Freeport-McMoRan 2014 Annual Report Download - page 46

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MANAGEMENT’S DISCUSSION AND ANALYSIS
44
Morenci Mill Expansion. At Morenci, the mill expansion project
commenced operations in May 2014 and is expected to achieve
full rates in first-quarter 2015. The project targets average
incremental annual production of approximately 225 million
pounds of copper through an increase in milling rates from 50,000
metric tons of ore per day to approximately 115,000 metric tons
of ore per day. Morenci’s mill rates averaged 100,900 metric tons
per day in fourth-quarter 2014. Morenci’s copper production
is expected to average over 900 million pounds per year over the
next five years, compared with 691 million pounds in 2014.
Construction of the expanded Morenci milling facility is
substantially complete. Remaining items include completion of
the molybdenum circuit, which adds capacity of approximately
9 million pounds of molybdenum per year, and the construction of
an expanded tailings storage facility. Both are expected to be
completed in 2015. At December 31, 2014, approximately $1.6 billion
had been incurred for the Morenci mill expansion project
($0.6 billion during 2014), with approximately $55 million remaining
to be incurred.
Operating Data. Following is summary operating data for the
North America copper mines for the years ended December 31:
2014 2013 2012
Operating Data, Net of Joint Venture Interest
Copper (recoverable)
Production (millions of pounds) 1,670 1,431 1,363
Sales, excluding purchases
(millions of pounds) 1,664 1,422 1,351
Average realized price per pound $ 3.13 $ 3.36 $ 3.64
Molybdenum (millions of recoverable
pounds)
Production
a
33 32 36
100% Operating Data
SX/EW operations
Leach ore placed in stockpiles
(metric tons per day) 1,005,300 1,003,500 998,600
Average copper ore grade (percent) 0.25 0.22 0.22
Copper production
(millions of recoverable pounds) 963 889 866
Mill operations
Ore milled (metric tons per day) 273,800 246,500 239,600
Average ore grade (percent):
Copper 0.45 0.39 0.37
Molybdenum 0.03 0.03 0.03
Copper recovery rate (percent) 85.8 85.3 83.9
Copper production
(millions of recoverable pounds) 828 642 592
a. Refer to “Consolidated Results“ for our consolidated molybdenum sales volumes,
which includes sales of molybdenum produced at the North America copper mines.
2014 compared with 2013. Copper sales volumes from our North
America copper mines increased to 1.66 billion pounds in 2014,
compared with 1.42 billion pounds in 2013, primarily reflecting
higher mining and milling rates at Morenci and higher ore grades
at Chino.
Copper sales from North America are expected to approximate
1.9 billion pounds in 2015 as a result of higher mill rates from the
Morenci expansion. Refer to “Outlook“ for projected molybdenum
sales volumes.
2013 compared with 2012. Copper sales volumes from our
North America copper mines increased to 1.42 billion pounds in
2013, compared with 1.35 billion pounds in 2012, primarily
because of higher mining and milling rates, higher copper ore
grades and higher recovery rates.
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 and Molybdenum. The following
tables summarize unit net cash costs and gross profit per
pound at our 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 financial statements.