Kathleen L. Quirk
President at Freeport-McMoRan
Okay. Thank you, Richard. And I'll be covering the presentation materials. Starting with Slide 3, our achievements for 2023 are summarized here. Our sharp focus on executing our plans in an effective, safe and responsible manner, managing the controllable drivers, and navigating challenges successfully all translated into solid operating results over the year.
A big highlight for the year was the outstanding progress in Indonesia where we grew production levels for the fourth year in a row. We posted several new operating records, and we continue to enhance values for this large-scale low-cost and long-lived resource.
We were also successful in reaching several milestones during the year, including our -- reaching our target run rate for incremental leach production in the Americas, enhancing optionality in the Americas for our brownfield growth projects, and reaching our targeted 90% completion milestone for the Indonesian smelter project by the end of 2023. As a leader in the industry, we were one of the first companies to have all of our operating sites certified under the copper and molybdenum marks. And this demonstrates our performance and commitment to responsible mining practices. We ended the year 2023 in a strong financial position, a positive outlook, and as we work together to enhance long-term value for shareholders.
On Slide 4, we summarize the key results for 2023 compared with historical levels. After growing our volumes from 2020 to 2021 and 2022, we were able to sustain production of copper in 2023 despite a challenging environment for copper supply as Richard discussed. And we reported another year of growth in gold production.
Our unit net cash costs for 2023 were above 2022 level as expected, but they came in very close to our original guidance for the year. We're continuing to actively manage costs and productivity initiatives to address cost inflation, and we'll be working on that as we go forward.
For the year 2023, we generated strong EBITDA of $8.8 billion and operating cash flows of over $5 billion. We're continuing to carefully manage not only our operating costs, but also capital expenditures with a priority on spending on projects to sustain production, improve efficiencies and enhance optionality for future development options with attractive rates of return.
During 2023, we returned $860 million to shareholders, bringing the total shareholder returns to $3.8 billion since we implemented our performance-based payout framework in 2021. We ended the year with net debt of approximately $800 million and that excludes the smelter-related debt, which is being financed separately.
I'm going to move to Slide 5 and talk about the fourth quarter. During the fourth quarter, our sales were 3% above our estimates going into the quarter. Our gold production was also very strong, but our shipments of gold in the fourth quarter were slightly below the previous estimates and that reflected timing, and these shipments were made in the first quarter.
Unit net cash cost averaged $1.52 per pound in the fourth quarter that was better than our guidance of $1.58 per pound and slightly below the year-ago period. Notably, unit net cost -- cash costs in Indonesia were zero in the fourth quarter, $0.00 per pound, meaning our gold credits completely offset the production cost for copper. Average copper realizations in the fourth quarter were $3.81 per pound, and we generated $2.3 billion in EBITDA and operating cash flows of $1.3 billion.
We go around the world and talk a little bit about various operations in the fourth quarter. In the U.S., we made progress in increasing our mining rate, that's been a big focus during the quarter with a 9% increase over the year-ago quarter. We have a continued focus on improving our asset efficiencies and workforce experience levels. These are important initiatives as we seek to increase productivities to combat lower ore grades.
Our innovative leach initiatives met expectations and also helped to mitigate the impact of lower ore grades in the U.S. Labor market conditions in the U.S. continue to be tight. We're taking steps to expand housing options in our remote locations through recruiting and retention. And we're also continuing to pursue technology solutions to enhance productivity.
Conversion of the Bagdad truck fleet to fully autonomous is advancing, and we're targeting to commence the transition in the second half of next year. In South America, our ore milled was sustained above 400,000 metric tons per day and our ore stacking rates increased at a El Abra. No recoveries at Cerro Verde in the fourth quarter of 2023 were below the year-ago level because of the material types that we're mining in the fourth quarter. This is continuing for mining phases in early 2024 and we're working to optimize performance.
As Richard discussed, the fourth quarter performance in Indonesia was exceptional. Underground ore mined averaged over 214,000 tons per day and that was 8% higher than the year-ago period. Combined with strong wage and recoveries, our copper and gold production in the fourth quarter was over 20% higher than last year's fourth quarter.
We completed the installation of a new SAG mill at PT-FI in December, and that will provide additional opportunities for us going forward. And the team is just doing outstanding work sustaining and optimizing value from this large resource position. That would be good to look back in history of how the underground transition has gone up.
Slide 6 covers this. We show the history of the progression of the transition. As Richard mentioned, we stopped mining from the surface in the Grasberg open pit at the end of 2019 and transitioned to fully underground operations beginning in 2020. We have a long history in Indonesia, spanning over 56 years and a great track record for building value over many years for all stakeholders.
