Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $228 million, $0.16 per share, for
first-quarter 2017. After adjusting for net gains of $8 million,
$0.01 per share, first-quarter 2017 adjusted net income
attributable to common stock totaled $220 million, $0.15 per
share.
- Consolidated sales totaled 809
million pounds of copper, 182 thousand ounces of gold and 24
million pounds of molybdenum for first-quarter 2017. Sales volumes
have been impacted by regulatory restrictions on PT Freeport
Indonesia's (PT-FI) concentrate exports since mid-January 2017,
resulting in the deferral of approximately 190 million pounds of
copper and 280 thousand ounces of gold in first-quarter 2017.
PT-FI's concentrate exports resumed on April 21, 2017.
- Consolidated sales for the year
2017 are expected to approximate 3.9 billion pounds of copper, 1.9
million ounces of gold and 93 million pounds of molybdenum,
including 1.0 billion pounds of copper, 440 thousand ounces of gold
and 24 million pounds of molybdenum for second-quarter 2017.
- Average realized prices were
$2.67 per pound for copper, $1,229 per ounce for gold and $8.71 per
pound for molybdenum for first-quarter 2017.
- Average unit net cash costs were
$1.39 per pound of copper for first-quarter 2017 and are expected
to average $1.08 per pound of copper for the year 2017.
- Operating cash flows totaled
$792 million (including $178 million in working capital sources and
changes in other tax payments) for first-quarter 2017. Based on
current sales volume and cost estimates and assuming average prices
of $2.50 per pound for copper, $1,250 per ounce for gold and $9.00
per pound for molybdenum, operating cash flows for the year 2017
are expected to approximate $4.0 billion (including $1.0 billion in
working capital sources and changes in other tax payments).
- Capital expenditures totaled
$344 million (including $210 million for major mining projects) for
first-quarter 2017. Capital expenditures for the year 2017 are
expected to approximate $1.6 billion, including $0.7 billion for
underground development activities for the remainder of 2017, which
are dependent on a resolution of PT-FI's long-term operating
rights.
- At March 31, 2017, consolidated
debt totaled $15.4 billion and consolidated cash totaled
$4.0 billion. FCX had no borrowings and $3.5 billion available
under its $3.5 billion revolving credit facility at March 31,
2017.
- In April 2017, PT Freeport Indonesia
(PT-FI) reached agreement with the Indonesian government to
resume concentrate exports (which had been suspended since January
12, 2017) for a six-month period to enable the negotiation of a new
special operating license (IUPK) and investment stability agreement
to support PT-FI's long-term investment plans.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $228 million ($0.16 per share) for
first-quarter 2017, compared with a net loss attributable to common
stock of $4.2 billion ($3.35 per share) for first-quarter 2016.
FCX’s net income (loss) attributable to common stock includes net
gains of $8 million ($0.01 per share) in first-quarter 2017 and
charges totaling $4.0 billion ($3.19 per share) in first-quarter
2016, which were primarily for the reduction of the carrying value
of oil and gas properties. For a summary of these amounts, refer to
the supplemental schedule, "Adjusted Net Income (Loss)," on page
VI, which is available on FCX's website, "fcx.com."
Richard C. Adkerson, President and Chief Executive Officer,
said, "During the first quarter, we continued to strengthen our
financial position despite the production interruptions experienced
at our Indonesian operations. Our strong focus on cost and
capital discipline combined with improved market conditions for
copper are producing solid results. The resumption of
concentrate exports in Indonesia and expected continued strong
performance from our Americas operations will enable us to generate
significant cash flows in the balance of the year to achieve our
balance sheet objectives. Our team is focused on reaching a
positive near-term resolution to protect our past investments and
support our long-term investment plans in Indonesia and in building
long-term values in our large portfolio of high-quality copper
assets in the Americas."
SUMMARY FINANCIAL DATA
Three Months Ended March 31, 2017
2016 (in millions, except per share amounts)
Revenuesa,b $ 3,341 $ 3,242 Operating income (loss)a $ 580 $ (3,872
) Net income (loss) from continuing operations $ 268 $ (4,097 ) Net
income (loss) from discontinued operations $ 38 c $ (4 ) Net income
(loss) attributable to common stockd,e $ 228 $ (4,184 ) Diluted net
income (loss) per share of common stock: Continuing operations $
0.13 $ (3.34 ) Discontinued operations 0.03 (0.01 ) $ 0.16 $ (3.35
) Diluted weighted-average common shares outstanding 1,454 1,251
Operating cash flowsf $ 792 $ 740 Capital expenditures $ 344 $ 982
At March 31: Cash and cash equivalents $ 4,001 $ 231 Total debt,
including current portion $ 15,363 $ 20,675
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 favorable adjustments to
provisionally priced concentrate and cathode copper sales
recognized in prior periods totaling $91 million ($39 million to
net income attributable to common stock or $0.03 per share) in
first-quarter 2017 and $9 million ($5 million to net loss
attributable to common stock or less than $0.01 per share) in
first-quarter 2016. 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 the potential $120 million in contingent
consideration related to the November 2016 sale of FCX's interest
in TF Holdings Limited (TFHL), which in accordance with accounting
guidelines will continue to be adjusted through December 31,
2019.
