Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX):
- Net income attributable to
common stock totaled $821 million, $0.79 per share for
third-quarter 2013, compared with net income of $824 million, $0.86
per share, for third-quarter 2012. Net income attributable to
common stock for the first nine months of 2013 totaled $2.0
billion, $1.96 per share, compared with $2.3 billion, $2.41 per
share, for the first nine months of 2012.
- Consolidated sales for
third-quarter 2013 totaled 1.04 billion pounds of copper, 305
thousand ounces of gold, 23 million pounds of molybdenum and 16.5
million barrels of oil equivalents (MMBOE). For the year 2013,
sales are expected to approximate 4.1 billion pounds of copper, 1.1
million ounces of gold, 92 million pounds of molybdenum and 37.5
MMBOE (for the period from June 1, 2013 to December 31, 2013),
including 1.1 billion pounds of copper, 390 thousand ounces of
gold, 21 million pounds of molybdenum and 16 MMBOE for
fourth-quarter 2013.
- Average realized prices for
third-quarter 2013 were $3.28 per pound for copper (compared with
$3.64 per pound in third-quarter 2012), $1,329 per ounce for gold
(compared with $1,728 per ounce in third-quarter 2012) and $104.33
per barrel for oil (excluding impacts of unrealized losses on
derivative contracts).
- Operating cash flows totaled
$1.9 billion (net of $294 million in working capital uses and
changes in other tax payments) for third-quarter 2013 and $3.7
billion (net of $489 million in working capital uses and changes in
other tax payments) for the first nine months of 2013. Based on
current sales volume and cost estimates and assuming average prices
of $3.25 per pound for copper, $1,300 per ounce for gold, $9.50 per
pound for molybdenum and $110 per barrel for Brent crude oil in
fourth-quarter 2013, operating cash flows for the year 2013 are
expected to approximate $6 billion (net of $0.3 billion of net
working capital uses and changes in other tax payments).
- Capital expenditures totaled
$1.6 billion for third-quarter 2013 and $3.6 billion for the first
nine months of 2013. Capital expenditures are expected to
approximate $5.5 billion for the year 2013, including $2.4 billion
for major projects at mining operations and $1.5 billion for oil
and gas operations for the period from June 1, 2013 to December 31,
2013.
- FCX is taking steps to achieve
significant reductions and deferrals of capital
expenditures, operating, exploration and other costs following its
July 2013 announcement of $1.9 billion in targeted reductions for
2013 and 2014. FCX is reviewing its portfolio of assets for
opportunities to accelerate its deleveraging plans through
potential asset sales, joint venture transactions or further
adjustments to capital spending plans.
- At September 30, 2013,
consolidated cash totaled $2.2 billion and consolidated
debt totaled $21.1 billion. During third-quarter 2013, FCX paid
$1.4 billion in common stock dividends, which included $1.0 billion
for a supplemental dividend of $1.00 per share paid on July 1,
2013.
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported net
income attributable to common stock of $821 million, $0.79 per
share, for third-quarter 2013 and $2.0 billion, $1.96 per share,
for the first nine months of 2013, compared with $824 million,
$0.86 per share, for third-quarter 2012 and $2.3 billion, $2.41 per
share, for the first nine months of 2012. FCX’s results for the
2013 periods included net charges for unrealized losses on oil and
gas derivative contracts totaling $98 million to net income
attributable to common stock, $0.09 per share, for third-quarter
2013 and $120 million to net income attributable to common stock,
$0.12 per share, for the first nine months of 2013 (reflecting the
period from June 1, 2013 to September 30, 2013).
James R. Moffett, Chairman of the Board; Richard C. Adkerson,
Vice Chairman, and FCX President and Chief Executive Officer; and
James C. Flores, Vice Chairman, and FM O&G President and Chief
Executive Officer, said, "Our third quarter results reflect strong
operating performance from our global mining business together with
an impressive and significant contribution from our recently
acquired oil and gas operations. We advanced several important
capital projects during the quarter which position us for
significant future growth. We remain focused on solid execution of
our plans to generate strong margins and cash flows which will
enable us to invest prudently in financially attractive growth
opportunities, execute on our commitment to achieve previously
announced debt reduction targets and provide attractive cash
returns to shareholders. Our portfolio of operating assets
generates significant current cash flows, and our large resource
position provides long-term growth opportunities to build
meaningful values for shareholders."
SUMMARY FINANCIAL DATA
Three Months Ended Nine Months Ended
September 30, September 30, 2013
2012 2013
a
2012 (in millions, except per share amounts)
Revenuesb $ 6,165 c $ 4,417 $ 15,036 c $ 13,497 Operating income $
1,707 d $ 1,411 d $ 3,701 d,e $ 4,456 d Net income attributable to
common stockf $ 821 c,d $ 824 d,g $ 1,951 c,d,e,h,i $ 2,298 d,g,i
Diluted net income per share of common stock $ 0.79 c,d $ 0.86 d,g
$ 1.96 c,d,e,h,i $ 2.41 d,g,i Diluted weighted-average common
shares outstanding 1,043 953 993 953 Operating cash flowsj $ 1,878
$ 526 $ 3,743 $ 2,509 Capital expenditures $ 1,645 $ 971 $ 3,623 $
2,518 At September 30: Cash and cash equivalents $ 2,219 $ 3,727 $
2,219 $ 3,727 Total debt, including current portion $ 21,123 $
3,523 $ 21,123 $ 3,523
a. Includes the results of
Freeport-McMoRan Oil & Gas (FM O&G) beginning June 1,
2013.
b. Includes adjustments to provisionally
priced concentrate and cathode copper sales recognized in prior
periods. For further discussion, refer to the supplemental schedule
"Derivative Instruments" on page IX, which is available on FCX's
website, "www.fcx.com."
c. Includes charges for unrealized losses
on oil and gas derivative contracts totaling $158 million ($98
million to net income attributable to common stock or $0.09 per
share) in third-quarter 2013 and $194 million ($120 million to net
income attributable to common stock or $0.12 per share) for the
first nine months of 2013 (reflecting the four-month period from
June 1, 2013 to September 30, 2013). For further discussion, refer
to the supplemental schedule, "Derivative Instruments" on page IX,
which is available on FCX's website, "www.fcx.com."
d. Includes net credits for adjustments to
environmental obligations and related litigation reserves totaling
$22 million ($14 million to net income attributable to common stock
or $0.01 per share) in third-quarter 2013, $85 million ($68 million
to net income attributable to common stock or $0.07 per share) in
third-quarter 2012, $14 million ($7 million to net income
attributable to common stock or $0.01 per share) for the first nine
months of 2013 and $19 million ($16 million to net income
attributable to common stock or $0.02 per share) for the first nine
months of 2012.
e. The first nine months of 2013 include
transaction and related costs totaling $76 million ($47 million to
net income attributable to common stock or $0.05 per share)
principally associated with FCX's oil and gas acquisitions.
f. FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. Refer
to the "Consolidated Statements of Income" on page V for a summary
of net impacts from changes in these deferrals.
g. The 2012 periods include a net credit
of $100 million, net of noncontrolling interests, ($0.11 per share)
associated with adjustments to deferred income taxes. For further
discussion, refer to the supplemental schedule, "Provision for
Income Taxes," on page VIII, which is available on FCX's website,
"www.fcx.com."
h. The first nine months of 2013 include
gains associated with FCX's oil and gas acquisitions, including (i)
$128 million to net income attributable to common stock ($0.13 per
share) primarily related to FCX's preferred stock investment in and
the subsequent acquisition of McMoRan Exploration Co. (MMR), and
(ii) $183 million to net income attributable to common stock ($0.18
per share) associated with net reductions in FCX's deferred tax
liabilities and deferred tax asset valuation allowances.
i. Includes losses on early extinguishment
of debt totaling $36 million to net income attributable to common
stock ($0.04 per share) for the first nine months of 2013 related
to the termination of the acquisition bridge loan facilities and
$149 million to net income attributable to common stock ($0.16 per
share) for the first nine months of 2012 associated with the
redemption of FCX's remaining 8.375% senior notes.
j. Includes net working capital uses and
changes in other tax payments of $294 million for third-quarter
2013, $765 million for third-quarter 2012, $489 million for the
first nine months of 2013 and $1.5 billion for the first nine
months of 2012.
