Ladies and gentlemen, thank you for standing by. Welcome to the Freeport McMurrayan Conference Call, where management will discuss revised operating plans in response to the COVID-nineteen pandemic and 1st quarter financial results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Would now like to turn the conference over to Ms.
Kathleen Quirk, Executive Vice President and Chief Financial Officer. Please go ahead, ma'am.
Thank you. Good morning, everyone, and welcome to the Freeport McMoRan conference call. Earlier this morning, we reported our revised operating plans and our Q1 operating and financial results. A copy of today's press release and the presentation materials are available on our website atfcx.com. Our conference call today is being broadcast live on the Internet and anyone may listen to the call by accessing our Web site homepage and clicking on the webcast link for the call.
In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include forward looking statements and actual results may differ materially. I'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our 2019 Form 10 ks. On the call today is Richard Atkerson, our Chief Executive Officer Red Conger is on Mark Johnson is on from Indonesia. We've got a number of other of our senior executives on the phone as well, and they'll be available to participate in our Q and A session.
Our comments today in the prepared materials will be principally focused on our plans and our outlook and how we are addressing current market conditions. I'll briefly summarize our financial results for the Q1 and then turn the call over to Richard who will be reviewing our revised plans. As usual, we'll open up the call for Q and A after our prepared remarks. We announced revised operating plans as you've seen in the press release. We've had a series of cost reductions and capital expenditure reductions.
We've also reduced our copper production volumes by £400,000,000 in response to market conditions in an effort to reduce our costs and capital expenditures. In terms of our Q1 results, we reported a net loss attributable to common stock of $491,000,000 in the quarter. That was $0.34 a share, which included $256,000,000 or $0.18 per share associated with inventory valuation adjustments and other items that are detailed in our press release attachment on Roman numeral VI. Adjusted net loss attributable to common stock totaled $235,000,000 or $0.16 per share in the Q1. Our adjusted EBITDA or earnings before interest taxes and depreciation for the Q1 totaled $189,000,000 and we've included a reconciliation of our EBITDA calculation on Page 43 of our slide materials.
Our first quarter sales of copper and gold were slightly higher than our January 2020 estimates. We sold £729,000,000 of copper during the quarter and 144,000 ounces of gold. That mostly reflected higher production from PT3 Port Indonesia, partially offset by lower sales volumes in the Americas. Our average realized price in the Q1 was $2.43 per pound that was 16% lower than the year ago, average price of $2.90 per pound. And the realized price for gold in the Q1 was just over $1600 per ounce, which was 24% above the Q1 of the prior year.
Our consolidated average unit net cash costs were also lower than our expectations. They averaged $1.90 per pound of copper in the Q1 and the estimate going into the quarter was about $2 per pound. Capital expenditures for the quarter totaled 600,000,000 dollars that included roughly $300,000,000 for projects that we're doing to increase production and reduce unit costs in Indonesia and also our Lone Star project in the U. S. And Arizona.
We ended the quarter with a cash balance of $1,600,000,000 and consolidated debt of 10,000,000,000 dollars We had no borrowings under our $3,500,000,000 revolving credit facility and have significant liquidity as we manage volatility during 2020. I'd now like to turn the call over to Richard, who will be referring to our slide materials.
So good morning. Thank each of you for participating in today's call. I hope you and your families are well and staying safe during this very difficult time for everyone. Our Freeport family extends sympathy and support to all those that are impacted by the virus and also by the very significant economic hardship is brought on for so many people. We appreciate particularly the global healthcare providers, government authorities and others who are on the front lines working often at personal peril to protect our people and all people around the world.
At Freeport, we are prioritizing the health and safety of our workers. While we support the communities where we operate as we serve customers with the ongoing requirements of copper. Copper is an essential metal for the global economy even in today's world. The plan we're announcing today is a comprehensive response by our company, following a carefully planned process to develop proactive actions, first to safeguard our people and our business and then to protect the value of our assets for the long term. Very proud of our Freeport team for the response they developed in a very short period during a time when the world faces this unprecedented pandemic crisis.
Our team is responding the right way with the right attitude of commitment and cooperation. Our revised plan will target year end 2020 financial liquidity that at current copper prices actually exceeds the liquidity that we had targeted in our annual plan announced just a quarter ago. That was when copper prices were 20% more than 20% higher than today's price. What we had to do with this plan was offset the loss of approximately $1,700,000,000 of cash flow from lower prices. We've done this by reducing spending, revising mine plans and taking a series of financial initiatives.
And importantly, we have contingency plans to preserve our business if the copper price were to fall further. What this plan will do is carry us over to brighter days for our company. When production volumes increased substantially with the ramp up of our new underground mines in Indonesia 2021 and as the world's economy recovers whenever that might be. Our Freeport team has done fabulous work by making tough decisions in developing the plan, while we are protecting our workers, treating them fairly. I personally cannot thank our team enough for the work done in developing this plan.
Look, we fully recognize the uncertainties we all face about the duration and extent of the pandemic and its impact on the global economies. Having said that, I'm confident the actions we are taking will allow Freeport to navigate this period of uncertainty and position our company for long term success. Starting with Slide 3, I emphasize again that health and well-being of our people is number one priority. As we protect our workers, we are addressing the current financial challenge using our experience and successfully responding to past financial crises. We have an existing playbook that we're following, but we're also taking into account current conditions and uncertainties.
We are now undertaking aggressive proactive actions focused on protecting liquidity by cutting costs, maximizing cash flows. Situation is dynamic and uncertain. We're prepared to do further adjustments to preserve liquidity and protect long term values if we have to. Our company benefits in a major way from having extraordinarily long life and durable reserves and resources. I'm confident that the actions we're announcing today and our preparation to respond further as required will make these assets even more valuable for shareholders in the future.
Turning to Slide 4, we have implemented prudent health protocols in all of our locations to do what we can to avert a spread of coronavirus in our operations. We are monitoring and following all the guidelines of international health organizations and governments. The efforts being led by a dedicated team of medical advisors and providers, our procedures are robust, forward looking, proactive rather than reactive. Our international medical providers are administering testing, tracing, quarantine procedures on an ongoing basis. We severely restricted and in most cases eliminated travel, group meetings have been eliminated, working virtually and all work that can be done remotely is being done remotely.
