Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):
- Net income attributable to
common stock for fourth-quarter 2012 was $743 million, $0.78 per
share, compared with net income of $640 million, $0.67 per share,
for fourth-quarter 2011. Net income attributable to common stock
for the year 2012 was $3.0 billion, $3.19 per share, compared with
$4.6 billion, $4.78 per share, for the year 2011.
- Consolidated sales from mines
for fourth-quarter 2012 totaled 972 million pounds of copper, 254
thousand ounces of gold and 21 million pounds of molybdenum,
compared with 823 million pounds of copper, 133 thousand ounces of
gold and 19 million pounds of molybdenum for fourth-quarter 2011.
Consolidated sales for the year 2012 totaled 3.65 billion pounds of
copper, 1.0 million ounces of gold and 83 million pounds of
molybdenum, compared with 3.70 billion pounds of copper, 1.4
million ounces of gold and 79 million pounds of molybdenum for the
year 2011.
- Consolidated sales from mines
for the year 2013 are expected to approximate 4.3 billion pounds of
copper, 1.4 million ounces of gold and 90 million pounds of
molybdenum, including 940 million pounds of copper, 230 thousand
ounces of gold and 23 million pounds of molybdenum for
first-quarter 2013.
- Consolidated unit net cash costs
(net of by-product credits) averaged $1.54 per pound of copper for
fourth-quarter 2012, compared with $1.57 per pound for
fourth-quarter 2011. Based on current sales volume and cost
estimates and assuming average prices of $1,700 per ounce for gold
and $11 per pound for molybdenum, consolidated unit net cash costs
(net of by-product credits) are estimated to average $1.35 per
pound of copper for the year 2013.
- Operating cash flows totaled
$1.3 billion for fourth-quarter 2012 (including $122 million of net
working capital sources and other tax payments) and $3.8 billion
(net of $1.4 billion in working capital uses and other tax
payments) for the year 2012, compared with $746 million for
fourth-quarter 2011 (net of $335 million in working capital uses
and other tax payments) and $6.6 billion (net of $461 million in
working capital uses and other tax payments) for the year 2011.
Based on current sales volume and cost estimates and assuming
average prices of $3.65 per pound for copper, $1,700 per ounce for
gold and $11 per pound for molybdenum, operating cash flows are
estimated to approximate $7 billion for the year 2013, excluding
results of pending acquisitions.
- Capital expenditures totaled
$976 million for fourth-quarter 2012 and $3.5 billion for the year
2012, compared with $785 million for fourth-quarter 2011 and $2.5
billion for the year 2011. Excluding amounts for pending
acquisitions, capital expenditures are expected to approximate $4.6
billion for the year 2013, including $2.8 billion for major
projects and $1.8 billion for sustaining capital.
- At December 31, 2012,
consolidated cash totaled $3.7 billion and total debt
totaled $3.5 billion.
- On December 5, 2012, FCX announced
definitive agreements to acquire Plains Exploration &
Production Company (PXP) and McMoRan Exploration Co.
(MMR) in transactions totaling $20 billion, which would create a
premier U.S.-based natural resource company. The transactions are
expected to close in second-quarter 2013.
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported
fourth-quarter 2012 net income attributable to common stock of $743
million, $0.78 per share, compared with $640 million, $0.67 per
share, for fourth-quarter 2011. Fourth-quarter 2012 net income
included a net credit of $40 million ($0.04 per share) associated
with adjustments to environmental obligations and related
litigation reserves and a gain for insurance recoveries, partly
offset by charges for labor agreement costs at Candelaria and for
costs associated with the PXP and MMR transactions. Fourth-quarter
2011 net income included a net charge of $73 million ($0.08 per
share) associated with adjustments to environmental obligations and
related litigation reserves and bonuses for new labor agreements
and other employee costs at PT Freeport Indonesia, Cerro Verde and
El Abra. For the year 2012, FCX reported net income attributable to
common stock of $3.0 billion, $3.19 per share, compared with $4.6
billion, $4.78 per share, for the year 2011.
James R. Moffett, Chairman of the Board, and Richard C.
Adkerson, President and Chief Executive Officer said, "Our global
team continues to achieve strong and safe production while
aggressively managing costs and executing on financially attractive
projects to grow our copper production from 3.66 billion pounds in
2012 to over 5 billion pounds per annum in 2015. We are
positive about the long-term outlook for our business, the markets
we serve and the opportunities that the pending oil and gas
acquisitions will provide. We are focused on executing our strategy
of developing long-term resources in a cost effective and
financially attractive manner to generate long-term value for
shareholders."
SUMMARY FINANCIAL AND OPERATING DATA
Three Months Ended Years
Ended December 31, December 31,
2012 2011 2012
2011 Financial Data (in millions, except per share
amounts) Revenuesa $ 4,513 $ 4,162 $ 18,010 $ 20,880 Operating
income $ 1,358
b,c,d,e
$ 1,297 b,d $ 5,814 b,c,d,e $ 9,140 b,d Net income attributable to
common stockf $ 743 b,c,d,e $ 640 b,d $ 3,041 b,c,d,e,g,h $ 4,560
b,d,g,h Diluted net income per share of common stock $ 0.78 b,c,d,e
$ 0.67 b,d $ 3.19 b,c,d,e,g,h $ 4.78 b,d,g,h Diluted
weighted-average common shares outstanding 954 953 954 955
Operating cash flowsi $ 1,265 $ 746 $ 3,774 $ 6,620 Capital
expenditures $ 976 $ 785 $ 3,494 $ 2,534
Mining Operating
Data Copper (millions of recoverable pounds) Production
1,005 823 3,663 3,691 Sales, excluding purchases 972 823 3,648
3,698 Average realized price per pound $ 3.60 $ 3.42 $ 3.60 $ 3.86
Site production and delivery costs per poundj $ 2.01 $ 1.96 $ 2.00
$ 1.72 Unit net cash costs per poundj $ 1.54 $ 1.57 $ 1.48 $ 1.01
Gold (thousands of recoverable ounces) Production 251 181
958 1,383 Sales, excluding purchases 254 133 1,010 1,378 Average
realized price per ounce $ 1,681 $ 1,656 $ 1,665 $ 1,583
Molybdenum (millions of recoverable pounds) Production 24 18
85 83 Sales, excluding purchases 21 19 83 79 Average realized price
per pound $ 12.62 $ 15.08 $ 14.26 $ 16.98
a. Includes the impact of adjustments to provisionally priced
sales recognized in prior periods (refer to the "Consolidated
Statements of Income" on page IV for further discussion).
b. Includes net (credits) charges for adjustments to
environmental obligations and related litigation reserves totaling
$(42) million ($(24) million to net income attributable to common
stockholders or $(0.03) per share) for fourth-quarter 2012, $29
million ($23 million to net income attributable to common
stockholders or $0.02 per share) for fourth-quarter 2011, $(62)
million ($(40) million to net income attributable to common
stockholders or $(0.04) per share) for the year 2012 and $107
million ($86 million to net income attributable to common
stockholders or $0.09 per share) for the year 2011.
c. The 2012 periods include a gain of $59 million ($31 million
to net income attributable to common stockholders or $0.03 per
share) for the settlement of the insurance claim for business
interruption and property damage relating to the 2011 incidents
affecting PT Freeport Indonesia's concentrate pipelines.
d. The 2012 periods include a charge of $16 million ($8 million
to net income attributable to common stockholders or $0.01 per
share) associated with labor agreement costs at Candelaria. The
2011 periods include charges totaling $116 million ($50 million to
net income attributable to common stockholders or $0.05 per share)
primarily associated with bonuses for new labor agreements and
other employee costs at PT Freeport Indonesia, Cerro Verde and El
Abra.
e. The 2012 periods include charges of $9 million ($7 million to
net income attributable to common stockholders or $0.01 per share)
for costs associated with the PXP and MMR transactions.