SUMMARY OPERATING DATA
Three Months Ended Nine Months Ended September
30, September 30, 2013 2012
2013 a
2012 Copper (millions of
recoverable pounds) Production 1,063 938 2,952 2,658 Sales,
excluding purchases 1,041 922 2,946 2,676 Average realized price
per pound $ 3.28 $ 3.64 $ 3.31 $ 3.63 Site production and delivery
costs per poundb $ 1.85 $ 2.03 $ 1.96 $ 2.00 Unit net cash costs
per poundb $ 1.46 $ 1.62 $ 1.62 $ 1.46
Gold (thousands of
recoverable ounces) Production 327 204 713 707 Sales, excluding
purchases 305 202 692 756 Average realized price per ounce $ 1,329
$ 1,728 $ 1,395 $ 1,666
Molybdenum (millions of recoverable
pounds) Production 25 20 71 61 Sales, excluding purchases 23 21 71
62 Average realized price per pound $ 11.21 $ 13.62 $ 12.12 $ 14.79
Oil Equivalents Sales volumes: MMBOE 16.5 21.5 MBOE per day
179 176 Cash operating margin per BOE:
Realized revenuesc
$ 80.93 $ 79.40 Less: Cash production costsc 16.80 16.76
Cash operating marginc $ 64.13 $ 62.64
a. Reflects the operating results of FM
O&G beginning June 1, 2013.
b. 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 XIII, which is available on FCX's website,
"www.fcx.com."
c. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Realized revenues exclude unrealized gains (losses) on derivative
contracts and cash production costs exclude accretion and other
costs. For reconciliations of realized revenues and cash production
costs per BOE to revenues and production and delivery costs
reported in FCX's consolidated financial statements, refer to the
supplemental schedule “Product Revenues and Production Costs”
beginning on page XIII, which is available on FCX's website,
“www.fcx.com.”
Consolidated Sales Volumes
Third-quarter 2013 consolidated copper sales of 1.04
billion pounds were higher than third-quarter 2012 sales of 922
million pounds reflecting improved volumes throughout FCX's global
mining operations, but were lower than the July 2013 estimate of
1.06 billion pounds because of lower than expected volumes in South
America. Third-quarter 2013 consolidated gold sales of 305
thousand ounces were significantly higher than third-quarter 2012
sales of 202 thousand ounces reflecting anticipated higher ore
grades in Indonesia, but were lower than the July 2013 estimate of
330 thousand ounces reflecting timing of shipments in Indonesia and
lower South America production. Third-quarter 2013 consolidated
molybdenum sales of 23 million pounds were higher than
third-quarter 2012 sales of 21 million pounds and the July 2013
estimate of 22 million pounds.
Third-quarter 2013 copper and gold sales volumes also benefited
from improved operational performance with the resumption of mining
operations at PT Freeport Indonesia following the 38-day temporary
suspension in second-quarter 2013.
Third-quarter 2013 sales from oil and gas operations of 16.5
MMBOE, including 11.5 million barrels of (MMBbls) of crude
oil, 23.6 billion cubic feet (Bcf) of natural gas and
1.0 MMBbls of natural gas liquids (NGLs), were approximately
10 percent higher than the July 2013 estimate of 15 MMBOE,
primarily reflecting strong performance in the Eagle Ford and
Deepwater Gulf of Mexico (GOM) fields.
Consolidated sales for the year 2013 are expected to approximate
4.1 billion pounds of copper, 1.1 million ounces of gold, 92
million pounds of molybdenum and 37.5 MMBOE (for the period from
June 1, 2013 to December 31, 2013), including 1.1 billion pounds of
copper, 390 thousand ounces of gold, 21 million pounds of
molybdenum and 16 MMBOE for fourth-quarter 2013.
Consolidated Unit Costs
Mining Unit Net Cash Costs. Consolidated average unit net cash
costs (net of by-product credits) for FCX's copper mines of $1.46
per pound of copper in third-quarter 2013 were lower than unit net
cash costs of $1.62 per pound in third-quarter 2012 primarily
reflecting higher copper and gold volumes in Indonesia and ongoing
cost control efforts.
Assuming average prices of $1,300 per ounce of gold and $9.50
per pound of molybdenum for fourth-quarter 2013 and achievement of
current sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) for FCX's copper mines are
expected to average approximately $1.58 per pound of copper for the
year 2013. Quarterly unit net cash costs vary with fluctuations in
sales volumes and average realized prices (primarily gold and
molybdenum prices). Unit net cash costs are expected to decline in
2014, compared to the 2013 average, as FCX gains access to higher
grade ore in Indonesia.
Oil and Gas Cash Production Costs per BOE. Cash production costs
for oil and gas operations were $16.80 per BOE in third-quarter
2013 benefiting from strong production volumes and operational
efficiencies. Based on current sales volume and cost estimates for
fourth-quarter 2013, cash production costs per BOE are expected to
approximate $17 per BOE for the period from June 1, 2013 to
December 31, 2013.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit
copper mines in North America - Morenci, Bagdad, Safford, Sierrita
and Miami in Arizona, and Chino and Tyrone 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, the Sierrita, Bagdad, Morenci and Chino mines also
produce molybdenum concentrates.
Operating and Development Activities. FCX has increased
production from its North America copper mines in recent years and
continues to evaluate a number of opportunities to invest in
additional production capacity following positive exploration
results. Future investments will be undertaken based on the results
of economic and technical feasibility studies and taking into
consideration market conditions.
At Morenci, FCX is expanding mining and milling capacity to
process additional sulfide ores identified through exploratory
drilling. The 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. The targeted increase in
mining rates has been achieved and construction activities for the
new mill and related facilities are being advanced. Construction is
over 40 percent complete and the project is on track for completion
in the first half of 2014. At September 30, 2013,
approximately $0.8 billion had been incurred for this project, with
approximately $0.8 billion remaining to be incurred.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the third quarters and first
nine months of 2013 and 2012:
Three Months Ended Nine
Months Ended September 30, September 30,
2013 2012 2013 2012
Copper (millions of recoverable pounds) Production 354 337
1,046 1,005 Sales 363 331 1,088 1,030 Average realized price per
pound $ 3.27 $ 3.58 $ 3.37 $ 3.66
Molybdenum
(millions of recoverable pounds) Productiona 9 8 26 27
Unit net cash costs per pound of copperb: Site
production and delivery, excluding adjustments $ 2.00 $ 1.97 $ 2.03
$ 1.88 By-product credits (0.24 ) (0.32 ) (0.25 ) (0.37 ) Treatment
charges 0.10 0.12 0.10 0.12 Unit net
cash costs $ 1.86 $ 1.77 $ 1.88 $ 1.63
a. Refer to summary operating data on page
3 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the North America copper mines.
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 XIII, which is available on FCX's website,
"www.fcx.com."
North America's consolidated copper sales volumes of 363 million
pounds in third-quarter 2013 were higher than third-quarter 2012
sales of 331 million pounds. Sales from the North America copper
mines are expected to approximate 1.44 billion pounds of copper for
the year 2013, compared with 1.35 billion pounds in 2012. North
America copper production is expected to continue to improve in
2014 following the completion of the Morenci mill expansion
project.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.86 per pound of copper in
third-quarter 2013 were higher than unit net cash costs of $1.77
per pound in third-quarter 2012, primarily reflecting lower
molybdenum credits. Average unit net cash costs (net of by-product
credits) for the North America copper mines are expected to
approximate $1.86 per pound of copper for the year 2013, based on
current sales volume and cost estimates and assuming an average
molybdenum price of $9.50 per pound for fourth-quarter 2013.
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 the Candelaria and Ojos del Salado mining complex. All
operations in South America are consolidated in FCX's financial
statements. In addition to copper, the Candelaria and Ojos del
Salado mines produce gold and silver, and the Cerro Verde mine
produces molybdenum concentrates.
