PHOENIX--(BUSINESS WIRE)--Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):
- Net income attributable to common stock for second-quarter 2012 was $710 million, $0.74 per share, compared with net income of $1.4 billion, $1.43 per share, for second-quarter 2011. Net income attributable to common stock for the first six months of 2012 was $1.5 billion, $1.55 per share, compared with $2.9 billion, $3.00 per share, for the first six months of 2011.
- Consolidated sales from mines for second-quarter 2012 totaled 927 million pounds of copper, 266 thousand ounces of gold and 20 million pounds of molybdenum, compared with 1.0 billion pounds of copper, 356 thousand ounces of gold and 21 million pounds of molybdenum for second-quarter 2011.
- Consolidated sales from mines for the year 2012 are expected to approximate 3.6 billion pounds of copper, 1.1 million ounces of gold and 81 million pounds of molybdenum, including 885 million pounds of copper, 225 thousand ounces of gold and 20 million pounds of molybdenum for third-quarter 2012.
- Consolidated unit net cash costs (net of by-product credits) averaged $1.49 per pound of copper for second-quarter 2012, compared with $0.93 per pound for second-quarter 2011. Based on current 2012 sales volume and cost estimates and assuming average prices of $1,600 per ounce for gold and $13 per pound for molybdenum for the second half of 2012, consolidated unit net cash costs (net of by-product credits) are estimated to average $1.47 per pound of copper for the year 2012.
- Operating cash flows totaled $1.2 billion for second-quarter 2012 and $2.0 billion (net of $774 million in working capital uses and other tax payments) for the first six months of 2012, compared with $1.7 billion for second-quarter 2011 and $4.0 billion (net of $382 million in working capital uses and other tax payments) for the first six months of 2011. Based on current 2012 sales volume and cost estimates and assuming average prices of $3.50 per pound for copper, $1,600 per ounce for gold and $13 per pound for molybdenum for the second half of 2012, operating cash flows are estimated to approximate $4.0 billion for the year 2012 (net of an estimated $1.2 billion in working capital uses and other tax payments).
- Capital expenditures totaled $840 million for second-quarter 2012 and $1.5 billion for the first six months of 2012, compared with $527 million for second-quarter 2011 and $1.0 billion for the first six months of 2011. Capital expenditures are expected to approximate $4.0 billion for the year 2012, including $2.5 billion for major projects and $1.5 billion for sustaining capital.
- During second-quarter 2012, the Climax molybdenum mine began commercial production. Production from the Climax mine is expected to ramp up to a rate of 20 million pounds of molybdenum per year during 2013.
- At June 30, 2012, consolidated cash approximated $4.5 billion and total debt approximated $3.5 billion.
- In May 2012, FCX paid a quarterly common stock dividend of $0.3125 per share, following the February 2012 authorization by the Board of Directors to increase the annual dividend rate to $1.25 per share.
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported second-quarter 2012 net income attributable to common stock of $710 million, $0.74 per share, compared with $1.4 billion, $1.43 per share, for second-quarter 2011. Second-quarter 2012 net income included charges for environmental obligations and related litigation reserves totaling $53 million ($0.06 per share), compared with $40 million ($0.04 per share) in second-quarter 2011. For the first six months of 2012, FCX reported net income attributable to common stock of $1.5 billion, $1.55 per share, compared with $2.9 billion, $3.00 per share, for the first six months of 2011.
James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer, said, "Our second-quarter results reflect our global team's focus on achieving strong operating results in a safe and efficient fashion, and the pursuit of opportunities to grow our production and large resource base. We are on track to increase our annual copper production by more than 25 percent over the next three years through financially attractive brownfield investments. We are positive about the long-term fundamentals of the metals we produce, our geographically diverse portfolio of large-scale operations with long-lived reserves and mineral resources, and the strong track record of our team to execute our plans."
SUMMARY FINANCIAL AND OPERATING DATA
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Financial Data (in millions, except per share amounts) | |||||||||||||||||
| Revenuesa | $ | 4,475 | $ | 5,814 | $ | 9,080 | $ | 11,523 | |||||||||
| Operating incomeb | $ | 1,311 | c | $ | 2,757 | c | $ | 3,045 | c | $ | 5,693 | c | |||||
| Net income attributable to common stock | $ | 710 | c | $ | 1,368 | c, d | $ | 1,474 | c, d | $ | 2,867 | c, d | |||||
| Diluted net income per share of common stock | $ | 0.74 | c | $ | 1.43 | c, d | $ | 1.55 | c, d | $ | 3.00 | c, d | |||||
| Diluted weighted-average common shares outstanding | 953 | 956 | 954 | 956 | |||||||||||||
| Operating cash flows | $ | 1,182 | e | $ | 1,680 | e | $ | 1,983 | e | $ | 4,039 | e | |||||
| Capital expenditures | $ | 840 | $ | 527 | $ | 1,547 | $ | 1,032 | |||||||||
| Mining Operating Data | |||||||||||||||||
| Copper (millions of recoverable pounds) | |||||||||||||||||
| Production | 887 | 967 | 1,720 | 1,917 | |||||||||||||
| Sales, excluding purchases | 927 | 1,002 | 1,754 | 1,928 | |||||||||||||
| Average realized price per pound | $ | 3.53 | $ | 4.22 | $ | 3.61 | $ | 4.24 | |||||||||
| Site production and delivery costs per poundf | $ | 2.01 | $ | 1.63 | $ | 1.98 | $ | 1.62 | |||||||||
| Unit net cash costs per poundf | $ | 1.49 | $ | 0.93 | $ | 1.38 | $ | 0.87 | |||||||||
| Gold (thousands of recoverable ounces) | |||||||||||||||||
| Production | 251 | 351 | 503 | 817 | |||||||||||||
| Sales, excluding purchases | 266 | 356 | 554 | 836 | |||||||||||||
| Average realized price per ounce | $ | 1,588 | $ | 1,509 | $ | 1,639 | $ | 1,466 | |||||||||
| Molybdenum (millions of recoverable pounds) | |||||||||||||||||
| Production | 20 | 22 | 41 | 42 | |||||||||||||
| Sales, excluding purchases | 20 | 21 | 41 | 41 | |||||||||||||
| Average realized price per pound | $ | 15.44 | $ | 18.16 | $ | 15.39 | $ | 18.13 | |||||||||
a. Includes the impact of adjustments to provisionally priced sales recognized in prior periods (refer to the "Consolidated Statements of Income" on page IV for further discussion).
