Kathleen Quirk
President at Freeport-McMoRan
Okay, great. Thank you, Richard, and I'll cover the presentation that's on our website and then we'll come back and take your questions.
Starting on Slide 3, we summarize the highlights of the second quarter. We achieved solid operating performance in the quarter and continued our momentum and executing our operating plans, growing our production year over year and managing costs in a challenging environment. Our sales volumes for copper was 17% higher than last year's second quarter and 5% above our recent guidance. We benefited from strong operating performance across the portfolio.
Gold sales were 56% above the year ago quarter and 18% above our April guidance reflecting the exceptional performance at Grasberg. Our consolidated average unit net cash costs for the quarter of $1.41 per pound were in line with our guidance, and notably Grasberg costs were a net credit of $0.02 per pound in the quarter, meeting -- meaning that the gold revenues more than offset all of our cash production cost at the site.
We're actively engaged in cost management and efficiencies across the portfolio to mitigate cross -- cost increases. We generated adjusted EBITDA of $2.3 billion in the quarter. This was net of a $355 million reduction associated with copper sales recorded in the first quarter provisionally priced at the end of March at $4.71 per pound which remains subject to final settlement. The decline in copper prices during the second quarter resulted in a negative adjustment for these provisionally priced sales.
Our adjusted net income totaled $854 million in the second quarter, $0.58 per share. That excluded net charges detailed on roman numeral Page 7 of our earnings release, total -- totaling $0.01 per share. Operating cash flows of $1.6 billion in the quarter exceeded our capital expenditures of roughly $900 million.
Capital spending in the quarter included $400 million of major projects, principally associated with the Grasberg underground and roughly $200 million to advance the construction of the Indonesian smelter.
We took advantage of weakness in credit markets during the quarter and opportunistically repurchased debt in the open market. To date, we have purchased $754 million of FCX's notes in open market transactions at a cost of $718 million including $582 million in principal amount in the second quarter. The current market situation provides a great opportunity for us to reduce absolute debt levels at attractive prices. We also continue to execute our share repurchase program. Since starting the program last November, we have purchased 48 million shares at a total cost of $1.8 billion and average approximating $38 per share.
Since the end of the first quarter, we purchased nearly 800 million in stock, including 110 million in July, which were executed at an average share price of $28 per share. Since reaching our net debt target in the middle of last year in the range of $3 billion to $4 billion, we have used approximately 50% of our free cash flow for shareholder returns. Today we announced that our Board increased our share purchase authorization by $2 billion to refresh availability on the program to the $3 billion range. The timing of our future purchases will be dependent on our cash flows and general market conditions. We'll will continue our priority of maintaining a strong balance sheet and use excess cash to return to shareholders.
As Richard discussed, the magnitude of the decline in copper in recent weeks was sudden and unexpected. We have the balance sheet, asset quality and experience to successfully manage a volatile and uncertain market environment. Our net debt at the end of June was $1.6 billion that included $600 million in net debt associated with the Indonesian smelter.
Consolidated debt was $11.1 billion and consolidated cash was $9.5 billion. We don't have requirements to raise capital in the current environment. We've been opportunistic in taking advantage of recent market weakness to repurchase our debt and equity securities. As we look forward, we will manage through the near-term effectively and are positive about our strategy centered on being foremost in copper. The strength of our assets and our team is focused on increasing value for all stakeholders.
Moving to Markets on Slide 4, we show a graph of year-to-date copper prices. The price for months ago hit a high of $4.87 per pound with market analysts predicting multi-year periods of price increases, based on fundamentals and rising demand required to support the energy transition, limited supplies and sizable deficits on the horizon.
You've all read about the macro factors which I have manifested over the last several weeks, triggering recessionary concerns. In addition, concerns about the impact of COVID shutdowns in China and a strong U.S dollar have weighed on copper which is viewed as a close proxy for sentiment on the health of the global economy. The reality is that this has been a financially driven anticipatory move in copper prices.
