Freeport-McMoRan Inc. (NYSE:FCX):
- Net income attributable to common stock
totaled $9 million, less than $0.01 per share, in fourth-quarter
2019. After adjusting for net charges of $22 million, $0.02 per
share, fourth-quarter 2019 adjusted net income attributable to
common stock totaled $31 million, or $0.02 per share.
- Consolidated sales totaled 906 million pounds of
copper, 317 thousand ounces of gold and 22 million pounds of
molybdenum in fourth-quarter 2019, and 3.3 billion pounds of
copper, 991 thousand ounces of gold and 90 million pounds of
molybdenum for the year 2019.
- Consolidated sales for the year 2020 are expected
to approximate 3.5 billion pounds of copper, 0.8 million ounces of
gold and 88 million pounds of molybdenum, including 725 million
pounds of copper, 105 thousand ounces of gold and 22 million pounds
of molybdenum in first-quarter 2020. Sales are expected to increase
to 4.3 billion pounds of copper and 1.4 million ounces of gold in
2021.
- Average realized prices in fourth-quarter 2019
were $2.74 per pound for copper, $1,491 per ounce for gold and
$11.65 per pound for molybdenum.
- Average unit net cash costs in fourth-quarter 2019
were $1.67 per pound of copper and $1.74 per pound of copper for
the year 2019. Unit net cash costs are expected to average $1.75
per pound of copper for the year 2020.
- Operating cash flows totaled $170 million in
fourth-quarter 2019 and $1.5 billion (including $349 million of
working capital and other sources) for the year 2019. Based on
current sales volume and cost estimates, and assuming average
prices of $2.85 per pound for copper, $1,500 per ounce for gold and
$10.00 per pound for molybdenum, operating cash flows are expected
to approximate $2.4 billion (including $0.2 billion of working
capital and other sources) for the year 2020.
- Capital expenditures totaled $0.7 billion
(including approximately $0.4 billion for major projects) in
fourth-quarter 2019 and $2.65 billion (including approximately $1.5
billion for major projects) for the year 2019. Capital expenditures
for the year 2020 are expected to approximate $2.8 billion,
including $1.8 billion for major projects primarily associated with
underground development activities in the Grasberg minerals
district in Indonesia and completion of the Lone Star copper leach
project in Arizona, and exclude estimates associated with the new
smelter in Indonesia. FCX expects capital expenditures for the
development of the new smelter in Indonesia to approximate $0.5
billion in 2020, of which approximately 49 percent will be
attributable to FCX's equity interest.
- During fourth-quarter 2019, FCX generated $452 million
in proceeds from asset sales associated with the previously
announced sales of a portion of its Freeport Cobalt business and
its interest in the lower zone of the Timok exploration
project.
- At December 31, 2019, consolidated debt
totaled $9.8 billion and consolidated cash totaled $2.0
billion. FCX had no borrowings and $3.5 billion available under its
revolving credit facility at December 31, 2019.
- On December 18, 2019, FCX declared a quarterly cash
dividend of $0.05 per share on its common stock, which will be
paid on February 3, 2020.
Freeport-McMoRan Inc. (NYSE:FCX) reported net income (loss)
attributable to common stock of $9 million (less than $0.01 per
share) in fourth-quarter 2019 and $(239) million ($(0.17) per
share) for the year 2019. After adjusting for net charges of $22
million ($0.02 per share), primarily reflecting net charges at
PT-FI (mostly for historical contested tax audits) and metals
inventory adjustments, partly offset by gains on sales of assets,
adjusted net income attributable to common stock totaled $31
million ($0.02 per share) in fourth-quarter 2019. For additional
information, refer to the supplemental schedule, "Adjusted Net
Income," on page VII, which is available on FCX's website,
"fcx.com."
Richard C. Adkerson, President and Chief Executive Officer,
said, "During 2019, we progressed three major initiatives to
enhance future cash flows and value for our shareholders. We are on
schedule to establish large-scale production from our high-grade,
low-cost and long-lived underground ore bodies at Grasberg; the
Lone Star project in Arizona is nearing completion; and early
results from our innovation initiatives to enhance productivity at
our operations in the Americas are positive. Combined, these
initiatives are expected to strengthen our cost position, future
cash flows and long-term value for our shareholders, further
advancing Freeport as foremost in the global copper industry. We
are laser focused on execution of these plans designed to increase
copper and gold sales by more than 30 percent, reduce unit net cash
costs by approximately 25 percent and more than double operating
cash flows in 2021 from 2019 levels."
SUMMARY FINANCIAL DATA
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
(in millions, except per share
amounts)
Revenuesa,b
$
3,911
$
3,684
$
14,402
$
18,628
Operating incomea
$
775
$
316
$
1,091
$
4,754
Net income (loss) from continuing
operations
$
42
$
374
$
(192
)
$
2,909
Net income (loss) attributable to common
stockc,d
$
9
$
485
$
(239
)
$
2,602
Diluted net income (loss) per share of
common stock:
Continuing operations
$
—
$
0.33
$
(0.17
)
$
1.79
Discontinued operations
—
—
—
(0.01
)
$
—
$
0.33
$
(0.17
)
$
1.78
Diluted weighted-average common shares
outstanding
1,457
1,457
1,451
1,458
Operating cash flowse
$
170
$
(62
)
$
1,482
$
3,863
Capital expenditures
$
735
$
580
$
2,652
$
1,971
At December 31:
Cash and cash equivalents
$
2,020
$
4,217
$
2,020
$
4,217
Total debt, including current portion
$
9,826
$
11,141
$
9,826
$
11,141
a.
For segment financial results, refer to
the supplemental schedules, "Business Segments," beginning on page
X, 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 $33 million ($14 million to net
income attributable to common stock or $0.01 per share) in
fourth-quarter 2019, $(32) million ($(15) million to net income
attributable to common stock or $(0.01) per share) in
fourth-quarter 2018, $58 million ($24 million to net loss
attributable to common stock or $0.02 per share) for the year 2019
and $(70) million ($(31) million to net income attributable to
common stock or $(0.02) per share) for the year 2018. For further
discussion, refer to the supplemental schedule, "Derivative
Instruments," beginning on page IX, which is available on FCX's
website, "fcx.com."
c.
