Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $31 million, $0.02 per share, in first-quarter
2019. After adjusting for net charges of $36 million, $0.03 per
share, first-quarter 2019 adjusted net income attributable to
common stock totaled $67 million, $0.05 per share.
- Consolidated sales totaled 784
million pounds of copper, 242 thousand ounces of gold and 22
million pounds of molybdenum in first-quarter 2019.
- Consolidated sales for the year
2019 are expected to approximate 3.3 billion pounds of copper, 0.8
million ounces of gold and 94 million pounds of molybdenum,
including 800 million pounds of copper, 265 thousand ounces of gold
and 25 million pounds of molybdenum in second-quarter 2019.
- Average realized prices in
first-quarter 2019 were $2.90 per pound for copper, $1,291 per
ounce for gold and $12.69 per pound for molybdenum.
- Average unit net cash costs in
first-quarter 2019 were $1.78 per pound of copper and are expected
to approximate $1.75 per pound of copper for the year 2019.
- Operating cash flows totaled
$534 million (net of $27 million in working capital uses and timing
of other tax payments) in first-quarter 2019. Based on current
sales volume and cost estimates, and assuming average prices of
$3.00 per pound for copper, $1,300 per ounce for gold and $13.00
per pound for molybdenum for the remainder of 2019, operating cash
flows are expected to approximate $2.3 billion for the year
2019.
- Capital expenditures totaled
$622 million in first-quarter 2019 (including approximately $370
million for major mining projects). Capital expenditures for the
year 2019 are expected to approximate $2.5 billion, including $1.5
billion for major mining projects primarily associated with
underground development activities in the Grasberg minerals
district in Indonesia and development of the Lone Star copper leach
project in Arizona.
- In March 2019, FCX redeemed all of
its outstanding $1 billion aggregate principal amount of senior
notes due 2020.
- At March 31, 2019, consolidated
debt totaled $9.9 billion and consolidated cash totaled
$2.8 billion. FCX had no borrowings and $3.5 billion available
under its revolving credit facility at March 31, 2019.
- On March 27, 2019, FCX declared a
quarterly cash dividend of $0.05 per share on its common stock,
which will be paid on May 1, 2019.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $31 million ($0.02 per share) in
first-quarter 2019. After adjusting for net charges of $36 million
($0.03 per share), adjusted net income attributable to common stock
totaled $67 million ($0.05 per share) in first-quarter 2019. 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 its
focus on providing products necessary to support growing economies
around the world in a cost-efficient, safe and environmentally
responsible manner. Our transition to underground mining at
Grasberg is advancing according to plan, and we are encouraged by
recent milestones. In North America and South America, we are
advancing the Lone Star copper leach project in eastern Arizona and
continuing to focus on opportunities to enhance operating
performance from existing mines. As we look forward, we are
optimistic about the future that our asset base and copper market
fundamentals are expected to provide shareholders. Our strategy
will continue to focus on maximizing the value of our existing
resource base through rigorous cost management, productivity and
technology, executing our plan to successfully transition from
open-pit mining to large-scale underground mining at Grasberg,
generating cash flows to enhance shareholder returns and creating
value organically from our large undeveloped resource
position.”
SUMMARY FINANCIAL DATA
Three Months Ended March 31,
2019 2018 (in millions, except per
share amounts) Revenuesa,b $ 3,792 $ 4,868 Operating incomea $ 321
$ 1,459 Net income from continuing operations $ 75 $ 828 Net income
attributable to common stockc,d $ 31 $ 692 Diluted net income
(loss) per share of common stock: Continuing operations $ 0.02 $
0.48 Discontinued operations — (0.01 ) $ 0.02 $ 0.47
Diluted weighted-average common shares outstanding 1,457 1,458
Operating cash flowse $ 534 $ 1,369 Capital expenditures $ 622 $
402 At March 31: Cash and cash equivalents $ 2,833 $ 3,749 Total
debt, including current portion $ 9,905 $ 11,718
a. For segment financial results, refer to the supplemental
schedules, "Business Segments," beginning on page VII, which are
available on FCX's website, "fcx.com."
b. Includes favorable (unfavorable) adjustments to prior period
provisionally priced concentrate and cathode copper sales totaling
$70 million ($29 million to net income attributable to common stock
or $0.02 per share) in first-quarter 2019 and $(78) million ($(35)
million to net income attributable to common stock or $(0.02) per
share) in first-quarter 2018. For further discussion, refer to the
supplemental schedule, "Derivative Instruments," on page VII, which
is available on FCX's website, "fcx.com."
c. Includes net (charges) gains of $(36) million ($(0.03) per
share) in first-quarter 2019 and $13 million ($0.01 per share) in
first-quarter 2018 that are described in the supplemental schedule,
"Adjusted Net Income," on page VI, which is available on FCX's
website, "fcx.com."
d. 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."
e. Net of working capital uses and timing of other tax payments
of $27 million in first-quarter 2019 and $21 million in
first-quarter 2018.