Development Activities. Construction activities associated with
a large-scale expansion at Cerro Verde are in progress. Engineering
is approximately 80 percent complete and earthworks have commenced.
The project will 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. At September 30, 2013, approximately $1.1
billion had been incurred for this project, with approximately $3.5
billion remaining to be incurred. Project cost estimates, based on
current labor contract rates, have been revised from $4.4 billion
to $4.6 billion following advanced engineering and an updated cost
review. Efforts are underway to mitigate cost escalation associated
with the project.
FCX continues to evaluate a potential large-scale milling
operation at El Abra to process additional sulfide material and to
achieve higher recoveries. Exploration results in recent years at
El Abra indicate a significant sulfide resource, which could
potentially support a major mill project. Future investments will
be dependent on technical studies, economic factors and global
copper market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the third quarters and
first nine months of 2013 and 2012:
Three Months Ended Nine
Months Ended September 30, September 30,
2013 2012 2013 2012
Copper (millions of recoverable pounds) Production 347 311
944 908 Sales 323 308 923 895 Average realized price per pound $
3.30 $ 3.68 $ 3.30 $ 3.63
Gold (thousands of
recoverable ounces) Production 30 20 70 57 Sales 26 21 68 56
Average realized price per ounce $ 1,335 $ 1,736 $ 1,415 $ 1,678
Molybdenum (millions of recoverable pounds)
Productiona 4 2 8 6
Unit net cash costs per pound of
copperb: Site production and delivery, excluding
adjustments $ 1.49 $ 1.63 $ 1.57 $ 1.58 By-product credits (0.22 )
(0.25 ) (0.25 ) (0.26 ) Treatment charges 0.16 0.17
0.17 0.16 Unit net cash costs $ 1.43 $ 1.55
$ 1.49 $ 1.48
a. Refer to summary operating data on page
3 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at Cerro Verde.
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 XIII, which is available on FCX's website,
"www.fcx.com."
South America's consolidated copper sales volumes of 323 million
pounds in third-quarter 2013 were higher than third-quarter 2012
sales of 308 million pounds primarily reflecting increased
production at Candelaria. While third-quarter 2013 sales exceeded
the prior year quarter, sales were below the July 2013 estimates
primarily because of lower production at Candelaria and El Abra and
the timing of shipments from Cerro Verde. Sales from South America
mining are expected to approximate 1.3 billion pounds of copper for
the year 2013, compared with sales of 1.25 billion pounds of copper
in 2012, primarily reflecting higher grade ore at Candelaria.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.43 per pound of copper in third-quarter
2013 were lower than unit net cash costs of $1.55 per pound in
third-quarter 2012 primarily reflecting higher volumes and lower
energy costs. Average unit net cash costs (net of by-product
credits) for South America mining are expected to approximate $1.46
per pound of copper for the year 2013, based on current sales
volume and cost estimates and assuming average prices of $1,300 per
ounce of gold and $9.50 per pound of molybdenum for fourth-quarter
2013.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT Freeport Indonesia, FCX's assets include
one of the world's largest copper and gold deposits at the Grasberg
minerals district in Papua, Indonesia. PT Freeport Indonesia
operates a proportionately consolidated joint venture, which
produces copper concentrates that contain significant quantities of
gold and silver.
Development Activities. FCX has several projects in progress in
the Grasberg minerals district related to the development of
large-scale, long-lived, high-grade underground ore bodies. In
aggregate, these underground ore bodies are expected to ramp up
over several years to produce approximately 240,000 metric tons of
ore per day following the transition from the Grasberg open pit,
currently anticipated to occur in 2017. Development of the Grasberg
Block Cave and Deep Mill Level Zone (DMLZ) mines is advancing to
enable DMLZ to commence production in 2015 and the Grasberg Block
Cave mine to commence production in 2017. Over the next five years,
estimated aggregate capital spending on these projects is currently
expected to average $800 million per year ($630 million per year
net to PT Freeport Indonesia).
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the third quarters and
first nine months of 2013 and 2012:
Three Months Ended Nine
Months Ended September 30, September 30,
2013 2012 2013 2012
Copper (millions of recoverable pounds) Production 253 199
611 495 Sales 237 195 593 512 Average realized price per pound $
3.30 $ 3.72 $ 3.27 $ 3.64
Gold (thousands of
recoverable ounces) Production 297 182 640 641 Sales 278 178 620
691 Average realized price per ounce $ 1,330 $ 1,728 $ 1,393 $
1,665
Unit net cash costs per pound of
coppera: Site production and delivery, excluding
adjustments $ 2.30 $ 2.96 $ 2.74 $ 3.20 Gold and silver credits
(1.65 ) (1.66 ) (1.52 ) (2.34 ) Treatment charges 0.23 0.22 0.23
0.21 Royalty on metals 0.11 0.13 0.12 0.13
Unit net cash costs $ 0.99 $ 1.65 $ 1.57
$ 1.20
a. 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 XIII, which is available on FCX's website,
"www.fcx.com."
Indonesia's third-quarter 2013 copper sales of 237 million
pounds and gold sales of 278 thousand ounces were higher than
third-quarter 2012 copper sales of 195 million pounds and gold
sales of 178 thousand ounces resulting primarily from higher ore
grades and increased mill rates. The ramp-up in production during
third-quarter 2013 was in line with July 2013 estimates, with mill
rates averaging 198,200 metric tons of ore per day. During
third-quarter 2013, the Deep Ore Zone underground mine's rates
averaged 47,600 metric tons of ore per day and are expected to
reach 80,000 metric tons of ore per day by mid-2014.
As anticipated, ore grades improved from levels experienced in
recent quarters and PT Freeport Indonesia expects to mine higher
grade ores in 2014 through 2016 compared with average ore grades in
2012 and 2013.
At the Grasberg mine, the sequencing of mining areas with
varying ore grades causes fluctuations in quarterly and annual
production of copper and gold. Sales from Indonesia mining are
expected to approximate 0.9 billion pounds of copper and 1.0
million ounces of gold for the year 2013, compared with 0.7 billion
pounds of copper and 0.9 million ounces of gold for the year 2012.
Sales from Indonesia mining are expected to increase in 2014
through 2016 as PT Freeport Indonesia gains access to higher grade
ore.
A significant portion of PT Freeport Indonesia's costs are fixed
and unit costs vary depending on production volumes. Indonesia's
unit net cash costs (including gold and silver credits) of $0.99
per pound of copper in third-quarter 2013 were lower than unit net
cash costs of $1.65 per pound in third-quarter 2012 reflecting
higher volumes and lower operating costs.
Unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $1.46 per pound of
copper for the year 2013, based on current sales volume and cost
estimates and assuming an average gold price of $1,300 per ounce
for fourth-quarter 2013. Indonesia mining's projected unit net cash
costs would change by approximately $0.03 per pound for each $50
per ounce change in the average price of gold for fourth-quarter
2013. 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 volumes. Indonesia mining's unit net cash costs are
expected to decline in future periods as it continues to gain
access to higher grade ore.
During October 2013, PT Freeport Indonesia reached agreement
with union officials on terms to be incorporated into its bi-annual
Collective Labor Agreement. The terms provide for increased wages
over the two-year period and enhanced pension and other
benefits.
Africa Mining. Through its 56 percent owned and
consolidated subsidiary Tenke Fungurume Mining S.A.R.L. (TFM), FCX
operates the Tenke Fungurume (Tenke) minerals district 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. TFM completed its second
phase expansion project in early 2013, which included optimizing
the current plant and increasing mine, mill and processing
capacity. The expanded mill has a design capacity of 14,000 metric
tons of ore per day, enabling an increase in Tenke's copper
production by an estimated 150 million pounds to over 430 million
pounds per year. The expanded mill facility is performing well,
with third-quarter 2013 average throughput rates of 14,500 metric
tons per day. The addition of a second sulphuric acid plant is
expected to be completed in 2016.
FCX continues to engage in exploration activities and
metallurgical testing to evaluate the potential of the highly
prospective minerals district at Tenke. These analyses are being
incorporated in future plans for potential expansions of production
capacity. Future expansions are subject to a number of factors,
including economic and market conditions, and the business and
investment climate in the DRC.