Includes net (charges) gains of $(22) million ($(0.02) per share)
in fourth-quarter 2019, $324 million ($0.22 per share) in
fourth-quarter 2018, $(275) million ($(0.19) per share) for the
year 2019 and $379 million ($0.24 per share) for the year 2018 that
are described in the supplemental schedule, "Adjusted Net Income,"
on page VII, 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 X, which is available on FCX's website,
"fcx.com."
e.
Working capital and other sources (uses) totaled $75 million in
fourth-quarter 2019, $(556) million in fourth-quarter 2018, $349
million for the year 2019 and $(656) million for the year 2018.
SUMMARY OPERATING DATA
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Copper (millions of recoverable
pounds)
Production
827
841
3,247
3,813
Sales, excluding purchases
906
785
3,292
3,811
Average realized price per pound
$
2.74
$
2.75
$
2.73
$
2.91
Site production and delivery costs per
pounda
$
2.12
$
1.98
$
2.15
$
1.76
Unit net cash costs per pounda
$
1.67
$
1.54
$
1.74
$
1.07
Gold (thousands of recoverable
ounces)
Production
223
334
882
2,439
Sales, excluding purchases
317
266
991
2,389
Average realized price per ounce
$
1,491
$
1,255
$
1,415
$
1,254
Molybdenum (millions of recoverable
pounds)
Production
21
26
90
95
Sales, excluding purchases
22
24
90
94
Average realized price per pound
$
11.65
$
12.75
$
12.61
$
12.50
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 XIII, which are available on FCX's
website, "fcx.com."
Consolidated Sales Volumes
Fourth-quarter 2019 copper sales of 906 million pounds
were 4 percent higher than the October 2019 estimate of 870 million
pounds, and 15 percent higher than fourth-quarter 2018 sales of 785
million pounds, mostly reflecting higher sales from Indonesia,
primarily associated with an extension of mining from the Grasberg
open pit, which was completed in the fourth quarter, and the timing
of shipments.
Fourth-quarter 2019 gold sales of 317 thousand ounces
were 117 thousand ounces higher than the October 2019 estimate of
200 thousand ounces and approximately 20 percent higher than
fourth-quarter 2018 sales of 266 thousand ounces, primarily
reflecting an extension of mining from the Grasberg open pit and
the timing of shipments.
Fourth-quarter 2019 molybdenum sales of 22 million pounds
were slightly lower than both the October 2019 estimate and
fourth-quarter 2018 sales of 24 million pounds.
Consolidated sales volumes for the year 2020 are expected to
approximate 3.5 billion pounds of copper, 0.8 million ounces of
gold and 88 million pounds of molybdenum, including 725 million
pounds of copper, 105 thousand ounces of gold and 22 million pounds
of molybdenum in first-quarter 2020. As PT-FI continues to ramp-up
production from its significant underground ore bodies, metal
production is expected to improve significantly by 2021.
Consolidated Unit Net Cash Costs
Consolidated average unit net cash costs (net of by-product
credits) for FCX's copper mines of $1.67 per pound of copper in
fourth-quarter 2019, were lower than the October 2019 estimate of
$1.76 per pound, primarily reflecting higher copper and gold sales
volumes. As anticipated, consolidated average unit net cash costs
were higher than the fourth-quarter 2018 average of $1.54 per
pound, primarily reflecting lower production volumes as PT-FI
continues to ramp-up production from its significant underground
ore bodies, and lower molybdenum by-product credits.
Assuming average prices of $1,500 per ounce of gold and $10.00
per pound of molybdenum for 2020 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 2020. The impact of price changes
on 2020 consolidated unit net cash costs would approximate $0.01
per pound for each $50 per ounce change in the average price of
gold and $0.03 per pound for each $2 per pound change in the
average price of molybdenum. Quarterly unit net cash costs vary
with fluctuations in sales volumes and realized prices, primarily
for gold and molybdenum. FCX expects consolidated unit net cash
costs to decline by 2021, following a ramp-up period at PT-FI.
MINING OPERATIONS
Productivity and Innovation Initiatives. During 2019, FCX
advanced initiatives in its North America and South America mining
operations to enhance productivity, expand margins and reduce the
capital intensity of the business through the utilization of new
technology applications in combination with a more interactive
operating structure. The pilot program initiated at the Bagdad mine
in northwest Arizona in late 2018 was highly successful in
utilizing data science, machine learning and integrated functional
teams to address bottlenecks, provide cost benefits and drive
improved overall performance. The program is now being implemented
across the North America and South America operations.
A series of action items have been identified, prioritized and
are being implemented. Based on the opportunities identified to
date, FCX has incorporated higher mining and milling rates in its
future plans, resulting in estimated incremental production of
approximately 100 million pounds of copper in 2021 and
approximately 200 million pounds in 2022.
Capital expenditures associated with these initiatives are
expected to be attractive in relation to developing new copper
supply. FCX currently estimates capital costs of these initiatives,
principally for mining equipment and ongoing development of data
science and machine learning programs, will approximate $200
million.
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 are
dependent upon market conditions, and will be undertaken based on
the results of economic and technical feasibility studies,
including the incorporation of innovation initiatives to reduce
capital intensity.
Through exploration drilling, FCX has identified a significant
resource at its wholly owned Lone Star copper leach project located
near the Safford operation in eastern Arizona. An initial project
to develop the Lone Star leachable ores commenced in 2018, with
first production expected during 2020. Initial production from the
Lone Star leachable ores following a ramp-up period 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 December 31, 2019, approximately
$655 million has been incurred for this project, which is on
schedule and within budget. The project also advances exposure to a
significant sulfide resource. FCX expects to incorporate 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 December
31,
Years Ended December
31,
2019
2018
2019
2018
Copper (millions of recoverable
pounds)
Production
361
353
1,457
1,404
Sales, excluding purchases
358
333
1,442
1,428
Average realized price per pound
$
2.73
$
2.77
$
2.74
$
2.96
Molybdenum (millions of recoverable
pounds)
Productiona
8
9
32
32
Unit net cash costs per pound of
copperb
Site production and delivery, excluding
adjustments
$
2.07
$
2.01
$
2.05
$
1.94
By-product credits
(0.22
)
(0.34
)
(0.24
)
(0.26
)
Treatment charges
0.11
0.12
0.11
0.11
Unit net cash costs
$
1.96
$
1.79
$
1.92
$
1.79
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 XIII, which are available on FCX's website, "fcx.com."
