Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $556 million, $0.38 per share, in
third-quarter 2018. After adjusting for net gains of $42 million,
$0.03 per share, third-quarter 2018 adjusted net income
attributable to common stock totaled $514 million, $0.35 per
share.
- Consolidated sales totaled 1.04
billion pounds of copper, 837 thousand ounces of gold and 22
million pounds of molybdenum in third-quarter 2018.
- Consolidated sales for the year
2018 are expected to approximate 3.8 billion pounds of copper, 2.45
million ounces of gold and 95 million pounds of molybdenum,
including 790 million pounds of copper, 330 thousand ounces of gold
and 25 million pounds of molybdenum in fourth-quarter 2018.
- Average realized prices in
third-quarter 2018 were $2.80 per pound for copper, $1,191 per
ounce for gold and $12.40 per pound for molybdenum.
- Average unit net cash costs in
third-quarter 2018 were $0.93 per pound of copper and are expected
to average $1.06 per pound of copper for the year 2018.
- Operating cash flows totaled
$1.25 billion in third-quarter 2018 and $3.9 billion for the first
nine months of 2018. Based on current sales volume and cost
estimates, and assuming average prices of $2.85 per pound for
copper, $1,200 per ounce for gold and $12.00 per pound for
molybdenum for fourth-quarter 2018, operating cash flows are
expected to approximate $4.2 billion (net of $0.5 billion in
working capital uses and timing of other tax payments) for the year
2018.
- Capital expenditures totaled
$0.5 billion (including approximately $0.4 billion for major mining
projects) in third-quarter 2018 and $1.4 billion (including
approximately $0.9 billion for major mining projects) for the first
nine months of 2018. Capital expenditures for the year 2018 are
expected to approximate $2.0 billion, including $1.2 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.
- On September 27, 2018, FCX and PT
Freeport Indonesia (PT-FI) entered into a definitive
agreement with PT Indonesia Asahan Aluminium (Persero) (PT
Inalum) consistent with previously agreed economic terms. Closing
is expected to occur in late 2018 or early 2019, subject to
satisfaction of conditions.
- On September 26, 2018, FCX declared
a quarterly cash dividend of $0.05 per share on its common
stock, which will be paid on November 1, 2018.
- At September 30, 2018,
consolidated debt totaled $11.1 billion and consolidated
cash totaled $4.6 billion. FCX had no borrowings and $3.5
billion available under its revolving credit facility at
September 30, 2018.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $556 million ($0.38 per share) in
third-quarter 2018 and $2.1 billion ($1.45 per share) for the first
nine months of 2018. After adjusting for net gains of $42 million
($0.03 per share), primarily reflecting adjustments to assets held
for sale and the fair value of potential contingent consideration,
partly offset by nonrecurring charges for Cerro Verde's new
three-year collective labor agreement (CLA), adjusted net income
attributable to common stock totaled $514 million ($0.35 per share)
in third-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 global team delivered a solid operating quarter and
maintained a sharp focus on productivity, cost management, capital
discipline and initiatives to build value for shareholders. The
pending completion of our new long-term partnership with the
Indonesian government will enable us to de-risk a world class
asset. Supported by a premier portfolio of geographically diverse
long-lived copper assets, a solid balance sheet, a large resource
position to support future growth and a positive fundamental
outlook for copper, FCX is poised to deliver substantial value to
shareholders."
SUMMARY FINANCIAL DATA
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 (in millions, except per share amounts) Revenuesa,b $
4,908 $ 4,310 $ 14,944 $ 11,362 Operating incomea $ 1,315 $ 928 $
4,438 $ 2,211 Net income from continuing operations $ 668 $ 242 $
2,535 $ 836 Net income attributable to common stockc,d $ 556 $ 280
$ 2,117 $ 776 Diluted net income (loss) per share of common stock:
Continuing operations $ 0.38 $ 0.19 $ 1.46 $ 0.50 Discontinued
operations — — (0.01 ) 0.03 $ 0.38 $ 0.19 $ 1.45 $ 0.53
Diluted weighted-average common shares outstanding 1,458 1,454
1,458 1,453 Operating cash flowse $ 1,247 $ 1,183 $ 3,925 $ 3,012
Capital expenditures $ 507 $ 314 $ 1,391 $ 1,020 At September 30:
Cash and cash equivalents $ 4,556 $ 4,957 $ 4,556 $ 4,957 Total
debt, including current portion $ 11,127 $ 14,782 $ 11,127 $ 14,782
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
$(111) million ($(48) million to net income attributable to common
stock or $(0.03) per share) in third-quarter 2018, $95 million ($39
million to net income attributable to common stock or $0.03 per
share) in third-quarter 2017, $(70) million ($(31) million to net
income attributable to common stock or $(0.02) per share) for the
first nine months of 2018 and $81 million ($35 million to net
income attributable to common stock or $0.02 per share) for the
first nine 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. Includes net gains (charges) of $42
million ($0.03 per share) in third-quarter 2018, $(212) million
($(0.15) per share) in third-quarter 2017, $69 million ($0.04 per
share) for the first nine months of 2018 and $(178) million
($(0.12) per share) for the first nine 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."
