Copper & Gold: Poor Q3 Results as Ore Grades and Gold Production Declines

Submitted by SD Contributor SRSrocco:

If we take a look at Freeport-McMoRan’s Q3 Report, we see that the base miners balance sheets continue to erode as costs increase while ore grades and the market price for commodities continue to decline.

In the first nine months of 2012, total revenues have declined nearly 20% compared to the same period in 2011.  We can also see that production of copper has fallen 7.3% in the first nine months while gold as declined a staggering 41%.  We can also see that operating & net income both fell quite hard.

Cash Costs for their North American copper production increased substantially:

Q3 2011 = $1.42 lb

Q3 2012 = $1.77 lb

This is a 25% increase in cash cost in just one year.  Again, cash costs do no reflect TOTAL COSTS for mining copper.  North America produces about 38% of Freeport-McMoRan’s copper and not much gold.  The decline in gold production was in a large extent due to their Grasberg mine in Indonesia.

The drop in Gold production at Grasberg made Freeport-McMoRan’s copper cash cost rise in its Indonesian region from ($0.48) to $1.65.  That’s correct a (negative) -$0.48 to +$1.65.  This is a staggering $2.00 change in cash cost for their copper in just a lousy year.

Things are going to get a great deal more interesting in the next several years as costs escalate and margins continue to get crushed.