Freeport CEO says no change of plans despite copper price rally

Shares in US copper giant Freeport McMoRan (NYSE:FCX) declined by as much as 2.3% in New York trading on Thursday after the company released results that disappointed markets despite a swing to profit.

The company announced net income attributable to common stock of $53 million, or 3 cents per share, in the second quarter, compared with a loss of $72 million, or 5 cents per share, in the same period last year.

The Phoenix, Arizona-based company is now worth $19.4 billion on the NYSE, flat for the year to date despite a resurgent copper price.

The miner’s quarterly copper production fell 1.2% to 767 million pounds (350,000 tonnes), molybdenum declined to 19 million pounds, while its gold output rose 19% to 191,000 ounces.

Consolidated sales for 2020 are expected to be approximately 3.15 billion pounds of copper (1.43 million tonnes), 0.8 million ounces of gold and 77 million pounds of molybdenum, rising sharply next year as its 49%-owned Grasberg mine in Indonesia expands underground.

Capital expenditure

Capital expenditures this year are expected to come in around $2 billion, including $1.3 billion for Grasberg and the completion of the Lone Star copper leach project in Arizona, but do not include outlays for its smelter project in Indonesia.

Freeport said the Lone Star project, near its Safford mine in the eastern part of the state, is substantially complete and on track to produce some 200 million pounds (90,000 tonnes) of copper annually beginning in the second half of 2020.

In April, Freeport unveiled a $1.3 billion cost-cutting plan, including delays to expansion projects, suspension of operations at its China mine in New Mexico, and deep cuts to exploration expenditure.

Only a handful of employees had gotten seriously sick from covid-19, CEO Richard Adkerson told investors on a Thursday conference call.

Exploration spending for 2020 is estimated at $30 million, roughly 60% below the 2019 total.

Copper rally

Copper was last trading at $2.93 a pound, not far off two-year highs and up by more than 50% from the covid-19 lows struck in March.

“We’re not making any major adjustments to those plans until we have clarity in this market situation,” Adkerson said in a response to the rising copper price.

If prices do continue to improve, Freeport may consider reinstating its dividend or share buybacks in 2021, he said in a conference call, Reuters reports.

Grasberg economic interest

Freeport operates seven open-pit copper mines in North America – Morenci (72%-owned), Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico – responsible for around half its output.

Freeport also operates the Cerro Verde mine in Peru, where it has a 53.6% interest, and the 51%-owned El Abra complex in Chile.

Freeport operates the Grasberg copper-gold mine and has an 81% economic interest in the venture through 2022. The government of the Asian nation owns 51% of the iconic mine.

In the current financial environment, the cost base is a significant consideration taking care of an effective quarrying company, as well as wear prices associated with cone crushers can be a significant expense center. This paper describes a technique to decrease wear prices by hardfacing crusher liners. Although this process is not new to the quarrying market, it is not the standard, as there are several skeptics that have tried it in the past with bitter memories. Nevertheless, the process has actually been developed in the last few years as well as can work well in the appropriate applications.

Cone crushers operate by having rock fed into the top of the crusher chamber. The chamber is lined with wear components, cone crusher wear parts namely the mantle and concaves. As the stone drops though the choked chamber, squashing is attained when the motion of the mantle causes compressive and abrasive pressures to act upon the stone and also dish liner, creating the rock to damage.

Liners are manufactured from manganese steel rather than normal steel as the manganese material gives security against abrasion (normal steel typically has a lower tolerance to use than squashing obligations require). Depending upon the rock being crushed, the portion of manganese in the linings can differ from around 12% to 23%. Care needs to be taken throughout choice, as inadequate manganese will not safeguard the lining, while excessive can lead to brittleness in the lining, causing failure not via wear but with fracturing. In either case, the cost of manganese can be considerable but, as this paper will show, this can be reduced.