b. FCX defers recognizing profits on intercompany sales until final sales to third parties occur (refer to the "Consolidated Statements of Income" on page IV for a summary of net impacts from changes in these deferrals).
c. Includes charges for adjustments to environmental obligations and related litigation reserves totaling $66 million ($53 million to net income or $0.06 per share) for the second quarter and first six months of 2012 and $49 million ($40 million to net income or $0.04 per share) for the second quarter and first six months of 2011.
d. Includes losses on early extinguishment of debt totaling $54 million ($0.06 per share) in second-quarter 2011, $149 million ($0.16 per share) for the first six months of 2012 and $60 million ($0.06 per share) for the first six months of 2011.
e. Includes working capital uses and other tax payments of $54 million for second-quarter 2012, $496 million for second-quarter 2011, $774 million for the first six months of 2012 and $382 million for the first six months of 2011.
f. Reflects per pound weighted-average site production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, excluding net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
OPERATIONS
Consolidated. Second-quarter 2012 consolidated sales of 927 million pounds of copper and 266 thousand ounces of gold were higher than the April 2012 estimates of 895 million pounds of copper and 235 thousand ounces of gold primarily reflecting higher copper sales volumes in North America and higher gold sales volumes in Indonesia, principally timing related. Second-quarter 2012 consolidated sales were lower than second-quarter 2011 sales of 1.0 billion pounds of copper and 356 thousand ounces of gold primarily reflecting lower ore grades and production rates in Indonesia. Lower copper sales volumes also reflected lower ore grades in South America, partly offset by increased production in North America and Africa.
Operations and productivity at PT Freeport Indonesia have continued to improve following the first-quarter 2012 work interruptions in connection with efforts to resume normal operations. PT Freeport Indonesia's milling rates averaged 179,500 metric tons of ore per day in second-quarter 2012, compared with the first-quarter 2012 average of 114,800 metric tons of ore per day. Mining operations in the Grasberg open pit are approaching normal levels and underground mining operations at the Deep Ore Zone (DOZ) underground mine continue to be ramped up following the 2011 work stoppages. Mining rates at the DOZ underground mine averaged 45,400 metric tons per day in second-quarter 2012 and are expected to reach 80,000 metric tons per day in fourth-quarter 2012.
Second-quarter 2012 consolidated molybdenum sales of 20 million pounds approximated the April 2012 estimate of 20 million pounds and second-quarter 2011 sales of 21 million pounds.
Consolidated sales from mines for the year 2012 are expected to approximate 3.6 billion pounds of copper, 1.1 million ounces of gold and 81 million pounds of molybdenum, including 885 million pounds of copper, 225 thousand ounces of gold and 20 million pounds of molybdenum in third-quarter 2012. FCX's revised 2012 estimates are lower than previous estimates reported in April by approximately 85 million pounds of copper and 60 thousand ounces of gold primarily because of mine sequencing changes and slower underground ramp-up at PT Freeport Indonesia and revisions to El Abra production.
As anticipated, consolidated average unit net cash costs (net of by-product credits) of $1.49 per pound of copper in second-quarter 2012 were higher than unit net cash costs of $0.93 per pound in second-quarter 2011 primarily because of lower volumes in Indonesia, higher mining rates in North America and lower by-product credits.
Quarterly unit net cash costs will vary with fluctuations in sales volumes and average realized prices for gold and molybdenum. Assuming average prices of $1,600 per ounce of gold and $13 per pound of molybdenum for the second half of 2012 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for FCX's copper mining operations are expected to average approximately $1.47 per pound of copper for the year 2012. Projected unit net cash costs for 2012 are slightly higher than previous estimates reported in April primarily because of lower by-product credits. The impact of price changes for the second half of 2012 on consolidated unit net cash costs would approximate $0.01 per pound for each $50 per ounce change in the average price of gold and $0.01 per pound for each $2 per pound change in the average price of molybdenum. Assuming consistent commodity price assumptions, unit net cash costs for 2013 are expected to be lower than 2012 because of projected increased copper and gold volumes at Grasberg.
