Income Taxes
Following is a summary of the approximate amounts used in the calculation of our consolidated income tax benefit (provision) (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2020
|
|
2019
|
|
|
Income (Loss)a
|
|
Effective
Tax Rate
|
|
Income Tax (Provision) Benefit
|
|
Income (Loss)a
|
|
Effective
Tax Rate
|
|
Income Tax (Provision) Benefit
|
|
U.S.b
|
$
|
(451
|
)
|
|
1%
|
|
$
|
4
|
|
c
|
$
|
(97
|
)
|
|
1%
|
|
$
|
1
|
|
|
South America
|
(202
|
)
|
|
39%
|
|
78
|
|
|
263
|
|
|
40%
|
|
(105
|
)
|
|
Indonesia
|
(19
|
)
|
|
(63)%
|
|
(12
|
)
|
d
|
79
|
|
|
33%
|
|
(26
|
)
|
e
|
Eliminations and other
|
60
|
|
|
N/A
|
|
(11
|
)
|
|
(62
|
)
|
|
N/A
|
|
10
|
|
|
Rate adjustmentf
|
—
|
|
|
N/A
|
|
1
|
|
|
—
|
|
|
N/A
|
|
15
|
|
|
Consolidated FCX
|
$
|
(612
|
)
|
|
10%
|
g
|
$
|
60
|
|
|
$
|
183
|
|
|
57%
|
|
$
|
(105
|
)
|
|
|
|
a.
|
Represents income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings (losses).
|
|
|
b.
|
In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs.
|
|
|
c.
|
Includes a tax credit of $6 million associated with the removal of a valuation allowance on deferred tax assets.
|
|
|
d.
|
Includes a tax charge of $8 million ($7 million net of noncontrolling interest) associated with an unfavorable Indonesia Supreme Court ruling on a 2012 PT-FI income tax matter.
|
|
|
e.
|
Includes a tax credit of $8 million ($6 million net of noncontrolling interest) associated with the reduction in PT-FI's statutory tax rates in accordance with its special mining license (IUPK).
|
|
|
f.
|
In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate.
|
|
|
g.
|
Our first-quarter 2020 consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S. jurisdiction. Because our U.S. jurisdiction generated net losses in first-quarter 2020 that will not result in a realized tax benefit, applicable accounting rules require us to adjust our estimated annual effective tax rate to exclude the impact of U.S. net losses.
|
Assuming achievement of current sales volume and cost estimates and average prices of $2.30 per pound for copper, $1,600 per ounce for gold and $9.00 per pound for molybdenum for the remainder of 2020, we estimate our consolidated effective tax rate for the year 2020 would approximate 62 percent. Changes in sales volumes and average prices during 2020 would incur tax impacts at estimated effective rates of 38 percent for Indonesia, 34 percent for Peru and 0 percent for the U.S.
Variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Because of our U.S. tax position, we do not record a financial statement impact for income or losses generated in the U.S.
OPERATIONS
We have revised our operating plans in response to the significant negative impacts of the COVID-19 pandemic on the global economy, and we will continue to closely monitor health and market conditions and make further adjustments to our mine plans as required.
Productivity and Innovation Initiatives
During 2019, we advanced initiatives in our North America and South America operations to enhance productivity through the use of new technologies, data science and a more interactive, multi-disciplined operating structure. Capital projects associated with this initiative, which were expected to total $150 million for the year 2020, and were projected to add approximately 200 million pounds of copper per year beginning in 2022, have been suspended in response to current market conditions and capital preservation initiatives. Under current market conditions, our data analytics tools will be utilized to drive cost performance, improve recoveries and other initiatives that do not require significant investment.
North America Copper Mines
We operate 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 these mines produce molybdenum concentrate, gold and silver. We are also nearing completion of a development project in eastern Arizona to commence production from the Lone Star leachable ores during the second half of 2020. All of the North America mining operations are wholly owned, except for Morenci. We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method.
The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper production is sold as copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines.
In April 2020, we entered into forward sales contracts for approximately 150 million pounds of copper for settlement in May and June of 2020. The forward sales provide for fixed pricing of $2.34 per pound of copper on approximately 60 percent of North America’s projected sales volumes for May and June 2020.
Revised Operating Plans. We have completed a review of mine plans at each of our operating sites in North America to target a lower cost mining configuration, defer all nonessential projects and preserve long-term value in the long-lived resources. Under the revised plans, mining and milling rates for the year 2020 have been reduced by approximately 20 percent, resulting in a projected 12 percent decline in North America copper sales for the year 2020 (compared to the January 2020 estimate), lower unit net cash costs and lower capital spending requirements.
The plans take into account the impact of currently suspended operations at the Chino mine. We are currently assessing options and future timing of restart of the Chino mine, which will consider health and market conditions. We have also deferred approximately $0.3 billion in capital projects from 2020 to future periods for the North America copper mines.
Following extensive review, we have elected to complete the initial phase of the Lone Star copper leach project with a remaining investment of approximately $100 million in 2020. The decision was supported by the advanced stage of the project (approximately 90 percent complete), expected quick return of the remaining investment and long-term value of the resource. First production is expected during the second half of 2020. Initial production from the Lone Star copper leach project following a ramp-up period is expected to average approximately 200 million pounds of copper per year and, subject to market conditions, the potential for future expansion options.
Following is selected summary consolidated operating data for the North America copper mines for 2020, including a comparison of April 2020 estimates to the estimates reported in January 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2020
Estimates
|
|
January 2020 Estimates
|
|
|
|
First-quarter 2020
(Actual)
|
|
Remainder of 2020
|
|
Total
2020
|
|
Total
2020
|
|
Total Percent Change
|
Copper (millions of recoverable pounds)
|
|
|
|
|
|
|
|
|
|
Sales, excluding purchases
|
355
|
|
|
1,040
|
|
|
1,395
|
|
|
1,580
|
|
|
(12)%
|
|
|
|
|
|
|
|
|
|
|
Unit net cash costs per pound of copper
|
$
|
2.04
|
|
a
|
$
|
1.67
|
|
|
$
|
1.77
|
|
b
|
$
|
1.93
|
|
b
|
(8)%
|
|
|
a.
|
For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to "Product Revenues and Production Costs."
|
|
|
b.
|
Average unit net cash costs (net of by-product credits) for our North America copper mines are based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $9.00 per pound for the remainder of 2020. North America's average unit net cash costs for the year 2020 would change by approximately $0.03 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 2020. The January 2020 estimates were based on an average price of $10.00 per pound of molybdenum for the year 2020.
|
Operating Data. Following is summary consolidated operating data for the North America copper mines:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
Operating Data, Net of Joint Venture Interests
|
|
|
|
|
Copper (millions of recoverable pounds)
|
|
|
|
|
Production
|
346
|
|
|
336
|
|
|
Sales, excluding purchases
|
355
|
|
|
320
|
|
|
Average realized price per pound
|
$
|
2.56
|
|
|
$
|
2.85
|
|
|
|
|
|
|
|
Molybdenum (millions of recoverable pounds)
|
|
|
|
|
Productiona
|
8
|
|
|
7
|
|
|
|
|
|
|
|
100% Operating Data
|
|
|
|
|
Leach operations
|
|
|
|
|
Leach ore placed in stockpiles (metric tons per day)
|
728,100
|
|
|
705,000
|
|
|
Average copper ore grade (percent)
|
0.27
|
|
|
0.23
|
|
|
Copper production (millions of recoverable pounds)
|
235
|
|
|
226
|
|
|
|
|
|
|
|
Mill operations
|
|
|
|
|
Ore milled (metric tons per day)
|
333,400
|
|
|
315,600
|
|
|
Average ore grade (percent):
|
|
|
|
|
Copper
|
0.32
|
|
|
0.33
|
|
|
Molybdenum
|
0.02
|
|
|
0.02
|
|
|
Copper recovery rate (percent)
|
87.0
|
|
|
87.8
|
|
|
Copper production (millions of recoverable pounds)
|
178
|
|
|
176
|
|
|
|
|
a.
|
Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines.
|
North America’s consolidated copper sales volumes of 355 million pounds in first-quarter 2020 were higher than first-quarter 2019 copper sales volumes of 320 million pounds, primarily reflecting higher mining rates.
Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Gross (Loss) Profit per Pound of Copper and Molybdenum
The following table summarizes unit net cash costs and gross (loss) profit per pound at our North America copper mines. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2020
|
|
2019
|
|
|
By- Product Method
|
|
Co-Product Method
|
|
By- Product Method
|
|
Co-Product Method
|
|
|
|
Copper
|
|
Molyb-
denuma
|
|
|
Copper
|
|
Molyb-
denuma
|
|
Revenues, excluding adjustments
|
$
|
2.56
|
|
|
$
|
2.56
|
|
|
$
|
9.69
|
|
|
$
|
2.85
|
|
|
$
|
2.85
|
|
|
$
|
11.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
2.15
|
|
|
1.97
|
|
|
8.93
|
|
|
2.06
|
|
|
1.92
|
|
|
6.98
|
|
|
By-product credits
|
(0.22
|
)
|
|
—
|
|
|
—
|
|
|
(0.26
|
)
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
0.11
|
|
|
0.10
|
|
|
—
|
|
|
0.11
|
|
|
0.11
|
|
|
—
|
|
|
Unit net cash costs
|
2.04
|
|
|
2.07
|
|
|
8.93
|
|
|
1.91
|
|
|
2.03
|
|
|
6.98
|
|
|
DD&A
|
0.26
|
|
|
0.24
|
|
|
0.73
|
|
|
0.26
|
|
|
0.24
|
|
|
0.44
|
|
|
Metals inventory adjustments
|
0.41
|
|
|
0.41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Noncash and other costs, net
|
0.10
|
|
|
0.08
|
|
|
0.23
|
|
|
0.07
|
|
|
0.07
|
|
|
0.14
|
|
|
Total unit costs
|
2.81
|
|
|
2.80
|
|
|
9.89
|
|
|
2.24
|
|
|
2.34
|
|
|
7.56
|
|
|
Revenue adjustments, primarily for pricing
on prior period open sales
|
(0.06
|
)
|
|
(0.06
|
)
|
|
—
|
|
|
0.04
|
|
|
0.04
|
|
|
—
|
|
|
Gross (loss) profit per pound
|
$
|
(0.31
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.65
|
|
|
$
|
0.55
|
|
|
$
|
4.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
354
|
|
|
354
|
|
|
|
|
320
|
|
|
320
|
|
|
|
|
Molybdenum sales (millions of recoverable pounds)a
|
|
|
|
|
8
|
|
|
|
|
|
|
7
|
|
|
|
|
a.
|
Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
|
Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) for the North America copper mines of $2.04 per pound of copper in first-quarter 2020 were higher than unit net cash costs of $1.91 per pound of copper in first-quarter 2019, primarily reflecting higher mining and milling costs, partly offset by higher sales volumes.
Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales.
South America Mining
We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest), which are consolidated in our financial statements.
South America mining includes open-pit mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.
Revised Operating Plans. In mid-March 2020, the Peruvian government issued a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19, and subsequently extended this order through May 10, 2020. To comply with the government’s requirements, Cerro Verde temporarily transitioned to a care and maintenance status and has adjusted its operations to prioritize critical activities. Cerro Verde also completed construction of temporary onsite facilities and enhanced protocols to enable critical operations to be maintained in compliance with the Peruvian government order. During April 2020, Cerro Verde operated at an average of approximately one-third of planned rates. Beginning in late April 2020, operating rates increased to over 50 percent of capacity. In early May, the Peruvian government updated its State of Emergency to allow major mining operations to gradually increase activities. Cerro Verde is in discussions with the Peruvian government to clarify the requirements for gradual resumption of normal operations.
Cerro Verde’s revised 2020 plans reflect limited operations during second-quarter 2020 and increased mining and milling rates in the second half of the year. Subject to the timing of Peruvian government approvals associated with the COVID-19 pandemic, milling rates are currently expected to average approximately 400,000 metric tons per day in the second half of 2020. Cerro Verde’s mine plans have been revised to target a lower cost mining configuration, defer all nonessential projects and preserve long-term value in the long-lived resource. Compared with January 2020 estimates, mining and milling rates have been reduced by 13 percent (including the impact of the Peruvian
government order and mine plan optimization in the second half of 2020), resulting in a decline in projected copper sales from Cerro Verde of approximately 130 million pounds (13 percent) in 2020. The revised mine plans also include significant reductions in capital spending and operating costs.
Operating plans at El Abra have also been revised to incorporate lower mining rates, operating costs and capital spending. We have deferred approximately $0.2 billion in capital projects for South America mining, including the deferral of construction of a new leach pad at El Abra, from 2020 to future periods.
Following is selected summary consolidated operating data for South America mining for 2020, including a comparison of April 2020 estimates to the estimates reported in January 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2020
Estimates
|
|
January 2020 Estimates
|
|
|
|
First-quarter 2020
(Actual)
|
|
Remainder
of 2020
|
|
Total
2020
|
|
Total
2020
|
|
Total Percent Change
|
Copper sales (millions of recoverable pounds)
|
247
|
|
|
705
|
|
|
952
|
|
|
1,150
|
|
|
(17)%
|
|
|
|
|
|
|
|
|
|
|
Unit net cash costs per pound of copper
|
$
|
2.00
|
|
a
|
$
|
1.89
|
|
|
$
|
1.92
|
|
b
|
$
|
1.95
|
|
b
|
(2)%
|
|
|
a.
|
For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to "Product Revenues and Production Costs."
|
|
|
b.
|
Average unit net cash costs (net of by-product credits) for South America mining are based on current sales volume and cost estimates and assuming an average price of $9.00 per pound of molybdenum for the remainder of 2020. The January estimates were based on an average of $10.00 per pound of molybdenum for the year 2020.
|
Projected sales volumes and average unit net cash costs for the South America operations are dependent on government approvals for Cerro Verde to return to full operations during the second half of 2020.
Operating Data. Following is summary consolidated operating data for South America mining:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
Copper (millions of recoverable pounds)
|
|
|
|
|
Production
|
245
|
|
|
299
|
|
|
Sales
|
247
|
|
|
290
|
|
|
Average realized price per pound
|
$
|
2.33
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
Molybdenum (millions of recoverable pounds)
|
|
|
|
|
Productiona
|
4
|
|
|
8
|
|
|
|
|
|
|
|
Leach operations
|
|
|
|
|
Leach ore placed in stockpiles (metric tons per day)
|
182,500
|
|
|
166,700
|
|
|
Average copper ore grade (percent)
|
0.37
|
|
|
0.34
|
|
|
Copper production (millions of recoverable pounds)
|
63
|
|
|
59
|
|
|
|
|
|
|
|
Mill operations
|
|
|
|
|
Ore milled (metric tons per day)
|
349,600
|
|
b
|
386,500
|
|
|
Average ore grade (percent):
|
|
|
|
|
Copper
|
0.35
|
|
|
0.37
|
|
|
Molybdenum
|
0.01
|
|
|
0.02
|
|
|
Copper recovery rate (percent)
|
78.4
|
|
|
87.2
|
|
|
Copper production (millions of recoverable pounds)
|
182
|
|
|
240
|
|
|
|
|
a.
|
Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde.
|
|
|
b.
|
Beginning on March 16, 2020, Cerro Verde mill operations were impacted as a result of the Peruvian government's issuance of a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19. The Cerro Verde mill operations averaged over 400,000 metric tons of ore per day from January 1, 2020, through March 15, 2020.
|
Lower consolidated copper sales volumes from South America of 247 million pounds in first-quarter 2020, compared with 290 million pounds in first-quarter 2019, primarily reflect anticipated lower recovery rates and ore grades and lower mill rates associated with Cerro Verde’s temporary transition to a care and maintenance status associated with the COVID-19 pandemic.
Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Gross (Loss) Profit per Pound of Copper
The following table summarizes unit net cash costs and gross (loss) profit per pound of copper at the South America mining operations. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2020
|
|
2019
|
|
|
By-Product
Method
|
|
Co-Product
Method
|
|
By-Product
Method
|
|
Co-Product
Method
|
|
Revenues, excluding adjustments
|
$
|
2.33
|
|
|
$
|
2.33
|
|
|
$
|
2.93
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
2.00
|
|
|
1.85
|
|
|
1.73
|
|
|
1.55
|
|
|
By-product credits
|
(0.17
|
)
|
|
—
|
|
|
(0.34
|
)
|
|
—
|
|
|
Treatment charges
|
0.16
|
|
|
0.16
|
|
|
0.19
|
|
|
0.19
|
|
|
Royalty on metals
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
|
Unit net cash costs
|
2.00
|
|
|
2.02
|
|
|
1.59
|
|
|
1.75
|
|
|
DD&A
|
0.44
|
|
|
0.40
|
|
|
0.39
|
|
|
0.34
|
|
|
Metals inventory adjustments
|
0.24
|
|
|
0.24
|
|
|
—
|
|
|
—
|
|
|
Noncash and other costs, net
|
0.12
|
|
a
|
0.11
|
|
|
0.09
|
|
b
|
0.09
|
|
|
Total unit costs
|
2.80
|
|
|
2.77
|
|
|
2.07
|
|
|
2.18
|
|
|
Revenue adjustments, primarily for pricing
on prior period open sales
|
(0.30
|
)
|
|
(0.30
|
)
|
|
0.16
|
|
|
0.16
|
|
|
Gross (loss) profit per pound
|
$
|
(0.77
|
)
|
|
$
|
(0.74
|
)
|
|
$
|
1.02
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
247
|
|
|
247
|
|
|
290
|
|
|
290
|
|
|
|
|
a.
|
Includes COVID-19 related costs of $0.08 per pound of copper, primarily associated with idle facility costs at Cerro Verde as a result of the Peruvian government issuance of a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19 and contract cancellation costs at El Abra.
|
|
|
b.
|
Includes charges of $0.04 per pound of copper associated with weather-related impacts at El Abra.
|
Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) of $2.00 per pound of copper in first-quarter 2020 were higher than unit net cash costs of $1.59 per pound of copper in first-quarter 2019, primarily reflecting lower sales volumes and lower by-product credits.