f. FCX defers recognizing profits on intercompany sales until
final sales to third parties occur (refer to the "Consolidated
Statements of Income" on page IV for a summary of net impacts from
changes in these deferrals).
g. Includes net losses on early extinguishment of debt totaling
$149 million ($0.16 per share) for the year 2012, and $60 million
($0.06 per share) for the year 2011.
h. The year 2012 includes a net credit of $98 million, net of
noncontrolling interests ($0.11 per share) associated with
adjustments to Cerro Verde's deferred income taxes. The year 2011
includes a charge of $49 million, net of noncontrolling interests
($0.05 per share) for additional taxes associated with Cerro
Verde's election to pay a special mining burden during the
remaining term of its current stability agreement. For further
discussion refer to the supplemental schedule, "Provision for
Income Taxes," on page XXVI, which is also available on FCX's
website, "www.fcx.com."
i. Includes net working capital sources (uses) and other tax
payments of $122 million for fourth-quarter 2012, $(335) million
for fourth-quarter 2011, $(1.4) billion for the year 2012 and
$(461) million for the year 2011.
j. Reflects per pound weighted-average site production and
delivery costs and unit net cash costs (net of by-product credits)
for all copper mines, excluding net noncash and other costs. For
reconciliations of per pound unit costs by operating division 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 VII, which is also available on FCX's website,
“www.fcx.com.”
OPERATIONS
Consolidated. Fourth-quarter 2012 consolidated copper
sales of 972 million pounds were higher than the October 2012
estimates of 930 million pounds, primarily reflecting higher
production in North and South America. Fourth-quarter 2012
consolidated sales of 254 thousand ounces of gold and 21 million
pounds of molybdenum approximated the October 2012 estimates of 255
thousand ounces of gold and 20 million pounds of molybdenum.
Fourth-quarter 2012 consolidated copper and gold sales were higher
than fourth-quarter 2011 sales of 823 million pounds of copper and
133 thousand ounces of gold primarily reflecting the impact of PT
Freeport Indonesia labor disruptions in fourth-quarter 2011.
Operations and productivity have improved in 2012 at PT Freeport
Indonesia.
Consolidated sales from mines for the year 2013 are expected to
approximate 4.3 billion pounds of copper, 1.4 million ounces of
gold and 90 million pounds of molybdenum, including 940 million
pounds of copper, 230 thousand ounces of gold and 23 million pounds
of molybdenum in first-quarter 2013. Projected copper sales for
2013 are expected be 18 percent higher than 2012 sales, reflecting
access to higher grade ore at PT Freeport Indonesia and in South
America and higher production in North America and Africa.
Projected 2013 gold sales are expected to be 37 percent higher than
2012, primarily reflecting higher ore grades at Grasberg.
Consolidated average unit net cash costs (net of by-product
credits) of $1.54 per pound of copper in fourth-quarter 2012 were
lower than unit net cash costs of $1.57 per pound in fourth-quarter
2011 reflecting charges in fourth-quarter 2011 associated with new
labor agreements and other employee costs, partly offset by higher
fourth-quarter 2012 mining costs in North and South America.
FCX expects to gain access to higher grade ore at Grasberg in
late 2013, which will result in higher copper and gold production
volumes. Approximately 29 percent of 2013 consolidated copper sales
volumes and 37 percent of consolidated gold sales volumes are
expected in fourth-quarter 2013. Quarterly unit net cash costs vary
with fluctuations in sales volumes and average realized prices for
gold and molybdenum. Assuming average prices of $1,700 per ounce of
gold and $11 per pound of molybdenum and achievement of current
sales volume and cost estimates, consolidated unit net cash costs
(net of by-product credits) for FCX's copper mining operations are
expected to average $1.67 per pound of copper in first-quarter 2013
and $1.35 per pound for the year 2013. The impact of price changes
on 2013 consolidated unit net cash costs would approximate $0.015
per pound for each $50 per ounce change in the average price of
gold and $0.015 per pound for each $2 per pound change in the
average price of molybdenum.
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. 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. In addition
to copper, certain of FCX's North America copper mines (Sierrita,
Bagdad, Morenci and Chino) also produce molybdenum
concentrates.
Operating and Development Activities. FCX has completed projects
to increase production at its North America copper mines, including
restarting certain mining and milling operations and increasing
mining rates at Morenci and Chino. Ramp up activities at Chino are
continuing, with annual production of approximately 250 million
pounds of copper targeted in 2014. FCX continues to evaluate
opportunities to invest in additional production capacity at its
North America copper mines in response to positive exploration
results in recent years.
At Morenci, FCX is engaged in a project to expand mining and
milling capacity to process additional sulfide ores identified
through exploratory drilling. The approximate $1.4 billion project
is targeting incremental annual production of approximately 225
million pounds of copper in 2014 (an approximate 40 percent
increase from 2012) through an increase in milling rates from
50,000 metric tons of ore per day to approximately 115,000 metric
tons of ore per day and mining rates from 700,000 short tons per
day to 900,000 short tons per day. Engineering activities are
progressing and construction activities are under way.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the fourth quarters and
years ended 2012 and 2011:
Three Months Ended Years
Ended December 31, December 31,
2012 2011 2012
2011 Copper (millions of recoverable pounds)
Production 358 341 1,363 1,258 Sales, excluding purchases 321 333
1,351 1,247 Average realized price per pound $ 3.63 $ 3.44 $ 3.64 $
3.99
Molybdenum (millions of recoverable pounds)
Productiona 9 8 36 35
Unit net cash costs per pound of
copper: Site production and delivery, excluding adjustments $
2.00 $ 1.73 $ 1.91 $ 1.78 By-product credits, primarily molybdenumb
(0.35 ) (0.37 ) (0.36 ) (0.48 ) Treatment charges 0.13 0.12
0.12 0.11 Unit net cash costsc $ 1.78 $
1.48 $ 1.67 $ 1.41
a. Reflects molybdenum production from certain of the North
America copper mines. Sales of molybdenum are reflected in the
Molybdenum division (refer to page 9).
b. Molybdenum credits reflect volumes produced at market-based
pricing.
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 VII, which is also available on FCX's website,
“www.fcx.com.”
Consolidated copper sales volumes from North America of 321
million pounds in fourth-quarter 2012 were lower than
fourth-quarter 2011 sales of 333 million pounds primarily
reflecting timing of shipments.
FCX expects sales from the North America copper mines to
approximate 1.45 billion pounds of copper for the year 2013,
compared with 1.35 billion pounds of copper in 2012, primarily
reflecting higher production at Morenci and Chino.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.78 per pound of copper in
fourth-quarter 2012 were higher than unit net cash costs of $1.48
per pound in fourth-quarter 2011, primarily reflecting increased
mining and milling activities.
FCX estimates that average unit net cash costs (net of
by-product credits) for the North America copper mines would
approximate $1.82 per pound of copper for the year 2013, based on
current sales volume and cost estimates and assuming an average
molybdenum price of $11 per pound. North America's average unit net
cash costs for 2013 would change by approximately $0.04 per pound
for each $2 per pound change in the average price of molybdenum.
North America's average unit net cash costs for 2013 are expected
to be higher than 2012 because of lower molybdenum credits and
higher mining rates.
South America Mining. FCX operates four copper mines in
South America - Cerro Verde in Peru and El Abra, Candelaria and
Ojos del Salado in Chile. FCX owns a 53.56 percent interest in
Cerro Verde, a 51 percent interest in El Abra, and an 80 percent
interest in both the Candelaria and Ojos del Salado mining
complexes. All operations in South America are consolidated in
FCX's financial statements. South America mining includes open-pit
and underground mining. In addition to copper, the Cerro Verde mine
produces molybdenum concentrates, and the Candelaria and Ojos del
Salado mines produce gold and silver.