Operating Data. Following is summary consolidated operating data
for the Africa mining operations for the third quarters and first
nine months of 2013 and 2012:
Three Months Ended Nine
Months Ended September 30, September 30,
2013 2012 2013 2012
Copper (millions of recoverable pounds) Production 109 91
351 250 Sales 118 88 342 239 Average realized price per pounda $
3.19 $ 3.55 $ 3.22 $ 3.54
Cobalt (millions of
contained pounds) Production 8 8 19 20 Sales 6 8 17 19 Average
realized price per pound $ 8.57 $ 8.24 $ 8.10 $ 8.36
Unit
net cash costs per pound of copperb: Site
production and delivery, excluding adjustments $ 1.43 $ 1.63 $ 1.43
$ 1.54 Cobalt creditsc (0.27 ) (0.48 ) (0.26 ) (0.39 ) Royalty on
metals 0.07 0.08 0.06 0.08 Unit net
cash costs $ 1.23 $ 1.23 $ 1.23 $ 1.23
a. Includes point-of-sale transportation
costs as negotiated in customer contracts.
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 XIII, which is available on FCX's website,
"www.fcx.com."
c. Net of cobalt downstream processing and
freight costs.
TFM's copper sales of 118 million pounds in third-quarter 2013
were higher than third-quarter 2012 copper sales of 88 million
pounds, primarily reflecting increased mining and milling rates and
higher ore grades. TFM's sales are expected to approximate 460
million pounds of copper and 24 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.
During third-quarter 2013, TFM experienced several power
interruptions, which impacted operating rates. While the situation
has improved, TFM is working closely with its power provider and
DRC authorities to address the situation.
Africa mining's unit net cash costs (net of cobalt credits) of
$1.23 per pound of copper in third-quarter 2013 were consistent
with third-quarter 2012 as lower cobalt credits were offset by
higher volumes. Unit net cash costs (net of cobalt credits) for
Africa mining are expected to approximate $1.24 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 for
fourth-quarter 2013. Africa mining's projected unit net cash costs
would change by approximately $0.02 per pound for each $2 per pound
change in the average price of cobalt for fourth-quarter 2013.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines in North America - the Henderson underground mine and the
Climax open-pit mine, both in Colorado. The Henderson and Climax
mines produce high-purity, chemical-grade molybdenum concentrates,
which are typically further processed into value-added molybdenum
chemical products.
Operating Data. Following is summary consolidated operating data
for the molybdenum mines for the third quarters and first nine
months of 2013 and 2012:
Three Months Ended Nine
Months Ended September 30, September 30,
2013 2012 2013 2012
Molybdenum production (millions of recoverable pounds)a 12 10 37 28
Unit net cash cost per pound of molybdenumb $ 7.15 $ 7.11 $
7.08 $ 6.94
a. Refer to summary operating data on page
3 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the molybdenum mines, and from the North and
South America copper mines.
b. Unit net cash costs per pound of
molybdenum for the 2013 periods reflect the results of the
Henderson and Climax mines, and the 2012 periods reflect the
results of only the Henderson mine as startup activities were still
underway for the Climax mine. 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 XIII, which is available on FCX's website,
"www.fcx.com."
Average unit net cash costs for the molybdenum mines of $7.15
per pound of molybdenum in third-quarter 2013 were similar to
Henderson's unit net cash costs of $7.11 per pound in third-quarter
2012. Based on current sales volume and cost estimates, unit net
cash costs for the molybdenum mines are expected to average
approximately $7.15 per pound of molybdenum for the year 2013.
Market conditions for molybdenum have declined in 2013 resulting
from weak demand in the metallurgical sector and increased supply.
FCX will review market conditions and may make adjustments to its
primary molybdenum production as market conditions warrant.
Mining 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. 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 associated with mining operations is
expected to approximate $185 million for the year 2013, compared to
$251 million in 2012. Exploration activities will continue to focus
primarily on the potential for future reserve additions in FCX's
existing minerals districts.
OIL & GAS OPERATIONS
In late May and early June 2013, FCX completed acquisitions of
Plains Exploration & Production Company (PXP) and MMR
(collectively FM O&G), adding an attractive oil and gas
portfolio to its global mining business. FCX's oil and gas
operations provide exposure to energy markets with positive
fundamentals, strong margins and cash flows and a large resource
base with financially attractive exploration and development
investment opportunities. The portfolio of assets includes
significant oil production facilities and growth potential in the
Deepwater GOM, strong oil production from the onshore Eagle Ford
trend in Texas, established oil production facilities onshore and
offshore California, large onshore resources in the Haynesville
natural gas trend in Louisiana, and an industry leading position in
the emerging shallow water, ultra-deep gas trend on the Shelf of
the GOM and onshore in South Louisiana. More than 90 percent of
FCX's oil and gas revenues are from oil and NGLs.
FM O&G follows the full cost method of accounting whereby
all costs associated with oil and gas acquisition, exploration and
development activities are capitalized. Capitalized costs, along
with estimated future costs to develop proved reserves, are
amortized to expense under the unit-of-production method using
estimates of proved oil and natural gas reserves. The costs of
unproved oil and gas properties are excluded from amortization
until the properties are evaluated, at which time the related costs
are subject to amortization. Under the full cost accounting rules,
a "ceiling test" is conducted each quarter to review the carrying
value of the oil and gas properties for impairment.
Financial and Operating Data. Following is summary financial and
operating data for the oil and gas operations for third-quarter
2013 and the four-month period from June 1, 2013 to
September 30, 2013:
Four Months From Three Months
Ended June 1, 2013 to September 30, 2013
September 30, 2013 Financial Summary (in millions):
Realized revenuesa $ 1,333 $ 1,705 Less: Cash production costsa 277
360 Cash operating margin $ 1,056 $ 1,345 Capital
expenditures $ 738 $ 928
Sales Volumes: Oil (MMBbls) 11.5
14.9 Natural gas (Bcf) 23.6 31.3 NGLs (MMBbls) 1.0 1.3 MMBOE 16.5
21.5
Average Realizationsa: Oil (per barrel) $
104.33 $ 102.76 Natural gas (per MMbtu) $ 3.97 $ 3.94 NGLs (per
barrel) $ 37.16 $ 36.70
Cash Operating Margin per
BOEa: Realized revenues $ 80.93 $ 79.40 Less:
Cash production costs 16.80 16.76 Cash operating margin $
64.13 $ 62.64
a. Cash operating margin for FCX's oil and
gas operations reflects realized revenues less cash production
costs. Realized revenues exclude unrealized gains (losses) on
derivative contracts and cash production costs exclude accretion
and other costs. For reconciliations of realized revenues and cash
production costs to revenues and production and delivery costs
reported in FCX's consolidated financial statements, refer to the
supplemental schedule “Product Revenues and Production Costs”
beginning on page XIII, which is available on FCX's website,
“www.fcx.com.”
Third-quarter 2013 realized revenues for oil and gas operations
totaled $1.3 billion ($80.93 per BOE) and cash production costs
totaled $277 million ($16.80 per BOE).
Third-quarter 2013 average realized price for oil was $104.33
per barrel. Excluding the impact of derivative contracts, the
third-quarter 2013 average realized price for crude oil was $106.00
per barrel, or 97 percent of the average Brent crude oil price of
$109.59 per barrel.
Third-quarter 2013 average realized price for natural gas was
$3.97 per million British thermal units (MMBtu), compared to the
New York Mercantile Exchange (NYMEX) gas price for the September
2013 contract of $3.58 per MMBtu. Excluding the impact of
derivative contracts, the third-quarter 2013 average realized price
for natural gas was $3.67 per MMBtu.
Following is a summary of sales volumes per day by region for
oil and gas operations for third-quarter 2013 and the four-month
period from June 1, 2013 to September 30, 2013:
Four Months From Three Months
Ended June 1, 2013 to September 30, 2013
September 30, 2013 Sales Volumes (MBOE per day): GOMa
73 71 Eagle Ford 46 45 California 39 38 Haynesville/Madden/Other 21
22 Total oil and gas operations 179 176
a. Includes sales from properties on the
GOM Shelf and in the Deepwater GOM. Production from the GOM Shelf
totaled 13 MBOE per day (18 percent of the GOM total) for both
third-quarter 2013 and the four-month period from June 1, 2013 to
September 30, 2013.