SUMMARY OPERATING DATA
Three Months Ended March 31,
2019 2018 Copper (millions of
recoverable pounds) Production 780 952 Sales, excluding purchases
784 993 Average realized price per pound $ 2.90 $ 3.11 Site
production and delivery costs per pounda $ 2.17 $ 1.67 Unit net
cash costs per pounda $ 1.78 $ 0.98
Gold (thousands of
recoverable ounces) Production 166 599 Sales, excluding purchases
242 610 Average realized price per ounce $ 1,291 $ 1,312
Molybdenum (millions of recoverable pounds) Production 23 22
Sales, excluding purchases 22 24 Average realized price per pound $
12.69 $ 11.95
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 IX, which are available on FCX's website, "fcx.com."
Consolidated Sales Volumes
First-quarter 2019 copper sales of 784 million pounds and
gold sales of 242 thousand ounces were approximately five
percent lower than January 2019 sales estimates of 825 million
pounds of copper and 255 thousand ounces of gold, reflecting
impacts from weather events at El Abra, unscheduled maintenance in
North America and timing of shipments in Indonesia. First-quarter
2019 copper and gold sales were lower than first-quarter 2018 sales
volumes primarily reflecting anticipated lower mill rates and ore
grades as PT Freeport Indonesia (PT-FI) transitions mining from the
open pit to underground.
First-quarter 2019 molybdenum sales of 22 million pounds
were lower than the January 2019 estimate and first-quarter 2018
sales of 24 million pounds.
Sales volumes for the year 2019 are expected to approximate 3.3
billion pounds of copper, 0.8 million ounces of gold and 94 million
pounds of molybdenum, including 800 million pounds of copper, 265
thousand ounces of gold and 25 million pounds of molybdenum in
second-quarter 2019. As PT-FI transitions mining from the open pit
to underground, its production is expected to be significantly
lower in 2019 and 2020, compared with 2018. Metal production is
expected to improve significantly by 2021 following a ramp-up
period.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product
credits) for FCX's copper mines were $1.78 per pound of copper in
first-quarter 2019. As anticipated, average unit net cash costs
were higher than the first-quarter 2018 average of $0.98 per pound,
primarily reflecting lower sales volumes in Indonesia associated
with PT-FI's transition.
Assuming average prices of $1,300 per ounce of gold and $13.00
per pound of molybdenum for the remainder of 2019 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 $1.75 per pound of copper for the year 2019.
FCX expects unit net cash costs to decline by 2021 following a
ramp-up period at PT-FI. The impact of price changes on
consolidated unit net cash costs would approximate $0.01 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 2019. 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 pursue projects to enhance productivity through
innovative technologies and 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. An initial project to
develop the Lone Star leachable ores commenced in first-quarter
2018, with first production expected by the end of 2020. Initial
production from the Lone Star leachable ores is expected to average
approximately 200 million pounds of copper per year, with the
potential for future expansion options. Total capital costs for the
initial project, including mine equipment and pre-production
stripping, are expected to approximate $850 million and will
benefit from the utilization of existing infrastructure at the
adjacent Safford operation. As of March 31, 2019,
approximately $385 million has been incurred for this project. The
project also advances exposure to a significant sulfide resource.
FCX expects to incorporate recent positive drilling and ongoing
results in its future development plans.
Operating Data. Following is summary consolidated operating data
for the North America copper mines:
Three Months Ended March 31,
2019 2018 Copper (millions of
recoverable pounds) Production 336 348 Sales, excluding purchases
320 384 Average realized price per pound $ 2.85 $ 3.16
Molybdenum (millions of recoverable pounds) Productiona 7 7
Unit net cash costs per pound of copperb Site
production and delivery, excluding adjustments $ 2.06 $ 1.84
By-product credits (0.26 ) (0.20 ) Treatment charges 0.11
0.10 Unit net cash costs $ 1.91 $ 1.74
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 IX, which are available on FCX's website, "fcx.com."
North America's consolidated copper sales volumes of 320 million
pounds in first-quarter 2019 were lower than first-quarter 2018
sales of 384 million pounds, primarily reflecting timing of
shipments. North America copper sales are estimated to approximate
1.4 billion pounds for the year 2019, similar to 2018.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.91 per pound of copper in
first-quarter 2019 were higher than unit net cash costs of $1.74
per pound in first-quarter 2018, primarily reflecting lower copper
sales volumes.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.91 per
pound of copper for the year 2019, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $13.00 per pound for the remainder of 2019. North
America's average unit net cash costs for the year 2019 would
change by approximately $0.03 per pound for each $2 per pound
change in the average price of molybdenum for the remainder of
2019.
