Freeport-McMoRan 2008 Annual Report Download - page 35

Management’s Discussion and Analysis
2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 33
favorable foreign exchange rates on operating costs; reduced
mining rates at the Candelaria and Ojos del Salado mines to
reduce costs; a significant reduction in capital spending plans,
including deferral of the planned incremental expansion
project at the Cerro Verde mine and a delay in the sulfide project
at El Abra; and reduced spending for discretionary items. In
addition, we plan to temporarily curtail the molybdenum circuit at
Cerro Verde. Our operating plans for the South America copper
mines will continue to be reviewed and additional adjustments
may be made as market conditions warrant.
Operating Data. Following is summary operating data for the
South America copper mines for the years ended December 31,
2008, 2007 and 2006. The below operating data for 2007 combines
our historical data beginning March 20, 2007, with Phelps Dodge
pre-acquisition data through March 19, 2007, and 2006 reflects
Phelps Dodge pre-acquisition data. As the pre-acquisition data
represents the results of these operations under Phelps Dodge
management, such combined data is not necessarily indicative
of what past results would have been under FCX management or
of future operating results.
2008 2007
a
2006
a
Copper (millions of recoverable pounds)
Production
1,506 1,413 1,133
Sales
1,521 1,399 1,126
Average realized price per pound $ 2.57 $ 3.25 $ 3.03
Gold (thousands of recoverable ounces)
Production 114 116 112
Sales 116 114 111
Average realized price per ounce $ 853 $ 683 $ 552
Molybdenum (millions of recoverable pounds)
Production (by-product)
b
3 1 –
SX/EW operations
Leach ore placed in stockpiles
(metric tons per day) 279,700 289,100 257,400
Average copper ore grade (percent) 0.45 0.43 0.45
Copper production (millions of
recoverable pounds) 560 569 695
Mill operations
Ore milled (metric tons per day) 181,400 167,900 68,500
Average copper ore grade (percent):
Copper 0.75 0.74 0.87
Molybdenum 0.02 0.02 N/A
Copper recovery rate (percent) 89.2 87.1 93.8
Production (millions of recoverable pounds):
Copper 946 844 438
Molybdenum 3 1 –
a. The South America copper mines’ operating data for 2007 combines our historical
data beginning March 20, 2007, with Phelps Dodge pre-acquisition data through
March 19, 2007, and 2006 reflects Phelps Dodge pre-acquisition data. As the pre-
acquisition data represents the results of these operations under Phelps Dodge
management, such combined data is not necessarily indicative of what past results
would have been under FCX management or of future operating results.
b. Reflects by-product molybdenum production from our Cerro Verde copper mine.
Sales of by-product molybdenum are reflected in the Molybdenum segment.
2008 Compared with 2007
Copper sales from the South America mines totaled 1.5 billion
pounds in 2008, compared with 1.4 billion for the combined year
2007. Higher copper sales volumes in 2008 primarily reflected
higher production from the Cerro Verde concentrator, which
reached design capacity in mid-2007. Consolidated sales volumes
from our South America mines are expected to approximate 1.4
billion pounds of copper and 100 thousand ounces of gold in 2009.
Our revised operating plans for the South America copper mines
do not have a significant effect on 2009 production volumes, but
are expected to result in lower 2010 production by approximately
100 million pounds of copper.
2007 Compared with 2006
Copper sales from the South America mines totaled
approximately 1.4 billion pounds in the combined year 2007 and
approximately 1.1 billion pounds in 2006. Higher copper sales
volumes in 2007 primarily reflected higher production from the
Cerro Verde concentrator, which reached design capacity in
mid-2007, partly offset by lower production at El Abra in 2007
resulting from lower ore grades.
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. This information differs 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. This measure is presented by other mining companies,
although our measure may not be comparable to similarly titled
measures reported by other companies.