We're extremely proud of the team's execution on this transition. We now have the world's largest underground mining complex and it's been developed in a modern, efficient operation. The Grasberg is the world's second-largest copper mine and one of the largest gold mines, even though gold is a byproduct. High grades of both copper and gold make it one of the lowest-cost operations in the world as well. This took a lot of planning. We began planning for this underground era over 25 years ago and commenced development activities in 2004. And as you can see from the graph, the project is performing exceptionally well and generated strong margins and cash flows.
As we look forward, we're continuing to make investments in this resource to enhance value and sustain long-term performance. We're working on the extension of our operating rights beyond 2041 and are increasingly confident about securing our long-term rights. And that would extend the lives of our resources and open a whole new set of opportunities for this this district.
Richard touched on the smelter progress, and this is really important for us in terms of securing long-term rights. We reached two important milestones on these initiatives in 2023. The projects include a new greenfield smelter in East Java and expansion of our nearby existing smelter, which was developed in the late 1990s.
Richard mentioned, we celebrated in December the completion of the expansion project with the Indonesian government and our Japanese partner. And we also reached a really important milestone on progress of the greenfield project with completion progress achieving the target we set with the government of over 90% by the end of December. We posted a video this morning on our website that shows the greenfield smelter project. You can see all the progress that's been made, and you can see the sheer size and scale of this impressive facility. And I hope you'll have a chance to look at it.
Both projects have been executed very efficiently in the context of a challenging market for major project development. The internal team that we have working on this project together with our contractor has done an outstanding job containing costs and maintaining schedules. We're working to complete the construction by the end of May 2024 and to start commissioning and to conduct the ramp-up period over the balance of 2024.
This is a big deal for us. It's not very frequent that you see new smelters starting up and we've done a lot of planning going into the startup process. Our teams are well-prepared and really highly motivated to achieve a safe, efficient and timely startup in 2024.
Turning to the U.S. and the Americas, where we've got an important leach initiative ongoing. We achieved our targeted run rate where we were targeting approximately 200 million pounds of copper per year by the end of 2023. This is an exciting and innovative initiative involving new operating practices being applied to our traditional leach operations, and really working to get more out of our massive stockpiles that contain material that has been placed in prior years.
Remember, as we talked about on prior calls, the cost of this -- incremental cost of production is lower from both an operating and capital perspective, because we're targeting material, where the material has already been mined and we're largely using existing infrastructure to extract the new metal.
The first phase of this initiative essentially involves four basic categories of actions. One, as we've talked about, previously, we commenced the process to install covers over the stockpiles to increase heat retention and drive higher recoveries. Two, we gained access to areas in the stockpiles that had not previously had the benefit of leach solution initiative, the initiative we call Leach Everywhere. Three, we started using grilling techniques to specifically target areas within the stockpile where solution was lacking. And importantly, the fourth area is developing more sophisticated models using data analytics to optimize the application of solutions to improve performance and using this data as a valuable tool in guiding work in all the areas of initiative in this important program.
As we look at where the impact came from, you can see most of the incremental production was from our Morenci mine. That mine has a very long history of leaching operations. We have a massive set of stockpiles there and a very large opportunity set at Morenci. As we go to Phase 2 of the project where we are working to essentially double the initial target from 200 million pounds to 400 million pounds, we really are looking at just scaling these practices further. And by continuing to scale the operating practices, we think we can double the initial target over the next two to three years. And as we continue to work to sustain the production, we can add to our reserve position. And that's a real focus of ours to capitalize the progress into long-term reserve additions.
The first and the second phase of this initiative is really operationally driven using existing technologies. The third phase, which is also very exciting, is really the work that we and others are doing to advance the leaching process using different additives and different techniques. And this is more of an R&D effort, but it's being advanced. We're commencing a large-scale testing activity to evaluate the response to new additives. And we're also evaluating opportunities to get more heat retention in our stockpiles and heat really is an enabler of more copper production and higher recoveries.
In aggregate, these initiatives have the potential to reach 800 million pounds per annum, and that's equivalent to a large-scale copper mine. And notably, it's got very low capital intensity and we've seen how much new copper mines process [Indecipherable] a very low capital intensity, low incremental operating costs and a low-carbon footprint. And the value potential here is very attractive, particularly for a company like Freeport to take advantage of given our large quantities of suitable material that we previously mined.
