Analyzing Copper Miners’ Cost Progression



Cost progression

Previously in this series, we looked at copper miners’ 3Q17 production profiles and guidance. In this article, we’ll look at their unit production costs. Commodity producers don’t have much control over commodity prices (GLEN-L) (AAL-L). When commodity prices fall, high-cost producers become unprofitable much sooner than peers with a lower cost structure. It’s therefore crucial for commodity producers to have competitive cost structures.

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3Q17 production costs

Freeport-McMoRan (FCX) reported copper after by product unit cash costs of $1.21 per pound in 3Q17 versus $1.20 per pound in 2Q17. The company’s Indonesia operations were the lowest cost operation in its asset portfolio, while its South America operations reported the highest unit production cost. Antofagasta’s (ANTO) 3Q17 unit cash costs after-by-product credit fell to $1.18 per pound in 3Q17 compared to $1.20 per pound in the sequential quarter. While the company’s unit production costs before byproduct credit rose slightly from 2Q17, they were offset by higher by-product credits led by both volume and price. Southern Copper’s (SCCO) after-by-product unit cash costs fell to $0.90 per pound in 3Q17 compared to $0.98 in the sequential quarter.


Freeport expects its copper after-by-product unit cash cost to average $1.19 per pound in 2017, which implies a 4Q17 unit production cost of $0.98 per pound. Antofagasta now expects its 2017 unit cash costs after by-product credit to be lower than its previous guidance of $1.30 per pound.

In the next article, we’ll look at copper miners’ 3Q17 profitability.


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