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. Cerro Verde's expanded
operations benefit from its large-scale, long-lived reserves and
cost efficiencies. Cerro Verde's concentrator facilities have
continued to perform well, with average mill throughput rates of
386,500 metric tons of ore per day in first-quarter 2019.
Debottlenecking projects and additional initiatives to enhance
operating rates are being advanced.
FCX continues to evaluate a large-scale expansion at El Abra to
process additional sulfide material and to achieve higher
recoveries. El Abra's large sulfide resource could potentially
support a major mill project similar to facilities constructed at
Cerro Verde. Technical and economic studies are being advanced to
determine the optimal scope and timing for the project.
Operating Data. Following is summary consolidated operating data
for South America mining:
Three Months Ended March 31,
2019 2018 Copper (millions of
recoverable pounds) Production 299 293 Sales 290 290 Average
realized price per pound $ 2.93 $ 3.08
Molybdenum
(millions of recoverable pounds) Productiona 8 6
Unit net
cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.73 $ 1.78 By-product credits
(0.34 ) (0.25 ) Treatment charges 0.19 0.20 Royalty on metals 0.01
0.01 Unit net cash costs $ 1.59 $ 1.74
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 IX, which are available on FCX's website, "fcx.com."
South America's consolidated copper sales volumes of 290 million
pounds in first-quarter 2019 approximated first-quarter 2018, with
lower volumes from El Abra being offset by higher volumes at Cerro
Verde.
During first-quarter 2019, heavy rainfall and electrical storms
resulted in a suspension of El Abra's crushed leach stacking
operations for approximately 35 days; operations resumed in
mid-March. The estimated impact of the disruption on FCX's 2019
consolidated copper production approximates 30 million pounds,
approximately half of which was in first-quarter 2019.
Sales from South America mining are expected to approximate 1.3
billion pounds of copper for the year 2019, similar to 2018.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.59 per pound of copper in first-quarter
2019 were lower than unit net cash costs of $1.74 per pound in
first-quarter 2018, primarily reflecting higher by-product
credits.
Average unit net cash costs (net of by-product credits) for
South America mining are expected to approximate $1.66 per pound of
copper for the year 2019, based on current sales volume and cost
estimates and assuming an average price of $13.00 per pound of
molybdenum for the remainder of 2019.
Indonesia Mining. PT-FI's assets include one of the
world's largest copper and gold deposits at the Grasberg minerals
district in Papua, Indonesia. PT-FI produces copper concentrate
that contains significant quantities of gold and silver. FCX has a
48.76 percent ownership interest in PT-FI and manages its mining
operations. PT-FI is consolidated in FCX's financial
statements.
The transaction completed in December 2018 regarding PT-FI's
long-term mining rights and share ownership provided for FCX and
the other pre-transaction PT-FI shareholders to retain the
economics of the revenue and cost sharing arrangements under the
former joint venture with Rio Tinto. As a result, FCX’s economic
interest in PT-FI is expected to approximate 81 percent through
2022.
Operating and Development Activities. PT-FI is currently mining
the final phase of the Grasberg open pit and expects to transition
to the Grasberg Block Cave (GBC) underground mine in mid-2019.
PT-FI continues to assess opportunities to recover additional ore
from the open pit during the remainder of 2019, subject to mine
planning considerations.
PT-FI continues to advance 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.
PT-FI's estimated annual capital spending on underground mine
development projects is expected to average $0.7 billion per year
over the next four years, net of scheduled contributions from PT
Indonesia Asahan Aluminium (Persero) (PT Inalum). In accordance
with applicable accounting guidance, aggregate costs (before
scheduled contributions from PT Inalum), which are expected to
average $0.9 billion per year through 2022, will be reflected as an
investing activity in FCX's cash flow statement, and contributions
from PT Inalum will be reflected as a financing activity.
Considering the long-term nature and size of these projects, actual
costs could vary from these estimates.
Substantial progress has been made to prepare for the transition
to mining of the GBC underground mine. First undercut blasting
occurred in late 2018 and several drawbells have been constructed
and blasted to prepare for mining. Cave production is in progress
and on schedule. All underground mining levels and the ore flow
system are being commissioned. Production rates over the next five
years are expected to ramp up to 130,000 metric tons of ore per
day.
