Kathleen Quirk
President at Freeport-McMoRan
Thank you, Richard. And I'll start on Slide 3, where we summarize our key operating and financial highlights for the second quarter. Production results across the portfolio were strong in the second quarter approaching 1.1 billion pounds of copper and nearly 500,000 ounces of gold. Our copper sales were about 3% below our guidance as a result of administrative delays in obtaining PT-FI's export license approval. We expect that PT-FI will receive approval to resume concentrate exports over the next several days. Our unit net cash cost during the quarter averaged $1.47 per pound, and that was a little better than our guidance of $1.51 per pound. With average copper prices realized of $3.84 per pound in the quarter, we generated strong margins and EBITDA of $2.14 billion.
Our operating cash flows totaled $1.7 billion, and that was substantially above our mining capital expenditures, which totaled $700 million roughly, and that excludes the smelter capital of approximately $500 million in the quarter, which is being funded from proceeds that we raised last year. The balance sheet, liquidity, financial flexibility remain in great shape. Excluding net debt associated with the smelter, we ended the quarter with under $1 billion of net debt. You'll see that we completed and we conducted some additional open market purchases of our public debt in the quarter at prices below par. As we look forward, we're well positioned for strong results in the second half of the year as second half copper volumes are projected to be over 15% higher than the first half and second half gold sales are projected to be over 25% than what we sold in the first half of the year.
I'm going to move to Slide 4, where we showcase a few of the operational highlights that we're particularly proud of in the second quarter. At Cerro Verde, where we operate one of the largest concentrate sites in the world, the mill averaged 425,000 tonnes of ore throughput per day during the quarter. This was a site that was designed several years ago at 360,000 tonnes per day. And over time, our team has found ways to improve efficiencies, and we'll continue to do that in the future.
At Grasberg, mill rates averaged over 200,000 tonnes per day, was 207,000 tonnes per day in the quarter, and that was processing very high grades of both copper and gold ore that was significantly above the first quarter level and actually the highest average quarterly throughput in over a decade. All this ore is coming from our large-scale, modern and efficient underground mines now. Notably, the large-scale operation at Grasberg produced copper during the quarter at a net cash credit of $0.09 per pound, and it was just extraordinary performance. We're making steady progress on the smelter in Indonesia. This is an important initiative, and we're now at 75% compared with 60% progress three months ago.
Our project execution is going well, and our team is very focused on completing the project efficiently over the next several months. We expect to complete construction by the second quarter of 2024 and begin commissioning and ramp up over the balance of 2024.We're also happy to report ongoing progress with our Leach initiative, and that's particularly helping our sites in the U.S. During the second quarter, this effort yielded incremental copper of 29 million pounds, and that was over 2 times the level in last year's second quarter. We're about 60% of our targeted annual run rate at this level, and we're well on our way to getting to our target of roughly 200 million pounds of copper per year incremental from this initiative. We're going to talk later more -- about it later in the presentation. But our confidence is increasing in meeting the initial target and on a significant upside for this highly valuable initiative.
Turning to Slide 5, and you've seen a lot of press reports over the last several weeks about the regulatory situation in Indonesia, and we're providing an update on recent regulatory changes in the country. As many of you know, Indonesia is highly focused on downstream resource development that's been evolving over many years, and that reflects the country's national strategic priorities. The evolution of this ultimately led to our agreement in 2018 to expand our domestic smelting and refining capacity in the country.
In 2020, Indonesia passed the law restricting exports of certain minerals, weren't all defined, but that was beginning in June 2023. Given our IUPK license and rights and progress on the smelter, we continue to work with the government to allow time for us to complete our projects, which were delayed by the pandemic. As we mentioned, the projects are well advanced and nearing completion, and we were really honored to host Indonesia's President, Joko Widodo, at our smelter site in June.
Beginning in June and July of this year, various ministries completed regulatory process to enable ongoing exports of copper concentrates through May 2024 for exporters with more than 50% smelter progress, and we're over 70%. Last week, the Trade Ministry enacted legislation to allow the exports. And now just the administrative process, we expect to receive formal approval to resume exports over the next several days. We're going to continue to work with the government to enable exports to continue in 2024 until the new smelter is fully ramped up and operational.
The Ministry of Finance also passed regulations last week to increase the duties on exports for various products, including copper concentrates. For companies with progress of more than 70%, the new duty rate is 7.5% for the second half of this year. Under our IUPK, which provides stabilized terms for taxes, royalties and duties, duties are phased out after 50% progress. And so we're currently reviewing the IUPK provisions with the ministry and are engaged in discussions on this matter.
