Vancouver — At a time when Afghanistan is being bombed and Muslim fundamentalists are calling for a “holy war” against the U.S., it must be a tad unsettling for an American-based mining company to have its main operation in the world’s most populous Muslim country. However,
The New Orleans-based company achieved its (lowered) profit forecast of US$4.2 million (or US3 per share) in the third quarter, compared with a loss of US$9.2 million (US6 per share) in the corresponding period of 2000.
Revenue between the two periods fell to US$441.2 million from US$473.8 million.
The quarterly profit reflects record gold recoveries and mill throughput at Grasberg, as well as a 62% jump in sales, to 673,800 oz. compared with 422,700 oz. in the third quarter of 2000. The miner realized a slightly higher gold price for the quarter, coming in at US$277.08 per oz.
“The world political situation has not affected our operations,” says CEO James Moffett, noting that the Grasberg milling complex set new records for ore throughput and gold recoveries, averaging more than 244,000 tonnes per day for the quarter, with gold recoveries of almost 90%.
Offsetting a good gold showing, copper sales fell 10%, year over year, to 159,000 tonnes, as the price of the red metal dropped 25% to US65 per lb.
Situated in Indonesia’s easternmost province of Irian Jaya, Grasberg is the said to be the lowest-cost copper producer in the world. Net cash production costs amounted to US5 per lb., an improvement over the US33 per lb. recorded in 2000.
Operating cash flow amounted to US$184 million in the latest quarter, allowing the company to repay some US$95 million of debt. In the first nine months of the year, Freeport made a profit of US$78.6 million (54 per share), compared with a loss of US$18.6 million (12 per share) in the corresponding period of 2000.
Says Moffet: “We look forward to continuing our strong operating performance, which has enabled us to achieve industry-leading cost performance and generate significant cash flow despite near-record-low copper prices.”
The quarterly profit was affected by a US3-per-share non-cash charge (attributable to the strengthening of the Euro), which had an impact on the long-term pension liability of the company’s Spanish smelting unit, Atlantic Copper.
In the fourth quarter, gold sales are expected to be 440,000 oz.; copper sales, 150,000 tonnes. For the year, a total of 635,000 tonnes copper and 2.6 million oz. gold are to be sold from the gigantic operation.
Meanwhile, Freeport says it has improved relations with the indigenous community by establishing a trust for the benefit of the original tribal people around the mine site. Through its local mining affiliate,
“This agreement . . . [is] the result of several years of dialogue between PT-FI and the local community as we continue to work together in a spirit of mutual respect and understanding,” states Moffet.
The fund benefits tribal groups in villages closest to the mining operations, including the Amungme villages of Waa-Banti, Tsinga and Arwanop, and the Kamoro villages of Nayaro, Nawaripi and Tipuka.
“We used to be on the outside, but now we stand together,” says the chairman of one of the local groups, Thomas Beanal. “We have a stake in this mining operation, and we will work hard so that we can share in its success.”
Freeport already spends US$20 million in yearly development through the Freeport Fund for Irian Jaya Development and existing land-use recognition programs.
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