During third-quarter 2018, PT-FI commenced hydraulic fracturing
activities to manage rock stresses and pre-condition the Deep Mill
Level Zone (DMLZ) underground mine for large-scale production
following mining induced seismic activity experienced in 2017 and
2018. Results to date have been effective in managing rock stresses
and pre-conditioning the cave. PT-FI expects to commence the
ramp-up of production in the DMLZ underground mine by mid-2019 and
to reach full production rates of 80,000 metric tons per day in
2022. Estimates of timing of future production continue to be
reviewed and may be modified as additional information becomes
available.
In connection with completion of the December 2018 transaction,
PT-FI committed to construct a new smelter in Indonesia by December
21, 2023. PT-FI has reviewed various process technologies and has
initiated front-end engineering and design for the selected
technology. The preliminary capital cost estimate for the project
is in the $3 billion range and PT-FI intends to pursue financing,
commercial and potential partner arrangements for this project. The
economics of PT-FI’s share of the new smelter will be shared by
PT-FI’s shareholders according to their respective share ownership
percentages.
Operating Data. Following is summary consolidated operating data
for Indonesia mining:
Three Months Ended March 31,
2019 2018 Copper (millions of
recoverable pounds) Production 145 311 Sales 174 319 Average
realized price per pound $ 2.92 $ 3.06
Gold
(thousands of recoverable ounces) Production 162 595 Sales 235 603
Average realized price per ounce $ 1,291 $ 1,312
Unit net
cash costs (credits) per pound of coppera Site
production and delivery, excluding adjustments $ 3.10 $ 1.36 Gold
and silver credits (1.81 ) (2.59 ) Treatment charges 0.29 0.25
Export duties 0.10 0.14 Royalty on metals 0.16 0.21
Unit net cash costs (credits) $ 1.84 $ (0.63 )
a. For a reconciliation of unit net cash costs (credits) 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 IX, which are available on FCX's website,
"fcx.com."
In March 2019, PT-FI's export license was extended to March 8,
2020. PT-FI's approved export quota for the current export period
totals approximately 180,000 dry metric tons of concentrate,
reflecting PT-FI's production plan submitted to the Indonesian
government in November 2018. PT-FI plans to seek approval from the
Indonesian government for an increase in its export quota for the
current export period.
Indonesia's consolidated sales of 174 million pounds of copper
and 235 thousand ounces of gold in first-quarter 2019 were lower
than first-quarter 2018 sales of 319 million pounds of copper and
603 thousand ounces of gold, primarily reflecting anticipated lower
mill rates and ore grades as PT-FI transitions mining from the open
pit to underground.
As PT-FI transitions mining from the open pit to underground,
production is expected to be significantly lower in 2019 and 2020,
compared with historical levels. Metal production is expected to
improve significantly by 2021 following a ramp-up period.
Consolidated sales volumes from Indonesia are expected to
approximate 0.6 billion pounds of copper and 0.8 million ounces of
gold in 2019.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes and other factors. Indonesia's
unit net cash costs (including gold and silver credits) of $1.84
per pound of copper in first-quarter 2019, compared with unit cash
credits of $0.63 per pound in first-quarter 2018, primarily
reflected lower gold and silver credits and lower copper sales
volumes.
Because of the fixed nature of a large portion of Indonesia's
costs, unit net cash costs vary from quarter to quarter depending
on copper and gold volumes. Assuming an average gold price of
$1,300 per ounce for the remainder of 2019 and achievement of
current sales volume and cost estimates, unit net cash costs
(including gold and silver credits) for Indonesia mining are
expected to approximate $1.54 per pound of copper for the year
2019. Indonesia mining's unit net cash costs for the year 2019
would change by approximately $0.05 per pound for each $50 per
ounce change in the average price of gold for the remainder of
2019.
Indonesia mining's projected sales volumes and unit net cash
costs for the year 2019 are dependent on a number of factors,
including operational performance, timing of shipments, export
quotas and workforce productivity.
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 8 million pounds of molybdenum in
first-quarter 2019 and 9 million pounds in first-quarter 2018.
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 $9.80 per
pound of molybdenum in first-quarter 2019 and $8.57 per pound in
first-quarter 2018. Based on current sales volume and cost
estimates, average unit net cash costs for the Molybdenum mines are
expected to approximate $9.60 per pound of molybdenum for the year
2019.
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 IX, 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 significant additional mineralization in this
district, with higher ore grades than FCX's other North America
copper mines. Exploration results continue to indicate
opportunities for significant future potential reserve additions in
North America and South America. Exploration spending is expected
to approximate $70 million for the year 2019, compared with $78
million in 2018.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $534
million (net of $27 million in working capital uses and timing of
other tax payments) in first-quarter 2019.
