Vancouver —
The gain, which was boosted by US$9.1 million (US5 per share) as a result of a change in the accounting of retirement obligations, reverses a loss of US$4.2 million (US3 per share) at the end of the first quarter of 2002. Revenue between the two periods rose by more than 33% to US$524.6 million, due in part to an 18% jump in gold prices.
“Our first quarter results reflect the excellent performance of our Grasberg operations,” says Chief Executive Officer James Moffett. “The strength of our asset base was demonstrated by the successful completion of more than $1 billion in financing transactions during the quarter, which significantly enhanced our financial position.”
Situated in Indonesia’s Papua province, Grasberg produced 388,800 million lbs. copper and 579,600 oz. gold during the first quarter, compared with 296,700 million lbs. and 335,800 oz. a year earlier. The company benefited from an average realized gold price of US$341.55 per oz., compared with US$289.51 per oz. a year earlier. The average price of copper remained the same at US73 per lb.
The higher metal output is attributed to higher-grade ore and improved recoveries. The copper grade averaged 1.15% during the quarter, compared with 0.9% last year, while recoveries increased to 88.4% from 85.5% in the first quarter of 2002. The gold grade jumped to 1.26 grams gold per tonne from 0.73 gram gold in last year’s quarter.
Underground mining, which currently marks 21% of the mill output, got a boost during the quarter with the ramp-up of production at the Deep Ore zone to 35,000 tonnes per day. The increased output propelled the company to a new underground mining record of 50,000 tonnes per day. The move towards underground mining is significant in that the open-pit operation is slated for depletion in 2014.
The Grasberg operation remained the world’s lowest-cost producer, with net cash costs ringing in at US7 per lb. copper, compared with US30 in the first quarter of last year.
“If we have a continuation of today’s gold price, our gold revenues offset all our production costs for 2003, resulting in zero net cash costs,” says President Richard Adkerson.
Grasberg accounts for all of Freeport’s production, though the company is looking at other projects in the interest of diversification.
“We monitor all over the world, but we are not going to marry our unique mine with other low-grade deposits and turn a silk purse into a sow’s ear,” says Moffett.
London-based
Proven and probable reserves total 2.6 billion tonnes grading 1.12% copper, plus 1.02 grams gold and 3.73 grams silver per tonne. Net of Rio Tinto’s share, Freeport Indonesia’s share of proven and probable reserves amounts to 39.4 billion lbs. copper, 48.5 million oz. gold and 110.9 million oz. silver. Freeport-McMoRan holds a 90.6% equity interest in Freeport Indonesia.
For 2003, Freeport expects to produce 1.4 billion lbs. copper and 2.6 million oz. gold.
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