Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $869 million, $0.59 per share, in
second-quarter 2018. After adjusting for net gains of $16 million,
$0.01 per share, second-quarter 2018 adjusted net income
attributable to common stock totaled $853 million, $0.58 per
share.
- Consolidated sales totaled 989
million pounds of copper, 676 thousand ounces of gold and 24
million pounds of molybdenum in second-quarter 2018.
- Consolidated sales for the year
2018 are expected to approximate 3.8 billion pounds of copper, 2.4
million ounces of gold and 95 million pounds of molybdenum,
including 970 million pounds of copper, 700 thousand ounces of gold
and 24 million pounds of molybdenum in third-quarter 2018.
- Average realized prices in
second-quarter 2018 were $3.08 per pound for copper, $1,274 per
ounce for gold and $12.89 per pound for molybdenum.
- Average unit net cash costs in
second-quarter 2018 were $0.96 per pound of copper and are expected
to average $1.04 per pound of copper for the year 2018.
- Operating cash flows totaled
$1.3 billion (net of $0.2 billion in working capital uses and
timing of other tax payments) in second-quarter 2018 and $2.7
billion (net of $0.2 billion in working capital uses and timing of
other tax payments) for the first six months of 2018. Based on
current sales volume and cost estimates, and assuming average
prices of $2.75 per pound for copper, $1,250 per ounce for gold and
$11.00 per pound for molybdenum for the second half of 2018,
operating cash flows are expected to approximate $4.3 billion (net
of $0.2 billion in working capital uses and timing of other tax
payments) for the year 2018.
- Capital expenditures totaled
$0.5 billion (including approximately $0.3 billion for major mining
projects) in second-quarter 2018 and $0.9 billion (including
approximately $0.5 billion for major mining projects) for the first
six months of 2018. Capital expenditures for the year 2018 are
expected to approximate $2.0 billion, including $1.1 billion for
major mining projects primarily associated with underground
development activities in the Grasberg minerals district in
Indonesia and development of the Lone Star oxide project in
Arizona.
- In April 2018, FCX repaid $454
million in debt, consisting of the redemption of $404 million
of senior notes due 2022 and $50 million of senior notes due
2023.
- At June 30, 2018, consolidated
debt totaled $11.1 billion and consolidated cash totaled
$3.9 billion. FCX had no borrowings and $3.5 billion available
under its revolving credit facility at June 30, 2018.
- On June 27, 2018, FCX declared
a quarterly cash dividend of $0.05 per share on its common
stock, which will be paid on August 1, 2018.
- In July 2018, FCX and PT Freeport
Indonesia (PT-FI) entered into a non-binding Heads of
Agreement with PT Indonesia Asahan Aluminium (Persero) (Inalum)
and Rio Tinto to establish a new long-term partnership between FCX,
Inalum and the Indonesian government.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $869 million ($0.59 per share) in
second-quarter 2018 and $1.6 billion ($1.07 per share) for the
first six months of 2018, compared with $268 million ($0.18 per
share) in second-quarter 2017 and $496 million ($0.34 per share)
for the first six months of 2017. After adjusting for net gains of
$16 million ($0.01 per share), adjusted net income attributable to
common stock totaled $853 million ($0.58 per share) in
second-quarter 2018. Refer to the supplemental schedule, "Adjusted
Net Income," on page VII, which is available on FCX's website,
"fcx.com," for additional information.
Richard C. Adkerson, President and Chief Executive Officer,
said, "Our second quarter results reflect strong performance from
our global operations and a continued focus on productivity, cost
management and capital discipline. During the first half of 2018,
we generated $2.7 billion in cash flow from operations and capital
expenditures totaled $0.9 billion, enabling further strengthening
of our balance sheet and advancement of initiatives to build value
for FCX shareholders. We achieved important progress during the
quarter to reach a new long-term partnership structure with the
Indonesian government, and we remain focused on completing
negotiation and documentation of definitive agreements to restore
long-term stability for our Grasberg operations.
Despite the recent decline in copper prices associated with
the uncertain impact on the global economy of recent international
trade actions, we remain positive on the outlook for copper prices
given limitations on supply and the important role of copper in the
global economy. To date, we have not experienced a decline in
demand for our products, but will be prepared to adjust our plans
if necessary to respond to market conditions. Our shareholders are
well positioned to benefit from FCX’s global leadership position in
copper, supported by a large, high-quality portfolio of long-lived,
geographically diverse assets."
SUMMARY FINANCIAL DATA
Three Months Ended Six Months Ended
June 30, June 30, 2018 2017
2018 2017 (in millions, except per share
amounts)
Revenuesa,b
$ 5,168 $ 3,711 $ 10,036 $ 7,052 Operating incomea $ 1,664 $ 686 $
3,123 $ 1,283 Net income from continuing operations $ 1,039 $ 326 $
1,867 $ 594 Net (loss) income from discontinued operationsc $ (4 )
$ 9 $ (15 ) $ 47 Net income attributable to common stockd,e $ 869 $
268 $ 1,561 $ 496 Diluted net income (loss) per share of common
stock: Continuing operations $ 0.59 $ 0.18 $ 1.08 $ 0.31
Discontinued operations — — (0.01 ) 0.03 $ 0.59
$ 0.18 $ 1.07 $ 0.34 Diluted weighted-average
common shares outstanding 1,458 1,453 1,458 1,453 Operating cash
flowsf $ 1,309 $ 1,037 $ 2,678 $ 1,829 Capital expenditures $ 482 $
362 $ 884 $ 706 At June 30: Cash and cash equivalents $ 3,859 $
4,667 $ 3,859 $ 4,667 Total debt, including current portion $
11,127 $ 15,354 $ 11,127 $ 15,354
a.
For segment financial results, refer to
the supplemental schedules, "Business Segments," beginning on page
IX, which are available on FCX's website, "fcx.com."
b.
Includes adjustments to prior period
provisionally priced concentrate and cathode copper sales totaling
$23 million ($9 million to net income attributable to common stock
or $0.01 per share) in second-quarter 2018, $(20) million ($(8)
million to net income attributable to common stock or $(0.01) per
share) in second-quarter 2017, $(70) million ($(31) million to net
income attributable to common stock or $(0.02) per share) for the
first six months of 2018 and $81 million ($35 million to net income
attributable to common stock or $0.02 per share) for the first six
months of 2017. For further discussion, refer to the supplemental
schedule, "Derivative Instruments," beginning on page VIII, which
is available on FCX's website, "fcx.com."
c.
Primarily reflects adjustments to the fair
value of contingent consideration related to the 2016 sale of FCX's
interest in TF Holdings Limited, which will continue to be adjusted
through December 31, 2019.
d.