Physical markets remained healthy, as evidenced by the global exchange inventories illustrated on this chart, which remain at historically low levels. Our customers report solid orders and the industry continues to struggle to meet production targets. The current decline in price is below Wood McKenzie's estimate, $4.25 per pound, necessary to incentivize new supply under an accelerated energy transition and will also provide less cash flow to the industry to develop new supplies, making the projected deficits in copper more significant in the future.
The long-term secular demand trends for copper demand associated with electrification, decarbonization will be important demand drivers for copper. We see these trends being less economically sensitive than traditional uses of copper in the economy. We fully recognize the short-term uncertainties but had conviction about long-term fundamentals for the copper markets.
Richard mentioned the S&P Global report. Many of you have seen it, it was published last week prepared by analysts at S&P Global and led by Dan Juergen of well known energy industry expert, author and historian. The independent study, which is available on S&P Global's website forecast above trend copper demand. Through 2035 associated with electrification and the energy transition. The report projects long term structural deficits in copper and highlights copper's prominent role in the global aspirations of a net zero economy. It confirms the work of other reputable analysts in the future of copper and will serve as an educational tool for governments and other policy makers on the importance of future new copper supply development.
We recognize the short-term macro was a different picture. And as we move to Slide 6, Richard highlighted this summarizes our experience in managing challenging environments. For those of you who have followed our company and industry for a long time, you know that our team is proficient and successfully navigating challenging circumstances. This slide, on slide 6 summarizes our actions in prior periods, when we took decisive steps to adjust our operating plans, reduce costs, the first spending protect liquidity and preserve our asset values for improved market conditions.
Notably, we operate all of our mines and manage major capital and operating decisions centrally. Each one of these periods had its own unique challenges and our team proved its agility each time. We are prepared to respond to a weakening market environment, if necessary. We're a much stronger position than in past downturns with a significantly improved balance sheet and our successful expansion of the low-cost production at Grasberg. Our team is resilient, experienced, professional and value-driven in our approach. We can't predict the extent or time frame of the current situation. But as a responsible producer of scale and a strategy focused on copper with long-life reserves, the prospects are bright for portfolio to become more scarce and highly valued in the future.
On Slide 7, we provide some additional details on our operating activities in the quarter. In the U.S. the Lone Star mine, continues to perform above design capacity. We're expanding further to take us to 300 million pounds per annum by 2023 with an investment of approximately $250 million. As we accelerate the mining of oxide ores, this will expose a much larger sulfide opportunity at this site.
We're also advancing and we're very excited about our leach recovery initiatives at Morenci and across the Americas portfolio using data analytics and new technologies to enhance our leach production. This is a significant value enhancing opportunity for us and we continue to gain momentum, and expect to have success on this priority initiative. At our Bagdad mine and in Northwest Arizona, we are advancing plans for the Bagdad 2x project to double production. Studies are advancing and we're planning to advance early initiatives in parallel with the studies. We're focusing on developing this opportunity as a future growth option, but we'll be flexible on timing, subject to market conditions.
In South America, the teams have done exceptional work navigating the pandemic. We've had a great highlight and significant milestone for the Cerro Verde team during the quarter, setting the quarterly record for concentrating of averaging 427,000 tons of concentrating per day. At Cerro Verde, we also had some recent positive results on exploration, which have the potential to expand reserves and increase grades at this large-scale operation.
At El Abra, we have increased stacking rates and commencing leaching on a new leach pad. We continue to evaluate alternatives for the long-term at El Abra including options for new concentrator or an extension of existing operations subject to ongoing monitoring of the investment climate in Chile. At Grasberg, we sustained our large-scale metal production after reaching our target metal run rate in the fourth quarter of last year. The cost position at Grasberg is exceptional and the team there is doing outstanding work in managing and sustaining the largest and most profitable underground operation in the world.
