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Freeport cuts costs further amid weak copper prices

http://www.chemnet.com   Aug 28,2015 Platts
Freeport-McMoRan, the world's largest publicly traded copper producer, said Thursday it would cut costs further in a bid to shore up capital, in part by shrinking copper sales by 150 million lb/year in 2016 and 2017, as prices for the red metal slump.

London Metal Exchange copper prices averaged $3.11/lb in 2014 and $2.69/lb in the six-month period ending June 30, 2015. During the third quarter of 2015, copper prices have averaged $2.41/lb and are currently about $2.25/lb, near a six-year low, Freeport said.

The bulk of the reductions will come from the miner's North and South American operations.

Freeport operates seven open-pit copper mines in North America: Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico.

Revised plans in North America include reductions in mining rates to cut operating and capital costs, including the suspension of mining operations at its Miami mine (which produced 57 million lb in 2014), a 50% reduction in mining rates at the Tyrone mine (which produced 94 million lb) and adjustments to mining rates at other US mines.

"These changes are expected to result in an approximate 10% reduction in employees and contractors at US operations," the miner said.

In South America Freeport operates two copper mines, Cerro Verde in Peru and El Abra in Chile.

The revised operating plans for 2016 for the South America copper mines principally reflect adjustments to the mine plan at El Abra (which produced 367 million pounds in 2014) to reduce mining and stacking rates by about 50% to achieve lower operating and labor costs, defer capital expenditure and extend the life of the existing operations.

At Cerro Verde, the concentrator expansion is proceeding towards completion in late 2015, which will enable Cerro Verde to contribute significant cash flows as a large-scale, long-lived and low-cost operation in the coming years, the miner said.

Earlier in August Freeport said it was undertaking a review of its operations, with a view to revise operating and capital plans in order to strengthen its financial position.

"The revised plans will target lower operating and capital costs to achieve maximum cash flow under the current market conditions. Production at certain operations challenged by low commodity prices will be curtailed," the company said.
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