With continued use the crystal structure of manganese steel changes, becoming more dense. This occurs when the stone being crushed is forced against the liner causing it to ‘work-harden’. ‘Green’ manganese starts off at around 25 Rockwell (250 Brinell) and can achieve a hardness of approximately 60 Rockwell (660 Brinell) after a period of work-hardening.

Liner selection

When selecting a crusher the bowl liner also varies in type:

• Coarse: wide inlet aperture
• Medium: medium inlet aperture
• Fine: small inlet aperture

Once again, selection depends upon the product required and the feedstock. Consultation with manufacturers is essential, some of whom will provide computer design facilities and offer wear-analysis services on both their own and other makes of crusher, such is the level of competition.

Crusher selection

Correct crushing chamber selection is crucial when installing a cone crusher. The reduction ratio, which in turn determines the product produced, depends on the chamber selected. In addition, the closed-side setting (the gap where maximum crushing is attained) affects both wear and the product produced. For example, if a standard unit is used instead of a shorthead, a reduction in fine product occurs, resulting in recirculation and, hence, more wear.

The characteristics of the main types of the chamber are:

Standard: shallower angle than a shorthead with a longer crushing face. Suitable for larger feed size, generally +100mm, with a wide feed grading curve. Suitable for use as a secondary crusher but, if smaller feed is introduced, can become susceptible to packing/blockages.

Shorthead: steeper angle than a standard with a shorter crushing face. Suitable for smaller feed size, generally –100mm, with a short feed grading curve. Suitable for use as a tertiary crusher but will not accept large feed size owing to its smaller feed aperture.

Hardfacing

In order to prevent liner wear during the initial period of work-hardening, specialist contractors can coat the liners with a protective surface. This process has to be carried out with great care because the manganese liners can distort and/or shrink during the process, causing a poor fit in the crusher. Small distortions are generally not a problem in crushers using backing compound, as the backing material compensates for any such irregularities. To apply the protective coating, the liner is placed on a rotating turntable and carefully preheated. A bead of 3mm thick chrome carbide is welded on to the liner as the table revolves. The areas requiring treatment are determined by the wear pattern on a normal set of liners, and by experimenting with resultant wear patterns on treated liners. Hardfacing can give the liners a protective coating of up to 62 Rockwell until it is worn off, but by this time the manganese should have work-hardened to its maximum hardness of around 60 Rockwell.

In trials undertaken at Quartzite Quarry the mantle of a standard 3ft Nordberg crusher had 3mm thickness of hardfacing applied from top to bottom, overlain with another 3mm from the middle to the bottom, with another 3mm near the bottom (ie a total thickness of 3mm where stone enters the crusher, 6mm where crushing is apparent and 9mm at the point of discharge). Wear was not as bad on the bowl liner, therefore this was treated with a single 3mm thickness across its entire surface. The stone being processed was a quartzite with an 85% silica content, a PSV of 65 and an AAV of 2.

Health and safety implications

On most cone crushers, rough-cast manganese liners are fitted to the head assembly and concave using an epoxy material commonly known as crusher backing. Exposure to this backing material has been known to result in cases of sensitization, a condition that can lead to people having violent allergic reactions upon minute exposure, causing possible respiratory failure. Any reduction in wear part changes will not only reduce exposure to backing compounds (an improvement to employee’s work conditions required under COSHH), but also reduce the use of cranes or overhead winches, thereby further reducing the frequency of potentially hazardous situations. Some cone crushers do not use backing but instead have precision-cast and machined liners. Work to reduce wear on these has been carried out but is not discussed in this paper.

One of the most common sources of wear is the silica content of the stone being crushed.

Rock with a low silica content, eg good-quality limestone, does not normally give rise to high wear costs, whereas rock which contains a high silica component, eg sandstone, sand and gravel etc, invariably does. The problem is usually encountered as soon as the liners are fitted, with the manganese being worn away before it has a chance to work-harden. The resulting wear costs can be considerable, as new liners, cranes, fitters and associated downtime are usually all involved.

@Nick Sun    NICK@XZHUAGANG.COM