d. Includes net gains of $8 million ($0.01
per share) in first-quarter 2017 and charges totaling $4.0 billion
($3.19 per share) in first-quarter 2016, which are described in the
supplemental schedule, "Adjusted Net Income (Loss)," 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 VIII, which
is available on FCX's website, "fcx.com."
f. Includes net working capital sources
and changes in other tax payments of $178 million for first-quarter
2017 and $188 million for first-quarter 2016.
SUMMARY OPERATING DATA
Three Months Ended March 31,
2017 2016a Copper
(millions of recoverable pounds) Production 851 987 Sales,
excluding purchases 809 1,000 Average realized price per pound $
2.67 $ 2.18 Site production and delivery costs per poundb $ 1.60 $
1.49 Unit net cash costs per poundb $ 1.39 $ 1.38
Gold
(thousands of recoverable ounces) Production 239 184 Sales,
excluding purchases 182 201 Average realized price per ounce $
1,229 $ 1,227
Molybdenum (millions of recoverable pounds)
Production 23 20 Sales, excluding purchases 24 17 Average realized
price per pound $ 8.71 $ 7.61
a. Excludes the results of the Tenke
Fungurume (Tenke) mine, which was sold in November 2016 and is
reported as a discontinued operation. Copper sales from the Tenke
mine totaled 123 million pounds in first-quarter 2016.
b. 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 2017 sales of 809 million pounds of copper
and 182 thousand ounces of gold were lower than the January
2017 estimates of 1.0 billion pounds of copper and 460 thousand
ounces of gold, primarily reflecting lower volumes from Indonesia
as a result of regulatory restrictions on PT-FI's concentrate
exports. First-quarter 2017 copper sales were lower than
first-quarter 2016 sales of 1.0 billion pounds, primarily
reflecting lower volumes from North America and Indonesia.
First-quarter 2017 molybdenum sales of 24 million pounds
approximated the January 2017 estimate of 23 million pounds and
were higher than first-quarter 2016 sales of 17 million pounds.
Sales volumes for the year 2017 are expected to approximate 3.9
billion pounds of copper, 1.9 million ounces of gold and 93 million
pounds of molybdenum, including 1.0 billion pounds of copper, 440
thousand ounces of gold and 24 million pounds of molybdenum in
second-quarter 2017. Estimated sales volumes assume normal
operating rates at PT-FI beginning mid-April 2017. Refer to page 6
for discussion of Indonesia Regulatory Matters, which may have a
significant impact on future results.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product
credits) for FCX's copper mines of $1.39 per pound of copper in
first-quarter 2017 were slightly higher than unit net cash costs of
$1.38 per pound in first-quarter 2016, primarily reflecting lower
sales volumes, partly offset by higher by-product credits.
Assuming average prices of $1,250 per ounce of gold and $9.00
per pound of molybdenum for the remainder of 2017 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 $1.08 per pound of copper for the year 2017.
The impact of price changes on consolidated unit net cash costs
would approximate $0.02 per pound for each $50 per ounce change in
the average price of gold for the remainder of 2017 and $0.02 per
pound for each $2 per pound change in the average price of
molybdenum for the remainder of 2017. 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, molybdenum concentrate, gold and silver are
also produced by certain of FCX's North America copper mines.
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 market conditions.