Operating and Development Activities. At Cerro Verde, FCX is
engaged in a large-scale expansion. The approximate $4.4 billion
project would expand the concentrator facilities from 120,000
metric tons of ore per day to 360,000 metric tons of ore per day
and provide incremental annual production of approximately 600
million pounds of copper and 15 million pounds of molybdenum
beginning in 2016. Cerro Verde received approval of the
environmental impact assessment in fourth-quarter 2012. Detailed
engineering and long-lead item procurement are under way, and
construction is expected to commence in 2013.
FCX is also engaged in pre-feasibility studies for a potential
large-scale milling operation at El Abra to process additional
sulfide material and to achieve higher recoveries. Exploration
results at El Abra have identified a significant sulfide
resource.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the fourth quarters and
years ended 2012 and 2011:
Three Months Ended Years
Ended December 31, December 31,
2012 2011 2012
2011 Copper (millions of recoverable pounds)
Production 349 337 1,257 1,306 Sales 350 357 1,245 1,322 Average
realized price per pound $ 3.60 $ 3.45 $ 3.58 $ 3.77
Gold (thousands of recoverable ounces) Production 26 28 83
101 Sales 26 29 82 101 Average realized price per ounce $ 1,686 $
1,626 $ 1,673 $ 1,580
Molybdenum (millions of
recoverable pounds) Productiona 2 2 8 10
Unit net cash
costs per pound of copper: Site production and delivery,
excluding adjustments $ 1.67 b $ 1.56 b $ 1.60 b $ 1.38 b
By-product credits (0.29 ) (0.27 ) (0.26 ) (0.35 ) Treatment
charges 0.16 0.15 0.16 0.17 Unit net
cash costsc $ 1.54 $ 1.44 $ 1.50 $ 1.20
a. Reflects molybdenum production from Cerro Verde. Sales of
molybdenum are reflected in the Molybdenum division (refer to page
9).
b. The 2012 periods include $16 million ($0.04 per pound of
copper for fourth-quarter 2012 and $0.01 per pound for the year
2012) associated with labor agreement costs at Candelaria. The 2011
periods include $50 million ($0.14 per pound of copper for
fourth-quarter 2011 and $0.04 per pound for the year 2011)
associated with bonuses paid at Cerro Verde and El Abra pursuant to
the new labor agreements.
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 VII, which is also available on FCX's website,
“www.fcx.com.”
Copper sales from South America mining totaled 350 million
pounds in fourth-quarter 2012 and 357 million pounds in
fourth-quarter 2011.
FCX expects South America's sales to approximate 1.33 billion
pounds of copper and 140 thousand ounces of gold for the year 2013,
compared with 2012 sales of 1.25 billion pounds of copper and 82
thousand ounces of gold, primarily reflecting the mining of higher
grade ore at Candelaria.
Average unit net cash costs (net of by-product credits) for
South America of $1.54 per pound of copper in fourth-quarter 2012
were higher than unit net cash costs of $1.44 per pound in
fourth-quarter 2011, primarily reflecting higher mining and input
costs (including energy), partly offset by lower costs relating to
labor agreements.
FCX estimates that average unit net cash costs (net of
by-product credits) for South America mining would approximate
$1.50 per pound of copper for the year 2013, based on current sales
volume and cost estimates and assuming average prices of $1,700 per
ounce of gold and $11 per pound of molybdenum.
Indonesia Mining. Through its 90.64 percent owned and
wholly consolidated subsidiary PT Freeport Indonesia, FCX operates
the world's largest copper and gold mine in terms of reserves at
its Grasberg operations in Papua, Indonesia. PT Freeport Indonesia
produces copper concentrates, which contain significant quantities
of gold and also silver.
Operating and Development Activities. FCX has several projects
in progress in the Grasberg minerals district, primarily related to
the development of large-scale, high-grade underground ore bodies.
In aggregate, these underground ore bodies are expected to ramp up
over several years to approximately 240,000 metric tons of ore per
day following the currently anticipated transition from the
Grasberg open pit in 2016. Development of the Grasberg Block Cave
and Deep Mill Level Zone (DMLZ) is advancing. The DMLZ is expected
to commence production in 2015, and the Grasberg Block Cave mine is
scheduled to commence production in 2017. Over the next five years,
estimated aggregate capital spending on these projects is currently
expected to average $715 million per year ($565 million per year
net to PT Freeport Indonesia).
Production from the Deep Ore Zone (DOZ) underground mine
averaged 51,200 metric tons of ore per day in fourth-quarter 2012,
and is expected to ramp up to the design rate of 80,000 metric tons
of ore per day by year-end 2013, following completion of ongoing
panel repairs.
The high-grade Big Gossan underground mine, which began
producing in fourth-quarter 2010, averaged 2,100 metric tons of ore
per day in fourth-quarter 2012. Full rates of 7,000 metric tons of
ore per day are expected in 2014.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the fourth quarters and
years ended 2012 and 2011:
Three Months Ended Years
Ended December 31, December 31,
2012 2011 2012
2011 Copper (millions of recoverable pounds)
Production 200 68 695 846 Sales 204 50 716 846 Average realized
price per pound $ 3.59 $ 3.31 $ 3.58 $ 3.85
Gold
(thousands of recoverable ounces) Production 221 149 862 1,272
Sales 224 102 915 1,270 Average realized price per ounce $ 1,680 $
1,664 $ 1,664 $ 1,583
Unit net cash costs per pound of
copper: Site production and delivery, excluding adjustments $
2.91 $ 6.92 a $ 3.12 $ 2.21 a Gold and silver credits (1.93 ) (3.72
) (2.22 ) (2.47 ) Treatment charges 0.22 0.22 0.21 0.19 Royalty on
metals 0.13 0.15 0.13 0.16 Unit net
cash costsb $ 1.33 $ 3.57 $ 1.24 $ 0.09
a. The 2011 periods include $66 million ($1.30 per pound of
copper for fourth-quarter 2011 and $0.08 per pound for the year
2011) associated with bonuses and other strike-related costs.
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 VII, which is also available on FCX's website,
“www.fcx.com.”
Indonesia's fourth-quarter 2012 sales of 204 million pounds of
copper and 224 thousand ounces of gold were higher than
fourth-quarter 2011 sales of 50 million pounds of copper and 102
thousand ounces of gold, primarily reflecting the impact in
fourth-quarter 2011 of labor related disruptions and temporary
suspension of milling operations.
At the Grasberg mine, the sequencing of mining areas with
varying ore grades causes fluctuations in the timing of ore
production resulting in varying quarterly and annual sales of
copper and gold. FCX expects sales from Indonesia to approximate
1.1 billion pounds of copper and 1.2 million ounces of gold for the
year 2013, compared with 716 million pounds of copper and 915
thousand ounces of gold for the year 2012. FCX expects sales from
Indonesia to increase in fourth-quarter 2013 as PT Freeport
Indonesia gains access to higher ore grades and achieves the
targeted ramp up in production from the DOZ mine. Approximately 33
percent of Indonesia's projected copper sales and 38 percent of
projected gold sales are expected in fourth-quarter 2013.
Indonesia's unit net cash costs (including gold and silver
credits) of $1.33 per pound of copper in fourth-quarter 2012 were
lower than unit net cash costs of $3.57 per pound in fourth-quarter
2011 primarily reflecting higher sales volumes. Fourth-quarter 2011
costs also included $66 million, or $1.30 per pound of copper, for
bonuses and other strike-related costs.
FCX estimates Indonesia's unit net cash costs (net of gold and
silver credits) would approximate $0.68 per pound of copper for the
year 2013, based on current sales volume and cost estimates and
assuming an average gold price of $1,700 per ounce. Indonesia's
unit net cash costs for 2013 would change by approximately $0.055
per pound for each $50 per ounce change in the average price of
gold. Because of the fixed nature of a large portion of Indonesia's
costs, unit costs vary from quarter to quarter depending on copper
and gold sales volumes, as well as average realized gold prices for
the quarterly period. Indonesia's unit net cash costs for
first-quarter 2013 are expected to approximate $1.57 per pound of
copper and are expected to decline in future quarterly periods as
volumes increase.
