Engineering & Mining Journal

AUG 2013

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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NEWS-LEADING DEVELOPMENTS ly with the governments of both countries to ensure Pascua-Lama is on the right path to deliver value for all of our stakeholders, including shareholders, host governments and local communities." Newmont and Goldcorp Report Impairment Charges Newmont Mining and Goldcorp each reported major impairment charges in their second-quarter 2013 financial results, released in late July. Newmont reported that as a result of lower gold and copper prices and in accordance with U.S. GAAP, its second quarter net income was adjusted by $1.8 billion, net of taxes and minority interest, for impairments and revaluation. Of that amount, $272 million was related to impairments of stockpiles and ore on leach pads. The remaining $1.5 billion was related to impairments of property, plant and mine development, and other long-term assets at Boddington and Tanami in Australia. The charges do not impact the company's cash flow and are considered one-time charges. Goldcorp reported a non-cash, after-tax impairment charge of $1.96 billion, consisting primarily of impairment to the value of exploration potential at its Peñasquito operations in Mexico. As a result of its impairment charge, Newmont reported a net second-quarter 2013 loss attributable to stockholders of $2 billion, compared to net income of $279 million during the second quarter of 2012. Newmont President and CEO Gary Goldberg said, "I am pleased with our progress to improve our costs and operating efficiencies across our portfolio, which has resulted in a $362-million reduction in year-to-date spending compared to the first half of 2012. We are also on track to reduce our corporate work force by more than onethird, with similar efforts under way at our regional offices. At our operations, we performed in line with our plans. Excluding non-cash asset write-downs, we remain on track with our original outlook for gold and copper production, costs applicable to sales, and all-in sustaining costs." Newmont's second quarter financial highlights included: • Revenues of $2 billion; • Attributable gold and copper production of 1.167 million oz and 34 million lb, down 1% and 11%, respectively, from second quarter 2012; • Attributable gold and copper sales of 1.213 million oz and 37 million lb, up www.e-mj.com Freeport Indonesia Returns to Production In an operations update included in its first-half 2013 report, Freeport-McMoRan Copper & Gold reported that its Indonesian subsidiary, PT Freeport Indonesia, resumed open-pit mining and concentrating activities at its Grasberg operations on June 24, and underground mining operations on July 9. The mines were shut down following an accident on May 14 that resulted in 28 deaths and 10 injuries (E&MJ;, June 2013, p. 9). For the period from July 10 to July 19, the Grasberg mill averaged ore throughput of approximately 200,000 mt/d, almost back to its pre-accident operating rate of 220,000 mt/d. Freeport-Indonesia's second quarter 2013 sales totaled 158 million lb of copper and 151,000 oz of gold, down from 183 million lb of copper and 247,000 oz of gold in the second quarter of 2012. Freeport-McMoRan also reported that it took actions during the second quarter of 2013 to reduce or defer capital expenditures and other costs, and initiated efforts to identify potential asset sales to reduce debt and maintain financial strength and flexibility in response to recent declines in metals prices. As a first step, Freeport has reduced budgeted capital expenditures, exploration spending, and other costs by a total of $1.9 billion for 2013 and 2014. Freeport Indonesia has several projects in progress in the Grasberg minerals district, primarily related to the development of large-scale, high-grade underground orebodies. In aggregate, these underground orebodies are expected to ramp up over several years to produce approximately 240,000 mt/d of ore, following the cur- rently anticipated transition from the Grasberg open pit in 2017. Developments of the Grasberg Block Cave and of the Deep Mill Level Zone (DMLZ) are advancing according to schedule, which would enable the DMLZ to begin production in 2015 and the Grasberg Block Cave mine to begin production in 2017. Over the next five years, capital spending on these projects is expected to average $760 million per year. At its Morenci mine in Arizona, Freeport-McMoRan is expanding mining and milling capacity to process additional sulphide ores. The project is targeting an increase in milling rates from 50,000 mt/d to approximately 115,000 mt/d in 2014. As of June 30, approximately $600 million had been spent on the project, with another $1 billion remaining to be spent. Cost estimates for the project are now approximately 15% higher than previous estimates as a result of increased equipment and material costs and higher labor costs. In South America, Freeport has started construction activities associated with a large-scale expansion at Cerro Verde, Peru. The project will expand concentrator throughput capacity from 120,000 mt/d to 360,000 mt/d. As of June 30, approximately $800 million had been incurred for this project, with approximately $3.6 billion remaining to be spent. Freeport continues to evaluate a potential large-scale milling operation at El Abra, Chile, to process additional sulphide material and achieve higher recoveries. Future long-term investments will require completion of feasibility studies and will be dependent on overall market conditions. PT Freeport Indonesia restarted underground mining operations on July 9 after a tunnel collapse killed 28 miners in May. (Photo courtesy of PT Freeport Indonesia) AUGUST 2013 • E&MJ; 5

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