The Asia Miner

JAN-MAR 2019

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 16 • issue 1 33 AROUND THE REGION Copper concentrate exports from Indonesia's Grasberg mine, the world's second-largest copper mine, are forecast to plunge this year because of a lag in output as operaঞons move from open pit to underground mining. Ferro Alloy Net reports that in 2019, copper concentrate exports are expected to drop to 200000 tonnes from about 1.2-million tonnes last year. Grasberg's operator, US miner Freeport McMoRan, has documented the output decline, which is the result of the switch from the depleঞng open pit mine early this year, and before a substanঞal expansion of a coexisঞng underground mine ramps up to full producঞon. According to Freeport McMoRan's Q4 2018 report, sales volumes for the year 2019 are expected to approximate 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum. This is expected to include 0.8 billion pounds of copper, 255 thousand ounces of gold and 24 million pounds of molybdenum in Q1 2019. "As PT-FI transiঞons mining from the open pit to underground, its producঞon is expected to be significantly lower in 2019 and 2020, compared to 2018. Metal producঞon is expected to improve significantly by 2021 following a ramp- up period," stated Freeport McMoRan. The output drop will cut Grasberg's revenue over the next few years just as Indonesia's state-owned miner PT Indonesia Asahan Aluminium (PT Inalum) takes over ownership of the US miner's PT Freeport Indonesia unit. Consolidated sales for 2018 totalled 785 million pounds of copper, 266 thousand ounces of gold and 24 million pounds of molybdenum in Q4 2018; and 3.8 billion pounds of copper, 2.4 million ounces of gold and 94 million pounds of molybdenum for the year 2018. The company reports that Q4 2018 consolidated copper and gold sales were lower than consolidated producঞon of 841 million pounds of copper and 334 thousand ounces of gold due to the ঞming of shipments. The consolidated sales for the year 2019 are expected to approximate 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 0.8 billion pounds of copper, 255 thousand ounces of gold and 24 million pounds of molybdenum in Q1 2019. A spokesman for Inalum said the decline was in line with expectaঞons. "Producঞon will resume normally a[er 2022, and Inalum has forecast net profit to average more than US$2 billion annually when the transiঞon is slated to be completed a[er 2022," Inalum spokesman Rendi Witular told Reuters. Revenues of Freeport Indonesia, in which Inalum holds a majority stake, are expected to drop to US$3.1 billion in 2019 from US$6.3 billion in 2018, and peak again at US$7.5 billion in 2023, according to data provided by Inalum. Recently appointed Freeport Indonesia Chief Execuঞve Officer Tony Wenas said last month that Grasberg output would begin to climb again in 2020, although the company said in October output would be "significantly: impacted unঞl 2021. In December 2018, Freeport MacMoRan successfully completed the transacঞon with the Indonesian government regarding PT Freeport Indonesia's (PT-FI) long-term mining rights and share ownership. The company expects its share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transacঞon, to be comparable to its share of anঞcipated future cash flows under PT-FI's previous Contract of Work (COW) and joint venture arrangements with Rio Tinto. Indonesia forecasts drop in Grasberg copper concentrate exports in 2019 Copper concentrate exports from Indonesia's Grasberg mine are forecast to drop in 2019. Image source: Freeport MacMoRan

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