Africa Mining. Through its 56 percent owned and wholly
consolidated subsidiary Tenke Fungurume Mining S.A.R.L (TFM), FCX
operates the Tenke Fungurume (Tenke) mine in the Katanga province
of the Democratic Republic of Congo (DRC). In addition to copper,
the Tenke mine produces cobalt hydroxide.
Operating and Development Activities. An expansion of the
project to optimize the current plant and increase capacity is
substantially complete. The expanded mill will be capable of
throughput of 14,000 metric tons of ore per day, and expanded
processing facilities will enable the addition of approximately 150
million pounds of copper per year. The approximate $850 million
project, which included mill upgrades, additional mining equipment,
a new tankhouse and a new sulphuric acid plant, is being completed
within budget. The addition of a second sulphuric acid plant is
expected to be completed in 2015.
FCX continues to engage in drilling activities, exploration
analyses and metallurgical testing to evaluate the potential of the
highly prospective minerals district at Tenke. These analyses are
being incorporated in future plans to evaluate opportunities for
expansion. Future expansions are subject to a number of factors,
including economic and market conditions, and the business and
investment climate in the DRC.
On January 21, 2013, FCX, through a newly formed joint
venture entered into a definitive agreement with OM Group, Inc. to
acquire a large scale cobalt chemical refinery located in Kokkola,
Finland, and the related sales and marketing business. The
acquisition would provide direct end-market access for the cobalt
hydroxide production at Tenke. FCX will be the operator of the
joint venture with an effective 56 percent ownership interest, with
the remaining effective ownership interests held by its partners in
TFM, including 24 percent by Lundin Mining Corporation and 20
percent by La Générale des Carrières et des Mines
(Gécamines). Under the terms of the agreement, initial
consideration of $325 million (subject to working capital
adjustments) will be paid at closing, with the potential for
additional consideration of up to $110 million over a period of
three years, contingent upon the achievement of revenue-based
performance targets. The acquisition is subject to customary
closing conditions, including required regulatory
approvals, and is expected to close in second-quarter
2013.
Operating Data. Following is summary consolidated operating data
for the Africa mining operations for the fourth quarters and years
ended 2012 and 2011:
Three Months Ended Years
Ended December 31, December 31,
2012 2011 2012
2011 Copper (millions of recoverable pounds)
Production 98 77 348 281 Sales 97 83 336 283 Average realized price
per pounda $ 3.50 $ 3.32 $ 3.51 $ 3.74
Cobalt
(millions of contained pounds) Production 6 7 26 25 Sales 6 6 25 25
Average realized price per pound $ 6.95 $ 8.78 $ 7.83 $ 9.99
Unit net cash costs per pound of copper: Site production and
delivery, excluding adjustments $ 1.38 $ 1.58 $ 1.49 $ 1.57 Cobalt
creditsb (0.21 ) (0.35 ) (0.33 ) (0.58 ) Royalty on metals 0.07
0.07 0.07 0.08 Unit net cash costsc $
1.24 $ 1.30 $ 1.23 $ 1.07
a. Includes 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 VII, which is also available on FCX's website,
“www.fcx.com.”
During 2012, Tenke achieved record mining, milling and
production rates. Copper sales from Africa of 97 million pounds in
fourth-quarter 2012 were higher than fourth-quarter 2011 copper
sales of 83 million pounds primarily reflecting higher mining and
milling rates principally related to the ramp-up of the second
phase expansion.
FCX expects Africa's sales to approximate 410 million pounds of
copper and 30 million pounds of cobalt for the year 2013, compared
with 336 million pounds of copper and 25 million pounds of cobalt
for the year 2012.
Africa's unit net cash costs (net of cobalt credits) of $1.24
per pound of copper were lower than unit net cash costs of $1.30
per pound in fourth-quarter 2011 primarily reflecting higher
volumes, partly offset by higher mining costs and lower cobalt
credits.
FCX estimates Africa's unit net cash costs would approximate
$1.03 per pound of copper for the year 2013, based on current sales
volume and cost estimates and assuming an average cobalt price of
$12 per pound. Africa's unit net cash costs for 2013 would change
by approximately $0.09 per pound for each $2 per pound change in
the average price of cobalt.
Molybdenum. FCX is the world's largest producer of
molybdenum. FCX conducts molybdenum mining operations at its wholly
owned Henderson underground mine and Climax open-pit mine in
Colorado, and also sells molybdenum produced from its North and
South America copper mines.
Operating and Development Activities. The Climax molybdenum
mine, which was commissioned in second-quarter 2012, includes a new
25,000 metric ton per day mill facility. Production in
fourth-quarter 2012 totaled 5 million pounds of molybdenum and is
targeted at 20 million pounds for 2013, with potential to produce
30 million pounds per year, depending on market conditions. FCX
intends to operate the Climax and Henderson mines in a flexible
manner to meet market requirements. FCX believes that Climax is one
of the most attractive primary molybdenum mines in the world, with
large-scale production capacity, attractive cash costs and future
growth options.
Operating Data. Following is summary consolidated operating data
for the Molybdenum operations for the fourth quarters and years
ended 2012 and 2011:
Three Months Ended Years
Ended December 31, December 31,
2012 2011 2012
2011 Molybdenum (millions of recoverable pounds)
Production 13
a
8 41 a 38 Sales, excluding purchasesb 21 19 83 79 Average realized
price per pound $ 12.62 $ 15.08 $ 14.26 $ 16.98 Unit net
cash cost per pound of molybdenumc $ 7.53 $ 6.87 $ 7.07 $ 6.34
a. Molybdenum production from the Climax mine totaled 5 million
pounds in fourth-quarter 2012 and 7 million pounds for the year
2012 reflecting production since the start of commercial operations
in May 2012. The 2011 periods reflect production only from the
Henderson molybdenum mine.
b. Includes sales of molybdenum produced at the North and South
America copper mines.
c. Reflects unit net cash costs for the Henderson molybdenum
mine, excluding net noncash and other costs. 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 VII, which is also
available on FCX's website, “www.fcx.com.”
For the year 2013, FCX expects molybdenum sales to approximate
90 million pounds (including production of approximately 40 million
pounds from the North and South America copper mines), compared
with 83 million pounds in 2012 (including production of 44 million
pounds from the North and South America copper mines).
Unit net cash costs at the Henderson mine of $7.53 per pound of
molybdenum in fourth-quarter 2012 were higher than unit net cash
costs of $6.87 per pound in fourth-quarter 2011, primarily
reflecting lower production volumes and higher input costs.
Based on current sales volume and cost estimates, FCX expects
unit net cash costs for primary molybdenum mines to average $7.00
per pound of molybdenum for the year 2013 (reflecting approximately
$7.50 per pound for Henderson and $6.50 per pound for Climax).
PRELIMINARY RECOVERABLE PROVEN AND PROBABLE RESERVES
FCX has significant reserves, resources and future development
opportunities within its portfolio of assets. FCX's preliminary
estimated consolidated recoverable proven and probable reserves at
December 31, 2012, include 116.5 billion pounds of copper,
32.5 million ounces of gold and 3.42 billion pounds of molybdenum,
which were determined using long-term average prices of $2.00 per
pound for copper, $750 per ounce for gold and $10.00 per pound for
molybdenum, consistent with the long-term average prices used at
year-end 2011. The preliminary recoverable proven and probable
reserves presented in the table below represent the estimated metal
quantities from which FCX expects to be paid after application of
estimated metallurgical recovery rates and smelter recovery rates,
where applicable. Recoverable reserves are that part of a mineral
deposit, which FCX estimates can be economically and legally
extracted or produced at the time of the reserve determination.