Based on current sales volume and cost estimates, and assuming
average prices of $3.00 per pound of copper, $1,300 per ounce of
gold and $13.00 per pound of molybdenum for the remainder of 2019,
FCX's consolidated operating cash flows are estimated to
approximate $2.3 billion for the year 2019. The impact of price
changes during the remainder of 2019 on operating cash flows would
approximate $265 million for each $0.10 per pound change in the
average price of copper, $30 million for each $50 per ounce change
in the average price of gold and $95 million for each $2 per pound
change in the average price of molybdenum.
Capital Expenditures. Capital expenditures totaled $622 million
in first-quarter 2019 (including approximately $370 million for
major mining projects).
Capital expenditures are expected to approximate $2.5 billion
for the year 2019, including $1.5 billion for major mining projects
primarily associated with underground development activities in the
Grasberg minerals district and development of the Lone Star
project, and exclude estimates associated with the new smelter in
Indonesia. A large portion of the capital expenditures relate to
projects that are expected to add significant production and cash
flow in future periods, enabling FCX to generate operating cash
flows exceeding capital expenditures in future years. FCX has cash
on hand and the financial flexibility to fund these expenditures
and will continue to be disciplined in deploying capital.
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, 2019 (in billions):
Cash at domestic companies $ 1.9 Cash
at international operations 0.9 Total consolidated cash and
cash equivalents 2.8 Noncontrolling interests' share (0.4 ) Cash,
net of noncontrolling interests' share $ 2.4 Withholding taxes and
other — a
Net cash available $ 2.4
a. Rounds to less than $0.1 billion.
Debt. At March 31, 2019, FCX's consolidated debt totaled
$9.9 billion, with a related weighted-average interest rate of 4.7
percent. FCX had no borrowings, $13 million in letters of credit
issued and $3.5 billion available under its revolving credit
facility at March 31, 2019.
During first-quarter 2019, FCX redeemed all of its outstanding
$1 billion aggregate principal amount of 3.100% Senior Notes due
2020 and repaid $200 million under Cerro Verde's credit facility.
FCX recorded losses on early extinguishment of debt totaling $6
million in first-quarter 2019.
FINANCIAL POLICY
On March 27, 2019, FCX declared a quarterly cash dividend of
$0.05 per share on its common stock, which will be paid on May 1,
2019, to shareholders of record as of April 15, 2019. The
declaration of dividends is at the discretion of the Board of
Directors (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 2019 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 24,
2019.
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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 one of the world's largest
publicly traded copper producers.
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 North America
and South America, including the large-scale Morenci minerals
district in Arizona and the Cerro Verde operation in Peru.
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; FCX's
expectations regarding its share of PT-FI's net income and future
cash flows through 2022; PT-FI's development, financing,
construction and completion of a new smelter in Indonesia; PT-FI's
compliance with environmental standards under the new framework
established by the Ministry of Environment and Forestry;
exploration efforts and results; development and production
activities, rates and costs; liquidity; tax rates; export quotas
and duties; the impact of copper, gold and molybdenum price
changes; the impact of deferred intercompany profits on earnings;
reserve estimates; and future dividend payments, 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, expected, 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, but are not limited to,
supply of and demand for, and prices of, copper, gold and
molybdenum; mine sequencing; production rates; timing of shipments;
results of feasibility studies; potential inventory adjustments;
potential impairment of long-lived mining assets; the potential
effects of violence in Indonesia generally and in the province of
Papua; the Indonesian government's approval of an increase in
PT-FI's export quota for the current export period, which ends
March 8, 2020, and extension of PT-FI's export license after March
8, 2020; risks associated with underground mining; satisfaction of
requirements in accordance with PT-FI's IUPK to extend mining
rights from 2031 through 2041; industry risks; regulatory changes;
political and social risks; labor relations; weather- and
climate-related risks; environmental risks; litigation results;
cybersecurity incidents; 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, 2018, 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 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 costs (credits) 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,
2019 2018 2019 2018
MINING OPERATIONS: Production Sales
Copper (millions
of recoverable pounds) (FCX's net interest in %)
North
America
Morenci (72%)a 167 169 156 187 Bagdad (100%) 55 49 51 51 Safford
(100%) 28 33 27 36 Sierrita (100%) 36 41 34 44 Miami (100%) 3 4 3 5
Chino (100%) 35 38 37 45 Tyrone (100%) 12 13 12 15 Other (100%) — 1
— 1 Total North America 336 348 320 384
South
America
Cerro Verde (53.56%) 261 243 256 242 El Abra (51%) 38 50 34 48
Total South America 299 293 290 290
Indonesia
Grasberg (48.76%)b 145 311 174 319
Total 780
952 784 c
993 c Less noncontrolling interests
167 167 168 166
Net 613 785 616
827 Average realized price per pound $ 2.90 $ 3.11
Gold (thousands of recoverable ounces) (FCX's net
interest in %) North America (100%) 4 4 7 7 Indonesia (48.76%)b 162
595 235 603
Consolidated 166 599 242
610 Less noncontrolling interests 30 55 44
57
Net 136 544 198 553
Average realized price per ounce $ 1,291 $ 1,312
Molybdenum (millions of recoverable pounds) (FCX's net
interest in %) Henderson (100%) 4 4 N/A N/A Climax (100%) 4 5 N/A
N/A North America (100%)a 7 7 N/A N/A Cerro Verde (53.56%) 8 6 N/A
N/A
Consolidated 23 22 22 24
Less noncontrolling interests 4 3 3 3
Net 19
19 19 21 Average realized price per
pound $ 12.69 $ 11.95
a. Amounts are net of Morenci's undivided joint venture
partners' interests.
