Fitch Affirms Freeport-McMoRan Copper & Gold's IDR at 'BBB'; Outlook Stable
March 15 2012 - 5:08PM
Business Wire
Fitch Ratings has affirmed the Issuer Default Rating (IDR) of
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) at 'BBB', along
with the outstanding debt of FCX and its subsidiary
Freeport-McMoRan Corporation (FMC) formerly known as Phelps Dodge
Corporation. A full list of ratings follows at the end of this
release.
The Rating Outlook is Stable.
The ratings reflect the company's leading position in the
industry, strong liquidity, and sound operational and financial
management. Operations benefit from low average costs, large scale
and long lived reserves. Long-term copper fundamentals benefit from
short supply, modest inventories, strong demand from China and
solid demand from developed nations.
The Stable Outlook reflects FCX's balanced approach to capital
expenditures, dividends and financial leverage and Fitch's outlook
on the copper market.
At Dec. 31, 2011, pro forma for the note issuance in February
2012 and redemption in March 2012, cash on hand was $4.6 billion of
which $3.7 billion would be available to the parent company after
non-controlling interests and withholding taxes. Pro forma total
debt was $3.5 billion with scheduled maturities over the next five
years of $4 million in 2012 and $500 million in 2015. The $1.5
billion revolver, maturing March 30, 2016, was fully available
except for $44 million representing letters of credits issued at
Dec. 31, 2011.
Guidance for 2012 operating cash flow is $4.7 billion including
$800 million of working capital uses and assuming average
realizations of copper at $3.50/lb., gold at $1,600/oz. and
molybdenum at $13/lb. This compares to 2011 operating cash flow of
$6.6 billion on average realizations of copper at $3.86/lb., gold
at $1,583/oz., and molybdenum at $16.98/lb.
Guidance for annual average operating cash flows, excluding
working capital changes, for 2013 and 2014, is between about $5
billion and $8 billion (assuming copper realizations between
$3.00/lb. and $4.00/lb., gold at $1,200/oz. and molybdenum at
$12/lb.) Guidance for capital expenditures is $4 billion in 2012
and $3.5 billion in 2013. Fitch estimates annual interest expense
on pro forma debt levels to be about $140 million per year and
ordinary common dividends of about $1.1 billion for 2012. Fitch
expects free cash flow to be neutral to positive.
Operating EBITDA for 2011 was $10.6 billion and FCX guides to an
annual range for 2013 and 2014 of between $7.4 billion and $11.6
billion for copper prices between $3.00/lb. and $4.00/lb. These
levels correspond to a pro forma total debt to EBITDA range of 0.5
times (x) to 0.3x on a gross basis.
Fitch expects FFO adjusted leverage to remain under 1.5x over
the next 24 months.
Fitch notes that earnings and cash flows are highly leveraged to
metals prices and a $0.10/lb. decline in copper prices could cut
EBITDA by $400 million over a 12-month period. In particular, FCX's
average copper realizations were $3.86/lb. for the full year 2011
and $3.42/lb. for the fourth quarter of 2011. Average copper
realizations were $2.60/lb. in 2009 and $3.59/lb in 2010.
Thirty-one percent of 2011 operating profits and 26% of copper
reserves as of Dec. 31, 2011 are from Papua, Indonesia. Fitch rates
Indonesia 'BBB-' with a Stable Outlook. FCX has been in this area
for more than 40 years, and the mine is a significant exporter.
Fitch currently rates FCX as follows:
FCX
--Issuer Default Rating 'BBB';
--$1.5 billion unsecured bank revolver 'BBB';
--$500 million 1.40% senior notes due Feb. 13, 2015 'BBB';
--$500 million 2.15% senior notes due March 1, 2017 'BBB';
--$2 billion 3.55% senior notes due March 1, 2022 'BBB'.
FMC
--7.125% senior unsecured debentures due 2027 'BBB';
--9.50% senior unsecured notes due 2031 'BBB';
--6.125% senior unsecured notes due 2034 'BBB'.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer,
and therefore, Fitch has been compensated for the provision of the
ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 13, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
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