North America's consolidated copper sales volumes of 358 million
pounds in fourth-quarter 2019 were higher than fourth-quarter 2018
copper sales volumes of 333 million pounds, primarily reflecting
timing of shipments and higher production from Morenci. North
America copper sales are estimated to approximate 1.6 billion
pounds for the year 2020, compared with 1.4 billion pounds in
2019.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.96 per pound of copper in
fourth-quarter 2019 were higher than fourth-quarter 2018 unit net
cash costs of $1.79 per pound, primarily reflecting lower
by-product/molybdenum credits.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.93 per
pound of copper for the year 2020, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $10.00 per pound. The impact of price changes during 2020
on North America's average unit net cash costs would approximate
$0.04 per pound for each $2 per pound change in the average price
of molybdenum.
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 and have continued to perform well.
Debottlenecking projects and additional initiatives to enhance
operating rates continue to be advanced. Cerro Verde concentrating
operations averaged 396,800 metric tons of ore per day in
fourth-quarter 2019, approximately 10 percent above design
capacity. Ongoing productivity and innovation initiatives are
targeting the opportunity to increase production to 420,000 metric
tons of ore per day in 2021.
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 continue to be
evaluated to determine the optimal scope and timing for the project
in parallel with extending the life of the current leaching
operation.
Operating Data. Following is summary consolidated operating data
for South America mining:
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Copper (millions of recoverable
pounds)
Production
320
318
1,183
1,249
Sales
345
325
1,183
1,253
Average realized price per pound
$
2.76
$
2.74
$
2.71
$
2.87
Molybdenum (millions of recoverable
pounds)
Productiona
8
8
29
28
Unit net cash costs per pound of
copperb
Site production and delivery, excluding
adjustments
$
1.85
c
$
1.77
$
1.85
$
1.79
d
By-product credits
(0.18
)
(0.26
)
(0.27
)
(0.24
)
Treatment charges
0.17
0.19
0.18
0.19
Royalty on metals
0.01
0.01
0.01
0.01
Unit net cash costs
$
1.85
$
1.71
$
1.77
$
1.75
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 XIII, which are available on FCX's website, "fcx.com."
c.
Includes a charge of $0.04 per pound of copper for adjustments to
deferred profit sharing for prior years.
d.
Includes charges totaling $0.06 per pound of copper associated with
Cerro Verde's three-year collective labor agreement.
South America's consolidated copper sales volumes of 345 million
pounds in fourth-quarter 2019 were higher than fourth-quarter 2018
copper sales volumes of 325 million pounds, primarily reflecting
timing of shipments. Sales from South America mining are expected
to approximate 1.15 billion pounds of copper for the year 2020,
similar to the year 2019.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.85 per pound of copper in fourth-quarter
2019 were higher than unit net cash costs of $1.71 per pound in
fourth-quarter 2018, primarily reflecting lower by-product credits
and adjustments to deferred profit sharing for prior years.
Average unit net cash costs (net of by-product credits) for
South America mining are expected to approximate $1.95 per pound of
copper for the year 2020, based on current sales volume and cost
estimates and assuming an average price of $10.00 per pound of
molybdenum.
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. Under the terms of the shareholders agreement, FCX’s
economic interest in PT-FI approximates 81 percent through 2022.
PT-FI's results are consolidated in FCX's financial statements.
Operating and Development Activities. During fourth-quarter
2019, PT-FI completed mining in the Grasberg open pit and continues
to achieve important milestones in ramping-up production of
large-scale quantities of copper and gold from its significant
underground ore bodies. In aggregate, the Grasberg open pit
produced over 27 billion pounds of copper and 46 million ounces of
gold in the 30-year period from 1990 through 2019.
Grasberg Block Cave. PT-FI has
commenced extraction of ore from the Grasberg Block Cave
underground mine, which is the same ore body historically mined
from the surface in the Grasberg open pit. Reserves from the
Grasberg Block Cave totaled 17.2 billion pounds of copper and 14.2
million ounces of gold at December 31, 2019, representing
approximately half of PT-FI's total copper and gold reserves.
Undercutting, drawbell construction and ore extraction activities
in the Grasberg Block Cave underground mine continue to track
expectations. Ore extraction from the Grasberg Block Cave
underground mine averaged 11,200 metric tons of ore per day in
fourth-quarter 2019, including a planned three week outage for the
installation of ore-flow infrastructure. Following completion of
the maintenance program in mid-December, ore extraction from the
Grasberg Block Cave averaged 17,000 metric tons of ore per day.
Monitoring data on cave propagation in the Grasberg Block Cave
underground mine is providing confidence in growing production
rates over time. As existing drawpoints mature and additional
drawpoints are added, cave development is expected to increase
production rates to an average of 30,000 metric tons of ore per day
in 2020, over 60,000 metric tons of ore per day in 2021 and 130,000
metric tons of ore per day in 2023 from five production blocks
spanning 335,000 square meters.
Deep Mill Level Zone (DMLZ). The
DMLZ underground mine, located east of the Grasberg ore body and
below the Deep Ore Zone (DOZ) underground mine, has continued its
ramp up of production. Hydraulic fracturing operations have been
effective in managing rock stresses and pre-conditioning the cave
following mining-induced seismic activity experienced in 2017 and
2018. Ore extraction continues to exceed expectations, averaging
14,900 metric tons of ore per day in fourth-quarter 2019 and
reached approximately 16,000 metric tons of ore per day at year-end
2019. Ongoing hydraulic fracturing operations combined with
continued undercutting and drawbell openings in the two currently
active production blocks are expected to expand the cave,
supporting higher production rates that are expected to average
29,000 metric tons of ore per day in 2020, approach 60,000 metric
tons of ore per day in 2021 and 80,000 metric tons of ore per day
in 2022 from three production blocks.
Results to date from the Grasberg Block Cave and DMLZ
underground mines are positive and in line with long-term plans to
reach full production rates. Because of the nature of block caving,
estimates of timing of future production from PT-FI's underground
ore bodies will continue to be reviewed and may be modified as
additional information becomes available.
Indonesian Smelter. In connection
with the extension of PT-FI's mining rights from 2031 to 2041,
PT-FI committed to construct a new smelter in Indonesia by December
21, 2023. A site for the new smelter has been selected, and ground
preparation is advancing. Engineering and front-end engineering and
design for the selected process technology are advancing and
expected to be completed in 2020. The preliminary capital cost
estimate for the project approximates $3 billion, pending
completion of final engineering. Estimated capital expenditures for
2020 approximate $0.5 billion. PT-FI has advanced financing
discussions with a syndicate of banks and expects the project will
be funded by a bank loan to PT-FI. The debt service for the new
smelter will be shared by PT-FI's shareholders according to their
respective equity ownership percentages. As a result, FCX's future
distributions from PT-FI will incorporate approximately 49 percent
of the smelter debt service.