North America Copper Mines. FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. All of the North America mining operations are wholly owned, except for Morenci. FCX records its 85 percent joint venture interest in Morenci using the proportionate consolidation method. In addition to copper, certain of FCX's North America copper mines (Sierrita, Bagdad, Morenci and Chino) also produce molybdenum concentrates.
Operating and Development Activities. FCX has completed projects to increase production at its North America copper mines, including restarting milling operations and increasing mining rates at Morenci and Chino, and restarting the Miami mine. Ramp up activities at Chino are continuing, with annual production of approximately 250 million pounds of copper targeted in 2014. FCX continues to evaluate a number of opportunities to invest in additional production capacity at several of its North America copper mines. Exploration results in recent years indicate the potential for significant additional sulfide development in North America.
At Morenci, FCX completed a feasibility study to expand mining and milling capacity to process additional sulfide ores identified through exploratory drilling. The approximate $1.4 billion project would target incremental annual production of approximately 225 million pounds of copper in 2014 through an increase in milling rates from the current level of 50,000 metric tons of ore per day to approximately 115,000 metric tons of ore per day, and mining rates from the current level of 700,000 short tons per day to 900,000 short tons per day. FCX has commenced initial construction and engineering, and procurement activities are in progress.
Operating Data. Following is summary consolidated operating data for the North America copper mines for the second quarters and first six months of 2012 and 2011:
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
| Copper (millions of recoverable pounds) | |||||||||||||||||||
| Production | 331 | 313 | 668 | 595 | |||||||||||||||
| Sales, excluding purchases | 361 | 331 | 699 | 607 | |||||||||||||||
| Average realized price per pound | $ | 3.57 | $ | 4.19 | $ | 3.68 | $ | 4.28 | |||||||||||
| Molybdenum (millions of recoverable pounds) | |||||||||||||||||||
| Productiona | 9 | 10 | 19 | 17 | |||||||||||||||
| Unit net cash costs per pound of copper: | |||||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 1.88 | $ | 1.78 | $ | 1.84 | $ | 1.76 | |||||||||||
| By-product credits, primarily molybdenumb | (0.36 | ) | (0.52 | ) | (0.39 | ) | (0.50 | ) | |||||||||||
| Treatment charges | 0.10 | 0.10 | 0.12 | 0.10 | |||||||||||||||
| Unit net cash costsc | $ | 1.62 | $ | 1.36 | $ | 1.57 | $ | 1.36 | |||||||||||
a. Reflects molybdenum production from certain of the North America copper mines. Sales of molybdenum are reflected in the Molybdenum division (refer to page 9).
b. Molybdenum credits reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
c. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
Consolidated copper sales volumes from North America of 361 million pounds in second-quarter 2012 were higher than second-quarter 2011 sales of 331 million pounds primarily reflecting increased production at Chino and Safford.
FCX expects sales from the North America copper mines to approximate 1.3 billion pounds of copper for the year 2012, compared with 1.2 billion pounds of copper in 2011.
As anticipated, average unit net cash costs (net of by-product credits) for the North America copper mines of $1.62 per pound of copper in second-quarter 2012 were higher than unit net cash costs of $1.36 per pound in second-quarter 2011 reflecting increased mining rates and lower molybdenum credits, partly offset by higher volumes.
FCX estimates that average unit net cash costs (net of by-product credits) for the North America copper mines would approximate $1.65 per pound of copper for the year 2012, based on current sales volume and cost estimates and assuming an average molybdenum price of $13 per pound for the second half of 2012. North America's average unit net cash costs for 2012 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the second half of 2012.
South America Mining. FCX operates four copper mines in South America - Cerro Verde in Peru and El Abra, Candelaria and Ojos del Salado in Chile. FCX owns a 53.56 percent interest in Cerro Verde, a 51 percent interest in El Abra, and an 80 percent interest in both the Candelaria and Ojos del Salado mining complexes. All operations in South America are consolidated in FCX's financial statements. South America mining includes open-pit and underground mining. In addition to copper, the Cerro Verde mine produces molybdenum concentrates, and the Candelaria and Ojos del Salado mines produce gold and silver.
Operating and Development Activities. During 2011, FCX commenced production from El Abra's sulfide ores. Production from the sulfide ore is expected to approximate 300 million pounds of copper per year, replacing the currently depleting oxide copper production.
FCX is also engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra indicate the potential for a significant sulfide resource. Exploration activities are continuing.
At Cerro Verde, plans for a large-scale concentrator expansion continue to be advanced. The approximate $4 billion project would expand the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day and provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016. An environmental impact assessment was filed in fourth-quarter 2011. Permitting is being advanced and engineering and procurement of long-lead items are in progress.
