Study
Actual (00-04)/Current Projections (05-09)
10
20
30
40
50
09080706050403020100
Quarterly Mill Throughput
in thousands of metric tons per day
50
100
150
200
250
4Q043Q042Q041Q04
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