In our operations, physical distancing and mining processing is being achieved. Ours is not like a factory where people are working totally together, truck drivers, shovel operators, other operators and work with social distance. At the sites where we provide housing, meals, transportation, we are being diligent with sanitization, isolation of workers showing symptoms and treating workers who have potential illness with state of the art equipment and facilities. Our management of worker health to date has been very effective. We've experienced a limited, less than 50 confirmed cases to date across our global workforce, which approaches 70,000 workers.
But knowing just how fast this virus can spread, we remain diligent and proactive in protecting our people. Slide 5 addresses our commitment to communities where we operate. This commitment is long standing and unwavering. These communities are the homes for our workers and their families. They are essential to our long term success.
Across the globe, we are supporting communities during this time of great need. We're prioritizing critical needs caused by COVID-nineteen and we continue to work with the communities of governments to Slide 6 presents a global span of our workforce, including employees and contractors. Worldwide companies or countries are dealing with the pandemic in varying degrees. Our workforce is adhering to global health standards, focusing on their personal safety and the well-being of those around them. Our global work our global team of workers is critical to our company's success and we fully recognize that.
I personally appreciate the dedication, commitment, cooperation during this challenging time. Slide 7, we note that copper is a metal strategic to the world and its importance is growing. Freeport is a long standing time leading supplier of copper to the global economy. We're working closely with customers to meet their needs in today's world, protecting our business so we can reliably serve customers in the future. Copper is essential to the global economy not only in times when the economy is growing, but also in times like these.
When healthcare, water and food supply, communications and technology are critically important. Telecommunications, digital technologies cloud applications has ever been important than in today's world, and copper is an essential element in meeting these requirements. On Slide 8, I want to note and many of you probably have seen recent reports on the growing recognition of copper's antimicrobial properties. Copper can play a significant role in preventing transmission of viruses and bacteria. This has been known for a long time.
Our industry has supported research efforts and education efforts for the public to understand the benefits of copper in fighting the spread of infections in normal times. The current pandemic is bringing to light what copper can achieve in improving public health. Studies have demonstrated that copper can destroy viruses like COVID-nineteen. Copper's use in healthcare equipment and facilities and in public places will undoubtedly grow significantly when the cost of copper, which has been a barrier in the past, is measured by the enormous cost to society that is being brought on by this pandemic. Freeport will be at the forefront of leading the world to understand the benefits of greater uses of copper globally.
To learn more about this, I'll refer you to the Copper Development Association's website, and you can read articles about it almost every day in the press. On Slide 9, we talk about just how quickly the market conditions change. Just seems like a lifetime. When FCX reported its 4th quarter results, the global economy was showing clear signs of progress. The Phase 1 deal with China was encouraging.
After trade issues had burdened copper prices for the previous 18 months. The copper price was then $2.85 a pound and pulp poised and seem poised to move higher. Now we have copper prices today about $0.50 a pound lower than in late January. And in recent times, we have seen copper trade down to near $2 a pound, totally unexpected. Same time, gold prices have risen dramatically.
Gold is a benefit to our operations in Indonesia. Oil markets are in turmoil. Diesel fuel, roughly 8% of our operating costs has declined roughly by 50%. Dollars strengthened, lowers our U. S.
Dollar cost for expenditures incurred in local currencies. Many other input costs have dropped. The rapid change in markets required us to move quickly and aggressively to adjust our plans. Freeport's 2020 revenues were already abnormally low because of the transition of Grasberg to underground mining. We completed mining the massive Grasberg high volume open pit in December 2018.
To date, ETFI is effectively managing the coronavirus health challenge. DTFI is progressing on schedule with the ramp up of its massive underground mines. This has been the critical strategic initiative for our company for many years. Continued progress with this ramp up will place Freeport in a much stronger cash flow position even if copper prices stay low in 2021 and beyond. The gold benefit of Grasberg production is a major benefit as I said, The gold component, Grasberg production is a major benefit.
It's what together with good copper grades make this one of the mining industry's most fabulous assets. Of course, gold is having its day in the sun, copper days copper's day will come. On Slide 10, we talk about this transition at Grasberg to move to underground mining and with the current ramp up. We've incorporated in our original plans our budget going into 2020 prior to the current pandemic series of proactive steps to protect our balance sheet and liquidity. Over the past 4 years, we have cut what was then crippling debt levels in 2016 in half.
Through 2019, we extended our $3,500,000,000 bank credit facility currently undrawn for a new 5 year term extending to 2024. Kathleen and her team also worked with our banks to obtain amendments to our bank credit revolving covenants to give us flexibility during the Grasberg ramp up. In recent months, we've had 2 bond offerings raising a total of $2,500,000,000 in long term notes at attractive rates, which we use to refinance debt maturities. Today, we have no significant near term debt maturities. Slide 11 now addresses the aggressive actions we're now taking.
Our team undertook a comprehensive and iterative process involving site management across the company. Greg Conger and his team in the Americas were facing the challenge this time around of not being supported by cash flows going out of coming out of Indonesia. Cash we're generating in Indonesia is going into continuing to develop the underground. So what they had to do for each operation, each individual mine was develop a plan to maximize near term cash flow at low prices while protecting long term values. All the savings reflected in our new plans that we're reporting today are supported by detailed analysis.
We left no stone unturned. This was not a top down exercise. The objective was set at the top, but our operating teams developed these plans and now own them. They are committed to executing them and our senior management team and our administrative organization will support them. Everybody is on board.
Our Board of Directors has deferred common stock dividends in 2020 to prioritize liquidity. The Board will review dividend actions on a regular basis with a goal of restoring dividends when conditions improve. The chart on the right summarizes the combined impact of these actions. Based on our January plan at $2.85 copper, we would have ended the year with a consolidated cash position of $1,000,000,000 before returning to significant cash flow generation in 2021 with Grassburg's ramp up and beyond. Despite this $0.50 a pound current reduction in copper prices, our revised plans at 2.30 Copper, plans we're announcing today project $1,700,000,000 in cash at year end, an increase in liquidity without raising new capital.
This is a major accomplishment. 3, 4 weeks ago we wouldn't have anticipated. We have stress test our plans at lower prices to ensure we have a plan to bridge us through 2020 regardless of prices and put us in a strong position as we enter 2021 when we will be adding large scale low cost volumes for Grasberg. Significantly, we reserve a plan double EBITDA in 2021 from this year's levels without higher copper prices. Slide 12 illustrates the impact of this.
