Freeport Prepares for Long Term

Leading copper producer invests in Arizona operations to maintain a steady copper production pipeline

By Steve Fiscor, Editor-in-Chief, E&MJ

Freeport-McMoRan produced 3.21 billion lb of copper in 2020 and about 1.42 billion lb came from its North American mining operations. The company operates seven open-pit copper mines in North America — Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and the Chino and Tyrone in New Mexico. The Morenci mine is the company’s leading North American copper producer (707 million lb/y) followed by Bagdad (216 million lb/y), Sierrita (178 million lb/y) and Safford (161 million lb/y).

Operations continue to ramp up at the Lone Star mine, which is part of the Safford complex, and copper production is growing by leaps and bounds. Freeport brought the Lone Star project online at the end of 2020 and copper production has already grown to more than 200 million lb by the end of the third quarter. The company hopes to grow that annual figure to as much as 300 million lb/y.

Modern copper leaching technology is presenting an opportunity to increase production from all the mines and Freeport is currently studying a program that could recover substantial amounts of copper from existing stockpiles at Morenci. The company is looking to double the output at Bagdad. Freeport also has considerable undeveloped copper reserves in Arizona.

During February, Freeport appointed Kathleen Quirk as president, in addition to her role as CFO, recognizing her work and leadership over the years. Quirk joined Freeport in 1989 and became CFO in 2003, with her responsibilities over the years continually expanding into all aspects of the business. Today, she works closely with all of Freeport’s operations, including Grasberg in Indonesia and the mines in South America as well as the company’s North American operations.

Safety is the primary consideration at all of its mining operations. Similar to businesses in any area, however, Freeport has had to learn to adapt and work around COVID-19. The company quickly put policies in place to protect its workers and local communities, Quirk explained, following the Centers for Disease Control and Prevention safety protocols and in some cases, the company took it a step farther. “When vaccines became available last year, we strongly encouraged people to get vaccinated and offered incentives,” Quirk said. As far as working with the corporate headquarters in Phoenix, Freeport has established a Collaboration Hub where groups get together on a need-to basis, while at the same time taking advantage of the efficiencies gained and learned during the pandemic.

Reviewing the company’s Arizona mines, Quirk is excited about the company’s recent accomplishments with the Lone Star mine at Safford. She and the team have a few projects on the horizon that could increase copper production from existing Arizona operations. Her objectives for the future focus on plan execution and building and maintaining a healthy pipeline to fulfill the world’s growing need for copper.

Producing More Copper From Existing Operations

Lone Star is mining from an impressive orebody in a historic Arizona district. “We are just starting at Lone Star,” Quirk said. “We began with the original oxide project, which leveraged Safford’s infrastructure, and that’s been operating since late 2020 very effectively. We started at a rate of 200 million lb/y of copper, we’re now currently achieving 250 million lb/y, and we’ve got some evaluations that could bring production up to 300 million lb/y.”

A 50% increase in production from the original design is a significant achievement for any business. Quirk attributes the increase to eliminating bottlenecks. “It’s a great, great way to start a project like this, which has a long life and a big future ahead of it, and the benefit of us expanding the oxides is that it not only generates a good return on investment for that project, but it also exposes what we see as a major sulphide development.”

Lone Star’s mineral potential is 10 times the current reserves, and it’s rather unusual to have such a large deposit in an area where the company has been mining for so many years. “People in the area are familiar with us,” Quirk said. “We have a high level of community acceptance and we have a very, very positive outlook for the future of this operation.”

As it mines through the oxide cap, Lone Star is profitably pre-stripping a massive sulphide orebody. “We’ve done a lot of drilling in recent years, and we will be doing significant work to incorporate that drilling into our longer-term plans,” Quirk said. She believes that Lone Star will become something of significance and scale for Freeport for decades to come.

Another established mining area is Freeport’s Bagdad mine in northwest Arizona. Freeport has operated there for decades. Unlike Lone Star, which is a leaching operation, Bagdad operates a concentrating mill that produces both copper and molybdenum in concentrate. “We have an opportunity at Bagdad that we’ve been discussing for some time,” Quirk said. “Because the reserve life is so long at Bagdad, on the order of 80 years at the current milling rates, we started looking at upgrades, such as automation, to improve the plant’s throughput and recoveries without investing a lot of capital.”

Using machine learning and artificial intelligence, Freeport determined they not only had the ability to increase production and improve recoveries through automation, which they are currently implementing, it also pointed the way to the next phase: investing in second concentrating line. “We will be in feasibility this year on that project,” Quirk said. “It could essentially double the capacity at Bagdad.”

The Sierrita mine, which is located near Tucson, is using a throughput and recovery optimization model to predict, based on data, the best way to process various types of ores passing through the plant at any given time. “This model was developed by data analysts working in conjunction with our operators and we’re seeing good performance of these models relative to the historical way that we use data, and this really gives us much more ability to predict and know the cause and effect of the actions we take,” Quirk said.