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 IX, which is
available on FCX's website, "fcx.com."
e. Includes net working capital sources
(uses) and timing of other tax payments of $59 million in
third-quarter 2018, $46 million in third-quarter 2017, $(154)
million for the first nine months of 2018 and $389 million for the
first nine months of 2017.
SUMMARY OPERATING DATA
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018 2017 Copper
(millions of recoverable pounds) Production 1,006 996 2,972 2,730
Sales, excluding purchases 1,044 932 3,026 2,683 Average realized
price per pound $ 2.80 $ 2.94 $ 2.96 $ 2.79 Site production and
delivery costs per pounda $ 1.73 b $ 1.56 c $ 1.70 b $ 1.59 c Unit
net cash costs per pounda $ 0.93 b $ 1.20 c $ 0.95 b $ 1.25 c
Gold (thousands of recoverable ounces) Production 760 418
2,105 1,010 Sales, excluding purchases 837 355 2,123 969 Average
realized price per ounce $ 1,191 $ 1,290 $ 1,249 $ 1,261
Molybdenum (millions of recoverable pounds) Production 23 24
69 70 Sales, excluding purchases 22 22 70 71 Average realized price
per pound $ 12.40 $ 9.22 $ 12.41 $ 9.18
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."
b. Includes $0.07 per pound of copper in
third-quarter 2018 and $0.02 per pound of copper for the first nine
months of 2018 associated with nonrecurring charges for Cerro
Verde's new three-year CLA. Refer to the supplemental schedule,
"Adjusted Net Income," on page VII, which is available on FCX's
website, "fcx.com," for additional information.
c. Excludes $0.01 per pound of copper in
third-quarter 2017 and $0.04 per pound of copper for the first nine
months of 2017 associated with PT-FI workforce reductions. Refer to
the supplemental schedule, "Adjusted Net Income," on page VII,
which is available on FCX's website, "fcx.com," for additional
information.
Consolidated Sales Volumes
Third-quarter 2018 copper sales of 1.04 billion pounds
were 8 percent higher than the July 2018 estimate of 970 million
pounds and 12 percent higher than third-quarter 2017 sales of 932
million pounds, primarily reflecting higher ore grades and
operating rates in Indonesia.
Third-quarter 2018 gold sales of 837 thousand ounces were
20 percent higher than the July 2018 estimate of 700 thousand
ounces and more than double third-quarter 2017 sales of 355
thousand ounces, primarily reflecting higher ore grades and
operating rates in Indonesia.
Third-quarter 2018 molybdenum sales of 22 million pounds
were lower than the July 2018 estimate of 24 million pounds and
approximated third-quarter 2017 sales.
Sales volumes for the year 2018 are expected to approximate 3.8
billion pounds of copper, 2.45 million ounces of gold and 95
million pounds of molybdenum, including 790 million pounds of
copper, 330 thousand ounces of gold and 25 million pounds of
molybdenum in fourth-quarter 2018.
Projections for 2018 and other forward looking statements in
this release assume extension of PT-FI’s long-term mining rights or
an extension of PT-FI’s temporary special mining license (IUPK)
after October 31, 2018. Refer to "Indonesia Mining," beginning on
page 7, for further discussion of Indonesia regulatory matters.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product
credits) for FCX's copper mines of $0.93 per pound of copper in
third-quarter 2018 were lower than unit net cash costs of $1.20 per
pound in third-quarter 2017, primarily reflecting higher by-product
credits, partly offset by nonrecurring charges associated with
Cerro Verde's new three-year CLA.
Assuming average prices of $1,200 per ounce of gold and $12.00
per pound of molybdenum for fourth-quarter 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 $1.06 per pound of copper for the year 2018 (including
$1.45 per pound of copper in fourth-quarter 2018). The impact of
price changes for fourth-quarter 2018 on consolidated unit net cash
costs would approximate $0.01 per pound for each $50 per ounce
change in the average price of gold and $0.005 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.
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 commenced in first-quarter 2018,
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 September 30, 2018, approximately $200
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 exposure to a significant sulfide
resource. FCX continues to advance drilling activities to define
future large-scale development opportunities in the Lone
Star/Safford minerals district.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the third quarters and first
nine months of 2018 and 2017:
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 Copper (millions of recoverable pounds)
Production 349 375 1,051 1,151 Sales, excluding purchases 350 347
1,095 1,130 Average realized price per pound $ 2.77 $ 2.92 $ 3.02 $
2.74
Molybdenum (millions of recoverable pounds)
Productiona 8 8 23 25
Unit net cash costs per pound of
copperb Site production and delivery, excluding
adjustments $ 1.98 $ 1.65 $ 1.92 $ 1.57 By-product credits (0.26 )
(0.17 ) (0.23 ) (0.16 ) Treatment charges 0.10 0.11
0.10 0.11 Unit net cash costs $ 1.82 $ 1.59
$ 1.79 $ 1.52
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 totaled 350
million pounds in third-quarter 2018 and 347 million pounds in
third-quarter 2017. North America copper sales are estimated to
approximate 1.4 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 $1.82 per pound of copper in
third-quarter 2018 were higher than unit net cash costs of $1.59
per pound in third-quarter 2017, primarily reflecting increased
mining rates and higher mining and milling costs.