Operating Data. Following is summary consolidated operating data
for Indonesia mining:
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Copper (millions of recoverable
pounds)
Production
146
170
607
1,160
Sales
203
127
667
1,130
Average realized price per pound
$
2.75
$
2.72
$
2.72
$
2.89
Gold (thousands of recoverable
ounces)
Production
218
327
863
2,416
Sales
314
261
973
2,366
Average realized price per ounce
$
1,491
$
1,254
$
1,416
$
1,254
Unit net cash costs (credits) per pound
of coppera
Site production and delivery, excluding
adjustments
$
2.69
$
2.44
$
2.91
$
1.48
Gold and silver credits
(2.38
)
(2.70
)
(2.13
)
(2.69
)
Treatment charges
0.23
0.29
0.26
0.26
Export duties
0.11
0.21
0.08
0.16
Royalty on metals
0.19
0.21
0.16
0.21
Unit net cash costs (credits)
$
0.84
$
0.45
$
1.28
$
(0.58
)
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 XIII, which are available
on FCX's website, "fcx.com."
PT-FI's consolidated sales of 203 million pounds of copper and
314 thousand ounces of gold in fourth-quarter 2019 were higher than
fourth-quarter 2018 consolidated sales of 127 million pounds of
copper and 261 thousand ounces of gold, reflecting the extension of
mining in the Grasberg open pit, which was completed in December
2019, and timing of shipments.
Consolidated sales volumes from PT-FI are expected to
approximate 750 million pounds of copper and 0.8 million ounces of
gold in 2020, compared with 667 million pounds of copper and 1.0
million ounces of gold in 2019. As PT-FI continues to ramp-up
production from its underground ore bodies, metal production is
expected to improve significantly by 2021.
Because of the fixed nature of a large portion of PT-FI's costs,
unit net cash costs can vary significantly from quarter to quarter
depending on copper and gold volumes. PT-FI's unit net cash costs
(including gold and silver credits) of $0.84 per pound of copper in
fourth-quarter 2019, were higher than unit net cash costs of $0.45
per pound in fourth-quarter 2018, primarily reflecting lower copper
production and gold credits.
Assuming an average gold price of $1,500 per ounce for 2020 and
achievement of current sales volume and cost estimates, unit net
cash costs (including gold and silver credits) for PT-FI are
expected to approximate $1.04 per pound of copper for the year
2020. The impact of price changes during 2020 on PT-FI's average
unit net cash costs would approximate $0.05 per pound for each $50
per ounce change in the average price of gold.
PT-FI's projected sales volumes and unit net cash costs for the
year 2020 are dependent on a number of factors, including
operational performance, timing of shipments and the Indonesian
government's extension of PT-FI's export license beyond March 8,
2020.
PT-FI's estimated annual capital spending on underground mine
development projects is expected to average $0.8 billion per year
for the three-year period 2020 through 2022, 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 $1.0 billion per year for the
three-year period 2020 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.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines in Colorado - the Henderson underground mine and the Climax
open-pit mine. 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 the 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 5 million pounds of molybdenum in
fourth-quarter 2019 and 29 million pounds for the year 2019,
compared with 9 million pounds in fourth-quarter 2018 and 35
million pounds for the year 2018. The decrease in the 2019 periods
primarily reflects the impacts of market conditions. 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 of $14.20 per pound
of molybdenum in fourth-quarter 2019 and $10.80 per pound for the
year 2019 were higher than unit net cash costs of $9.16 per pound
in fourth-quarter 2018 and $8.77 per pound for the year 2018,
primarily reflecting lower volumes. Based on current sales volume
and cost estimates, average unit net cash costs for the Molybdenum
mines are expected to approximate $10.50 per pound of molybdenum
for the year 2020.
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 XIII, 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 2020, compared with $77
million in 2019.
Preliminary Estimated Recoverable Proven and Probable Mineral
Reserves. FCX has significant reserves, resources and future
development opportunities within its portfolio of mining assets.
FCX's preliminary estimated consolidated recoverable proven and
probable reserves from its mines at December 31, 2019, include
116.0 billion pounds of copper, 29.6 million ounces of gold and
3.58 billion pounds of molybdenum, which were determined using
$2.50 per pound for copper, $1,200 per ounce for gold and $10.00
per pound for molybdenum. The preliminary estimated recoverable
proven and probable mining reserves presented in the table below
represent the estimated metal quantities from which FCX expects to
be paid after application of estimated metallurgical recovery rates
and smelter recovery rates, where applicable. Recoverable reserve
volumes are those which FCX estimates can be economically and
legally extracted or produced at the time of the reserve
determination.
Preliminary Estimated
Recoverable Proven and Probable Mineral Reserves
at December 31, 2019
Copper
Gold
Molybdenum
(billion pounds)
(million ounces)
(billion pounds)
North America
47.2
0.5
2.87
South America
33.2
—
0.71
Indonesia
35.6
29.1
—
Consolidated basisa
116.0
29.6
3.58
Net equity interestb
83.4
16.1
3.25
a.
Consolidated reserves represent estimated
metal quantities after reduction for FCX's joint venture partner
interest at the Morenci mine in North America. Excluded from the
table above are FCX's estimated recoverable proven and probable
reserves of 375 million ounces of silver, which were determined
using $15 per ounce.
b.
Net equity interest reserves represent estimated consolidated metal
quantities further reduced for noncontrolling interest ownership.
FCX's net equity interest for estimated metal quantities in
Indonesia reflects 81.27 percent through 2022 and 48.76 percent
from 2023 through 2041. Excluded from the table above are FCX's
estimated net recoverable proven and probable reserves of 251
million ounces of silver.