Through exploration drilling, FCX has identified a significant
resource at the Lone Star project located near the Safford
operation in Eastern Arizona. Initial production from Lone
Star is being planned from the oxide ores beginning in 2021, which
can be processed through existing infrastructure to replace oxide
production from Safford. FCX continues to evaluate longer term
opportunities available from the significant 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, 2017 and 2016:
Three Months Ended March 31,
2017 2016 Copper (millions of
recoverable pounds) Production 392 487 Sales, excluding purchases
375 503 Average realized price per pound $ 2.68 $ 2.16
Molybdenum (millions of recoverable pounds) Productiona 9 8
Unit net cash costs per pound of copperb Site
production and delivery, excluding adjustments $ 1.52 $ 1.40
By-product credits (0.15 ) (0.08 ) Treatment charges 0.11
0.10 Unit net cash costs $ 1.48 $ 1.42
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 375 million
pounds in first-quarter 2017 were lower than first-quarter 2016
sales of 503 million pounds, primarily reflecting lower ore grades
and mining rates, timing of shipments, and the impact of the May
2016 sale of an additional 13 percent interest in Morenci. North
America copper sales are estimated to approximate 1.5 billion
pounds for the year 2017, compared with 1.8 billion pounds in
2016.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.48 per pound of copper in
first-quarter 2017 were higher than unit net cash costs of $1.42
per pound in first-quarter 2016, primarily reflecting lower copper
sales volumes, partly offset by higher molybdenum credits.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.53 per
pound of copper for the year 2017, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $9.00 per pound for the remainder of 2017. North America's
average unit net cash costs for the year 2017 would change by
approximately $0.03 per pound for each $2 per pound change in the
average price of molybdenum for the remainder of 2017.
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 commenced operations in September 2015 and achieved
capacity operating rates during first-quarter 2016. Cerro Verde's
expanded operations benefit from its large-scale, long-lived
reserves and cost efficiencies. The project expanded the
concentrator facilities from 120,000 metric tons of ore per day to
360,000 metric tons of ore per day.
In the second half of 2015, FCX adjusted operations at its El
Abra mine to reduce mining and stacking rates by approximately 50
percent to achieve lower operating and labor costs, defer capital
expenditures and extend the life of the existing operations. El
Abra continues to operate at reduced rates.
FCX continues to evaluate a potential large-scale milling
operation at El Abra to process additional sulfide material and to
achieve higher recoveries. Exploration results in recent years at
El Abra indicate a significant sulfide resource, which could
potentially support a major mill project. Future investments will
depend on technical studies, 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, 2017 and 2016:
Three Months Ended March 31,
2017 2016 Copper (millions of
recoverable pounds) Production 304 335 Sales 309 323 Average
realized price per pound $ 2.66 $ 2.19
Molybdenum
(millions of recoverable pounds) Productiona 6 5
Unit net
cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.48 $ 1.23 By-product credits
(0.18 ) (0.07 ) Treatment charges 0.22 0.23 Royalty on metals 0.01
0.01 Unit net cash costs $ 1.53 $ 1.40
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 309 million
pounds in first-quarter 2017 were lower than first-quarter 2016
sales of 323 million pounds. During first-quarter 2017, Cerro
Verde's operations were unfavorably impacted by unusually heavy
rainfall and a 21-day labor strike. These issues resulted in lower
than planned mining rates and a reduction of approximately 80
million pounds of copper in Cerro Verde's estimated 2017 sales
volumes. Sales from South America mining are expected to
approximate 1.2 billion pounds of copper for the year 2017,
compared with 1.3 billion pounds of copper in 2016.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.53 per pound of copper in first-quarter
2017 were higher than unit net cash costs of $1.40 per pound in
first-quarter 2016, primarily reflecting higher milling and mining
costs at Cerro Verde and lower volumes, partly offset by higher
by-product credits. Average unit net cash costs (net of by-product
credits) for South America mining are expected to approximate $1.63
per pound of copper for the year 2017, based on current sales
volume and cost estimates and assuming an average price of $9.00
per pound of molybdenum for the remainder of 2017.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary 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. In January and February 2017, the Indonesian
government issued new regulations to address exports of unrefined
metals, including copper concentrate and anode slimes, and other
matters related to the mining sector. The new regulations permit
the continuation of copper concentrate exports for a five-year
period through January 2022, subject to various conditions,
including conversion from a contract of work to a special operating
license (known as an IUPK, which does not provide the same level of
protections of a contract of work), commitment to completion of
smelter construction in five years and payment of export duties to
be determined by the Ministry of Finance. In addition, the new
regulations enable application for extension of operating rights
five years before expiration of the IUPK and require foreign IUPK
holders to divest 51 percent to Indonesian interests no later than
the tenth year of production. Export licenses would be valid for
one-year periods, subject to review every six months, depending on
smelter construction progress.
Following the issuance of the January and February 2017
regulations and discussions with the government, PT-FI advised the
Indonesian government that it was prepared to convert its Contract
of Work (COW) to an IUPK, subject to obtaining an investment
stability agreement providing equivalent rights with the same level
of legal and fiscal certainty enumerated under its COW, and
provided that the COW would remain in effect until it is replaced
by a mutually satisfactory alternative. PT-FI also committed to
commence construction of a new smelter during a five-year timeframe
after approval of the extension of its long-term operating
rights.
In mid-February 2017, pursuant to the COW's dispute resolution
provisions, PTFI provided formal notice to the Indonesian
government of an impending dispute listing the government's
breaches and violations of the COW.
