Freeport-McMoRan 2012 Annual Report Download - page 40

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MANAGEMENT’S DISCUSSION AND ANALYSIS
2012 2011 2010
Copper (millions of recoverable pounds)
Production 1,257 1,306 1,354
Sales 1,245 1,322 1,335
Average realized price per pound $ 3.58 $ 3.77 $ 3.68
Gold (thousands of recoverable ounces)
Production 83 101 93
Sales 82 101 93
Average realized price per ounce $ 1,673 $ 1,580 $ 1,263
Molybdenum (millions of recoverable
pounds)
Production
a
8 10 7
SX/EW operations
Leach ore placed in stockpiles
(metric tons per day) 229,300 245,200 268,800
Average copper ore grade (percent) 0.55 0.50 0.41
Copper production (millions of
recoverable pounds) 457 439 504
Mill operations
Ore milled (metric tons per day) 191,400 189,200 188,800
Average ore grade:
Copper (percent) 0.60 0.66 0.65
Gold (grams per metric ton) 0.10 0.12 0.10
Molybdenum (percent) 0.02 0.02 0.02
Copper recovery rate (percent) 90.1 89.6 90.0
Copper production (millions of
recoverable pounds) 800 867 850
a. Reflects molybdenum production from the Cerro Verde mine. Sales of molybdenum are
reflected in the Molybdenum division.
2012 compared with 2011. Copper sales volumes from our South
America mining operations totaled 1.25 billion pounds in 2012,
compared with 1.32 billion in 2011, primarily reflecting lower ore
grades at Candelaria and Cerro Verde, partly offset by higher
mining rates and ore grades at El Abra.
Consolidated copper sales volumes from our South America
mines are expected to approximate 1.33 billion pounds in
2013. Higher projected copper sales volumes in 2013, compared
with 2012, primarily reflect the mining of higher grade ore at
Candelaria. Refer to "Outlook" for projected gold and molybdenum
sales volumes.
2011 compared with 2010. Copper sales volumes from our
South America mining operations totaled 1.32 billion pounds in
2011 and 1.34 billion pounds in 2010, primarily reflecting lower
mining rates at El Abra as it transitions from oxide to sulfide ores,
partially offset by higher grade ore at Candelaria.
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 metals mining companies,
although our measure may not be comparable to similarly titled
measures reported by other companies.
Gross Profit per Pound of Copper. The following tables summarize
unit net cash costs and gross profit per pound at our South
America mining operations for the years ended December 31. Unit
net cash costs per pound of copper are reflected under the
by-product and co-product methods as the South America mining
operations also had small amounts of molybdenum, gold and
silver sales. 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 financial statements.
2012 2011
By-Product Co-Product By-Product Co-Product
Method Method Method Method
Revenues, excluding adjustments $ 3.58 $ 3.58 $ 3.77 $ 3.77
Site production and delivery, before net noncash
and other costs shown below 1.60
a
1.49 1.38
a
1.27
By-product credits (0.26) — (0.35) —
Treatment charges 0.16 0.16 0.17 0.17
Unit net cash costs 1.50 1.65 1.20 1.44
Depreciation, depletion and amortization 0.23 0.22 0.20 0.18
Noncash and other costs, net 0.09 0.06 0.06 0.05
Total unit costs 1.82 1.93 1.46 1.67
Revenue adjustments, primarily for pricing on
prior period open sales
0.09 0.09 0.01 —
Gross profit per pound
$ 1.85 $ 1.74 $ 2.32 $ 2.10
Copper sales (millions of recoverable pounds) 1,245 1,245 1,322 1,322
a. Includes $16 million ($0.01 per pound) associated with labor agreement costs at Candelaria in 2012, and $50 million ($0.04 per pound) for bonuses paid at Cerro Verde and El Abra pursuant to
new labor agreements in 2011.