Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $692 million, $0.47 per share, for
first-quarter 2018. After adjusting for net gains of $13 million,
$0.01 per share, first-quarter 2018 adjusted net income
attributable to common stock totaled $679 million, $0.46 per
share.
- Consolidated sales totaled 993
million pounds of copper, 610 thousand ounces of gold and 24
million pounds of molybdenum for first-quarter 2018.
- Consolidated sales for the year
2018 are expected to approximate 3.8 billion pounds of copper, 2.4
million ounces of gold and 95 million pounds of molybdenum,
including 970 million pounds of copper, 700 thousand ounces of gold
and 24 million pounds of molybdenum for second-quarter 2018.
- Average realized prices for
first-quarter 2018 were $3.11 per pound for copper, $1,312 per
ounce for gold and $11.95 per pound for molybdenum.
- Average unit net cash costs for
first-quarter 2018 were $0.98 per pound of copper and are expected
to average $1.01 per pound of copper for the year 2018.
- Operating cash flows totaled
$1.4 billion (net of $21 million in working capital uses and timing
of other tax payments) for first-quarter 2018. Based on current
sales volume and cost estimates, and assuming average prices of
$3.15 per pound for copper, $1,300 per ounce for gold and $12.00
per pound for molybdenum for the remainder of 2018, operating cash
flows are expected to approximate $5.6 billion (including $0.2
billion in working capital sources and timing of other tax
payments) for the year 2018.
- Capital expenditures for
first-quarter 2018 totaled $402 million (including approximately
$250 million for major mining projects). Capital expenditures for
the year 2018 are expected to approximate $2.0 billion, including
$1.1 billion for major mining projects primarily associated with
underground development activities in the Grasberg minerals
district in Indonesia and development of the Lone Star oxide
project in Arizona.
- During first-quarter 2018, FCX
repaid borrowings totaling $1.5 billion, and in April 2018,
FCX repaid $454 million in debt, consisting of the
redemption of $404 million of senior notes due 2022 and $50 million
of senior notes due 2023.
- At March 31, 2018, consolidated
debt totaled $11.6 billion and consolidated cash totaled
$3.7 billion. FCX had no borrowings and $3.5 billion available
under its revolving credit facility at March 31, 2018.
- In February 2018, FCX's Board of
Directors (the Board) reinstated a cash dividend on FCX's
common stock. On March 28, 2018, FCX declared a quarterly cash
dividend of $0.05 per share, which will be paid on May 1,
2018.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $692 million ($0.47 per share) for
first-quarter 2018, compared with $228 million ($0.16 per share)
for first-quarter 2017. After adjusting for net gains of $13
million ($0.01 per share), adjusted net income attributable to
common stock totaled $679 million ($0.46 per share) for
first-quarter 2018. Refer to the supplemental schedule, "Adjusted
Net Income," on page VI, which is available on FCX's website,
"fcx.com," for additional information.
Richard C. Adkerson, President and Chief Executive Officer,
said, "During the first quarter, our global team maintained our
focus on productivity, cost management and capital discipline. Our
results reflect strong cash flows, continued strengthening of our
balance sheet and advancement of initiatives to build value for
shareholders. We continue to engage in negotiations with the
Indonesian government to restore long-term stability for our
Grasberg operations and look forward to reaching a mutually
positive resolution. Our improved financial position enabled
our Board to reinstate cash dividends to shareholders and a
continuation of strong results and positive market conditions will
enable further strengthening of our balance sheet, investments in
attractive long-term growth projects and the consideration of
additional cash returns to shareholders. Our shareholders are
well positioned to benefit from FCX’s global leadership position in
copper, supported by a large, high-quality portfolio of long-lived,
geographically diverse assets and a positive market outlook for
copper."
SUMMARY FINANCIAL DATA
Three Months Ended March 31, 2018
2017 (in millions, except per share amounts)
Revenuesa,b $ 4,868 $ 3,341 Operating incomea $ 1,459 $ 597 Net
income from continuing operations $ 828 $ 268 Net (loss) income
from discontinued operationsc $ (11 ) $ 38 Net income attributable
to common stockd,e $ 692 $ 228 Diluted net income (loss) per share
of common stock:
Continuing operations $ 0.48 $ 0.13 Discontinued operations (0.01 )
0.03 $ 0.47 $ 0.16 Diluted weighted-average common shares
outstanding 1,458 1,454 Operating cash flowsf $ 1,369 $ 792 Capital
expenditures $ 402 $ 344 At March 31: Cash and cash equivalents $
3,702 $ 4,001 Total debt, including current portion $ 11,606 $
15,363
a.
For segment financial results, refer to
the supplemental schedules, "Business Segments," beginning on page
VIII, which are available on FCX's website, "fcx.com."
b.
Includes adjustments to prior period
provisionally priced concentrate and cathode copper sales totaling
$(78) million ($(35) million to net income attributable to common
stock or $(0.02) per share) in first-quarter 2018 and $91 million
($39 million to net income attributable to common stock or $0.03
per share) in first-quarter 2017. For further discussion, refer to
the supplemental schedule, "Derivative Instruments," on page VII,
which is available on FCX's website, "fcx.com."
c.
Primarily reflects adjustments to the fair
value of contingent consideration related to the 2016 sale of FCX's
interest in TF Holdings Limited, which will continue to be adjusted
through December 31, 2019.
d.