In March 2017, PT Smelting's (PT-FI's 25-percent owned copper
smelter and refinery located in Gresik, Indonesia) anode slimes
export license was renewed through March 1, 2018.
In late March 2017, the Indonesian government amended the
regulations to enable PT-FI to retain its COW until replaced with
an IUPK accompanied by an investment stability agreement, and to
grant PT-FI a temporary IUPK through October 10, 2017, to enable
concentrate exports during this period. In April 2017, PT-FI
entered into a Memorandum of Understanding with the Indonesian
government confirming that the COW would continue to be valid and
honored until replaced by a mutually agreed IUPK and investment
stability agreement. PT-FI will continue to pay a five percent
export duty during this period.
On April 21, 2017, the Indonesian government issued a permit to
PT-FI to enable exports to resume for a six-month period. PT-FI has
begun loading export shipments and plans to ramp up its production
to full rates during second-quarter 2017.
As a result of the first-quarter 2017 regulatory restrictions
and uncertainties regarding long-term investment stability, PT-FI
has taken actions to adjust its cost structure, reduce its
workforce and slow investments in its underground development
projects and new smelter.
PT-FI and the Indonesian government will immediately commence
negotiations on the conversion of PT-FI's COW to an IUPK
accompanied by an investment stability agreement with the objective
of providing a mutually acceptable long-term investment
framework.
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
over the next several quarters prior to transitioning to the
Grasberg Block Cave underground mine in late 2018.
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. As a
result of regulatory uncertainty, PT-FI has slowed investments in
its underground development projects during first-quarter 2017.
Assuming an agreement is reached to support PT-FI's long-term
investment plans, estimated annual capital spending on these
projects would average $1.0 billion per year ($0.8 billion per year
net to PT-FI) over the next five years. The timing of these
expenditures continues to be reviewed. If PT-FI is unable to reach
agreement with the Indonesian government on its long-term mining
rights, FCX intends to significantly reduce or defer investments in
underground development projects.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the three months ended
March 31, 2017 and 2016:
Three Months Ended March 31,
2017 2016 Copper (millions of
recoverable pounds) Production 155 165 Sales 125 174 Average
realized price per pound $ 2.63 $ 2.20
Gold
(thousands of recoverable ounces) Production 232 178 Sales 177 195
Average realized price per ounce $ 1,229 $ 1,228
Unit net
cash costs per pound of coppera Site production and
delivery, excluding adjustments $ 2.15 $ 2.24 Gold and silver
credits (1.88 ) (1.52 ) Treatment charges 0.28 0.31 Export duties
0.11 0.08 Royalty on metals 0.16 0.13 Unit net cash
costs $ 0.82 $ 1.24
a. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedules, "Product Revenues and Production
Costs," beginning on page X, which are available on FCX's website,
"fcx.com."
Indonesia's consolidated sales of 125 million pounds of copper
and 177 thousand ounces of gold in first-quarter 2017 were lower
than first-quarter 2016 sales of 174 million pounds of copper and
195 thousand ounces of gold, primarily reflecting the impact of
regulatory restrictions on PT-FI's concentrate exports beginning on
January 12, 2017, and a six-week temporary shutdown at PT Smelting,
which began on January 19, 2017.
As a result of the regulatory uncertainties, PT-FI has taken
actions to adjust its cost structure, reduce its workforce and slow
investment in its long-term underground development projects and
new smelter.
In April 2017, PT-FI received approval to resume concentrate
exports. Assuming normal operating rates for the remainder of the
year, consolidated sales volumes from Indonesia mining are expected
to approximate 1.1 billion pounds of copper and 1.9 million ounces
of gold for the year 2017, compared with 1.1 billion pounds of
copper and 1.1 million ounces of gold for the year 2016.
During April 2017, PT-FI experienced a high level of worker
absenteeism. Union leaders have notified PT-FI of a potential
strike during the month of May. PT-FI is working with union
leaders, with the support of government officials, to encourage a
safe and efficient return to normal operations for the benefit of
all stakeholders.
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 $0.82
per pound of copper in first-quarter 2017 were lower than unit net
cash costs of $1.24 per pound in first-quarter 2016, primarily
reflecting higher gold and silver credits and lower production
costs. Indonesia's unit cash costs for first-quarter 2017 exclude
$21 million ($0.17 per pound of copper) for costs charged directly
to cost of sales as a result of the impact of regulatory
restrictions on PT-FI's concentrate exports.