Includes net gains of $16 million ($0.01
per share) in second-quarter 2018, $27 million ($0.01 per share) in
second-quarter 2017, $27 million ($0.02 per share) for the first
six months of 2018 and $34 million ($0.02 per share) for the first
six months of 2017 that are described in the supplemental schedule,
"Adjusted Net Income," on page VII, 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 IX, which is
available on FCX's website, "fcx.com."
f.
Includes net working capital (uses)
sources and timing of other tax payments of $(192) million in
second-quarter 2018, $154 million in second-quarter 2017, $(213)
million for the first six months of 2018 and $343 million for the
first six months of 2017.
SUMMARY OPERATING DATA
Three Months Ended
Six Months Ended
June 30,
June 30, 2018 2017 2018
2017 Copper (millions of recoverable pounds)
Production 1,014 883 1,966 1,734 Sales, excluding purchases 989 942
1,982 1,751 Average realized price per pound $ 3.08 $ 2.65 $ 3.10 $
2.65 Site production and delivery costs per pounda $ 1.69 $ 1.63 $
1.68 $ 1.61 Unit net cash costs per pounda $ 0.96 $ 1.19 $ 0.97 $
1.28
Gold (thousands of recoverable ounces) Production 746
353 1,345 592 Sales, excluding purchases 676 432 1,286 614 Average
realized price per ounce $ 1,274 $ 1,243 $ 1,291 $ 1,242
Molybdenum (millions of recoverable pounds) Production 24 23
46 46 Sales, excluding purchases 24 25 48 49 Average realized price
per pound $ 12.89 $ 9.58 $ 12.42 $ 9.16
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 XII, which are available on FCX's
website, "fcx.com."
Consolidated Sales Volumes
Second-quarter 2018 copper sales of 989 million pounds
were higher than the April 2018 estimate of 970 million pounds and
higher than second-quarter 2017 sales of 942 million pounds,
primarily reflecting higher mining and milling rates and higher ore
grades in Indonesia.
Second-quarter 2018 gold sales of 676 thousand ounces
were lower than the April 2018 estimate of 700 thousand ounces,
primarily because of timing of shipments, and were higher than
second-quarter 2017 sales of 432 thousand ounces, primarily
reflecting higher ore grades and operating rates in Indonesia.
Lower second-quarter 2017 operating rates in Indonesia included the
impact of labor disruptions at PT-FI in the first half of 2017.
Second-quarter 2018 molybdenum sales of 24 million pounds
approximated the April 2018 estimate of 24 million pounds and
second-quarter 2017 sales of 25 million pounds.
Sales volumes for the year 2018 are expected to approximate 3.8
billion pounds of copper, 2.4 million ounces of gold and 95 million
pounds of molybdenum, including 970 million pounds of copper, 700
thousand ounces of gold and 24 million pounds of molybdenum in
third-quarter 2018.
Projections for 2018 and other forward looking statements in
this release assume resolution of PT-FI’s long-term mining rights
or an extension of PT-FI’s temporary special mining license (IUPK)
after July 31, 2018. Refer to "Indonesia Mining," beginning on page
7, for further discussion of Indonesia regulatory matters which
could 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 $0.96 per pound of copper in
second-quarter 2018 were lower than unit net cash costs of $1.19
per pound in second-quarter 2017, primarily reflecting higher
by-product credits.
Assuming average prices of $1,250 per ounce of gold and $11.00
per pound of molybdenum for the second half of 2018 and achievement
of current sales volume and cost estimates, consolidated unit net
cash costs (net of by-product credits) for copper mines are
expected to average $1.04 per pound of copper for the year 2018.
The impact of price changes on consolidated unit net cash costs
would approximate $0.015 per pound for each $50 per ounce change in
the average price of gold and $0.02 per pound for each $2 per pound
change in the average price of molybdenum for the second half of
2018. Quarterly unit net cash costs vary with fluctuations in sales
volumes and realized prices, primarily for gold and molybdenum.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit
copper mines in North America - Morenci, Bagdad, Safford, Sierrita
and Miami in Arizona, and Chino and Tyrone in New Mexico. In
addition to copper, certain of FCX's North America copper mines
produce molybdenum concentrate, gold and silver.
All of the North America mining operations are wholly owned,
except for Morenci. FCX records its 72 percent undivided joint
venture interest in Morenci using the proportionate consolidation
method.
Operating and Development Activities. FCX has significant
undeveloped reserves and resources in North America and a portfolio
of potential long-term development projects. Future investments
will be undertaken based on the results of economic and technical
feasibility studies, and are dependent on market conditions. FCX
continues to study opportunities to reduce the capital intensity of
its potential long-term development projects.
Through exploration drilling, FCX has identified a significant
resource at its wholly owned Lone Star project located near the
Safford operation in eastern Arizona. An initial project to
develop the Lone Star oxide ores has commenced with first
production expected by the end of 2020. Total capital costs,
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
June 30, 2018, $113 million has been incurred for this
project. Production from the Lone Star oxide ores is expected to
average approximately 200 million pounds of copper per year with an
approximate 20-year mine life. The project also advances the
potential for development of a larger-scale district opportunity.
FCX is conducting additional drilling following positive
exploration results and continues to evaluate longer term
opportunities available from the significant long-term sulfide
potential in the Lone Star/Safford minerals district.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the second quarters and
first six months of 2018 and 2017:
Three Months Ended Six Months Ended
June 30, June 30, 2018 2017
2018 2017 Copper (millions of
recoverable pounds) Production 354 384 702 776 Sales, excluding
purchases 361 408 745 783 Average realized price per pound $ 3.12 $
2.62 $ 3.14 $ 2.65
Molybdenum (millions of
recoverable pounds) Productiona 8 8 15 17
Unit net cash
costs per pound of copperb Site production and delivery,
excluding adjustments $ 1.94 $ 1.58 $ 1.89 $ 1.54 By-product
credits (0.25 ) (0.16 ) (0.22 ) (0.15 ) Treatment charges 0.10
0.10 0.10 0.10 Unit net cash costs $
1.79 $ 1.52 $ 1.77 $ 1.49
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 XII, which are available on FCX's
website, "fcx.com."
North America's consolidated copper sales volumes of 361 million
pounds in second-quarter 2018 were lower than second-quarter 2017
sales of 408 million pounds, primarily reflecting anticipated lower
ore grades and timing of second-quarter 2017 shipments. North
America copper sales are estimated to approximate 1.45 billion
pounds for the year 2018, compared with 1.5 billion pounds in
2017.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.79 per pound of copper in
second-quarter 2018 were higher than unit net cash costs of $1.52
per pound in second-quarter 2017, primarily reflecting lower sales
volumes and higher mining and milling costs, partly offset by
higher by-product credits.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.78 per
pound of copper for the year 2018, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $11.00 per pound for the second half of 2018. North
America's average unit net cash costs for the year 2018 would
change by approximately $0.02 per pound for each $2 per pound
change in the average price of molybdenum for the second half of
2018.