Execution of these plans will set us up for improvements in 2021 apart from changes in prices copper prices. Projecting a 20 6% increase in copper sales, volumes in 2021, 75% increase in gold volumes. The outlook takes into account approximately £400,000,000 of Americas production that we are idling in this plant and our projections include that remaining idled in 2021, which will adjust it if condition improve. Our unit cost projected to decline, 2021 EBITDA was double, 2020 levels at $2.30 copper and $1600 gold. Cash flow benefit from potential higher gold prices noted as well many expect as well as the potential for a return of copper prices to the levels we saw earlier this year.
Looking at Slide 13, we note that our management team has had extensive experience in managing tough market environments. Leadership teams across the company are seasoned, they've been effective and successful in past downturns. Prices is different, but in each of our past experiences, Freeport has come out stronger. We have a management structure and a team that is collaborative, experienced and decisive. Never cut corners on important issues involving worker safety or environmental obligations.
We keep a long term focus on our license to operate around the world that we work so hard to earn. We adjust to market conditions quickly, develop contingency plan for further actions as required, do this on a site by site basis. A plan safeguard protect long term values. This is a real hallmark of this Freeport organization. Highlighted on the slide are actions we took in 20 in 2014 and reached critically low levels in 2015 2016 when our company was heavily burdened by debt from our discontinued oil and gas business.
Note where share prices were for FCX during each of these crises and the improvement within 2 years that followed. We're all committed to successful execution of these plans. We are all intensely focused on restoring value in our shares. Now I want to provide you a brief update of our operations and projects. Slide 14 addresses Cerro Verde.
As reported previously, the Peruvian government declared a national emergency, which was just extended to May 10. This government order affects Cerro Verde and other mines in Peru. Our Cerro Verde team is doing great work in managing smaller scale operations during this period. While we protect the health of a much reduced workforce and as we work with the government to explain our health protocols, so that we can position Sierra Verde for a restart to normal operations. Sierra Verde has been operating in excess of design capacity for several quarters, achieved a mill throughput of over 400,000 metric tons per day leading up to March 16.
We are currently operating about a third of this level. Our plants are developing on ramping up Cerro Verde late in the second quarter and returning to higher production levels in the second half. Returning Cerro Verde to normal production is important to the government of Peru and the community of Arequipa. Cerro Verde has been a large contributor to the national local economy, one of the largest employers in the region. Slide 15 covers our new mine that we're developing in Eastern Arizona adjacent to our Safford mine, very close to Morenci, called Lone Star.
We're nearing completion of this new mine and we will commence production in the coming months. The project is 90% complete, capital is largely behind us. We're advancing on schedule with pre stripping, which we expect to complete in the Q3. We've started to ramp up placement of ore on newly constructed leach pad at the nearby Safford operation. Project is forecast to add £200,000,000 of copper per year initially opportunities to increase production over time with low capital intensity.
While we have great expansion opportunities at Lonestar, we are deferring those until market conditions more. We remain excited about the long term opportunity for Lonestar. We believe it will be a significant future cornerstone asset for Freeport in the United States. At Grasberg, very pleased to report that our Grasberg underground ramp up is proceeding on schedule. Cave propagation for the Grasberg Block Cave and the Deep MLZ mine continue to go well.
We have achieved important milestones to establish large scale production from these high grade low cost ore bodies. Then consistently meeting or exceeding key performance indicators. I congratulate Mark Johnson and our PTS team for its noteworthy performance in advancing this massive undertaking in such an effective manner. During the Q1, production from Grasberg Block Cave and Deep MLZ together averaged over 37,000 tons per day, slightly in excess of our forecast at the beginning of the year and over 44% higher than prior quarter rates. By the end of the Q1, we were producing at a combined rate of over 40,000 metric tons per day.
Rates will be increasing continually as we go forward. We've added almost 50 new drawbells at the 2 mines during the quarter compared with 34 in the 4th quarter. We now have 250 open drawbells, which are the rock funnels that allow us to gain scale in oil production. These are high grade, large copper and gold orebikes. It's noteworthy that the 1st quarter mill rate throughput was only about a half of last year's Q1.
Yet PTFI's quarterly metal production was similar to last year's Q1. This demonstrates that these underground ore bodies can produce at scale because of their grades. At full rates, the production of these 2 ore bodies is projected to average over £1,300,000,000 of copper, 1,300,000 ounces of gold per year. In the earlier years, we'll have higher grades and that'll yield higher metal production. Average net unit costs are expected to average less than 0 point rates.
Dollars 0.20 a pound, that's notable and rare for large scale operations in the global copper industry. Our PT FI team deserves compliments for their extraordinary performance in managing the health situation, while continuing to execute on this major project. We have a workforce of about 30,000 people, large portion of that work in the Highlands, where they live in dorms and even mess halls. Our team is supported by world class medical providers. They've been proactive with a series of actions to help us prevent any major outbreak at this remote location.
Our testing and screening activities in one of the most remote places in the world are much more advanced than much of what we're seeing today in communities in the United States. Our PTFI development operating team is supported by FCX's global world class technical organization. ETFI Indonesia is benefiting now from its ownership that was put in place in late 2018, where now we have a 51% shareholder that's a state owned company named Mind ID. And now we have a much more positive relationship gate permit. Unlike years past, now all stakeholder interest in our business in Indonesia are aligned.
Slide 17 talks about the smelter that we committed to construct as part of the IUPK. We're facing delays with this project. It's located far from our operations in Papua in a densely populated area of Eastern Java. We have notified the government of delays because of worker restrictions and supply chain issues and we're in discussions to extend the December 2023 project deadline. We're also reviewing with the government other issues related to the smelter that might be mutually beneficial to PT FI and the government.
We do not expect to incur capital expenditures of significance in 2020 on the smelter as a result of the delays that we're experiencing. Slide 18 looks at copper markets. Copper prices have dropped from weaker demand from the declining GDP, of course. On the other hand, supplies of coppers have been impacted by the pandemic. Copper mines and development projects are being curtailed or canceled.
Scrap market, which provides a large part of refined copper to the market is currently very weak. We're encouraged by data now coming out of China indicating an emerging recovery. There is strong likelihood around the world that ongoing stimulus actions will help economies recover. Despite the long term the near term uncertainties, we're not trying to base our business on ours or anybody else's ability to predict these near term situations. The long term copper outlook for copper remains highly positive and in some ways being supported by the supply curtailments we're now seeing.
