Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):
- Net income attributable to
common stock for first-quarter 2011 was $1.5 billion, $1.57 per
share, compared to net income of $897 million, $1.00 per share, for
first-quarter 2010.
- Consolidated sales from mines
for first-quarter 2011 totaled 926 million pounds of copper, 480
thousand ounces of gold and 20 million pounds of molybdenum,
compared to 960 million pounds of copper, 478 thousand ounces of
gold and 17 million pounds of molybdenum for first-quarter
2010.
- Consolidated sales from mines
for the year 2011 are expected to approximate 3.9 billion pounds of
copper, 1.6 million ounces of gold and 73 million pounds of
molybdenum, including 965 million pounds of copper, 365 thousand
ounces of gold and 17 million pounds of molybdenum for
second-quarter 2011.
- Consolidated unit net cash costs
(net of by-product credits) averaged $0.79 per pound of copper for
first-quarter 2011, compared to $0.82 per pound for first-quarter
2010. Assuming average prices of $1,400 per ounce for gold and $15
per pound for molybdenum for the remainder of 2011, consolidated
unit net cash costs (net of by-product credits) are estimated to
average approximately $1.04 per pound of copper for the year
2011.
- Operating cash flows totaled
$2.4 billion for first-quarter 2011. Using current 2011 sales
volume and cost estimates and assuming average prices of $4.25 per
pound for copper, $1,400 per ounce for gold and $15 per pound for
molybdenum for the remainder of 2011, operating cash flows for the
year 2011 are estimated to approximate $8.3 billion.
- Capital expenditures totaled
$505 million for first-quarter 2011. FCX currently expects capital
expenditures to approximate $2.5 billion for the year 2011,
including $1.2 billion for sustaining capital and $1.3 billion for
major projects.
- At March 31, 2011, total debt
approximated $4.8 billion. After taking into account the April 1,
2011, redemption of $1.1 billion in 8.25% Senior Notes due 2015,
total debt approximated $3.7 billion and consolidated cash
approximated $4.1 billion.
- A two-for-one stock split of FCX
common stock was effected on February 1, 2011. All references to
earnings or losses per share have been retroactively adjusted to
reflect the two-for-one stock split.
- FCX’s Board of Directors declared a
$0.50 per share supplemental common stock dividend to be
paid on June 1, 2011, to shareholders of record as of May 15,
2011.
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported
first-quarter 2011 net income attributable to common stock of $1.5
billion, $1.57 per share, compared to net income of $897 million,
$1.00 per share, for the first quarter of 2010.
James R. Moffett, Chairman of the Board, and Richard C.
Adkerson, President and Chief Executive Officer, said, “Our strong
first-quarter results reflect solid execution by our global
operating teams and continuation of favorable pricing for our
principal commodities – copper, gold and molybdenum. We are
focused on continuing the successful execution of our operating
plans and on developing our highly attractive projects for future
growth. We are well placed for future success with an
attractive resource position, strong technical and project
management capabilities and the financial resources required for
investment. We are also pleased to have significant cash
flows to enable investment in growth projects while providing
increased cash returns to shareholders.”
SUMMARY FINANCIAL AND OPERATING DATA
Three Months Ended March 31, 2011
2010 Financial Data (in millions,
except per share amounts) Revenuesa $ 5,709 $ 4,363 Operating
income $ 2,936 $ 2,048 Net income attributable to common stock $
1,499 b $ 897 b Diluted net income per share attributable to common
stock $ 1.57 b $ 1.00 b,c Diluted weighted-average common shares
outstanding 955 947 c Operating cash flows $ 2,359 d $ 1,818 d
Capital expenditures $ 505 $ 231
Mining Operating
Data Copper (millions of recoverable pounds) Production
950 929 Sales, excluding purchased metal 926 960 Average realized
price per pound $ 4.31 $ 3.42 Site production and delivery unit
costs per pounde $ 1.61 $ 1.35 Unit net cash costs per pounde $
0.79 $ 0.82
Gold (thousands of recoverable ounces)
Production 466 449 Sales, excluding purchased metal 480 478 Average
realized price per ounce $ 1,399 $ 1,110
Molybdenum
(millions of recoverable pounds) Production 20 17 Sales, excluding
purchased metal 20 17 Average realized price per pound $ 18.10 $
15.09
a.
Includes impacts of adjustments to provisionally priced
concentrate and cathode sales recognized in prior years (see
discussion on page 10).
b.
Includes net losses on early extinguishment of debt totaling $6
million, $0.01 per share, in first-quarter 2011 and $23 million,
$0.02 per share, in first-quarter 2010.
c.
Adjusted to reflect the February 1, 2011, two-for-one stock split.
d.
Includes working capital sources of $114 million in first-quarter
2011 and $280 million in first-quarter 2010.
e.
Reflects per pound weighted-average site
production and delivery unit costs and unit net cash costs, net of
by-product credits, for all copper mines. For reconciliations of
unit costs per pound by operating division to production and
delivery costs reported in FCX’s consolidated financial statements,
refer to the supplemental schedule, “Product Revenues and
Production Costs,” beginning on page VI, which is available on
FCX’s website, “www.fcx.com.”
OPERATIONS
Consolidated. First-quarter 2011 consolidated copper
sales of 926 million pounds were higher than the January 2011
estimate of 840 million pounds but lower than first-quarter 2010
copper sales of 960 million pounds. The variance to the January
2011 estimate primarily reflects favorable production performance
in Indonesia, because of access to high-grade ore previously
expected to be mined in future periods, and improved production in
North and South America. The variance to the 2010 period primarily
reflects lower sales from Indonesia and North America because of
timing of shipments.
First-quarter 2011 consolidated gold sales of 480 thousand
ounces were higher than the January 2011 estimate of 325 thousand
ounces, primarily because of mining higher grade ore in Indonesia
previously expected in future periods, and approximated
first-quarter 2010 gold sales of 478 thousand ounces.
First-quarter 2011 consolidated molybdenum sales of 20 million
pounds were higher than the January 2011 estimate and first-quarter
2010 sales of 17 million pounds, primarily reflecting improved
demand in the chemical and metallurgical sectors.