Includes net gains of $13 million ($0.01
per share) in first-quarter 2018 and $8 million ($0.01 per share)
in first-quarter 2017 that are described in the supplemental
schedule, "Adjusted Net Income," on page VI, which is available on
FCX's website, "fcx.com."
e.
FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. For a
summary of net impacts from changes in these deferrals, refer to
the supplemental schedule, "Deferred Profits," on page VII, which
is available on FCX's website, \"fcx.com."
f.
Includes net working capital (uses)
sources and timing of other tax payments of $(21) million in
first-quarter 2018 and $189 million in first-quarter 2017.
SUMMARY OPERATING DATA
Three Months Ended March 31, 2018
2017 Copper (millions of recoverable pounds)
Production 952 851 Sales, excluding purchases 993 809 Average
realized price per pound $ 3.11 $ 2.67 Site production and delivery
costs per pounda $ 1.67 $ 1.60 Unit net cash costs per pounda $
0.98 $ 1.39
Gold (thousands of recoverable ounces)
Production 599 239 Sales, excluding purchases 610 182 Average
realized price per ounce $ 1,312 $ 1,229
Molybdenum
(millions of recoverable pounds) Production 22 23 Sales, excluding
purchases 24 24 Average realized price per pound $ 11.95 $ 8.71
a.
Reflects per pound weighted-average
production and delivery costs and unit net cash costs (net of
by-product credits) for all copper mines, before 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 schedules, "Product Revenues and Production
Costs," beginning on page X, which are available on FCX's website,
"fcx.com."
Consolidated Sales Volumes
First-quarter 2018 copper sales of 993 million pounds
approximated the January 2018 estimate of 1.0 billion pounds, and
were higher than first-quarter 2017 sales of 809 million pounds,
primarily reflecting higher operating rates in Indonesia.
First-quarter 2018 gold sales of 610 thousand ounces were
lower than the January 2018 estimate of 675 thousand ounces,
primarily because of lower-than-expected mill throughput rates
associated with maintenance activities at Grasberg. First-quarter
2018 gold sales were higher than first-quarter 2017 sales of 182
thousand ounces, primarily reflecting higher ore grades and
operating rates in Indonesia.
Lower operating rates in first-quarter 2017 reflected the
regulatory restrictions on PT-FI's concentrate exports from
mid-January 2017 to mid-April 2017.
First-quarter 2018 molybdenum sales of 24 million pounds
approximated the January 2018 estimate and first-quarter 2017 sales
of 24 million pounds.
Sales volumes for the year 2018 are expected to approximate 3.8
billion pounds of copper, 2.4 million ounces of gold and 95 million
pounds of molybdenum, including 970 million pounds of copper, 700
thousand ounces of gold and 24 million pounds of molybdenum in
second-quarter 2018.
Projections for 2018 and other forward looking statements in
this release assume resolution of PT-FI’s long-term mining rights
or an extension of PT-FI’s temporary IUPK after June 30, 2018.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product
credits) for FCX's copper mines of $0.98 per pound of copper in
first-quarter 2018 were lower than unit net cash costs of $1.39 per
pound in first-quarter 2017, primarily reflecting higher sales
volumes and by-product credits.
Assuming average prices of $1,300 per ounce of gold and $12.00
per pound of molybdenum for the remainder of 2018 and achievement
of current sales volume and cost estimates, consolidated unit net
cash costs (net of by-product credits) for copper mines are
expected to average $1.01 per pound of copper for the year 2018.
The impact of price changes on consolidated unit net cash costs
would approximate $0.025 per pound for each $50 per ounce change in
the average price of gold and $0.02 per pound for each $2 per pound
change in the average price of molybdenum for the remainder of
2018. Quarterly unit net cash costs vary with fluctuations in sales
volumes and realized prices, primarily for gold and molybdenum.
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. In
addition to copper, certain of FCX's North America copper mines
produce molybdenum concentrate, gold and silver.
All of the North America mining operations are wholly owned,
except for Morenci. FCX records its 72 percent undivided joint
venture interest in Morenci using the proportionate consolidation
method.
Operating and Development Activities. FCX has significant
undeveloped reserves and resources in North America and a portfolio
of potential long-term development projects. Future investments
will be undertaken based on the results of economic and technical
feasibility studies, and are dependent on market conditions. FCX
continues to study opportunities to reduce the capital intensity of
its potential long-term development projects.
Through exploration drilling, FCX has identified a significant
resource at its wholly owned Lone Star project located near the
Safford operation in eastern Arizona. FCX has commenced an
initial project to develop the Lone Star oxide ores with first
production expected by the end of 2020. Total estimated capital
costs, including mine equipment and pre-production stripping,
approximate $850 million and will benefit from the utilization of
existing infrastructure at the adjacent Safford operation. At
March 31, 2018, approximately $35 million has been incurred
for this project. Production from the Lone Star oxide ores is
expected to average approximately 200 million pounds of copper per
year with an approximate 20-year mine life. The project also
advances the potential for development of a larger-scale district
opportunity. FCX is conducting additional drilling to follow up on
positive exploration results as it continues to evaluate longer
term opportunities available from the significant long-term sulfide
potential in the Lone Star/Safford minerals district.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the three months ended
March 31, 2018 and 2017:
Three Months Ended March 31, 2018
2017 Copper (millions of recoverable pounds)
Production 348 392 Sales, excluding purchases 384 375 Average
realized price per pound $ 3.16 $ 2.68
Molybdenum
(millions of recoverable pounds) Productiona 7 9
Unit net
cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.84 $ 1.50 By-product credits
(0.20 ) (0.15 ) Treatment charges 0.10 0.11 Unit net
cash costs $ 1.74 $ 1.46
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 schedules, "Product Revenues and Production
Costs," beginning on page X, which are available on FCX's website,
"fcx.com."