Third-quarter 2013 daily sales volumes averaged 179 MBOE,
including 125 MBbls of crude oil per day, 256 MMcf of natural gas
per day and 11 MBbls of NGLs per day. Production volumes were
approximately 10 percent above the July 2013 estimate, reflecting
strong performance from the Eagle Ford and Deepwater GOM and
continued stable production from California. For fourth-quarter
2013, sales volumes from oil and gas operations are expected to
average 175 MBOE per day, comprised of 70 percent oil, 24 percent
natural gas and 6 percent NGLs.
Cash production costs averaged $16.80 per BOE in third-quarter
2013 and benefited from improved production performance and
operational efficiency. Based on current sales volume and cost
estimates for fourth-quarter 2013, cash production costs are
expected to approximate $17 per BOE for the year 2013 (reflecting
results beginning June 1, 2013).
Exploration, Operating and Development Activities. FCX's
oil and gas business has significant proved, probable and possible
reserves, and a large resource position with financially attractive
organic growth opportunities. The portfolio includes a broad range
of relatively low-risk development opportunities and high-potential
exploration prospects. The business will be managed to reinvest its
cash flows in projects with attractive rates of returns and risk
profiles.
Capital expenditures for oil and gas operations approximated
$0.7 billion for third-quarter 2013, including $221 million in
Eagle Ford, $180 million in GOM (including GOM Shelf), $81 million
in California and $86 million in the Ultra-deep Trend. Capital
expenditures for oil and gas operations, which are expected to be
funded by FM O&G's operating cash flows, are projected to
approximate $1.5 billion for the period from June 1, 2013 to
December 31, 2013, including $0.4 billion in the Deepwater GOM,
$0.5 billion in Eagle Ford and $0.2 billion in the Ultra-deep
Trend.
Gulf of Mexico. Multiple development and exploration
opportunities have been identified in the Deepwater GOM that are
expected to benefit from tieback opportunities to available
production capacity at the FM O&G operated large-scale
Holstein, Marlin and Horn Mountain deepwater production platforms.
Third-quarter 2013 production performance benefited from successful
well stimulation activities and lower than expected downtime. In
third-quarter 2013, FM O&G conducted activities to prepare the
platform rig at Holstein for drilling in 2014.
At the Lucius development in Keathley Canyon (in which FM
O&G has a 23.33 percent working interest) the sixth planned
well, which encountered approximately 600 net feet of oil pay in
the Pliocene with all sands full to base, has been drilled and is
currently being completed. The geologic results from the six wells
drilled confirm a significant oil resource. During third-quarter
2013 the truss spar hull was anchored in place. The sanctioned
development of Lucius is a subsea development consisting of a truss
spar hull located in 7,200 feet of water with a topside capacity of
80 MBbls of oil per day and 450 MMcf of gas per day. First
production is anticipated in the second half of 2014.
Eagle Ford. FM O&G has an attractive position in an oil and
NGLs rich section of the Eagle Ford shale play, located in South
Texas. Production from the field has grown significantly in recent
years and averaged 46 MBOE per day in third-quarter 2013. At the
end of third-quarter 2013, there were seven drilling rigs operating
(of which four were operated by FM O&G) and 35 wells were
drilled but waiting on completion or connection to pipelines. The
current drilling program decreases the number of drilling rigs
which FM O&G operates to three in fourth-quarter 2013.
California. Development plans are principally focused on
maintaining stable production levels in the long established
producing fields principally onshore California. Production
averaged 39 MBOE per day in third-quarter 2013, with 95 percent
from oil.
Haynesville. FM O&G has rights to a substantial natural gas
resource, estimated to exceed five trillion cubic feet (Tcf),
located in the Haynesville shale play in north Louisiana. Drilling
activities in recent years have been significantly reduced as a
result of low natural gas prices. The field is currently being
operated to maximize cash flows in a low natural gas price
environment. FM O&G has flexibility to manage its drilling
program and large resource to benefit from potentially higher
future natural gas prices.
Ultra-deep Trend. FM O&G has a industry leading position in
the emerging ultra-deep trend with a significant onshore and
offshore lease acreage position with high quality prospects and the
potential to develop a significant long-term, low-cost source of
natural gas. Data from seven wells drilled to date indicate
the presence of geologic formations that are analogous to
productive formations in the Deepwater GOM and onshore in the Gulf
Coast region. The near-term focus is on further defining the
trend onshore. FM O&G currently has one onshore ultra-deep
exploration prospect in-progress, and plans to complete and perform
production tests on three wells in 2014, including one onshore
well.
The Lomond North exploratory well in the Highlander area (in
which FM O&G has a 72 percent working interest) is currently
drilling below 26,800 feet towards a proposed total depth of 30,000
feet to evaluate Lower Wilcox and Cretaceous objectives below the
salt weld. The Lineham Creek exploration well (in which FM O&G
has a 36 percent working interest) located in Cameron Parish was
sidetracked and drilled to 24,600 feet. The results of the Lineham
Creek well are under review, and FM O&G plans to propose a
completion operation in the sands above 24,000 feet under the
Operating Agreement. During 2014, FCX also plans to complete
the Davy Jones No. 2 well (in which FM O&G has a 75 percent
working interest) located on South Marsh Island Block 234, and the
Blackbeard West No.2 well (in which FM O&G has a 69 percent
working interest) located on Ship Shoal Block 188.
Gulf of Mexico Shelf. During third-quarter 2013, FCX initiated a
process to evaluate alternatives for its shelf oil and gas
properties, including a possible divestment. Evaluation of these
alternatives is ongoing.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.9
billion (net of $294 million in working capital uses and changes in
other tax payments) for third-quarter 2013 and $3.7 billion (net of
$489 million in working capital uses and changes in other tax
payments) for the first nine months of 2013.
Based on current sales volume and cost estimates and assuming
average prices of $3.25 per pound of copper, $1,300 per ounce of
gold, $9.50 per pound of molybdenum, and $110 per barrel of Brent
crude oil for fourth-quarter 2013, FCX's consolidated operating
cash flows are estimated to approximate $6 billion (net of $0.3
billion in net working capital uses and changes in other tax
payments) for the year 2013. The impact of price changes during
fourth-quarter 2013 on operating cash flows would approximate $90
million for each $0.10 per pound change in the average price of
copper, $15 million for each $50 per ounce change in the average
price of gold, $15 million for each $2 per pound change in the
average price of molybdenum and $30 million for each $5 per barrel
increase in the price of Brent crude oil.
Capital Expenditures. Capital expenditures totaled $1.6 billion
for third-quarter 2013 and $3.6 billion for the first nine months
of 2013, including capital expenditures for oil and gas operations
totaling $0.7 billion for the third-quarter and $0.9 billion for
the four-month period from June 1, 2013 to September 30,
2013.
Capital expenditures are currently expected to approximate $5.5
billion for the year 2013, including $2.4 billion for major
projects at mining operations and $1.5 billion for oil and gas
operations (for the period from June 1, 2013 to December 31, 2013).
Major projects at mining operations for the year 2013 primarily
include the expansions at Cerro Verde and Morenci and underground
development activities at Grasberg. Capital expenditures for FCX's
oil and gas operations are expected to be funded by its operating
cash flows.
FCX has taken steps during 2013 to reduce or defer capital
expenditures in response to market conditions. Capital spending
plans remain under review and will be revised as market conditions
warrant.
Cash. Following is a summary of cash available to the parent
company, net of noncontrolling interests' share, taxes and other
costs at September 30, 2013 (in billions):
Cash at domestic companies $ 0.1 Cash at
international operations 2.1 Total consolidated cash and
cash equivalents 2.2 Less: Noncontrolling interests' share (0.8 )
Cash, net of noncontrolling interests' share 1.4 Less: Withholding
taxes and other (0.1 )
Net cash available $
1.3
Debt. Following is a summary of total debt and related
weighted-average interest rates at September 30, 2013:
Weighted- September 30, 2013 Average (in
billions) Interest Rate Acquisition-related debt $ 10.5
a
3.1% Assumed debt of PXP and MMR 7.1 7.0% FCX's previously existing
debt 3.5 3.5% $ 21.1 4.4%
a. FCX used the proceeds from
the issuance of $6.5 billion of senior notes and a $4.0 billion
bank term loan to finance the acquisitions of PXP and MMR and repay
certain PXP debt.