Consolidated sales for 2011 are expected to approximate 3.9
billion pounds of copper, 1.6 million ounces of gold and 73 million
pounds of molybdenum. Annual sales estimates are higher than the
January 2011 estimates of 3.85 billion pounds of copper and 1.4
million ounces of gold, primarily because of mine plan improvements
in Indonesia.
As anticipated, consolidated unit site production and delivery
costs of $1.61 per pound of copper in the first quarter of 2011
were higher than first-quarter 2010 unit costs of $1.35 per pound
of copper as a result of increased input costs, including
materials, labor and energy. Average unit net cash costs of $0.79
per pound of copper in the first quarter of 2011 were lower than
$0.82 per pound of copper in the prior year quarter, primarily
because of higher gold and molybdenum by-product credits in the
2011 period.
Assuming average prices of $1,400 per ounce for gold and $15 per
pound for molybdenum for the remainder of 2011 and using current
2011 sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) are expected to average
approximately $1.04 per pound of copper for the year 2011. Unit net
cash costs are lower than previous estimates because of higher
volumes in Indonesia. Quarterly unit net cash costs will vary with
fluctuations in sales volumes. Unit net cash costs for 2011 would
change by approximately $0.02 per pound for each $50 per ounce
change in the average price of gold for the remainder of 2011 and
by approximately $0.02 per pound for each $2 per pound change in
the average price of molybdenum for the remainder of 2011.
North America Copper Mines. FCX operates seven open-pit
copper mines in North America (Morenci, Bagdad, Safford, Sierrita
and Miami in Arizona and Tyrone and Chino in New Mexico).
Molybdenum is also produced by Sierrita, Bagdad and Morenci. All of
the North America mining operations are wholly owned, except for
Morenci. FCX records its 85 percent joint venture interest in
Morenci using the proportionate consolidation method.
Operating and Development Activities. At Morenci, FCX reached
its targeted mining rate of 635,000 metric tons of ore per day in
March 2011 after commencing a staged ramp up from the 2009 mining
rate of 450,000 metric tons per day. In addition, FCX restarted the
Morenci mill in March 2010 to process available sulfide material
currently being mined. Mill throughput averaged 48,300 metric tons
of ore per day during the first quarter of 2011 and is expected to
increase to approximately 50,000 metric tons per day by the second
half of 2011. The increased mining and milling activities are
expected to enable copper production to increase by approximately
125 million pounds per year beginning in 2011. During the first
quarter of 2011, FCX commenced a feasibility study to add
additional mining and milling capacity at Morenci to process
additional sulfide ores identified through positive exploratory
drilling in recent years. The project, which would require
significant investment, would increase milling rates to
approximately 115,000 metric tons of ore per day and target 150 to
200 million pounds of incremental annual copper production within a
two to three year timeframe. The study is expected to be completed
in the second half of 2011.
FCX has initiated limited mining activities at the Miami mine in
Arizona to improve efficiencies of ongoing reclamation projects
associated with historical mining operations at the site. During an
approximate five-year mine life, FCX expects to ramp up production
at Miami to approximately 100 million pounds of copper per year by
2012.
FCX has initiated the restart of mining and milling activities
at the Chino mine in New Mexico, which were suspended in late 2008.
The ramp-up of mining and milling activities will significantly
increase production at Chino, which is currently producing small
amounts of copper from existing leach stockpiles. The start-up is
on schedule, with planned mining and milling rates expected to be
achieved by the end of 2013. Incremental annual production is
expected to be 100 million pounds in 2012 and 2013 and 200 million
pounds in 2014. Costs for the project associated with equipment and
mill refurbishment are expected to approximate $150 million.
FCX has completed construction of the $150 million sulphur
burner at the Safford mine, which will provide a more cost
effective source of sulphuric acid used in solution
extraction/electrowinning (SX/EW) operations and lower
transportation costs.
Operating Data. Following is summary operating data for the
North America copper mines for the first quarters of 2011 and
2010.
Three Months Ended March 31,
2011 2010 Copper
(millions of recoverable pounds) Production 282 264 Sales,
excluding purchased metal 276 291 Average realized price per pound
$ 4.40 $ 3.32
Molybdenum (millions of recoverable
pounds) Productiona 7 6
Unit net cash costs per pound of
copper: Site production and delivery, excluding adjustments $
1.75 $ 1.31 By-product credits, primarily molybdenum (0.49 ) (0.26
) Treatment charges 0.11 0.08 Unit net
cash costsb $ 1.37 $ 1.13
a.
Sales of molybdenum produced at the North America copper
mines are reflected in the molybdenum division discussion on page
9.
b.
For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX’s consolidated financial statements, refer to
the supplemental schedule, “Product Revenues and Production Costs,”
beginning on page VI, which is available on FCX’s website,
“www.fcx.com.”
First-quarter 2011 consolidated copper sales in North America of
276 million pounds were lower than first-quarter 2010 sales because
of timing of shipments. As anticipated, production was higher in
the first quarter of 2011, compared to the 2010 period, primarily
reflecting increased mining and milling activities at Morenci.
For the year 2011, FCX expects sales from North America copper
mines to approximate 1.2 billion pounds of copper, compared to 1.1
billion pounds of copper for 2010. The restart of Miami and Chino
and potential expansion of Morenci are expected to further increase
production in future periods.
As anticipated, North America unit site production and delivery
costs were higher in the first quarter of 2011, compared to the
first quarter of 2010, primarily because of increased mining and
milling activities and higher input costs. First-quarter 2011 unit
net cash costs benefited from higher molybdenum by-product
credits.
Based on current operating plans, assuming an average molybdenum
price of $15 per pound for the remainder of 2011 and using current
2011 sales volume and cost estimates, FCX estimates that average
unit net cash costs, including molybdenum credits, for its North
America copper mines would approximate $1.47 per pound of copper
for the year 2011. Unit net cash costs for 2011 would change by
approximately $0.04 per pound for each $2 per pound change in the
average price of molybdenum for the remainder of 2011.