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 $12.00 per pound for fourth-quarter 2018. North America's
average unit net cash costs for the year 2018 would change by
approximately $0.01 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. 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. During 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 384,800 metric tons of ore per day for the first nine months of
2018.
FCX continues to evaluate a large-scale expansion at El Abra to
process additional sulfide material and to achieve higher
recoveries. El Abra's large sulfide resource could potentially
support a major mill project similar to facilities constructed at
Cerro Verde. Technical and economic studies are being advanced to
determine the optimal scope and timing for the project.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the third quarters and
first nine months of 2018 and 2017:
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018 2017 Copper
(millions of recoverable pounds) Production 325 328 931 932 Sales
326 327 928 923 Average realized price per pound $ 2.80 $ 2.95 $
2.93 $ 2.82
Molybdenum (millions of recoverable
pounds) Productiona 7 8 20 21
Unit net cash costs per
pound of copperb Site production and delivery, excluding
adjustments $ 1.84 c $ 1.60 $ 1.80 c $ 1.55 By-product credits
(0.23 ) (0.19 ) (0.24 ) (0.17 ) Treatment charges 0.20 0.22 0.20
0.22 Royalty on metals — 0.01 — 0.01
Unit net cash costs $ 1.81 $ 1.64 $ 1.76 $
1.61
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."
c. Includes $0.21 per pound of copper in
third-quarter 2018 and $0.07 per pound of copper for the first nine
months of 2018 associated with nonrecurring charges for Cerro
Verde's new three-year CLA. Refer to the supplemental schedule,
“Adjusted Net Income,” on page VII, which is available on FCX’s
website, “fcx.com,” for a summary of these charges.
South America's consolidated copper sales volumes totaled 326
million pounds in third-quarter 2018 and 327 million pounds in
third-quarter 2017. 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 $1.81 per pound of copper in third-quarter
2018 were higher than unit net cash costs of $1.64 per pound in
third-quarter 2017, primarily reflecting nonrecurring charges
associated with Cerro Verde's new three-year CLA. Excluding this
charge, South America's average unit site production and delivery
costs of $1.63 per pound of copper would have approximated
third-quarter 2017.
Average unit net cash costs (net of by-product credits) for
South America mining are expected to approximate $1.73 per pound of
copper for the year 2018, based on current sales volume and cost
estimates and assuming an average price of $12.00 per pound of
molybdenum for fourth-quarter 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. On September 27, 2018, FCX, PT-FI, PT
Indocopper Investama (PT-II) and PT Inalum entered into a
Divestment Agreement on previously agreed economic terms in
connection with PT Inalum’s acquisition of shares of PT-FI. Under
the Divestment Agreement, PT Inalum will acquire, for cash
consideration of $350 million, 100 percent of FCX's interests in
PT-II, which owns 9.36 percent of PT-FI (equates to a 5.6 percent
interest after 2022). PT Inalum also entered into a definitive
agreement with Rio Tinto to acquire for cash consideration of $3.5
billion, all of Rio Tinto's interests (40 percent interest after
2022) associated with its joint venture with PT-FI (the Joint
Venture).
The arrangements provide for FCX and existing PT-FI shareholders
to retain the economics of the revenue and cost sharing
arrangements under the Joint Venture and for FCX to continue to
manage PT-FI's operations. Following completion of the transaction,
which includes Rio Tinto's interest being merged into PT-FI, PT-FI
will have an expanded asset base and PT Inalum's share ownership
will be 51.2 percent of PT-FI (subject to a dividend assignment
mechanism to replicate the Joint Venture economics), and FCX's
ownership will be 48.8 percent.
Concurrent with the closing of the divestment transaction, PT-FI
will be granted an IUPK providing long-term mining rights with
assured legal and fiscal terms and legal enforceability through
2041. PT-FI has agreed to construct a smelter within five years of
the closing with economics shared pro rata by FCX and PT Inalum
according to their respective equity ownership in PT-FI.
The transaction, which is expected to close in late 2018 or
early 2019, is subject to certain conditions, including the
issuance of the IUPK in a form acceptable to FCX and PT Inalum;
resolution of environmental regulatory matters satisfactory to the
Indonesian government, FCX and PT Inalum; various other Indonesian
regulatory actions and approvals; and receipt of customary
approvals from international competition authorities.
PT-FI's export license is effective through February 15, 2019,
and PT-FI's temporary IUPK is effective through October 31, 2018.
PT-FI will continue to seek extensions to its temporary IUPK until
closing of the pending transaction. Until the pending transaction
is completed, PT-FI has reserved all rights under its Contract of
Work (COW).
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. Following results of an economic
analysis in the first half of 2018, PT-FI revised its mine plans to
continue to mine ore from the open pit until transitioning to the
Grasberg Block Cave (GBC) underground mine in the first half of
2019.
