Freeport-McMoRan 2011 Annual Report Download - page 38

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36 | FREEPORT-McMoRan COPPER & GOLD INC.
2010 compared with 2009. Copper sales volumes from our
North America copper mines decreased to 1.1 billion pounds in
2010, compared with 1.2 billion pounds in 2009, primarily
because of anticipated lower ore grades at Saord and Sierrita, lower
mill throughput because of unscheduled crusher maintenance at
Bagdad and mill maintenance at Sierrita.
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 and Molybdenum. e following
tables summarize unit net cash costs and gross prot per pound at
the North America copper mines for the years ended December 31.
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.
Unit net cash costs (net of by-product credits) for our North
America copper mines increased to $1.41 per pound of copper in
2011, compared with $1.24 per pound in 2010, primarily reecting
higher site production and delivery costs ($0.28 per pound)
resulting from increased mining and milling activities and higher
input costs. Partly osetting higher site production and delivery
costs were higher molybdenum credits ($0.13 per pound) primarily
resulting from higher molybdenum volumes.
Our operating North America copper mines have varying cost
structures because of dierences in ore grades and characteristics,
processing costs, by-products and other factors. During 2011,
average unit net cash costs for the North America copper mines
ranged from a net cost of $0.41 per pound to $1.97 per pound at the
individual mines and averaged $1.41 per pound. Assuming
achievement of current sales volume and cost estimates and an
average price of $13 per pound of molybdenum for 2012, we
estimate that average unit net cash costs (net of by-product credits)
for our North America copper mines would approximate $1.67 per
pound of copper in 2012. North America’s average unit net cash
costs for 2012 would change by approximately $0.04 per pound for
each $2 per pound change in the average price of molybdenum
during 2012. Higher projected unit net cash costs in 2012,
compared with 2011, primarily reect higher mining and milling
rates and lower by-product credits associated with lower
molybdenum grades and prices, partly oset by higher projected
copper volumes.
2011 2010
By-Product Co-Product Method By-Product
Co-Product Method
Method Copper Molybdenum
a
Method Copper Molybdenum
a
Revenues, excluding adjustments $ 3.99 $ 3.99 $ 15.72 $ 3.42 $ 3.42 $ 15.60
Site production and delivery, before net noncash
and other costs shown below 1.78 1.60 6.86 1.50 1.35 7.95
By-product credits
a
(0.48) — — (0.35) — —
Treatment charges 0.11 0.10 — 0.09 0.09 —
Unit net cash costs 1.41 1.70 6.86 1.24 1.44 7.95
Depreciation, depletion and amortization 0.21 0.20 0.39 0.24 0.22 0.54
Noncash and other costs, net 0.07 0.07 0.05 0.12 0.12 0.01
Total unit costs 1.69 1.97 7.30 1.60 1.78 8.50
Revenue adjustments — — — — — —
Idle facility and other non-inventoriable costs (0.06) (0.06) (0.04) (0.08) (0.08) (0.02)
Gross profit per pound $ 2.24 $ 1.96 $ 8.38 $ 1.74 $ 1.56 $ 7.08
Copper sales (millions of recoverable pounds) 1,244 1,244 1,082 1,082
Molybdenum sales (millions of recoverable pounds)
b
35 25
a. Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b. Reflects molybdenum produced by certain of our North America copper mines.
MANAGEMENT’S DISCUSSION AND ANALYSIS