b. Effective December 21, 2018, FCX's share ownership in PT
Freeport Indonesia (PT-FI) is 48.76 percent. Through 2022, FCX’s
economic interest in PT-FI is expected to approximate 81
percent.
c. Consolidated sales volumes exclude purchased copper of 117
million pounds in first-quarter 2019 and 74 million pounds in
first-quarter 2018.
Freeport-McMoRan Inc. SELECTED OPERATING DATA
(continued) Three Months Ended
March 31, 2019 2018
100% North America Copper
Mines
Leach
Operations
Leach ore placed in stockpiles (metric tons per day) 705,000
674,600 Average copper ore grade (percent) 0.23 0.27 Copper
production (millions of recoverable pounds) 226 239
Mill
Operations
Ore milled (metric tons per day) 315,600 288,600 Average ore grades
(percent): Copper 0.33 0.35 Molybdenum 0.02 0.02 Copper recovery
rate (percent) 87.8 88.0 Production (millions of recoverable
pounds): Copper 176 174 Molybdenum 8 7
100% South America
Mining
Leach
Operations
Leach ore placed in stockpiles (metric tons per day) 166,700
168,000 Average copper ore grade (percent) 0.34 0.33 Copper
production (millions of recoverable pounds) 59 67
Mill
Operations
Ore milled (metric tons per day) 386,500 385,500 Average ore grades
(percent): Copper 0.37 0.39 Molybdenum 0.02 0.01 Copper recovery
rate (percent) 87.2 79.0 Production (millions of recoverable
pounds): Copper 240 226 Molybdenum 8 6
100% Indonesia
Mining Ore milled (metric tons per day):a Grasberg open pit
102,800 125,200 Deep Ore Zone underground mine 30,300 39,400 Deep
Mill Level Zone underground mine 6,800 2,600 Grasberg Block Cave
underground mine 5,000 4,000 Big Gossan underground mine 5,600
2,400 Total 150,500 173,600 Average ore grades: Copper (percent)
0.62 1.12 Gold (grams per metric ton) 0.58 1.63 Recovery rates
(percent): Copper 84.7 92.0 Gold 68.7 84.7 Production
(recoverable): Copper (millions of pounds) 145 340 Gold (thousands
of ounces) 162 673
100% Molybdenum Mines Ore milled
(metric tons per day) 27,700 23,100 Average molybdenum ore grade
(percent) 0.16 0.21 Molybdenum production (millions of recoverable
pounds) 8 9
a. Amounts represent the approximate average daily throughput
processed at PT-FI mill facilities from each producing mine,
related stockpiles and development activities that result in metal
production.
Freeport-McMoRan Inc. CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) Three Months
Ended March 31, 2019 2018 (In Millions,
Except Per Share Amounts) Revenuesa $ 3,792 $ 4,868 Cost of sales:
Production and delivery 2,919 b 2,808 Depreciation, depletion and
amortization 347 451 Cobalt inventory adjustments 57 —
Total cost of sales 3,323 3,259 Selling, general and
administrative expenses 112 131 Mining exploration and research
expenses 27 21 Environmental obligations and shutdown costs 42 9
Net gain on sales of assets (33 ) (11 ) Total costs and expenses
3,471 3,409 Operating income 321 1,459 Interest
expense, netc (146 ) (151 ) Net loss on early extinguishment of
debt (6 ) (1 ) Other income, net 14 29 d
Income from continuing operations before
income taxes and equity in affiliated companies' net losses
183 1,336 Provision for income taxese (105 ) (506 ) Equity in
affiliated companies' net losses (3 ) (2 ) Net income from
continuing operations 75 828 Net gain (loss) from discontinued
operationsf 1 (11 ) Net income 76 817 Net income
attributable to noncontrolling interests (45 ) (125 ) Net income
attributable to common stockholdersg $ 31 $ 692
Diluted net income (loss) per share attributable to common
stock: Continuing operations $ 0.02 $ 0.48 Discontinued operations
—
(0.01
)
$ 0.02 $ 0.47 Weighted-average common shares
outstanding: Basic 1,451 1,449 Diluted 1,457
1,458 Dividends declared per share of common stock $
0.05 $ 0.05
a. Includes 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.