Operating Data. Following is summary consolidated operating data for the South America mining operations for the second quarters and first six months of 2012 and 2011:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
| Production | 304 | 327 | 597 | 644 | ||||||||||||
| Sales | 301 | 331 | 587 | 643 | ||||||||||||
| Average realized price per pound | $ | 3.51 | $ | 4.24 | $ | 3.56 | $ | 4.24 | ||||||||
| Gold (thousands of recoverable ounces) | ||||||||||||||||
| Production | 18 | 24 | 37 | 48 | ||||||||||||
| Sales | 16 | 25 | 35 | 49 | ||||||||||||
| Average realized price per ounce | $ | 1,596 | $ | 1,515 | $ | 1,630 | $ | 1,467 | ||||||||
| Molybdenum (millions of recoverable pounds) | ||||||||||||||||
| Productiona | 2 | 3 | 4 | 6 | ||||||||||||
| Unit net cash costs per pound of copper: | ||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 1.56 | $ | 1.26 | $ | 1.55 | $ | 1.28 | ||||||||
| By-product credits | (0.23 | ) | (0.37 | ) | (0.26 | ) | (0.37 | ) | ||||||||
| Treatment charges | 0.16 | 0.19 | 0.16 | 0.19 | ||||||||||||
| Unit net cash costsb | $ | 1.49 | $ | 1.08 | $ | 1.45 | $ | 1.10 | ||||||||
a. Reflects molybdenum production from Cerro Verde. Sales of molybdenum are reflected in the Molybdenum division (refer to page 9).
b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
Copper sales from South America mining of 301 million pounds in second-quarter 2012 were lower than second-quarter 2011 sales of 331 million pounds primarily reflecting anticipated lower ore grades at Cerro Verde and Candelaria, partly offset by increased production at El Abra.
FCX expects South America's sales to approximate of 1.2 billion pounds of copper and 100 thousand ounces of gold for the year 2012, compared with 2011 sales of 1.3 billion pounds of copper and 101 thousand ounces of gold. Copper sales estimates for South America are approximately 35 million pounds lower than previous estimates reported in April because of revisions to El Abra production.
As anticipated, average unit net cash costs (net of by-product credits) for South America of $1.49 per pound of copper in second-quarter 2012 were higher than unit net cash costs of $1.08 per pound in second-quarter 2011, primarily reflecting lower copper sales volumes, lower by-product credits and increased mining costs.
FCX estimates that average unit net cash costs (net of by-product credits) for South America mining would approximate $1.48 per pound of copper for the year 2012, based on current sales volume and cost estimates and assuming average prices of $1,600 per ounce of gold and $13 per pound of molybdenum for the second half of 2012.
Indonesia Mining. Through its 90.64 percent owned and wholly consolidated subsidiary PT Freeport Indonesia, FCX operates the world's largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia. PT Freeport Indonesia produces copper concentrates, which contain significant quantities of gold and also silver.
Operating and Development Activities. FCX has several projects in progress in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up over several years to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016. Over the next five years, estimated aggregate capital spending on these projects is expected to average $700 million per year ($550 million per year net to PT Freeport Indonesia). Considering the long-term nature and large size of these projects, actual costs could differ materially from these estimates.
The high-grade Big Gossan underground mine, which began producing in fourth-quarter 2010, is expected to reach full rates of 7,000 metric tons of ore per day in 2013. Substantial progress has been made in developing infrastructure and underground workings that will enable access to the underground ore bodies. Development of both the Grasberg Block Cave and Deep Mill Level Zone spurs is advancing, and the tunneling required to reach these underground ore bodies is complete.
Operating Data. Following is summary consolidated operating data for the Indonesia mining operations for the second quarters and first six months of 2012 and 2011:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
| Production | 173 | 261 | 296 | 545 | ||||||||||||
| Sales | 183 | 265 | 317 | 543 | ||||||||||||
| Average realized price per pound | $ | 3.49 | $ | 4.26 | $ | 3.56 | $ | 4.23 | ||||||||
| Gold (thousands of recoverable ounces) | ||||||||||||||||
| Production | 230 | 325 | 459 | 766 | ||||||||||||
| Sales | 247 | 330 | 513 | 784 | ||||||||||||
| Average realized price per ounce | $ | 1,587 | $ | 1,509 | $ | 1,639 | $ | 1,466 | ||||||||
| Unit net cash costs per pound of copper: | ||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 3.23 | $ | 1.93 | $ | 3.35 | $ | 1.88 | ||||||||
| Gold and silver credits | (2.20 | ) | (2.06 | ) | (2.75 | ) | (2.20 | ) | ||||||||
| Treatment charges | 0.21 | 0.18 | 0.20 | 0.18 | ||||||||||||
| Royalty on metals | 0.13 | 0.17 | 0.13 | 0.16 | ||||||||||||
| Unit net cash costsa | $ | 1.37 | $ | 0.22 | $ | 0.93 | $ | 0.02 | ||||||||
a. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
Indonesia's second-quarter 2012 copper sales of 183 million pounds and gold sales of 247 thousand ounces were significantly lower than second-quarter 2011 copper sales of 265 million pounds and gold sales of 330 thousand ounces, primarily reflecting anticipated lower ore grades and production rates.