South America Mining. FCX operates four copper mines in
South America – Cerro Verde in Peru and Candelaria, Ojos del Salado
and El Abra in Chile. FCX owns a 53.56 percent interest in Cerro
Verde, an open-pit mine currently producing both electrowon copper
cathodes and copper concentrates. FCX owns 80 percent of the
Candelaria and Ojos del Salado mining complexes, which include the
Candelaria open-pit and underground mines and the Ojos del Salado
underground mines. These mines use common processing facilities to
produce copper concentrates. FCX owns a 51 percent interest in El
Abra, an open-pit mine producing electrowon copper cathodes. All
operations in South America are consolidated in FCX’s financial
statements.
Operating and Development Activities. During the first quarter
of 2011, El Abra commenced production from its newly commissioned
stacking and leaching facilities to transition from oxide to
sulfide ores. Production from the sulfide ore, which is projected
to reach design levels in the second half of 2011, would
approximate 300 million pounds of copper per year, substantially
replacing the currently depleting oxide copper production. The
aggregate capital investment for this project is expected to total
$725 million through 2015, including $565 million for the initial
phase of the project expected to be completed in 2011. In addition,
FCX is engaged in pre-feasibility studies for a potential
large-scale milling operation to process additional sulfide
material and to achieve higher recoveries.
FCX is progressing its evaluation of a large-scale concentrator
expansion at Cerro Verde. Significant reserve additions in recent
years have provided opportunities to expand significantly the
existing facility’s capacity. A range of expansion options have
been considered, and FCX is targeting a project to increase mill
throughput from 120,000 metric tons of ore per day to 360,000
metric tons per day, making Cerro Verde one of the world’s largest
concentrating operations. Following completion of the feasibility
study in the second quarter of 2011, FCX expects to file an
environmental impact assessment in the second half of 2011.
Operating Data. Following is summary operating data for the
South America mining operations for the first quarters of 2011 and
2010.
Three Months Ended March 31,
2011 2010 Copper
(millions of recoverable pounds) Production 317 322 Sales 312 307
Average realized price per pound $ 4.31 $ 3.46
Gold
(thousands of recoverable ounces) Production 24 19 Sales 24 19
Average realized price per ounce $ 1,394 $ 1,113
Molybdenum (millions of recoverable pounds) Productiona 3 2
Unit net cash costs per pound of copper: Site
production and delivery, excluding adjustments $ 1.30 $ 1.20
Molybdenum and gold credits (0.36 ) (0.17 ) Treatment charges
0.19 0.15 Unit net cash costsb $ 1.13
$ 1.18
a.
Sales of molybdenum produced at Cerro Verde are reflected in
the molybdenum division discussion on page 9.
b.
For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX’s consolidated financial statements, refer to
the supplemental schedule, “Product Revenues and Production Costs,”
beginning on page VI, which is available on FCX’s website,
“www.fcx.com.”
Copper sales from South America mining operations of 312 million
pounds in the first quarter of 2011 were slightly higher than
first-quarter 2010 sales of 307 million pounds, primarily
reflecting higher ore grades at Candelaria and increased mill
throughput at Cerro Verde, partly offset by anticipated lower
mining rates at El Abra as it transitions from oxide to sulfide
ores.
For the year 2011, FCX expects South America sales of 1.3
billion pounds of copper and 100 thousand ounces of gold, similar
to 2010 sales.
As anticipated, South America unit site production and delivery
costs for the first quarter of 2011 were higher than the year-ago
period, principally reflecting higher input costs, including
materials, energy and currency exchange rates, partly offset by
higher volumes. Average unit net cash costs of $1.13 per pound in
the first quarter of 2011 were lower than $1.18 per pound for the
first quarter of 2010, primarily reflecting higher molybdenum and
gold credits.
Using current 2011 sales volume and cost estimates and assuming
average prices of $1,400 per ounce of gold and $15 per pound of
molybdenum for the remainder of 2011, FCX estimates that average
unit net cash costs (net of molybdenum and gold credits) for its
South America mining operations would approximate $1.19 per pound
of copper for the year 2011.
Indonesia Mining. Through its 90.64 percent owned and
wholly consolidated subsidiary PT Freeport Indonesia (PT-FI), FCX
operates the world’s largest copper and gold mine in terms of
reserves at its Grasberg operations in Papua, Indonesia.
Operating and Development Activities. FCX has several projects
in process in the Grasberg minerals district, primarily related to
the development of the large-scale, high-grade underground ore
bodies located beneath and nearby the Grasberg open pit. In
aggregate, these underground ore bodies are expected to ramp up to
approximately 240,000 metric tons of ore per day following the
currently anticipated transition from the Grasberg open pit in
2016.
The Deep Ore Zone (DOZ) mine, one of the world’s largest
underground mines, has been expanded to 80,000 metric tons of ore
per day; and a feasibility study for the Deep Mill Level Zone
(DMLZ), which is expected to start up as the DOZ depletes, has been
completed. The high-grade Big Gossan mine, which began producing in
the fourth quarter of 2010, is expected to reach full rates of
7,000 metric tons of ore per day by the end of 2012. Substantial
progress has been made in developing infrastructure and underground
workings that will enable access to the underground ore bodies.
Development of the terminal infrastructure and mine access for the
Grasberg Block Cave and DMLZ ore bodies is in progress. Over the
next five years, estimated aggregate capital spending is expected
to average approximately $600 million ($470 million net to PT-FI)
per year on underground development activities.
Operating Data. Following is summary operating data for the
Indonesia mining operations for the first quarters of 2011 and
2010.
Three Months Ended March 31,
2011 2010 Copper
(millions of recoverable pounds) Production 284 279 Sales 278 296
Average realized price per pound $ 4.26 $ 3.51
Gold
(thousands of recoverable ounces) Production 441 429 Sales 454 458
Average realized price per ounce $ 1,400 $ 1,110
Three
Months Ended March 31, 2011 2010 Unit
net cash (credits) costs per pound of copper: Site production
and delivery, excluding adjustments $ 1.84 $ 1.54 Gold and silver
credits (2.34 ) (1.79 ) Treatment charges 0.18 0.23 Royalties
0.16 0.12 Unit net cash (credits)
costsa $ (0.16 ) $ 0.10
a.
For a reconciliation of unit net cash
(credits) costs per pound to production and delivery costs
applicable to sales reported in FCX’s consolidated financial
statements, refer to the supplemental schedule, “Product Revenues
and Production Costs,” beginning on page VI, which is available on
FCX’s website, “www.fcx.com.”
