Grasberg gold boost Freeport

Vancouver The second quarter of 2003 proved to be a stellar one for the operator of the World’s largest copper-gold mine. New Orleans-based Freeport-McMoRan Copper & Gold (FCX-N) earned US$57.4 million, or US$0.37 per share, in the three months ended June 30.

This marks a 10-fold jump over the US$5.6 million, or US$0.04 per share profit tallied in the corresponding period last year. Revenue rocketed to US$609.5 million from US$408 million in the second quarter of 2002, while cash flow soared to US$229.9 million.

Driving the gains were record gold production and lower unit costs at the mighty Grasberg copper-gold mine situated in Papua province in Indonesia. The operation produced 401,200 million lbs. of copper and 858,400 oz. of gold during the first quarter, compared with 374,500 million lbs. of copper and 444,200 oz. of gold in the same period of 2002. Benefiting the company was an average realized price for gold of US$347.69 per oz, compared with a price of US$308.76 received in the second quarter of 2001. The average price of copper remained the same at US$0.75 per lb.

The copper grade averaged 1.24% copper during the quarter, compared with 1.14% copper last year, while recoveries increased to 89.8% from 87.1% in the second quarter of 2002. The gold grade jumped to 1.95 grams gold per tonne from 0.98 gram gold in last year’s quarter. Gold recovery rates came in at 87.9%, a marked improvement from the 86.3% tallied last year.

Underground mining, which currently marks 23% of the mill output, got a boost during the quarter with the ramp-up of production at the Deep Ore zone to 35,000 tonnes per day. The move propelled the company to a new underground mining record of 50,200 tonnes per day. The move towards underground mining is significant in the open pit mining is slated for depletion in 2014.

The Grasberg operation remained the world’s lowest cost producer with net cash costs ringing in at US$(0.16) per lb of copper, compared with US$0.18 in the same period last year.

London-based Rio Tinto (RTP-N) has a 40% interest in future production from Grasberg’s reserves above those reported at the end of 1994.

Proven and probable reserves total 2.6 billion tonnes grading 1.12% copper, plus 1.02 grams gold and 3.73 grams silver per tonne. Net of Rio Tinto’s share, Freeport Indonesia’s share of proven and probable reserves amount to 39.4 billion lbs. copper, 48.5 million oz. gold and 110.9 million oz. silver. Freeport-McMoRan holds a 90.6% equity interest in Freeport Indonesia.

For all of 2003, Freeport expects to produce 1.4 billion lbs of copper and 2.6 million oz. of gold.