Across the North American operations, Quirk said they are considering advanced leaching initiatives, especially at Morenci, which has advantages to enhance and modernize solvent extraction/electrowinning (SX/EW). “The processing at Morenci is much different,” Quirk explained. “The leached material does not have to be smelted, but the recoveries are much lower than a concentrator, and we and others in the industry are embarking on a major effort to find ways to improve recoveries from leach production.

Freeport has a variety of leaching initiatives under way, both internal research and development and partnerships with third parties, to look at ways to improve recoveries from our leach stockpiles. “We have 38 billion lb of copper in stockpiles today that are not included in our reserves or resources,” Quirk said. “We didn’t expect to recover it and we’re looking at ways to recover some of it now. If we just get a 10% to 20% increase in recoveries, that’s similar to bringing a new mine online without the mining and capital. We’re talking low incremental costs, very low capital, and importantly, a very low carbon footprint.”

As Quirk and the team survey the situation around the world with respect to copper, they see a new element of demand emerging with respect to demand from de-carbonization, especially with battery-electric vehicles and renewable energy. “When we look at how copper supply matches up with this new element of demand, it’s not obvious where that copper will come from,” she said. “There aren’t a lot of actionable development projects available to the industry, like there once was. The industry will have to find new ways to produce more metals and we believe these advanced leaching methods, if we can crack the code, will be a new source of mine supply that the market really needs to respond to increasing demand from decarbonization.”

About half of that 38 billion lb is at Morenci. “That’s why we’re focusing most of our efforts on the Morenci leaching program,” Quirk said. “It has the ability to really move the needle. The ways in which we are able to use data these days is amazing. In the past, with leaching, it was much more of a trial-and-error process. Now, with data analytics, we know a lot more about what effect different technologies have on leach recoveries.”

Morenci generates no waste rock. It processes all the mined material. Some of it may be very low grade will little copper recovered. Higher grades are processed through  the concentrator and lower grades are stacked on the leach pads. “With this new technology, how the ore responds could change the way we operate,” Quirk said. “Accurately predicting where the ore should be processed could be a game-changer when it comes to more complex ores.”

Quirk described Freeport’s leaching initiative as a collaborative process, one that involves engineers, metallurgists, mine planners and geologists. “We have developed an agile way of working during the past few years,” Quirk said. “We were always collaborative, but we really started to ramp up an agile approach to problem-solving. It really helps to have the ability to go across functions and bring people and resources together to bounce around ideas and move more quickly than we have in the past.

“Rather than over-analyzing the situation, we’re trying things more quickly, and making incremental progress,” Quirk said. “Hopefully, during 2022, we will make more meaningful progress on this, but it’s still in the research and development phase.”

Dealing With Rising Costs

Copper is commanding a higher price these days. In 2020, Freeport sold copper at an average price of $2.82/lb. During 2021, the average price of copper sold was $4.22/lb, but increasing costs are partially eating into those pro-
fit margins. In 2021, oil prices and energy prices in general rose significantly. “Energy costs definitely impact our cost structure,” Quirk said. “For a number of years, we have been working on energy efficiency projects, but we still consume a lot of energy in operations.”

Other consumables like sulphuric acid and ammonium nitrate have been a major factor for Freeport as well. Those items are more of a supply-demand factor as opposed to traditional inflation, Quirk explained. “Ammonium nitrate has been affected by high ammonia prices and high natural gas prices, but our team has been managing the supply chain well. They take a strategic view with our suppliers, and we work with them, providing forecasts so they know our plans and they can plan their business.

Labor has also been a factor lately. “We have a number of open positions in the U.S., and the mining industry is a very competitive environment right now,” Quirk said. “We are implementing programs to try to help retain and attract the best people to our mine sites. We have a really good workforce that’s dedicated and committed to our values. However, we need to continue to recruit new workers and that’s a challenge in today’s world, even when you offer a really good work environment, very good pay and benefits, and an inclusive culture.”

Looking toward the future, Quirk said she is laser focused on execution. During 2020 in the midst of a pandemic, the Grasberg mine in Indonesia successfully transitioned from open pit to underground mining. “We’ve got significant operations in Peru and a major development opportunity in Chile,” Quirk said. “On top of all that, our balance sheet is in super shape. We’re investing in the mines and opportunities for them, and we’re returning cash to shareholders.”

“For me, it’s about executing that strategy and thinking about what the next 10 years will look like,” Quirk said. “We need to make decisions now that will set us on a course to maintain large-scale production for decades to come.”

Freeport has completed climate-related initiatives and it recently published a comprehensive climate report. “We’re also documenting our ESG [environmental, social and governance] strategy,” Quirk said. “It’s been a feature of our industry forever because we’ve operated in remote communities for decades. We have demonstrated our ability to be really great stewards of the environment and great partners with communities over a long period of time. Today, there’s so much more emphasis on ESG from a reporting, disclosure and accountability perspective, and we’re taking that very serious.”

Freeport is fortunate to have a pipeline of opportunities and to be able to rank those opportunities in sequence to ensure a long-term successful future. Quirk believes the best is yet to come.