Indonesia reported slightly lower copper sales in the first
quarter of 2011, compared to the first quarter of 2010, primarily
because of timing of shipments. Gold sales in the first quarter of
2011 approximated first-quarter 2010 sales. First-quarter 2011
copper and gold sales were significantly above the January 2011
estimates because of improved pit slope conditions, which enabled
access to ore previously expected to be mined in future periods. At
the Grasberg mine, the sequencing of mining areas with varying ore
grades causes fluctuations in the timing of ore production
resulting in fluctuations in quarterly and annual sales of copper
and gold.
Because of recent revisions to its Grasberg mine plans, FCX
expects 2011 sales to approximate 1.1 billion pounds of copper and
1.5 million ounces of gold, which reflect increases of
approximately 40 million pounds and approximately 130 thousand
ounces compared to the January 2011 estimates.
Indonesia unit site production and delivery costs were higher in
the first quarter of 2011, compared to the first quarter of 2010,
primarily because of higher maintenance and other input costs. Unit
net cash costs averaged a net credit of $0.16 per pound in the
first quarter of 2011, compared to a net cost of $0.10 per pound
for the first quarter of 2010, primarily reflecting higher gold
credits.
Assuming an average gold price of $1,400 per ounce for the
remainder of 2011 and using current 2011 sales volume and cost
estimates, FCX expects PT-FI’s average unit net cash costs,
including gold and silver credits, to approximate $0.38 per pound
of copper for the year 2011. Unit net cash costs for 2011 would
change by approximately $0.06 per pound for each $50 per ounce
change in the average price of gold for the remainder of 2011.
Quarterly unit net cash costs will vary significantly with
variations in quarterly metal sales volumes.
Africa Mining. FCX holds an effective 57.75 percent
interest in the Tenke Fungurume copper and cobalt mining
concessions in the Katanga province of the Democratic Republic of
Congo (DRC) and is the operator of the project, which is
consolidated in FCX’s financial statements. The Tenke mine includes
surface mining, leaching and SX/EW operations. Copper production
from the Tenke mine is sold as copper cathode. In addition to
copper, the Tenke mine produces cobalt hydroxide.
In October 2010, the government of the DRC announced the
conclusion of the review of Tenke Fungurume Mining’s (TFM)
contracts, and confirmed that TFM’s existing mining contracts are
in good standing and acknowledged the rights and benefits granted
under those contracts. In connection with the review, TFM made
several commitments that have been reflected in amendments to its
mining contracts, which were signed by the parties in December
2010. In March 2011, the amendments were approved by a ministerial
council; and a Presidential Decree, signed by the President and
Prime Minister of the DRC, was issued in April 2011. After giving
effect to the modifications that will be made to TFM’s bylaws to
reflect the agreement of the parties, FCX’s effective ownership
percentage in the project will be 56.0 percent, compared to its
current ownership interest of 57.75 percent.
Operating and Development Activities. The milling facilities,
which were designed to produce at a capacity rate of 8,000 metric
tons of ore per day, continue to perform above capacity. During the
first quarter of 2011, mill throughput averaged 10,800 metric tons
of ore per day. Tenke Fungurume has procured additional mining
equipment, which is enabling additional high-grade material to be
mined and processed in 2011. Based on these enhancements to the
mine plan and an expected mill throughput rate of 10,000 metric
tons of ore per day, FCX estimates average annual copper production
will approximate 290 million pounds.
FCX continues to engage in drilling activities, exploration
analyses and metallurgical testing to evaluate the potential of the
highly prospective minerals district at Tenke Fungurume. These
analyses are being incorporated in future plans to evaluate
expansion opportunities. FCX is planning a second phase of the
project, which would include optimizing the current plant and
increasing capacity. As part of the second phase, FCX is completing
studies to expand the mill rate to 14,000 metric tons of ore per
day and construct related processing facilities that would target
the addition of approximately 150 million pounds of copper per year
in an approximate two-year timeframe. FCX expects production
volumes from the project to expand significantly over time.
Operating Data. Following is summary operating data for the
Africa mining operations for the first quarters of 2011 and
2010.
Three Months Ended March 31,
2011 2010 Copper
(millions of recoverable pounds) Production 67 64 Sales 60 66
Average realized price per pounda $ 4.19 $ 3.26
Cobalt (millions of contained pounds) Production 6 5 Sales 6
3 Average realized price per pound $ 10.99 $ 10.94
Unit
net cash costs per pound of copper: Site production and
delivery, excluding adjustments $ 1.51 $ 1.37 Cobalt creditsb (0.75
) (0.40 ) Royalties 0.10 0.07 Unit net
cash costsc $ 0.86 $ 1.04
a.
Includes adjustments for point-of-sale transportation costs
as negotiated in customer contracts.
b.
Net of cobalt downstream processing and freight costs.
c.
For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX’s consolidated financial statements, refer to
the supplemental schedule, “Product Revenues and Production Costs,”
beginning on page VI, which is available on FCX’s website,
“www.fcx.com.”
Tenke Fungurume reported lower copper sales in the first quarter
of 2011, compared to the first quarter of 2010, primarily because
of timing of shipments.
FCX expects Tenke Fungurume sales of approximately 285 million
pounds of copper and over 20 million pounds of cobalt for the year
2011, compared to 262 million pounds of copper and 20 million
pounds of cobalt for 2010.
Tenke Fungurume’s unit site production and delivery costs for
the first quarter of 2011 were higher than the first quarter of
2010, principally reflecting increased mining and milling
activities and higher input costs. Average unit net cash costs of
$0.86 per pound in the first quarter of 2011 were lower than $1.04
per pound for the first quarter of 2010, primarily reflecting
higher cobalt credits.
Assuming an average cobalt price of $14 per pound for the
remainder of 2011 and using current 2011 sales volume and cost
estimates, average unit net cash costs are expected to approximate
$0.93 per pound of copper for the year 2011. Each $2 per pound
change in the average price of cobalt for the remainder of 2011
would impact unit net cash costs by approximately $0.06 per pound
of copper.
Molybdenum. FCX is the world’s largest producer of
molybdenum. FCX conducts molybdenum mining operations at its wholly
owned Henderson underground mine in Colorado and also sells
molybdenum produced from its North and South America copper
mines.