The following table summarizes changes in FCX's preliminary
estimated consolidated recoverable proven and probable copper, gold
and molybdenum reserves during 2019:
Copper
Gold
Molybdenum
(billion pounds)
(million ounces)
(billion pounds)
Reserves at December 31, 2018
119.6
30.8
3.78
Net revisions
(0.4
)
(0.3
)
(0.11
)
Production
(3.2
)
(0.9
)
(0.09
)
Reserves at December 31, 2019
116.0
29.6
3.58
In addition to the preliminary estimated consolidated
recoverable proven and probable reserves, FCX's preliminary
estimated mineralized material at December 31, 2019, which was
assessed using $3.00 per pound for copper, totaled 133 billion
pounds of incremental contained copper. FCX continues to pursue
opportunities to convert this material into reserves, future
production volumes and cash flow.
CASH FLOWS, ASSET SALES, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $170
million in fourth-quarter 2019 and $1.5 billion (including $349
million of working capital and other sources) for the year 2019.
Fourth-quarter and year 2019 operating cash flows included a $250
million payment to Indonesia tax authorities for historical
contested tax audits.
Based on current sales volume and cost estimates, and assuming
average prices of $2.85 per pound of copper, $1,500 per ounce of
gold and $10.00 per pound of molybdenum, FCX's consolidated
operating cash flows are estimated to approximate $2.4 billion
(including $0.2 billion of working capital and other sources) for
the year 2020. The impact of price changes during 2020 on operating
cash flows would approximate $350 million for each $0.10 per pound
change in the average price of copper, $35 million for each $50 per
ounce change in the average price of gold and $125 million for each
$2 per pound change in the average price of molybdenum.
Capital Expenditures. Capital expenditures totaled $0.7 billion
in fourth-quarter 2019 (including approximately $0.4 billion for
major projects) and $2.65 billion for the year 2019 (including
approximately $1.5 billion for major projects).
Capital expenditures are expected to approximate $2.8 billion
for the year 2020, including $1.8 billion for major projects
primarily associated with underground development activities in the
Grasberg minerals district and completion of the Lone Star copper
leach 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 expects capital expenditures for the development of the new
smelter in Indonesia to approximate $0.5 billion in 2020, of which
approximately 49 percent will be attributable to FCX's equity
interest. PT-FI expects these amounts to be funded by a new bank
loan.
Asset Sales. In November 2019, FCX completed the sale of its
cobalt refinery in Kokkola, Finland, and related cobalt cathode
precursor business for total cash consideration of approximately
$200 million, including approximately $50 million of working
capital. FCX recorded a gain of $59 million on the transaction.
In December 2019, FCX completed the sale of its interest in the
lower zone of the Timok exploration project in Serbia for cash
consideration of $240 million at closing, plus the right to future
contingent payments of up to $150 million. In addition, the
purchaser agreed to pay $107 million of previously agreed
contingent consideration related to FCX's 2016 sale of its interest
in the upper zone of the Timok exploration project in three
installment payments between 2020 and 2022. FCX recorded a gain of
$343 million on the transaction.
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 December 31, 2019 (in billions):
Cash at domestic companies
$
1.3
Cash at international operations
0.7
Total consolidated cash and cash
equivalents
2.0
Noncontrolling interests' share
(0.3
)
Cash, net of noncontrolling interests'
share
$
1.7
Withholding taxes
—
a
Net cash available
$
1.7
a.
Rounds to less than $0.1 billion.
Debt. At December 31, 2019, FCX's consolidated debt totaled $9.8
billion, with a related weighted-average interest rate of 4.5
percent. FCX had no borrowings, $13 million in letters of credit
issued and $3.5 billion available under its revolving credit
facility at December 31, 2019.
FINANCIAL POLICY
On December 18, 2019, FCX declared a quarterly cash dividend of
$0.05 per share on its common stock, which will be paid on February
3, 2020, to shareholders of record as of January 15, 2020. 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
fourth-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, February 21,
2020.
-----------------------------------------------------------------------------------------------------------
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 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 plans, 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 (loss) income and
future cash flows through 2022; PT-FI's development, financing,
construction and completion of a new smelter in Indonesia; FCX's
expectations regarding results associated with productivity and
innovation initiatives; 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; execution of the settlement
agreement associated with the Louisiana coastal erosion cases; 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; changes in mine plans; 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
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 special mining license (IUPK) to extend
mining rights from 2031 through 2041; FCX's ability to achieve the
expected results of its productivity and innovation initiatives;
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).
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 adjusted net income and unit net cash costs (credits) 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 December
31,
2019
2018
2019
2018
MINING OPERATIONS:
Production
Sales
COPPER
(millions of recoverable pounds)
(FCX's net interest in %)
North
America
Morenci (72%)a
182
163
181
156
Bagdad (100%)
48
57
50
51
Safford (100%)
26
29
26
28
Sierrita (100%)
43
39
41
36
Miami (100%)
4
4
4
4
Chino (100%)
46
47
44
43
Tyrone (100%)
11
14
11
14
Other (100%)
1
—
1
1
Total North America
361
353
358
333
South
America
Cerro Verde (53.56%)
269
269
289
271
El Abra (51%)
51
49
56
54
Total South America
320
318
345
325
Indonesia
Grasberg (48.76%)b
146
170
203
127
Total
827
841
906
c
785
c
Less noncontrolling interests
178
166
199
166
Net
649
675
707
619
Average realized price per pound
$
2.74
$
2.75
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %)
North America (100%)
5
7
3
5
Indonesia (48.76%)b
218
327
314
261
Consolidated
223
334
317
266
Less noncontrolling interests
41
33
58
26
Net
182
301
259
240
Average realized price per ounce
$
1,491
$
1,255
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %)
Henderson (100%)
2
4
N/A
N/A
Climax (100%)
3
5
N/A
N/A
North America copper mines (100%)a
8
9
N/A
N/A
Cerro Verde (53.56%)
8
8
N/A
N/A
Consolidated
21
26
22
24
Less noncontrolling interests
3
4
3
4
Net
18
22
19
20
Average realized price per pound
$
11.65
$
12.75
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. FCX’s
economic interest in PT-FI is expected to approximate 81 percent
through 2022 and 48.76 percent thereafter.
c.
Consolidated sales volumes exclude
purchased copper of 69 million pounds in fourth-quarter 2019 and 99
million pounds in fourth-quarter 2018.
Freeport-McMoRan Inc.