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 GBC underground mine. First undercut blasting
occurred in September 2018, and cave production is scheduled for
the first half of 2019. All underground mining levels and the ore
flow system are being commissioned. Production rates over the next
five years are expected to ramp up to 130,000 metric tons of ore
per day.
During second-quarter 2018, PT-FI initiated plans to conduct
hydraulic fracturing activities to manage rock stresses and
pre-condition the Deep Mill Level Zone (DMLZ) underground mine for
large-scale production following mining induced seismic activity
experienced in 2017 and 2018. Hydraulic fracturing activities
designed to safely manage production commenced in third-quarter
2018 and to date have accomplished expected results. PT-FI's
revised mine plans for the DMLZ underground mine, which continue to
be reviewed, currently project block cave mining activities in the
DMLZ underground mine to commence in mid-2019. PT-FI expects the
DMLZ to reach full production rates of 80,000 metric tons per day
in 2022. Estimates of timing of future production continue to be
reviewed and may be modified as additional information becomes
available.
PT-FI's estimated annual capital spending on underground mine
development projects is expected to 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.
PT-FI is also evaluating plans for the development of a new
copper smelter in Indonesia, including site selection, engineering,
joint venture and financing arrangements.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the third quarters and
first nine months of 2018 and 2017:
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 Copper (millions of recoverable pounds)
Production 332 293 990 647 Sales 368 258 1,003 630 Average realized
price per pound $ 2.81 $ 2.95 $ 2.93 $ 2.81
Gold
(thousands of recoverable ounces) Production 754 412 2,089 992
Sales 831 352 2,105 956 Average realized price per ounce $ 1,191 $
1,290 $ 1,248 $ 1,261
Unit net cash (credits) costs per
pound of coppera Site production and delivery, excluding
adjustments $ 1.40 $ 1.41 b $ 1.36 $ 1.70 b Gold and silver credits
(2.72 ) (1.80 ) (2.69 ) (1.98 ) Treatment charges 0.26 0.27 0.26
0.27 Export duties 0.14 0.08 0.15 0.10 Royalty on metals 0.20
0.17 0.21 0.16 Unit net cash (credits)
costs $ (0.72 ) $ 0.13 $ (0.71 ) $ 0.25
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 $0.03 per pound of copper
in third-quarter 2017 and $0.18 per pound of copper for the first
nine months of 2017 associated with workforce reductions. Refer to
the supplemental schedule, “Adjusted Net Income,” on page VII,
which is available on FCX’s website, “fcx.com,” for a summary of
these charges.
Indonesia's consolidated sales of 368 million pounds of copper
and 831 thousand ounces of gold in third-quarter 2018 were higher
than third-quarter 2017 sales of 258 million pounds of copper and
352 thousand ounces of gold, primarily reflecting higher operating
rates and ore grades.
Assuming achievement of planned operating rates for
fourth-quarter 2018, consolidated sales volumes from Indonesia
mining are expected to approximate 1.16 billion pounds of copper
and 2.45 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.
As PT-FI transitions mining from the open pit to underground,
its production is expected to be significantly lower in 2019 and
2020, compared to 2018. Metal production is expected to improve
significantly by 2021 following a ramp-up period.
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 $0.72
per pound of copper in third-quarter 2018, compared with unit net
cash costs of $0.13 per pound in third-quarter 2017.
Assuming an average gold price of $1,200 per ounce for
fourth-quarter 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 $0.54 per
pound of copper for the year 2018 (including unit net cash costs of
$0.48 per pound of copper in fourth-quarter 2018). Indonesia
mining's unit net cash credits for the year 2018 would change by
approximately $0.03 per pound for each $50 per ounce change in the
average price of gold for fourth-quarter 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 extension
of PT-FI's long-term mining rights or an extension of PT-FI's
temporary IUPK after October 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 8 million pounds of molybdenum in both
third-quarter 2018 and third-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 $9.02 per
pound of molybdenum in third-quarter 2018 and $7.82 per pound in
third-quarter 2017. Based on current sales volume and cost
estimates, average unit net cash costs for the Molybdenum mines are
expected to approximate $8.80 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 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 $85 million for the year 2018.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of
$1.25 billion in third-quarter 2018 and $3.9 billion for the first
nine months of 2018.
Based on current sales volume and cost estimates, and assuming
average prices of $2.85 per pound of copper, $1,200 per ounce of
gold and $12.00 per pound of molybdenum for fourth-quarter 2018,
FCX's consolidated operating cash flows are estimated to
approximate $4.2 billion for the year 2018 (net of $0.5 billion in
working capital uses and timing of other tax payments). The impact
of price changes during fourth-quarter 2018 on operating cash flows
would approximate $105 million for each $0.10 per pound change in
the average price of copper, $15 million for each $50 per ounce
change in the average price of gold and $15 million for each $2 per
pound change in the average price of molybdenum.