Development Activities. Construction activities at the Climax
molybdenum mine are approximately 60 percent complete. Recent
activities include continuation of mill equipment assembly,
commencement of flotation cell placement and refurbishment of the
primary crusher. FCX plans to advance construction and conduct mine
preparation activities throughout 2011, with construction expected
to be complete by early 2012. The timing for start up of mining and
milling activities will be dependent on market conditions. FCX
believes that this project is one of the most attractive primary
molybdenum development projects in the world, with large-scale
production capacity, attractive cash costs and future growth
options. The Climax mine would have an initial annual design
capacity of 30 million pounds with significant expansion options.
Estimated remaining costs for the project approximate $350
million.
Operating Data. Following is summary operating data for the
Molybdenum operations for the first quarters of 2011 and 2010.
Three Months Ended March 31,
2011 2010 Molybdenum
(millions of recoverable pounds) Productiona 10 9 Sales, excluding
purchased metalb 20 17 Average realized price per pound $ 18.10 $
15.09 Unit net cash costs per pound of molybdenumc $ 6.13 $
5.56
a.
Amounts reflect production at the Henderson molybdenum mine.
b.
Includes sales of molybdenum produced at the North and South
America copper mines.
c.
For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX’s consolidated financial statements, refer to
the supplemental schedule, “Product Revenues and Production Costs,”
beginning on page VI, which is available on FCX’s website,
“www.fcx.com.”
Consolidated molybdenum sales from mines were higher in the
first quarter of 2011, compared to the first quarter of 2010,
primarily reflecting improved demand in the chemical and
metallurgical sectors.
For the year 2011, FCX expects molybdenum sales from its mines
to approximate 73 million pounds (including production of
approximately 45 million pounds from the North and South America
copper mines), compared to 67 million pounds in 2010 (including
production of 32 million pounds from the North and South America
copper mines).
Unit net cash costs at the Henderson primary molybdenum mine
were higher in the first quarter of 2011, compared to the first
quarter of 2010, primarily because of increased input costs,
including labor and materials. Using current 2011 sales volume and
cost estimates, FCX expects average unit net cash costs for its
Henderson mine to approximate $7.25 per pound of molybdenum for the
year 2011.
EXPLORATION ACTIVITIES
FCX is conducting exploration activities near its existing mines
with a focus on opportunities to expand reserves that will support
the development of additional future production capacity in the
large minerals districts where it currently operates. Favorable
exploration results indicate opportunities for significant future
potential reserve additions in the Americas and in the Tenke
Fungurume minerals district. The drilling data in North America
continue to indicate the potential for expanded sulfide
production.
Exploration spending in 2011 is expected to approximate $225
million, compared to $113 million in 2010. Exploration activities
will continue to focus primarily on the potential for future
reserve additions in FCX’s existing minerals districts.
PROVISIONAL PRICING AND OTHER
For the first quarter of 2011, 57 percent of FCX’s mined copper
was sold in concentrate, 22 percent as rod from North America
operations and 21 percent as cathode. Under the long-established
structure of sales agreements prevalent in the industry,
substantially all of FCX’s copper concentrate and cathode sales are
provisionally priced at the time of shipment. The provisional
prices are finalized in a contractually specified future period
(generally one to four months from the shipment date), primarily
based on quoted London Metal Exchange (LME) monthly average spot
prices. Because a significant portion of FCX’s concentrate and
cathode sales in any quarterly period usually remain subject to
final pricing, the quarter-end forward price is a major determinant
of recorded revenues and the average recorded copper price for the
period. LME spot copper prices averaged $4.38 per pound during the
first quarter of 2011, compared to FCX’s recorded average price of
$4.31 per pound.
At December 31, 2010, 417 million pounds of copper sales at
FCX’s copper mining operations (net of intercompany sales and
noncontrolling interests) were provisionally priced at an average
of $4.36 per pound. Lower prices during the first quarter of 2011
resulted in unfavorable adjustments to these provisionally priced
copper sales and decreased first-quarter 2011 consolidated revenues
by $10 million ($4 million to net income attributable to common
stock or less than $0.01 per share). Unfavorable adjustments to the
December 31, 2009, provisionally priced copper sales decreased
first-quarter 2010 consolidated revenues by $4 million ($2 million
to net income attributable to common stock or less than $0.01 per
share).
At March 31, 2011, FCX had copper sales of 464 million pounds of
copper at its copper mining operations (net of intercompany sales
and noncontrolling interests) priced at an average of $4.27 per
pound, subject to final pricing over the next several months. Each
$0.05 change from the March 31, 2011, average price for
provisionally priced copper sales would have an approximate $15
million effect on FCX’s 2011 net income attributable to common
stock. The LME spot copper price on April 19, 2011, was $4.21 per
pound.
FCX defers recognizing profits on its PT-FI and South America
sales to Atlantic Copper and on 25 percent of PT-FI’s sales to PT
Smelting, PT-FI’s 25 percent-owned Indonesian smelting unit, until
final sales to third parties occur. FCX’s net deferred profits on
PT-FI and South America concentrate inventories at Atlantic Copper
and PT Smelting to be recognized in future periods’ net income
attributable to common stock totaled $249 million at March 31,
2011. Changes in FCX’s net deferrals attributable to variability in
intercompany volumes resulted in reductions to net income
attributable to common stock totaling $15 million, $0.02 per share,
in the first quarter of 2011 and $48 million, $0.05 per share, for
the first quarter 2010. Quarterly variations in ore grades, the
timing of intercompany shipments and changes in product prices will
result in variability in FCX’s net deferred profits and quarterly
earnings.
CASH FLOWS, CASH and DEBT
Operating cash flows totaled $2.4 billion for the first quarter
of 2011. Cash used in investing activities for the first quarter of
2011 reflected capital expenditures of $505 million.
At March 31, 2011, FCX had consolidated cash of
$4.1 billion, excluding $1.2 billion of restricted cash. Net of
noncontrolling interests’ share, taxes and other costs, cash
available to the parent company totaled $3.2 billion as shown below
(in billions):
March 31, 2011 Cash at domestic
companiesa $ 1.9 Cash at international operations 2.2
Total consolidated cash 4.1 Less: Noncontrolling interests’ share
(0.7 ) Cash, net of noncontrolling interests’ share 3.4
Less: Withholding taxes and other (0.2 )
Net cash
$ 3.2
a. Includes cash at FCX’s parent and North
America mining operations.