During the quarter, we again achieved higher gold recoveries compared with forecasts, which contributed to a favorable variance for the quarter and we've now increased our outlook for full year gold production. At PT-FI, we are advancing mill projects to provide additional capacity in the second half of 2023. We're diversifying our power sources and advancing the long-term development for Kucing Liar. The construction of the new smelter in Indonesia is advancing. We reached an important construction milestone during the quarter, which will enable us to begin to reduce export duties later this year.
Turning to Slide 8, we provide a 3-year outlook for our volumes which are largely in line with our prior forecast. We've made small changes to our 2022 copper volumes totaling about 40 million pounds or about 1% and have increased our forecast for gold volumes in 2022 by about 5%. The execution of our long-term plans is on track. After delivering 19% increase in copper sales in 2021, we are projecting growth in volumes in 2022 and further growth in 2023. For 2022, we estimate 36% of our sales volumes will come from the U.S., 27% from South America, and 37% from Grasberg.
Moving to our cost outlook on Slide 9, as I mentioned, we're actively engaged in cost management and efficiency initiatives to mitigate the impacts of the challenging cost environment. We've updated our plans to incorporate recent commodity pricing, exchange rates, and our latest operating plans. We're now estimating unit net cash costs for the year approximating $1.50 per pound for 2022 that compares with our prior estimate of $1.44 per pound.
As you'll see from the reconciliation on slide 9, the majority of this increase reflects a decline in byproduct credits associated with the reduction in assumed gold and molybdenum prices for the balance of the year. Our projected $0.03 per pound increase in site production and delivery costs reflects the assumption of higher energy prices in our second half -- in the second half compared with our prior forecast, higher consumable costs together with the impact of a change in estimate for copper and the maturing leach pad at El Abra and this was partly offset by the favorable impact we have on labor costs internationally associated with weakening exchange rates compared to the U.S. dollar.
Historically copper prices have been correlated with the number of our input costs. Should recessionary pressures continue, historical correlations would indicate that we may begin to see a reversal of some of the cost experiences we've seen over the last 2 years.
Moving to slide 10. As one of the world's leading copper producers, our earnings and cash flows have significant leverage to the price of copper up and down. On slide 10, we show modeled results for our EBITDA and cash flow at various prices and we've shown a broad range of prices this quarter given the volatility ranging from $3 per pound of copper to $5 per pound of copper, which is close to where the prices were earlier in the year.
We've updated our gold and molybdenum prices to reflect current prices as Richard talked about the current price is not sustainable long-term given the cost structure of the industry and the need for new supply development in the future. We show modeled results on this slide using the average of 2023 and 2024 with current volume and cost estimates and holding gold flat at $1700 per ounce and molybdenum at $16 per pound.
Our annual EBITDA under these scenarios would range from over $6 billion per annum at $3 copper to $15 billion per year at $5 copper with operating cash flows ranging from $4.5 billion per year at $3 copper to over $11 billion per year at $5 copper. We show sensitivities on the right to various commodities and input costs. We can't predict prices and prepared to manage in a low price environment. Long-term fundamentals of our business indicate that low copper prices are not sustainable longer term providing increased cash flow as market conditions improve.
We show the consolidated capital expenditures on Slide 11. These are largely unchanged from our prior guidance. We've reduced the 2022 capital forecast by $100 million, which is a timing variance with 2023 and as you probably noted, we've been spending capital during 2022 at a slower pace than our original plans and in the current weak environment, we will review opportunities to defer spending as we've done in the past. We have flexibility with our plans and benefit from the fact that the major investments required for the Grasberg transition are largely behind us and will begin to decline as we go into 2023.
On slide 12, we show our future growth options embedded in our asset base. We have multiple options for brownfield, low-risk growth across our portfolio. Recall, we have 191 billion pounds of copper mineral resources in our portfolio in addition to our proved and probable reserves of 107 billion pounds of copper.
The leaching opportunity is a major value driver opportunity for us and is not included in our reserves and resources. Success in this area will enable us to create the equivalent of a new mine with extremely low capital intensity, low incremental operating costs and importantly a low carbon footprint. We're continuing to apply covers to our leach stockpiles as the retention of heat is proven to enhance recoveries. We're using data analytics and evaluating various additives that can further enhance recoveries. We're initially targeting the addition of 100 million to 200 million pounds of new copper per annum, within a relatively short time frame and believe we can build on this target with initial success.
