Kathleen L. Quirk
President at Freeport-McMoRan
Thank you, Richard. And I'll start on Slide 3. You've probably seen, we published our Annual Report and our Sustainability Report today and the reports are available on our website. The theme of this year's Annual Report is The Power of Copper. It highlights the critical role that Freeport and our principal product, copper, play in powering the global economy and the growing uses of copper as the world decarbonize and re-imagines modern infrastructure to support a highly connected world.
We're also proud to publish our annual Sustainability Report. We've been reporting on our comprehensive sustainability initiatives for 22 years now and transparency continues to be enhanced. The report summarizes our initiatives, our achievements, and the challenges that we face in managing the safety, social, and environmental aspects of our business, which are critical to our long-term success. We use international standards, best practices, and third-parties, such as The Copper Mark, to measure our performance and responsibility to our stakeholders. We hope you'll have the chance to review this information and engage with us on these topics.
We'll turn to Slide 4, which summarizes our key operating and financial highlights in the first quarter. As previously disclosed, our Grasberg operations were temporarily disrupted in February, following a significant weather impact in our mill area. As Richard said, the team did a great job to safely restore production to normal levels in March. Despite the lower volumes compared with our estimates going into the quarter, our consolidated unit net cash costs were essentially in line with our guidance. Consolidated cost per unit averaged $1.76 per pound in the quarter as higher byproduct credits more than offset the volume impact.
As Richard mentioned, notably, even with the disruption, Grasberg unit net cash costs averaged a net credit of $0.08 per pound, meaning the gold revenues more than offset the cash costs of production. With the return to normal operations in March and a great start in April, we expect our volumes to be strong in the balance of the year. Our margins in the quarter were strong, our EBITDA totaled $2.2 billion in the quarter, operating cash flows, which were net of $500 million use of cash for working capital totaled $1.1 billion.
We funded investments during the quarter of $1.1 billion. That included about $400 million for major mining projects and $300 million for the Indonesia smelter, which is being funded from proceeds from financing we raised last year. Excluding net debt associated with the smelter, we ended the quarter with $1.3 billion in net debt. Our balance sheet, liquidity, financial flexibility are in terrific shape. The outlook is positive for free cash flow generation in the balance of the year.
The next slide, Richard talked about the challenges we faced in the first quarter and we faced these across our global operations. Our teams executed well in the circumstances. And you can see on the left, the production impact of the weather event at Grasberg in February and the strong recovery in March. In Peru, we and other companies experienced a challenging environment earlier in the year associated with widespread protests, which impacted supply chains and transportation routes. Our team at Cerro Verde did a great job managing the situation efficiently and safely. Situation in Peru has improved in recent weeks, and we're now operating at normal rates.
In the US, we were challenged with ongoing labor shortages, extreme weather events earlier in the quarter, and unplanned maintenance issues. We're working to improve productivity and reliability, working on skills development, and pursuing technology and automation initiatives, as we aggressively seek to recruit workers with ongoing tight labor market conditions in the US. The leach recovery efforts, which we'll talk more about, really helped to offset some of the shortfalls in mining rates, and we're going to continue to build on this.
Turning to the markets on Slide 6. Freeport is well-positioned as a leader in the global copper industry. Demand for copper is expected to accelerate going forward with projections for demand to double by 2035. Copper is essential in electrification. Low carbon investments in renewable power and electrification are driving massive growth in demand. In addition, the initiatives by many countries from major infrastructure programs and the uses of copper for connectivity, data, and artificial intelligence are also growing demand drivers.
At the same time, the ability of the industry to meet this rising demand is a real challenge. All of us can look back at this time last year where many were projecting the market to move to a surplus in 2023, pointing to the new projects that were coming online. As we look at the situation today, most analysts now project the market to be balanced this year even with the new projects, and longer-term, the projections are for very large deficits.
Under this backdrop, we believe prices will need to rise to incentivize new supplies. And at Freeport, we benefit from a large reserve position, as you see on the slide, and an even larger resource position to grow our business in the future. We're strongly positioned to continue to support growing demand and are pursuing several of these initiatives to enhance production going forward.
On Slide 7, we talk about the molybdenum markets, and as we've discussed, in addition to being a leading copper producer, Freeport is the world's largest molybdenum producer. Last quarter, we spoke about the significant rise in molybdenum from $18 per pound in late 2022 to a high of over $38 per pound in the first quarter of this year. We realized $30 per pound for our molybdenum sales in the first quarter. The price rose sharply beginning in late 2022 in response of supply issues and favorable demand drivers in energy and aerospace sectors. The prices began to drop from the highs in recent weeks, partly related to improved supply. As we look forward, the demand drivers from moly are positive, and since moly is principally produced as a byproduct from copper mines, it's also subject to some of the same supply issues as we have in copper. Current price of moly approximates just over $21 per pound.