North America's consolidated copper sales volumes of 384 million
pounds in first-quarter 2018 were higher than first-quarter 2017
sales of 375 million pounds, primarily reflecting timing of
shipments. North America copper sales are estimated to approximate
1.5 billion pounds for the year 2018, compared with 1.5 billion
pounds in 2017.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.74 per pound of copper in
first-quarter 2018 were higher than unit net cash costs of $1.46
per pound in first-quarter 2017, primarily reflecting higher repair
and maintenance costs.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.71 per
pound of copper for the year 2018, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $12.00 per pound for the remainder of 2018. North
America's average unit net cash costs for the year 2018 would
change by approximately $0.03 per pound for each $2 per pound
change in the average price of molybdenum for the remainder of
2018.
South America Mining. FCX operates two copper mines in
South America - Cerro Verde in Peru (in which FCX owns a 53.56
percent interest) and El Abra in Chile (in which FCX owns a 51
percent interest). These operations are consolidated in FCX's
financial statements. In addition to copper, the Cerro Verde mine
produces molybdenum concentrate and silver.
Operating and Development Activities. The Cerro Verde expansion
project, which commenced operations in September 2015, achieved
capacity operating rates in early 2016. The project expanded the
concentrator facilities' capacity from 120,000 metric tons of ore
per day to 360,000 metric tons of ore per day. Cerro Verde's
expanded operations benefit from its large-scale, long-lived
reserves and cost efficiencies. The project has continued to
perform well, with average mill throughput rates of 385,500 metric
tons of ore per day in first-quarter 2018, including a daily record
of 462,900 metric tons of ore.
Exploration results at El Abra indicate a significant sulfide
resource, which could potentially support a major mill project
similar to facilities recently constructed at Cerro Verde. FCX
continues to evaluate a major expansion at El Abra to process
additional sulfide material and to achieve higher recoveries.
Future investments will depend on technical studies, which are
being advanced, economic factors and market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the three months ended
March 31, 2018 and 2017:
Three Months Ended March 31, 2018
2017 Copper (millions of recoverable
pounds) Production 293 304 Sales 290 309 Average realized price per
pound $ 3.08 $ 2.66
Molybdenum (millions of
recoverable pounds) Productiona 6 6
Unit net cash costs
per pound of copperb Site production and delivery,
excluding adjustments $ 1.78 $ 1.48 By-product credits (0.25 )
(0.18 ) Treatment charges 0.20 0.22 Royalty on metals 0.01
0.01 Unit net cash costs $ 1.74 $ 1.53
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 schedules, "Product Revenues and Production
Costs," beginning on page X, which are available on FCX's website,
"fcx.com."
South America's consolidated copper sales volumes of 290 million
pounds in first-quarter 2018 were lower than first-quarter 2017
sales of 309 million pounds, primarily reflecting lower ore grades
and recovery rates at Cerro Verde. Sales from South America mining
are expected to approximate 1.2 billion pounds of copper for the
year 2018, compared with 1.2 billion pounds of copper in 2017.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.74 per pound of copper in first-quarter
2018 were higher than unit net cash costs of $1.53 per pound in
first-quarter 2017, primarily reflecting higher mining rates and
lower ore grades. Average unit net cash costs (net of by-product
credits) for South America mining are expected to approximate $1.64
per pound of copper for the year 2018, based on current sales
volume and cost estimates and assuming an average price of $12.00
per pound of molybdenum for the remainder of 2018.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT Freeport Indonesia (PT-FI), FCX's assets
include one of the world's largest copper and gold deposits at the
Grasberg minerals district in Papua, Indonesia. PT-FI operates a
proportionately consolidated joint venture, which produces copper
concentrate that contains significant quantities of gold and
silver.
Regulatory Matters. PT-FI continues to actively engage with
Indonesian government officials to address regulatory changes that
conflict with its contractual rights in a manner that provides
long-term stability for PT-FI’s operations and investment plans,
and protects value for FCX’s shareholders.
Following a framework understanding reached in August 2017, the
parties have been engaged in negotiation and documentation of a
special license (IUPK) and accompanying documentation for
assurances on legal and fiscal terms to provide PT-FI with
long-term mining rights through 2041. In addition, the IUPK would
provide that PT-FI construct a smelter within five years of
reaching a definitive agreement and include agreement for the
divestment of 51 percent of the project area interests to
Indonesian participants at fair market value.
In late 2017, the Indonesian government (including the regional
government of Papua Province and Mimika Regency) and PT Indonesia
Asahan Aluminium (Inalum), a state-owned enterprise, which leads
the Indonesian government's consortium of investors, formed a
special purpose company to acquire Grasberg project area interests.
Inalum is owned 100 percent by the Indonesian government and
currently holds 9.36 percent of PT-FI's outstanding common
stock.
FCX continues to engage with Inalum and PT-FI’s joint venture
partner on potential arrangements that would result in the Inalum
consortium acquiring interests that would meet the Indonesian
government’s 51 percent ownership objective in a manner
satisfactory to all parties, and in a structure that would provide
for continuity of FCX’s management of PT-FI’s operations and
governance of the business. The parties continue to negotiate
documentation on a comprehensive agreement for PT-FI’s extended
operations and to reach agreement on timing, process and governance
matters relating to the divestment. The parties have a mutual
objective of completing negotiations and the required documentation
as soon as possible.