Preliminary Recoverable Proven and Probable Reserves at
December 31, 2012 Copper
Gold Molybdenum (billions of
lbs) (millions of ozs) (billions of lbs) North America 38.8 0.4
2.69 South America 38.8 1.2 0.73 Indonesia 31.0 30.9 — Africa 7.9
— —
Consolidated basisa 116.5
32.5 3.42
Net equity interestb 93.2
29.4 3.08
a. Consolidated basis reserves represent estimated metal
quantities after reduction for joint venture partner interests at
the Morenci mine in North America and the Grasberg minerals
district in Indonesia. Excluded from the table above are FCX's
estimated recoverable proven and probable reserves of 0.84 billion
pounds for cobalt at Tenke Fungurume and 321.4 million ounces for
silver in Indonesia, South America and North America.
b. Net equity interest reserves represent estimated consolidated
basis metal quantities further reduced for noncontrolling interest
ownership. Excluded from the table above are FCX's estimated
recoverable proven and probable reserves totaling 0.47 billion
pounds for cobalt at Tenke Fungurume and 264.2 million ounces for
silver in Indonesia, South America and North America.
The following table summarizes changes in FCX's estimated
consolidated recoverable proven and probable copper, gold and
molybdenum reserves during 2012:
Copper Gold Molybdenum (billions of lbs)
(millions of ozs) (billions of lbs) Reserves at December 31, 2011
119.7 33.9 3.42 Net additions/revisions 0.5 (0.4 ) 0.08 Production
(3.7 ) (1.0 ) (0.08 ) Reserves at December 31, 2012 116.5
32.5 3.42
At December 31, 2012, in addition to preliminary
consolidated recoverable proven and probable reserves, FCX's
preliminary estimated mineralized material (assessed using a
long-term average copper price of $2.20 per pound for copper)
totals 113 billion pounds of incremental contained copper. FCX
continues to pursue aggressively opportunities to convert this
mineralized material into reserves, future production volumes and
cash flow.
EXPLORATION ACTIVITIES
FCX is actively 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 North and South
America and in the Tenke Fungurume minerals district. The drilling
data in North America continue to indicate the potential for
expanded sulfide production.
Exploration spending for the year 2013 is expected to
approximate $235 million, compared with $251 million in 2012.
Exploration activities will continue to focus primarily on the
potential for future reserve additions in FCX's existing minerals
districts. Approximately one third of the 2013 budget is associated
with greenfield exploration projects.
PROVISIONAL PRICING AND OTHER
For the year 2012, 46 percent of FCX's mined copper was sold in
concentrate, 28 percent as cathode and 26 percent as rod from North
America operations. Under the long-established structure of sales
agreements prevalent in the industry, copper contained in
concentrate and cathode is provisionally priced at the time of
shipment. The provisional prices are finalized in a contractually
specified future month (generally one to four months from the
shipment date) primarily based on quoted monthly average spot
copper prices on the London Metal Exchange (LME). 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.
During fourth-quarter 2012, LME spot copper prices averaged $3.59
per pound, compared to FCX's recorded average price of $3.60 per
pound.
At September 30, 2012, FCX had provisionally priced copper
sales at its copper mining operations, primarily South America and
Indonesia, totaling 325 million pounds (net of intercompany sales
and noncontrolling interests) recorded at an average of $3.72 per
pound. Lower prices resulted in adjustments to these provisionally
priced copper sales that unfavorably impacted fourth-quarter 2012
consolidated revenues by $73 million ($31 million to net income
attributable to common stock or $0.03 per share), compared with
adjustments to the September 30, 2011, provisionally priced
copper sales that favorably impacted fourth-quarter 2011
consolidated revenues by $125 million ($56 million to net income
attributable to common stock or $0.06 per share).
Adjustments to the December 31, 2011, provisionally priced
copper sales favorably impacted consolidated revenues by $101
million ($43 million to net income attributable to common stock or
$0.05 per share) for the year 2012, compared with adjustments to
the December 31, 2010, provisionally priced copper sales that
unfavorably impacted consolidated revenues by $12 million ($5
million to net income attributable to common stock or $0.01 per
share) for the year 2011.
At December 31, 2012, FCX had provisionally priced copper
sales at its copper mining operations, primarily South America and
Indonesia, totaling 341 million pounds of copper (net of
intercompany sales and noncontrolling interests) recorded at an
average of $3.59 per pound, subject to final pricing over the next
several months. FCX estimates that each $0.05 change in the price
realized from the December 31, 2012, provisional price
recorded would have an approximate $11 million effect on 2013 net
income attributable to common stock. The LME spot copper price
closed at $3.64 per pound on January 21, 2013.
FCX defers recognizing profits on its sales from its mining
operations to Atlantic Copper and on 25 percent of Indonesia's
sales to PT Smelting (PT Freeport Indonesia's 25 percent-owned
Indonesian smelting unit) until final sales to third parties occur.
FCX's net deferred profits on its Indonesia and South America
concentrate inventories at Atlantic Copper and PT Smelting to be
recognized in future periods' net income attributable to common
stock totaled $121 million at December 31, 2012. Refer to the
"Consolidated Statements of Income" on page IV for a summary of net
impacts from changes in these deferrals. 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
FCX generated operating cash flows of $1.3 billion for
fourth-quarter 2012 (including net working capital sources and
other tax payments of $122 million) and $3.8 billion for the year
2012 (net of working capital uses and other tax payments of $1.4
billion).
Based on current sales volume and cost estimates and assuming
average prices of $3.65 per pound of copper, $1,700 per ounce of
gold and $11 per pound of molybdenum, FCX's consolidated operating
cash flows, excluding results from pending acquisitions, are
estimated to approximate $7 billion for the year 2013 (including
$450 million from net working capital sources and other tax
payments). The impact of price changes on operating cash flows
would approximate $350 million for each $0.10 per pound change in
the average price of copper, $55 million for each $50 per ounce
change in the average price of gold and $110 million for each $2
per pound change in the average price of molybdenum.
Capital expenditures totaled $976 million for fourth-quarter
2012 and $3.5 billion for the year 2012. Excluding amounts for
pending acquisitions, capital expenditures are currently estimated
to approximate $4.6 billion for the year 2013 (including $2.8
billion for major projects and $1.8 billion for sustaining
capital). Major projects for 2013 primarily include underground
development activities at Grasberg and the expansion projects at
Cerro Verde and Morenci. FCX is also 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.
CASH AND DEBT
At December 31, 2012, FCX had consolidated cash of $3.7
billion. Net of noncontrolling interests' share, taxes and other
costs, cash available to the parent company totaled $2.7 billion as
shown below (in billions):
December 31, 2012 Cash at
domestic companiesa $ 1.3 Cash at international operations 2.4
Total consolidated cash and cash equivalents 3.7 Less:
Noncontrolling interests' share (0.8 ) Cash, net of noncontrolling
interests' share 2.9 Less: Withholding taxes and other (0.2 )
Net cash available $ 2.7
a. Includes cash at the parent company and North America
operations.
At December 31, 2012, FCX had $3.5 billion in debt. FCX had
no borrowings and $43 million of letters of credit issued under its
revolving credit facility resulting in total availability of $1.5
billion at December 31, 2012.
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. FCX paid common stock
dividends of $1.1 billion during 2012. FCX's current annual
dividend rate for its common stock is $1.25 per share. On December
26, 2012, FCX's Board of Directors (the Board) declared a regular
quarterly dividend of $0.3125 per share, which will be paid on
February 1, 2013. FCX intends to continue to maintain a strong
financial position, invest in financially attractive growth
projects and provide cash returns to shareholders. The Board will
continue to review FCX's financial policy on an ongoing basis.
PENDING ACQUISITIONS of PLAINS EXPLORATION & PRODUCTION
COMPANY (PXP) AND McMoRAN EXPLORATION CO. (MMR)
On December 5, 2012, FCX announced definitive agreements to
acquire PXP and MMR. PXP per-share consideration is equivalent to
0.6531 shares of FCX common stock and $25.00 in cash (approximately
$3.4 billion in cash and 91 million shares of FCX common stock).