Copper Strong is supported by fundamentals, has an essential role in the overall global economy, the major element in efforts to reduce carbon in the world and the world is increasingly turning to electronics in so many respects, extended from electric vehicles, charging stations, but also 5 gs and other technical factors are going to require more electronics in the world. Supplies of copper continue to be that would be limited. No one can predict with confidence when economies will recover. Copper is a highly attractive commodity to move and it's positioned to move substantially higher as the economic conditions improve. Freeport will be a major beneficiary of this movement.
I've included Slide 19 as an infographic developed by the Copper Development Associations, which I thought does a great job of illustrating broad ranges of uses of copper in the economy. I'll just refer it to you and ask you to take a look at it when you have a moment to consider. Slide 20, we present our reserve and resource position. We have long live and valuable resources that will be available for organic growth development for decades to come. Volumes we've elected to curtail the current market will be more valuable in the future as economic conditions improve.
Before turning to Kathleen to review the financial outlook in more detail, I want to close with a follow. Freeport is foremost in copper. Looking beyond the current troubled conditions, copper is widely considered the best positioned major commodity for our supply from a supply demand standpoint. Freeport's portfolio of copper assets are large and high quality. We're an established industry leader.
We operate the mines that we have interest in, which are among the largest in the world. And by operating all of our assets, it provides us valuable synergies and flexibility across the portfolio to deal with times like these and to take advantages of the brighter days to come. Our assets are on live, durable with embedded option for reserve and resource growth. Strong franchises in the United States, South America and Indonesia. Near term Freeport is at an advanced stage for a major increase in margin and cash flows beginning in 2021, apart from copper price movements and extended for 20 years and further.
We have industry leading technical capabilities through strong track record of execution over many years. We've earned the trust and respect of our partners, our customers, our suppliers, financial markets, most importantly our workers, communities and host countries where we operate. Our block caving experience is one of the most extensive and longest standing in the history of the global mining industry. We've been operating block caves in Indonesia since the early 1980s, and we have an important aluminum block cave operation in Colorado. This is a critically important factor as we transition Grasberg to the largest bot caving operation in the world.
Our experience and battle tested management team has demonstrated the capabilities to perform in good times and bad. We are confident of our ability to prove our mettle as we've done in the past. Slide 22, I'm going to close by talking about our people. Again, I want to recognize the strength and resiliency of the entire Freeport family who inspire me every day. I'm proud to be part of this team.
We're all motivated and committed to persevere and achieve success for all of our stakeholders. Kathleen, I'll let you take over.
Okay. Thank you, Richard. I'll turn to Slide 24 and run through some of the details of our operating plans and financial outlook before we begin the Q and A session. On 24, we present a summary of our revised operating plans. As Richard was saying earlier, as we develop the new plans, we focused on reducing operating costs and capital expenditures, while maintaining safety, reliability and the integrity of the long range plans.
In the Americas, we reduced mining rates across the board by about 20% in total. What this did, it had the impact of reducing all elements of our operating costs and the capital that higher mining rates would require. We note that this material is still there and available to us in the future as market conditions warrant. At our molybdenum mine in Colorado, the Climax mine, we're going to reduce the mining rate there by about 50 percent to better match our supply and the supply in current market conditions. In the Americas, we reduced capital by $500,000,000 and that included the capital associated with our innovation initiatives that we previously estimated at $150,000,000 of capital in 2020 that would add production as we go forward.
We have suspended that project, but we're still using the data analytics tools and the agile way of working to drive cost performance and other things like recoveries and initiatives that do not require significant capital. We believe these tools will be very useful to us as we drive efficiency. We'll use them rather than driving higher production levels. We'll use them to manage costs and improve our recoveries in our Americas mines. In Indonesia, our mine plans are basically the same as our prior plans.
We incorporated updated market rates for energy and the favorable impacts of the stronger dollar on our foreign denominated labor costs. We also tightened our belt to reduce spending in a number of areas throughout the operation. Combined these savings reduced costs in Indonesia by about 10% for 2020. We also benefit from a higher gold price, which our prior plan was based on $1500 gold and we've adjusted this plan to $1600 gold and as you know gold is currently over $1700 per ounce today. Our capital spending in Indonesia was reduced by over $200,000,000 in 2020.
About half of this is timing of installation of planned mill upgrades, which we deferred by a year as a result of the pandemic and current constraints on international contractors. We've also reduced spending forecasts associated with the proposed smelter in Indonesia that Richard referred to earlier as a result of project delays and the current discussions with the Indonesian government. Looking at Slide 25 and this is also in our press release, it's a financial summary of the revised plan for 2020 compared to the January plan that we prepared in conjunction with our earnings call in late January. Because of the sequencing of our mine plans during the year, we expected the Q1 to be the weakest of the year. We also expect under the current plan for capital expenditures to exceed our operating cash flows in the Q2.
But as you can see here, on the slide, we expect our operating cash flows for the full 9 month period, in the balance of this year to exceed capital expenditures by 400,000,000 dollars And that's a $200,000,000 improvement in cash flows for the full year compared to our previous plan despite a $0.50 decline in assumed average copper prices. In addition to the cost and capital reductions, our plan reflects a number of cash flow benefits associated with reductions in materials and supplies inventories, an acceleration of tax refunds and a series of other items to improve our cash flow. Importantly, we boosted liquidity during the year compared to our prior plans and our net debt is lower. Richard mentioned, we've gone through a process of stress testing these plans at various prices and believe we have a plan that will bridge us through 2020 and put us in a strong position as we enter 2021 with the addition of large scale low cost volumes from Grasberg. Turning to Slide 26, we show our sales outlook for 2020 through 2022.
As you'll note in this slide, the sales volumes are about £400,000,000 per annum lower than our previous estimates. This reflects the, curtailments that we're making in the Americas, reducing our mining rates. And it also includes a small change in 2022 associated with the deferral of the upgrade of the mill project, which has a slight impact on our mine plan for the ramp up of the Deep MLZ. You see the gold sales are similar to our prior levels. There's a small change in 2022 related to the timing of the mill upgrade.