PT-FI is also engaged in discussions with Indonesia's Ministry
of Environment and Forestry regarding approval of pending
environmental permits and April 2018 ministerial actions imposing
new environmental standards, which are subject to a six-month
transition period and conflict with PT-FI's approved environmental
management programs. Resolution of these matters is a requirement
for concluding a comprehensive agreement for PT-FI's extended
operations.
In December 2017, the Indonesian government extended PT-FI’s
temporary IUPK to June 30, 2018, to enable normal operations
to continue during the negotiation period. In February 2018,
PT-FI's export license was extended to February 15, 2019. Until a
definitive agreement is reached, PT-FI has reserved all rights
under its Contract of Work (COW), including dispute resolution
procedures.
Operating and Development Activities. PT-FI is currently mining
the final phase of the Grasberg open pit, which contains high
copper and gold ore grades. PT-FI expects to mine high-grade ore
until transitioning to the Grasberg Block Cave underground mine in
the first half of 2019.
PT-FI has several projects in the Grasberg minerals district
related to the development of its large-scale, long-lived,
high-grade underground ore bodies. In aggregate, these underground
ore bodies are expected to produce large-scale quantities of copper
and gold following the transition from the Grasberg open pit.
Substantial progress has been made to prepare for the transition to
mining of the Grasberg Block Cave underground mine. Mine
development activities are sufficiently advanced to commence caving
by early 2019. The ore flow system and underground rail line are
expected to be installed during 2018.
PT-FI continues to review its mine plan for the Deep Mill Level
Zone underground mine, which is currently in pre-commercial
production. In response to recent mining-induced seismic activity,
the development plans have been revised to a slower start-up to
full production to manage rock stress encountered in the early
phase of cave development.
Subject to reaching a definitive agreement with the Indonesian
government to support PT-FI's long-term investment plans, estimated
annual capital spending on these projects would average $0.8
billion per year ($0.7 billion per year net to PT-FI) over the next
five years. Considering the long-term nature and size of these
projects, actual costs could vary from these estimates. In response
to market conditions and Indonesian regulatory uncertainty, the
timing of these expenditures continues to be reviewed. If PT-FI is
unable to reach a definitive agreement with the Indonesian
government on its long-term mining rights, FCX intends to reduce or
defer investments significantly in its underground development
projects and will pursue dispute resolution procedures under its
COW.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the three months ended
March 31, 2018 and 2017:
Three Months Ended March 31, 2018
2017 Copper (millions of recoverable pounds)
Production 311 155 Sales 319 125 Average realized price per pound $
3.06 $ 2.63
Gold (thousands of recoverable ounces)
Production 595 232 Sales 603 177 Average realized price per ounce $
1,312 $ 1,229
Unit net cash (credits) costs per pound of
coppera Site production and delivery, excluding
adjustments $ 1.36 $ 2.13 Gold and silver credits (2.59 ) (1.88 )
Treatment charges 0.25 0.28 Export duties 0.14 0.11 Royalty on
metals 0.21 0.16 Unit net cash (credits) costs $
(0.63 ) $ 0.80
a.
For a reconciliation of unit net cash
(credits) costs per pound to production and delivery costs
applicable to sales reported in FCX's consolidated financial
statements, refer to the supplemental schedules, "Product Revenues
and Production Costs," beginning on page X, which are available on
FCX's website, "fcx.com."
Indonesia's consolidated sales of 319 million pounds of copper
and 603 thousand ounces of gold in first-quarter 2018 were higher
than first-quarter 2017 sales of 125 million pounds of copper and
177 thousand ounces of gold, primarily reflecting higher operating
rates and gold ore grades. Lower operating rates in first-quarter
2017 reflected the regulatory restrictions on PT-FI's concentrate
exports from mid-January 2017 to mid-April 2017.
During first-quarter 2018, Indonesia mining's copper and gold
production was adversely affected by lower- than-expected mill
throughput rates associated with maintenance activities on PT-FI's
ore-flow systems and the characteristics of ore processed during
the quarter. Corrective actions are being taken to restore
reliability and productivity.
Assuming achievement of planned operating rates for the
remainder of 2018, consolidated sales volumes from Indonesia mining
are expected to approximate 1.15 billion pounds of copper and 2.4
million ounces of gold for the year 2018, compared with 1.0 billion
pounds of copper and 1.5 million ounces of gold for the year
2017.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes and other factors. As a result
of higher sales volumes and gold and silver credits, Indonesia had
unit net cash credits (including gold and silver credits) of $0.63
per pound of copper in first-quarter 2018, compared with unit net
cash costs of $0.80 per pound in first-quarter 2017.
Assuming an average gold price of $1,300 per ounce for the
remainder of 2018 and achievement of current sales volume and cost
estimates, unit net cash credits (including gold and silver
credits) for Indonesia mining are expected to approximate $0.55 per
pound of copper for the year 2018. Indonesia mining's unit net cash
credits for the year 2018 would change by approximately $0.09 per
pound for each $50 per ounce change in the average price of gold
for the remainder of 2018. Because of the fixed nature of a large
portion of Indonesia's costs, unit net cash credits/costs vary from
quarter to quarter depending on copper and gold volumes.