SELECTED OPERATING DATA
(continued)
Years Ended December 31,
2019
2018
2019
2018
MINING OPERATIONS:
Production
Sales
Copper (millions of recoverable
pounds)
(FCX's net interest in %)
North
America
Morenci (72%)a
730
684
717
700
Bagdad (100%)
218
199
218
197
Safford (100%)
110
123
111
127
Sierrita (100%)
160
152
157
154
Miami (100%)
15
16
15
16
Chino (100%)
175
173
174
176
Tyrone (100%)
48
55
49
56
Other (100%)
1
2
1
2
Total North America
1,457
1,404
1,442
1,428
South
America
Cerro Verde (53.56%)
1,003
1,049
1,002
1,051
El Abra (51%)
180
200
181
202
Total South America
1,183
1,249
1,183
1,253
Indonesia
Grasberg (48.76%)b
607
1,160
667
1,130
Total
3,247
3,813
3,292
c
3,811
c
Less noncontrolling interests
668
695
679
694
Net
2,579
3,118
2,613
3,117
Average realized price per pound
$
2.73
$
2.91
Gold (thousands of recoverable
ounces)
(FCX's net interest in %)
North America (100%)
19
23
18
23
Indonesia (48.76%)b
863
2,416
973
2,366
Consolidated
882
2,439
991
2,389
Less noncontrolling interests
162
228
182
223
Net
720
2,211
809
2,166
Average realized price per ounce
$
1,415
$
1,254
Molybdenum (millions of recoverable
pounds)
(FCX's net interest in %)
Henderson (100%)
12
14
N/A
N/A
Climax (100%)
17
21
N/A
N/A
North America (100%)a
32
32
N/A
N/A
Cerro Verde (53.56%)
29
28
N/A
N/A
Consolidated
90
95
90
94
Less noncontrolling interests
13
13
13
13
Net
77
82
77
81
Average realized price per pound
$
12.61
$
12.50
a.
Amounts are net of Morenci's undivided
joint venture partners' interests.
b.
Effective December 21, 2018, FCX's share
ownership in PT-FI is 48.76 percent. FCX’s economic interest in
PT-FI is expected to approximate 81 percent through 2022 and 48.76
percent thereafter.
c.
Consolidated sales volumes exclude
purchased copper of 379 million pounds for the year 2019 and 356
million pounds for the year 2018.
Freeport-McMoRan Inc.
SELECTED OPERATING DATA
(continued)
Three Months Ended December
31,
Years Ended December 31,
2019
2018
2019
2018
100% North America Copper Mines
Leach
Operations
Leach ore placed in stockpiles (metric
tons per day)
743,700
704,000
750,900
681,400
Average copper ore grade (percent)
0.24
0.23
0.23
0.24
Copper production (millions of recoverable
pounds)
252
228
993
951
Mill
Operations
Ore milled (metric tons per day)
330,700
310,500
326,100
301,000
Average ore grades (percent):
Copper
0.33
0.35
0.34
0.35
Molybdenum
0.02
0.03
0.02
0.02
Copper recovery rate (percent)
84.2
87.0
87.0
87.8
Production (millions of recoverable
pounds):
Copper
179
188
748
719
Molybdenum
9
11
34
35
100% South America Mining
Leach
Operations
Leach ore placed in stockpiles (metric
tons per day)
208,000
171,600
205,900
195,200
Average copper ore grade (percent)
0.38
0.34
0.37
0.33
Copper production (millions of recoverable
pounds)
76
73
268
287
Mill
Operations
Ore milled (metric tons per day)
396,800
395,800
393,100
387,600
Average ore grades (percent):
Copper
0.38
0.36
0.36
0.38
Molybdenum
0.02
0.01
0.02
0.01
Copper recovery rate (percent)
83.6
87.7
83.5
84.3
Production (millions of recoverable
pounds):
Copper
245
245
916
962
Molybdenum
8
8
29
28
100% Indonesia Mining
Ore extracted and milled (metric tons per
day):
Grasberg open pita
14,500
110,800
60,100
133,300
Deep Ore Zone underground mineb
26,100
35,600
25,500
33,800
Deep Mill Level Zone underground mineb
14,900
4,700
9,800
3,200
Grasberg Block Cave underground mineb
11,200
4,300
8,600
4,000
Big Gossan underground mineb
6,500
5,100
6,100
3,800
Total
73,200
160,500
110,100
178,100
Average ore grades:
Copper (percent)
1.16
0.73
0.84
0.98
Gold (grams per metric ton)
1.31
1.08
0.93
1.58
Recovery rates (percent):
Copper
91.0
88.7
88.4
91.8
Gold
79.5
80.0
75.0
84.7
Production (recoverable):
Copper (millions of pounds)
146
197
607
1,227
Gold (thousands of ounces)
218
391
863
2,697
100% Molybdenum Mines
Ore milled (metric tons per day)
21,500
30,300
30,100
27,900
Average molybdenum ore grade (percent)
0.13
0.16
0.14
0.18
Molybdenum production (millions of
recoverable pounds)
5
9
29
35
a.
Includes ore from related stockpiles.
b.
Reflects ore extracted, including ore from
development activities that result in metal production.
Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
Three Months Ended
Years Ended
December 31,
December 31,
2019
2018
2019
2018
(In Millions, Except Per Share
Amounts)
Revenuesa
$
3,911
$
3,684
$
14,402
b
$
18,628
Cost of sales:
Production and deliveryb,c
2,930
2,897
11,514
11,687
Depreciation, depletion and
amortization
391
403
b
1,412
1,754
b
Metals inventory adjustments
79
2
179
4
Total cost of sales
3,400
3,302
13,105
13,445
Selling, general and administrative
expensesb
99
102
414
443
Mining exploration and research
expenses
21
33
104
105
Environmental obligations and shutdown
costs
20
13
105
89
Net gain on sales of assets
(404
)
d
(82
)
(417
)
d
(208
)
Total costs and expenses
3,136
3,368
13,311
13,874
Operating income
775
316
1,091
4,754
Interest expense, netb,c,e
(219
)
(509
)
(620
)
(945
)
Net (loss) gain on early extinguishment of
debt
—
(1
)
(27
)
7
Other (expenses) income, netb
(190
)
13
c
(138
)
76
c,f
Income (loss) from continuing operations
before income taxes and equity in affiliated companies' net
earnings
366
(181
)
306
3,892
(Provision for) benefit from income
taxesg
(329
)
552
(510
)
(991
)
Equity in affiliated companies' net
earnings
5
3
12
8
Net income (loss) from continuing
operations
42
374
(192
)
2,909
Net income (loss) from discontinued
operations
1
4
3
(15
)
Net income (loss)
43
378
(189
)
2,894
Net (income) loss attributable to
noncontrolling interests
(34
)
107
(50
)
h
(292
)
Net income (loss) attributable to common
stockholdersi
$
9
$
485
$
(239
)
$
2,602
Diluted net income (loss) per share
attributable to common stock:
Continuing operations
$
—
$
0.33
$
(0.17
)
$
1.79
Discontinued operations
—
—
—
(0.01
)
$
—
$
0.33
$
(0.17
)
$
1.78
Weighted-average common shares
outstanding:
Basic
1,452
1,450
1,451
1,449
Diluted
1,457
1,457
1,451
1,458
Dividends declared per share of common
stock
$
0.05
$
0.05
$
0.20
$
0.20
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," beginning on page IX.
b.
