Could you provide an overview of 2020 production amid the pandemic, and indicate your guidance for 2021?
We had to modify our operating plans as a result of the impacts of COVID-19 on the global economy and the copper market. I’m extremely proud of how well the Freeport-McMoRan team responded to the challenges of the pandemic, specifically safeguarding our people, communities and assets as we executed and delivered on our revised operating plans.
As stated in our recent earnings call, copper sales for 2021 are projected to increase 20% over 2020, and our unit net cash cost of production is expected to decline. Consolidated sales volumes for the year 2021 are expected to approximate 3.8 billion pounds of copper, 1.3 million ounces of gold and 85 million pounds of molybdenum.
What are the status and details of El Abra’s expansion? How will it expand your operational capacity?
El Abra, our mine in Chile, has been a part of our asset portfolio for many years and is similar to several other of our operations that are focused on leach production. During the last decade, our brownfield exploration has identified a significant sulfide resource opportunity at El Abra. We’ve been exploring to determine if and when a transition from a leaching operation into a sulfide operation is economically feasible. As we look into the future, there are opportunities for growth at El Abra. Studies are currently underway but no decisions have been made at this point.
We’re taking the operation back to pre-COVID-19 levels during the next 12 months or so. Pre-COVID-19, we were in the process of doing baseline studies for the significant sulfide resource, but were forced to stop that work. This year, we plan to restart those baseline studies and consolidate all our previous efforts on pre-feasibility studies to determine whether we want to take the project to the next step.
How are you addressing the water scarcity challenges of operating in Chile?
At El Abra, we source new water needed for our operations from groundwater and storm water. Globally, Freeport-McMoRan prioritizes maximizing our recycled/reused water across all our operations. El Abra is no exception, especially given it is in an arid region near the Atacama Desert. Our water use efficiency (water reused/recycled) at El Abra averages around 94% annually.
In addition to managing our own water risks, we also are dedicated to supporting our local communities in securing water. El Abra has been supplying drinking water to the indigenous community in Ascotán since 2009.
What is your view of copper fundamentals and its key drivers?
If you look at both supply and demand, the market seems to be tight. The global inventories are as low as they’ve been in at least a decade. From a fundamental perspective, the market continues to be strong, the challenges are around the uncertainties associated with a global recovery and China. Recently, prices have risen significantly in recognition of copper's favorable demand trends and the limited ability of the industry to increase supply.
With 70% of the world's copper supply used to deliver electricity, the intensity of copper use will increase as clean energy initiatives are implemented. Copper utilization in electric vehicles and in the generation of renewable power is more than four times greater per unit than that of traditional vehicles and power generation. In a relatively short timeframe, global demand just from these green initiatives could approximate the size of today's US copper market. As demand accelerates, copper supply will continue to struggle to keep up, and this supports the favorable near-term and long-term outlook for copper.
Can you elaborate on Freeport’s growth strategy in Chile in the upcoming years?
Similar to our overall growth strategy for Freeport, in Chile we’re focused on brownfield expansions. The potential sulphide resource and possible El Abra expansion project are very much in alignment with that.
As for acquiring assets in other metals, Freeport is foremost in copper. Our portfolio of assets is large and high quality. We are a well-established industry leader and operate mines that are among the largest in the world. Our assets have long lives and are durable, with embedded options, reserves and resource growth. In short, we're a reliable supplier to the global copper industry.