Indonesia mining's projected sales volumes and unit net cash
credits for the year 2018 are dependent on a number of factors,
including operational performance, workforce productivity, timing
of shipments, and Indonesia regulatory matters, including the
resolution of PT-FI's long-term mining rights or an extension of
PT-FI's temporary IUPK after June 30, 2018.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines - the Henderson underground mine and the Climax open-pit mine
- both in Colorado. The Henderson and Climax mines produce
high-purity, chemical-grade molybdenum concentrate, which is
typically further processed into value-added molybdenum chemical
products. The majority of molybdenum concentrate produced at the
Henderson and Climax mines, as well as from FCX's North America and
South America copper mines, is processed at FCX's conversion
facilities.
Operating and Development Activities. Production from the
Molybdenum mines totaled 9 million pounds of molybdenum in
first-quarter 2018 and 8 million pounds in first-quarter 2017.
Refer to summary operating data on page 3 for FCX's consolidated
molybdenum sales and average realized prices, which includes sales
of molybdenum produced at the Molybdenum mines, and from FCX's
North America and South America copper mines.
Unit net cash costs for the Molybdenum mines averaged $8.57 per
pound of molybdenum in first-quarter 2018 and $7.02 per pound in
first-quarter 2017. Based on current sales volume and cost
estimates, average unit net cash costs for the Molybdenum mines are
expected to approximate $8.75 per pound of molybdenum for the year
2018.
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
schedules, "Product Revenues and Production Costs," beginning on
page X, which are available on FCX's website, "fcx.com."
Mining Exploration Activities. FCX's mining exploration
activities are generally associated with its existing mines,
focusing on opportunities to expand reserves and resources to
support development of additional future production capacity. A
drilling program to further delineate the Lone Star resource
continues to indicate additional mineralization in this district.
Exploration results continue to indicate opportunities for
significant future potential reserve additions in North America and
South America. Exploration spending is expected to approximate $72
million for the year 2018, consistent with the year 2017.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.4
billion (net of $21 million in working capital uses and timing of
other tax payments) in first-quarter 2018.
Based on current sales volume and cost estimates, and assuming
average prices of $3.15 per pound of copper, $1,300 per ounce of
gold and $12.00 per pound of molybdenum for the remainder of 2018,
FCX's consolidated operating cash flows are estimated to
approximate $5.6 billion for the year 2018 (including $0.2 billion
in working capital sources and timing of other tax payments). The
impact of price changes during the remainder of 2018 on operating
cash flows would approximate $250 million for each $0.10 per pound
change in the average price of copper, $90 million for each $50 per
ounce change in the average price of gold and $85 million for each
$2 per pound change in the average price of molybdenum.
Capital Expenditures. Capital expenditures totaled $402 million
for first-quarter 2018 (including approximately $250 million for
major mining projects). Capital expenditures are expected to
approximate $2.0 billion for the year 2018, including $1.1 billion
for major mining projects primarily associated with underground
development activities in the Grasberg minerals district and
development of the Lone Star oxide project.
If PT-FI is unable to reach a definitive agreement with the
Indonesian government on its long-term mining rights, FCX intends
to reduce or defer investments significantly in its underground
development projects and will pursue dispute resolution procedures
under its COW.
Cash. Following is a summary of the U.S. and international
components of consolidated cash and cash equivalents available to
the parent company, net of noncontrolling interests' share, taxes
and other costs at March 31, 2018 (in billions):
Cash at domestic companies $ 2.5 Cash at
international operations 1.2 Total consolidated cash and
cash equivalents 3.7 Noncontrolling interests' share (0.4 ) Cash,
net of noncontrolling interests' share 3.3 Withholding taxes and
other (0.1 )
Net cash available $ 3.2
Debt. Following is a summary of total debt and the related
weighted-average interest rates at March 31, 2018 (in
billions, except percentages):
Weighted- Average Interest
Rate Senior Notes $ 10.4 4.7% Cerro Verde credit facility 1.2
3.8% Total debt $ 11.6 4.6%
During first-quarter 2018, FCX repaid borrowings totaling $1.5
billion, consisting of $1.4 billion for senior notes due March 2018
and $0.1 billion for the Cerro Verde credit facility.
In April 2018, FCX redeemed $404 million of senior notes due
2022 and $50 million of senior notes due 2023. FCX expects to
record a gain of $10 million in second-quarter 2018 related to
these redemptions, and the aggregate annual cash interest savings
approximate $30 million.
At March 31, 2018, FCX had no borrowings, $13 million in
letters of credit issued and $3.5 billion available under its
revolving credit facility. During April 2018, FCX entered into a
new $3.5 billion, five-year revolving credit facility with
substantially similar structure and terms as its prior facility,
which was scheduled to mature in May 2019.
FINANCIAL POLICY
In February 2018, the Board reinstated a cash dividend on FCX
common stock. On March 28, 2018, FCX declared a quarterly cash
dividend of $0.05 per share, which will be paid on May 1, 2018, to
shareholders of record as of April 13, 2018. 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.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
first-quarter 2018 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 “fcx.com.” A replay of
the webcast will be available through Friday, May 25,
2018.
-----------------------------------------------------------------------------------------------------------
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 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; and significant mining operations in the
Americas, including the large-scale Morenci minerals district in
North America and the Cerro Verde operation in South America.