Capital Expenditures. Capital expenditures totaled $0.5 billion
in third-quarter 2018 (including approximately $0.4 billion for
major mining projects) and $1.4 billion for the first nine months
of 2018 (including approximately $0.9 billion for major mining
projects). Capital expenditures are expected to approximate $2.0
billion for the year 2018, including $1.2 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 September 30, 2018 (in billions):
Cash at domestic companies $ 2.7 Cash at
international operations 1.9 Total consolidated cash and
cash equivalents 4.6 Noncontrolling interests' share (0.5 ) Cash,
net of noncontrolling interests' share 4.1 Withholding taxes and
other (0.1 )
Net cash available $ 4.0
Debt. Following is a summary of total debt and the related
weighted-average interest rates at September 30, 2018 (in
billions, except percentages):
Weighted- Average
Interest Rate Senior Notes $ 9.9 4.6 % Cerro Verde credit
facility 1.2 4.1 % Total debt $ 11.1 4.5 %
At September 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 FCX Board of Directors (Board) reinstated
a cash dividend on FCX common stock. On September 26, 2018, FCX
declared a quarterly cash dividend of $0.05 per share on its common
stock, which will be paid on November 1, 2018, to shareholders of
record as of October 15, 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
third-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, November 23,
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, expectations
related to the pending transaction between FCX, PT-FI, PT-II, and
PT Inalum, including, but not limited to, replication of the
economics of the revenue and cost sharing arrangements under the
Joint Venture pursuant to a dividend assignment mechanism, FCX's
continued management of PT-FI's operations, the expected timing of
completion of the pending transaction, 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, expected, projected or assumed
in the forward-looking statements. Important factors that can cause
FCX's actual results to differ materially from those anticipated in
the forward-looking statements include, but are not limited to,
supply of and demand for, and prices of, copper, gold and
molybdenum; mine sequencing; production rates; potential inventory
adjustments; potential impairment of long-lived mining assets; the
ability to satisfy conditions to close the pending transaction,
including, but not limited to, the documentation and issuance of an
IUPK providing for the extension and stability of PT-FI's long-term
mining rights with assured legal and fiscal terms and legal
enforceability through 2041 in a form acceptable to FCX and PT
Inalum, resolution of environmental regulatory matters that include
amendments to the decrees imposing unattainable environmental
standards on PT-FI pending before Indonesia’s Ministry of
Environment and Forestry satisfactory to the Indonesian government,
FCX and PT Inalum, various other Indonesian regulatory actions and
approvals, including modification or revocation of current
regulations and implementation of new regulations by the Indonesian
government and assurances or approvals by Indonesian tax
authorities with respect to the pending transaction, including
confirmation of withholding tax treatment, and obtaining customary
approvals from international competition authorities; obtaining an
extension of PT-FI's temporary IUPK after October 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; litigation results (including 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 September 30, 2018 2017 2018 2017
MINING OPERATIONS: Production Sales
COPPER
(millions of recoverable pounds)
(FCX's net interest in %)
North
America
Morenci (72%)a 170 186 174 169 Bagdad (100%) 45 45 47 41 Safford
(100%) 32 37 31 35 Sierrita (100%) 36 40 36 37 Miami (100%) 4 4 3 4
Chino (100%) 46 48 45 47 Tyrone (100%) 15 13 14 12 Other (100%) 1 2
— 2 Total North America 349 375 350 347
South
America
Cerro Verde (53.56%) 275 284 280 291 El Abra (51%) 50 44 46 36
Total South America 325 328 326 327
Indonesia
Grasberg (90.64%)b 332 293 368 258
Total 1,006
996 1,044 c
932 c Less noncontrolling
interests 183 181 186 177
Net 823 815
858 755 Average realized price per pound $
2.80 $ 2.94
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 6 6 6 3 Indonesia
(90.64%)b 754 412 831 352
Consolidated 760 418
837 355 Less noncontrolling interests 70 39 77 32
Net 690 379 760 323
Average realized price per ounce $ 1,191 $ 1,290
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 3 3 N/A N/A Climax
(100%) 5 5 N/A N/A North America copper mines (100%)a 8 8 N/A N/A
Cerro Verde (53.56%) 7 8 N/A N/A
Consolidated 23
24 22 22 Less noncontrolling interests 3 4 2 3
Net 20 20 20 19 Average
realized price per pound $ 12.40 $ 9.22
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 93 million pounds in third-quarter 2018 and 75
million pounds in third-quarter 2017.
