Freeport-McMoRan Ships Tenke Cathodes, Forecasts Improved Results


The Tenke Fungurume copper-gold-moly project, operated by Freeport-McMoRan and owned by Freeport (57.75%),
Lundin Mining (24.75%) and Congolese state mining company Gecamines (17.5%), began producing copper cathodes
in late March. (Photo courtesy of Lundin Mining)
Freeport-McMoRan reported sharply lower first-quarter 2009 earnings, in comparison with first-quarter 2008, but expects improved results during the remainder of the year. The company also reported that the first truck-load of copper cathodes departed from its newly operational, 57.75%-owned-and-operated Tenke Fungurume project in the Democratic Republic of the Congo (DRC) on April 22, headed for South Africa. The trip was described as a test run and was expected to take 20 to 30 days.

Freeport’s net earnings for the quarter totaled $43 million, down from $1.1 billion during the first quarter of 2008 due to sharply lower copper prices. That comparison does not look good, but it could have been worse. Freeport’s unit cost/lb of copper produced dropped to $0.66/lb during first quarter 2009, down from $1.06/lb during first quarter 2008. Revised operating plans and delayed capital spending contributed to the lower unit copper cost, as did sharply higher gold production at Freeport’s Grasberg operations in Indonesia, where gold is accounted as a by-product. Mining at Grasberg has moved into a higher-grade gold area of the mine, and as a result, the mine’s first-quarter 2009 gold production jumped to 545,000 oz from 280,000 oz in 2008. The 2009 total was sufficient to fully off-set the mine’s quarterly operating costs.

Freeport is currently forecasting that its company-wide, full-year 2009 consolidated sales will total 3.9 billion lb of copper, 2.3 million oz of gold and 50 million lb of molybdenum. Capital expenditures are budgeted at about $1.3 billion for 2009, down from $2.7 billion in 2008.

Regarding Tenke Fungurume, Freeport reported that the project produced its first copper cathode in late March and is scheduled to ramp up to full capacity of about 250 million lb/y of copper and 18 million lb/y of cobalt in the second half of the year. The initial project is based on mining and processing ore reserves totaling about 119 million mt at average grades of 2.6% copper and 0.35% cobalt.

Over the past year, the DRC government has been reviewing mining contracts within the country. The government has also had to deal with violence in the DRC’s eastern provinces, a change of parliament and economic challenges resulting from lower copper prices; and, in part because of these distractions, the issue of mining contracts has not been fully resolved. Freeport believes its existing contracts are fair and equitable, comply with Congolese law, and are enforceable without modifications. The mining contract review process has not affected the Tenke Fungurume development schedule or production plans.

As featured in Womp 2009 Vol 04 - www.womp-int.com