Additional information about FCX is available on FCX's website at
"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 and
molybdenum price changes, the impact of deferred intercompany
profits on earnings, reserve estimates, future dividend payments,
and share purchases and sales. The words “anticipates,” “may,”
“can,” “plans,” “believes,” “estimates,” “expects,” “projects,”
"targets," “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 the 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 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 supply of and demand for, and
prices of, copper, gold and molybdenum; mine sequencing; production
rates; potential inventory adjustments; potential impairment of
long-lived mining assets; the outcome of negotiations with the
Indonesian government regarding PT-FI's long-term mining rights;
the potential effects of violence in Indonesia generally and in the
province of Papua; industry risks; regulatory changes; political
risks; labor relations; weather- and climate-related risks;
environmental risks (including resolution of the administrative
sanctions and other environmental matters pending before
Indonesia's Ministry of Environment and Forestry); litigation
results (including the final disposition of Indonesian tax disputes
and the outcome of Cerro Verde's royalty dispute with the Peruvian
national tax authority); 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, 2017, filed with the U.S.
Securities and Exchange Commission (SEC) as updated by FCX's
subsequent filings with the SEC. With respect to FCX's operations
in Indonesia, such factors include whether PT-FI will be able to
resolve complex regulatory matters in Indonesia by June 30, 2018,
or obtain an extension of its temporary IUPK after June 30,
2018.
Investors are cautioned that many of the assumptions upon which
FCX's forward-looking statements are based are likely to change
after the 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 not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its 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 (credits) costs per pound of copper and molybdenum
and adjusted net income, which are not recognized under U.S.
generally accepted accounting principles. 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, "fcx.com."
FREEPORT-McMoRan INC. SELECTED OPERATING DATA
Three Months Ended March 31, 2018 2017 2018 2017
MINING OPERATIONS: Production Sales
COPPER
(millions of recoverable pounds)
(FCX's net interest in %)
North
America
Morenci (72%)a 169 181 187 172 Bagdad (100%) 49 40 51 38 Safford
(100%) 33 42 36 43 Sierrita (100%) 41 41 44 38 Miami (100%) 4 5 5 5
Chino (100%) 38 62 45 60 Tyrone (100%) 13 20 15 18 Other (100%) 1
1 1 1 Total North America 348
392 384 375
South
America
Cerro Verde (53.56%) 243 262 242 268 El Abra (51%) 50 42
48 41 Total South America 293 304
290 309
Indonesia
Grasberg (90.64%)b 311 155 319 125
Total 952 851 993 c
809 c Less
noncontrolling interests 167 157 166 156
Net 785 694 827
653 Average realized price per pound $
3.11 $ 2.67
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 4 7 7 5 Indonesia
(90.64%)b 595 232 603 177
Consolidated 599 239 610 182
Less noncontrolling interests 55 22 57 17
Net 544 217 553
165 Average realized price per ounce $
1,312 $ 1,229
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 4 3 N/A N/A Climax
(100%) 5 5 N/A N/A North America copper mines (100%)a 7 9 N/A N/A
Cerro Verde (53.56%) 6 6 N/A N/A
Consolidated
22 23 24 24 Less noncontrolling
interests 3 3 3 3
Net 19
20 21 21
Average realized price per pound $ 11.95 $ 8.71 a.
Amounts are net of Morenci's undivided joint venture partners'
interests. 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. Consolidated sales volumes
exclude purchased copper of 74 million pounds in first-quarter 2018
and 58 million pounds in first-quarter 2017.
FREEPORT-McMoRan INC. SELECTED OPERATING DATA
(continued) Three Months Ended March 31, 2018
2017
100% North America Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 674,600
701,800 Average copper ore grade (percent) 0.27 0.28 Copper
production (millions of recoverable pounds) 262 277
Mill
Operations
Ore milled (metric tons per day) 288,600 303,800 Average ore grades
(percent): Copper 0.35 0.41 Molybdenum 0.02 0.03 Copper recovery
rate (percent) 88.0 86.4 Production (millions of recoverable
pounds): Copper 151 186 Molybdenum 7 9
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 168,000
120,100 Average copper ore grade (percent) 0.33 0.42 Copper
production (millions of recoverable pounds) 67 66
Mill
Operations
Ore milled (metric tons per day) 385,500 338,900 Average ore grades
(percent): Copper 0.39 0.44 Molybdenum 0.01 0.02 Copper recovery
rate (percent) 79.0 84.5 Production (millions of recoverable
pounds): Copper 226 238 Molybdenum 6 6
100% Indonesia
Mining Ore milled (metric tons per day):a Grasberg open pit
125,200 53,600 Deep Ore Zone underground mine 39,400 26,100 Deep
Mill Level Zone (DMLZ) underground mineb 2,600 3,200 Grasberg Block
Cave underground mineb 4,000 2,600 Big Gossan underground mineb
2,400 1,700 Total 173,600 87,200 Average ore grades:
Copper (percent) 1.12 1.15 Gold (grams per metric ton) 1.63 1.17
Recovery rates (percent): Copper 92.0 92.2 Gold 84.7 84.8
Production (recoverable): Copper (millions of pounds) 340 172 Gold
(thousands of ounces) 673 241
100% Molybdenum Mines
Ore milled (metric tons per day) 23,100 21,600 Average molybdenum
ore grade (percent) 0.21 0.21 Molybdenum production (millions of
recoverable pounds) 9 8
a.
Amounts represent the approximate average
daily throughput processed at PT Freeport Indonesia's (PT-FI) mill
facilities from each producing mine and from development activities
that result in metal production.
b.
Targeted production rates once the DMLZ
underground mine reaches full capacity are expected to approximate
80,000 metric tons of ore per day in 2021; production from the
Grasberg Block Cave underground mine is expected to commence in the
first half of 2019, and production from the Big Gossan underground
mine restarted in fourth-quarter 2017.