At March 31, 2011, FCX had $4.8 billion in debt. After giving
effect to the April 1, 2011, redemption of $1.1 billion in FCX’s
8.25% Senior Notes due 2015, which was funded with restricted cash,
total debt approximated $3.7 billion.
On March 30, 2011, FCX entered into a new senior unsecured
revolving credit facility, which replaced the revolving credit
facilities that were scheduled to mature in March 2012. The new
revolving credit facility is available until March 30, 2016, in an
aggregate principal amount of $1.5 billion, with $500 million
available to PT-FI. FCX had no borrowings and $43 million of
letters of credit issued under its revolving credit facility
resulting in total availability of approximately $1.5 billion at
March 31, 2011.
After taking into account the April 1, 2011,
redemption of the 8.25% Senior Notes, FCX has repaid approximately
$3.7 billion in debt (approximately 50 percent) since January 1,
2009, resulting in estimated annual interest savings of
approximately $260 million based on current interest rates. FCX
expects to record an approximate $49 million charge to net income
attributable to common stock in the second quarter of 2011 in
connection with the April 1, 2011, senior note redemption. FCX’s
debt maturities through 2013 are indicated in the table below (in
millions).
2011 $ 90 2012 2 2013
1 Total 2011 – 2013 $
93
FCX has $3.0 billion in debt, which is redeemable in whole or in
part, at its option, at make-whole redemption prices prior to April
2012, and afterwards at stated redemption prices.
OUTLOOK
Projected consolidated sales volumes for 2011 approximate 3.9
billion pounds of copper, 1.6 million ounces of gold and 73 million
pounds of molybdenum, including 965 million pounds of copper, 365
thousand ounces of gold and 17 million pounds of molybdenum in the
second quarter of 2011.
Using 2011 sales volume and cost estimates and assuming average
prices of $4.25 per pound of copper, $1,400 per ounce of gold and
$15 per pound of molybdenum for the remainder of 2011, FCX’s
consolidated operating cash flows are estimated to approximate $8.3
billion in 2011. The impact of price changes for the remainder of
2011 on FCX’s 2011 operating cash flows would approximate $125
million for each $0.05 per pound change in the average price of
copper, $50 million for each $50 per ounce change in the average
price of gold and $60 million for each $2 per pound change in the
average price of molybdenum.
FCX’s capital expenditures are currently estimated to
approximate $2.5 billion for 2011. Capital expenditures for major
projects in 2011 are expected to approximate $1.3 billion, which
primarily includes underground development activities at Grasberg,
construction activities at the Climax molybdenum mine and
completion of the initial phase of the sulfide ore project at El
Abra. In addition, FCX is considering additional investments at
several of its sites. Capital spending plans will continue to be
reviewed and adjusted in response to changes in market conditions
and other factors.
FINANCIAL POLICY
FCX has a long-standing tradition of seeking to build
shareholder value through investing in projects with attractive
rates of return and returning cash to shareholders through common
stock dividends and share purchases.
In December 2010, FCX’s Board of Directors declared a
two-for-one stock split of its common stock. On February 1, 2011,
shareholders received one additional share of common stock for each
share of common stock held. After taking the stock split into
account, the annual dividend rate is $1.00 per share ($0.25 per
share quarterly).
FCX also announced today that its Board of Directors declared a
supplemental common stock dividend of $0.50 per share to be paid on
June 1, 2011, to shareholders of record as of May 15, 2011. The
supplemental dividend to be paid in June represents an addition to
FCX’s regular quarterly common stock dividend of $0.25 per share.
Based on approximately 947 million shares currently outstanding,
the June 2011 supplemental dividend payment will approximate $474
million.
FCX intends to continue to maintain a strong financial position,
invest aggressively in attractive growth projects and provide cash
returns to shareholders. The Board will continue to review FCX’s
financial policy on an ongoing basis.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX’s
first-quarter 2011 results is scheduled for today at 10:00 a.m.
Eastern Time. The conference call will be broadcast on the Internet
along with slides. Interested parties may listen to the conference
call live and view the slides by accessing “www.fcx.com.” A replay
of the webcast will be available through Friday, May 20, 2011.
FCX is a leading international mining company with headquarters
in Phoenix, Arizona. FCX operates large, long-lived, geographically
diverse assets with significant proven and probable reserves of
copper, gold and molybdenum. FCX has a dynamic portfolio of
operating, expansion and growth projects in the copper industry and
is the world’s largest producer of molybdenum.
The company’s portfolio of assets includes the Grasberg minerals
district, the world’s largest copper and gold mine in terms of
recoverable reserves; significant mining operations in the
Americas, including the large-scale Morenci and Safford minerals
districts in North America and the Cerro Verde and El Abra
operations in South America; and the Tenke Fungurume minerals
district in the DRC. Additional information about FCX is available
on FCX’s website at “www.fcx.com.”
Cautionary Statement and Regulation G Disclosure: This
press release contains forward-looking statements in which FCX
discusses its potential future performance. Forward-looking
statements are all statements other than statements of historical
facts, such as those statements regarding projected ore grades and
milling rates, projected production and sales volumes, projected
unit net cash costs, projected operating cash flows, projected
capital expenditures, exploration efforts and results, mine
production and development plans, liquidity, other financial
commitments and tax rates, the impact of copper, gold, molybdenum
and cobalt price changes, potential prepayments of debt, future
dividend payments and potential share purchases. The words
“anticipates,” “may,” “can,” “plans,” “believes,” “estimates,”
“expects,” “projects,” “intends,” “likely,” “will,” “should,” “to
be,” and any similar expressions are intended to identify those
assertions as forward-looking statements. The declaration of
dividends is at the discretion of FCX’s Board of Directors (the
Board) and will depend on FCX’s financial results, cash
requirements, future prospects, and other factors deemed relevant
by the Board.
In making any forward-looking statements, the person making them
believes that the expectations are based on reasonable assumptions.