We currently estimate 38 billion pounds of copper in our stockpiles which is already been mined but not in our reserves or production plans. A significant portion of this opportunities at our flagship Morenci mine, the largest mine in North America. A cross-functional team of Technical experts, metallurgists, mine planners, data scientists, geologists and business analysts are working together to make -- take full advantage of this exciting opportunity.
We review the ongoing oxide expansion at Lone Star, which is progressing on schedule. Longer term, we have the massive Lone Star sulfide opportunity of 50 billion pound copper resource in our established mining area in Eastern Arizona. This project is right in our wheelhouse and is a valuable development option for the future. In the medium term, we're planning to double the size of Bagdad. We have a very large reserve position at the site. We expect to complete the feasibility study for this project in the first half of next year and would be positioned to start construction activities as market conditions warrant.
The El Abra project has a resource approaching 30 billion pounds of copper and we've done a lot of work in identifying an operation that could produce over 700 million pounds of copper per year. In parallel with our evaluation of a major expansion, we're also considering investments in water, which would extend the life of the existing operation while maintaining the longer-term growth option. We continue to closely monitor developments in Chile and are deferring decisions for the time being.
In Indonesia, Kucing Liar project is a natural extension of our operations there and will allow us to continue large scale, low cost mining there for decades to come. The learnings and shared infrastructure from our successful development of Grasberg underground and the Deep MLZ really enhance the value of this project at Kucing Liar.
We benefit from having a large pipeline of options and have flexibility on the timing of development of our projects, particularly the extensive options we have for development of new supply in the U.S. where we own most of our land and fee. We believe the world is going to need our projects in the future. We've a long track record of success and qualifying and developing projects in an efficient and responsible manner enhanced by our industry-leading technical capabilities, established licenses to operate and our strong franchises in the areas of focus.
I want to turn to our balance sheet on slide 13, which our financial policy centered around a strong balance sheet, the actions we've taken in the past have placed us in exceptionally strong position particularly in the context of current market weakness. We don't have a need to raise new capitals for the foreseeable future. During the quarter, we took a number of steps, which further direst our balance sheet. We raised long-term financing for the smelter. We repaid our term loans at PT-FI and Cerro Verde and expanded our bank credit facilities for these subsidiaries and we opportunistically purchased over 750 in senior notes at attractive prices.
As we talked about our net debt including $11 billion in total debt and $9.5 billion of cash, net debt including the smelter net debt was $1 billion and below our targeted net debt of $3 billion to $4 billion providing cushion in a weak market environment. We have an attractive debt maturity profile as you'll see with easily manageable maturities. We can continue to be opportunistic on value opportunities to repurchase debt in the open market.
Slide 14 and closing, we show a scorecard of our shareholder returns, which have increased with our strong financial performance in recent quarters. We were active in the market in the second quarter and into July and have allocated approximately 50% of excess cash flows to shareholder returns since the third quarter of last year and that consisted of $1.8 billion in share repurchases and common stocks of over -- this common stock dividends totaling over $650 million during this period. Our Board authorized a $2 billion increase in our share purchase program to restore $3 billion in availability under the program. We will continue to prioritize our balance sheet as the cornerstone of our financial policy and that will allow us to operate well in varying market conditions and drive long-term returns for shareholders.
The discretionary purchases of our shares will be dependent on market conditions and cash flow generation in the future and our Board will continue to review our financial policy on a regular basis.
In summary, we are all focused on long-term value and executing our plans responsibly, safely and efficiency -- efficiently. Despite the recent market conditions, we're optimistic about the value of our assets, the strength of our global team, the fundamentals of the copper business and the future prospects for the markets we serve. We appreciate your attention and we look forward to your questions. Operator will now open the call for Q&A.