FCX is targeting reductions in total debt to $12 billion over
the next three years. FCX will continue to review its portfolio of
assets and will consider opportunities to accelerate its
deleveraging plans through potential asset sales, joint venture
transactions or further adjustments to capital spending plans.
Upon closing of the PXP acquisition, FCX replaced its revolving
credit facility that was scheduled to expire in March 2016 with a
new $3.0 billion senior unsecured revolving credit facility, which
is available through May 2018. At September 30, 2013, FCX had
no borrowings outstanding and $46 million of letters of credit
issued under its revolving credit facility, resulting in
availability of approximately $3.0 billion.
On October 15, 2013, FCX announced its intent to redeem the $0.3
billion of MMR's outstanding 11.875% Senior Notes due 2014 on
November 15, 2013. Holders will receive the principal amount
together with accrued and unpaid interest to the redemption
date.
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 $2.0 billion in the first nine months of 2013, which
included $1.0 billion for a supplemental dividend of $1.00 per
share paid on July 1, 2013.
FCX's current annual dividend rate for its common stock is $1.25
per share. On September 25, 2013, FCX's Board of Directors (the
Board) declared a regular quarterly dividend of $0.3125 per share,
which will be paid on November 1, 2013. The declaration of
dividends is at the discretion of the Board and will depend upon
FCX's financial results, cash requirements, future prospects and
other factors deemed relevant by the Board.
FCX intends to continue to maintain a strong financial position,
with a focus on reducing debt while continuing to invest in
attractive growth projects and providing 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
third-quarter 2013 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, November 22,
2013.
FCX is a premier U.S.-based natural resource company with an
industry leading global portfolio of mineral assets, significant
oil and gas resources and a growing production profile. FCX is the
world's largest publicly traded copper producer.
FCX's portfolio of assets includes the Grasberg minerals
district in Indonesia, one of the world's largest copper and gold
deposits; 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; the Tenke
Fungurume minerals district in the DRC; and significant oil and
natural gas assets in North America, including reserves in the
Deepwater GOM, onshore and offshore California and in the Eagle
Ford and Haynesville shale plays, and an industry leading position
in the emerging shallow water, ultra-deep gas trend on the Shelf of
the GOM and onshore in South Louisiana. 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 projections or expectations relating to ore grades
and milling rates, production and sales volumes, unit net cash
costs, operating cash flows, capital expenditures, exploration
efforts and results, development and production activities and
costs, liquidity, tax rates, the impact of copper, gold,
molybdenum, cobalt, oil and gas price changes, the impact of
derivative positions, the impact of deferred intercompany profits
on earnings, reserve estimates, future dividend payments and
potential share purchases. The words “anticipates,” “may,” “can,”
“plans,” “believes,” “estimates,” “expects,” “projects,” “intends,”
“likely,” “will,” “should,” “to be," ”potential" 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.
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 demand for, and prices of,
copper, gold, molybdenum, cobalt, oil and gas, mine sequencing,
production rates, drilling results, 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, labor relations, the ability
to retain current or future lease acreage rights, unanticipated
hazards for which we have limited or no insurance coverage, failure
of third party partners to fulfill their capital and other
commitments, adverse conditions that could lead to structural or
mechanical failures or increased costs, changes in reserve
estimates, currency translation risks, risks associated with the
integration of recently acquired oil and gas operations, industry
risks, regulatory changes, political risks, weather- and
climate-related risks, environmental risks, litigation results, 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, 2012, filed with the U.S. Securities and Exchange
Commission (SEC) as updated by FCX's 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, oil and gas realized revenues, cash production costs
and cash operating margin, which are not recognized under generally
accepted accounting principles in the U.S. As required by SEC
Regulation G, reconciliations of these measures to amounts reported
in FCX's consolidated financial statements are in the supplemental
schedules of this press release, which are also available on FCX's
website, "www.fcx.com."
FREEPORT-McMoRan COPPER & GOLD INC. SELECTED
MINING OPERATING DATA
Three Months Ended September 30, Production Sales
COPPER
(millions of recoverable pounds)
2013 2012 2013 2012 (FCX's net interest in %)
North
America
Morenci (85%)a 137 136 141 132 Bagdad (100%) 56 51 56 49 Safford
(100%) 38 37 39 40 Sierrita (100%) 47 38 47 38 Miami (100%) 15 14
16 15 Chino (100%) 36 39 39 35 Tyrone (100%) 24 21 24 21 Other
(100%) 1 1 1 1 Total North America 354 337 363 331
South
America
Cerro Verde (53.56%) 147 153 133 155 El Abra (51%) 81 85 84 74
Candelaria/Ojos del Salado (80%) 119 73 106 79 Total South
America 347 311 323 308
Indonesia
Grasberg (90.64%)b 253 199 237 195
Africa
Tenke Fungurume (56%) 109 91 118 88
Consolidated 1,063 938 1,041
922 Less noncontrolling interests 203 186 198 181
Net 860 752 843 741
Consolidated sales from mines 1,041 922 Purchased copper 79
45 Total copper sales, including purchases 1,120 967 Average
realized price per pound $ 3.28 $ 3.64
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) —
2
1 3 South America (80%) 30 20 26 21 Indonesia (90.64%)b 297 182
278 178
Consolidated 327 204
305 202 Less noncontrolling interests 34 21 31
21
Net 293 183 274 181
Average realized price per ounce $ 1,329 $ 1,728
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 7 9 N/A N/A Climax
(100%) 5 1 N/A N/A North America copper mines (100%)a 9 8 N/A N/A
Cerro Verde (53.56%) 4 2 N/A N/A
Consolidated
25 20 23 21 Less noncontrolling
interests 2 1 1 1
Net 23 19
22 20 Average realized price per pound $ 11.21
$ 13.62
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)
8 8 6 8 Less
noncontrolling interests 3 4 3 3
Net 5
4 3 5 Average realized price per
pound $ 8.57 $ 8.24
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.
FREEPORT-McMoRan COPPER & GOLD INC. SELECTED
MINING OPERATING DATA (continued)
Nine Months Ended September 30, Production Sales
COPPER
(millions of recoverable pounds)
2013 2012 2013 2012 (FCX's net interest in %)
North
America
Morenci (85%)a 411 395 429 405 Bagdad (100%) 157 147 161 150
Safford (100%) 111 129 119 135 Sierrita (100%) 130 120 132 127
Miami (100%) 43 51 45 54 Chino (100%) 119 99 126 94 Tyrone (100%)
71 61 72 62 Other (100%) 4 3 4 3 Total North America 1,046 1,005
1,088 1,030
South
America
Cerro Verde (53.56%) 405 443 391 440 El Abra (51%) 255 249 256 240
Candelaria/Ojos del Salado (80%) 284 216 276 215 Total South
America 944 908 923 895
Indonesia
Grasberg (90.64%)b 611 495 593 512
Africa
Tenke Fungurume (56%) 351 250 342 239
Consolidated
2,952 2,658 2,946 2,676 Less
noncontrolling interests 581 526 568 517
Net 2,371
2,132 2,378 2,159 Consolidated sales
from mines 2,946 2,676 Purchased copper 182 97 Total copper sales,
including purchases 3,128 2,773 Average realized price per
pound $ 3.31 $ 3.63
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 3 9 4 9 South
America (80%) 70 57 68 56 Indonesia (90.64%)b 640 641 620 691
Consolidated 713 707 692 756
Less noncontrolling interests 74 71 71 76
Net 639
636 621 680 Average realized price per
ounce $ 1,395 $ 1,666
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 22 26 N/A N/A Climax
(100%) 15 2 c N/A N/A North America copper mines (100%)a 26 27 N/A
N/A Cerro Verde (53.56%) 8 6 N/A N/A
Consolidated 71
61 71 62 Less noncontrolling interests 4 3 3 3
Net
67 58 68 59 Average realized
price per pound $ 12.12 $ 14.79
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)
19 20 17 19
Less noncontrolling interests
8 9 8 8
Net 11 11 9 11
Average realized price per pound $ 8.10 $ 8.36
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. Includes results from the Climax mine
since the start of commercial operations in May 2012.
