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Researched by Industrial Info Resources (Sugar Land, Texas)--Global copper, gold and molybdenum miner Freeport-McMoRan Incorporated (NYSE:FCX) (Phoenix, Arizona) plans to boost capital expenditures in 2018 by 50% from last year, with an emphasis on major projects in Indonesia and the U.S. Industrial Info is tracking $2.65 billion in active Freeport-McMoRan projects.
The company said in its fourth-quarter earnings report last week that it expects capital expenditures for 2018 to be about $2.1 billion, compared with $1.4 billion for 2017. The 2018 estimate includes $1.2 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district in Indonesia and development of the Lone Star oxide project in eastern Arizona.
Chief Executive Officer Richard Adkerson told investment analysts that Freeport-McMoRan is making progress in its negotiations with the Indonesian government over the future of the Grasberg operations, which has one of the of the world's largest copper and gold deposits.
Adkerson said the company was "blindsided" a year ago by new regulations from the government of Indonesia that raised questions about the future of Freeport-McMoRan's contract there.
The "first part of 2017 was tough in Indonesia," Adkerson said. "We were restricted on exports for a period of time. We had significant labor problems by mid-year."
To make matters worse, in November, Freeport-McMoRan evacuated the families of workers at the Grasberg mine following a string of shootings by gunmen with suspected links to rebels in the area, according to Reuters.
However, "our labor relations issues have been really progressed," Adkerson said. In December, the company signed a two-year labor contract with new union leadership in Indonesia, "without any controversy or drama associated with it," he said.
And since the first quarter of 2017, he said, "We were pleased that after facing the prospects of very contentious arbitration proceeding [...] we have reached a common ground for moving forward with the government of Indonesia. We now mutually want to get this thing solved."
The Indonesian government wants two "nonnegotiable" items, Adkerson said. One of those items is new smelter capacity. Industrial Info is tracking development of a new grassroot copper smelter by Freeport-McMoRan subsidiary PT Freeport Indonesia at Gresik in Jawa Timur. The $2.3 billion facility would process 1.6 million tons per year of copper concentrates from Grasberg to produce 400,000 tons per year of copper cathodes. The project is expected to see completion in late 2020. For more information, see Industrial Info's project report.
Also, the Indonesian government wants 51% ownership of the Grasberg operations. Freeport-McMoRan would agree to majority ownership by the Indonesian government "so long as [...] we continue to have control over operations in the governance of the business," Adkerson said.
In return, Freeport-McMoRan wants the rights to operate the Grasberg complex through 2041. An agreement could be reached by 2018.
The Grasberg site currently consists of an open pit mine, and the company is focused on developing an underground block cave operation there. For more information on the Grasberg block cave underground copper-gold mine expansion, see Industrial Info's project report.
In the U.S., Freeport-McMoRan is pushing to develop its Lone Star oxide project in eastern Arizona. Located seven miles from the company's Safford mine, the project would have an estimated cost of $850 million and has reserves of 4.4 billion pounds of copper. The oxide material would be transported to the Safford site for processing. Initial production from the Lone Star oxide ores could begin in 2021. Mining of the oxide material ultimately will give the company access to a sulfide deposit underneath, Adkerson said, who added a new concentrator mill would be necessary to mine the sulfide deposit. For more information on the Lone Star project, see Industrial Info's project report.
At the Safford mine, Freeport-McMoRan is performing an economic evaluation for a second 1,300 ton-per-day sulfuric acid plant, with a total investment value of $150 million. Current expectations are for the project to be completed in mid-2019. For more information, see Industrial Info's project report.
Adkerson noted that the price of copper rose in 2017. Looking forward, he said, the outlook for copper prices is good as the industry is in a period relatively low investments in new production.
"There's a real absence of major new projects on the horizon [and] declining production from existing mines," he said.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
The company said in its fourth-quarter earnings report last week that it expects capital expenditures for 2018 to be about $2.1 billion, compared with $1.4 billion for 2017. The 2018 estimate includes $1.2 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district in Indonesia and development of the Lone Star oxide project in eastern Arizona.
Chief Executive Officer Richard Adkerson told investment analysts that Freeport-McMoRan is making progress in its negotiations with the Indonesian government over the future of the Grasberg operations, which has one of the of the world's largest copper and gold deposits.
Adkerson said the company was "blindsided" a year ago by new regulations from the government of Indonesia that raised questions about the future of Freeport-McMoRan's contract there.
The "first part of 2017 was tough in Indonesia," Adkerson said. "We were restricted on exports for a period of time. We had significant labor problems by mid-year."
To make matters worse, in November, Freeport-McMoRan evacuated the families of workers at the Grasberg mine following a string of shootings by gunmen with suspected links to rebels in the area, according to Reuters.
However, "our labor relations issues have been really progressed," Adkerson said. In December, the company signed a two-year labor contract with new union leadership in Indonesia, "without any controversy or drama associated with it," he said.
And since the first quarter of 2017, he said, "We were pleased that after facing the prospects of very contentious arbitration proceeding [...] we have reached a common ground for moving forward with the government of Indonesia. We now mutually want to get this thing solved."
The Indonesian government wants two "nonnegotiable" items, Adkerson said. One of those items is new smelter capacity. Industrial Info is tracking development of a new grassroot copper smelter by Freeport-McMoRan subsidiary PT Freeport Indonesia at Gresik in Jawa Timur. The $2.3 billion facility would process 1.6 million tons per year of copper concentrates from Grasberg to produce 400,000 tons per year of copper cathodes. The project is expected to see completion in late 2020. For more information, see Industrial Info's project report.
Also, the Indonesian government wants 51% ownership of the Grasberg operations. Freeport-McMoRan would agree to majority ownership by the Indonesian government "so long as [...] we continue to have control over operations in the governance of the business," Adkerson said.
In return, Freeport-McMoRan wants the rights to operate the Grasberg complex through 2041. An agreement could be reached by 2018.
The Grasberg site currently consists of an open pit mine, and the company is focused on developing an underground block cave operation there. For more information on the Grasberg block cave underground copper-gold mine expansion, see Industrial Info's project report.
In the U.S., Freeport-McMoRan is pushing to develop its Lone Star oxide project in eastern Arizona. Located seven miles from the company's Safford mine, the project would have an estimated cost of $850 million and has reserves of 4.4 billion pounds of copper. The oxide material would be transported to the Safford site for processing. Initial production from the Lone Star oxide ores could begin in 2021. Mining of the oxide material ultimately will give the company access to a sulfide deposit underneath, Adkerson said, who added a new concentrator mill would be necessary to mine the sulfide deposit. For more information on the Lone Star project, see Industrial Info's project report.
At the Safford mine, Freeport-McMoRan is performing an economic evaluation for a second 1,300 ton-per-day sulfuric acid plant, with a total investment value of $150 million. Current expectations are for the project to be completed in mid-2019. For more information, see Industrial Info's project report.
Adkerson noted that the price of copper rose in 2017. Looking forward, he said, the outlook for copper prices is good as the industry is in a period relatively low investments in new production.
"There's a real absence of major new projects on the horizon [and] declining production from existing mines," he said.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