We're really excited -- moving to Slide 8, really excited to talk today to give you an update on our leach initiatives, which Richard referred to earlier. Our efforts to increase copper production through enhance recoveries from our massive leach stockpiles is continuing to gain momentum. Based on our results today, we're gaining increasing confidence in achieving our initial target of 200 million pounds per annum, and have begun to model what the next phase could look like.
On the left-side of the chart, we summarize the various categories that make-up the initial 200 million pound target, basically in three buckets. The first is, relates to heat, increasing temperatures within the stockpiles. The second is an initiative we call Leach Everywhere, which is focused on making sure the entire stockpile has the benefit of the liquid solution we use to leach copper. And the third category, which is really important, it involves data analytics using new data available through sensors used in a variety of ways, including optimizing the amount of solution use and the rate of application we use to achieve the best results.
It's been proven that increasing heat in the stockpiles enhances recoveries. We've advanced the installation of covers on our stockpiles for heat retention and we've mechanized the process, and that's allowed us to execute more efficiently. We now have over 30% of our massive stockpiles covered. These initiatives provide 30% of the targeted increase.
The Leach Everywhere initiative makes up 50% of the uplift and uses targeted drilling to improve flow of the solution that may not be getting through the stockpile. We're also drilling injection wells to add the liquid solution to lower stockpile sections. The sensors we've installed and access to other technology used in oil and gas formations are providing new information on where additional leach solution would stimulate the process and support higher production.
The data analytics works is providing new insights. We really haven't had the benefit of this in the past, and we're now able to get the benefit to determine the optimal operating protocols under various conditions of the stockpiles. The initial success of these initiatives adds production at low incremental cost and a low carbon footprint. In parallel with our initial activities, we've been doing substantial work on the drivers to stimulate leach production and have modeled results on what the next phase of initiatives could yield. We see an opportunity to add an additional 600 million pounds per annum from these initiatives, which would provide a total of 800 million pounds per year. That's the size of a major new mine without the capital intensity and a very low incremental operating cost.
The three areas of focus are highlighted in the center of the slide and we're in various stages of development on each of these initiatives. We've got a lot of work to do to advance these initiatives and some of this requires further innovation, but we have a clear path to success in this program. We're evaluating opportunities to increase the temperature further by heating the liquid solution before application on the stockpile. We're evaluating options to do this using solar-generated power, geothermal or other renewable sources at our mine sites to accomplish the additional heat requirement.
We're also testing various additives that we're developing both internally as well as from third-party initiatives. And we're using artificial intelligence in our journey and in our evaluations to help expedite the process. We're also evaluating options to inject air into the stockpiles in areas that are not getting enough oxygen. Again, we have much more knowledge of what is going on within the stockpiles and are working to design solutions to restimulate copper production. Freeport is in an exceptionally strong position to lead the industry in this area with massive stockpiles currently under leach, ongoing mine leach -- mine for leach activities and the latent tankhouse capacity that we have. This will be part of our growth plans as we go forward in addition to the organic growth that we have to develop new copper in traditional ways.
And Slide 9 highlights the growth and development outlook. And as we look at growing copper demand and the limitations and risks and actionable greenfield project development, our strategy and development priorities are focused on extensions of our existing operations and our portfolio of brownfield opportunities. On Slide 9, we show our near-term, medium-term, and longer-term development options. Following the significant growth in recent years achieved through the successful Grasberg development, we're focused on advancing to next phases. In the near-term, we see the best options for growth and achieving our initial leach targets and actions to enhance productivity and reliability in our US operations. If we can get our mining rates up in the US, which we're working on, and hit our targets for asset efficiency and reliability, we have the opportunity to add an additional 200 million pounds per year with limited capital investment.
In the medium-term, we've outlined a series of initiatives. The first includes the second phase of our leach project. We're also looking to expand our Bagdad mine in Arizona and expect to complete feasibility studies this year. We have a major opportunity in Chile at our El Abra project and we already have an existing operation and looking to expand it significantly. And we're in the process of developing a new 90,000-ton per day block cave mine in Indonesia called Kucing Liar, which is currently in progress and expected to commence initial production by the end of the decade.
At Bagdad, we're making some investments, which are included in our new capital expenditure guidance to conduct early works in the tailings area to enhance optionality to move more quickly with the mill expansion project, following completion of the feasibility study. Longer-term, and we're already working on these projects, as they require long lead times, we expect we'll have the opportunity for further major expansion in the Safford/Lone Star district where we have identified significant resource and we have a series of US brownfield projects that can be pursued.