To-date, the production impacts on our operations from the shipping delays have been limited, and this has been more of a timing consideration between production and sales. We currently have a sizable volume of copper concentrate at our port site, ready for shipment, and we expect to work down inventories over the next several months.
Moving to the copper markets on Slide 6, and Richard touched on this in his comments. Copper is the metal when it comes to electrification. And Freeport is really well positioned as a leader in the global copper industry. The short-term market situation is characterized by, on the one hand, favorable demand drivers from growing intensity in autos, renewables and data centers, and that's partly offset by slowing manufacturing growth.
China remains the world's largest consumer of copper and even with the country's current economic challenges and the weakness in the property sector, copper consumption continues to grow and that's been bolstered by large investments in copper-intensive electrical grid and strong growth in electric vehicle production. Richard referenced the inventories, which are very low levels by historical standards, they're now lower than they were at the start of this year, and we see this as evidence of a tightly balanced market.
As we look forward over the next several years, demand is expected to accelerate with third-party projections for demand to double by 2035. Investments in low carbon renewable power, electrification will lead to massive growth in demand. And in addition to that, the initiatives by many countries for major infrastructure programs and the uses of copper for connectivity, data, AI, those are also growing demand drivers.
At the same time, the ability of the copper industry to meet this rising demand is a major challenge, and we are working very hard to increase our supplies as we look forward. We believe prices will need to rise to incentivize new supplies of copper. At Freeport, we benefit from a large reserve position and even greater resource position to be able to grow our business in the future. As I mentioned, we're really focused on continuing to support the growing demand, producing responsibly and we're pursuing several initiatives to enhance our production going forward.
Moving to Slide 7. We provide an update of our three-year outlook for sales volumes. This is largely unchanged from our prior forecast. We've reduced our 2023 copper sales volumes by about 40 million pounds, that's about 1%, to take into account the shipping schedules in the balance of the year.
The guidance for 2024 and 2025 is unchanged, and we are focused on continued success in our leach efforts, which we believe have the potential to provide some upside to these estimates.
Moving to the regional information on Slide 8. We show our projected 2023 volumes and unit net cash costs by region. Our business in the Americas, including the U.S. and in South America, comprise about two-thirds of our 2023 copper sales and all of our molybdenum sales, and Indonesia represents about one third of the copper sales and all of our gold sales.
On a consolidated basis from a cost standpoint, our unit net cash cost forecast of $1.55 per pound for the year 2023 is consistent with our prior estimate. We've had some small offsetting changes between the regions. But in total, we're continuing to project cash cost of $1.55 for the year.
As we move through the year, we're continuing to experience improving cost trends for several of our commodity-based input costs, and we're seeing more stability in labor, services and equipment component costs. We remain focused on cost management and all of our ongoing initiatives to improve productivity to offset the cost increases that we've experienced in recent years. The estimates that were provided on Slide 8 assume that the export duties in Indonesia are unchanged from our existing duties.
As I mentioned previously, the new regulations imposed higher duties than our stabilized rates under the IUPK and we're engaged in the discussions with the government to review this. We provided some sensitivities on potential impacts of the higher duty rates on this page, which you can see at the bottom would have a $0.07 per pound impact on consolidated unit net cash cost for the year take into account the impact in Indonesia of $0.19 per pound for the year with the duty starting in the second half.
On Slide 9, we updated our outlook for our margins and cash flows. And if we put together our projected volumes and cost projections, we show the modeled results for our EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These results on the slide are modeled using the average of our 2024 and 2025 volume and cost estimates, and we hold gold flat in these scenarios at $1,950 per ounce and molybdenum flat at $20 per pound; both of those commodities are slightly above that today.
Annual EBITDA under these assumptions would range from about $11 billion per annum to $15 billion per annum at $5. The $11 billion was at $4. And our operating cash flows before working capital would range from nearly $8 billion per year at $4 copper and $11 billion per year at $5 copper.
We've got some sensitivities to the various commodities both the sales commodities as well as our input costs on the right of the chart. We're well-positioned with our long-life reserves, large-scale production to benefit from future metals intensive growth trends, and we've got prospects as we look forward for increasing cash returns under our performance-based financial policy payout framework.
Return to capital expenditures next on Slide 10, where we show our current forecast for capital expenditures in 2023 and 2024. These include the capital the we're investing in the Indonesian smelter project and those amounts are being funded from a debt offering we did last year, and we've got cash on the balance sheet and availability to support those investments and the detail of those expenditures are on Page 25 of the slide deck. But all in all, on the non-smelter related investments, the -- we've had some timing adjustments moving some spending from '23 to '24. But the current forecast for the two years is pretty similar to what we had before. It's about 3% higher for the two-year period, and that reflects some updated estimates principally for projects at Grasberg.
