Freeport-McMoran announced revised capital and operating plans in response to the recent decline in copper prices resulting in reduced capital expenditures, lower production levels and lower operating, administrative and exploration costs.
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Since late 2014, FCX has reduced its consolidated 2015 capital expenditure budget from $7.5 billion to $6.3 billion, including reductions of $700 million in oil and gas expenditures and $500 million in mining expenditures.
After incorporating this announcements and the August 5, 2015 announcement of reduced oil and gas expenditures, capital expenditures for 2016 are expected to decline to a total of $4 billion, including $1.4 billion in mining projects, $0.6 billion in mining sustaining capital and $2 billion in oil and gas expenditures.
The current 2016 capital estimate of $4 billion is approximately 29% lower than the $5.6 billion estimate on July 23, 2015, reflecting aggressive actions in response to current market conditions.
The impact of the revised plans will be to reduce 2016 and 2017 copper production by approximately 150 million pounds per year from July 23, 2015 estimates, principally resulting from reduced operating rates at several of FCX’s mining operations in the Americas.
Based on the revised operating plans and reductions in estimated energy and other input costs, FCX’s site production and delivery costs, before by-product credits, would average approximately $1.45 per pound in 2016, approximately 20 percent lower than 2015 levels.
Net unit costs after by-product credits would approximate $1.15 per pound in 2016, assuming prices of $6 per pound for molybdenum and $1,150 per ounce for gold.
FCX’s revised plans in North America incorporate reductions in mining rates to reduce operating and capital costs, including the suspension of mining operations at its Miami mine (which produced 57 million pounds in 2014), a 50% reduction in mining rates at the Tyrone mine (which produced 94 million pounds in 2014) and adjustments to mining rates at other U.S. mines.
These changes are expected to result in an approximate 10 percent reduction in employees and contractors at U.S. mining operations. ■