Assuming an average gold price of $1,250 per ounce for the
remainder of 2017 and achievement of current sales volume and cost
estimates, unit net cash credits (net of gold and silver credits)
for Indonesia mining are expected to approximate $0.10 per pound of
copper for the year 2017. Indonesia mining's unit net cash credits
for the year 2017 would change by approximately $0.07 per pound for
each $50 per ounce change in the average price of gold for the
remainder of 2017. Because of the fixed nature of a large portion
of Indonesia's costs, unit costs vary from quarter to quarter
depending on copper and gold volumes.
Indonesia mining's projected sales volumes are dependent on a
number of factors, including operational performance, workforce
productivity, the timing of shipments and its ability to continue
to export copper concentrate.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines in North America - the Henderson underground mine and the
Climax open-pit mine, both in Colorado. The Henderson and Climax
mines produce high-purity, chemical-grade molybdenum 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. In response to market
conditions, the Henderson molybdenum mine continues to operate at
reduced rates. Production from the Molybdenum mines totaled 8
million pounds of molybdenum in first-quarter 2017 and 7 million
pounds in first-quarter 2016. Refer to summary operating data on
page 3 for FCX's consolidated molybdenum sales, which includes
sales of molybdenum produced at the Molybdenum mines, and from
FCX's North America and South America copper mines.
Average unit net cash costs for the Molybdenum mines of $7.10
per pound of molybdenum in first-quarter 2017 were lower than $7.43
per pound in first-quarter 2016, primarily reflecting higher
volumes. Based on current sales volume and cost estimates, unit net
cash costs for the Molybdenum mines are expected to average
approximately $7.85 per pound of molybdenum for the year 2017.
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.
Exploration results continue to indicate opportunities for
significant future potential reserve additions in North America and
South America. Exploration spending continues to be constrained by
market conditions and is expected to approximate $70 million for
the year 2017, compared to $44 million in 2016.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $792
million (including $178 million in working capital sources and
changes in other tax payments) in first-quarter 2017.
Based on current sales volume and cost estimates and assuming
average prices of $2.50 per pound of copper, $1,250 per ounce of
gold and $9.00 per pound of molybdenum for the remainder of 2017,
FCX's consolidated operating cash flows are estimated to
approximate $4.0 billion for the year 2017 (including $1.0 billion
in working capital sources and other tax payments). The impact of
price changes during the remainder of 2017 on operating cash flows
would approximate $275 million for each $0.10 per pound change in
the average price of copper, $65 million for each $50 per ounce
change in the average price of gold and $70 million for each $2 per
pound change in the average price of molybdenum. Refer to page 6
for discussion of Indonesian Regulatory Matters, which may have a
significant impact on future results.
Capital Expenditures. Capital expenditures totaled $344 million
for first-quarter 2017 (including $210 million for major mining
projects). Capital expenditures are expected to approximate $1.6
billion for the year 2017, including $0.9 billion for major mining
projects primarily for underground development activities at
Grasberg. As a result of regulatory uncertainty, PT-FI has slowed
investments in its underground development projects during
first-quarter 2017. If PT-FI is unable to reach agreement with the
Indonesian government on its long-term mining rights, FCX intends
to significantly reduce or defer investments in underground
development projects.
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, 2017 (in billions):
Cash at domestic companies $ 3.4 Cash at
international operations 0.6 Total consolidated cash and
cash equivalents 4.0 Noncontrolling interests' share (0.2 ) Cash,
net of noncontrolling interests' share 3.8 Withholding taxes and
other (0.1 )
Net cash available $ 3.7
Debt. Following is a summary of total debt and the related
weighted-average interest rates at March 31, 2017 (in
billions, except percentages):
Weighted- Average
Interest Rate Senior Notes $ 13.9 4.4% Cerro Verde Credit
Facility 1.3 2.9% Other FCX debt 0.2 2.9% Total debt $ 15.4 4.3%
At March 31, 2017, FCX had no borrowings, $39 million in
letters of credit issued and $3.5 billion available under its $3.5
billion revolving credit facility.
During first-quarter 2017, FCX repaid its $500 million of 2.15%
Senior Notes due 2017.
FINANCIAL POLICY
In December 2015, FCX's common stock dividend was suspended. 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 2017 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,
2017.
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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 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.
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 effects of cost and capital expenditure
reductions, and production curtailments on financial results and
cash flow; potential inventory adjustments; potential impairment of
long-lived mining assets; the outcome of negotiations with the
Indonesian government regarding PT-FI's COW; 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;
litigation results (including the final disposition of the recent
unfavorable Indonesian Tax Court ruling relating to surface water
taxes); 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, 2016, filed with the U.S. Securities
and Exchange Commission (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.
