Freeport reports Q3 Indonesian production

The following is an excerpt on Papua project of US mining giant Freeport-McMoRan Copper & Gold Inc.'s third quarter 2011 report released on Thursday.

Through its 90.64 percent owned and wholly consolidated subsidiary PT-FI, FCX operates the world's largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia

FCX has several projects in process in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016.

The Deep Ore Zone (DOZ) mine, one of the world's largest underground mines, has been expanded to a capacity of 80,000 metric tons of ore per day and a feasibility study for the Deep Mill Level Zone (DMLZ) has been completed. The high-grade Big Gossan mine, which began producing in fourth-quarter 2010, is expected to reach full rates of 7,000 metric tons of ore per day by the end of 2012. Substantial progress has been made in developing infrastructure and underground workings that will enable access to the underground ore bodies. Development of the terminal infrastructure and mine access for the Grasberg Block Cave and DMLZ ore bodies is in progress. Over the next five years, estimated aggregate capital spending is expected to average approximately $635 million ($500 million net to PT-FI) per year on underground development activities.

Following is summary consolidated operating data for the Indonesia mining operations for the third quarters and first nine months of 2011 and 2010:

Indonesian Mining Operations	Three Months Ended September 30		Nine Months Ended September 30
	2011	2010	2011	2010
Copper (million of recoverable pounds):
Production	233	358	778	913
Sales	253	364	796	919
Average realized price per pound	$ 3.29	$ 3.60	$ 3.82	$ 3.36
Gold (thousands of recoverable ounces):
Production	357	462	1,123	1,185
Sales	384	466	1,168	1,200
Average realized price per ounce	$ 1,695	$ 1,266	$ 1,565	$ 1,204
Unit net cash (credits) costs per pound of copper:
Site production and delivery, excluding adjustments	$ 1.98	$ 1.43	$ 1.91	$ 1.52
Gold and silver credits	(2.80)	(1.67)	(2.39)	(1.63)
Treatment charges	0.18	0.22	0.18	0.23
Royalties	0.16	0.12	0.16	0.12
Unit net cash (credits) costs (*)	$ 0.48	$ 0.10	$ 0.14	$ 0.24
*. For a reconciliation of unit net cash (credits) costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, ?Product Revenues and Production Costs,? beginning on page VII, which is available on FCX's website, ?www.fcx.com.?

At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold. Indonesia's thirdquarter 2011 copper sales of 253 million pounds and gold sales of 384 thousand ounces were lower than thirdquarter 2010 copper sales of 364 million pounds and gold sales of 466 thousand ounces primarily because of planned sequencing of mining in a lower ore-grade section of the Grasberg open pit and the impact of labor disruptions during the quarter. The estimated impact from labor disruptions on third-quarter 2011 production, including the eight-day strike in July 2011 and the ongoing strike that commenced on September 15, 2011, totaled approximately 70 million pounds of copper and 100 thousand ounces of gold. PT-FI has developed revised operating plans to produce and ship concentrates at modified levels with a reduced workforce and also sold concentrate from inventory during third-quarter 2011, which partly mitigated the lower production levels.

FCX expects sales from Indonesia to approximate 1.0 billion pounds of copper and 1.45 million ounces of gold for the year 2011, compared with 1.2 billion pounds of copper and 1.8 million ounces of gold for the year 2010. Indonesia's fourth-quarter 2011 sales estimates of 185 million pounds of copper and 280 thousand ounces of gold reflect the impact of labor disruptions and expected mining in a lower ore-grade section of the Grasberg open pit. The impact of labor disruptions for the year 2011, which is subject to change based on operating rates, mine plans, the extent to which we can operate using a reduced workforce, and the timing of resumption of normal operations, is estimated to approximate 100 million pounds of copper and 100 thousand ounces of gold.

Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on volumes of copper and gold sold, as well as average realized gold prices during the period. Unit net cash costs (including gold and silver credits) for Indonesia averaged a net credit of $0.48 per pound of copper in third-quarter 2011, compared to a net cost of $0.10 per pound in third-quarter 2010. The favorable variance was primarily associated with higher gold and silver credits that more than offset increases in site production and delivery costs primarily from lower copper volumes.

FCX estimates Indonesia's average unit net cash costs (net of gold and silver credits) would approximate $0.03 per pound of copper for the year 2011, based on current sales volume and cost estimates and assuming an average gold price of $1,600 per ounce during fourth-quarter 2011. Indonesia's unit net cash costs for 2011 would change by approximately $0.025 per pound for each $50 per ounce change in the average price of gold during fourth-quarter 2011. Fourth-quarter 2011 unit net cash costs are expected to be higher than the average for the year primarily because of lower volumes. (end of excerpt)