Revenues from Cerro Verde’s concentrate sales are recorded net of treatment charges, which will vary with Cerro Verde’s sales volumes and the price of copper.
Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales.
Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.
Indonesia Mining
PT-FI’s assets include one of the world’s largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 2 of our 2019 Form 10-K, under the terms of the shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022. PT-FI’s results are consolidated in our financial statements.
Substantially all of PT-FI’s copper concentrate is sold under long-term contracts. During the first quarter of 2020, 81 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia).
In late March 2020, a shooting incident occurred near PT-FI’s administrative offices in the lowlands in Papua, Indonesia, resulting in the death of one PT-FI employee. PT-FI continues to work with the Indonesian government to enhance security in and around the lowlands area and throughout the PT-FI project area.
Revised Operating Plans and Development Activities. PT-FI has implemented a series of actions to prevent a spread of COVID-19 at its remote operating site in Papua, Indonesia. While a limited number of COVID-19 cases have been confirmed through testing, PT-FI has been successful in maintaining the health of its workforce while continuing to make important progress in increasing production from its underground ore bodies.
During first-quarter 2020, PT-FI achieved additional progress in increasing mining rates by adding a total of 49 new drawbells at the Deep Mill Level Zone (DMLZ) and Grasberg Block Cave underground mines to build scale. Combined average daily production from the DMLZ and Grasberg Block Cave underground mines averaged approximately 37,500 metric tons of ore per day, slightly above forecast and 44 percent above the fourth-quarter 2019 average. PT-FI remains on track to continue to ramp-up production rates and expects 2021 production of 1.4 billion pounds of copper (more than 75 percent above the current April 2020 estimate for the year 2020) and 1.4 million ounces of gold (70 percent above the current April 2020 estimate for the year 2020).
The successful completion of this ramp up is expected to enable PT-FI to generate average annual production for the next several years of 1.55 billion pounds of copper and 1.6 million ounces of gold at an average unit net cash cost of approximately $0.20 per pound.
PT-FI’s revised plans incorporate benefits of reduced input costs for energy, foreign exchange rates and recent increases in gold prices. PT-FI has also deferred approximately $0.2 billion in capital projects from 2020 to future periods, primarily related to a delay in construction and installation of an additional milling circuit from 2022 to 2023, mostly reflecting limitations on work schedules and travel by international contractors during COVID-19 mitigation measures.
PT-FI's estimated annual capital spending on underground mine development projects is expected to average $0.8 billion per year for the three-year period 2020 through 2022, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum). In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $1.0 billion per year for the three-year period 2020 through 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity.
Indonesia Smelter. As a result of disruptions to work and travel schedules of international contractors and current limitations on access to the proposed physical site in Gresik, Indonesia associated with COVID-19 mitigation measures, PT-FI notified the Indonesian government of delays in achieving the completion timeline of December 2023. PT-FI is currently discussing with the Indonesian government a deferred schedule for the project as well as other alternatives in light of COVID-19 and global economic conditions.
Following is selected summary consolidated operating data for Indonesia mining for 2020, including a comparison of April 2020 estimates to the estimates reported in January 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2020
Estimates
|
|
January 2020 Estimates
|
|
|
|
First-quarter 2020
(Actual)
|
|
Remainder
of 2020
|
|
Total
2020
|
|
Total
2020
|
|
Total Percent Change
|
Copper sales (millions of recoverable pounds)
|
127
|
|
|
615
|
|
|
742
|
|
|
750
|
|
|
(1)%
|
Gold sales (thousands of recoverable ounces)
|
139
|
|
|
636
|
|
|
775
|
|
|
775
|
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
Unit net cash costs per pound of copper
|
$
|
1.31
|
|
a
|
$
|
0.51
|
|
|
$
|
0.65
|
|
b
|
$
|
1.04
|
|
b
|
(37)%
|
|
|
a.
|
For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to "Product Revenues and Production Costs."
|
|
|
b.
|
Based on achievement of current sales volume and cost estimates, and assuming an average gold price of $1,600 per ounce for the remainder of 2020. The impact of price changes during the remainder of 2020 on PT-FI's average unit net cash costs for the year 2020 would approximate $0.05 per pound for each $50 per ounce change in the average price of gold. The January 2020 estimates were based on an average price of $1,500 per ounce of gold for the year 2020.
|
PT-FI's projected sales volumes and unit net cash costs for the year 2020 are dependent on a number of factors, including operational performance and timing of shipments. PT-FI has received a one-year extension of its export license through March 15, 2021.
Operating Data. Following is summary consolidated operating data for Indonesia mining:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
Operating Data
|
|
|
|
|
Copper (millions of recoverable pounds)
|
|
|
|
|
Production
|
140
|
|
|
145
|
|
|
Sales
|
127
|
|
|
174
|
|
|
Average realized price per pound
|
$
|
2.28
|
|
|
$
|
2.92
|
|
|
|
|
|
|
|
Gold (thousands of recoverable ounces)
|
|
|
|
|
Production
|
152
|
|
|
162
|
|
|
Sales
|
139
|
|
|
235
|
|
|
Average realized price per ounce
|
$
|
1,606
|
|
|
$
|
1,291
|
|
|
|
|
|
|
|
100% Operating Data
|
|
|
|
|
Ore extracted and milled (metric tons per day):
|
|
|
|
|
Grasberg open pit
|
7,500
|
|
a
|
102,800
|
|
|
DOZ underground mineb
|
20,200
|
|
|
30,300
|
|
|
Grasberg Block Cave underground mineb
|
19,000
|
|
|
5,000
|
|
|
DMLZ underground mineb
|
18,500
|
|
|
6,800
|
|
|
Big Gossan underground mineb
|
6,800
|
|
|
5,600
|
|
|
Total
|
72,000
|
|
|
150,500
|
|
|
Average ore grades:
|
|
|
|
|
Copper (percent)
|
1.15
|
|
|
0.62
|
|
|
Gold (grams per metric ton)
|
0.99
|
|
|
0.58
|
|
|
Recovery rates (percent):
|
|
|
|
|
Copper
|
91.8
|
|
|
84.7
|
|
|
Gold
|
76.7
|
|
|
68.7
|
|
|
Production:
|
|
|
|
|
Copper (millions of recoverable pounds)
|
140
|
|
|
145
|
|
|
Gold (thousands of recoverable ounces)
|
152
|
|
|
162
|
|
|
|
|
a.
|
Represents ore from the Grasberg open-pit stockpile.
|
|
|
b.
|
Reflects ore extracted, including ore from development activities that result in metal production.
|
PT-FI’s consolidated sales of 127 million pounds of copper and 139 thousand ounces of gold in first-quarter 2020 were lower than first-quarter 2019 consolidated sales of 174 million pounds of copper and 235 thousand ounces of gold, reflecting anticipated lower mill rates as PT-FI continues to ramp-up production from its underground ore bodies.
Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Gross Profit (Loss) per Pound of Copper and per Ounce of Gold
The following table summarizes the unit net cash costs and gross profit (loss) per pound of copper and per ounce of gold at our Indonesia mining operations. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
By-Product Method
|
|
Co-Product Method
|
|
By-Product Method
|
|
Co-Product Method
|
|
|
Copper
|
|
Gold
|
|
|
Copper
|
|
Gold
|
Revenues, excluding adjustments
|
$
|
2.28
|
|
|
$
|
2.28
|
|
|
$
|
1,606
|
|
|
$
|
2.92
|
|
|
$
|
2.92
|
|
|
$
|
1,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site production and delivery, before net noncash and other costs shown below
|
2.68
|
|
|
1.49
|
|
|
1,052
|
|
|
3.10
|
|
|
1.92
|
|
|
850
|
|
Gold and silver credits
|
(1.85
|
)
|
|
—
|
|
|
—
|
|
|
(1.81
|
)
|
|
—
|
|
|
—
|
|
Treatment charges
|
0.30
|
|
|
0.17
|
|
|
118
|
|
|
0.29
|
|
|
0.18
|
|
|
80
|
|
Export duties
|
0.03
|
|
|
0.02
|
|
|
11
|
|
|
0.10
|
|
|
0.06
|
|
|
27
|
|
Royalty on metals
|
0.15
|
|
|
0.09
|
|
|
50
|
|
|
0.16
|
|
|
0.10
|
|
|
46
|
|
Unit net cash costs
|
1.31
|
|
|
1.77
|
|
|
1,231
|
|
|
1.84
|
|
|
2.26
|
|
|
1,003
|
|
DD&A
|
0.79
|
|
|
0.44
|
|
|
310
|
|
|
0.61
|
|
|
0.37
|
|
|
166
|
|
Noncash and other costs, net
|
0.21
|
|
|
0.12
|
|
|
82
|
|
|
0.01
|
|
a
|
0.01
|
|
|
4
|
|
Total unit costs
|
2.31
|
|
|
2.33
|
|
|
1,623
|
|
|
2.46
|
|
|
2.64
|
|
|
1,173
|
|
Revenue adjustments, primarily for pricing on prior period open sales
|
(0.16
|
)
|
|
(0.16
|
)
|
|
33
|
|
|
0.11
|
|
|
0.11
|
|
|
9
|
|
PT Smelting intercompany profit
|
0.20
|
|
|
0.11
|
|
|
77
|
|
|
0.02
|
|
|
0.01
|
|
|
5
|
|
Gross profit (loss) per pound/ounce
|
$
|
0.01
|
|
|
$
|
(0.10
|
)
|
|
$
|
93
|
|
|
$
|
0.59
|
|
|
$
|
0.40
|
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
127
|
|
|
127
|
|
|
|
|
174
|
|
|
174
|
|
|
|
Gold sales (thousands of recoverable ounces)
|
|
|
|
|
139
|
|
|
|
|
|
|
235
|
|
|
|
a.
|
Includes credits of $0.11 per pound of copper associated with adjustments to prior year treatment and refining charges.
|
A significant portion of PT-FI’s costs are fixed and unit costs vary depending on volumes and other factors. PT-FI’s unit net cash costs (including gold and silver credits) of $1.31 per pound of copper in first-quarter 2020 were lower than unit net cash credits of $1.84 per pound of copper in first-quarter 2019, primarily reflecting lower site production and delivery costs associated with lower mining and milling rates.
Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold. PT-FI will continue to pay export duties until development progress for the new smelter in Indonesia exceeds 50 percent.
PT-FI export duties totaled $4 million in first-quarter 2020 and $17 million in first-quarter 2019, and PT-FI’s royalties totaled $19 million in first-quarter 2020 and $28 million in first-quarter 2019.
Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate may vary with asset additions and the level of copper production and sales. DD&A per pound of copper under the by-product method was $0.79 per pound in first-quarter 2020, compared with $0.61 per pound in first-quarter 2019, primarily reflecting lower copper sales volumes in first-quarter 2020.
Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods.
PT Smelting intercompany profit represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting. Refer to “Smelting and Refining” below for further discussion.
Molybdenum Mines
We have two wholly owned molybdenum mines in Colorado – the Henderson underground mine and the Climax open-pit mine. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities.
Revised Operating Plans. In response to global market conditions, we intend to reduce production from the Climax open pit mine by approximately 50 percent for the remainder of 2020. The Climax mine produced 17 million pounds of molybdenum in 2019. Revised operating plans for the molybdenum business also include reductions in operating costs, administrative and centralized support costs and capital spending.
Production from the Molybdenum mines totaled 7 million pounds of molybdenum in first-quarter 2020 and 8 million pounds in first-quarter 2019. Refer to “Consolidated Results” for our consolidated molybdenum operating data, which includes sales of molybdenum produced at our Molybdenum mines and from our North America and South America copper mines. Refer to “Outlook” for projected consolidated molybdenum sales volumes.
Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Average unit net cash costs for our Molybdenum mines of $10.03 per pound of molybdenum in first-quarter 2020 were higher than average unit net cash costs of $9.80 per pound in first-quarter 2019. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $10.60 per pound of molybdenum for the year 2020.
Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.
Smelting and Refining
We wholly own and operate a smelter in Arizona (Miami smelter), a refinery in Texas (El Paso refinery) and a smelter and refinery in Spain (Atlantic Copper). Additionally, PT-FI owns 25 percent of a smelter and refinery in Gresik, Indonesia (PT Smelting). Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter and El Paso refinery. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.
Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During first-quarter 2020, Atlantic Copper’s concentrate purchases include 23 percent from our copper mining operations and 77 percent from third parties.
PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum treatment charge rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT-FI may also sell copper concentrate to PT Smelting at market rates
for quantities in excess of 205,000 metric tons of copper annually. During first-quarter 2020, PT-FI supplied substantially all of PT Smelting’s concentrate requirements. PT Smelting has received a one-year extension of its anode slimes export license through March 10, 2021.
We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to operating (loss) income totaling $11 million ($7 million to net loss attributable to common stock) for first-quarter 2020 and $(31) million ($(14) million to net income attributable to common stock) for first-quarter 2019. Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $2 million at March 31, 2020.
Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings. In first-quarter 2020, Indonesia mining's results included the recognition of $25 million in pre-tax net intercompany profit associated with copper concentrate sales to PT Smelting. Based on current price estimates and the impact of changes in operating costs and sales volumes associated with our revised operating plans, we currently expect second-quarter 2020 results to reflect net deferrals of pre-tax profits, which will be recognized in future periods as PT Smelting and Atlantic Copper sell final refined products to third parties.
CAPITAL RESOURCES AND LIQUIDITY
Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. 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 and we are nearing completion of a project to develop the Lone Star leachable ores near our Safford operation in eastern Arizona. We are also evaluating other opportunities to enhance net present values, and we continue to consider future development of our copper resources, the timing of which will be dependent on market conditions.
As discussed above, we assessed our near-term operating plans with a focus on maximizing cash flow and protecting liquidity in a weak and uncertain economic environment and to preserve asset values for anticipated improved copper prices as economic conditions recover; in response, we revised our operating plans to include: (1) a $1.3 billion reduction in 2020 estimated operating costs; (2) an $800 million reduction in 2020 estimated capital expenditures; (3) a $100 million reduction in 2020 estimated exploration and administrative costs; and (4) an approximate 400 million pound reduction in North America and South America 2020 estimated copper sales volumes.
As presented in “Outlook,” our projected capital expenditures for the year 2020 under our revised operating plans are approximately $0.2 billion higher than projected operating cash flows, an improvement of 50 percent from the operating plans reported in January 2020, despite an 18 percent decline in estimated copper prices between the two operating plans. We expect our capital expenditures to exceed operating cash flows in the first half of 2020 and to generate operating cash flows in excess of capital expenditures in the second half of 2020. A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital. Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows in 2020, plus available cash and availability under our credit facility, to be sufficient to fund our budgeted capital expenditures and other cash requirements for the year.
At March 31, 2020, we had $5.1 billion in liquidity, comprised of $1.6 billion in consolidated cash and $3.5 billion of availability under our revolving credit facility, of which $3.28 billion matures April 2024 and $220 million matures April 2023. With successful execution of the revised operating plans, we expect operating cash flows to improve significantly in 2021 and future years with substantial cash flow above capital expenditures as economic conditions improve.
We have a strong liquidity position to manage volatility, and following the April 2020 redemption (refer to Note 5 for and “Financing Activities” below), no senior notes maturing until 2022.
Cash
Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at March 31, 2020 (in billions):
|
|
|
|
|
|
Cash at domestic companies
|
$
|
0.8
|
|
|
Cash at international operations
|
0.8
|
|
|
Total consolidated cash and cash equivalents
|
1.6
|
|
|
Noncontrolling interests’ share
|
(0.3
|
)
|
|
Cash, net of noncontrolling interests’ share
|
1.3
|
|
|
Withholding taxes
|
—
|
|
a
|
Net cash available
|
$
|
1.3
|
|
|
a. Rounds to less than $0.1 billion.
Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayment, working capital and other tax payments, or other cash needs. Management believes that sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share.
Debt
At March 31, 2020, our consolidated debt totaled $10.1 billion, with a weighted-average interest rate of 4.5 percent. At March 31, 2020, we had no borrowings, $13 million in letters of credit issued and $3.5 billion of availability under our revolving credit facility and we were in compliance with our revolving credit facility covenants. Refer to Note 5 for further discussion of debt, and “Financing Activities” below and for additional information regarding our debt arrangements, refer to Note 8 included in our 2019 Form 10-K.
Operating Activities
We reported consolidated cash used in operating activities of $38 million (including $119 million of working capital and other sources) in first-quarter 2020 and generated consolidated operating cash flows of $534 million (net of $56 million in working capital and other uses) in first-quarter 2019. Lower operating cash flows in first-quarter 2020 compared with the first-quarter 2019, primarily reflect lower copper and gold sales volumes and lower copper prices.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized interest, totaled $0.6 billion in first-quarter 2020, including approximately $0.3 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and the Lone Star copper leach project. Capital expenditures, including capitalized interest, totaled $0.6 billion in first-quarter 2019, including approximately $0.4 billion for major mining projects. A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2020.