Molybdenum sales are down about 10% from our prior estimates and that reflects the change at the Climax mine and also the reduction in byproduct moly resulting from mine plan changes in our Americas copper mines. On Slide 27, we present a summary by region of our unit net cash costs. We separated the Q1 from the rest of the year, so you can see the impacts of our actions. Net unit cash costs on a consolidated basis in the Q1 were $1.90 per pound. This was better than our plan, which projected about just over $2 in the Q1.
And our Q1 was expected in the original plan to be our highest in the year. But as you'll see, what we've done with our cost structure in the balance of the year is driving a significant decline in net unit cash costs Compared with the Q1, cash costs in the 9 month average would be $1.44 per pound. That is $0.46 a pound or 24% below the Q1 average. We expect to average for the year $1.55 taking into account the Q1 results and move to a unit cost level of about $1.20 per pound in 2021. We show at the bottom of the page the makeup of our cost by region.
You can see energy on these pie charts, which includes diesel and electrical power, and that represents combined the diesel and other sources of energy, 17% of our consolidated costs. Diesel represents about 8% and our diesel prices have declined more than 50% since the start of 2020. Moving to Slide 28 and you've seen us present EBITDA and operating cash flow in this format over many quarters, but it's designed to show at various prices what our EBITDA and cash flow generating capacity is using the average volumes and costs for 2021 2022. We hold gold flat in this scenario at $1600 per ounce and molybdenum at $9 per pound and vary the copper prices for 2021 2022 between $2.50 $3 And you can see here, we would generate a $250,000,000 copper over $5,000,000,000 in EBITDA and over $3,000,000,000 of operating cash flow. And as prices move, we could generate over $7,000,000,000 at $3 copper and over $4,500,000,000 of operating cash flows.
We present sensitivities on the right side of the chart, so you can make your own adjustments as to different copper market or gold market outlooks. We expect, as Richard was talking about, to manage our situation from a financial standpoint in 2020 before getting into 2021, we will generate we expect to generate very significant increases in cash margins and cash flow. We've cut spending. I'm now on Slide 29. So these cash flows that we generate will be available to fund CapEx and also have excess cash flows for other initiatives, including debt reductions, and other initiatives that we have.
We cut CapEx from $2,800,000,000 to $2,000,000,000 and we show the details of where that came from. For 2021, we're currently estimating $2,300,000,000 in capital expenditures. That's about $100,000,000 lower than our prior estimate. The focus of our plans to date, our revised plans to date have been mainly on capital expenditures in 2020. We're continuing to review 2021 and we're reviewing those for potential additional reductions depending on market conditions, which we'll be evaluating in the coming months.
Our plans appropriately cut spending and capital and again preserving the strong outlook that we have over the next several years. I'll just close on our financial policy that we covered throughout the call, we remain focused on safeguarding our people and our business and maintaining strong liquidity and balance sheet strength as we manage uncertainty during the pandemic and the economics associated economic impacts. Under current market conditions and priorities, our Board does not expect to declare dividends in 2020. This will be evaluated on a regular basis. And as we successfully execute our plans and enter 2021, we expect to be in a much stronger position with increased cash flow, enhanced flexibility to consider shareholder returns.
Thanks for your attention today. And operator, we'd now like to open the call for
Our first question comes from the line of Alex Hacking with Citi.
Good morning, Richard and Kathleen, and I hope you guys are staying safe and doing well. Let
me ask
a couple of questions on Grasberg, if that's okay. The first question would be, how are the supply chains holding up there? Are you able to get access to the consumables and other things that you need? Or are you having to run down stockpiles? And then I guess secondly on Grasberg, congratulations on all the steps that you're taking there to keep everyone safe.
But in a worst case scenario where there is a significant outbreak, what is the contingency plan? I mean, it's obviously very difficult to kind of safely halt underground mining there. So maybe you could discuss a little bit what the contingency would be in a worst case scenario? Thank you very much.
Okay. Thank you for your question. Mark Johnson, would you comment Mark is actually in Poplar now at Grasberg. Can you comment on the supply chain issues and how we're dealing with it?
Yes. To date, we haven't had any problems. Nothing's been interrupted. We always have to maintain a supply up in the Highlands, but no issues on obviously, we have a large community up here. That's one of our concerns, but no problem.
Like some of the places in the States, we haven't had a run on any of our grocery stores, our medical supplies, all those key things, plus all the things that we're doing for production and for our development, we haven't had any issues. On the contingency plans, one of the things that we've looked at in a worst case scenario, as you mentioned, is the mines that we'd be need to have some consideration. The Big Gossan, we could shut off and turn on if we needed to. It's a stope mine. But we've got we worked with our consultants and we understand what sort of minimum draw rates we would need in our block caves to keep them going.
We could drop our personnel dramatically and to just do that minimum draw. For instance, in the Deep MLZ right now, we run 8 loaders, about the same in the GBC. That's our core production. So the core production is at a relatively small amount of people and equipment.
A lot
of our effort is in the continued expansion, the construction to achieve those out years that we've got. So it's an ongoing process. Our contingency plan in the worst case scenario would be to minimize those activities and focus on the production activities.
Thanks Mark. Thanks Mark.
Your next question is from the line of David Gagliano with BMO Capital Markets.
Hi, thanks for taking my questions and congrats on the comprehensive update, the quick actions, the cost improvements, the cash savings, everything that you highlighted today, clearly you've been through this before. My question is regarding the out years. It looks to me on my side like the 2021 2022 reductions in copper volumes are mainly tied to the AI initiative CapEx cut, at least for North America. So my question just to verify, do the 2021 2022 copper volume targets assume that the North American operations are back up and running at normal rates? Or does it assume they continue to operate at the roughly 20% lower rate?
And under what underlying market conditions do you plan to ramp those operations back up to normal again?
The, David, it's Kathleen. Our mining rates that we have put in here, the 20% reduction in 2020 continues into part of 2021. We have some mines that are starting to ramp up, but we still have idled production during that period of time. So when we were pursuing in our previous plans, the initiatives we were calling America's concentrator where we were increasing both mining rates and milling rates. We're not doing that at this point.
So we could if market conditions were to improve dramatically and we'd have to take a long hard look at that because as you know this is not a light switch that can go on and off, but we could start bringing back production and over time and increase our mining and milling rates again. So this assumes that we remain in a curtailed mode at most of the really all the operations through the 1st part of next year. And then some of the operations are increasing mining rates and others aren't. So it's a mixed bag, but we could there's nothing about our prior plans that would stop us from increasing production. It may delay because of the mining rate change this year, it may delay the timing to get to those volumes.
