PHOENIX (Yosefardi) – Freeport-McMoRan Inc. revised capital and operating plans in response to the recent decline in copper prices resulting in reduced capital expenditures, lower production levels and lower operating, administrative and exploration costs.
LME copper prices averaged $3.11 per pound in 2014 and $2.69 per pound in the six month period ending June 30, 2015. During the third quarter of 2015, copper prices have averaged $2.41 per pound and currently approximate $2.25 per pound, near a six year low.
Since late 2014, FCX has reduced its consolidated 2015 capital expenditure budget from $7.5 billion to $6.3 billion, including reductions of $700 million in oil and gas expenditures and $500 million in mining expenditures.
The capital expenditures for 2016 are expected to decline to a total of $4.0 billion, including $1.4 billion in mining projects, $0.6 billion in mining sustaining capital and $2.0 billion in oil and gas expenditures.
The current 2016 capital estimate of $4.0 billion is approximately 29% lower than the $5.6 billion estimate on July 23, 2015, reflecting aggressive actions in response to current market conditions.
In Indonesia mining, PT Freeport Indonesia (PT-FI) concentrate shipments are proceeding normally following receipt of its export license from Indonesian government authorities on July 29, 2015.
During the third quarter, milling operations have been impacted by a reduction in process water available under current El Nino conditions, resulting in a reduction in PT-FI’s annual copper sales volumes for 2015 of approximately 25 million pounds from the July 23, 2015 estimate of 860 million pounds.
PT-FI’s ore grades are expected to improve significantly in 2016 and 2017 with access to higher grade sections of the Grasberg open pit, resulting in higher production and lower unit costs.
PT-FI’s revised plans incorporate improved operational efficiencies, reductions in input costs, supplies and contractor costs, foreign exchange impacts and a 15 percent deferral of capital expenditures in 2016 from previous estimates.
Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $1.1 billion per year ($0.9 billion per year net to PT-FI), including aggregate costs over the period beyond 2016 of $2.0 billion ($1.6 billion net to PT-FI) attributable to investments in additional power, processing and development of certain ore types expected to be mined longer term (beyond the five year plan).
In response to recent market conditions and the uncertain global economic environment, PT-FI is undertaking a review of its underground development plans, which may result in the deferral of costs related to longer-term power and processing investments.