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) Three Months Ended March 31,
2018 2017a (In Millions, Except Per Share Amounts) Revenuesb $
4,868 $ 3,341 Cost of sales: Production and delivery 2,808 2,188 c
Depreciation, depletion and amortization 451 389
Total cost of sales 3,259 2,577 Selling, general and administrative
expenses 131 151 c Mining exploration and research expenses 21 14
Environmental obligations and shutdown costs 9 25 Net gain on sales
of assets (11 ) (23 ) Total costs and expenses 3,409 2,744
Operating income 1,459 597 Interest expense, netd (151 )
(167 ) Other income, net 28 e 8 Income from
continuing operations before income taxes and equity in affiliated
companies' net (losses) earnings 1,336 438 Provision for income
taxesf (506 ) (174 ) Equity in affiliated companies' net (losses)
earnings (2 ) 4 Net income from continuing operations 828
268 Net (loss) income from discontinued operationsg (11 ) 38
Net income 817 306 Net income attributable to noncontrolling
interests: Continuing operations (125 ) (75 ) Discontinued
operations — (3 ) Net income attributable to FCX common
stockh $ 692 $ 228 Diluted net income (loss)
per share attributable to common stock: Continuing operations $
0.48 $ 0.13 Discontinued operations (0.01 ) 0.03 $ 0.47
$ 0.16 Weighted-average common shares
outstanding: Basic 1,449 1,446 Diluted 1,458
1,454 Dividends declared per share of common stock $
0.05 $ —
a.
The adoption of accounting guidance
related to the presentation of retirement benefits resulted in the
reclassification of the non-service components of net periodic
benefit cost to other income, net.
b.
Revenues include adjustments to
provisionally priced concentrate and cathode sales. For a summary
of adjustments to provisionally priced copper sales, refer to the
supplemental schedule, "Derivative Instruments," on page VII.
c.
Includes net mining and oil and gas
charges that are summarized in the supplemental schedule, "Adjusted
Net Income," on page VI.
d.
Consolidated interest costs (before
capitalization) totaled $176 million in first-quarter 2018 and $195
million in first-quarter 2017.
e.
Includes interest received with the refund
of PT-FI's prior years' tax receivables, which is summarized in the
supplemental schedule, "Adjusted Net Income," on page VI.
f.
For a summary of FCX's provision for
income taxes, refer to the supplemental schedule, "Income Taxes,"
on page VI.
g.
Primarily reflects adjustments to the
estimated fair value of contingent consideration related to the
2016 sale of FCX’s interest in TF Holdings Limited (TFHL), which
will continue to be adjusted through December 31, 2019.
h.
FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. Refer
to the supplemental schedule, "Deferred Profits," on page VII for a
summary of net impacts from changes in these deferrals.
FREEPORT-McMoRan INC. CONSOLIDATED BALANCE SHEETS
(Unaudited) March 31, December 31, 2018
2017 (In Millions) ASSETS Current assets: Cash and cash equivalents
$ 3,702 $ 4,447 Trade accounts receivable 1,222 1,246 Income and
other tax receivables 222 325 Inventories: Mill and leach
stockpiles 1,448 1,422 Materials and supplies, net 1,335 1,305
Product 1,102 1,166 Other current assets 367 270 Held for sale 708
598 Total current assets 10,106 10,779 Property,
plant, equipment and mine development costs, net 22,792 22,844
Long-term mill and leach stockpiles 1,387 1,409 Other assets 2,352
2,270 Total assets $ 36,637 $ 37,302
LIABILITIES AND EQUITY Current liabilities: Accounts payable
and accrued liabilities $ 2,209 $ 2,321 Accrued income taxes 749
565 Current portion of debt 483 1,414 Current portion of
environmental and asset retirement obligations 396 388 Dividends
payable 72 — Held for sale 435 350 Total current
liabilities 4,344 5,038 Long-term debt, less current portion 11,123
11,703 Deferred income taxes 3,642 3,622 Environmental and asset
retirement obligations, less current portion 3,630 3,631 Other
liabilities 1,972 2,012 Total liabilities 24,711
26,006 Equity: Stockholders' equity: Common stock 158 158
Capital in excess of par value 26,729 26,751 Accumulated deficit
(14,030 ) (14,722 ) Accumulated other comprehensive loss (475 )
(487 ) Common stock held in treasury (3,726 ) (3,723 ) Total
stockholders' equity 8,656 7,977 Noncontrolling interests 3,270
3,319 Total equity 11,926 11,296 Total
liabilities and equity $ 36,637 $ 37,302
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) Three Months Ended March 31,
2018 2017 (In Millions) Cash flow from operating activities:
Net income $ 817 $ 306 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation, depletion and
amortization 451 389 Net gain on sales of assets (11 ) (23 )
Stock-based compensation 49 34 Payments for Cerro Verde royalty
dispute (10 ) (11 ) Net charges for environmental and asset
retirement obligations, including accretion 53 71 Payments for
environmental and asset retirement obligations (38 ) (33 ) Net
charges for defined pension and postretirement plans 18 33 Pension
plan contributions (24 ) (30 ) Deferred income taxes 22 20 Loss
(gain) on disposal of discontinued operations 11 (32 ) Decrease in
long-term mill and leach stockpiles 22 8 Oil and gas contract
settlement payments — (70 ) Other, net 30 (59 ) Changes in working
capital and other tax payments: Accounts receivable 136 623
Inventories (142 ) (135 ) Other current assets (42 ) (13 ) Accounts
payable and accrued liabilities (96 ) (433 ) Accrued income taxes
and timing of other tax payments 123 147 Net cash
provided by operating activities 1,369 792
Cash flow from investing activities: Capital expenditures: North
America copper mines (92 ) (28 ) South America (67 ) (15 )
Indonesia (203 ) (244 ) Molybdenum mines (1 ) (1 ) Other (39 ) (56
) Intangible water rights and other, net (90 ) (17 ) Net cash used
in investing activities (492 ) (361 ) Cash flow from
financing activities: Proceeds from debt 122 157 Repayments of debt
(1,633 ) (815 ) Cash dividends paid: Common stock — (1 )
Noncontrolling interests (80 ) (15 ) Stock-based awards net
proceeds (payments) 3 (5 ) Net cash used in financing
activities (1,588 ) (679 ) Net decrease in cash, cash
equivalents, restricted cash and restricted cash equivalents (711 )
(248 ) Decrease in cash and cash equivalents in assets held for
sale 32 8
Cash, cash equivalents, restricted cash
and restricted cash equivalents at beginning of year
4,631 4,403
Cash, cash equivalents, restricted cash
and restricted cash equivalents at end of perioda
$ 3,952 $ 4,163
a.
