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Page 3 of 4
So, this 200 million pounds that we’re talking about, we think that is really just bringing more of a light on our leach stockpiles and moving aggressively to -- over the last several years, the focus on the industry has been more on concentrating. And now we’re putting focus back on these leach initiatives, and we’ve identified some things.
more leaching
Transcript
2022 Q4
27 Jan 23
With leaching, we’re not constraining ourselves to conserve capital or anything else.
We’re -- we believe this is such a great opportunity for us that we are pursuing it as aggressively as we can, and we are pursuing it on a number of different fronts, some using outside vendors, some doing things on our own, some in joint ventures with companies. It’s just such a great opportunity to add production at low capital cost and with low carbon.
leaching colour
Transcript
2022 Q4
27 Jan 23
$9 billion per annum at $3.50 copper, to $15 billion per annum at $5 copper. And our operating cash flows would range over these prices from $6 billion at $350 copper to $11 billion at $5 copper.
ebitda and ocf at various copper prices
Transcript
2022 Q4
27 Jan 23
Moving to the cost outlook for 2023, we’re providing guidance of average cost of $1.60 per pound for the year. That compares with $1.50 per pound in 2022. We show a comparison to the two years, and you’ll see the site production cost line item is about 4.5% higher than the 2022 average. And that’s a result of assumptions that we’ve made in our forecast for higher average electricity and coal costs compared with the 2022 average and also higher power requirements, principally in Indonesia, and the impact of higher cost of equipment components, supply costs and labor cost increases.
higher cost
Transcript
2022 Q4
27 Jan 23
e provide a three-year outlook for our sales volumes. And as we talked about, we achieved two years of growth in copper sales. And currently, our forecast reflects sales in the ‘23 to ‘25 period that are similar to 2022 levels.
Our mine production is actually going to be higher than our sales by about 100 million pounds in 2023 and 2024.
copper sales volumes flat to 2025
Transcript
2022 Q4
27 Jan 23
We’re also planning at El Abra to test new leaching technologies in the near term, to evaluate the potential for expanded leach production and possibly competing technologies to a concentrator.
el abra
Transcript
2022 Q4
27 Jan 23
Our Lone Star opportunity is really something special. We’ve been successful in increasing production levels substantially above the original project. And we’re really in the early stages in the development of this mine, as we mine the oxide ores more quickly, we’re opening up the opportunity for a major sulfide development long term. The resource is massive.
You’ve seen the numbers, 50 billion pounds of potential resource here.
lone star
Transcript
2022 Q4
27 Jan 23
At our Bagdad mine in Northwest Arizona, we’re progressing a feasibility study to double production at that site.
We expect to complete the feasibility this year, and we’ll be in a position to assess options on how we time the future development.
studying briwnfield in arizona
Transcript
2022 Q4
27 Jan 23
he project with the shortest lead time is our Americas leach initiative. We’ve talked a lot about it in recent calls. The economics are compelling, low capital intensity, low incremental operating costs and a low carbon footprint. The new data analytics capabilities, we are continuing, to be applied to prioritize our work streams on the highest value.
We’re continuing our work to apply covers to the leach stockpiles because of the benefits that you get from heat retention in enhancing recoveries, and we’ve identified new areas that were not pursued historically.
leaching initiative
Transcript
2022 Q4
27 Jan 23
If you go to slide 10, we’ve got an update on our smelter project. And this is our key feature of our commitment to the Indonesian government, was to expand domestic copper smelting and refining capacity in Indonesia.
We’re making really good progress on constructing the new smelter in Eastern Java, it’s near our existing smelter, PT Smelting at Gresik.
You can see from the pictures that construction is advancing. We’ve got thousands of workers now on site.
We’re working very closely with our EPC contractor to try as much as possible to make up delays that were caused by the pandemic. We reached a milestone of over 50% completion recently and we are expecting to begin commissioning the smelter during 2024.
smelter to be comissioned during 2024
Transcript
2022 Q4
27 Jan 23
As we’ve talked about on prior calls, we experienced significant inflation pressures across the business during 2022, particularly for energy and other commodity-related consumables, and in the second half of the year, started to see inflation from a rising cost of materials, supplies and services. The situation started to improve in 2022 with a number of the commodity-related consumables, but we’re still dealing with costs in excess of historical levels.
If you look at the average cost for the year at Grasberg of $0.09 per pound is remarkable, particularly in the context of this cost environment.
cash cost discussion
Transcript
2022 Q4
27 Jan 23
molybdenum business.
