uploads/2017/03/PART-8-COST-GUIDANCE-1.png

Why Freeport Expects Its Production Costs to Fall Further in 2017

By

Updated

Production costs

Previously, we’ve looked at copper miners’ 2016 unit cash costs. In this article, we’ll look at the 2017 guidances provided by some of these companies.

Article continues below advertisement

Freeport

Freeport-McMoRan (FCX) expects its unit cash costs after by-product credits to average $1.06 per pound in 2017, compared to $1.26 per pound in 2016. Its Indonesian operations are expected to drive the reduction in its 2017 unit cash costs. The company expects its unit cash costs after by-product credits to average -$0.03 per pound in its Indonesian operations.

Because Freeport is expected to mine higher ore grades along with more gold (NEM) from its Grasberg mine (RIO) this year, its copper cash costs after by-product credits are expected to be negative in Indonesia, positively affecting its consolidated unit cash costs.

Remember that Freeport’s Indonesian operations have faced labor issues over the last two quarters, negatively impacting the company’s production profile. The company could risk missing its 2017 guidance if the impasse at its Grasberg mine lingers.

Other miners

Southern Copper (SCCO) also expects its unit cash costs after by-product credits to fall to $0.80 per pound in 2017, compared to $0.95 in 2016. According to the company, higher by-product credits and lower energy costs in its Peru operations should help it to lower its cash costs.

Teck Resources (TECK) expects its 2017 copper unit cash costs to be between $1.40 and $1.50 per pound, higher than in 2016. The company attributed these higher costs to lower ore grades at its Highland Valley operations.

In the next article, we’ll look at copper miners’ 2016 profitabilities.

Advertisement

More From Market Realist