Includes PT-FI and other net charges,
which are summarized in the supplemental schedule, "Adjusted Net
Income," beginning on page VII.
c.
Includes net charges associated with
disputed Cerro Verde royalties for prior years, which are
summarized in the supplemental schedule, "Adjusted Net Income,"
beginning on page VII.
d.
Primarily includes $343 million associated
with the sale of FCX's interest in the lower zone of the Timok
exploration project in Serbia and $59 million associated with the
sale of FCX's cobalt refinery in Kokkola, Finland, and related
cobalt cathode precursor business.
e.
Consolidated interest costs (before
capitalization and excluding interest expense associated with
disputed Cerro Verde royalties and PT-FI's historical contested tax
disputes) totaled $159 million in fourth-quarter 2019, $170 million
in fourth-quarter 2018, $623 million for the year 2019 and $671
million for the year 2018. Interest expense associated with
disputed Cerro Verde royalties totaled $24 million in
fourth-quarter 2019, $363 million in fourth-quarter 2018, $68
million for the year 2019 and $370 million for the year 2018.
Interest expense associated with PT-FI's historical contested tax
disputes totaled $78 million in the 2019 periods.
f.
Includes $30 million of interest received
with the refund of PT-FI's prior years' tax receivables.
g.
For a summary of FCX's provision for
income taxes, refer to the supplemental schedule, "Income Taxes,"
beginning on page VIII.
h.
Includes noncontrolling interest impacts
associated with tax charges to record deferred taxes for historical
balances in accordance with tax accounting guidance. Refer to the
supplemental schedule, "Income Taxes," beginning on page VIII.
i.
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 X.
Freeport-McMoRan Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31,
2019
2018
(In Millions)
ASSETS
Current assets:
Cash and cash equivalents
$
2,020
$
4,217
Trade accounts receivable
741
829
Income and other tax receivables
426
493
Inventories:
Materials and supplies, net
1,649
1,528
Mill and leach stockpiles
1,028
1,088
Product
1,281
1,778
Other current assets
655
422
Total current assets
7,800
10,355
Property, plant, equipment and mine
development costs, net
29,584
28,010
Long-term mill and leach stockpiles
1,540
1,679
Other assets
1,885
2,172
Total assets
$
40,809
$
42,216
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$
2,576
$
2,625
Current portion of environmental and asset
retirement obligations
436
449
Accrued income taxes
119
165
Dividends payable
73
73
Current portion of debt
5
17
Total current liabilities
3,209
3,329
Long-term debt, less current portion
9,821
11,124
Deferred income taxes
4,210
4,032
Environmental and asset retirement
obligations, less current portion
3,630
3,609
Other liabilities
2,491
2,230
Total liabilities
23,361
24,324
Equity:
Stockholders' equity:
Common stock
158
158
Capital in excess of par value
25,830
26,013
Accumulated deficit
(12,280
)
(12,041
)
Accumulated other comprehensive loss
(676
)
(605
)
Common stock held in treasury
(3,734
)
(3,727
)
Total stockholders' equity
9,298
9,798
Noncontrolling interestsa
8,150
8,094
Total equity
17,448
17,892
Total liabilities and equity
$
40,809
$
42,216
a.
Includes $4.6 billion associated with the December 2018 PT-FI
transaction, including $4.1 billion associated with the PT
Indonesia Asahan Aluminium (Persero) acquisition of Rio Tinto's
joint venture interest.
Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
Years Ended
December 31,
2019
2018
(In Millions)
Cash flow from operating activities:
Net (loss) income
$
(189
)
$
2,894
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation, depletion and
amortization
1,412
1,754
Metals inventory adjustments
179
4
Net gain on sales of assets
(417
)
(208
)
Stock-based compensation
63
76
Net charges for environmental and asset
retirement obligations, including accretion
221
262
Payments for environmental and asset
retirement obligations
(244
)
(239
)
Net charges for defined pension and
postretirement plans
108
81
Pension plan contributions
(75
)
(75
)
Net loss (gain) on early extinguishment of
debt
27
(7
)
Deferred income taxes
29
(404
)
(Income) loss on discontinued
operations
(3
)
15
Dividends received from PT Smelting
40
—
Charges for PT-FI surface water tax,
withholding tax and environmental matters
30
162
Payments for PT-FI surface water and
withholding tax matters
(67
)
—
Charges for Cerro Verde royalty
dispute
65
371
Payments for Cerro Verde royalty
dispute
(187
)
(56
)
U.S. tax reform benefit
—
(123
)
Other, net
141
12
Changes in working capital and other,
excluding disposition amounts:
Accounts receivable
119
649
Inventories
259
(537
)
Other current assets
60
(28
)
Accounts payable and accrued
liabilities
(60
)
(106
)
Accrued income taxes and timing of other
tax payments
(29
)
(634
)
Net cash provided by operating
activities
1,482
3,863
Cash flow from investing activities:
Capital expenditures:
North America copper mines
(877
)
(601
)
South America
(256
)
(237
)
Indonesia
(1,369
)
(1,001
)
Molybdenum mines
(19
)
(9
)
Other
(131
)
(123
)
Acquisition of PT Rio Tinto Indonesia
—
(3,500
)
Proceeds from sales of:
Timok exploration project and Freeport
Cobalt
452
—
PT Indonesia Papua Metal Dan Mineral
—
457
Other assets
109
93
Other, net
(12
)
(97
)
Net cash used in investing activities
(2,103
)
(5,018
)
Cash flow from financing activities:
Proceeds from debt
1,879
632
Repayments of debt
(3,197
)
(2,717
)
Proceeds from sale of PT-FI shares
—
3,500
Cash dividends and distributions paid:
Common stock
(291
)
(218
)
Noncontrolling interests
(82
)
(278
)
Contributions from noncontrolling
interests
165
—
Other, net
(30
)
(19
)
Net cash (used in) provided by financing
activities
(1,556
)
900
Net decrease in cash, cash equivalents,
restricted cash and restricted cash equivalents
(2,177
)
(255
)
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 yeara
$
2,278
$
4,455
a.