Proceeds from Sales of Assets. Proceeds from sales of assets totaled $66 million in first-quarter 2020, primarily related to contingent consideration associated with the 2016 sale of TF Holdings Limited, and $84 million in first-quarter 2019, including $50 million in contingent consideration received associated with the 2016 sale of onshore California oil and gas properties.
Financing Activities
Debt Transactions. Net borrowings of debt in first-quarter 2020 totaled $0.2 billion. During first-quarter 2020, we completed the sale of $1.3 billion in senior notes and used the net proceeds to purchase a portion of our senior notes due 2021 and 2022. On April 3, 2020, we used the remaining net proceeds to redeem the remainder of our senior notes due 2021. We recorded losses on early extinguishment of debt totaling $32 million in first-quarter 2020 related to these transactions.
Net repayments of debt in first-quarter 2019 totaled $1.2 billion, consisting of the redemption of $1.0 billion aggregate principal amount of our 3.100% Senior Notes due 2020 and the repayment of $200 million under Cerro Verde’s credit facility.
Cash Dividends and Distributions Paid. We paid cash dividends on our common stock totaling $73 million in each of the first quarters of 2020 and 2019.
The Board suspended the May 2020 quarterly cash dividend of $0.05 per share on our common stock, and under current market and economic conditions, the Board does not expect to declare common stock dividends during 2020. The payment of future dividends will be assessed on an ongoing basis, taking into account our financial results, cash requirements, future prospects, global economic conditions, and other factors deemed relevant by the Board.
There were no cash dividends or distributions paid to noncontrolling interests in first-quarter 2020 and $9 million paid in first-quarter 2019. Cash dividends and distributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries.
Contributions from Noncontrolling Interests. During first-quarter 2020, we received equity contributions totaling $32 million from PT Inalum for their share of capital spending on PT-FI underground mine development projects and costs for the new smelter in Indonesia.
CONTRACTUAL OBLIGATIONS
As further discussed in Note 5, during first-quarter 2020, we completed the sale of $1.3 billion in new 8-year and 10-year senior notes at an average interest rate of 4.2 percent. The net proceeds were used to purchase a portion of the senior notes due 2021 and 2022, and in early April 2020, to redeem the remainder of the senior notes due 2021. There have been no other material changes in our contractual obligations since December 31, 2019. Refer to Part II, Items 7. and 7A. in our 2019 Form 10-K, for information regarding our contractual obligations.
CONTINGENCIES
Environmental and Asset Retirement Obligations
Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly.
There have been no material changes to our environmental and asset retirement obligations since December 31, 2019. Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental obligations. Refer to Note 12 in our 2019 Form 10-K, for further information regarding our environmental and asset retirement obligations.
Litigation and Other Contingencies
Other than as discussed in Note 8, there have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2019. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our 2019 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters.
NEW ACCOUNTING STANDARDS
Refer to Note 10 for a summary of recently adopted accounting standards.
PRODUCT REVENUES AND PRODUCTION COSTS
Unit net cash costs per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies.
We present gross (loss) profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method. We use the by-product method in our presentation of gross (loss) profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications. In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.
We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales. Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit net cash costs, consist of items such as stock-based compensation costs, inventory adjustments, long-lived asset impairments, idle facility costs, restructuring and/or unusual charges. As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. The following schedules are presentations under both the by-product and co-product methods together with reconciliations to amounts reported in our consolidated financial statements.
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
(In millions)
|
|
By-Product
|
|
Co-Product Method
|
|
|
|
Method
|
|
Copper
|
|
Molybdenuma
|
|
Otherb
|
|
Total
|
|
Revenues, excluding adjustments
|
|
$
|
906
|
|
|
$
|
906
|
|
|
$
|
77
|
|
|
$
|
25
|
|
|
$
|
1,008
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
760
|
|
|
698
|
|
|
71
|
|
|
18
|
|
|
787
|
|
|
By-product credits
|
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
|
38
|
|
|
36
|
|
|
—
|
|
|
2
|
|
|
38
|
|
|
Net cash costs
|
|
723
|
|
|
734
|
|
|
71
|
|
|
20
|
|
|
825
|
|
|
DD&A
|
|
92
|
|
|
84
|
|
|
6
|
|
|
2
|
|
|
92
|
|
|
Metals inventory adjustments
|
|
145
|
|
|
145
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
Noncash and other costs, net
|
|
34
|
|
|
29
|
|
|
2
|
|
|
3
|
|
|
34
|
|
|
Total costs
|
|
994
|
|
|
992
|
|
|
79
|
|
|
25
|
|
|
1,096
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(22
|
)
|
|
(22
|
)
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
Gross loss
|
|
$
|
(110
|
)
|
|
$
|
(108
|
)
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
|
354
|
|
|
354
|
|
|
|
|
|
|
|
|
Molybdenum sales (millions of recoverable pounds)a
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loss per pound of copper/molybdenum:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustments
|
|
$
|
2.56
|
|
|
$
|
2.56
|
|
|
$
|
9.69
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
2.15
|
|
|
1.97
|
|
|
8.93
|
|
|
|
|
|
|
By-product credits
|
|
(0.22
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Treatment charges
|
|
0.11
|
|
|
0.10
|
|
|
—
|
|
|
|
|
|
|
Unit net cash costs
|
|
2.04
|
|
|
2.07
|
|
|
8.93
|
|
|
|
|
|
|
DD&A
|
|
0.26
|
|
|
0.24
|
|
|
0.73
|
|
|
|
|
|
|
Metals inventory adjustments
|
|
0.41
|
|
|
0.41
|
|
|
—
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
0.10
|
|
|
0.08
|
|
|
0.23
|
|
|
|
|
|
|
Total unit costs
|
|
2.81
|
|
|
2.80
|
|
|
9.89
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(0.06
|
)
|
|
(0.06
|
)
|
|
—
|
|
|
|
|
|
|
Gross loss per pound
|
|
$
|
(0.31
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
Production and Delivery
|
|
DD&A
|
|
Metals Inventory Adjustments
|
|
|
|
Totals presented above
|
|
$
|
1,008
|
|
|
$
|
787
|
|
|
$
|
92
|
|
|
$
|
145
|
|
|
|
|
Treatment charges
|
|
(8
|
)
|
|
30
|
|
|
—
|
|
|
—
|
|
|
|
|
Noncash and other costs, net
|
|
—
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(22
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Eliminations and other
|
|
7
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
|
|
North America copper mines
|
|
985
|
|
|
860
|
|
|
92
|
|
|
145
|
|
|
|
|
Other miningc
|
|
2,591
|
|
|
2,473
|
|
|
234
|
|
|
64
|
|
|
|
|
Corporate, other & eliminations
|
|
(778
|
)
|
|
(788
|
)
|
|
15
|
|
|
13
|
|
|
|
|
As reported in our consolidated financial statements
|
|
$
|
2,798
|
|
|
$
|
2,545
|
|
|
$
|
341
|
|
|
$
|
222
|
|
|
|
|
|
|
a.
|
Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
|
|
|
b.
|
Includes gold and silver product revenues and production costs.
|
|
|
c.
|
Represents the combined total for our other segments, as presented in Note 9.