But as we talked about, the volumes are still there and could be added over time if market conditions warrant.
Okay. And just as a related follow-up, just can you give us a sense as to when you say if market conditions warrant, is there what's the market condition that would warrant a full
Well, our prior plan at the beginning of the year was based on the context of a copper market $2.75 to $3 And as Richard was saying, the things that the groundwork was in place for potentially higher prices as we go forward. So I think you'd have to see prices move back to those levels and have more economic certainty around the economy. But we're going to be very disciplined about executing these plans really focused on cost, really focused on capital in the near term to make sure that we can preserve our financial position during 2020. And then as we get into 2021, we can start looking beyond at what the market conditions are and whether we restore full mining operations at that point.
Okay. That's helpful. Thank you.
And Dave, realistically, this situation is not likely to turn on at one point. Different countries are going to be in different situations and things will occur step by step and there will be uncertainties along the way. So it will be fair to say that given our overriding objective of protecting the long term values of our assets, we will be very measured on how we respond.
Got it. Helpful. Thanks very much.
Your next question is from the line of Chris Terry with Deutsche Bank.
I just had a follow on to David's question just now to Slide 26, just on the production. I understand North America, and I think that was probably reasonably well flagged that there might be adjustments there. But in terms of South America, appreciate Cerro Verde is offline currently. But the 2021 2022 impact of South America, can you just talk through that? I know you have a little bit of leaching on Cerro Verde.
Is that the carryover effect of less mining into 2021? Or is that what exactly is happening there? I'm just trying to think about how you could maybe increase that if again maybe back to copper conditions. We're just trying to understand the mechanics of 2021 in particular.
Yes. Well, we've also reduced production at El Abra. We deferred a significant capital item there and so we're reducing our mining rate at El Abra and that's also contributing to the lower production in South America. But we do show under our plans, we do show Cerro Verde production increasing in 2021 from the 2020 levels. But our Elabora mine is about flat like it was in 2020 when you compare it.
So that's a significant reduction from our prior plans.
Okay. Okay. Thanks. That's helpful. Just one more if I may.
I just wanted to follow-up on the comments on the smelter. So the concept is still the kind of $3,500,000,000 level, but you just pushed back 2020, but you're still working out exactly negotiations on that. Is that the right way to think about it? Thanks.
Richard, do you
want me to take that one?
Well, let me ask you to repeat the question. Unfortunately, I had a little static in my line here.
Sure. No, I just wanted to just be a little bit more detail on the smelter in terms of the concept. I think what you're saying is, it's still kind of the $3,500,000,000 You're just going to push out 2020 and you're in the process of renegotiating it. I just wanted to understand that that was correct. So
I wouldn't characterize it as a renegotiation. We reluctantly decided that we would have to commit to build the smelter in order to get a resolution of the long standing issues we'd had with the government in Indonesia about extending our operating rights. And that was one key concession that we made along with facilitating the government through a state owned company acquiring 51% of the shares. That, as you know, was achieved principally by Rio Tinto, deciding to sell their joint venture interest to the government. Of course, in return, we got clear cut operating rights, fixed fiscal and financial terms to 2,041 and established a positive new working relationship with the government.
So, we've made that commitment to the government and we're executing on that commitment. The facts are we can't proceed as we had planned because of the worker restrictions at Graseck where the smelter relocated and supply chain issues with contractors and the like. In the meantime, the government in Indonesia like governments around the world are struggling with state revenues because of lower economic activity and investments. So we are engaging with the government as to whether this new circumstance might provide a way that would be mutually advantageous for the government for our mined ID through PTFI to reconsider what we're doing with the smelter. But throughout all this, we are being clear cut that we made this commitment to the government and unless the government agrees to some changes, which the current circumstances might lead them to consider, we are proceeding with fulfilling our commitment to build this smelter.
Thanks, Chris.
Your next question is from the line of Carlos De Alba with Morgan Stanley.
Thank you. Very good morning. Hopefully, everyone is doing fine. So my question is first on working capital. The company generated cash flow from working capital reduction or lower levels of working capital in Q1.
How do you see that going forward during the remainder of the year? And the second question, if I may, is regarding the positive surprise for the second quarter in a row in terms of gold production or shipments out of Indonesia. Can you maybe provide a little bit more color as to what is going on there? And if there is this is something that maybe you have room to continue to surprise to the upside? Thank you.
Okay. With respect to the working capital question, we are projecting a large working capital source in 2020. As we mentioned, that is one of our initiatives here to release cash from the balance sheet through the materials. And as we curtail mining operations, we'll have the ability to use existing inventories as opposed to having to buy new consumables to a certain degree. So we'll have a reduction in materials and supplies.
We're also bringing forward some tax refunds that were projected over the next several years and we're bringing those forward into 2020. And there are a number of other cash flow initiatives that we have developed over the last several weeks in the context of our revised plans. And so we are showing a large source of working capital throughout the year.
So this will continue in Q2, Q3, above and beyond what we saw already in Q1 then?
Right. Yes.
Let me just add that again, complimenting people. Kathleen, her team has done a great job with financing. Steve Higgins, who heads up our administrative team is doing an excellent job in managing worker issues and HR and other matters. Danny Hughes, who heads up our global supply team is doing a fabulous job and we have tremendously positive relationships with our suppliers. We are often one of their largest customers, in many cases, the largest customer.
And so as we face this problem, we sit down with our suppliers and we're able to find ways to reduce costs, deal with payment terms and the like. Same way with our customers. We all understand each other's problems. We work together many years. Some of this you're seeing is result of all those long term relationships, but also how diligent
our whole
team is being in finding ways. I said we left no stone unturned in finding ways to generate cash. And we're going to continue to do that on an ongoing basis.
In terms of the question on the gold, we did experience some higher grades and of gold and that will we still are projecting that our grades are consistent with our plans and you'll have pluses and minuses with how the grades are measuring against the plans. So we did have some higher grades. And Mark, I don't know if you want to comment any further about gold grades and recoveries as we go forward.
Yes. I'm going to add that, Kathleen, before Mark talks. Mark, I've been noting just how strong our recoveries have been and recoveries have been above plan in many respects. So maybe you could talk about that.