FCX cautions readers that those statements are not guarantees of
future performance and its actual results may differ materially
from those anticipated, projected or assumed in the forward-looking
statements. Important factors that can cause FCX’s actual results
to differ materially from those anticipated in the forward-looking
statements include commodity prices, mine sequencing, production
rates, industry risks, regulatory changes, political risks, the
potential effects of violence in Indonesia, the resolution of
administrative disputes in the Democratic Republic of Congo,
weather-related risks, labor relations, environmental risks,
litigation results, currency translation risks and other factors
described in more detail under the heading “Risk Factors” in FCX's
Annual Report on Form 10-K for the year ended December 31, 2010,
filed with the SEC.
Investors are cautioned that many of the assumptions on which
our forward-looking statements are based are likely to change after
our forward-looking statements are made, including for example
commodity prices, which we cannot control, and production volumes
and costs, some aspects of which we may or may not be able to
control. Further, we may make changes to our business plans that
could or will affect our results. We caution investors that we do
not intend to update our forward-looking statements notwithstanding
any changes in our assumptions, changes in our business plans, our
actual experience, or other changes, and we undertake no obligation
to update any forward-looking statements more frequently than
quarterly.
This press release also contains certain financial measures such
as unit net cash costs (credits) per pound of copper and per pound
of molybdenum. As required by SEC Regulation G, reconciliations of
these measures to amounts reported in FCX’s consolidated financial
statements are in the supplemental schedule, “Product Revenues and
Production Costs,” beginning on page VI, which is available on
FCX’s website, “www.fcx.com.”
FREEPORT-McMoRan COPPER & GOLD
INC.
SELECTED OPERATING DATA Three Months
Ended March 31, Production Sales
COPPER
(millions of recoverable pounds)
2011 2010 2011 2010
MINED COPPER
(FCX’s net interest in %)
North
America
Morenci (85%) 122 a 98 a 118 a 107 a Bagdad (100%) 49 52 50 57
Safford (100%) 28 47 30 51 Sierrita (100%) 40 35 39 40 Miami (100%)
14 3 10 4 Tyrone (100%) 19 20 19 22 Chino (100%) 9 8 9 9 Other
(100%) 1 1
1 1 Total North America 282
264 276 291
South
America
Cerro Verde (53.56%) 175 165 169 156 Candelaria/Ojos del Salado
(80%) 94 72 93 74 El Abra (51%) 48
85 50 77 Total South
America 317 322
312 307
Indonesia
Grasberg (90.64%) 284 b
279 b 278 b 296 b
Africa
Tenke Fungurume (57.75%) 67
64 60 66
Consolidated 950
929 926 960
Less noncontrolling interests 179
186 173 181
Net
771
743 753 779
Consolidated sales from mines 926 960 Purchased copper 77 21
Total consolidated sales 1,003
981 Average realized price per pound $4.31
$3.42
GOLD
(thousands of recoverable ounces)
MINED GOLD (FCX’s net interest in %) North America (100%) 1
1 2 1 South America (80%) 24 19 24 19 Indonesia (90.64%)
441 b 429 b 454 b 458 b
Consolidated 466
449 480 478
Less noncontrolling interests 46
44 47 47
Net
420 405
433 431 Consolidated
sales from mines 480 478 Purchased gold - -
Total
consolidated sales 480 478
Average realized price per ounce $1,399 $1,110
MOLYBDENUM (millions of recoverable
pounds)
MINED MOLYBDENUM (FCX’s net interest in %) Henderson (100%)
10 9 N/A N/A North America (100%) 7 6 N/A N/A Cerro Verde (53.56%)
3 2 N/A
N/A
Consolidated
20 17 20
17 Less noncontrolling interests
1 1 1 1
Net 19
16 19 16
Consolidated sales from mines 20 17 Purchased molybdenum - 1
Total consolidated sales 20 18
Average realized price per pound $18.10 $15.09
COBALT
(millions of contained pounds)
MINED COBALT (FCX’s net interest in %)
Consolidated –
Tenke Fungurume (57.75%)
6
5 6 3
Less noncontrolling interests 3
2 3 1
Net
3 3
3 2 Total consolidated
sales 6 3 Average realized
price per pound $10.99 $10.94
a.
Net of Morenci’s joint venture partner’s 15 percent interest.
b.
Net of Grasberg’s joint venture partner’s interest, which varies in
accordance with the terms of the joint venture agreement.
FREEPORT-McMoRan COPPER & GOLD INC. SELECTED
OPERATING DATA (continued)
Three Months EndedMarch 31,
2011 2010
100% North America Copper Mines
Operating Data
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 699,700
601,900 Average copper ore grade (percent) 0.24 0.24 Copper
production (millions of recoverable pounds) 182 202
Mill
Operations
Ore milled (metric tons per day) 213,400 162,900 Average ore grades
(percent): Copper 0.36 0.30 Molybdenum 0.03 0.02 Copper recovery
rate (percent) 81.8 85.7 Production (millions of recoverable
pounds): Copper 122 80 Molybdenum 7 6
100% South America
Mining Operating Data
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 262,200
255,800 Average copper ore grade (percent) 0.43 0.44 Copper
production (millions of recoverable pounds) 90 133
Mill
Operations
Ore milled (metric tons per day) 191,800 180,100 Average ore
grades: Copper (percent) 0.68 0.62 Gold (grams per metric ton) 0.12
0.09 Molybdenum (percent) 0.02 0.02 Copper recovery rate (percent)
91.4 89.2
Production (recoverable):
Copper (millions of pounds)
227 189
Gold (thousands of ounces)
24 19
Molybdenum (millions of pounds)
3 2
100% Indonesia Mining Operating Data Ore milled
(metric tons per day) 222,200 234,000 Average ore grades: Copper
(percent) 0.77 0.78 Gold (grams per metric ton) 0.89 0.87 Recovery
rates (percent): Copper 87.3 88.2 Gold 82.0 79.0 Production
(recoverable): Copper (millions of pounds) 284 308 Gold (thousands
of ounces) 459 466
100% Africa Mining Operating Data
Ore milled (metric tons per day) 10,800 9,700 Average ore grades
(percent): Copper 3.42 3.70 Cobalt 0.38 0.46 Copper recovery rate
(percent) 91.7 91.7 Production (millions of pounds): Copper
(recoverable) 67 64 Cobalt (contained) 6 5
100% Henderson
Primary Molybdenum Mine Operating Data
Henderson Molybdenum
Mine Operations
Ore milled (metric tons per day) 23,400 23,200 Average molybdenum
ore grade (percent) 0.24 0.23 Molybdenum production (millions of
recoverable pounds) 10 9
FREEPORT-McMoRan COPPER &
GOLD INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months EndedMarch 31,
2011 2010
(In Millions, ExceptPer Share Amounts)
Revenues $ 5,709
a
$ 4,363
a
Cost of sales: Production and delivery 2,377 1,918 Depreciation,
depletion and amortization 232 271
Total cost of sales 2,609 2,189 Selling, general and administrative
expenses 114 95 Exploration and research expenses 50
31 Total costs and expenses 2,773
2,315 Operating income 2,936 2,048 Interest expense,
net (98 )b (145 )b Losses on early extinguishment of debt (7 ) (27
) Other income, net 10 12
Income before income taxes and equity in
affiliated companies’ net earnings
2,841 1,888 Provision for income taxes (984 ) (678 ) Equity in
affiliated companies’ net earnings 4 5
Net income 1,861 1,215 Net income attributable to noncontrolling
interests (362 ) (270 ) Preferred dividends -
c
(48 ) Net income attributable to FCX common stockholders $
1,499 $ 897 Net income per share attributable
to FCX common stockholders: Basic $ 1.58 $ 1.04
d
Diluted $ 1.57 $ 1.00
d
Weighted-average common shares outstanding: Basic 946
861
d
Diluted 955 947
d
Dividends declared per share of common stock $ 0.25 $
0.075
d
a.
