Accelerated removal of waste in the first quarter has allowed
Regular operations at the remote, rain-soaked, high-altitude mine were interrupted by a slippage event last October, and a subsequent debris flow into a section of the pit. Eight employees perished in the slippage incident. Freeport has since been working to remove waste material from the southern wall to restore safe access to higher-grade portions of the pit.
Chairman James Moffett, who recently spent several days at the site, says safe access to key areas has been re-established. “The pit is in great shape,” he says. “We’ve moved a lot of dirt around in order to get the pit back to where we consider it’s safe to resume operations.”
Freeport removed an estimated 100 metres, or about 25 million tonnes of waste rock, from the top of the 7 South Face (slide area) since last fall. The company also re-sloped pit walls, built terraces to contain debris and talus, installed more monitoring systems, and de-watered the south wall to improve pit-wall stability. Moffett praised the mine’s managers and employees for their hard work.
The accelerated waste-removal programs, combined with the mining of low-grade material, took a dramatic toll on the company’s bottom line. Freeport posted a net loss of US$19.5 million (or 10 per share) for its latest quarter ended March 31, compared with earnings of US$49.2 million (33 per share) in the corresponding period of 2003. Revenue fell to US$360 million from US$524 million between the two periods. Sales of copper plummeted to 105.4 million lbs. from 392 million lbs.; sales of gold, to 123,800 oz. from 583,900 oz.
In the first quarter, Freeport mined ore from the Deep Ore zone underground and from low-grade material in the pit. As a consequence, net cash production costs soared to an average of US$1.19 per lb. copper, including gold and silver credits, from US7 per lb. copper a year earlier. Daily mill throughput fell to an average of 151,800 tonnes from 238,200 tonnes.
Now that mining of higher-grade material has resumed, daily throughput is expected to average 210,000 tonnes for the balance of this year.
Freeport expects to produce 1 billion lbs. copper and 1.5 million oz. gold for its own account this year, and 1.5 billion lbs. copper and 2.9 million oz. gold in 2005.
The company ended the recent quarter with total debt of about US$2.2 billion, or US$1.6 billion net of US$533.5 million cash on hand.
Earlier this year, the company completed a private offering of US$1.1 billion worth of preferred stock. Freeport used the proceeds to acquire 23.9 million of its shares previously held by
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