b. Includes other charges totaling $22 million, which are
summarized in the supplemental schedules, "Adjusted Net Income," on
page VI.
c. Consolidated interest costs (before capitalization) totaled
$178 million in first-quarter 2019 and $176 million in
first-quarter 2018.
d. Includes $24 million of interest received with the refund of
PT-FI's prior years' tax receivables. Refer to the supplemental
schedule, "Adjusted Net Income," on page VI.
e. For a summary of FCX's provision for income taxes, refer to
the supplemental schedule, "Income Taxes," on page VI.
f. Primarily reflects adjustments to the estimated 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.
g. 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.
Freeport-McMoRan Inc. CONSOLIDATED BALANCE SHEETS
(Unaudited) March 31, 2019
December 31, 2018 (In Millions) ASSETS Current assets: Cash and
cash equivalents $ 2,833 $ 4,217 Trade accounts receivable 781 829
Income and other tax receivables 410 493 Inventories: Materials and
supplies, net 1,595 1,528 Mill and leach stockpiles 1,374 1,453
Product 1,492 1,778 Other current assets 502 422
Total current assets 8,987 10,720 Property, plant, equipment and
mine development costs, net 28,497 28,010 Long-term mill and leach
stockpiles 1,343 1,314 Other assets 2,232 2,172 Total
assets $ 41,059 $ 42,216 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 2,599 $ 2,625 Accrued income taxes 150 165 Current
portion of environmental and asset retirement obligations 422 449
Dividends payable 73 73 Current portion of debt 3 17
Total current liabilities 3,247 3,329 Long-term debt, less current
portion 9,902 11,124 Deferred income taxes 4,067 4,032
Environmental and asset retirement obligations, less current
portion 3,632 3,609 Other liabilities 2,370 2,230
Total liabilities 23,218 24,324 Equity: Stockholders'
equity: Common stock 158 158 Capital in excess of par value 25,963
26,013 Accumulated deficit (12,010 ) (12,041 ) Accumulated other
comprehensive loss (594 ) (605 ) Common stock held in treasury
(3,734 ) (3,727 ) Total stockholders' equity 9,783 9,798
Noncontrolling interestsa 8,058 8,094 Total equity
17,841 17,892 Total liabilities and equity $ 41,059
$ 42,216
a. Includes $4.6 billion associated with the December 2018 PT-FI
transaction.
Freeport-McMoRan Inc. CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) Three
Months Ended March 31, 2019 2018 (In Millions) Cash
flow from operating activities: Net income $ 76 $ 817 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation, depletion and amortization 347 451 Cobalt
inventory adjustments 57 — Net gain on sales of assets (33 ) (11 )
Stock-based compensation 29 49 Net charges for environmental and
asset retirement obligations, including accretion 64 53 Payments
for environmental and asset retirement obligations (46 ) (38 ) Net
charges for defined pension and postretirement plans 26 18 Pension
plan contributions (16 ) (24 ) Net loss on early extinguishment of
debt 6 1 Deferred income taxes 33 22 (Gain) loss on discontinued
operations (1 ) 11 (Increase) decrease in long-term mill and leach
stockpiles (29 ) 22 Other, net 48 19 Changes in working capital and
other tax payments: Accounts receivable 19 136 Inventories 221 (142
) Other current assets 42 (42 ) Accounts payable and accrued
liabilities (247 ) (96 ) Accrued income taxes and timing of other
tax payments (62 ) 123 Net cash provided by operating
activities 534 1,369 Cash flow from investing
activities: Capital expenditures: North America copper mines (210 )
(92 ) South America (61 ) (67 ) Indonesia (319 ) (203 ) Molybdenum
mines (4 ) (1 ) Other (28 ) (39 ) Proceeds from sales of oil and
gas properties 84 — Intangible water rights and other, net (8 ) (90
) Net cash used in investing activities (546 ) (492 ) Cash
flow from financing activities: Proceeds from debt 114 122
Repayments of debt (1,356 ) (1,633 ) Cash dividends and
distributions paid: Common stock (73 ) — Noncontrolling interests
(9 ) (80 ) Stock-based awards net (payments) proceeds (7 ) 3
Net cash used in financing activities (1,331 ) (1,588 ) Net
decrease in cash, cash equivalents, restricted cash and restricted
cash equivalents (1,343 ) (711 )
Cash, cash equivalents, restricted cash
and restricted cash equivalents at beginning of year
4,455 4,710
Cash, cash equivalents, restricted cash
and restricted cash equivalents at end of perioda
$ 3,112 $ 3,999
a. Includes restricted cash and restricted cash equivalents of
$279 million at March 31, 2019, and $250 million at
March 31, 2018.
