Freeport Offers Debt Securities for Underground Mining to Indonesia
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Freeport McMoran has offered bonds of up to the US $ 2.5 billion to fund the Underground Mining Project in Indonesia through PT Freeport Indonesia.
Richard C. Adkerson
Freeport McMoran President and Chief Executive of Ficer Richard C. Adkerson said that increased production from the Grasberg Block Cave underground mine and Deep Mill Level Zone continued as planned even during the Covid-19 pandemic. The budget to work on mine development also did not change according to the original plan before the pandemic occurred.
He explained this was because it had succeeded in reducing debt to only half of the amount in 2016. Specifically for underground mining, last year, it had also extended the term of its debt by the US $ 3.5 billion to 2024. It also discussed with banks to change the revolving debt agreement to be more flexible during the increase in production from Grasberg.
"In the last few months, we have also offered debt securities with the acquisition of funds of US $ 2.5 billion in the long term and attractive interest, which we use to refinancing maturing debt," said Adkerson.
Currently, it does not have short-term debt that is due. Apart from bank funding and debt securities, financing underground mining projects also uses cash generated from its mining business in Indonesia as well. In an official statement Freeport said investment for the development of this underground mine is planned to average the US $ 800 million per year for 2020-2022, excluding contributions from PT Indonesia Asahan Aluminum (Persero).
Regarding the progress of underground mining, Adkerson explained, has reached a milestone for large-scale production of blocks with high-quality ore at low cost. In the first quarter yesterday, ore production from the Grasberg Block Cave and Deep Mill Level Zone reached an average of 37 thousand tons per day.
"Slightly exceeding our estimates at the beginning of the year and 44% higher than the previous quarter. At the end of the first quarter, we were able to produce up to 40 thousand metric tons of ore per day and will continue to increase, "he said.
It has added 50 new draw bells in the two underground mines, more than the number of additional draw bells in the last quarter of 2019 of 34 draw bells. So, now there are 250 draw bells in the mine which allows increased ore production. Both of these underground mines have high-quality copper and gold ore reserves.
In line with the increase in underground mining production, Freeport Indonesia also projects an increase in sales. Although sales this year are still fairly low, production will start to rise to 1.4 billion pounds for copper and 1.4 million ounces for gold next year. In 2022, copper sales were targeted at 1.7 billion pounds and gold at 1.7 million ounces. The peak, in 2023, copper sales will stabilize at 1.7 billion pounds and gold will reach 1.8 million ounces.
Of these two underground mines, Freeport McMoran once projected that it could obtain gross revenue of US $ 150 billion. This figure is about 50% higher than those obtained over the past 30 years. This count assumes 20 years of production and a price of copper of US $ 3 per pound and gold of US $ 1,500 per ounce.
Adkerson had revealed, the projected gross revenue count only counted during the Freeport contract period. However, the existing reserves in the mine can be produced until more than 2041, at which Freeport's contract with the Indonesian Government ends.
"And I hope Freeport will continue to be involved [managing the mine] after 2041," he said.
Investor Daily, Page-9, Tuesday, April 28, 2020.
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