Richard touched on copper markets earlier and we have some information on Slide 9. Physical markets have continued to tighten, inventories have declined and demand is growing. Despite the weak sentiment over the last several quarters on the Chinese economy and property sector, the reality is the China's copper consumption was strong throughout 2023. And this reflected the intensity of copper used in energy infrastructure, renewables and electric vehicles.
In the U.S., our customers continue to report solid demand for copper, with growth in several sectors. At the same time, supply disruption increased meaningfully in recent months. In total, near-term supplies of copper have been reduced by over 700,000 tons in a very short period of time. The market was previously expecting that 2024 would be a small surplus market and turning to deficit beginning in 2025 time frame and continuing for some time.
With the recent supply disruptions and continued demand growth, the deficit market has been advanced into 2024, setting up for tight market conditions in the near term. While the fundamentals have become significantly more positive, macro conditions tied to us dollar strength and sentiment about China have influenced copper price movements.
Richard mentioned, we believe the fundamentals of the market will lead to significantly higher copper prices in the future, and that's supported by anticipated strong growth in demand associated with secular trends and the global economy's requirements for copper. Also, the realities of the cost and timeframes required for new supply development is an important factor when we look at the fundamental outlook for copper.
Turning to how Freeport is positioning to try to grow production in response to this market demand. Really look at the sizable -- on Slide 10, we really look at the sizable reserve position of copper and even larger resource position that Freeport has that supports a pipeline for future growth options. Within the portfolio, we look for opportunities to get more out of what we have through innovation and operating efficiencies. We look for investments in projects where we have large resource positions and where we have established track records and opportunities to leverage the existing infrastructure, our people and capabilities, all with a drive focused on increasing value.
We categorized on Slide 10 our near-term, medium-term and longer-term development options, and we've outlined identified projects totaling about 1.7 billion pounds of copper in the Americas. And we've also highlighted on the slide the ongoing development of the Kucing Liar project in Indonesia, which is expected to support long-term production profiles in the Grasberg district.
The opportunities that are shown on the slide in the two- to three-year category, they center around scaling our leach initiatives and achieving incremental production from our operational improvement projects. Together, the potential from these opportunities total 400 million pounds of incremental copper per annum and do not require significant investment or long lead times.
We discussed earlier the leach projects, but we're also dedicating significant resources to enhancing productivity and asset efficiencies, rebuilding the experience of our workforce given the large number of new hires in recent years, and utilizing new technologies and automation to restore and improve on productivity metrics that weakened somewhat during the pandemic.
As we indicated, we completed a feasibility study late in the year 2023 to evaluate a project to more than double the size of our Bagdad operation in northwest Arizona. The reserves at Bagdad are spanned for decades and they support expansion of infrastructure at the site to bring value forward.
The incremental capital cost to build a new concentrator and support infrastructure for significantly higher mining and milling rates is on the order of $3.5 billion. And an expanded operation would not only substantially increase copper production, but would produce economies of scale and reduce unit cost. The project does not require major permitting and is relatively straightforward. But given the tight labor market conditions and general market factors, we're not making a decision right now on the timing of the project.
We'll continue to evaluate the timing of when we would go forward, but we are taking steps now to enhance optionality for the future by making some investments in the autonomous haulage for our mining operations, making some investments in housing, and also advancing investments in the tailings infrastructure that will put us in a position that we make the decision, we could get the project online within a few years.
In Chile, at El Abra, we've talked about this. Our resource is very large. We have a major opportunity to install a new concentrator on the size of -- on the order of magnitude size of the concentrator we added at Cerro Verde in 2015.
We'll continue to work to retest the economics and updating our project capital costs in light of recent capital cost experience of other large projects. And in parallel, we're starting work in preparation for an environmental impact statement that would give us the ability to advance the project and provide optionality for future development.
We mentioned the Kucing Liar development project in the Grasberg district, which we've initiated development on. This is a multiyear development project and it's proceeding on schedule, and we expect to commence production by 2030, ramping up to over 500 million pounds of copper and over 500,000 ounces of gold. We're also conducting additional exploration in the Grasberg district, where we have identified potential. We've got a big potential below our deep MLZ ore body, and we expect to have additional opportunities in the future at Grasberg.
We have a major opportunity in the U.S. at the Safford/Lone Star district. We've identified a significant resource there. This year, we're going to work to complete metallurgical testing and mine planning and start a prefeasibility study to assess future development options there. We continue to see this district as one that has big potential and potentially being a cornerstone asset in the U.S. on -- adjacent to the Morenci operations.