Operations and productivity at PT Freeport Indonesia have continued to improve following the first-quarter 2012 work interruptions in connection with efforts to resume normal operations. PT Freeport Indonesia's milling rates averaged 179,500 metric tons of ore per day in second-quarter 2012, compared with the first-quarter 2012 average of 114,800 metric tons of ore per day. Mining operations in the Grasberg open pit are approaching normal levels and underground mining operations at the DOZ underground mine continue to be ramped up following the 2011 work stoppages. Mining rates at the DOZ underground mine averaged 45,400 metric tons per day in second-quarter 2012 and are expected to reach 80,000 metric tons per day in fourth-quarter 2012.
At the Grasberg mine, the sequencing of mining areas with varying ore grades also causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold. FCX expects sales from Indonesia to approximate 750 million pounds of copper and 960 thousand ounces of gold for the year 2012, compared with 846 million pounds of copper and 1.3 million ounces of gold for the year 2011. PT Freeport Indonesia's revised sales estimates for 2012 are lower than previous estimates reported in April by approximately 50 million pounds of copper and 60 thousand ounces of gold because of a deferral of access to high-grade material in the open pit to future periods and a slower than expected ramp-up of the DOZ underground mine. FCX expects sales from Indonesia to increase in 2013 as PT Freeport Indonesia gains access to higher ore grades.
Indonesia's unit net cash costs (including gold and silver credits) of $1.37 per pound of copper in second-quarter 2012 were higher than unit net cash costs of $0.22 per pound in second-quarter 2011 primarily reflecting lower sales volumes.
Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on volumes of copper and gold sold, as well as average realized gold prices during the period. FCX estimates Indonesia's average unit net cash costs (net of gold and silver credits) would approximate $1.24 per pound of copper for the year 2012, based on current sales volume and cost estimates and assuming an average gold price of $1,600 per ounce for the second half of 2012. Projected unit net cash costs for 2012 are higher than previous estimates reported in April primarily because of lower copper sales volumes and lower by-product credits. Indonesia's unit net cash costs for 2012 would change by approximately $0.04 per pound for each $50 per ounce change in the average price of gold for the second half of 2012. FCX expects Indonesia's unit net cash costs to decline significantly in future years, compared to the year 2012, because of higher projected copper and gold volumes.
Africa Mining. Through its 56 percent owned and wholly consolidated subsidiary Tenke Fungurume Mining S.A.R.L (TFM), FCX operates the Tenke Fungurume (Tenke) mine in the Katanga province of the Democratic Republic of Congo (DRC). In addition to copper, the Tenke mine produces cobalt hydroxide.
Operating and Development Activities. The milling facilities at Tenke, which were designed to produce at a rate of 8,000 metric tons of ore per day, continue to perform above capacity, with throughput averaging 12,900 metric tons of ore per day in second-quarter 2012 and 12,500 metric tons of ore per day for the first six months of 2012. Higher mining rates have increased copper production from the initial project capacity of 250 million pounds per year to approximately 290 million pounds per year.
FCX is constructing a second phase of the project, which would include optimizing the current plant and increasing capacity. FCX plans to expand the mill rate to 14,000 metric tons of ore per day and is constructing related processing facilities that would target the addition of approximately 150 million pounds of copper per year in 2013. The approximate $850 million project includes mill upgrades, additional mining equipment, a new tankhouse and a sulphuric acid plant expansion. Construction activities are progressing well and are expected to be completed by year-end 2012.
FCX continues to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective minerals district at Tenke. These analyses are being incorporated in future plans to evaluate opportunities for expansion. Future expansions are subject to a number of factors, including economic and market conditions, and the business and investment climate in the DRC.
Operating Data. Following is summary consolidated operating data for the Africa mining operations for the second quarters and first six months of 2012 and 2011:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
| Production | 79 | 66 | 159 | 133 | ||||||||||||
| Sales | 82 | 75 | 151 | 135 | ||||||||||||
| Average realized price per pounda | $ | 3.45 | $ | 4.08 | $ | 3.54 | $ | 4.11 | ||||||||
| Cobalt (millions of contained pounds) | ||||||||||||||||
| Production | 6 | 6 | 12 | 12 | ||||||||||||
| Sales | 6 | 7 | 11 | 13 | ||||||||||||
| Average realized price per pound | $ | 8.24 | $ | 11.16 | $ | 8.40 | $ | 11.02 | ||||||||
| Unit net cash costs per pound of copper: | ||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 1.48 | $ | 1.62 | $ | 1.49 | $ | 1.57 | ||||||||
| Cobalt creditsb | (0.33 | ) | (0.77 | ) | (0.34 | ) | (0.76 | ) | ||||||||
| Royalty on metals | 0.07 | 0.09 | 0.08 | 0.10 | ||||||||||||
| Unit net cash costsc | $ | 1.22 | $ | 0.94 | $ | 1.23 | $ | 0.91 | ||||||||
a. Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
b. Net of cobalt downstream processing and freight costs.
c. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
Copper sales from Africa of 82 million pounds in second-quarter 2012 were higher than second-quarter 2011 copper sales of 75 million pounds primarily reflecting higher mining and milling rates.
FCX expects Africa's sales to approximate 310 million pounds of copper and 25 million pounds of cobalt for the year 2012, compared with 283 million pounds of copper and 25 million pounds of cobalt for the year 2011.
Africa's unit net cash costs (net of cobalt credits) of $1.22 per pound of copper in second-quarter 2012 were higher than unit net cash costs of $0.94 per pound in second-quarter 2011 primarily reflecting lower cobalt credits, partly offset by higher copper volumes.
