Freeport-McMoRan 2014 Annual Report Download - page 54

MANAGEMENT’S DISCUSSION AND ANALYSIS
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Consolidated sales volumes from our Africa mining operations
are expected to approximate 445 million pounds of copper and
32 million pounds of cobalt in 2015.
2013 compared with 2012. Copper sales volumes from our Africa
mining operations increased to 454 million pounds of copper in
2013, compared with 336 million pounds of copper in 2012,
primarily reflecting increased mining and milling rates resulting
from the expansion project completed in early 2013 and higher
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 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 Cobalt. The following tables
summarize the unit net cash costs and gross profit per pound of
copper and cobalt at our Africa mining operations for the years
ended December 31. Refer to “Production Revenues and
Production Costs“ for an explanation of “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.
Lower unit net cash costs (net of cobalt credits) for our Africa
mining operations of $1.15 per pound of copper in 2014, compared
with $1.21 per pound of copper in 2013, primarily reflected higher
cobalt credits, partly offset by higher site production and delivery
costs associated with input and mine logistics support costs.
Assuming achievement of current sales volume and cost
estimates, and an average cobalt market price of $13 per pound
for 2015, average unit net cash costs (net of cobalt credits) are
expected to approximate $1.31 per pound of copper in 2015.
Africa’s projected unit net cash costs for 2015 would change by
$0.09 per pound for each $2 per pound change in the average
price of cobalt during 2015.
2014 2013
By-Product Co-Product Method By-Product
Co-Product Method
Method Copper Cobalt Method Copper Cobalt
Revenues, excluding adjustments
a
$ 3.06 $ 3.06 $ 9.66 $ 3.21 $ 3.21 $ 8.02
Site production and delivery, before net noncash
and other costs shown below 1.56 1.39 5.30 1.43 1.35 4.35
Cobalt credits
b
(0.48) — — (0.29) — —
Royalty on metals 0.07 0.06 0.16 0.07 0.06 0.14
Unit net cash costs 1.15 1.45 5.46 1.21 1.41 4.49
Depreciation, depletion and amortization 0.54 0.46 1.13 0.54 0.48 1.00
Noncash and other costs, net 0.05 0.04 0.11 0.06 0.06 0.11
Total unit costs 1.74 1.95 6.70 1.81 1.95 5.60
Revenue adjustments, primarily for pricing on
prior period open sales — — 0.07 — — 0.09
Gross profit per pound
$ 1.32 $ 1.11 $ 3.03 $ 1.40 $ 1.26 $ 2.51
Copper sales (millions of recoverable pounds) 425 425 454 454
Cobalt sales (millions of contained pounds) 30 25
a. Includes point-of-sale transportation costs as negotiated in customer contracts.
b. Net of cobalt downstream processing and freight costs.