|
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
(In millions)
|
|
By-Product
|
|
Co-Product Method
|
|
|
|
Method
|
|
Copper
|
|
Molybdenuma
|
|
Otherb
|
|
Total
|
|
Revenues, excluding adjustments
|
|
$
|
914
|
|
|
$
|
914
|
|
|
$
|
87
|
|
|
$
|
23
|
|
|
$
|
1,024
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
658
|
|
|
616
|
|
|
52
|
|
|
17
|
|
|
685
|
|
|
By-product credits
|
|
(83
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
|
36
|
|
|
35
|
|
|
—
|
|
|
1
|
|
|
36
|
|
|
Net cash costs
|
|
611
|
|
|
651
|
|
|
52
|
|
|
18
|
|
|
721
|
|
|
DD&A
|
|
83
|
|
|
77
|
|
|
3
|
|
|
3
|
|
|
83
|
|
|
Noncash and other costs, net
|
|
23
|
|
|
22
|
|
|
1
|
|
|
—
|
|
|
23
|
|
|
Total costs
|
|
717
|
|
|
750
|
|
|
56
|
|
|
21
|
|
|
827
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
12
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
Gross profit
|
|
$
|
209
|
|
|
$
|
176
|
|
|
$
|
31
|
|
|
$
|
2
|
|
|
$
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
|
320
|
|
|
320
|
|
|
|
|
|
|
|
|
Molybdenum sales (millions of recoverable pounds)a
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit per pound of copper/molybdenum:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustments
|
|
$
|
2.85
|
|
|
$
|
2.85
|
|
|
$
|
11.68
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
2.06
|
|
|
1.92
|
|
|
6.98
|
|
|
|
|
|
|
By-product credits
|
|
(0.26
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Treatment charges
|
|
0.11
|
|
|
0.11
|
|
|
—
|
|
|
|
|
|
|
Unit net cash costs
|
|
1.91
|
|
|
2.03
|
|
|
6.98
|
|
|
|
|
|
|
DD&A
|
|
0.26
|
|
|
0.24
|
|
|
0.44
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
0.07
|
|
|
0.07
|
|
|
0.14
|
|
|
|
|
|
|
Total unit costs
|
|
2.24
|
|
|
2.34
|
|
|
7.56
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
0.04
|
|
|
0.04
|
|
|
—
|
|
|
|
|
|
|
Gross profit per pound
|
|
$
|
0.65
|
|
|
$
|
0.55
|
|
|
$
|
4.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
Production and Delivery
|
|
DD&A
|
|
|
|
|
|
Totals presented above
|
|
$
|
1,024
|
|
|
$
|
685
|
|
|
$
|
83
|
|
|
|
|
|
|
Treatment charges
|
|
(13
|
)
|
|
23
|
|
|
—
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
—
|
|
|
23
|
|
|
—
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
12
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Eliminations and other
|
|
11
|
|
|
12
|
|
|
—
|
|
|
|
|
|
|
North America copper mines
|
|
1,034
|
|
|
743
|
|
|
83
|
|
|
|
|
|
|
Other miningc
|
|
3,515
|
|
|
2,851
|
|
|
244
|
|
|
|
|
|
|
Corporate, other & eliminations
|
|
(757
|
)
|
|
(675
|
)
|
|
20
|
|
|
|
|
|
|
As reported in our consolidated financial statements
|
|
$
|
3,792
|
|
|
$
|
2,919
|
|
|
$
|
347
|
|
|
|
|
|
|
|
|
a.
|
Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
|
|
|
b.
|
Includes gold and silver product revenues and production costs.
|
|
|
c.
|
Represents the combined total for our other segments, as presented in Note 9.
|
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
(In millions)
|
|
By-Product
|
|
Co-Product Method
|
|
|
|
Method
|
|
Copper
|
|
Othera
|
|
Total
|
|
Revenues, excluding adjustments
|
|
$
|
575
|
|
|
$
|
575
|
|
|
$
|
54
|
|
|
$
|
629
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
494
|
|
|
457
|
|
|
49
|
|
|
506
|
|
|
By-product credits
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
|
40
|
|
|
40
|
|
|
—
|
|
|
40
|
|
|
Royalty on metals
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Net cash costs
|
|
493
|
|
|
498
|
|
|
49
|
|
|
547
|
|
|
DD&A
|
|
107
|
|
|
98
|
|
|
9
|
|
|
107
|
|
|
Metals inventory adjustments
|
|
60
|
|
|
60
|
|
|
—
|
|
|
60
|
|
|
Noncash and other costs, net
|
|
30
|
|
b
|
28
|
|
|
2
|
|
|
30
|
|
|
Total costs
|
|
690
|
|
|
684
|
|
|
60
|
|
|
744
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(75
|
)
|
|
(75
|
)
|
|
—
|
|
|
(75
|
)
|
|
Gross loss
|
|
$
|
(190
|
)
|
|
$
|
(184
|
)
|
|
$
|
(6
|
)
|
|
$
|
(190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
|
247
|
|
|
247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loss per pound of copper:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustments
|
|
$
|
2.33
|
|
|
$
|
2.33
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
2.00
|
|
|
1.85
|
|
|
|
|
|
|
By-product credits
|
|
(0.17
|
)
|
|
—
|
|
|
|
|
|
|
Treatment charges
|
|
0.16
|
|
|
0.16
|
|
|
|
|
|
|
Royalty on metals
|
|
0.01
|
|
|
0.01
|
|
|
|
|
|
|
Unit net cash costs
|
|
2.00
|
|
|
2.02
|
|
|
|
|
|
|
DD&A
|
|
0.44
|
|
|
0.40
|
|
|
|
|
|
|
Metals inventory adjustments
|
|
0.24
|
|
|
0.24
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
0.12
|
|
b
|
0.11
|
|
|
|
|
|
|
Total unit costs
|
|
2.80
|
|
|
2.77
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(0.30
|
)
|
|
(0.30
|
)
|
|
|
|
|
|
Gross loss per pound
|
|
$
|
(0.77
|
)
|
|
$
|
(0.74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
|
|
|
Production
|
|
|
|
Inventory
|
|
|
|
Revenues
|
|
and Delivery
|
|
DD&A
|
|
Adjustments
|
|
Totals presented above
|
|
$
|
629
|
|
|
$
|
506
|
|
|
$
|
107
|
|
|
$
|
60
|
|
|
Treatment charges
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Royalty on metals
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Noncash and other costs, net
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Eliminations and other
|
|
(1
|
)
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
South America mining
|
|
512
|
|
|
534
|
|
|
108
|
|
|
60
|
|
|
Other miningc
|
|
3,064
|
|
|
2,799
|
|
|
218
|
|
|
149
|
|
|
Corporate, other & eliminations
|
|
(778
|
)
|
|
(788
|
)
|
|
15
|
|
|
13
|
|
|
As reported in our consolidated financial statements
|
|
$
|
2,798
|
|
|
$
|
2,545
|
|
|
$
|
341
|
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Includes silver sales of 0.9 million ounces ($17.71 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
|
|
|
b.
|
Includes COVID-19 related costs of $20 million ($0.08 per pound of copper), primarily associated with idle facility costs at Cerro Verde as a result of the Peruvian government's issuance of a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19 and contract cancellation costs at El Abra.
|
|
|
c.
|
Represents the combined total for our other segments, as presented in Note 9.
|
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
(In millions)
|
|
By-Product
|
|
Co-Product Method
|
|
|
|
Method
|
|
Copper
|
|
Othera
|
|
Total
|
|
Revenues, excluding adjustments
|
|
$
|
850
|
|
|
$
|
850
|
|
|
$
|
112
|
|
|
$
|
962
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
503
|
|
|
450
|
|
|
66
|
|
|
516
|
|
|
By-product credits
|
|
(99
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
|
56
|
|
|
56
|
|
|
—
|
|
|
56
|
|
|
Royalty on metals
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
Net cash costs
|
|
462
|
|
|
508
|
|
|
66
|
|
|
574
|
|
|
DD&A
|
|
114
|
|
|
101
|
|
|
13
|
|
|
114
|
|
|
Noncash and other costs, net
|
|
24
|
|
b
|
24
|
|
|
—
|
|
|
24
|
|
|
Total costs
|
|
600
|
|
|
633
|
|
|
79
|
|
|
712
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
47
|
|
|
47
|
|
|
—
|
|
|
47
|
|
|
Gross profit
|
|
$
|
297
|
|
|
$
|
264
|
|
|
$
|
33
|
|
|
$
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
|
290
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit per pound of copper:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustments
|
|
$
|
2.93
|
|
|
$
|
2.93
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
1.73
|
|
|
1.55
|
|
|
|
|
|
|
By-product credits
|
|
(0.34
|
)
|
|
—
|
|
|
|
|
|
|
Treatment charges
|
|
0.19
|
|
|
0.19
|
|
|
|
|
|
|
Royalty on metals
|
|
0.01
|
|
|
0.01
|
|
|
|
|
|
|
Unit net cash costs
|
|
1.59
|
|
|
1.75
|
|
|
|
|
|
|
DD&A
|
|
0.39
|
|
|
0.34
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
0.09
|
|
b
|
0.09
|
|
|
|
|
|
|
Total unit costs
|
|
2.07
|
|
|
2.18
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
0.16
|
|
|
0.16
|
|
|
|
|
|
|
Gross profit per pound
|
|
$
|
1.02
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
Revenues
|
|
and Delivery
|
|
DD&A
|
|
|
|
Totals presented above
|
|
$
|
962
|
|
|
$
|
516
|
|
|
$
|
114
|
|
|
|
|
Treatment charges
|
|
(56
|
)
|
|
—
|
|
|
—
|
|
|
|
|
Royalty on metals
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
|
|
Noncash and other costs, net
|
|
—
|
|
|
24
|
|
|
—
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
47
|
|
|
—
|
|
|
—
|
|
|
|
|
Eliminations and other
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
|
|
South America mining
|
|
951
|
|
|
539
|
|
|
114
|
|
|
|
|
Other miningc
|
|
3,598
|
|
|
3,055
|
|
|
213
|
|
|
|
|
Corporate, other & eliminations
|
|
(757
|
)
|
|
(675
|
)
|
|
20
|
|
|
|
|
As reported in our consolidated financial statements
|
|
$
|
3,792
|
|
|
$
|
2,919
|
|
|
$
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Includes silver sales of 1.3 million ounces ($15.75 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
|
|
|
b.