In Indonesia, Richard talked about the extension discussions we're having and the extension of our operating rights beyond 2041 would open the door for continuation of large scale mining and potential additional development options in one of the world's largest and highest grade copper and gold mining districts. We're in an outstanding position to continue our leadership role in supplying copper to a world with growing requirements. We're going to continue to be disciplined in our approach and focused on executing projects where we can create value for shareholders.
On Slide 10, we provide an update of our three-year outlook for sales volumes. We've updated the 2023 sales guidance to take into account the first quarter disruption and the impact of lower mining rates in the US. Despite the disruption at Grasberg in February, our gold volumes for 2023 are about 3% higher than prior estimates. We've incorporated estimates for stronger gold recoveries in our January forecast and we're doing really well in that regard. The guidance for 2024 and 2025 is unchanged, but with continued success in our leach efforts, we have some upside to these estimates.
On Slide 11, we show -- moving to cost, we show a comparison of our prior unit net cash cost guidance for 2023 compared to our current estimate. We currently estimate unit cash cost to average $1.55 per pound for 2023, that's slightly lower than our January estimate of $1.60 per pound. The impact of the lower volume -- copper volumes is offset by higher byproduct credits and a reduction in export duties in Indonesia associated with our smelter construction progress. Our assumptions for the key commodity-based input costs are similar to the January estimates. We're starting to experience less inflationary pressures in certain areas than in 2022, particularly for energy, while labor cost services and equipment components have increased.
In the reference slides on Page 23, you'll note an approximate 7% increase in site production delivery costs for our US mines compared with prior estimates. This largely reflects a reduction in volumes in the US associated with the challenges we discussed earlier and we've got ongoing initiatives to improve productivity there.
Moving to our cash flows on Slide 12. We show modeled results for EBITDA and cash flow at various copper prices, ranging from $4 to $5 per pound of copper. These are modeled results for 2024 and 2025 with our current volume estimates and our cost estimates, and we hold gold flat at $2,000, and molybdenum flat at $18 per pound in these models. Our annual EBITDA under these scenarios would range from over $10.5 billion per annum at $4 copper to $15 billion per annum at $5 copper. And operating cash flows would range from $7.5 billion per year at $4 copper to $11 billion per year at $5 copper. We show some sensitivities to the various commodities on the right. And with our long-term -- long life reserves and large scale production, we're really in a position to benefit from future metals intensive growth trends and the prospects for an increasing cash flows and cash returns under our performance-based payout framework.
On Slide 13, we provide an update to our capital expenditures. Current forecast -- and these exclude the Indonesian smelter project, which is being funded with cash that we raised last year in a bond offering, but our current forecast for 2023 totals $3.5 billion, that's up from the prior estimate of $3.4 billion, and capital expenditures for 2024 are currently forecast to approximate $3.3 billion. The change from our prior guidance principally reflects investments we're planning at Bagdad to jump-start early works to support optionality for future expansion. The Bagdad investments or projects that we categorize as discretionary and do not reduce the cash available for distribution under our payout policy as they will be funded with the remaining 50% of free cash flow retained for growth projects.
On Slide 14, we've got some great pictures showing the construction of our new smelter in Indonesia. This is a major undertaking for us, it's impressive, and it will be on a world-class scale. The project will become the world's largest single line flash copper smelting facility and it's advancing rapidly. We expect to commission the project in 2024. The project will include precious metals processing facility and an expansion of the existing nearby smelter. And it will align with Indonesia's downstream policy and enable PT-FI to process all of its concentrates domestically.
In closing, on Slide 15, we summarize our financial policy, which is centered around three priorities with the cornerstone being a strong balance sheet, and we've achieved that. Our balance sheet and liquidity are strong and provides significant financial flexibility for the future. We're executing the performance-based payout policy, which provides for 50% of our free cash flow to be allocated to shareholder returns in the form of dividends and share purchases and the balance available to invest in our projects.
We'll continue to pay a base dividend and a variable dividend at a combined annual rate of $0.60 per share. And since commencing the performance-based payout policy in 2021, we've returned about 60% of our free cash flow to shareholders, and it further strengthened our balance sheet along the way, providing capacity for funding new projects over time. We did not purchase shares in the first quarter, but have availability under our share purchase authorization to conduct purchases pursuant to the policy. And we have a positive outlook for substantial free cash flow generation in the future, depending on prices and other factors.
The three priorities of balance sheet strength, allocating cash flow to shareholder returns, and organic growth, we believe will enhance long-term value for the benefit of our shareholders. Our global team is energized, we're motivated to continue building value in our business, and we're executing our plans responsibly, safely, and efficiently.
Thanks for your attention, and we'll now take questions.