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 per pound of copper and molybdenum, 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,
2017 2016 2017 2016
MINING OPERATIONS: Production Sales
Copper
(millions of recoverable pounds) (FCX's net interest in %)
North America Morenci (72%)a 181 232 172 238 Bagdad
(100%) 40 48 38 50 Safford (100%) 42 56 43 59 Sierrita (100%) 41 41
38 43 Miami (100%) 5 8 5 9 Chino (100%) 62 81 60 83 Tyrone (100%)
20 20 18 20 Other (100%) 1 1 1 1 Total
North America 392 487 375 503
South America Cerro Verde (53.56%) 262 272 268 256 El
Abra (51%) 42 63 41 67 Total South
America 304 335 309 323
Indonesia Grasberg (90.64%)b 155 165 125
174
Consolidated - continuing operations
851 987 809 c
1,000 c Discontinued
operations - Tenke (56%)d — 110 — 123
Total 851 1,097 809 1,123 Less
noncontrolling interests 157 221 156 222
Net 694 876 653
901 Average realized price per pound
(continuing operations) $ 2.67 $ 2.18
Gold (thousands
of recoverable ounces) (FCX's net interest in %) North America
(100%) 7 6 5 6 Indonesia (90.64%)b 232 178 177
195
Consolidated 239 184
182 201 Less noncontrolling interests
22 17 17 18
Net 217
167 165 183
Average realized price per ounce $ 1,229 $ 1,227
Molybdenum (millions of recoverable pounds) (FCX's net
interest in %) Henderson (100%) 3 2 N/A N/A Climax (100%) 5 5 N/A
N/A North America (100%)a 9 8 N/A N/A Cerro Verde (53.56%) 6
5 N/A N/A
Consolidated 23 20
24 17 Less noncontrolling
interests 3 2 3 1
Net 20
18 21 16
Average realized price per pound $ 8.71 $ 7.61
U.S. OIL
AND GAS OPERATIONS: Sales Volumes Sales per Day Oil (thousand
barrels, or MBbls) 481 8,298 5 91 Natural gas (million cubic feet)
5,999 19,639 67 216 NGLs (MBbls) 89 574 1 6 Thousand barrels of oil
equivalents 1,570 12,146 17 133
a. Amounts are net of Morenci's undivided
joint venture partners' interest; effective May 31, 2016, FCX's
undivided interest in Morenci was prospectively reduced from 85
percent to 72 percent.
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 58 million pounds for first-quarter 2017 and 27
million pounds for first-quarter 2016.
d. On November 16, 2016, FCX completed the
sale of its interest in the Tenke mine.
FREEPORT-McMoRan INC. SELECTED OPERATING
DATA (continued) Three
Months Ended March 31, 2017 2016
100% North America Copper
Mines Solution Extraction/Electrowinning (SX/EW)
Operations Leach ore placed in stockpiles (metric tons per
day) 700,600 833,400 Average copper ore grade (percent) 0.28 0.31
Copper production (millions of recoverable pounds) 277 302
Mill Operations Ore milled (metric tons per day)
303,800 298,600 Average ore grades (percent): Copper 0.41 0.50
Molybdenum 0.03 0.03 Copper recovery rate (percent) 86.4 84.7
Production (millions of recoverable pounds): Copper 186 226
Molybdenum 9 8
100% South America Mining SX/EW
Operations Leach ore placed in stockpiles (metric tons per
day) 125,900 140,700 Average copper ore grade (percent) 0.42 0.41
Copper production (millions of recoverable pounds) 66 90
Mill Operations Ore milled (metric tons per day)
338,900 339,400 Average ore grades (percent): Copper 0.44 0.43
Molybdenum 0.02 0.02 Copper recovery rate (percent) 84.5 86.2
Production (millions of recoverable pounds): Copper 238 245
Molybdenum 6 5
100% Indonesia Mining Ore milled
(metric tons per day):a Grasberg open pit 53,600 105,800 Deep Ore
Zone underground mine 26,100 44,200 Deep Mill Level Zone (DMLZ)
underground mineb 3,200 4,100 Grasberg Block Cave underground mineb
2,600 2,300 Big Gossan underground mineb 1,700 200 Total 87,200
156,600 Average ore grades: Copper (percent) 1.15 0.69 Gold (grams
per metric ton) 1.17 0.53 Recovery rates (percent): Copper 92.2
89.3 Gold 84.8 80.6 Production (recoverable): Copper (millions of
pounds) 172 183 Gold (thousands of ounces) 241 190
100%
Molybdenum Mines Ore milled (metric tons per day) 21,600 18,400
Average molybdenum ore grade (percent) 0.21 0.22 Molybdenum
production (millions of recoverable pounds) 8 7
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 2022; production from the
Grasberg Block Cave underground mine is expected to commence in
late 2018, and production from the Big Gossan underground mine is
in care-and-maintenance.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2017 2016 (In Millions,
Except Per Share Amounts) Revenuesa $ 3,341 $ 3,242 Cost of sales:
Production and deliveryb 2,200 2,499 Depreciation, depletion and
amortization 389 662 Impairment of oil and gas properties —
