Freeport lowest-cost copper producer

In the fourth quarter of 1999, Freeport-McMoRan Copper & Gold (FCX-N) held on to its position as the world’s lowest-cost producer of the red metal.

At the company’s chief operating asset — the Grasberg mine in Irian Jaya, Indonesia — net cash costs during the period amounted to US10 per lb. (including silver and gold credits).

Cash costs for the year averaged US9 per lb.

Through its 85%-owned operating subsidiary, P.T. Freeport Indonesia (PT-FI), the New Orleans-based major produced 346 million lbs. copper during the 3-month period, along with 553,000 oz. gold and 898,200 oz. silver. In the comparable period of 1998, output consisted of 423.8 million lbs. copper, 819,500 oz. gold and 1 million oz. silver.

PT-FI’s share of production for the entire year was 1.4 billion lbs. copper, 2.4 million oz. gold and 3.4 million oz. silver in 1999, on par with the figures for 1998.

In the fourth quarter, Freeport sold 374.9 million lbs. copper, 597,400 oz. gold and 953,900 oz. silver, generating US$527.5 million in revenue. In the year-ago period, US$485 million was generated through the sale of 421.4 million lbs. copper, 782,100 oz. gold and 1 million oz. silver.

Earnings in the recent quarter totalled US$37.3 million (or 23 per share), compared with US$42.1 million (26 per share) a year earlier.

For all of 1999, Freeport turned a profit of US$100.8 million (61 per share) on revenue of US$1.9 billion, compared with US$118.3 million (67 per share) on US$1.8 billion in 1998.

At Grasberg, PT-FI milled 222,500 tonnes of ore per day during the fourth quarter, up from 210,600 tonnes in the corresponding period in 1998. For the year, throughput averaged 220,700 tonnes per day, compared with 196,400 tonnes daily in 1998.

As a result of its strong showing in the fourth quarter, Freeport was able to pay down US$109 million in debt. Over the course of the year, the company covered US$321 million of debt and redeemable preferred stock. Its outstanding debt at the end of 1999 was US$2.1 billion, plus US$487.5 million in mandatory redeemable preferred stock.

Although the company has yet to release year-end proven and probable reserves, it continues to explore Block A and Block B of PT-FI’s contract-of-work area, as well as two other CoWs: P.T. Irja Eastern Minerals and P.T. Nabire Bakti Mining.

The company spent US$3 million on exploration during the fourth quarter, representing 60% of the shared costs under a joint-venture agreement with London-based Rio Tinto (RTP-N).

In other news, Freeport has received a positive environmental audit of Grasberg. The audit, performed independently, supports a recent court ruling which dismissed a lawsuit filed on behalf of tribal leader Tom Beanal.

Meanwhile, Freeport has appointed Judge Gabrielle Kirk McDonald as its special counsel on human rights in Indonesia.