MMR per-share consideration consists of $14.75 in cash
(approximately $3.4 billion in cash, or $2.1 billion net of MMR
interests currently owned by FCX and PXP) and 1.15 units of a
royalty trust, which will hold a five percent overriding royalty
interest in future production from MMR's existing ultra-deep
exploration prospects. The value of the transactions, including
assumed debt of the targets, approximates $20 billion.
The combined company would be a premier U.S.-based natural
resource company with a growing production profile and an industry
leading global portfolio of mineral assets and significant oil and
gas resources. The addition of a high quality, U.S.-focused oil and
gas resource base is expected to provide strong margins and cash
flows, exploration leverage and financially attractive long-term
investment opportunities to enhance long-term returns for FCX
shareholders. After giving effect to the transactions, FCX's
estimated pro forma total debt would have approximated $20 billion
(or $16 billion net of cash) at September 30, 2012, and total pro
forma outstanding FCX common shares would have approximated 1.04
billion. On a pro forma basis for 2013, the combined company's
estimated EBITDA (equal to operating income plus depreciation,
depletion, and amortization) is expected to approximate $12 billion
(approximately 74 percent from mining and 26 percent from oil and
gas, with 48 percent of combined EBITDA from U.S. operations).
Completion of the transactions is subject to receipt of PXP and
MMR shareholder approval, regulatory approvals (including U.S.
antitrust clearance under the Hart-Scott-Rodino Act), and other
customary conditions. On December 26, 2012, the U.S. Federal Trade
Commission granted early termination of the Hart-Scott-Rodino
waiting period with respect to both transactions. PXP and MMR
shareholder meetings to approve the transactions will be scheduled
upon the effectiveness of the registration statements filed with
the U.S. Securities and Exchange Commission on December 28, 2012.
The transactions are expected to close in second-quarter 2013.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
fourth-quarter 2012 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, February 22,
2013.
--------------------------------------
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.
FCX's portfolio of assets includes the Grasberg minerals
district in Indonesia, the world’s largest copper and gold mine in
terms of recoverable reserves; significant mining operations in the
Americas, including the large-scale Morenci minerals district 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, the impact of deferred
intercompany profits on earnings, liquidity, other financial
commitments and tax rates, the impact of copper, gold, molybdenum
and cobalt price changes, reserve estimates, future dividend
payments and potential share purchases, and estimated EBITDA for
2013 assuming completion of the pending acquisitions. 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 and will depend on
FCX's financial results, cash requirements, future prospects, and
other factors deemed relevant by the Board.
This press release also includes forward-looking statements
regarding mineralized material not included in reserves. The
mineralized material described in this press release will not
qualify as reserves until comprehensive engineering studies
establish their economic feasibility. Accordingly, no assurance can
be given that the estimated mineralized material not included in
reserves will become proven and probable reserves.
FCX cautions readers that forward-looking 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 outcome of ongoing discussions with the
Indonesian government, the potential effects of violence in
Indonesia, the resolution of administrative disputes in the
Democratic Republic of Congo, weather- and climate-related risks,
labor relations, environmental risks, litigation results, currency
translation risks, risks associated with completion of the pending
acquisitions, 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, 2011, filed with the U.S. Securities
and Exchange Commission (SEC) as updated by our subsequent filings
with the SEC.
Investors are cautioned that many of the assumptions on which
FCX's forward-looking statements are based are likely to change
after its forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may or may not be able
to control. Further, FCX may make changes to its business plans
that could or will affect its results. FCX cautions investors that
it does not intend to update forward-looking statements more
frequently than quarterly notwithstanding any changes in FCX's
assumptions, changes in business plans, actual experience or other
changes, and FCX undertakes no obligation to update any
forward-looking statements.
This press release also contains certain financial measures such
as unit net cash costs 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 VII, which is also available
on FCX's website, “www.fcx.com.”
ADDITIONAL INFORMATION ABOUT THE PROPOSED PXP AND MMR
TRANSACTIONS AND WHERE TO FIND IT
PXP Transaction
In connection with the proposed transaction, FCX has filed with
the SEC a registration statement on Form S-4 that includes a
preliminary proxy statement of PXP that also constitutes a
prospectus of FCX. FCX and PXP also plan to file other relevant
documents with the SEC regarding the proposed transaction.
INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may
obtain a free copy of the definitive proxy statement/prospectus (if
and when it becomes available) and other relevant documents filed
by FCX and PXP with the SEC at the SEC's website at www.sec.gov.
You may also obtain these documents by contacting FCX's Investor
Relations department at (602) 366-8400, or via e-mail at
IR@fmi.com; or by contacting PXP's Investor Relations department at
(713) 579-6291, or via email at investor@pxp.com.
FCX and PXP and their respective directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transaction. Information about FCX's directors and
executive officers is available in FCX's proxy statement dated
April 27, 2012, for its 2012 Annual Meeting of Stockholders.
Information about PXP's directors and executive officers is
available in PXP's proxy statement dated April 13, 2012, for its
2012 Annual Meeting of Stockholders. Other information regarding
the participants in the proxy solicitation and a description of
their direct and indirect interests, by security holdings or
otherwise, will be contained in the definitive proxy
statement/prospectus and other relevant materials to be filed with
the SEC regarding the merger when they become available. Investors
should read the definitive proxy statement/prospectus carefully
when it becomes available. You may obtain free copies of these
documents from FCX or PXP using the sources indicated above.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
MMR Transaction
In connection with the proposed transaction, the royalty trust
formed in connection with the transaction has filed with the SEC a
registration statement on Form S-4 that includes a preliminary
proxy statement of MMR that also constitutes a prospectus of the
royalty trust. FCX, the royalty trust and MMR also plan to file
other relevant documents with the SEC regarding the proposed
transaction. INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. You may obtain a free copy of the proxy
statement/prospectus (if and when it becomes available) and other
relevant documents filed by FCX, the royalty trust and MMR with the
SEC at the SEC's website at www.sec.gov. You may also obtain these
documents by contacting FCX's Investor Relations department at
(602) 366-8400, or via e-mail at IR@fmi.com; or by contacting MMR's
Investor Relations department at (504) 582-4000, or via email at
IR@fmi.com.
FCX and MMR and their respective directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transaction. Information about FCX's directors and
executive officers is available in FCX's proxy statement dated
April 27, 2012, for its 2012 Annual Meeting of Stockholders.
Information about MMR's directors and executive officers is
available in MMR's proxy statement dated April 27, 2012, for its
2012 Annual Meeting of Stockholders. Other information regarding
the participants in the proxy solicitation and a description of
their direct and indirect interests, by security holdings or
otherwise, will be contained in the definitive proxy
statement/prospectus and other relevant materials to be filed with
the SEC regarding the merger when they become available. Investors
should read the definitive proxy statement/prospectus carefully
when it becomes available. You may obtain free copies of these
documents from FCX or MMR using the sources indicated above.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
FREEPORT-McMoRan COPPER & GOLD INC. SELECTED
OPERATING DATA Three Months
Ended December 31, Production Sales
COPPER
(millions of recoverable pounds)
2012 2011 2012 2011 (FCX's net interest in %)
North
America
Morenci (85%)a 142 131 127 132 Bagdad (100%) 50 49 46 49 Safford
(100%) 46 50 40 45 Sierrita (100%) 37 46 35 46 Miami (100%) 15 20
14 19 Tyrone (100%) 22 20 20 19 Chino (100%) 45 24 38 22 Other
(100%) 1 1 1 1 Total North America 358
341 321 333
South
America
Cerro Verde (53.56%) 152 145 149 154 El Abra (51%) 89 88 98 93
Candelaria/Ojos del Salado (80%) 108 104 103
110 Total South America 349 337 350 357
Indonesia
Grasberg (90.64%)b 200 68 204 50
Africa
Tenke Fungurume (56%)c 98 77 97 83
Consolidated 1,005 823
972 823 Less noncontrolling interests 197
170 200 179
Net 808
653 772 644 Consolidated
sales from mines 972 823 Purchased copper 28 38
Total
copper sales, including purchases 1,000
861 Average realized price per pound $ 3.60 $ 3.42
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 4 4 4 2 South
America (80%) 26 28 26 29 Indonesia (90.64%)b 221 149
224 102
Consolidated 251 181
254 133 Less noncontrolling interests
27 20 26 15
Net 224
161 228 118 Consolidated
sales from mines 254 133 Purchased gold — —
Total gold
sales, including purchases 254 133 Average
realized price per ounce $ 1,681 $ 1,656
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 8 8 N/A N/A Climax
(100%) 5 — N/A N/A North America (100%)a 9 8 N/A N/A Cerro Verde
(53.56%) 2 2 N/A N/A
Consolidated 24
18 21 19 Less
noncontrolling interests 1 1 1 1
Net
23 17 20 18
Consolidated sales from mines 21 19 Purchased molybdenum — —
Total molybdenum sales, including purchases 21
19 Average realized price per pound $ 12.62 $ 15.08
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)c
6 7 6 6
Less noncontrolling interests 2 3 3 2
Net 4 4 3 4
Average realized price per pound $ 6.95 $ 8.78 a.