Yes. In the Q1, what we the significant difference that we saw in grades in both copper and gold was in the Deep MLZ. We were essentially on or
just above target as far as
the tons. But for both the copper and gold grades, we were about 18% above plan. What's driving that is really we're mining the Deep MLZ for the cave management. We've talked about the seismicity. And so we're very cognizant of how we pull the cave.
And it's our tent is to draw it in a very even fashion. And we've got a great system now where we can track every single bucket and we know exactly where each bucket of material came from. Just happened in the Q1 to manage the cave on a daily basis. The grades came out, like Kathleen said, it was an advancement. It's not a change in our model.
We just happened to be able to pull by following the cave plan, we ended up with better grades. And those grades are quite good on both the copper grade for Deep MLZ was at 1.9 percent copper and 1.9 gram per tonne gold. And the plan for both of those were right in the 1.6 range. So that was a welcome surprise. Recoveries have been quite good.
As Richard said, we've been particularly on copper, we were over 92% copper recovery. Obviously, these our experience has been over the life of mining the Grasberg and other ore bodies here, the better the grade, the better the recoveries. And that's been tracking well as we mine these very high grades of grass at DeepMLZ and the grades at DVC are also very respectable and very high grade deposit at Big Dawson. So we track well on that and then we've been right in the 80% recovery range for the gold, which is very close to our expectations.
Thank you. Thank you, Mark.
Your next question is from the line of Chris Louthimina with Jefferies.
Hey, Richard and Kathleen, thank you for taking my question. It's good to see the improvements in your balance sheet and liquidity over last few years, very different from what you looked like in 2015. And also good to see the operational flexibility. Looks like you are actually generating positive free cash flow at current spot prices, which is encouraging. My question relates to how some of the operational changes that you're making today might affect the long term performance of your assets.
I recall back in 2,008, some mining companies revised their mine plans. They reduced their CapEx in response to low prices, which helped in the short term, but those changes led to an extended period of higher costs and higher sustaining CapEx. And I'm wondering if that's something that is likely to happen at Freeport or is it just that you are taking the short term measures without necessarily jeopardizing the longer term structural integrity of your assets?
Well, thanks, Chris. The word jeopardizing is not one that would be apply would apply here. But the effects of not spending some of this money now will carry over to future production levels because certain of the capital costs that we're deferring will have to be recovered in the future and it will push out some production. But this will not in any significant way jeopardize the value of the resources because the resources are still there, but it could it will result in some delays of when that production occurs. You see that at Grasberg where we are delaying spending on incremental crushing capacity at the mill for the time being and that will have an impact.
What we'll do is update you each quarter as we go through this and get our views of it. But again, it's not a question of destroying resources, but there will be some impact on future timing. Let me ask, Red, do you have a comment on this? Yes. Richard, you're absolutely correct.
And just one specific example would be El Abra that Kathleen mentioned earlier that we're slowing down the production rate there in order to push out capital expenditures and a new leach pad that's required for future production. So when things look up, we'll make that investment and be able to increase the volumes there if markets weren't.
The other thing I
would add Sorry.
I would just add, Red's team is very strong with all of the operations that during this downturn, we're not going to compromise safety. We're not going to be cannibalizing equipment. We're going to keep the equipment that we are using in good condition. It's just that we are not using all of our equipment. So we're postponing what we need to do in terms of rebuilding and things to meet a higher mining plan.
But we're not doing things that don't we aren't doing things that would destroy asset value and RED keeps preaching that to the team. So I just wanted to add that.
As a follow-up, it will be,
I suppose, interesting to see whether companies that don't have liquidity, don't have positive cash flow and are taking actions to kind of protect their balance sheet will have to do things that will lead to less production for an extended period of time. In other words, my question really is, do you think this leads ultimately this downturn leads to an extended period of less than expected global copper production as a result of initiatives that companies are taking today to protect themselves, in which case we could have higher prices and an upturn than we would have had otherwise?
No question about that. I think the feature that was most supportive of copper prices is the supply situation in copper. Supply was going to be tested in any event before all this happened. And now with development projects being delayed, curtailments occurring, which we just spoke about has some impact. And as you say, Chris, we know what it's like to be a company where you don't have flexibility with liquidity.
That's where we were in 2016. And as a result, we had to sell assets beyond copper, but also some copper assets. So this is depending on severity and the length of this lasting, there's going to be a longer run impact on copper supplies and that will ultimately be supportive of prices.
Thank you.
Your next question is from the line of Oscar Cabrera with CIBC.
Thank you, operator, and good morning, everyone. Richard, I just wanted to explore a little bit more the cost reductions that you team did. And by the way, congratulations to the team on a quick turnaround, something that took place in a few weeks where a little of the mining companies are not providing this level of detail. So your side and production and delivery costs with your original plan was about $2.04 a pound. This was now reduced to $1.80 I was wondering if you could provide us with an estimate of how much lower can this go?
And you talked about this will cost being lower as well as getting help from depreciating exchanges around the world. So I was wondering if you could provide just a ballpark estimate of what percentage of that accounted for the reduction?
Oscar, this is Kathleen. So it was a combination of many things, but in the Americas, we removed production. So that flows through all the costs, all the mining and labor costs and so that had an effect on removing all of the cost of production associated with those pounds. We also benefited from lower energy costs, which was about $0.07 a pound, compared to our prior forecast. Energy costs are lower than when we prepared these forecasts.
They're down probably another 15%, 20% from the time we prepared this forecast. But from a long term perspective, we're using about $1 per gallon of diesel in these forecasts and that had about a $0.07 impact on the Americas cost. Of course, in the U. S, our currencies, it's all a U. S.
Dollar business, but we really saw the benefit of the currency impact was in Indonesia. And as I mentioned, that reduced our cost by the absolute cost of energy plus the currency benefits by about 10% in Indonesia. And the big driver in Indonesia though is the volume aspect and that's really what's going to drive our cash costs lower. But as you've seen, we reduced our we were previously estimating over the next 5 years about $0.30 a pound for production costs in Indonesia And we're now using roughly $0.20 a pound for those costs. And that reflects some savings in the cost structure that we've been driving over many months, not just because of the COVID and the economic situation, but as we transitioned out of Grasberg into the underground, we've been, Mark and his team have been leading a zero based budgeting process to bring overall cost down in Indonesia.
I mean, during 2020, if need be, could cost be reduced further? Are there other sources you could use like cutting more production to lower the $1.80 that you're showing now?