FCX estimates Africa's average unit net cash costs would approximate $1.16 per pound of copper for the year 2012, based on current sales volume and cost estimates and assuming an average cobalt price of $12 per pound for the second half of 2012. Africa's unit net cash costs for 2012 would change by approximately $0.06 per pound for each $2 per pound change in the average price of cobalt for the second half of 2012.
Molybdenum. FCX is the world's largest producer of molybdenum. FCX conducts molybdenum mining operations at its wholly owned Henderson underground mine and Climax open-pit mine in Colorado, and also sells molybdenum produced from its North and South America copper mines.
Development Activities. Construction activities at the Climax molybdenum mine, which included the installation of a 25,400 metric ton per day mill facility, mining equipment and environmental management systems, is substantially complete. During second-quarter 2012, the operation began commercial production. Production from Climax is expected to ramp up to a rate of 20 million pounds of molybdenum per year during 2013 and, depending on market conditions, may be increased to 30 million pounds of molybdenum per year. FCX intends to operate the Climax and Henderson mines in a flexible manner to meet market requirements. FCX believes that Climax is one of the most attractive primary molybdenum mines in the world, with large-scale production capacity, attractive cash costs and future growth options.
Operating Data. Following is summary consolidated operating data for the Molybdenum operations for the second quarters and first six months of 2012 and 2011:
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||
| Molybdenum (millions of recoverable pounds) | |||||||||||||||
| Productiona | 9 | 9 | 18 | 19 | |||||||||||
| Sales, excluding purchasesb | 20 | 21 | 41 | 41 | |||||||||||
| Average realized price per pound | $ | 15.44 | $ | 18.16 | $ | 15.39 | $ | 18.13 | |||||||
| Henderson's unit net cash cost per pound | |||||||||||||||
| of molybdenumc | $ | 6.83 | $ | 6.21 | $ | 6.85 | $ | 6.17 | |||||||
a. Reflects production at the Henderson molybdenum mine. The 2012 periods also include production of 1 million pounds from the Climax molybdenum mine beginning in May 2012.
b. Includes sales of molybdenum produced at the North and South America copper mines.
c. Reflects unit net cash costs for the Henderson molybdenum mine, excluding net noncash and other costs. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
Consolidated molybdenum sales of 20 million pounds in second-quarter 2012 were slightly lower than second-quarter 2011 sales of 21 million pounds. For the year 2012, FCX expects molybdenum sales to approximate 81 million pounds (including production of approximately 42 million pounds from the North and South America copper mines), compared with 79 million pounds in 2011 (including production of 45 million pounds from the North and South America copper mines).
Unit net cash costs at the Henderson mine of $6.83 per pound of molybdenum in second-quarter 2012 were higher than unit net cash costs of $6.21 per pound in second-quarter 2011 primarily reflecting lower volumes.
Based on current sales volume and cost estimates, FCX expects average unit net cash costs for the Henderson mine to approximate $7.00 per pound of molybdenum for the year 2012.
EXPLORATION ACTIVITIES
FCX is actively conducting exploration activities near its existing mines with a focus on opportunities to expand reserves that will support the development of additional future production capacity in the large minerals districts where it currently operates. Exploration results indicate opportunities for significant future potential reserve additions in North and South America and in the Tenke Fungurume minerals district. The drilling data in North America continue to indicate the potential for expanded sulfide production.
Exploration spending for the year 2012 is expected to approximate $275 million, compared to $221 million in 2011. Exploration activities will continue to focus primarily on the potential for future reserve additions in FCX's existing minerals districts.
PROVISIONAL PRICING AND OTHER
For the first six months of 2012, 43 percent of FCX's mined copper was sold in concentrate, 29 percent as rod from North America operations and 28 percent as cathode. Under the long-established structure of sales agreements prevalent in the industry, copper contained in concentrates and cathodes is provisionally priced at the time of shipment. The provisional prices are finalized in a contractually specified future month (generally one to four months from the shipment date) primarily based on quoted monthly average spot copper prices on the London Metal Exchange (LME). Because a significant portion of FCX's concentrate and cathode sales in any quarterly period usually remain subject to final pricing, the quarter-end forward price is a major determinant of recorded revenues and the average recorded copper price for the period. LME spot copper prices averaged $3.57 per pound during second-quarter 2012, compared to FCX's average realized price of $3.53 per pound.
At March 31, 2012, FCX had provisionally priced copper sales at its copper mining operations, primarily South America and Indonesia, totaling 214 million pounds (net of intercompany sales and noncontrolling interests) recorded at an average price of $3.83 per pound. Lower prices during second-quarter 2012 resulted in adjustments to these provisionally priced copper sales and unfavorably impacted second-quarter 2012 consolidated revenues by $75 million ($31 million to net income attributable to common stock or $0.03 per share), compared with adjustments to the March 31, 2011, provisionally priced copper sales that unfavorably impacted second-quarter 2011 consolidated revenues by $47 million ($23 million to net income attributable to common stock or $0.02 per share). Adjustments to the December 31, 2011, provisionally priced copper sales favorably impacted consolidated revenues by $101 million ($43 million to net income attributable to common stock or $0.05 per share) for the first six months of 2012, compared with adjustments to the December 31, 2010, provisionally priced copper sales that unfavorably impacted consolidated revenues by $12 million ($5 million to net income attributable to common stock or $0.01 per share) for the first six months of 2011.