FREEPORT-McMoRan INC. SELECTED OPERATING
DATA (continued)
Nine Months Ended September 30, 2018
2017 2018 2017
MINING OPERATIONS: Production Sales
Copper (millions of recoverable pounds) (FCX's net interest
in %)
North
America
Morenci (72%)a 521 554 544 537 Bagdad (100%) 142 128 146 122
Safford (100%) 94 116 99 120 Sierrita (100%) 113 121 118 117 Miami
(100%) 12 14 12 14 Chino (100%) 126 168 133 170 Tyrone (100%) 41 47
42 47 Other (100%) 2 3 1 3 Total North America 1,051 1,151 1,095
1,130
South
America
Cerro Verde (53.56%) 780 806 780 803 El Abra (51%) 151 126 148 120
Total South America 931 932 928 923
Indonesia
Grasberg (90.64%)b 990 647 1,003 630
Total 2,972
2,730 3,026 c
2,683 c Less noncontrolling
interests 529 497 528 491
Net 2,443 2,233
2,498 2,192 Average realized price per pound $
2.96 $ 2.79
Gold (thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 16 18 18 13
Indonesia (90.64%)b 2,089 992 2,105 956
Consolidated
2,105 1,010 2,123 969 Less
noncontrolling interests 195 93 197 89
Net 1,910
917 1,926 880 Average realized price
per ounce $ 1,249 $ 1,261
Molybdenum (millions of
recoverable pounds) (FCX's net interest in %) Henderson (100%) 10 9
N/A N/A Climax (100%) 16 15 N/A N/A North America (100%)a 23 25 N/A
N/A Cerro Verde (53.56%) 20 21 N/A N/A
Consolidated
69 70 70 71 Less noncontrolling
interests 9 10 9 9
Net 60 60 61
62 Average realized price per pound $ 12.41 $ 9.18
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 257 million pounds for the first nine months of
2018 and 195 million pounds for the first nine months of 2017.
FREEPORT-McMoRan INC. SELECTED OPERATING
DATA (continued)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2018 2017 2018 2017
100% North
America Copper Mines
Leach
Operations
Leach ore placed in stockpiles (metric tons per day) 657,600
657,200 673,800 683,700 Average copper ore grade (percent) 0.22
0.27 0.25 0.28 Copper production (millions of recoverable pounds)
242 252 723 763
Mill
Operations
Ore milled (metric tons per day) 297,800 297,200 297,900 300,000
Average ore grades (percent): Copper 0.34 0.38 0.35 0.40 Molybdenum
0.03 0.03 0.02 0.03 Copper recovery rate (percent) 87.4 86.6 88.1
86.6 Production (millions of recoverable pounds): Copper 173 195
531 603 Molybdenum 8 9 24 27
100% South America
Mining
Leach
Operations
Leach ore placed in stockpiles (metric tons per day) 194,400
164,000 203,100 136,900 Average copper ore grade (percent) 0.34
0.36 0.32 0.37 Copper production (millions of recoverable pounds)
72 65 214 190
Mill
Operations
Ore milled (metric tons per day) 383,900 379,200 384,800 355,400
Average ore grades (percent): Copper 0.39 0.44 0.39 0.44 Molybdenum
0.02 0.02 0.01 0.02 Copper recovery rate (percent) 86.1 80.9 83.2
82.7 Production (millions of recoverable pounds): Copper 253 263
717 742 Molybdenum 7 8 20 21
100% Indonesia Mining
Ore milled (metric tons per day):a Grasberg open pit 149,500
130,500 141,100 91,200 Deep Ore Zone underground mine 31,000 34,500
33,200 29,400 Deep Mill Level Zone underground mine 2,500 2,400
2,600 3,100 Grasberg Block Cave underground mine 3,700 4,200 3,800
3,600 Big Gossan underground mine 3,900 — 3,400 500 Total 190,600
171,600 184,100 127,800 Average ore grades: Copper (percent) 1.00
0.91 1.06 1.00 Gold (grams per metric ton) 1.77 0.98 1.73 1.08
Recovery rates (percent): Copper 92.4 91.1 92.4 91.6 Gold 85.7 84.7
85.5 84.9 Production (recoverable): Copper (millions of pounds) 337
277 1,030 670 Gold (thousands of ounces) 817 405 2,306 993
100% Molybdenum Mines Ore milled (metric tons per day)
29,400 24,200 27,100 22,600 Average molybdenum ore grade (percent)
0.17 0.18 0.18 0.20 Molybdenum production (millions of recoverable
pounds) 8 8 26 24
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.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September
30, September 30, 2018 2017a 2018 2017a
(In Millions, Except Per Share Amounts) Revenuesb $ 4,908 $ 4,310 $
14,944 $ 11,362 Cost of sales: Production and deliveryc 3,069 2,794
d 8,792 7,462 d Depreciation, depletion and amortization 458
418 1,351 1,257 Total cost of sales 3,527
3,212 10,143 8,719 Selling, general and administrative expensesc
101 104 341 362 Mining exploration and research expenses 27 27 72
60 Environmental obligations and shutdown costs 8 72 76 76 Net gain
on sales of assets (70 ) (33 ) (126 ) (66 ) Total costs and
expenses 3,593 3,382 10,506 9,151
Operating income 1,315 928 4,438 2,211 Interest expense, netd,e
(143 ) (304 ) (436 ) (633 ) Net gain on early extinguishment of
debt — 11 8 8 Other income (expense), net 14 (9 ) 63
f (9 ) Income from continuing operations before income taxes and
equity in affiliated companies' net earnings 1,186 626 4,073 1,577
Provision for income taxesd,g (522 ) (387 ) (1,543 ) (747 ) Equity
in affiliated companies' net earnings 4 3 5 6
Net income from continuing operations 668 242 2,535 836 Net
(loss) income from discontinued operationsh (4 ) 3 (19 ) 50
Net income 664 245 2,516 886 Net (income) loss attributable
to noncontrolling interests: Continuing operationsd (108 ) 35 (399
) (106 ) Discontinued operations — — — (4 )
Net income attributable to FCX common stocki $ 556 $ 280
$ 2,117 $ 776 Basic net income (loss)
per share attributable to common stock:
Continuing operations
$ 0.38 $ 0.19 $ 1.47 $ 0.50 Discontinued operations — —
(0.01 ) 0.03 $ 0.38 $ 0.19 $ 1.46
$ 0.53 Diluted net income (loss) per share
attributable to common stock: Continuing operations $ 0.38 $ 0.19 $
1.46 $ 0.50 Discontinued operations — — (0.01 ) 0.03
$ 0.38 $ 0.19 $ 1.45 $ 0.53
Weighted-average common shares outstanding: Basic 1,450
1,448 1,449 1,447 Diluted 1,458
1,454 1,458 1,453 Dividends declared
per share of common stock $ 0.05 $ — $ 0.15 $
—
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. 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 VIII.