In Indonesia, we're focused on this extension of our rights beyond 2041 because that would open up substantial opportunity for reserve and resource expansion and a continuation of the large-scale mining in one of the world's largest and highest grade copper and gold mining districts. We're in a really strong position to continue our leadership role in supplying copper to a world with growing requirements, but we're going to continue to be disciplined in our approach and focused on executing projects where we can create value for shareholders.
We've got a lot of history in developing big projects. We included a slide on Page 11 that you can take a look at. A key strength of our Company is the ability to execute projects successfully. This does not come easy. It requires a focused, hands-on approach, and we've got a business model of pairing internal resources with trusted contractors, and that has served us well. We've listed several projects that we've led over the years, and we've developed very complex projects around the world. We're going to continue to approach future projects with the same level of preparedness, rigor and a focus on execution.
As we look at 2024, turning to Slide 12, we've got our focus areas listed here. And first and foremost, we remain committed to safe and reliable execution of our operating plans across the global business. It seems like a simple thing, but this involves discipline and hard work day in and day out. We discussed our focus on enhancing performance in the U.S. through our leach initiatives and productivity. This was particularly important to mitigate low grades and to manage costs, which have experienced higher inflation in recent years.
We're going to have another big year in Indonesia. A key priority for us is to complete the smelter and ramp up safely and efficiently, and to finalize an agreement for extension of our long-term operating rights. We're also very focused on enhancing optionality, definition and the value of our embedded growth options.
On Slide 13, we show -- as usual, we show a three-year outlook for sales volumes of copper, gold and molybdenum. For 2024, the copper sales volumes are slightly reduced, less than 2% below our prior estimate and are now expected to be similar to 2023 levels. The gold sales are 10% higher than our prior estimate and higher than they were in 2023. Higher sales in Indonesia for the year 2024 offset by slightly lower sales from the Americas.
In 2025, our sales estimates are similar to the prior estimates and we've added 2026 estimates which you can see are slightly above the 2025 levels. For 2024, we currently estimate our consolidated unit costs to approximate $1.60 per pound. We've got some details in the reference materials, I believe on Page 30, that you can look at the composition of those costs, but $1.60 very similar to what we had in 2023.
On Slide 14, we put together our projected volumes and cost projections, and we modeled the results for our EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These models use the average of 2025 and 2026, and our current volume estimates and our cost estimates and holding gold flat at roughly current levels of $2,000 per ounce and molybdenum flat at $19 per pound.
And you can see here on the charts that annual EBITDA in these periods would range from $10 billion per annum at $4 copper to over $14 billion per year at $5 copper, and operating cash flows under these price scenarios would range from $7 billion to over $10 billion.
And we've got sensitivities to the various commodities on the right-hand side of the chart. Really well positioned with long-lived reserves, large-scale production. We not only have current exposure to copper, but all of our future projects and growth opportunities are well positioned to benefit from future metals intensive growth. And this will give us the ability to generate returns on projects and enhance cash returns under our performance-based payout framework.
Turning to the capital expenditures on Slide 15, we show our current forecast for '24 and '25. We also show where we ended up for '23, which totaled $3.1 billion and that was slightly lower than what we had guided to in October of $3.2 billion. And capital for 2024 is currently forecast to approximate $3.6 billion compared with $3.9 billion previously.
The 2025 estimates that are new here are currently estimated to total $3.8 billion. That includes $1.2 billion in discretionary growth projects, which total $2.4 billion over the 2024 and 2025 years. This category reflects the capital investments we're making in new projects to generate returns that under our financial policy are funded with 50% of available cash that's not distributed.
They're value enhancing projects that are detailed in the reference materials on Slide 33. We're going to continue to be very disciplined around capital expenditures, carefully managing those. You saw we adjusted the capital expenditures down for 2024 and as we go forward, we'll continue to look at opportunities to do things to sustain our business and to do things on a low capital intensity basis.
And finally, before we take your questions, just on Slide 16, we reiterate our financial policies and those are prioritized, centered on a strong balance sheet, cash returns to shareholders and investments in value-enhancing growth projects. Balance sheet is solid. We've got strong credit metrics and a lot of flexibility within our debt targets to execute on our projects. You may have seen that Moody's upgraded our credit rating in December and that just demonstrates our strong financial profile.
Indicated on the slide, we've distributed almost $4 billion to shareholders through dividends and share purchases since the payout framework was implemented in the second half of 2021, and we have an attractive future long-term portfolio that will enable us to continue to build value -- long-term value for shareholders.
The global team, as we go forward, is really highly focused on our strategy of being foremost in copper, and we're driven to continue pursuing long-term value in the business and executing our plans responsibly, safely and efficiently.
And I want to thank everybody for their attention and we'll now take your questions.