Amounts are net of Morenci's 15 percent joint venture partner's
interest. b. Amounts are net of Grasberg's joint venture partner's
interest, which varies in accordance with the terms of the joint
venture agreement. c. Effective March 26, 2012, FCX's interest in
Tenke Fungurume was prospectively reduced from 57.75 percent to 56
percent.
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA (continued)
Years Ended December 31, Production Sales
COPPER
(millions of recoverable pounds)
2012 2011 2012 2011 (FCX's net interest in %)
North
America
Morenci (85%)a 537 522 532 521 Bagdad (100%) 197 194 196 201
Safford (100%) 175 151 175 147 Sierrita (100%) 157 177 162 175
Miami (100%) 66 66 68 59 Tyrone (100%) 83 76 82 79 Chino (100%) 144
69 132 62 Other (100%) 4 3 4 3 Total North
America 1,363 1,258 1,351 1,247
South
America
Cerro Verde (53.56%) 595 647 589 657 El Abra (51%) 338 274 338 276
Candelaria/Ojos del Salado (80%) 324 385 318
389 Total South America 1,257 1,306 1,245
1,322
Indonesia
Grasberg (90.64%)b 695 846 716 846
Africa
Tenke Fungurume (56%)c 348 281 336 283
Consolidated 3,663 3,691
3,648 3,698 Less noncontrolling interests 723
710 717 717
Net 2,940
2,981 2,931 2,981
Consolidated sales from mines 3,648 3,698 Purchased copper 125
223
Total copper sales, including purchases
3,773 3,921 Average realized price per
pound $ 3.60 $ 3.86
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 13 10 13 7 South
America (80%) 83 101 82 101 Indonesia (90.64%)b 862 1,272
915 1,270
Consolidated 958
1,383 1,010 1,378 Less
noncontrolling interests 98 139 102 139
Net 860 1,244 908
1,239 Consolidated sales from mines 1,010 1,378
Purchased gold 2 1
Total gold sales, including
purchases 1,012 1,379 Average
realized price per ounce $ 1,665 $ 1,583
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 34 38 N/A N/A Climax
(100%)d 7 N/A N/A N/A North America (100%)a 36 35 N/A N/A Cerro
Verde (53.56%) 8 10 N/A N/A
Consolidated
85 83 83 79 Less
noncontrolling interests 4 5 4 4
Net
81 78 79 75
Consolidated sales from mines 83 79 Purchased molybdenum — —
Total molybdenum sales, including purchases 83
79 Average realized price per pound $ 14.26 $ 16.98
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)c
26 25 25 25
Less noncontrolling interests 11 11 11 10
Net 15 14 14
15 Average realized price per pound $ 7.83 $ 9.99
a. Amounts are net of Morenci's 15 percent joint venture
partner's interest. b. Amounts are net of Grasberg's joint venture
partner's interest, which varies in accordance with the terms of
the joint venture agreement. c. Effective March 26, 2012, FCX's
interest in Tenke Fungurume was prospectively reduced from 57.75
percent to 56 percent. d. Includes results from the Climax
molybdenum mine since the start of commercial operations in May
2012.
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA (continued)
Three Months Ended Years Ended
December 31, December 31, 2012 2011 2012 2011
100% North America
Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 1,090,600
1,019,500 998,600 888,300 Average copper ore grade (percent) 0.21
0.23 0.22 0.24 Copper production (millions of recoverable pounds)
227 219 866 801
Mill
Operations
Ore milled (metric tons per day) 251,100 230,700 239,600 222,800
Average ore grades (percent): Copper 0.38 0.39 0.37 0.38 Molybdenum
0.03 0.03 0.03 0.03 Copper recovery rate (percent) 84.7 81.5 83.9
83.1 Production (millions of recoverable pounds): Copper 156 145
592 549 Molybdenum 9 8 36 35
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 229,900
232,500 229,300 245,200 Average copper ore grade (percent) 0.57
0.60 0.55 0.50 Copper production (millions of recoverable pounds)
111 125 457 439
Mill
Operations
Ore milled (metric tons per day) 195,500 179,900 191,400 189,200
Average ore grades: Copper (percent) 0.68 0.69 0.60 0.66 Gold
(grams per metric ton) 0.12 0.14 0.10 0.12 Molybdenum (percent)
0.02 0.02 0.02 0.02 Copper recovery rate (percent) 91.4 88.5 90.1
89.6 Production (recoverable): Copper (millions of pounds) 238 212
800 867 Gold (thousands of ounces) 26 28 83 101 Molybdenum
(millions of pounds) 2 2 8 10
100% Indonesia Mining
Ore milled (metric tons per day):a Grasberg open pit 125,200 40,600
118,800 112,900 DOZ underground mine 51,200 30,300 44,600 51,700
Big Gossan underground mine 2,100 900 1,600 1,500 Total 178,500
71,800 165,000 166,100 Average ore grades: Copper (percent) 0.66
0.65 0.62 0.79 Gold (grams per metric ton) 0.59 1.09 0.59 0.93
Recovery rates (percent): Copper 88.9 88.9 88.7 88.3 Gold 75.9 80.5
82.7 81.2 Production (recoverable): Copper (millions of pounds) 200
79 695 882 Gold (thousands of ounces) 221 183 862 1,444
100% Africa Mining Ore milled (metric tons per day) 13,300
11,900 13,000 11,100 Average ore grades (percent): Copper 3.81 3.40
3.62 3.41 Cobalt 0.35 0.38 0.37 0.40 Copper recovery rate (percent)
94.8 93.8 92.4 92.5 Production (millions of pounds): Copper
(recoverable) 98 77 348 281 Cobalt (contained) 6 7 26 25
100% Henderson Molybdenum Mine Ore milled (metric tons per
day) 19,900 19,300 20,800 22,300 Average molybdenum ore grade
(percent) 0.22 0.24 0.23 0.24 Molybdenum production (millions of
recoverable pounds) 8 8 34 38 a. Amounts represent the
approximate average daily throughput processed at PT Freeport
Indonesia's mill facilities from each producing mine.