c. Includes net mining and oil and gas
(credits) charges that are summarized in the supplemental schedule,
"Adjusted Net Income," on page VII.
d. Includes charges associated with
disputed Cerro Verde royalties for prior years, which are
summarized in the supplemental schedule, "Adjusted Net Income," on
page VII.
e. Consolidated interest costs (before
capitalization and excluding interest expense associated with
disputed Cerro Verde royalties) totaled $166 million in
third-quarter 2018, $196 million in third-quarter 2017, $501
million for the first nine months of 2018 and $583 million for the
first nine months of 2017.
f. Includes $30 million of interest
received on tax refunds, mostly associated with the refund of
PT-FI's prior years' tax receivables. Refer to the supplemental
schedule, "Adjusted Net Income," on page VII.
g. For a summary of FCX's provision for
income taxes, refer to the supplemental schedule, "Income Taxes,"
on page VIII.
h. 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.
i. 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) September
30, December 31, 2018 2017 (In Millions) ASSETS Current assets:
Cash and cash equivalents $ 4,556 $ 4,447 Trade accounts receivable
1,064 1,246 Income and other tax receivables 226 325 Inventories:
Materials and supplies, net 1,439 1,305 Mill and leach stockpiles
1,439 1,422 Product 1,169 1,166 Other current assets 402 270 Held
for sale 626 508 Total current assets 10,921 10,689
Property, plant, equipment and mine development costs, net 23,013
22,934 Long-term mill and leach stockpiles 1,355 1,409 Other assets
2,460 2,270 Total assets $ 37,749 $ 37,302
LIABILITIES AND EQUITY Current liabilities: Accounts
payable and accrued liabilities $ 2,396 $ 2,321 Accrued income
taxes 645 565 Current portion of environmental and asset retirement
obligations 460 388 Dividends payable 73 — Current portion of debt
4 1,414 Held for sale 273 323 Total current
liabilities 3,851 5,011 Long-term debt, less current portion 11,123
11,703 Deferred income taxes 3,839 3,649 Environmental and asset
retirement obligations, less current portion 3,564 3,631 Other
liabilities 1,918 2,012 Total liabilities 24,295
26,006 Equity: Stockholders' equity: Common stock 158 158
Capital in excess of par value 26,603 26,751 Accumulated deficit
(12,526 ) (14,722 ) Accumulated other comprehensive loss (532 )
(487 ) Common stock held in treasury (3,726 ) (3,723 ) Total
stockholders' equity 9,977 7,977 Noncontrolling interests 3,477
3,319 Total equity 13,454 11,296 Total
liabilities and equity $ 37,749 $ 37,302
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2018 2017 (In Millions) Cash
flow from operating activities: Net income $ 2,516 $ 886
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, depletion and amortization
1,351 1,257 Net gain on sales of assets (126 ) (66 ) Stock-based
compensation 70 58 Net charges for Cerro Verde royalty dispute —
359 Payments for Cerro Verde royalty dispute (32 ) (32 ) Net
charges for environmental and asset retirement obligations,
including accretion 206 196 Payments for environmental and asset
retirement obligations (179 ) (85 ) Net charges for defined pension
and postretirement plans 59 95 Pension plan contributions (60 )
(152 ) Net gain on early extinguishment of debt (8 ) (8 ) Deferred
income taxes 202 77 Loss (gain) on disposal of discontinued
operations 19 (41 ) Decrease in long-term mill and leach stockpiles
54 181 Non-cash drillship settlements/idle rig costs and other oil
and gas adjustments — (33 ) Oil and gas contract settlement
payments — (70 ) Other, net 7 1 Changes in working capital and
other tax payments: Accounts receivable 321 420 Inventories (326 )
(314 ) Other current assets (16 ) (17 ) Accounts payable and
accrued liabilities (2 ) (93 ) Accrued income taxes and timing of
other tax payments (131 ) 393 Net cash provided by operating
activities 3,925 3,012 Cash flow from
investing activities: Capital expenditures: North America copper
mines (413 ) (106 ) South America (188 ) (65 ) Indonesia (695 )
(663 ) Molybdenum mines (6 ) (4 ) Other (89 ) (182 ) Proceeds from
sales of assets 10 68 Intangible water rights and other, net (91 )
(2 ) Net cash used in investing activities (1,472 ) (954 )
Cash flow from financing activities: Proceeds from debt 475 795
Repayments of debt (2,410 ) (1,991 ) Cash dividends paid: Common