Includes negative adjustments to
provisionally priced copper sales recognized in prior years
totaling $10 million in first-quarter 2011 and $4 million in
first-quarter 2010.
b.
Consolidated interest expense (before capitalization) totaled $123
million in first-quarter 2011 and $151 million in first-quarter
2010. Lower interest expense in first-quarter 2011 primarily
reflects the impact of debt repayments in 2010.
c.
During the second quarter of 2010, FCX’s outstanding 6¾%
Mandatorily Convertible Preferred Stock converted into FCX common
stock.
d.
Adjusted to reflect the February 1, 2011, two-for-one stock split.
FREEPORT-McMoRan COPPER & GOLD INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2011 2010 (In Millions) ASSETS
Current assets: Cash and cash equivalents $
4,090 $ 3,738 Restricted cash for early extinguishment of debt
1,168
a
- Trade accounts receivable 1,588 2,132 Other accounts receivable
311 293 Inventories: Product 1,450 1,409 Materials and supplies,
net 1,199 1,169 Mill and leach stockpiles 1,060 856 Other current
assets 280 254
Total current assets 11,146 9,851 Property, plant, equipment and
development costs, net 17,076 16,785 Long-term mill and leach
stockpiles 1,402 1,425 Intangible assets, net 325 328 Other assets
1,059 997 Total
assets $ 31,008 $ 29,386
LIABILITIES AND EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 2,318 $ 2,441 Current portion of debt 1,170
a
95 Accrued income taxes 806 648 Dividends payable 239 240 Current
portion of reclamation and environmental obligations 201 207 Rio
Tinto share of joint venture cash flows
17 132 Total current liabilities 4,751 3,763
Long-term debt, less current portion 3,582 4,660 Deferred income
taxes 3,056 2,873 Reclamation and environmental obligations, less
current portion 2,065 2,071 Other liabilities
1,463 1,459 Total liabilities 14,917
14,826 Equity: FCX stockholders’ equity: Common stock 107 107
Capital in excess of par value 18,893 18,751 Accumulated deficit
(1,328 ) (2,590 ) Accumulated other comprehensive loss (318 ) (323
) Common stock held in treasury (3,553
) (3,441 ) Total FCX stockholders’ equity 13,801 12,504
Noncontrolling interests 2,290
2,056 Total equity 16,091
14,560 Total liabilities and equity $
31,008 $ 29,386
a.
Using restricted cash of $1.2 billion, on April 1, 2011, FCX
redeemed $1.1 billion of its outstanding 8.25% Senior Notes due
2015 for 104.125 percent of the principal amount together with
accrued and unpaid interest.
FREEPORT-McMoRan COPPER
& GOLD INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months EndedMarch 31,
2011 2010 (In Millions) Cash flow from operating
activities: Net income $ 1,861 $ 1,215
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 232 271 Stock-based
compensation 43 47 Charges for reclamation and environmental
obligations, including accretion 38 39 Payments of reclamation and
environmental obligations (52 ) (68 ) Losses on early
extinguishment of debt 7 27 Deferred income taxes 127 7 Other, net
(11 ) - (Increases) decreases in working capital: Accounts
receivable 511 33 Inventories (253 ) (113 ) Other current assets
(18 ) (2 ) Accounts payable and accrued liabilities (264 ) (17 )
Accrued income and other taxes 138 379
Net cash provided by operating activities 2,359
1,818 Cash flow from investing activities:
Capital expenditures: North America copper mines (119 ) (19 ) South
America (140 ) (48 ) Indonesia (125 ) (98 ) Africa (11 ) (39 )
Molybdenum (71 ) (7 ) Other (39 ) (20 ) Other, net -
2 Net cash used in investing activities (505 )
(229 ) Cash flow from financing activities: Proceeds
from debt 9 21 Repayments of debt (13 ) (326 ) Restricted cash for
early extinguishment of debt (1,124 ) - Cash dividends and
distributions paid: Common stock (238 ) (66 ) Preferred stock - (49
) Noncontrolling interests (133 ) (75 ) Contributions from
noncontrolling interests 5 8 Net payments for stock-based awards
(20 ) (10 ) Excess tax benefit from stock-based awards 21 4 Other,
net (9 ) - Net cash used in financing
activities (1,502 ) (493 ) Net increase in
cash and cash equivalents 352 1,096 Cash and cash equivalents at
beginning of year 3,738 2,656 Cash and
cash equivalents at end of period $ 4,090 $ 3,752
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