Includes restricted cash and restricted
cash equivalents of $250 million at March 31, 2018, and $162
million at March 31, 2017.
FREEPORT-McMoRan INC.
ADJUSTED NET INCOME
Adjusted net income is intended to provide investors and others
with information about FCX's recurring operating performance. This
information differs from net income attributable to common stock
determined in accordance with U.S. generally accepted accounting
principles (GAAP) and should not be considered in isolation or as a
substitute for measures of performance determined in accordance
with U.S. GAAP. FCX's adjusted net income follows, which may not be
comparable to similarly titled measures reported by other companies
(in millions, except per share amounts).
Three Months Ended March 31, 2018 2017 Pre-tax
After-taxa
Per Share Pre-tax After-taxa Per Share
Net
income attributable to common stock N/A $
692 $ 0.47 N/A
$ 228 $ 0.16 PT-FI
charges for workforce reductions $ — $ — $ — $ (21 ) $ (11 ) $
(0.01 ) Morenci asset impairment charge — — — (19 ) (19 ) (0.01 )
Net oil and gas charges — — — (1 ) b (1 ) — Net adjustments to
environmental obligations and related litigation reserves — — — (19
) (19 ) (0.01 ) Net gain on sales of assets 11 c 11 0.01 23 23 0.01
PT-FI interest on tax refund 24 d 13 0.01 — — — (Loss) gain on
discontinued operationse (11 ) (11 ) (0.01 ) 41 35
0.03 $ 24 $ 13 $ 0.01 $ 4 $ 8
$ 0.01
Adjusted net income attributable to
common stock N/A $ 679 $
0.46 N/A $ 220 $ 0.15
a.
Reflects impact to FCX net income
attributable to common stock (i.e., net of any taxes and
noncontrolling interests).
b.
Includes charges totaling $21 million in
selling, general and administrative expenses for contract
termination costs, mostly offset by adjustments of $20 million in
production and delivery costs for contingent payments related to
2016 drillship settlements.
c.
Reflects adjustments to the estimated fair
value of the potential $150 million in contingent consideration
related to the 2016 sale of onshore California oil and gas
properties, which will continue to be adjusted through December 31,
2020.
d.
Reflects interest received with the refund
of prior years' tax receivables.
e.
Primarily reflects adjustments to the
estimated fair value of the potential $120 million in contingent
consideration related to the 2016 sale of FCX’s interest in TFHL,
which will continue to be adjusted through December 31, 2019.
INCOME TAXES
Following is a summary of the approximate amounts used in the
calculation of FCX's consolidated income tax provision for three
months ended March 31, 2018 and 2017 (in millions, except
percentages):
Three Months Ended March 31, 2018 2017 Income Tax
Income Tax Effective (Provision) Effective
(Provision) Incomea Tax Rate Benefit Incomea Tax Rate Benefit U.S.
$ 170 (2)% $ 4 $ 10 70% $ (7 ) South America 183 39% (72 ) 260 39%
(101 ) Indonesia 933 43% (401 ) 152 44% (67 ) Eliminations and
other 50 N/A (3 ) 16 N/A (1 ) Rate adjustmentb — N/A (34 ) —
N/A 2 Continuing operations $ 1,336 38% c $
(506 ) $ 438 40% $ (174 )
a.
Represents income from continuing
operations by geographic location before income taxes and equity in
affiliated companies' net (losses) earnings.
b.
In accordance with applicable accounting
rules, FCX adjusts its interim provision for income taxes equal to
its consolidated tax rate.
c.
The consolidated effective income tax rate
is a function of the combined effective tax rates for the
jurisdictions in which FCX operates. Accordingly, variations in the
relative proportions of jurisdictional income result in
fluctuations to FCX's consolidated effective income tax rate.
Assuming achievement of current sales volume and cost estimates and
average prices of $3.15 per pound for copper, $1,300 per ounce for
gold and $12.00 per pound for molybdenum for the remainder of 2018,
FCX estimates its consolidated effective tax rate for the year 2018
will approximate 36 percent and would decrease with higher
prices.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180424005824/en/
Freeport-McMoRan 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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