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED MINING OPERATING DATA (continued)
Three Months Ended Nine Months Ended September
30, September 30, 2013 2012 2013 2012
100% North America Copper
Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 993,100
922,100 1,015,400 967,700 Average copper ore grade (percent) 0.22
0.22 0.22 0.22 Copper production (millions of recoverable pounds)
216 211 651 639
Mill
Operations
Ore milled (metric tons per day) 247,400 242,700 246,300 235,700
Average ore grades (percent): Copper 0.38 0.37 0.39 0.37 Molybdenum
0.03 0.03 0.03 0.03 Copper recovery rate (percent) 86.3 85.4 84.6
83.5 Production (millions of recoverable pounds):
Copper
163 150 469 436 Molybdenum 9 8 26 27
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 287,500
248,100 276,600 229,100 Average copper ore grade (percent) 0.48
0.55 0.49 0.55 Copper production (millions of recoverable pounds)
110 115 329 346
Mill
Operations
Ore milled (metric tons per day) 189,900 191,400 191,000 190,000
Average ore grades: Copper (percent) 0.71 0.59 0.62 0.58 Gold
(grams per metric ton) 0.14 0.09 0.11 0.09 Molybdenum (percent)
0.03 0.02 0.02 0.02 Copper recovery rate (percent) 90.5 90.7 90.4
89.5 Production (recoverable): Copper (millions of pounds) 237 196
615 562 Gold (thousands of ounces) 30 20 70 57 Molybdenum (millions
of pounds) 4 2 8 6
100% Indonesia Mining Ore milled
(metric tons per day)a Grasberg open pit 149,000 136,500 122,700
116,700 DOZ underground mine 47,600 48,300 45,900 42,300 Big Gossan
underground mine 1,600 1,900 2,000 1,400 Total 198,200 186,700
170,600 160,400 Average ore grades: Copper (percent) 0.74 0.63 0.71
0.61 Gold (grams per metric ton) 0.65 0.46 0.57 0.60 Recovery rates
(percent): Copper 89.7 87.7 89.1 88.6 Gold 80.3 71.4 76.3 76.7
Production (recoverable): Copper (millions of pounds) 253 199 611
495 Gold (thousands of ounces) 297 182 640 641
100%
Africa Mining Ore milled (metric tons per day) 14,500 13,600
14,700 12,900 Average ore grades (percent): Copper 3.94 3.60 4.32
3.56 Cobalt 0.43 0.38 0.36 0.37 Copper recovery rate (percent) 91.6
92.9 91.7 91.6 Production (millions of pounds): Copper
(recoverable) 109 91 351 250 Cobalt (contained) 8 8 19 20
100% Molybdenum Minesb Ore milled (metric tons per
day) 34,700 21,400 36,500 21,100 Average molybdenum ore grade
(percent) 0.20 0.23 0.19 0.23 Molybdenum production (millions of
recoverable pounds) 12 9 37 26
a. Amounts represent the approximate
average daily throughput processed at PT Freeport Indonesia's mill
facilities from each producing mine.
b. The 2013 periods reflect the results of
the Henderson and Climax mines; the 2012 periods reflect the
results of only the Henderson mine, as startup activities were
still underway for the Climax mine.
FREEPORT-McMoRan COPPER & GOLD INC. SELECTED
OIL AND GAS OPERATING DATA
Four Months From
Three Months Ended
June 1, 2013 to
September 30, 2013
September 30, 2013
Sales Volumes
(in MMBbls, Bcf and MMBOE)a
Sales per Day
(in MBbls, MMcf and MBOE)a
Sales Volumes
(in MMBbls, Bcf and MMBOE)a
Sales per Day
(in MBbls, MMcf and MBOE)a
FCX CONSOLIDATED OIL AND GAS OPERATIONS Oil (barrels)
11.5 125 14.9 122 Natural gas (cubic feet) 23.6 256 31.3 258
Natural gas liquids (NGLs, in barrels) 1.0 11 1.3 11 Barrels of oil
equivalents (BOE) 16.5 179 21.5 176 Cash operating margin per BOEb:
Realized revenue $ 80.93 $ 79.40 Less: Cash production costs 16.80
16.76 Cash operating margin $ 64.13 $ 62.64 Depreciation, depletion
and amortization per BOE $ 34.15
$ 34.07 Capital expenditures (in millions) $ 738 c $ 928 c
GULF OF MEXICO (GOM)d Oil (barrels) 4.9 54 6.3 52
Natural gas (cubic feet) 7.7 84 10.1 84 NGLs (barrels) 0.5 5 0.6 5
BOE 6.7 73 8.6 71 Average realized price per BOEb $ 89.05 $ 86.61
Cash production costs per BOEb $ 14.00 $ 14.01 Capital expenditures
(in millions) $ 266
c
$ 360 c
EAGLE FORD Oil (barrels) 3.1 33 4.0 33
Natural gas (cubic feet) 3.7 40 4.8 40 NGLs (barrels) 0.5 6 0.7 6
BOE 4.2 46 5.5 45 Average realized price per BOEb $ 83.47 $ 81.95
Cash production costs per BOEb $ 12.30 $ 12.42 Capital expenditures
(in millions) $ 221 c $ 299 c
CALIFORNIA Oil
(barrels) 3.4 37 4.5 37 Natural gas (cubic feet) 0.6 7 0.8 6 BOE
3.6 39 4.7 38 Average realized price per BOEb $ 98.75 $ 97.71 Cash
production costs per BOEb $ 30.22 $ 30.40 Capital expenditures (in
millions) $ 81 c $ 110 c
HAYNESVILLE/MADDEN/OTHER Oil
(barrels) 0.1 1 0.1 — e Natural gas (cubic feet) 11.6 125 15.6 128
BOE 2.0 21 2.7 22 Average realized price per BOEb $ 22.08 $ 22.52
Cash production costs per BOEb $ 11.58 $ 10.38 Capital expenditures
(in millions) $ 24 c $ 31 c
a. MMBbls = million barrels; MBbls =
thousand barrels; Bcf = billion cubic feet; MMcf = million cubic
feet; MMBOE = million BOE; MBOE = thousand BOE
b. Cash operating margin for FCX's oil and
gas operations reflects realized revenues less cash production
costs. Realized revenues exclude unrealized gains (losses) on
derivative contracts and cash production costs exclude accretion
and other costs. In addition, derivative instruments for FCX's oil
and gas operations are managed on a consolidated basis;
accordingly, the average realized price per BOE by region does not
reflect adjustments for derivative contracts. For reconciliations
of average realized price and cash production costs per BOE to
revenues and production and delivery costs reported in FCX's
consolidated financial statements, refer to the supplemental
schedule “Product Revenues and Production Costs” beginning on page
XIII, which is available on FCX's website, “www.fcx.com.”
c. Consolidated capital expenditures for
oil and gas operations reflect total spending and include amounts
totaling $146 million in third-quarter 2013 and $128 million for
the four-month period from June 1, 2013 to September 30, 2013,
which are not specifically allocated to the regions; capital
expenditures by region reflect amounts incurred for the respective
periods.
d. Includes properties on the Shelf and in
the Deepwater GOM.