At June 30, 2012, FCX had provisionally priced copper sales at its copper mining operations, primarily South America and Indonesia, totaling 329 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.49 per pound, subject to final pricing over the next several months. FCX estimates that each $0.05 change in the price realized from the June 30, 2012, provisional price recorded would have an approximate $22 million effect on its 2012 consolidated revenues ($11 million to net income attributable to common stock). The LME spot copper price closed at $3.45 per pound on July 18, 2012.
FCX defers recognizing profits on its sales from its Indonesia, South America, North America and Africa mining operations to Atlantic Copper and on 25 percent of Indonesia's mining sales to PT Smelting (PT Freeport Indonesia's 25 percent-owned Indonesian smelting unit) until final sales to third parties occur. FCX's net deferred profits on its Indonesia, South America and North America concentrate inventories at Atlantic Copper and PT Smelting to be recognized in future periods' net income attributable to common stock totaled $52 million at June 30, 2012. Refer to the "Consolidated Statements of Income" on page IV for a summary of net impacts from changes in these deferrals. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in FCX's net deferred profits and quarterly earnings. As PT Freeport Indonesia's sales volumes increase in the second half of 2012, FCX expects to defer a significant amount of PT Freeport Indonesia's profit on intercompany sales until final sales to third parties occur.
CASH FLOWS
FCX generated operating cash flows of $1.2 billion for second-quarter 2012 and $2.0 billion for the first six months of 2012. These amounts were net of working capital uses and other tax payments of $54 million for the second quarter and $774 million for the six-month period.
Based on current sales volume and cost estimates and assuming average prices of $3.50 per pound of copper, $1,600 per ounce of gold and $13 per pound of molybdenum for the second half of 2012, FCX's consolidated operating cash flows are estimated to approximate $4.0 billion for the year 2012 (net of an estimated $1.2 billion in working capital uses and other tax payments). The impact of price changes for the second half of 2012 on operating cash flows would approximate $80 million for each $0.05 per pound change in the average price of copper, $25 million for each $50 per ounce change in the average price of gold and $40 million for each $2 per pound change in the average price of molybdenum.
Capital expenditures, including capitalized interest, totaled $840 million for second-quarter 2012 and $1.5 billion for the first six months of 2012. FCX's capital expenditures are currently estimated to approximate $4.0 billion for the year 2012 (including $2.5 billion for major projects and $1.5 billion for sustaining capital). Major projects for 2012 primarily include underground development activities at Grasberg and the expansion projects at Tenke, Cerro Verde and Morenci. FCX is also considering additional investments at several of its sites. Capital spending plans will continue to be reviewed and adjusted in response to changes in market conditions and other factors.
CASH AND DEBT
At June 30, 2012, FCX had consolidated cash of $4.5 billion. Net of noncontrolling interests' share, taxes and other costs, cash available to the parent company totaled $3.4 billion as shown below (in billions):
| June 30, | ||||
| 2012 | ||||
| Cash at domestic companiesa | $ | 1.9 | ||
| Cash at international operations | 2.6 | |||
| Total consolidated cash and cash equivalents | 4.5 | |||
| Less: Noncontrolling interests' share | (0.9 | ) | ||
| Cash, net of noncontrolling interests' share | 3.6 | |||
| Less: Withholding taxes and other | (0.2 | ) | ||
| Net cash available | $ | 3.4 | ||
a. Includes cash at FCX's parent company and North America operations.
At June 30, 2012, FCX had $3.5 billion in debt. FCX had no borrowings and $44 million of letters of credit issued under its revolving credit facility, resulting in total availability of approximately $1.5 billion at June 30, 2012.
In first-quarter 2012, FCX sold $3.0 billion of senior notes in three tranches with a weighted average interest rate of approximately three percent. FCX used the proceeds from this offering (plus cash on hand), to redeem the remaining $3.0 billion of its 8.375% Senior Notes. Annual interest cost savings associated with this refinancing approximates $160 million. Annual interest cost savings associated with this transaction and debt repayments since January 1, 2009, approximate $420 million per year, based on current interest rates.
FINANCIAL POLICY
FCX has a long-standing tradition of seeking to build shareholder value through investing in projects with attractive rates of return and returning cash to shareholders through common stock dividends and share purchases. FCX's current annual dividend rate is $1.25 per share ($0.3125 per share quarterly). FCX paid common stock dividends of $535 million for the first six months of 2012. FCX intends to continue to maintain a strong financial position, invest aggressively in attractive growth projects and provide cash returns to shareholders. The Board will continue to review FCX's financial policy on an ongoing basis.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's second-quarter 2012 results is scheduled for today at 10:00 a.m. Eastern Time. The conference call will be broadcast on the Internet along with slides. Interested parties may listen to the conference call live and view the slides by accessing "www.fcx.com." A replay of the webcast will be available through Friday, August 17, 2012.
FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the world's largest producer of molybdenum.