|
Includes charges of $12 million ($0.04 per pound of copper) associated with weather-related impacts at El Abra.
|
|
|
c.
|
Represents the combined total for our other segments, as presented in Note 9.
|
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
(In millions)
|
|
By-Product
|
|
Co-Product Method
|
|
|
|
Method
|
|
Copper
|
|
Gold
|
|
Silvera
|
|
Total
|
|
Revenues, excluding adjustments
|
|
$
|
290
|
|
|
$
|
290
|
|
|
$
|
223
|
|
|
$
|
8
|
|
|
$
|
521
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
341
|
|
|
190
|
|
|
146
|
|
|
5
|
|
|
341
|
|
|
Gold and silver credits
|
|
(236
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
|
38
|
|
|
21
|
|
|
16
|
|
|
1
|
|
|
38
|
|
|
Export duties
|
|
4
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
4
|
|
|
Royalty on metals
|
|
19
|
|
|
12
|
|
|
7
|
|
|
—
|
|
|
19
|
|
|
Net cash costs
|
|
166
|
|
|
225
|
|
|
171
|
|
|
6
|
|
|
402
|
|
|
DD&A
|
|
101
|
|
|
56
|
|
|
43
|
|
|
2
|
|
|
101
|
|
|
Noncash and other costs, net
|
|
27
|
|
|
15
|
|
|
12
|
|
|
—
|
|
|
27
|
|
|
Total costs
|
|
294
|
|
|
296
|
|
|
226
|
|
|
8
|
|
|
530
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(20
|
)
|
|
(20
|
)
|
|
5
|
|
|
—
|
|
|
(15
|
)
|
|
PT Smelting intercompany profit
|
|
25
|
|
|
14
|
|
|
11
|
|
|
—
|
|
|
25
|
|
|
Gross profit (loss)
|
|
$
|
1
|
|
|
$
|
(12
|
)
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
|
127
|
|
|
127
|
|
|
|
|
|
|
|
|
Gold sales (thousands of recoverable ounces)
|
|
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) per pound of copper/per ounce of gold:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustments
|
|
$
|
2.28
|
|
|
$
|
2.28
|
|
|
$
|
1,606
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
2.68
|
|
|
1.49
|
|
|
1,052
|
|
|
|
|
|
|
Gold and silver credits
|
|
(1.85
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Treatment charges
|
|
0.30
|
|
|
0.17
|
|
|
118
|
|
|
|
|
|
|
Export duties
|
|
0.03
|
|
|
0.02
|
|
|
11
|
|
|
|
|
|
|
Royalty on metals
|
|
0.15
|
|
|
0.09
|
|
|
50
|
|
|
|
|
|
|
Unit net cash costs
|
|
1.31
|
|
|
1.77
|
|
|
1,231
|
|
|
|
|
|
|
DD&A
|
|
0.79
|
|
|
0.44
|
|
|
310
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
0.21
|
|
|
0.12
|
|
|
82
|
|
|
|
|
|
|
Total unit costs
|
|
2.31
|
|
|
2.33
|
|
|
1,623
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(0.16
|
)
|
|
(0.16
|
)
|
|
33
|
|
|
|
|
|
|
PT Smelting intercompany profit
|
|
0.20
|
|
|
0.11
|
|
|
77
|
|
|
|
|
|
|
Gross profit (loss) per pound/ounce
|
|
$
|
0.01
|
|
|
$
|
(0.10
|
)
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
and Delivery
|
|
DD&A
|
|
|
|
|
|
Totals presented above
|
|
$
|
521
|
|
|
$
|
341
|
|
|
$
|
101
|
|
|
|
|
|
|
Treatment charges
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Export duties
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Royalty on metals
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
—
|
|
|
27
|
|
|
—
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
PT Smelting intercompany profit
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
|
|
|
|
Indonesia mining
|
|
445
|
|
|
343
|
|
|
101
|
|
|
|
|
|
|
Other miningb
|
|
3,131
|
|
|
2,990
|
|
|
225
|
|
|
|
|
|
|
Corporate, other & eliminations
|
|
(778
|
)
|
|
(788
|
)
|
|
15
|
|
|
|
|
|
|
As reported in our consolidated financial statements
|
|
$
|
2,798
|
|
|
$
|
2,545
|
|
|
$
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Includes silver sales of 0.6 million ounces ($14.09 per ounce average realized price).
|
|
|
b.
|
Represents the combined total for our other segments, as presented in Note 9.
|
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
(In millions)
|
|
By-Product
|
|
Co-Product Method
|
|
|
|
Method
|
|
Copper
|
|
Gold
|
|
Silvera
|
|
Total
|
|
Revenues, excluding adjustments
|
|
$
|
507
|
|
|
$
|
507
|
|
|
$
|
303
|
|
|
$
|
9
|
|
|
$
|
819
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
538
|
|
|
333
|
|
|
199
|
|
|
6
|
|
|
538
|
|
|
Gold and silver credits
|
|
(314
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Treatment charges
|
|
51
|
|
|
31
|
|
|
19
|
|
|
1
|
|
|
51
|
|
|
Export duties
|
|
17
|
|
|
11
|
|
|
6
|
|
|
—
|
|
|
17
|
|
|
Royalty on metals
|
|
28
|
|
|
17
|
|
|
11
|
|
|
—
|
|
|
28
|
|
|
Net cash costs
|
|
320
|
|
|
392
|
|
|
235
|
|
|
7
|
|
|
634
|
|
|
DD&A
|
|
105
|
|
|
65
|
|
|
39
|
|
|
1
|
|
|
105
|
|
|
Noncash and other costs, net
|
|
2
|
|
b
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
Total costs
|
|
427
|
|
|
458
|
|
|
275
|
|
|
8
|
|
|
741
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
19
|
|
|
19
|
|
|
2
|
|
|
—
|
|
|
21
|
|
|
PT Smelting intercompany profit
|
|
3
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
Gross profit
|
|
$
|
102
|
|
|
$
|
70
|
|
|
$
|
31
|
|
|
$
|
1
|
|
|
$
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper sales (millions of recoverable pounds)
|
|
174
|
|
|
174
|
|
|
|
|
|
|
|
|
Gold sales (thousands of recoverable ounces)
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit per pound of copper/per ounce of gold:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustments
|
|
$
|
2.92
|
|
|
$
|
2.92
|
|
|
$
|
1,291
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
|
3.10
|
|
|
1.92
|
|
|
850
|
|
|
|
|
|
|
Gold and silver credits
|
|
(1.81
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Treatment charges
|
|
0.29
|
|
|
0.18
|
|
|
80
|
|
|
|
|
|
|
Export duties
|
|
0.10
|
|
|
0.06
|
|
|
27
|
|
|
|
|
|
|
Royalty on metals
|
|
0.16
|
|
|
0.10
|
|
|
46
|
|
|
|
|
|
|
Unit net cash costs
|
|
1.84
|
|
|
2.26
|
|
|
1,003
|
|
|
|
|
|
|
DD&A
|
|
0.61
|
|
|
0.37
|
|
|
166
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
0.01
|
|
b
|
0.01
|
|
|
4
|
|
|
|
|
|
|
Total unit costs
|
|
2.46
|
|
|
2.64
|
|
|
1,173
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
0.11
|
|
|
0.11
|
|
|
9
|
|
|
|
|
|
|
PT Smelting intercompany profit
|
|
0.02
|
|
|
0.01
|
|
|
5
|
|
|
|
|
|
|
Gross profit per pound/ounce
|
|
$
|
0.59
|
|
|
$
|
0.40
|
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
and Delivery
|
|
DD&A
|
|
|
|
|
|
Totals presented above
|
|
$
|
819
|
|
|
$
|
538
|
|
|
$
|
105
|
|
|
|
|
|
|
Treatment charges
|
|
(51
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Export duties
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Royalty on metals
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Noncash and other costs, net
|
|
19
|
|
|
21
|
|
|
—
|
|
|
|
|
|
|
Other revenue adjustments, primarily for pricing
on prior period open sales
|
|
21
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
PT Smelting intercompany profit
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
|
|
|
|
Indonesia mining
|
|
763
|
|
|
556
|
|
|
105
|
|
|
|
|
|
|
Other miningc
|
|
3,786
|
|
|
3,038
|
|
|
222
|
|
|
|
|
|
|
Corporate, other & eliminations
|
|
(757
|
)
|
|
(675
|
)
|
|
20
|
|
|
|
|
|
|
As reported in our consolidated financial statements
|
|
$
|
3,792
|
|
|
$
|
2,919
|
|
|
$
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Includes silver sales of 0.6 million ounces ($14.85 per ounce average realized price).