e. Rounds to less than 1 MBbl per day.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September
30, September 30, 2013 2012 2013 2012 (In Millions, Except Per
Share Amounts) Revenues $ 6,165 a,b $ 4,417 a $ 15,036 a,b $ 13,497
a Cost of sales: Production and delivery 3,332 2,592 8,904 7,642
Depreciation, depletion and amortization 919 298
1,778 856 Total cost of sales 4,251 2,890 10,682
8,498 Selling, general and administrative expenses 158 110 457 c
311 Mining exploration and research expenses 57 79 173 214
Environmental obligations and shutdown costs (8 ) d (73 ) d 23
d 18 d Total costs and expenses 4,458 3,006
11,335 9,041 Operating income 1,707 1,411
3,701 4,456 Interest expense, net (162 ) e (42 ) e (351 ) e (148 )
e Losses on early extinguishment of debt — — (45 ) (168 ) Gain on
investment in MMR — — 128 f — Other income (expense), net 3
(15 ) 13 23
Income before income taxes and equity in
affiliated companies' net earnings (losses)
1,548 1,354 3,446 4,163 Provision for income taxes (499 ) (215 ) g
(967 ) f (1,128 ) g Equity in affiliated companies' net earnings
(losses) (1 ) 1 3 — Net income 1,048 1,140
2,482 3,035 Net income attributable to noncontrolling interests
(227 ) (316 ) g (531 ) (737 ) g Net income attributable to FCX
common stock $ 821 h $ 824 h $ 1,951 h $ 2,298
h Net income per share attributable to FCX common
stock: Basic $ 0.79 $ 0.87 $ 1.97 $ 2.42
Diluted $ 0.79 $ 0.86 $ 1.96 $ 2.41
Weighted-average common shares outstanding: Basic
1,038 949 989 949 Diluted 1,043
953 993 953 Dividends declared per
share of common stock $ 0.3125 $ 0.3125 $ 1.9375
$ 0.9375
a. Includes favorable (unfavorable)
adjustments to provisionally priced copper sales recognized in
prior periods totaling $73 million ($35 million to net income
attributable to common stock) in third-quarter 2013, $24 million
($12 million to net income attributable to common stock) in
third-quarter 2012, $(26) million ($(12) million to net income
attributable to common stock) for the first nine months of 2013 and
$101 million ($43 million to net income attributable to common
stock) for the first nine months of 2012. For further discussion,
refer to the supplemental schedule, "Derivative Instruments" on
page IX.
b. Includes charges for unrealized losses
on oil and gas derivative contracts totaling $158 million ($98
million to net income attributable to common stock) in
third-quarter 2013 and $194 million ($120 million to net income
attributable to common stock) for the first nine months of 2013
(reflecting the four-month period from June 1, 2013, to September
30, 2013). For further discussion, refer to the supplemental
schedule, "Derivative Instruments" on page IX.
c. The first nine months of 2013 include
charges totaling $76 million ($47 million to net income
attributable to common stock) for transaction and related costs
principally associated with oil and gas acquisitions.
d. Includes net credits for adjustments to
environmental obligations and related litigation reserves totaling
$22 million ($14 million to net income attributable to common
stockholders) for third-quarter 2013, $85 million ($68 million to
net income attributable to common stockholders) for third-quarter
2012, $14 million ($7 million to net income attributable to common
stockholders) for the first nine months of 2013 and $19 million
($16 million to net income attributable to common stockholders) for
the first nine months of 2012.
e. Consolidated interest expense,
excluding capitalized interest, totaled $223 million in
third-quarter 2013, $56 million in third-quarter 2012, $465 million
for the first nine months of 2013 and $210 million for the first
nine months of 2012. Higher interest expense in the 2013 periods
primarily reflected additional expense associated with
acquisition-related debt.
f. The first nine months of 2013 include
gains associated with the oil and gas acquisitions, including (i)
$128 million to net income attributable to common stock primarily
related to FCX's preferred stock investment in and the subsequent
acquisition of MMR, and (ii) $183 million to net income
attributable to common stock associated with net reductions in
FCX's deferred tax liabilities and deferred tax asset valuation
allowances.
g. The 2012 periods includes a net tax
credit of $208 million ($108 million attributable to noncontrolling
interests and $100 million to net income attributable to common
stockholders) associated with adjustments to deferred income taxes.
For further discussion, refer to the supplemental schedule,
"Provision for Income Taxes" on page VIII.
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 additions (reductions) to net
income attributable to common stock of $2 million in third-quarter
2013, $(34) million in third- quarter 2012, $28 million for the
first nine months of 2013 and $(69) million for the first nine
months of 2012. For further discussion, refer to the supplemental
schedule, "Deferred Profits" on page X.
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 2013 2012 (In
Millions) ASSETS Current assets: Cash and cash equivalents $ 2,219
$ 3,705 Trade accounts receivable 1,749 927 Other accounts
receivable 480 702 Inventories: Materials and supplies, net 1,762
1,504 Mill and leach stockpiles 1,744 1,672 Product 1,347 1,400
Other current assets 305 387 Total current assets
9,606 10,297 Property, plant, equipment and development costs, net
46,647 20,999 Long-term mill and leach stockpiles 2,304 1,955
Goodwill 1,932 — Other assets 2,109 2,189 Total
assets $ 62,598 $ 35,440 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 3,728 $ 2,708 Dividends payable 332 299 Current
portion of reclamation and environmental obligations 257 241
Accrued income taxes 141 93 Current portion of debt 70 2
Total current liabilities 4,528 3,343 Long-term debt, less
current portion 21,053 3,525 Deferred income taxes 6,892 3,490
Reclamation and environmental obligations, less current portion
3,077 2,127 Other liabilities 1,774 1,644 Total
liabilities 37,324 14,129 Redeemable noncontrolling interest
720 — Equity: FCX stockholders' equity: Common stock 117 107
Capital in excess of par value 22,092 19,119 Retained earnings
2,361 2,399 Accumulated other comprehensive loss (484 ) (506 )
Common stock held in treasury (3,681 ) (3,576 ) Total FCX
stockholders' equity 20,405 17,543 Noncontrolling interests 4,149
3,768 Total equity 24,554 21,311 Total
liabilities and equity $ 62,598 $ 35,440
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2013 2012 (In
Millions) Cash flow from operating activities: Net income $ 2,482 $
3,035 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, depletion and amortization
1,778 856 Net losses on oil and gas derivative contracts 205 — Gain
on investment in MMR (128 ) — Stock-based compensation 94 77
Pension plan contributions (62 ) (114 ) Net charges for reclamation
and environmental obligations, including accretion 98 64 Payments
for reclamation and environmental obligations (166 ) (148 ) Losses
on early extinguishment of debt 45 168 Deferred income taxes 169
223 Increase in long-term mill and leach stockpiles (348 ) (184 )
Other, net 65 71 (Increases) decreases in working capital and other
tax payments, excluding amounts from acquisitions: Accounts
receivable 51 (603 ) Inventories (66 ) (581 ) Other current assets
162 (33 ) Accounts payable and accrued liabilities (596 ) 78
Accrued income taxes and other tax payments (40 ) (400 ) Net cash
provided by operating activities 3,743 2,509
Cash flow from investing activities: Capital expenditures: North
America copper mines (795 ) (568 ) South America (734 ) (659 )
Indonesia (720 ) (624 ) Africa (155 ) (428 ) Molybdenum mines (128
) (189 ) Oil and gas operations (928 ) — Other (163 ) (50 )
Acquisition of PXP, net of cash acquired (3,465 ) — Acquisition of
MMR, net of cash acquired (1,628 ) — Acquisition of cobalt chemical
business, net of cash acquired (348 ) — Other, net (24 ) (19 ) Net
cash used in investing activities (9,088 ) (2,537 ) Cash
flow from financing activities: Proceeds from debt 11,229 3,023
Repayments of debt (4,816 ) (3,179 ) Redemption of MMR preferred
stock (227 ) — Cash dividends and distributions paid: Common stock
(1,957 ) (832 ) Noncontrolling interests (157 ) (76 ) Debt
financing costs (113 ) (22 ) Net payments for stock-based awards
(101 ) (3 ) Other, net 1 22 Net cash provided by
(used in) financing activities 3,859 (1,067 ) Net
decrease in cash and cash equivalents (1,486 ) (1,095 ) Cash and
cash equivalents at beginning of year 3,705 4,822
Cash and cash equivalents at end of period $ 2,219 $ 3,727
Freeport-McMoRan Copper & Gold Inc.Financial
Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint,
504-582-4203orMedia Contact:Eric E. Kinneberg,
602-366-7994
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