I think what we're doing really is looking at what's cash flow positive. And so we look down at cutting production further at $2 copper, that may not make sense. We'll iterate on that some more as we go forward. But if you really look into our second half cash costs, at $2 copper, our Americas business is generating cash flow. And so prices would have to decline substantially for us to take it down further.
But you noted how quickly we moved here and we're continuing to evaluate to be flexible, to have a flexible operating structure regardless of prices.
Thanks very much, Kathleen, and all the best.
Your next question is from the
line of John Tumazos with the John Tumazos Very Independent Research.
Thank you very much for taking my question and for your service to the company. Concerning the exciting antimicrobial properties of copper, for weaving into linens and masks and things, I guess that would use wire rod and wire products consistent with infrastructure. But for countertops, tables, chairs, restaurant public applications, it would need sheet. And there's a very limited amount of foil or strip and electronics and a very limited architectural roofing applications. Would you be willing to contribute capital for a sheet rolling mill or a JV with other copper producers or fabricators or apply for stimulus money, which the government might grant to get the supply going, it could be a multimillion ton market?
John, we lost part of that. I think I understand your question.
You want to build a hot strip mill for copper sheet?
I think the more likely thing way forward with that is for our company and hopefully I feel confident other companies will join us is to provide the technical basis for these things and then to work with entrepreneurs, venture capital firms and so forth to develop these new industries. We tried this in the past and we ran into barriers because of the cost of refitting and so forth. Now the world has changed and people are seeing this and this flood of articles is coming out telling the truth about copper. So we think that will create a market and we will be working with the industry as a company to help promote this going forward. I think there would be some likelihood for government support of entrepreneurial type companies going forward.
Our primary focus is going to continue to be in developing and operating mines. But we will we've already begun talking and developing a team to see how we might help lead this movement to doing something that positive for copper markets, of course, but more importantly, would be positive for the world because these impacts of health protection are real and we just see how much they are needed in today's world. And even before that, the number of infections that people get going to hospitals for surgeries and things like knee replacements that occur because of infections from hospitals is staggering. So this is just bringing to light a contribution that copper as a metal can make to the world and we are going to be a leader in demonstrating that. Thank you.
Your next question is from the line of Lucas Pipes with B. Riley FBR.
Hey, good morning, everyone, and congratulations on a very impressive response to this, especially under these very difficult circumstances. I wanted to follow-up to Chris' question earlier on trade offs between today's cuts and future production. Is there a way to maybe quantify in a little bit more detail what the impact to production could look like for the Americas, call it, starting around 2023?
It's just too early to do that. I mean, we're in a period of uncertainty right now. Our focus has been on bridging from the loss of cash flows from the lower copper price to ensure that we could bridge our company to the higher volumes from Grasberg. And so that's what we're doing with this plan. We're focused on executing this plan for any of us to sit here today and be able to predict where the world is going to be any period of time.
I mean, even in the short run, there's huge uncertainties and beyond that, there are as well. So we're just not in a position right now to say what we're going to do. But I think what you can get comfort in is that we have the flexibility of addressing to whatever the world has. We have a track record of doing that. You can look and see what we did beginning in 2010, 2011, when we did in 2016, 2017 and see how we did it.
And that's what we're going to keep working on. So this is an unfolding story, work in process, but as a company, we have a lot of flexibility in dealing with whatever comes down the road, positive or negative.
And right now, our plans show pretty flat going out to that point to over the next 5 years for Americas. But as Richard said, it's going to be dynamic as we assess the situation going forward.
Yes, I understand. I appreciate the color. And again, I think you've done a really great job responding to this unanticipated environment here. 2nd question, just in terms of your relative cost position and the industry response, obviously, there's been a lot of supply being taken offline due to safety concerns and precautions. Do you anticipate first, what's kind of what is the relative what's your relative cost position today?
And then do you anticipate a broader supply response from the copper miners due to the decline in prices?
Thank you. Well, we have mines that range in cost structures from the lowest end of the industry to mines that are relatively high costs, because of the nature of the portfolio we put together years ago when we combined Grasberg with Phelps Dodge portfolio of assets. And by having these assets together is what enables us to produce mines that are relatively low margin during good times and generate profits and extend resources with having the ability to scale back production when prices are low. And that was the huge issue that fell to Dodge face years ago and the strategic benefit we achieved by putting these sets of assets together. So, we can calculate an average as a company and compare that average with other companies.
Look, when we manage the business, the management is focused on-site by site. And so what you're seeing here today is a layering of actions to reduce high cost production, drive our costs down and even within areas of mines like Morenci, there are elements of production within that large mine that get adjusted and others do not. So, there's no the average is calculated, but the management is managed site by site.
I think the other thing to add here is, we benefit from having very long life reserves. And when you're looking at aside from the Grasberg reinvestment program we're making right now, once we get into production at Grasberg, CapEx will decline and you'll be generating a lot of free cash flow. But also in the Americas, we have a very long life reserve base and additional resources. So when you look at the cash cost plus the CapEx and you think about we're not having to spend a lot of CapEx to replace reserves because we've got such a long reserve profile and we don't have the reinvestment risk that some other Shorlock mines might have. So, when we look at this and when we went through this plan with Red and the Americas team, we were really looking at what is the cash cost less the capital that comes with it.
And sometimes when you're trying to build production and grow, you've got a lot of capital that comes with that. And so right now, we're operating on a plan to have as lower cash costs, but also what is the lowest cash costs, plus capital expenditures that makes sense for us right now. And that's really the plan we're focused on.
Yes. Very good job and keep up the great work and best of luck in this environment. Thank you.
Thank you so much. I appreciate those comments.
Now, we will turn the call over to management for any closing remarks.
Well, it's been a long call. I appreciate your attention. I think the length of this call is warranted because of the uncertainties we face and we wanted to make sure that we did our best to try to explain to you what we're doing with the company. As you can tell, we're more than pleased with where we are in a very difficult and uncertain situation. Our guard is up.
We're not going to let down at all because none of us are quite sure what else we might have to deal with. And so, thanks for your attention. If you have follow-up questions or comments, please get in touch with David Joynt and we'll respond to them. I hope all of you stay healthy and your families and friends can do so as well. It's time to be reflective about what this situation is doing to so many people around the world and our hearts and prayers go out to everyone.
Thank you a lot.
Ladies and gentlemen, that concludes our call for today. Thank you for your participation. You may now disconnect.