We’re a leader in that industry.
We’re the world’s largest producer by a significant margin. And with the price move over the last couple of months of over 50% in molybdenum, we thought you’d be interested in learning more about our business. We produced 85 million pounds of molybdenum in 2022, and that’s comprised about 60% from copper mines as a byproduct and the balance from two primary molybdenum mines that we operate in Colorado. And these are the only primary molybdenum mines that are currently operated in the United States.
We also operate downstream processing facilities to produce products that are used in a broad range of metallurgical specialty steel and chemical applications. The price move from $18 per pound at the start of the fourth quarter to over $30 per pound currently has been driven by some of the same supply issues that have impacted copper. And in addition, demand drivers continue to be supported from the oil and gas, aerospace and power generation sectors.
So, we note on this slide, the impact of a $5 change in molybdenum prices, it’s material at $400 million in annual EBITDA and $375 million in cash flow. And the recent move of over $10 per pound, if sustained at a higher price, adds additional leverage to our results.
molybdenum business
Transcript
2022 Q4
27 Jan 23
have remained tight even during a period of weaker economic data coming out of China, and that’s evidenced by the low levels of available copper inventories throughout the year.
low level of copper inventories
Transcript
2022 Q4
27 Jan 23
We’ll talk about markets next, and we’ve got a slide on page 5. We experienced significant volatility as many of you have seen during 2022, with copper prices trading from a high of $4.87 per pound earlier in the year, falling to $3.18 per pound midyear and partially recovering to $3.80 per pound by year-end. Prices continued to move higher in early 2023 to a level currently approximating $4.25 per pound as several of the macroeconomic clouds began to lift. We discussed on prior calls that the dramatic moves in 2022 have been largely -- been based on sentiment rather than fundamentals.
copper proce volatility
Transcript
2022 Q4
27 Jan 23
Copper and gold sales exceeded our October guidance. And our consolidated unit net cash costs of $1.53 per pound in the quarter were better than our estimates going into the quarter. With average copper realizations in the fourth quarter of $3.77 per pound, we generated strong margins with fourth quarter adjusted EBITDA at approximately $2.25 billion.
bet cash costs better thsn expected
Transcript
2022 Q4
27 Jan 23
We have among the largest mines in the world, the mines have low grades, there’s much more material to be processed, to be mined in process to recover the copper, and it’s an operation that gets challenged by low copper prices and factors like inflation.
But when you look at the results and what our team has done this year, it’s been very positive. It’s also characterized by having some large future brownfield expansion opportunities, which is particularly meaningful given the situation of the copper in the world
Americas mines, low grade, needs material processing
Transcript
2022 Q4
27 Jan 23
PT Freeport Indonesia is characterized by very large volumes, very low cost because of the grades and the gold content, largest gold mine in the world is a byproduct.
As you’ll see in the fourth quarter, it operated as the world’s second largest copper mine with a net unit cost of $0.06 a pound.
indonesia opersations
Transcript
2022 Q4
27 Jan 23
It’s just striking to see that the price of copper dropped $0.70 from a quarter a year ago and yet the day-to-day business that we have is one where customers are really fighting to get product. We had something – I don’t think it’s ever happened as Kathleen or Mark Johnson is on the call, but we actually emptied all of our concentrate barns at Grasberg. I mean, they were empty. Generally, we have operational issues with the shallow seas there getting production out.
So, it’s just striking how negative the financial markets are about this industry and yet the fiscal market is so tight. It’s something that we haven’t seen.
Now the reality is, and Kathleen mentioned that, is this historical correlation between our input costs and copper prices is disrupted right now.
I think it will come back into a more traditional relationship in the future, but it’s not now. But – we just don’t see any – we certainly have no problem selling copper.
In fact, we have problems meeting demand for – sometimes it’s the rod market in the U.S. is disrupted.
confusing situation, demand good, but price fsalling
Transcript
2022 Q3
21 Oct 22
ood morning and thanks for taking my question. Obviously, we are hearing a lot out there about slowing demand, particularly in regions like Europe. Are you seeing any evidence of that from your customers? Like are any customers scaling back orders at all?
customers scaling back orders?
Transcript
2022 Q3
21 Oct 22
Yes, we’ve got about third of that included in our numbers, Alex.
And so there is certainly upside. And our team, we want to get to this initial target, but our team believes that with success there, we can scale it further.
1/3 of the 200m leaching target is already in the guidsance
Transcript
2022 Q3
21 Oct 22