South America Mining. FCX operates two copper mines in
South America - Cerro Verde in Peru (in which FCX owns a 53.56
percent interest) and El Abra in Chile (in which FCX owns a 51
percent interest). These operations are consolidated in FCX's
financial statements. In addition to copper, the Cerro Verde mine
produces molybdenum concentrate and silver.
Operating and Development Activities. Cerro Verde's expanded
operations benefit from its large-scale, long-lived reserves and
cost efficiencies. The Cerro Verde expansion project, which
achieved capacity operating rates in early 2016, expanded the
concentrator facilities' capacity from 120,000 metric tons of ore
per day to 360,000 metric tons of ore per day. In March 2018, Cerro
Verde received a modified environmental permit allowing it to
operate its existing concentrator facilities at rates up to 409,500
metric tons of ore per day. Cerro Verde's concentrator facilities
have continued to perform well, with average mill throughput rates
of 385,300 metric tons of ore per day for the first six months of
2018.
Exploration results at El Abra indicate a significant sulfide
resource, which could potentially support a major mill project
similar to facilities constructed at Cerro Verde. FCX continues to
evaluate a large-scale expansion at El Abra to process additional
sulfide material and to achieve higher recoveries. Future
investments will depend on technical studies, which are being
advanced, economic factors and market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the second quarters and
first six months of 2018 and 2017:
Three Months Ended Six Months Ended
June 30, June 30, 2018 2017
2018 2017 Copper (millions of
recoverable pounds) Production 313 300 606 604 Sales 312 287 602
596 Average realized price per pound $ 3.07 $ 2.67 $ 3.09 $ 2.65
Molybdenum (millions of recoverable pounds)
Productiona 7 7 13 13
Unit net cash costs per pound of
copperb Site production and delivery, excluding
adjustments $ 1.77 $ 1.55 $ 1.78 $ 1.52 By-product credits (0.22 )
(0.13 ) (0.24 ) (0.16 ) Treatment charges 0.18 0.22 0.19 0.22
Royalty on metals 0.01 0.01 0.01 0.01
Unit net cash costs $ 1.74 $ 1.65 $ 1.74 $
1.59
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 XII, which are available on FCX's
website, "fcx.com."
South America's consolidated copper sales volumes of 312 million
pounds in second-quarter 2018 were higher than second-quarter 2017
sales of 287 million pounds, primarily reflecting higher mining and
milling rates and timing of second-quarter 2017 shipments, partly
offset by lower ore grades. Sales from South America mining are
expected to approximate 1.2 billion pounds of copper for the year
2018, compared with 1.2 billion pounds of copper in 2017.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.74 per pound of copper in second-quarter
2018 were higher than unit net cash costs of $1.65 per pound in
second-quarter 2017, primarily reflecting higher mining and input
costs, partly offset by higher volumes and by-product credits.
Average unit net cash costs (net of by-product credits) for South
America mining are expected to approximate $1.67 per pound of
copper for the year 2018, based on current sales volume and cost
estimates and assuming an average price of $11.00 per pound of
molybdenum for the second half of 2018.
Cerro Verde and its workers' union are negotiating a new
collective labor agreement to replace the agreement that expires
August 31, 2018.
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. PT-FI continues to actively engage with
Indonesian government officials to address regulatory changes that
conflict with its contractual rights in a manner that provides
long-term stability for PT-FI’s operations and investment plans,
and protects value for FCX’s shareholders.
The parties have been engaged in negotiation and documentation
of an IUPK and accompanying documentation for assurances on legal
and fiscal terms to provide PT-FI with long-term mining rights
through 2041. In addition, the IUPK would provide that PT-FI
construct a smelter within five years of reaching a definitive
agreement and include agreement for the divestment of 51 percent of
the project area interests to Indonesian participants at fair
market value.
In July 2018, FCX entered into a Heads of Agreement with the
Indonesian state-owned enterprise Inalum and PT-FI’s joint venture
partner Rio Tinto. Under the terms of the non-binding agreement,
Inalum would acquire for aggregate cash consideration of $3.85
billion all of Rio Tinto's interests associated with its joint
venture with PT-FI (Joint Venture) and FCX's interests in PT
Indocopper Investama, which owns 9.36 percent of PT-FI.
Inalum would contribute the Rio Tinto interests to PT-FI, which
would expand PT-FI’s asset base, in exchange for a 40 percent share
ownership in PT-FI, pursuant to arrangements that would enable FCX
and existing PT-FI shareholders to retain the economics of the
revenue and cost sharing arrangements under the Joint Venture.
Following completion of the transaction, Inalum's share ownership
would approximate 51 percent of PT-FI (subject to an agreement
between shareholders to replicate the Joint Venture economics) and
FCX's ownership would approximate 49 percent.
At closing, Rio Tinto would receive $3.5 billion and FCX would
receive $350 million in cash proceeds from Inalum. In addition, Rio
Tinto would forego in favor of FCX an amount equivalent to Rio
Tinto's share of Joint Venture cash flows since January 1, 2018,
through closing.
Following completion of the ownership restructuring, FCX does
not expect its economic exposure to PT-FI to change significantly.
FCX expects its share of future cash flows of the expanded PT-FI
asset base, combined with the cash proceeds received in the
transaction, to be comparable to its existing share of future cash
flows under the current Joint Venture arrangement. FCX would also
continue to manage the operations of PT-FI.
The transaction, which is expected to close during the second
half of 2018, is subject to the negotiation and documentation of
definitive agreements, including purchase and sale agreements, the
extension and stability of PT-FI's long-term mining rights through
2041 in a form acceptable to FCX and Inalum, a shareholders’
agreement between FCX and Inalum providing for continuity of FCX’s
management of PT-FI’s operations and addressing governance
arrangements, and resolution of environmental regulatory matters
pending before Indonesia's Ministry of Environment and Forestry
satisfactory to the Indonesian government, FCX and Inalum. The
terms of these agreements will be subject to approval by the FCX
Board of Directors (Board).
In February 2018, PT-FI's export license was extended to
February 15, 2019, and in July 2018, PT-FI's temporary IUPK was
extended to July 31, 2018. PT-FI is seeking an extension of the
temporary IUPK to remain in effect until definitive agreements are
complete. Until definitive agreements are reached, PT-FI has
reserved all rights under its Contract of Work (COW), including
pursuing arbitration under the dispute resolution procedures.