3,787 Total cost of sales 2,589 6,948 Selling, general and
administrative expenses 153 c 138 Mining exploration and research
expenses 15 18 Environmental obligations and shutdown costs 27 10
Net gain on sales of assets (23 ) d — Total costs and
expenses 2,761 7,114 Operating income (loss) 580
(3,872 ) Interest expense, nete (167 ) (191 ) Other income, net 25
36 Income (loss) from continuing operations before
income taxes and equity in affiliated companies' net earnings 438
(4,027 ) Provision for income taxesf (174 ) (77 ) Equity in
affiliated companies' net earnings 4 7 Net income
(loss) from continuing operations 268 (4,097 ) Net income (loss)
from discontinued operations 38 g (4 ) Net income (loss) 306
(4,101 ) Net income attributable to noncontrolling interests:
Continuing operations (75 ) (62 ) Discontinued operations (3 ) (10
) Preferred dividends attributable to redeemable noncontrolling
interest — (11 ) Net income (loss) attributable to FCX
common stockh $ 228 $ (4,184 ) Basic and diluted net
income (loss) per share attributable to common stockholders:
Continuing operations $ 0.13 $ (3.34 ) Discontinued operations 0.03
(0.01 ) $ 0.16 $ (3.35 ) Weighted-average
common shares outstanding: Basic 1,446 1,251 Diluted
1,454 1,251
a. Includes adjustments to provisionally
priced concentrate and cathode copper sales recognized in prior
periods, which are summarized in the supplemental schedule,
"Derivative Instruments," on page VII.
b. Includes net charges (i) at mining
operations for asset impairments at Morenci and for costs charged
directly to cost of sales at PT-FI as a result of regulatory
restrictions on its concentrate exports and (ii) at oil and gas
operations associated with drillship settlement/idle rig (credits)
costs, inventory adjustments and asset impairment. Refer to the
supplemental schedule, "Adjusted Net Income (Loss)," on page VI for
a summary of these charges.
c. Includes oil and gas contract
termination costs, which are summarized in the supplemental
schedule, "Adjusted Net Income (Loss)," on page VI.
d. Primarily reflects net gains associated
with the sales of oil and gas properties, which are summarized in
the supplemental schedule, "Adjusted Net Income (Loss)," on page
VI.
e. Consolidated interest expense,
excluding capitalized interest, totaled $195 million in
first-quarter 2017 and $218 million in first-quarter 2016.
f. Refer to the supplemental schedule,
"Income Taxes," on page VII for a summary of FCX's provision for
income taxes.
g. Primarily reflects adjustments to the
fair value of the potential contingent consideration related to the
November 2016 sale of FCX's interest in TF Holdings Limited (TFHL),
which in accordance with accounting guidelines 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 VIII for
a summary of net impacts from changes in these deferrals.
FREEPORT-McMoRan INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) March 31,
December 31, 2017 2016 (In Millions) ASSETS Current assets: Cash
and cash equivalents $ 4,001 $ 4,245 Trade accounts receivable 734
1,126 Income and other tax receivables 665 879 Inventories: Mill
and leach stockpiles 1,355 1,338 Materials and supplies, net 1,275
1,306 Product 1,133 998 Other current assets 196 199 Held for sale
408 344 Total current assets 9,767
10,435 Property, plant, equipment and mine development costs, net
23,117 23,219 Oil and gas properties, subject to amortization, less
accumulated amortization 57 74 Long-term mill and leach stockpiles
1,625 1,633 Other assets 2,010 1,956
Total assets $ 36,576 $ 37,317 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 1,780 $ 2,393 Current portion of debt 2,228 1,232
Current portion of environmental and asset retirement obligations
388 369 Accrued income taxes 190 66 Held for sale 256
205 Total current liabilities 4,842 4,265 Long-term
debt, less current portion 13,135 14,795 Deferred income taxes
3,786 3,768 Environmental and asset retirement obligations, less
current portion 3,507 3,487 Other liabilities 1,719
1,745 Total liabilities 26,989 28,060 Equity:
Stockholders' equity: Common stock 158 157 Capital in excess of par
value 26,725 26,690 Accumulated deficit (16,311 ) (16,540 )
Accumulated other comprehensive loss (537 ) (548 ) Common stock
held in treasury (3,717 ) (3,708 ) Total
stockholders' equity 6,318 6,051 Noncontrolling interests
3,269 3,206 Total equity 9,587
9,257 Total liabilities and equity $ 36,576 $
37,317