We've highlighted, here on the slide, discretionary projects, and these are the projects that are being funded with 50% of available cash that's not distributed. Those total $2 billion over '23 and '24, and these are value-enhancing initiatives, we've got some details on Slide 24 in our reference material, but value-enhancing initiatives to improve our position as we look forward.
We'll talk on development options and our growth on Slide 11. We're really focused, as we said, on looking at the outlook for growing copper demand and looking at our brownfield strategy given the risk and actionability of greenfield projects, our strategy of developing our resources within our portfolio. We're focused on extensions of our existing operations and our broad portfolio of brownfield opportunities.
We've categorized the growth on Slide 11. And in near-term, medium-term and longer-term development operation -- options and you can see in the near term, the best options for us for growth are achieving our initial leach targets and the actions that we have, particularly in our U.S. operations to enhance productivity and reliability by increasing our mining rates in the U.S., through workforce additions, automation and achieving higher targets for asset efficiency and reliability in our equipment and processing facilities, we believe we have the opportunity to add 200 million pounds of copper a year with very limited capital investment.
We're very focused on the details of the reliability and asset efficiency that we're pursuing and see that potential as we look forward. We also outlined the potential of our leach opportunity beyond the initial target of 200 million pounds for annum. We talked extensively about this on our last call. We've got very large areas under leach. We've got new approaches and operating practices that we are deploying on this effort. And the more we work on it, the more optimistic we are about this opportunity is much larger than the initial 200 million pounds.
We continue to see the clear opportunity of expanding the initial 200 million pounds of copper per annum to 800 million pounds per annum over the next three to five years. We're continuing initiatives to increase heat to our stockpiles. We're continuing to enhance our ability to identify and deploy solution to areas of the stockpiles which aren't getting adequate solution, and we're continuing our work on additives through internal testing as well as looking at technology that others have with respect to additives.
This is a major value opportunity, a major catalyst for us, and Freeport is one of the best-placed companies in the industry to capture value from it. And that's because of our large existing stockpiles with billions of pounds of copper still in them, our technical know-how and the ability of our team to deploy learnings quickly across the portfolio through our operational control of all the mines we have interest in.
In addition to the leach opportunity, we've got more traditional sources of growth that we're pursuing. We're continuing to evaluate the expansion of our Bagdad mine in Arizona. We're completing the feasibility studies on that expansion. We've got the major El Abra opportunity in Chile, where we have an existing operation and very large reserves, resources that support future expansion.
And of course, we're developing, making progress with the 90,000 tonne per day Kucing Liar Block Cave in Indonesia, and that's expected to commence production by the end of the decade.
At Bagdad, we're making some investments to advance tailings and other infrastructure to enhance our optionality for the project. And we're doing the same at El Abra looking at some investments in water infrastructure, not only that would support the current operation but provide optionality for the large mill project in the future.
After those two projects, we've got big opportunity in our Safford, Lone Star District in Eastern Arizona. We've got current production there and have identified a significant resource that would allow us to make that district another cornerstone asset for Freeport as we look into the 2030 timeframe. We've got a series of U.S. brownfield projects that we're also looking at. A big opportunity for us is in Indonesia where an extension of our operating rights beyond 2041, which we're continuing to advance, would open the door for long-term, large-scale mining beyond 2041 and potential reserve expansion and additional development options in one of the world's largest and highest grade copper and gold mining districts.
With these projects, we're in a position to continue our leadership role, supplying copper to a world with growing requirements. We're going to continue to be disciplined in our approach but focused on executing the projects where we can create value for shareholders.
On the last slide, we -- on Slide 12, we reiterate the financial policy priorities. Those are really centered on our strong balance sheet, which we have, our cash returns to shareholders and investments in our value-enhancing growth projects. The balance sheet is solid. We've got very strong credit metrics and flexibility within our debt targets to execute on projects. At the same time, we've distributed over $3 billion to shareholders through dividends and share purchases since commencing this performance-based policy and have an attractive future long-term portfolio that will allow us to use a portion of our cash flow to build long-term value for shareholders. Richard mentioned the team is energized, motivated and we're focused on continuing to drive value in our business in executing these plans responsibly, safely and efficiently.
Thanks for your attention, your participation and operator, we'll now open the call for questions.
