JAKARTA (TheInsiderStories) – Gold and copper miner, PT Freeport Indonesia (PTFI) in-talks with local and foreign bank to get a syndicate loans to build smelter project in the country. As reported, the company prepared fund US$3 billion to build a smelter project starting 2023.
The smelter project in connection with the extension of the miner’ mining rights from 2031 to 2041. The unit of Freeport-McMoRan Inc. (NYSE:FCX) and PT Indonesia Asahan Aluminium (MIND ID), said a site for the new smelter has been selected and ground preparation is advancing.
“The preliminary capital cost estimate for the project approximates $3 billion, pending completion of final engineering. Estimated capital expenditures for 2020 approximate $0.5 billion,” said Richard C. Adkerson, President and CEO of Freeport Mcmoran, in official statement on Thursday (01/23).
He adds, the debt service for the new smelter will be shared by PTFI‘ shareholders according to their respective equity ownership percentages. As a result, FCX’ future distributions from PTFI will incorporate approximately 49 percent of the smelter debt service.
FCX has a 48.76 percent ownership interest in PTFI and manages its mining operations. Under the terms of the shareholders agreement, FCX’ economic interest in PTFI approximates 81 percent through 2022.
During fourth quarter (4Q) of 2019, said Adkerson, PTFI has completed mining in the Grasberg open pit and continues to achieve important milestones in ramping-up production of large-scale quantities of copper and gold from its significant underground ore bodies. In aggregate, the Grasberg open pit produced over 27 billion pounds of copper and 46 million ounces of gold in the 30-year period from 1990 through 2019.
While in the Grasberg Block Cave, the miner has commenced extraction of ore from the underground mine, which is the same ore body historically mined from the surface in the Grasberg open pit. Reserves from the Grasberg Block Cave totaled 17.2 billion pounds of copper and 14.2 million ounces of gold at Dec. 31, 2019, representing approximately half of PTFI’ total copper and gold reserves.
Ore extraction from the Grasberg Block Cave underground mine averaged 11,200 metric tons of ore per day in 4Q of 2019, including a planned three week outage for the installation of ore-flow infrastructure. Following completion of the maintenance program in mid-December, ore extraction from the Grasberg Block Cave averaged 17,000 metric tons of ore per day.
As existing drawpoints mature and additional drawpoints are added, cave development is expected to increase production rates to an average of 30,000 metric tons of ore per day in 2020, over 60,000 metric tons of ore per day in 2021 and 130,000 metric tons of ore per day in 2023 from five production blocks spanning 335,000 square meters.
While, deep mill level zone located east of the Grasberg ore body and below the Deep Ore Zone (DOZ) underground mine, has continued its ramp up of production. Hydraulic fracturing operations have been effective in managing rock stresses and pre-conditioning the cave following mining-induced seismic activity experienced in 2017 and 2018.
Ore extraction continues to exceed expectations, averaging 14,900 metric tons of ore per day in fourth-quarter 2019 and reached approximately 16,000 metric tons of ore per day at year-end 2019. Ongoing hydraulic fracturing operations combined with continued undercutting and drawbell openings in the two currently active production blocks are expected to expand the cave, supporting higher production rates that are expected to average 29,000 metric tons of ore per day in 2020, approach 60,000 metric tons of ore per day in 2021 and 80,000 metric tons of ore per day in 2022 from three production blocks.
Globally, Adkerson explained, Freeport-McMoRan reported net income (loss) attributable to common stock of $9 million (less than $0.01 per share) in 4Q of 2019 and ($239 million) the year 2019. While, consolidated sales totaled 906 million pounds of copper, 317 thousand ounces of gold and 22 million pounds of molybdenum in fourth-quarter 2019, and 3.3 billion pounds of copper, 991 thousand ounces of gold and 90 million pounds of molybdenum for the year 2019.
This year, he said, the consolidated sales are expected to approximate 3.5 billion pounds of copper, 0.8 million ounces of gold and 88 million pounds of molybdenum, including 725 million pounds of copper, 105 thousand ounces of gold and 22 million pounds of molybdenum in first-quarter 2020. Sales are expected to increase to 4.3 billion pounds of copper and 1.4 million ounces of gold in 2021.
Average realized prices in the 4Q of 2019 were $2.74 per pound for copper, $1,491 per ounce for gold and $11.65 per pound for molybdenum. Then, average unit net cash costs in fourth-quarter 2019 were $1.67 per pound of copper and $1.74 per pound of copper for the year 2019. Unit net cash costs are expected to average $1.75 per pound of copper for the year 2020.
The operating cash flows totaled $170 million in fourth-quarter 2019 and $1.5 billion (including $349 million of working capital and other sources) for the year 2019. Based on current sales volume and cost estimates, and assuming average prices of $2.85 per pound for copper, $1,500 per ounce for gold and $10.00 per pound for molybdenum, operating cash flows are expected to approximate $2.4 billion (including $0.2 billion of working capital and other sources) for the year 2020.
Capital expenditures totaled $700 million (including approximately $400 million for major projects) in the last quarter of 2019 and $2.65 billion (including approximately $1.5 billion for major projects) for the year 2019. In this year, the capital expenditures are expected to approximate $2.8 billion, including $1.8 billion for major projects primarily associated with underground development activities in the Grasberg and completion of the Lone Star copper leach project in Arizona.
During 4Q 2019, FCX generated $452 million in proceeds from asset sales associated with the previously announced sales of a portion of its Freeport Cobalt business and its interest in the lower zone of the Timok exploration project. On Dec. 18, 2019, FCX declared a quarterly cash dividend of $0.05 per share on its common stock, which will be paid on Feb. 3, 2020.
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