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 2017
2016 (In Millions) Cash flow from operating activities: Net
income (loss) $ 306 $ (4,101 ) Adjustments to reconcile net income
(loss) to net cash provided by operating activities: Depreciation,
depletion and amortization 389 722 Impairment of oil and gas
properties — 3,787 Net gain on sales of assets (23 ) — Stock-based
compensation 34 30 Net charges for environmental and asset
retirement obligations, including accretion 71 57 Payments for
environmental and asset retirement obligations (33 ) (90 ) Deferred
income taxes 20 152 Gain on disposal of discontinued operations (32
) — Decrease (increase) in long-term mill and leach stockpiles 8
(53 ) Oil and gas contract settlement payments (70 ) — Other, net
(56 ) 48 Changes in working capital and other tax payments,
excluding amounts from dispositions: Accounts receivable 623 93
Inventories (135 ) 114 Other current assets (13 ) (68 ) Accounts
payable and accrued liabilities (433 ) 9 Accrued income taxes and
changes in other tax payments 136 40
Net cash provided by operating activities 792
740 Cash flow from investing activities: Capital
expenditures: North America copper mines (28 ) (34 ) South America
(15 ) (157 ) Indonesia (244 ) (222 ) Molybdenum mines (1 ) (1 )
Other, including oil and gas operations (56 ) (568 ) Other, net
(21 ) 2 Net cash used in investing activities
(365 ) (980 ) Cash flow from financing
activities: Proceeds from debt 157 1,796 Repayments of debt (815 )
(1,442 ) Net proceeds from sale of common stock — 32 Cash dividends
paid: Common stock (1 ) (4 ) Noncontrolling interests (15 ) (18 )
Stock-based awards net payments (5 ) (4 ) Debt financing costs and
other, net — (13 ) Net cash (used in) provided
by financing activities (679 ) 347 Net
(decrease) increase in cash and cash equivalents (252 ) 107
Decrease (increase) in cash and cash equivalents in assets held for
sale 8 (53 ) Cash and cash equivalents at beginning of year
4,245 177 Cash and cash equivalents at end of
period $ 4,001 $ 231
FREEPORT-McMoRan INC.ADJUSTED NET
INCOME (LOSS)
Adjusted net income (loss) is intended to provide investors and
others with information about FCX's recurring operating
performance. This information differs from net income (loss)
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 (loss) 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, 2017
2016 Pre-tax After-tax Per Share
Pre-tax After-tax Per Share
Net
income (loss) attributable to common stock N/A $
228 $ 0.16 N/A $
(4,184 ) $ (3.35 )
Impairment of oil and gas properties $ — $ — $ — $ (3,787 ) $
(3,787 ) $ (3.03 ) Other oil and gas charges: Drillship
settlement/idle rig credits (costs) 20 a 20 0.01 (165 ) (165 )
(0.13 ) Other contract termination costs (21 ) (21 ) (0.01 ) — — —
Inventory adjustments and asset impairment — — — (35 ) (35 ) (0.03
) Mining charges: PT-FI non-inventoriable costs (21 ) (11 ) (0.01 )
— — — Other asset impairments (19 ) (19 ) (0.01 ) — — — Adjustments
to environmental obligations and related litigation reserves (19 )
(19 ) (0.01 ) (1 ) (1 ) — Gain on sales of assets 23 b 23 0.01 — —
— Gain on disposal of discontinued operations 38 c 35
0.03 — — — $ 1 $ 8 $ 0.01
$ (3,988 ) $ (3,988 ) $ (3.19 )
Adjusted net
income (loss) attributable to common stock N/A $
220 $ 0.15 N/A $ (196
) $ (0.16 )
a. Primarily reflects fair value
adjustments of contingent payments related to the 2016 drillship
settlements, which in accordance with accounting guidelines will
continue to be adjusted through June 30, 2017.
b. Primarily includes gains associated
with oil and gas transactions, including $17 million related to the
Madden sale and $16 million of adjustments related to the December
2016 Deepwater Gulf of Mexico sale, partly offset by adjustments of
$10 million to the fair value of the potential $150 million in
contingent consideration related to the December 2016 onshore
California sale, which in accordance with accounting guidelines
will continue to be adjusted through December 31, 2020.
c. Primarily reflects adjustments to the
fair value of the potential $120 million in contingent
consideration related to the November 2016 sale of FCX's interest
in TFHL, which in accordance with accounting guidelines will
continue to be adjusted through December 31, 2019.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170425005854/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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