Freeport-McMoRan 2013 Annual Report Download - page 52

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MANAGEMENT’S DISCUSSION AND ANALYSIS
50 | FREEPORT-McMoRan
During the second half of 2013, our Africa mining operations
experienced several power interruptions that negatively impacted
operating rates. Power availability has improved, and TFM
continues to work with its power provider and DRC authorities to
establish more consistent and reliable power availability.
Operating Data. Following is summary operating data for our
Africa mining operations for the years ended December 31.
2013 2012 2011
Copper (millions of recoverable pounds)
Production 462 348 281
Sales 454 336 283
Average realized price per pound
a
$ 3.21 $ 3.51 $ 3.74
Cobalt (millions of contained pounds)
Production 28 26 25
Sales 25 25 25
Average realized price per pound $ 8.02 $ 7.83 $ 9.99
Ore milled (metric tons per day) 14,900 13,000 11,100
Average ore grade (percent):
Copper 4.22 3.62 3.41
C obalt 0.37 0.37 0.40
Copper recovery rate (percent) 91.4 92.4 92.5
a. Includes point-of-sale transportation costs as negotiated in customer contracts.
2013 compared with 2012. Copper sales volumes from TFM
increased to 454 million pounds in 2013, compared with 336 million
pounds in 2012, primarily reflecting increased mining and milling
rates resulting from the expansion project completed in early
2013, and higher ore grades.
Consolidated sales volumes from our Africa mining operations
are expected to approximate 445 million pounds of copper and
30 million pounds of cobalt in 2014.
Unit net cash costs (net of gold and silver credits) for our Indonesia
mining operations averaged $1.24 per pound of copper in 2012,
compared with $0.09 per pound in 2011. Higher unit net cash costs
primarily reflected lower copper and gold sales volumes.
Africa Mining
Africa mining includes TFM’s Tenke minerals district. We hold an
effective 56 percent interest in the Tenke copper and cobalt
mining concessions in the Katanga province of the DRC through
our consolidated subsidiary TFM, and we are the operator of Tenke.
The Tenke operation includes surface mining, leaching and
SX/EW operations. Copper production from the Tenke minerals
district is sold as copper cathode. In addition to copper, the
Tenke minerals district produces cobalt hydroxide.
Operating and Development Activities. TFM completed its
second phase expansion project in early 2013, which included
optimizing the current plant and increasing mine, mill and
processing capacity. The expanded mill facility is performing well.
Throughput rates averaged 14,900 metric tons of ore per day
during 2013, compared with original design capacity of 14,000
metric tons of ore per day, which has enabled an increase in
Tenke’s copper production to over 430 million pounds per year.
The addition of a second sulphuric acid plant is expected to be
completed in 2016.
We continue to engage in exploration activities and metallurgical
testing to evaluate the potential of the highly prospective Tenke
minerals district. These analyses are being incorporated in
future plans for potential expansions of production capacity.
Future expansions are subject to a number of factors, including
economic and market conditions, and the business and
investment climate in the DRC.
2012 2011
By-Product Co-Product Method By-Product
Co-Product Method
Method Copper Gold Method Copper Gold
Revenues, excluding adjustments $ 3.58 $ 3.58 $ 1,664 $ 3.85 $ 3.85 $ 1,583
Site production and delivery, before net noncash
and other costs shown below 3.12 1.93 894 2.21
a
1.34 551
Gold and silver credits (2.22) — — (2.47) — —
Treatment charges 0.21 0.13 61 0.19 0.11 46
Royalty on metals 0.13 0.08 38 0.16 0.10 41
Unit net cash costs 1.24 2.14 993 0.09 1.55 638
Depreciation and amortization 0.30 0.18 85 0.25 0.16 63
Noncash and other costs, net 0.11 0.07 33 0.04 0.02 10
Total unit costs 1.65 2.39 1,111 0.38 1.73 711
Revenue adjustments, primarily for pricing on
prior period open sales 0.02 0.02 3 (0.01) (0.01) (13)
PT Smelting intercompany (loss) profit (0.05) (0.03) (15) 0.13 0.08 32
Gross profit per pound/ounce $ 1.90 $ 1.18 $ 541 $ 3.59 $ 2.19 $ 891
Copper sales (millions of recoverable pounds) 716 716 846 846
Gold sales (thousands of recoverable ounces) 915 1,270
a. Includes $66 million ($0.08 per pound) for bonuses and other strike-related costs.