Operating and Development Activities. PT-FI is currently mining
the final phase of the Grasberg open pit, which contains high
copper and gold ore grades. PT-FI has revised its mine plans to
extend mining activities in the open pit by approximately six
months following results of an economic analysis. PT-FI expects to
mine ore from the open pit until transitioning to the Grasberg
Block Cave underground mine in the first half of 2019. Lower copper
and gold production from Indonesia mining is expected during the
transition period in 2019 and 2020.
PT-FI has several projects in the Grasberg minerals district
related to the development of its large-scale, long-lived,
high-grade underground ore bodies. In aggregate, these underground
ore bodies are expected to produce large-scale quantities of copper
and gold following the transition from the Grasberg open pit.
Substantial progress has been made to prepare for the transition to
mining of the Grasberg Block Cave underground mine. Mine
development activities are sufficiently advanced to commence caving
in the first half of 2019. The ore flow and underground rail
haulage systems are expected to be fully commissioned and
operational in the second half of 2018.
PT-FI has revised its mine plan for the ramp-up of the Deep Mill
Level Zone (DMLZ) underground mine following mining-induced seismic
activity that began in 2017 and continued during 2018. During
second-quarter 2018, PT-FI initiated plans to conduct hydraulic
fracturing activities to manage rock stresses and pre-condition the
DMLZ for large-scale production. PT-FI's revised mine plans, which
will continue to be reviewed, currently project block cave mining
activities in the DMLZ to commence in mid-2019 following a period
of hydraulic fracturing activities designed to safely manage
production. PT-FI continues to expect the DMLZ to reach full
production rates of 80,000 metric tons per day in 2022.
Subject to reaching a definitive agreement with the Indonesian
government on PT-FI's long-term mining rights, estimated annual
capital spending on these projects would average $0.8 billion per
year ($0.7 billion per year net to PT-FI) over the next five years.
Considering the long-term nature and size of these projects, actual
costs could vary from these estimates. In response to market
conditions and Indonesian regulatory uncertainty, the timing of
these expenditures continues to be reviewed and could be reduced or
deferred significantly.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the second quarters and
first six months of 2018 and 2017:
Three Months Ended Six Months Ended June
30, June 30, 2018 2017 2018
2017 Copper (millions of recoverable pounds)
Production 347 199 658 354 Sales 316 247 635 372 Average realized
price per pound $ 3.05 $ 2.67 $ 3.07 $ 2.64
Gold
(thousands of recoverable ounces) Production 740 348 1,335 580
Sales 671 427 1,274 604 Average realized price per ounce $ 1,274 $
1,243 $ 1,291 $ 1,242
Unit net cash (credits) costs per
pound of coppera Site production and delivery, excluding
adjustments $ 1.33 $ 1.77 b $ 1.34 $ 1.89
b
Gold and silver credits (2.76 ) (2.21 ) (2.67 ) (2.10 ) Treatment
charges 0.26 0.26 0.25 0.27 Export duties 0.18 0.11 0.16 0.11
Royalty on metals 0.22 0.17 0.22 0.17
Unit net cash (credits) costs $ (0.77 ) $ 0.10 $ (0.70 ) $
0.34
a.
For a reconciliation of unit net cash
(credits) costs per pound to production and delivery costs
applicable to sales reported in FCX's consolidated financial
statements, refer to the supplemental schedules, "Product Revenues
and Production Costs," beginning on page XII, which are available
on FCX's website, "fcx.com."
b.
Excludes fixed costs charged directly to
production and delivery costs totaling $82 million ($0.33 per pound
of copper) in second-quarter 2017 and $103 million ($0.28 per pound
of copper) for the first six months of 2017 associated with
workforce reductions.
Indonesia's consolidated sales of 316 million pounds of copper
and 671 thousand ounces of gold in second-quarter 2018 were higher
than second-quarter 2017 sales of 247 million pounds of copper and
427 thousand ounces of gold, primarily reflecting higher operating
rates and ore grades. Lower second-quarter 2017 operating rates
included the impact of labor disruptions in the first half of
2017.
Assuming achievement of planned operating rates for the second
half of 2018, consolidated sales volumes from Indonesia mining are
expected to approximate 1.15 billion pounds of copper and 2.4
million ounces of gold for the year 2018, compared with 1.0 billion
pounds of copper and 1.5 million ounces of gold for the year 2017.
Because of the transition to underground mining, PT-FI's production
is expected to be significantly lower in 2019 and 2020, compared to
2018.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes and other factors. As a result
of higher sales volumes and gold and silver credits, Indonesia had
unit net cash credits (including gold and silver credits) of $0.77
per pound of copper in second-quarter 2018, compared with unit net
cash costs of $0.10 per pound in second-quarter 2017.
Assuming an average gold price of $1,250 per ounce for the
second half of 2018 and achievement of current sales volume and
cost estimates, unit net cash credits (including gold and silver
credits) for Indonesia mining are expected to approximate $0.58 per
pound of copper for the year 2018. Indonesia mining's unit net cash
credits for the year 2018 would change by approximately $0.06 per
pound for each $50 per ounce change in the average price of gold
for the second half of 2018. Because of the fixed nature of a large
portion of Indonesia's costs, unit net cash credits/costs vary from
quarter to quarter depending on copper and gold volumes.
Indonesia mining's projected sales volumes and unit net cash
credits for the year 2018 are dependent on a number of factors,
including operational performance, workforce productivity, timing
of shipments, and Indonesia regulatory matters, including the
resolution of PT-FI's long-term mining rights or an extension of
PT-FI's temporary IUPK after July 31, 2018.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines - the Henderson underground mine and the Climax open-pit mine
- both in Colorado. The Henderson and Climax mines produce
high-purity, chemical-grade molybdenum concentrate, which is
typically further processed into value-added molybdenum chemical
products. The majority of molybdenum concentrate produced at the
Henderson and Climax mines, as well as from FCX's North America and
South America copper mines, is processed at FCX's conversion
facilities.
Operating and Development Activities. Production from the
Molybdenum mines totaled 9 million pounds of molybdenum in
second-quarter 2018 and 8 million pounds in second-quarter 2017.
Refer to summary operating data on page 3 for FCX's consolidated
molybdenum sales and average realized prices, which includes sales
of molybdenum produced at the Molybdenum mines, and from FCX's
North America and South America copper mines.
Unit net cash costs for the Molybdenum mines averaged $8.36 per
pound of molybdenum in second-quarter 2018 and $7.73 per pound in
second-quarter 2017. Based on current sales volume and cost
estimates, average unit net cash costs for the Molybdenum mines are
expected to approximate $8.75 per pound of molybdenum for the year
2018.
For a reconciliation of unit net cash costs per pound to
production and delivery costs applicable to sales reported in FCX's
consolidated financial statements, refer to the supplemental
schedules, "Product Revenues and Production Costs," beginning on
page XII, which are available on FCX's website, "fcx.com."