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, 2019
2018 Pre-tax After-taxa Per
Share Pre-tax After-taxa Per Share
Net income attributable to common stock N/A
$ 31 $ 0.02 N/A
$ 692 $ 0.47
Cobalt inventory adjustments (57 ) (26 ) (0.02 ) — — — Other
charges (22 ) b (10 ) (0.01 ) — — —
Net adjustments to environmental
obligations and related litigation reserves
(35 ) (35 ) (0.02 ) — — — Net gain on sales of assets 33 c 33 0.02
11 11 0.01 Net loss on early extinguishment of debt (6 ) (5 ) — (1
) — — PT-FI interest on tax refunds — — — 24 13 0.01 Net tax
credits N/A 6 d — N/A — — Gain (loss) on discontinued operations 1
1 — (11 ) (11 ) (0.01 ) $ (86 ) $ (36 ) $
(0.03 ) $ 23 $ 13 $ 0.01
Adjusted
net income attributable to common stock N/A $
67 $ 0.05 N/A $ 679
$ 0.46
a. Reflects impact to FCX net income attributable to common
stock (i.e., net of any taxes and noncontrolling interests).
b. Includes charges primarily associated with weather-related
issues at El Abra and for non-recurring employee costs at
PT-FI.
c. Includes a $20 million gain on sales of oil and gas assets
and $13 million for adjustments to the fair value of potential
contingent consideration related to the 2016 sale of onshore
California oil and gas properties. FCX would receive additional
contingent consideration related to this transaction consisting of
$50 million per year for 2019 and 2020 if the price of Brent crude
oil averages over $70 per barrel in each of these calendar
years.
d. Refer to "Income Taxes" below for further discussion of net
tax credits.
INCOME TAXES
Following is a summary of the approximate amounts used in the
calculation of FCX's consolidated income tax provision (in
millions, except percentages):
Three Months Ended March 31, 2019
2018 Income Tax
Income Tax Income Effective (Provision)
Effective (Provision) (Loss)a Tax Rate Benefit Incomea Tax Rate
Benefit U.S.b $ (97 ) 1 % $ 1 $ 170 (2 )% $ 4 South America 263 40
% (105 ) 183 39 % (72 ) Indonesia 79 33 % (26 ) c 933 43 % (401 )
Eliminations and other (62 ) N/A 10 50 N/A (3 ) Rate adjustmentd —
N/A 15 — N/A (34 ) Continuing operations $ 183
57 % e $ (105 ) $ 1,336 38 % $ (506 )
a. Represents income from continuing operations before income
taxes and equity in affiliated companies' net losses.
b. In addition to FCX's North America mining operations, the
U.S. jurisdiction reflects corporate-level expenses, which includes
interest expense associated with senior notes, general and
administrative expenses, and environmental obligations and shutdown
costs.
c. Includes a tax credit of $8 million ($6 million net of
noncontrolling interest) associated with the reduction in PT-FI's
statutory tax rates in accordance with its special mining license
(IUPK).
d. In accordance with applicable accounting rules, FCX adjusts
its interim provision for income taxes equal to its consolidated
tax rate.
e. FCX's first-quarter 2019 consolidated effective income tax
rate is a function of the combined effective tax rates for the
jurisdictions in which FCX operates, excluding the U.S.
jurisdiction. Because FCX's U.S. jurisdiction generated net losses
in first-quarter 2019 that will not result in a realized tax
benefit, applicable accounting rules require FCX to adjust its
estimated annual effective tax rate to exclude the impact of U.S.
net losses.
Assuming achievement of current sales volume and cost estimates
and average prices of $3.00 per pound for copper, $1,300 per ounce
for gold and $13.00 per pound for molybdenum for the remainder of
2019, FCX estimates its consolidated effective tax rate for the
year 2019 would approximate 41 percent (comprised of an estimated
effective rate of 41 percent on South America income, 38 percent on
Indonesia income and 0 percent for the U.S.). Variations in the
relative proportions of jurisdictional income result in
fluctuations to FCX's consolidated effective income tax rate.
Because of FCX's U.S. tax position, it does not record a financial
statement impact for income or losses generated in the U.S.,
therefore, the consolidated effective tax rate is generally higher
than the international rates at lower copper prices and lower than
international rates at higher copper prices.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190425005488/en/
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Linda S.
Hayes, 602-366-7824
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