Includes restricted cash and restricted cash equivalents of $258
million at December 31, 2019, and $238 million at December 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
(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 follows, which may not be comparable to similarly titled
measures reported by other companies (in millions, except per share
amounts).
Three Months Ended December
31,
2019
2018
Pre-tax
After-taxa
Per Share
Pre-tax
After-taxa
Per Share
Net income attributable to common
stock
N/A
$
9
$
—
N/A
$
485
$
0.33
PT-FI net charges
$
(266
)
b
$
(283
)
$
(0.20
)
$
(192
)
c
$
(94
)
$
(0.07
)
Metals inventory adjustments
(79
)
(77
)
(0.05
)
(2
)
(2
)
—
Cerro Verde royalty dispute
(16
)
d
(7
)
—
(399
)
d
(195
)
(0.13
)
Other net charges
(17
)
e
(5
)
—
(63
)
f
(34
)
(0.02
)
Net adjustments to environmental
obligations and related litigation reserves
(5
)
(5
)
—
(5
)
(5
)
—
Net gain on sales of assets
404
326
0.22
82
82
0.05
Net loss on early extinguishment of
debt
—
—
—
(1
)
(1
)
—
Net tax creditsg
N/A
29
0.02
N/A
569
0.39
Gain on discontinued operations
1
1
—
4
4
—
$
21
h
$
(22
)
h
$
(0.02
)
h
$
(576
)
$
324
$
0.22
Adjusted net income attributable to
common stock
N/A
$
31
$
0.02
N/A
$
161
$
0.11
Years Ended December 31,
2019
2018
Pre-tax
After-taxa
Per Share
Pre-tax
After-taxa
Per Share
Net (loss) income attributable to
common stock
N/A
$
(239
)
$
(0.17
)
N/A
$
2,602
$
1.78
PT-FI net charges
$
(460
)
b
$
(379
)
$
(0.26
)
$
(223
)
c
$
(110
)
$
(0.08
)
Metals inventory adjustments
(179
)
(144
)
(0.10
)
(4
)
(4
)
—
Cerro Verde royalty dispute
(16
)
d
(7
)
—
(406
)
d
(195
)
(0.13
)
Cerro Verde labor agreement
—
—
—
(69
)
(22
)
(0.02
)
Other net charges
(59
)
e
(26
)
(0.02
)
(46
)
f
(26
)
(0.02
)
Net adjustments to environmental
obligations and related litigation reserves
(68
)
i
(68
)
(0.05
)
(57
)
(57
)
(0.04
)
Net gain on sales of assets
417
339
0.23
208
208
0.14
Net (loss) gain on early extinguishment of
debt
(27
)
(26
)
(0.02
)
7
7
—
Interest on tax refunds
—
—
—
30
19
0.01
Net tax creditsg
N/A
34
0.02
N/A
574
0.39
Gain (loss) on discontinued operations
3
3
—
(15
)
(15
)
(0.01
)
$
(390
)
h
$
(275
)
h
$
(0.19
)
h
$
(575
)
$
379
$
0.24
Adjusted net income attributable to
common stock
N/A
$
36
$
0.02
N/A
$
2,223
$
1.54
a.
Reflects impact to FCX net income (loss)
attributable to common stock (i.e., net of any taxes and
noncontrolling interests).
b.
Reflects charges of $234 million
associated with PT-FI's historical contested tax audits ($156
million in other (expenses) income, net and $78 million in interest
expense, net) and $32 million for a currency exchange adjustment to
value added tax receivables at PT-FI in other expenses (income),
net. The year 2019 also includes charges of $28 million in
production and delivery costs for an adjustment to the settlement
of the historical surface water tax matters with the local regional
tax authority in Papua, Indonesia, and $166 million in revenues,
primarily associated with an unfavorable Indonesia Supreme Court
ruling related to PT-FI export duties.
c.
Reflects charges in production and
delivery of $69 million for surface water tax settlements with the
local regional tax authority in Papua, Indonesia, $32 million for
assessments for prior period permit fees with Indonesia's Ministry
of Environment and Forestry, $72 million for disputed payroll
withholding taxes for prior years and other tax settlements, and
$62 million to write-off certain previously capitalized project
costs for the new Indonesian smelter. These charges were partly
offset by inventory adjustments ($43 million in fourth-quarter 2018
and $12 million for the year 2018).
d.
Reflects net charges for penalties and
interest associated with disputed royalties at Cerro Verde for
prior years. The 2019 periods consist of charges in production and
delivery costs ($6 million) and interest expense ($10 million). The
2018 periods consist of net charges in production and delivery
costs ($14 million), interest expense ($363 million in
fourth-quarter 2018 and $370 million for the year 2018) and in
other expenses (income), net ($22 million).
e.
Fourth-quarter 2019 includes charges
primarily associated with adjustments to deferred profit sharing in
production and delivery costs ($18 million) and in interest expense
($6 million), partly offset by a refund related to prior year fees
mostly in selling, general and administrative expenses ($7
million). The year 2019 also includes net charges of $42 million in
production and delivery costs, primarily associated with
weather-related issues at El Abra, asset impairments, and oil and
gas inventory adjustments, partly offset by a net credit for asset
retirement obligation adjustments.
f.
Includes depreciation expense at Freeport
Cobalt from November 2016 to September 2018 that was suspended
while it was classified as held for sale ($48 million in
fourth-quarter 2018 and $31 million for the year 2018), and other
net charges to production and delivery ($4 million), selling,
general, and administrative expenses ($4 million), interest expense
($4 million) and other expenses (income), net ($3 million).
g.
Refer to "Income Taxes" below for further
discussion of net tax credits.
h.
Does not foot because of rounding.
i.
Includes a charge to production and
delivery costs totaling $15 million related to Louisiana coastal
erosion litigation.
View source
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Financial Contacts: Kathleen L. Quirk 602-366-8016
David P. Joint 504-582-4203
Media Contact: Linda S. Hayes, 602-366-7824
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