Freeport achieves record throughput at Grasberg

As part of its “hunker down and go” program, Freeport-McMoRan Copper & Gold (FCX-N) is focusing on cutting costs and boosting production at its core operation, the giant Grasberg gold-copper mine in Irian Jaya, Indonesia.

With a fourth concentrator continuing to ramp up, the company’s Indonesian unit achieved record average mill throughput of 201,200 tonnes per day during the second quarter ended June 30.

The ongoing expansion program will boost throughput even further, to at least 130,000 tonnes, by year-end. As a result of the expansion, the company’s share of sales for this year is expected to total 1.4 billion lbs. of copper and a whopping 2.2 million oz. gold.

Despite the record throughput, Freeport’s earnings were clipped by lower prices for both copper and gold. The company posted net earnings of US$52.3 million for the first six months of this year, compared with US$132.3 million a year earlier. Revenues were US$829.9 million for the period, compared with $1.09 billion in the first half of 1997.

For the latest quarter ended June 30, Freeport posted earnings of US$25.8 million on revenue of US$433.8 million, compared with US$69.8 million on revenue of US$567 million a year earlier.

Cash production costs, including gold and silver credits, averaged US17 cents per lb. copper during the recent quarter, 43% below 1997 levels. This solid performance places Freeport among the lowest-cost copper and gold producers in the world.

Freeport views its Indonesian holdings, which already support a huge mining operation, as having excellent exploration potential. The company spent US$4.9 million on exploration during the latest quarter, primarily on ground adjacent to its existing operations.

Current work includes delineation drilling to expand the Kucing Liar and Grasberg underground resources within Block A. Recent results from Kucing Liar include 288.5 metres of 1.3% copper and 1.15 gram gold, and 451.7 metres of 1.81% copper and 1.3 grams gold. Drilling of a nearby target returned 213 metres of 2.7% copper and 1.88 grams gold, plus 141 metres of 1.64% copper and 1.27 grams gold.

Two rigs are at work probing mineralization below the Grasberg mine. Results from this work include: 144 metres of 0.94% copper and 1.46 grams gold; 328 metres of 1.28% copper and 1.62 grams gold; and 228 metres of 1.3% copper and 1.21 grams gold.

As part of a recent arrangement between Freeport and Rio Tinto, nearby ground covering 1 million acres was obtained through a contract of work application. To earn up to a 54% interest, Freeport must spend up to US$21 million on exploration and other activities in the joint-venture areas. Rio Tinto has the option to participate in 40% of Freeport’s interest (and costs) in the exploration project.