stock (145 ) (2 ) Noncontrolling interests (241 ) (67 ) Stock-based
awards net proceeds (payments) 4 (10 ) Debt financing costs and
other, net (23 ) (12 ) Net cash used in financing activities (2,340
) (1,287 ) Net increase in cash, cash equivalents,
restricted cash and restricted cash equivalents 113 771 Decrease
(increase) in cash and cash equivalents in assets held for sale 55
(45 )
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
$ 4,799 $ 5,129
a. Includes restricted cash and restricted
cash equivalents of $243 million at September 30, 2018, and
$172 million at September 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 September 30, 2018
2017 Pre-tax After-taxa Per
Share Pre-tax After-taxa Per Share
Net income attributable to common stock N/A
$ 556 $ 0.38 N/A
$ 280 $ 0.19
Cerro Verde royalty disputeb $ (1 ) $ — $ — $ (357 ) $ (188
) $ (0.13 ) Cerro Verde labor agreement (69 ) (22 ) (0.02 ) — — —
PT-FI net charges for workforce reductions — — — (9 ) (5 ) — Other
net mining credits — — — 4 4 — Net oil and gas credits — — — 4 4 —
Net adjustments to environmental obligations and related litigation
reserves (2 ) (2 ) — (64 ) (64 ) (0.04 ) Net gain on sales of
assets 70 c 70 0.05 33 33 0.02 Net gain on early extinguishment of
debt — — — 11 11 0.01 Net tax chargesd N/A — — N/A (10 ) (0.01 )
(Loss) gain on discontinued operationse (4 ) (4 ) — 3
3 — $ (6 ) $ 42 $ 0.03 $ (375 ) $ (212
) $ (0.15 )
Adjusted net income attributable to common
stock N/A $ 514 $ 0.35
N/A $ 492 $ 0.34
Nine Months Ended September 30, 2018 2017 Pre-tax After-taxa Per
Share Pre-tax After-taxa Per Share
Net income attributable to
common stock N/A $ 2,117
$ 1.45 N/A $ 776
$ 0.53 Cerro Verde royalty
disputeb $ (7 ) $ — $ — $ (357 ) $ (188 ) $ (0.13 ) Cerro Verde
labor agreement (69 ) (22 ) (0.02 ) — — — PT-FI charges for
workforce reductions — — — (117 ) f (62 ) (0.04 ) Other net mining
credits (charges) 10 4 — (24 ) (24 ) (0.02 ) Net oil and gas
credits — — — 8 g 8 0.01
Net adjustments to environmental
obligations and related litigation reserves
(52 ) (52 ) (0.04 ) (53 ) (53 ) (0.04 ) Net gain on sales of assets
126 c 126 0.09 66 66 0.05 Net gain on early extinguishment of debt
8 8 0.01 8 8 0.01 Interest on tax refunds 30 19 0.01 — — — Net tax
creditsd N/A 5 — N/A 21 0.01 (Loss) gain on discontinued
operationse (19 ) (19 ) (0.01 ) 54 46 0.03 $
27 $ 69 $ 0.04 $ (415 ) $ (178 ) $
(0.12 )
Adjusted net income attributable to common
stock N/A $ 2,048 $ 1.41
N/A $ 954 $ 0.65
a. Reflects impact to FCX net income
attributable to common stock (i.e., net of any taxes and
noncontrolling interests).
b. The 2017 periods include net charges of
$188 million associated with disputed Cerro Verde royalties for
prior years, consisting of $216 million to production and delivery
costs, $141 million to interest expense and $2 million to provision
for income taxes, net of $171 million to noncontrolling interests.
The 2018 periods include net charges to interest expense, offset by
provision for income taxes and noncontrolling interests.
c. Reflects adjustments to assets held for
sale and fair value adjustments associated with potential
contingent consideration related to the 2016 sale of onshore
California oil and gas properties. FCX would receive contingent
consideration related to this transaction consisting of $50 million
per year for 2018, 2019 and 2020 if the price of Brent crude oil
averages over $70 per barrel in each of these calendar years. The
average Brent crude oil price for the first nine months of 2018 is
above $70 per barrel.
d. Refer to "Income Taxes" on page VIII,
for further discussion of net tax (charges) credits.
e. 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.
f. Includes net charges in selling,
general and administrative expenses totaling $5 million.
g. Includes adjustments totaling $25
million in production and delivery costs primarily related to the
2016 drillship settlements, partly offset by charges totaling $17
million in selling, general and administrative expenses for
contract termination costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181024005446/en/
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Linda S.
Hayes, 602-366-7824
Freeport McMoRan (NYSE:FCX)
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Freeport McMoRan (NYSE:FCX)
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