Mining Exploration Activities. FCX's mining exploration
activities are generally associated with its existing mines,
focusing on opportunities to expand reserves and resources to
support development of additional future production capacity. A
drilling program to further delineate the Lone Star resource
continues to indicate additional mineralization in this district.
Exploration results continue to indicate opportunities for
significant future potential reserve additions in North America and
South America. Exploration spending is expected to approximate $90
million for the year 2018.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.3
billion (net of $0.2 billion in working capital uses and timing of
other tax payments) in second-quarter 2018 and $2.7 billion (net of
$0.2 billion in working capital uses and timing of other tax
payments) for the first six months of 2018.
Based on current sales volume and cost estimates, and assuming
average prices of $2.75 per pound of copper, $1,250 per ounce of
gold and $11.00 per pound of molybdenum for the second half of
2018, FCX's consolidated operating cash flows are estimated to
approximate $4.3 billion for the year 2018 (net of $0.2 billion in
working capital uses and timing of other tax payments). The impact
of price changes during the second half of 2018 on operating cash
flows would approximate $185 million for each $0.10 per pound
change in the average price of copper, $60 million for each $50 per
ounce change in the average price of gold and $55 million for each
$2 per pound change in the average price of molybdenum.
Capital Expenditures. Capital expenditures totaled $0.5 billion
in second-quarter 2018 (including approximately $0.3 billion for
major mining projects) and $0.9 billion for the first six months of
2018 (including approximately $0.5 billion for major mining
projects). Capital expenditures are expected to approximate $2.0
billion for the year 2018, including $1.1 billion for major mining
projects primarily associated with underground development
activities in the Grasberg minerals district and development of the
Lone Star oxide project.
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 June 30, 2018 (in billions):
Cash at domestic companies $ 2.9 Cash at international
operations 1.0 Total consolidated cash and cash equivalents
3.9 Noncontrolling interests' share (0.4 ) Cash, net of
noncontrolling interests' share 3.5 Withholding taxes and other
(0.1 )
Net cash available $ 3.4
Debt. Following is a summary of total debt and the related
weighted-average interest rates at June 30, 2018 (in billions,
except percentages):
Weighted- Average Interest Rate
Senior Notes $ 9.9 4.6% Cerro Verde credit facility 1.2 4.0%
Total debt $ 11.1 4.5%
In April 2018, FCX redeemed $404 million of senior notes due
2022 and $50 million of senior notes due 2023, resulting in
aggregate annual cash interest savings of approximately $30
million. In second-quarter 2018, FCX recorded a net gain on early
extinguishment of debt totaling $9 million primarily related to
these redemptions.
During April 2018, FCX entered into a new $3.5 billion,
five-year, unsecured revolving credit facility with substantially
similar structure and terms as its prior facility, which was
scheduled to mature in May 2019. At June 30, 2018, FCX had no
borrowings, $13 million in letters of credit issued and $3.5
billion available under its revolving credit facility.
FINANCIAL POLICY
In February 2018, the Board reinstated a cash dividend on FCX
common stock. On June 27, 2018, FCX declared a quarterly cash
dividend of $0.05 per share on its common stock, which will be paid
on August 1, 2018, to shareholders of record as of July 13, 2018.
The declaration of dividends is at the discretion of the Board and
will depend upon FCX’s financial results, cash requirements, future
prospects and other factors deemed relevant by the Board.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
second-quarter 2018 results is scheduled for today at 10:00 a.m.
Eastern Time. The conference call will be broadcast on the Internet
along with slides. Interested parties may listen to the conference
call live and view the slides by accessing “fcx.com.” A replay of
the webcast will be available through Friday, August 24,
2018.
-----------------------------------------------------------------------------------------------------------
FCX is a leading international mining company with headquarters
in Phoenix, Arizona. FCX operates large, long-lived, geographically
diverse assets with significant proven and probable reserves of
copper, gold and molybdenum. FCX is the world's largest publicly
traded copper producer. FCX’s portfolio of assets includes the
Grasberg minerals district in Indonesia, one of the world's largest
copper and gold deposits; and significant mining operations in the
Americas, including the large-scale Morenci minerals district in
North America and the Cerro Verde operation in South America.
Additional information about FCX is available on FCX's website at
"fcx.com."
Cautionary Statement and Regulation G Disclosure: This
press release contains forward-looking statements in which FCX
discusses its potential future performance. Forward-looking
statements are all statements other than statements of historical
facts, such as projections or expectations relating to ore grades
and milling rates, production and sales volumes, unit net cash
costs, operating cash flows, capital expenditures, the transaction
contemplated by the non-binding Heads of Agreement between FCX,
PT-FI, Inalum and Rio Tinto, exploration efforts and results,
development and production activities and costs, liquidity, tax
rates, the impact of copper, gold and molybdenum price changes, the
impact of deferred intercompany profits on earnings, reserve
estimates, future dividend payments, and share purchases and sales.
The words “anticipates,” “may,” “can,” “plans,” “believes,”
“estimates,” “expects,” “projects,” "targets," “intends,” “likely,”
“will,” “should,” “to be,” ”potential" and any similar expressions
are intended to identify those assertions as forward-looking
statements. The declaration of dividends is at the discretion of
the Board and will depend on FCX's financial results, cash
requirements, future prospects, and other factors deemed relevant
by the Board.
FCX cautions readers that forward-looking statements are not
guarantees of future performance and actual results may differ
materially from those anticipated, projected or assumed in the
forward-looking statements. Important factors that can cause FCX's
actual results to differ materially from those anticipated in the
forward-looking statements include supply of and demand for, and
prices of, copper, gold and molybdenum; mine sequencing; production
rates; potential inventory adjustments; potential impairment of
long-lived mining assets; FCX’s ability to complete the transaction
contemplated by the non-binding Heads of Agreement, which is
subject to the negotiation and documentation of definitive
agreements, including purchase and sale agreements, the extension
and stability of PT-FI's long-term mining rights through 2041 in a
form acceptable to FCX and Inalum, a shareholders’ agreement
between FCX and Inalum providing for continuity of FCX’s management
of PT-FI’s operations and addressing governance arrangements, and
resolution of administrative sanctions and environmental regulatory
matters pending before Indonesia’s Ministry of Environment and
Forestry satisfactory to the Indonesian government, FCX and Inalum,
the terms of all of which will be subject to FCX Board approval;
PT-FI’s ability to obtain an extension of its temporary IUPK after
July 31, 2018; the potential effects of violence in Indonesia
generally and in the province of Papua; industry risks; regulatory
changes; political risks; labor relations; weather- and
climate-related risks; environmental risks (including resolution of
the administrative sanctions and other environmental matters
pending before Indonesia's Ministry of Environment and Forestry);
litigation results (including the final disposition of Indonesian
tax disputes and the outcome of Cerro Verde's royalty dispute with
the Peruvian national tax authority); and other factors described
in more detail under the heading “Risk Factors” in FCX's Annual
Report on Form 10-K for the year ended December 31, 2017,
filed with the U.S. Securities and Exchange Commission (SEC) as
updated by FCX's subsequent filings with the SEC.