|
|
|
b.
|
Includes credits of $19 million ($0.11 per pound of copper) associated with adjustments to prior year treatment and refining charges.
|
|
|
c.
|
Represents the combined total for our other segments, as presented in Note 9.
|
Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In millions)
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustmentsa
|
$
|
77
|
|
|
$
|
98
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
64
|
|
|
70
|
|
|
|
|
|
|
Treatment charges and other
|
6
|
|
|
7
|
|
|
|
|
|
|
Net cash costs
|
70
|
|
|
77
|
|
|
|
|
|
|
DD&A
|
16
|
|
|
16
|
|
|
|
|
|
|
Metals inventory adjustments
|
4
|
|
|
—
|
|
|
|
|
|
|
Noncash and other costs, net
|
2
|
|
|
1
|
|
|
|
|
|
|
Total costs
|
92
|
|
|
94
|
|
|
|
|
|
|
Gross (loss) profit
|
$
|
(15
|
)
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Molybdenum sales (millions of recoverable pounds)a
|
7
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit per pound of molybdenum:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding adjustmentsa
|
$
|
10.97
|
|
|
$
|
12.49
|
|
|
|
|
|
|
Site production and delivery, before net noncash
and other costs shown below
|
9.17
|
|
|
8.94
|
|
|
|
|
|
|
Treatment charges and other
|
0.86
|
|
|
0.86
|
|
|
|
|
|
|
Unit net cash costs
|
10.03
|
|
|
9.80
|
|
|
|
|
|
|
DD&A
|
2.29
|
|
|
2.00
|
|
|
|
|
|
|
Metals inventory adjustments
|
0.51
|
|
|
—
|
|
|
|
|
|
|
Noncash and other costs, net
|
0.30
|
|
|
0.16
|
|
|
|
|
|
|
Total unit costs
|
13.13
|
|
|
11.96
|
|
|
|
|
|
|
Gross (loss) profit per pound
|
$
|
(2.16
|
)
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metals
|
|
|
|
|
Production
|
|
|
|
Inventory
|
|
Three Months Ended March 31, 2020
|
Revenues
|
|
and Delivery
|
|
DD&A
|
|
Adjustments
|
|
Totals presented above
|
$
|
77
|
|
|
$
|
64
|
|
|
$
|
16
|
|
|
$
|
4
|
|
|
Treatment charges and other
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Noncash and other costs, net
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
Molybdenum mines
|
71
|
|
|
66
|
|
|
16
|
|
|
4
|
|
|
Other miningb
|
3,505
|
|
|
3,267
|
|
|
310
|
|
|
205
|
|
|
Corporate, other & eliminations
|
(778
|
)
|
|
(788
|
)
|
|
15
|
|
|
13
|
|
|
As reported in our consolidated financial statements
|
$
|
2,798
|
|
|
$
|
2,545
|
|
|
$
|
341
|
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
Totals presented above
|
$
|
98
|
|
|
$
|
70
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
Treatment charges and other
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Noncash and other costs, net
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Molybdenum mines
|
91
|
|
|
71
|
|
|
16
|
|
|
—
|
|
|
Other miningb
|
4,458
|
|
|
3,523
|
|
|
311
|
|
|
—
|
|
|
Corporate, other & eliminations
|
(757
|
)
|
|
(675
|
)
|
|
20
|
|
|
57
|
|
|
As reported in our consolidated financial statements
|
$
|
3,792
|
|
|
$
|
2,919
|
|
|
$
|
347
|
|
|
$
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.
|
|
|
b.
|
Represents the combined total for our other segments, as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
|
GUARANTOR SUMMARIZED FINANCIAL INFORMATION
All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC), as guarantor, which is a 100-percent-owned subsidiary of FCX Oil & Gas LLC (FM O&G) and FCX. The guarantee is an unsecured obligation of the guarantor and ranks equal in right of payment with all existing and future indebtedness of FM O&G LLC, including indebtedness under FCX’s revolving credit facility. The guarantee ranks senior in right of payment with all of FM O&G LLC’s future subordinated obligations and is effectively subordinated in right of payment to any debt of FM O&G LLC’s subsidiaries. The indentures provide that FM O&G LLC’s guarantee obligations may be released or terminated upon: (i) the sale of all or substantially all of the equity interests or assets of FM O&G LLC to a third party that is not a subsidiary or an affiliate of FCX; (ii) FM O&G LLC no longer having any obligations under any FM O&G senior notes or any refinancing thereof and no longer being a co-borrower or guarantor of any obligations of FCX under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof; or (iii) the discharge of FCX’s obligations under the indentures in accordance with their terms.
The following summarized financial information includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all other non-guarantor subsidiaries of FCX at March 31, 2020, and December 31, 2019, for the three months ended March 31, 2020, and the year ended December 31, 2019.
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FCX
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FM O&G LLC
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Non-guarantor
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Consolidated
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Issuer
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Guarantor
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Subsidiaries
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Eliminations
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FCX
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As of March 31, 2020
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Current assets
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$
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275
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$
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614
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$
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7,092
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$
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(624
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)
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$
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7,357
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Noncurrent assets
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1,525
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6
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32,817
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(1,486
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)
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32,862
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Current liabilities
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368
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32
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3,400
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(657
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)
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3,143
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Noncurrent liabilities
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9,155
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10,986
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16,039
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(16,067
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)
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20,113
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As of December 31, 2019
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Current assets
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$
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154
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$
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657
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$
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7,778
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$
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(674
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)
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$
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7,915
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Noncurrent assets
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1,620
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22
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32,692
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(1,440
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)
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32,894
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Current liabilities
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323
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42
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3,550
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(706
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)
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3,209
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Noncurrent liabilities
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9,180
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10,892
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15,975
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(15,895
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)
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20,152
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Three Months Ended March 31, 2020
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Revenues
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$
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—
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$
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9
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$
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2,789
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$
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—
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$
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2,798
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Operating loss
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(12
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)
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(15
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(443
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)
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(3
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(473
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)
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Net (loss) income
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(491
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)
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a
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(83
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a
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(562
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)
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587
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(549
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)
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Year Ended December 31, 2019
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Revenues
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$
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—
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$
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40
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$
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14,362
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$
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—
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$
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14,402
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Operating (loss) income
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(25
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)
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(14
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)
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1,118
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12
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1,091
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Net (loss) income
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(239
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)
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a
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(333
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)
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a
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(432
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)
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815
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(189
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)
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a.
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Net (loss) income equals net (loss) income to common stockholders because net (income) loss attributable to noncontrolling interests is zero for issuer and guarantor.
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CAUTIONARY STATEMENT
Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to ore grades and milling rates; forecasts or expectations regarding business outlook; production and sales volumes; unit net cash costs; cash flows; capital expenditures; liquidity; operating costs; operating plans; cost savings; our expectations regarding our share of PT-FI's net (loss) income and future cash flows through 2022; PT-FI's development, financing, construction and completion of a new smelter in Indonesia; improvements in operating procedures and technology; exploration efforts and results; development and production activities, rates and costs; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; reserve estimates; execution of the settlement agreement associated with the Louisiana coastal erosion cases; and future dividend payments, share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” "targets," “intends,” “likely,” “will,” “should,” “could,” “to be,” ”potential," “assumptions,” “guidance,” “future” 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 our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.
We caution 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 our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, the duration and scope of and uncertainties associated with the COVID-19 pandemic, and the impact thereof on commodity prices, our business and the global economy, which are evolving and beyond our control, and any related actions taken by governments and businesses (including the Peruvian government’s order); our ability to contain and mitigate the risk of spread or major outbreak of COVID-19 at our operating sites, including at PT-FI’s remote operating site in Papua; supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; changes in mine plans or operational modifications, delays, deferrals or cancellations; production rates; timing of shipments; results of feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesian government's extension of PT-FI's export license after March 15, 2021; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI's IUPK to extend mining rights from 2031 through 2041; the Indonesian government's approval of a deferred schedule for completion of the new smelter in Indonesia; expected results from improvements in operating procedures and technology, including innovation initiatives; industry risks; regulatory changes; political and social risks; labor relations; weather- and climate-related risks; environmental risks; litigation results; cybersecurity incidents; changes in general market, economic and industry conditions; financial condition of our customers, suppliers, vendors, partners and affiliates, particularly during weak economic conditions and extended periods of low commodity prices; reductions in liquidity and access to capital; and other factors described in more detail as described further in “Risk Factors” contained in Part I, Item 1A. of our 2019 Form 10-K and in Part II, Item 1A. herein.
Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may not be able to control. Further, we may make changes to our business plans that could affect our results. We caution investors that we do not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes, and we undertake no obligation to update any forward-looking statements.