FREEPORT-McMoRan COPPER & GOLD INC. CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
Three Months Ended Years Ended December 31, December 31,
2012 2011 2012 2011 (In Millions, Except Per Share Amounts)
Revenues $ 4,513 a $ 4,162 a $ 18,010 a $ 20,880 a Cost of sales:
Production and delivery 2,740 b 2,394 b 10,382 b 9,898 b
Depreciation, depletion and amortization 323 266
1,179 1,022 Total cost of sales 3,063 2,660 11,561
10,920 Selling, general and administrative expenses 120 c 92 431 c
415 Exploration and research expenses 71 77 285 271 Environmental
obligations and shutdown costs (40 ) d 36 d (22 ) d 134 d Gain on
insurance settlement (59 ) e — (59 ) e — Total costs
and expenses 3,155 2,865 12,196 11,740
Operating income 1,358 1,297 5,814 9,140 Interest expense, net (38
) f (62 ) f (186 ) f (312 ) f Losses on early extinguishment of
debt — — (168 ) (68 ) Other income, net 4 18 27
58
Income before income taxes and equity in
affiliated companies' net earnings
1,324 1,253 5,487 8,818 Provision for income taxes (382 ) (389 )
(1,510 ) g (3,087 ) g Equity in affiliated companies' net earnings
3 2 3 16 Net income 945 866 3,980 5,747
Net income attributable to noncontrolling interests (202 ) (226 )
(939 ) g (1,187 ) g Net income attributable to FCX common
stockholders $ 743 a,b,c,d,e,h $ 640 a,b,d,h $ 3,041
a,b,c,d,e,g,h $ 4,560 a,b,d,g,h Net income per
share attributable to FCX common stockholders: Basic $ 0.78
$ 0.67 $ 3.20 $ 4.81 Diluted $ 0.78 $
0.67 $ 3.19 $ 4.78 Weighted-average
common shares outstanding: Basic 949 948 949
947 Diluted 954 953 954 955
Dividends declared per share of common stock $ 0.3125
$ 0.25 $ 1.25 $ 1.50
a. Includes (unfavorable) favorable adjustments to provisionally
priced copper sales recognized in prior periods totaling $(73)
million ($(31) million to net income attributable to common
stockholders) in fourth-quarter 2012, $125 million ($56 million to
net income attributable to common stockholders) in fourth-quarter
2011, $101 million ($43 million to net income attributable to
common stockholders) for the year 2012 and $(12) million ($(5)
million to net income attributable to common stockholders) for the
year 2011.
b. The 2012 periods include a charge of $16 million ($8 million
to net income attributable to common stockholders) associated with
labor agreement costs at Candelaria. The 2011 periods include
charges totaling $116 million ($50 million to net income
attributable to common stock) associated with bonuses for new labor
agreements and other employee costs at PT Freeport Indonesia, Cerro
Verde and El Abra.
c. The 2012 periods include charges of $9 million ($7 million to
net income attributable to common stockholders) for costs
associated with the PXP and MMR transactions.
d. Includes net (credits) charges for adjustments to
environmental obligations and related litigation reserves totaling
$(42) million ($(24) million to net income attributable to common
stockholders) for fourth-quarter 2012, $29 million ($23 million to
net income attributable to common stockholders) for fourth-quarter
2011, $(62) million ($(40) million to net income attributable to
common stockholders) for the year 2012 and $107 million ($86
million to net income attributable to common stockholders) for the
year 2011.
e. The 2012 periods reflect a gain of $59 million ($31 million
to net income attributable to common stockholders) for the
settlement of the insurance claim for business interruption and
property damage relating to the 2011 incidents affecting PT
Freeport Indonesia's concentrate pipelines.
f. Consolidated interest expense, before capitalized interest,
totaled $57 million in fourth-quarter 2012, $96 million in
fourth-quarter 2011, $267 million for the year 2012 and $421
million for the year 2011. Lower interest expense in the 2012
periods primarily reflects the impact of the first-quarter 2012
refinancing transaction.
g. The year 2012 includes a net credit of $205 million ($107
million attributable to noncontrolling interests and $98 million to
net income attributable to common stockholders) associated with
adjustments to Cerro Verde's deferred income taxes. The year 2011
includes a tax charge of $53 million ($4 million attributable to
noncontrolling interests and $49 million to net income attributable
to common stockholders) for additional taxes associated with Cerro
Verde's election to pay a special mining burden during the
remaining term of its current stability agreement. For further
discussion refer to the supplemental schedule, "Provision for
Income Taxes," on page XXVI, which is also available on FCX's
website, "www.fcx.com."
h. FCX defers recognizing profits on intercompany sales until
final sales to third parties occur. Changes in these deferrals
attributable to variability in intercompany volumes resulted in net
(reductions) additions to net income attributable to common
stockholders of $(10) million in fourth-quarter 2012, $39 million
in fourth-quarter 2011, $(80) million for the year 2012 and $156
million for the year 2011.
FREEPORT-McMoRan COPPER & GOLD INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31, December 31, 2012 2011 (In Millions)
ASSETS Current assets: Cash and cash equivalents $ 3,705 $ 4,822
Trade accounts receivable 927 892 Other accounts receivable 702 250
Inventories: Mill and leach stockpiles 1,672 1,289 Materials and
supplies, net 1,504 1,354 Product 1,400 1,226 Other current assets
387 214 Total current assets 10,297 10,047 Property,
plant, equipment and development costs, net 20,999 18,449 Long-term
mill and leach stockpiles 1,955 1,686 Long-term receivables 769 675
Intangible assets, net 334 325 Other assets 1,086 888
Total assets $ 35,440 $ 32,070 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 2,324 $ 2,194 Current deferred income taxes 384 103
Dividends payable 299 240 Current portion of reclamation and
environmental obligations 241 236 Accrued income taxes 93 163
Current portion of debt 2 4 Total current liabilities
3,343 2,940 Long-term debt, less current portion 3,525 3,533
Deferred income taxes 3,490 3,255 Reclamation and environmental
obligations, less current portion 2,127 2,138 Other liabilities
1,644 1,651 Total liabilities 14,129 13,517 Equity:
FCX stockholders' equity: Common stock 107 107 Capital in excess of
par value 19,119 19,007 Retained earnings 2,399 546 Accumulated
other comprehensive loss (506 ) (465 ) Common stock held in
treasury (3,576 ) (3,553 ) Total FCX stockholders' equity 17,543
15,642 Noncontrolling interests 3,768 2,911 Total
equity 21,311 18,553 Total liabilities and equity $
35,440 $ 32,070
FREEPORT-McMoRan COPPER
& GOLD INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Years Ended December 31, 2012
2011 (In Millions) Cash flow from operating
activities: Net income $ 3,980 $ 5,747 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation,
depletion and amortization 1,179 1,022 Stock-based compensation 100
117 Pension plans contributions (140 ) (46 ) Net charges for
reclamation and environmental obligations, including accretion 22
208 Payments of reclamation and environmental obligations (246 )
(170 ) Losses on early extinguishment of debt 168 68 Deferred
income taxes 269 523 Increase in long-term mill and leach
stockpiles (269 ) (262 ) Other, net 128 (126 ) (Increases)
decreases in working capital and other tax payments: Accounts
receivable (365 ) 1,246 Inventories (729 ) (431 ) Other current
assets (76 ) (57 ) Accounts payable and accrued liabilities 209
(387 ) Accrued income and other tax payments (456 ) (832 ) Net cash
provided by operating activities 3,774 6,620
Cash flow from investing activities: Capital expenditures: North
America copper mines (827 ) (495 ) South America (931 ) (603 )
Indonesia (843 ) (648 ) Africa (539 ) (193 ) Molybdenum (258 ) (461
) Other (96 ) (134 ) Other, net 31 (1 ) Net cash used in
investing activities (3,463 ) (2,535 ) Cash flow from
financing activities: Repayments of debt (3,186 ) (1,313 ) Proceeds
from debt 3,029 48 Cash dividends paid: Common stock (1,129 )
(1,423 ) Noncontrolling interests (113 ) (391 ) Contributions from
noncontrolling interests 15 62 Excess tax benefit from stock-based
awards 8 23 Other, net (52 ) (7 ) Net cash used in financing
activities (1,428 ) (3,001 ) Net (decrease) increase in cash
and cash equivalents (1,117 ) 1,084 Cash and cash equivalents at
beginning of year 4,822 3,738 Cash and cash
equivalents at end of year $ 3,705 $ 4,822
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