Investors are cautioned that many of the assumptions upon which
FCX's forward-looking statements are based are likely to change
after the forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its assumptions, changes
in business plans, actual experience or other changes, and FCX
undertakes no obligation to update any forward-looking
statements.
This press release also contains certain financial measures such
as unit net cash (credits) costs per pound of copper and molybdenum
and adjusted net income, which are not recognized under U.S.
generally accepted accounting principles. As required by SEC
Regulation G, reconciliations of these measures to amounts reported
in FCX's consolidated financial statements are in the supplemental
schedules of this press release, which are also available on FCX's
website, "fcx.com."
FREEPORT-McMoRan INC. SELECTED OPERATING DATA
Three Months Ended June 30, 2018 2017 2018
2017
MINING OPERATIONS: Production Sales
COPPER
(millions of recoverable pounds)
(FCX's net interest in %)
North
America
Morenci (72%)a 182 187 183 196 Bagdad (100%) 48 43 48 43 Safford
(100%) 29 37 32 42 Sierrita (100%) 36 40 38 42 Miami (100%) 4 5 4 5
Chino (100%) 42 58 43 63 Tyrone (100%) 13 14 13 17 Other (100%) —
— — — Total North America 354
384 361 408
South
America
Cerro Verde (53.56%) 262 260 258 244 El Abra (51%) 51 40
54 43 Total South America 313 300
312 287
Indonesia
Grasberg (90.64%)b 347 199 316 247
Total 1,014 883 989 c
942 c Less
noncontrolling interests 179 159 176 158
Net 835 724 813
784 Average realized price per pound $
3.08 $ 2.65
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 6 5 5 5 Indonesia
(90.64%)b 740 348 671 427
Consolidated 746 353 676 432
Less noncontrolling interests 70 32 63 40
Net 676 321 613
392 Average realized price per ounce $
1,274 $ 1,243
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 3 3 N/A N/A Climax
(100%) 6 5 N/A N/A North America copper mines (100%)a 8 8 N/A N/A
Cerro Verde (53.56%) 7 7 N/A N/A
Consolidated
24 23 24 25 Less noncontrolling
interests 3 3 4 3
Net 21
20 20 22
Average realized price per pound $ 12.89 $ 9.58 a.
Amounts are net of Morenci's undivided joint venture partners'
interests. b. Amounts are net of Grasberg's joint venture partner's
interest, which varies in accordance with the terms of the joint
venture agreement. c. Consolidated sales volumes exclude purchased
copper of 90 million pounds in second-quarter 2018 and 62 million
pounds in second- quarter 2017.
FREEPORT-McMoRan
INC. SELECTED OPERATING DATA (continued)
Six Months Ended June 30, 2018 2017 2018 2017
MINING
OPERATIONS: Production Sales
Copper (millions of
recoverable pounds) (FCX's net interest in %)
North
America
Morenci (72%)a 351 368 370 368 Bagdad (100%) 97 83 99 81 Safford
(100%) 62 79 68 85 Sierrita (100%) 77 81 82 80 Miami (100%) 8 10 9
10 Chino (100%) 80 120 88 123 Tyrone (100%) 26 34 28 35 Other
(100%) 1 1 1 1 Total North America 702
776 745 783
South
America
Cerro Verde (53.56%) 505 522 500 512 El Abra (51%) 101 82
102 84 Total South America 606 604
602 596
Indonesia
Grasberg (90.64%)b 658 354 635 372
Total 1,966 1,734 1,982 c
1,751
c Less noncontrolling interests 346 316 342
314
Net 1,620 1,418
1,640 1,437 Average realized
price per pound $ 3.10 $ 2.65
Gold (thousands of
recoverable ounces) (FCX's net interest in %) North America (100%)
10 12 12 10 Indonesia (90.64%)b 1,335 580 1,274
604
Consolidated 1,345 592
1,286 614 Less noncontrolling interests 125
54 120 57
Net
1,220 538 1,166
557 Average realized price per ounce $ 1,291 $
1,242
Molybdenum (millions of recoverable pounds)
(FCX's net interest in %) Henderson (100%) 7 6 N/A N/A Climax
(100%) 11 10 N/A N/A North America (100%)a 15 17 N/A N/A Cerro
Verde (53.56%) 13 13 N/A N/A
Consolidated
46 46 48 49 Less noncontrolling
interests 6 6 7 6
Net 40
40 41 43
Average realized price per pound $ 12.42 $ 9.16 a.
Amounts are net of Morenci's undivided joint venture partners'
interests. b. Amounts are net of Grasberg's joint venture partner's
interest, which varies in accordance with the terms of the joint
venture agreement. c. Consolidated sales volumes exclude purchased
copper of 164 million pounds for the first six months of 2018 and
120 million pounds for the first six months of 2017.
FREEPORT-McMoRan INC. SELECTED OPERATING DATA
(continued) Three Months Ended June
30, Six Months Ended June 30, 2018 2017 2018 2017
100% North
America Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 689,500
692,700 682,100 697,300 Average copper ore grade (percent) 0.24
0.29 0.26 0.28 Copper production (millions of recoverable pounds)
268 282 530 559
Mill
Operations
Ore milled (metric tons per day) 307,000 299,100 297,900 301,400
Average ore grades (percent): Copper 0.35 0.39 0.35 0.40 Molybdenum
0.02 0.03 0.02 0.03 Copper recovery rate (percent) 89.1 86.7 88.5
86.6 Production (millions of recoverable pounds): Copper 157 174
308 360 Molybdenum 9 9 16 18
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 246,700
126,000 207,600 123,100 Average copper ore grade (percent) 0.30
0.36 0.32 0.39 Copper production (millions of recoverable pounds)
75 59 142 125
Mill
Operations
Ore milled (metric tons per day) 385,200 347,600 385,300 343,300
Average ore grades (percent): Copper 0.38 0.44 0.39 0.44 Molybdenum
0.01 0.02 0.01 0.02 Copper recovery rate (percent) 84.4 83.0 81.7
83.8 Production (millions of recoverable pounds): Copper 238 241
464 479 Molybdenum 7 7 13 13
100% Indonesia Mining
Ore milled (metric tons per day):a Grasberg open pit 148,400 88,600
136,800 71,200 Deep Ore Zone underground mine 29,200 27,300 34,300
26,800 Deep Mill Level Zone (DMLZ) underground mineb 2,700 3,800
2,700 3,500 Grasberg Block Cave underground mineb 3,800 3,800 3,900
3,200 Big Gossan underground mineb 3,800 — 3,100
800 Total 187,900 123,500 180,800
105,500 Average ore grades: Copper (percent) 1.06 1.03 1.09 1.08
Gold (grams per metric ton) 1.77 1.16 1.71 1.17 Recovery rates
(percent): Copper 92.7 91.8 92.4 92.0 Gold 86.1 85.3 85.5 85.1
Production (recoverable): Copper (millions of pounds) 353 221 693
393 Gold (thousands of ounces) 816 347 1,489 588
100%
Molybdenum Mines Ore milled (metric tons per day) 28,900 22,000
26,000 21,800 Average molybdenum ore grade (percent) 0.18 0.20 0.19
0.21 Molybdenum production (millions of recoverable pounds) 9 8 18
16 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 the first half of 2019, and production from the Big
Gossan underground mine restarted in fourth-quarter 2017.
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) Three Months Ended Six
Months Ended June 30, June 30, 2018 2017a 2018 2017a (In Millions,
Except Per Share Amounts) Revenuesb $ 5,168 $ 3,711 $ 10,036 $
7,052 Cost of sales: Production and deliveryc 2,915 2,480 5,723
4,668 Depreciation, depletion and amortization 442 450
893 839 Total cost of sales 3,357 2,930 6,616
5,507 Selling, general and administrative expensesc 109 107 240 258
Mining exploration and research expenses 24 19 45 33 Environmental
obligations and shutdown costs 59 (21 ) 68 4 Net gain on sales of
assets (45 ) (10 ) (56 ) (33 ) Total costs and expenses 3,504
3,025 6,913 5,769 Operating income
1,664 686 3,123 1,283 Interest expense, netc,d (142 ) (162 ) (293 )
(329 ) Net gain (loss) on early extinguishment of debt 9 (4 ) 8 (3
) Other income (expense), netc 20 (7 ) 49 e —
Income from continuing operations before income taxes and equity in
affiliated companies' net earnings (losses) 1,551 513 2,887 951
Provision for income taxesf (515 ) (186 ) (1,021 ) (360 ) Equity in
affiliated companies' net earnings (losses) 3 (1 ) 1
3 Net income from continuing operations 1,039 326 1,867 594
Net (loss) income from discontinued operationsg (4 ) 9 (15 )
47 Net income 1,035 335 1,852 641 Net income attributable to
noncontrolling interests: Continuing operations (166 ) (66 ) (291 )
(141 ) Discontinued operations — (1 ) — (4 ) Net
income attributable to FCX common stockh $ 869 $ 268
$ 1,561 $ 496 Basic net income (loss) per
share attributable to common stock: Continuing operations $ 0.60 $
0.18 $ 1.08 $ 0.31 Discontinued operations — — (0.01
) 0.03 $ 0.60 $ 0.18 $ 1.07 $ 0.34
Diluted net income (loss) per share attributable to
common stock: Continuing operations $ 0.59 $ 0.18 $ 1.08 $ 0.31
Discontinued operations — — (0.01 ) 0.03 $
0.59 $ 0.18 $ 1.07 $ 0.34
Weighted-average common shares outstanding: Basic 1,449
1,447 1,449 1,447 Diluted 1,458 1,453
1,458 1,453 Dividends declared per
share of common stock $ 0.05 $ — $ 0.10 $ —
a.
The adoption of accounting guidance
related to the presentation of retirement benefits resulted in the
reclassification of the non-service components of net periodic
benefit cost to other income (expense), net.
b.
Revenues include adjustments to
provisionally priced concentrate and cathode sales. For a summary
of adjustments to provisionally priced copper sales, refer to the
supplemental schedule, "Derivative Instruments," beginning on page
VIII.
c.
Includes net mining and oil and gas
charges that are summarized in the supplemental schedule, "Adjusted
Net Income," on page VII.
d.
Consolidated interest costs (before
capitalization) totaled $165 million in second-quarter 2018, $192
million in second-quarter 2017, $341 million for the first six
months of 2018 and $387 million for the first six months of
2017.
e.
Includes interest received by PT-FI with
the refund of prior years' tax receivables, which is summarized in
the supplemental schedule, "Adjusted Net Income," on page VII.
f.
For a summary of FCX's provision for
income taxes, refer to the supplemental schedule, "Income Taxes,"
on page VIII.
g.
Primarily reflects adjustments to the
estimated fair value of contingent consideration related to the
2016 sale of FCX’s interest in TF Holdings Limited (TFHL), which
will continue to be adjusted through December 31, 2019.
h.
FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. Refer
to the supplemental schedule, "Deferred Profits," on page IX for a
summary of net impacts from changes in these deferrals.
FREEPORT-McMoRan INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) June 30, December 31, 2018
2017 (In Millions) ASSETS Current assets: Cash and cash equivalents
$ 3,859 $ 4,447 Trade accounts receivable 1,077 1,246 Income and
other tax receivables 225 325 Inventories: Mill and leach
stockpiles 1,435 1,422 Materials and supplies, net 1,404 1,305
Product 1,337 1,166 Other current assets 381 270 Held for sale 625
508 Total current assets 10,343 10,689 Property,
plant, equipment and mine development costs, net 22,923 22,934
Long-term mill and leach stockpiles 1,371 1,409 Other assets 2,391
2,270 Total assets $ 37,028 $ 37,302
LIABILITIES AND EQUITY Current liabilities: Accounts payable
and accrued liabilities $ 2,420 $ 2,321 Accrued income taxes 569
565 Current portion of environmental and asset retirement
obligations 380 388 Dividends payable 73 — Current portion of debt
4 1,414 Held for sale 353 323 Total current
liabilities 3,799 5,011 Long-term debt, less current portion 11,123
11,703 Deferred income taxes 3,702 3,649 Environmental and asset
retirement obligations, less current portion 3,631 3,631 Other
liabilities 1,931 2,012 Total liabilities 24,186
26,006 Equity: Stockholders' equity: Common stock 158 158
Capital in excess of par value 26,667 26,751 Accumulated deficit
(13,161 ) (14,722 ) Accumulated other comprehensive loss (464 )
(487 ) Common stock held in treasury (3,726 ) (3,723 ) Total
stockholders' equity 9,474 7,977 Noncontrolling interests 3,368
3,319 Total equity 12,842 11,296 Total
liabilities and equity $ 37,028 $ 37,302
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) Six Months Ended June 30,
2018 2017 (In Millions) Cash flow from operating activities:
Net income $ 1,852 $ 641 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation, depletion and
amortization 893 839 Net gain on sales of assets (56 ) (33 )
Stock-based compensation 60 44 Payments for Cerro Verde royalty
dispute (21 ) (21 ) Net charges for environmental and asset
retirement obligations, including accretion 152 87 Payments for
environmental and asset retirement obligations (110 ) (59 ) Net
charges for defined pension and postretirement plans 38 70 Pension
plan contributions (44 ) (56 ) Net (gain) loss on early
extinguishment of debt (8 ) 3 Deferred income taxes 61 55 Loss
(gain) on disposal of discontinued operations 15 (38 ) Decrease in
long-term mill and leach stockpiles 38 80 Non-cash drillship
settlements/idle rig costs and other oil and gas adjustments — (33
) Oil and gas contract settlement payments — (70 ) Other, net 21
(23 ) Changes in working capital and other tax payments: Accounts
receivable 309 589 Inventories (468 ) (101 ) Other current assets
(20 ) (2 ) Accounts payable and accrued liabilities 114 (267 )
Accrued income taxes and timing of other tax payments (148 ) 124
Net cash provided by operating activities 2,678 1,829
Cash flow from investing activities: Capital
expenditures: North America copper mines (232 ) (67 ) South America
(138 ) (45 ) Indonesia (449 ) (457 ) Molybdenum mines (2 ) (2 )
Other (63 ) (135 ) Intangible water rights and other, net (86 ) 3
Net cash used in investing activities (970 ) (703 )
Cash flow from financing activities: Proceeds from debt 352 606
Repayments of debt (2,297 ) (1,250 ) Cash dividends paid: Common
stock (73 ) (2 ) Noncontrolling interests (241 ) (39 ) Stock-based
awards net proceeds (payments) 5 (8 ) Debt financing costs and
other, net (23 ) (11 ) Net cash used in financing activities (2,277
) (704 ) Net (decrease) increase in cash, cash equivalents,
restricted cash and restricted cash equivalents (569 ) 422 Decrease
in cash and cash equivalents in assets held for sale 44 7 Cash,
cash equivalents, restricted cash and restricted cash equivalents
at
beginning of year
4,631 4,403 Cash, cash equivalents, restricted cash
and restricted cash equivalents at
end of perioda
$ 4,106 $ 4,832
a. Includes restricted cash and restricted
cash equivalents of $247 million at June 30, 2018, and $165
million at June 30, 2017.
FREEPORT-McMoRan INC.ADJUSTED NET
INCOME
Adjusted net income is intended to provide investors and others
with information about FCX's recurring operating performance. This
information differs from net income attributable to common stock
determined in accordance with U.S. generally accepted accounting
principles (GAAP) and should not be considered in isolation or as a
substitute for measures of performance determined in accordance
with U.S. GAAP. FCX's adjusted net income follows, which may not be
comparable to similarly titled measures reported by other companies
(in millions, except per share amounts).
Three Months Ended June 30, 2018 2017 Pre-tax After-taxa
Per Share Pre-tax After-taxa Per Share
Net income
attributable to common stock N/A $ 869
$ 0.59 N/A $ 268
$ 0.18 PT-FI net charges for
workforce reductions — — — (87 ) b (46 ) (0.03 ) Other net mining
credits (charges) 14 c 9 0.01 (9 ) (9 ) (0.01 ) Net oil and gas
credits — — — 6 6 — Net adjustments to environmental obligations
and related litigation reserves (50 ) (50 ) (0.03 ) 30 30 0.02 Net
gain on sales of assets 45 d 45 0.03 10 10 0.01 Net gain (loss) on
early extinguishment of debt 9 9 0.01 (4 ) (4 ) — Net tax creditse
N/A 7 — N/A 32 0.02 (Loss) gain on discontinued operationsf (4 ) (4
) — 10 8 — $ 14 $ 16 $
0.01 g $ (44 ) $ 27 $ 0.01
Adjusted
net income attributable to common stock N/A $ 853 $ 0.58
N/A $ 241 $ 0.17 Six
Months Ended June 30, 2018 2017 Pre-tax After-taxa Per Share
Pre-tax After-taxa Per Share
Net income attributable to common
stock N/A $ 1,561 $
1.07 N/A $ 496 $
0.34 PT-FI charges for workforce reductions $
— $ — $ — $ (108 ) b $ (57 ) $ (0.04 ) Other net mining credits
(charges) 10 c 8 0.01 (28 ) (28 ) (0.02 ) Net oil and gas credits —
— — 4 h 4 0.01 Net adjustments to environmental obligations and
related litigation reserves (50 ) (50 ) (0.03 ) 11 11 0.01 Net gain
on sales of assets 56 d 56 0.04 33 33 0.02 Net gain (loss) on early
extinguishment of debt 8 8 — (3 ) (3 ) — PT-FI interest on tax
refund 24 i 13 0.01 — — — Net tax creditse N/A 7 — N/A 31 0.02
(Loss) gain on discontinued operationsf (15 ) (15 ) (0.01 ) 51
43 0.03 $ 33 $ 27 $ 0.02
$ (40 ) $ 34 $ 0.02 g
Adjusted net income
attributable to common stock N/A $ 1,534
$ 1.05 N/A $ 462 $
0.32
a.
Reflects impact to FCX net income
attributable to common stock (i.e., net of any taxes and
noncontrolling interests).
b.
Includes charges totaling $82 million in
second-quarter 2017 and $103 million for the first six months of
2017 in production and delivery costs and $5 million for the second
quarter and first six months of 2017 in selling, general and
administrative expenses.
c.
Includes net credits totaling $10 million
for the second quarter and first six months of 2018 in production
and delivery costs and $6 million for the second quarter and first
six months of 2018 in other income (expense), net, partly offset by
interest expense totaling $2 million in second-quarter 2018 and $6
million for the first six months of 2018.
d.
Reflects adjustments to the estimated fair
value of the potential $150 million in contingent consideration
related to the 2016 sale of onshore California oil and gas
properties, which will continue to be adjusted through December 31,
2020.
e.
Refer to "Income Taxes" on page VIII, for
further discussion of net tax credits.
f.
Primarily reflects adjustments to the
estimated fair value of the potential $120 million in contingent
consideration related to the 2016 sale of FCX’s interest in TFHL,
which will continue to be adjusted through December 31, 2019.
g.
Does not foot because of rounding.
h.
Includes adjustments to the fair value of
contingent payments totaling $26 million in production and delivery
costs related to the 2016 drillship settlements, partly offset by
charges totaling $22 million in selling, general and administrative
expenses primarily for contract termination costs.
i.
Reflects interest received with the refund
of prior years' tax receivables.
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version on businesswire.com: https://www.businesswire.com/news/home/20180725005333/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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