FCX's portfolio of assets includes the Grasberg minerals district in Indonesia, the world’s largest copper and gold mine in terms of recoverable reserves; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde and El Abra operations in South America; and the Tenke Fungurume minerals district in the Democratic Republic of Congo. Additional information about FCX is available on FCX's website at "www.fcx.com."
Cautionary Statement and Regulation G Disclosure: This press release contains forward-looking statements in which FCX discusses its potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as those statements regarding projected ore grades and milling rates, projected production and sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, exploration efforts and results, mine production and development plans, the impact of deferred intercompany profits on earnings, liquidity, other financial commitments and tax rates, the impact of copper, gold, molybdenum and cobalt price changes, future dividend payments and potential share purchases. The words "anticipates," "may," "can," "plans," "believes," "estimates," "expects," "projects," "intends," "likely," "will," "should," "to be," and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration of dividends is at the discretion of FCX's Board of Directors (the Board) and will depend on FCX's financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.
FCX cautions readers that forward-looking statements are not guarantees of future performance and its actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause FCX's actual results to differ materially from those anticipated in the forward-looking statements include commodity prices, mine sequencing, production rates, industry risks, regulatory changes, political risks, the outcome of ongoing discussions with the Indonesian government, the potential effects of violence in Indonesia, the resolution of administrative disputes in the Democratic Republic of Congo, weather- and climate-related risks, labor relations, environmental risks, litigation results, currency translation risks and other factors described in more detail under the heading "Risk Factors" in FCX's Annual Report on Form 10-K for the year ended December 31, 2011, filed with the U.S. Securities and Exchange Commission (SEC) as updated by FCX's subsequent filings with the SEC.
Investors are cautioned that many of the assumptions on which FCX's forward-looking statements are based are likely to change after its forward-looking statements are made, including for example commodity prices, which FCX cannot control, and production volumes and costs, some aspects of which FCX may or may not be able to control. Further, FCX may make changes to its business plans that could or will affect its results. FCX cautions investors that it does not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in assumptions, changes in business plans, actual experience or other changes, and FCX undertakes no obligation to update any forward-looking statements.
This press release also contains certain financial measures such as unit net cash costs per pound of copper and per pound of molybdenum. As required by SEC Regulation G, reconciliations of these measures to amounts reported in FCX's consolidated financial statements are in the supplemental schedule, "Product Revenues and Production Costs," beginning on page VII, which is available on FCX's website, "www.fcx.com."
| FREEPORT-McMoRan COPPER & GOLD INC. | ||||||||||||||||||
| SELECTED OPERATING DATA | ||||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||||
| Production | Sales | |||||||||||||||||
|
COPPER (millions of recoverable pounds) |
2012 | 2011 | 2012 | 2011 | ||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
|
North America |
||||||||||||||||||
| Morenci (85%)a | 129 | 135 | 141 | 142 | ||||||||||||||
| Bagdad (100%) | 48 | 48 | 52 | 54 | ||||||||||||||
| Safford (100%) | 46 | 37 | 50 | 38 | ||||||||||||||
| Sierrita (100%) | 39 | 45 | 45 | 46 | ||||||||||||||
| Miami (100%) | 17 | 15 | 19 | 15 | ||||||||||||||
| Tyrone (100%) | 20 | 18 | 21 | 22 | ||||||||||||||
| Chino (100%) | 31 | 14 | 32 | 13 | ||||||||||||||
| Other (100%) | 1 | 1 | 1 | 1 | ||||||||||||||
| Total North America | 331 | 313 | 361 | 331 | ||||||||||||||
|
South America |
||||||||||||||||||
| Cerro Verde (53.56%) | 151 | 170 | 149 | 173 | ||||||||||||||
| El Abra (51%) | 82 | 66 | 87 | 60 | ||||||||||||||
| Candelaria/Ojos del Salado (80%) | 71 | 91 | 65 | 98 | ||||||||||||||
| Total South America | 304 | 327 | 301 | 331 | ||||||||||||||
|
Indonesia |
||||||||||||||||||
| Grasberg (90.64%)b | 173 | 261 | 183 | 265 | ||||||||||||||
|
Africa |
||||||||||||||||||
| Tenke Fungurume (56%)c | 79 | 66 | 82 | 75 | ||||||||||||||
| Consolidated | 887 | 967 | 927 | 1,002 | ||||||||||||||
| Less noncontrolling interests | 175 | 181 | 178 | 186 | ||||||||||||||
| Net | 712 | 786 | 749 | 816 | ||||||||||||||
| Consolidated sales from mines | 927 | 1,002 | ||||||||||||||||
| Purchased copper | 25 | 57 | ||||||||||||||||
| Total copper sales, including purchases | 952 | 1,059 | ||||||||||||||||
| Average realized price per pound | $ | 3.53 | $ | 4.22 | ||||||||||||||
|
GOLD (thousands of recoverable ounces) |
||||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
| North America (100%) | 3 | 2 | 3 | 1 | ||||||||||||||
| South America (80%) | 18 | 24 | 16 | 25 | ||||||||||||||
| Indonesia (90.64%)b | 230 | 325 | 247 | 330 | ||||||||||||||
| Consolidated | 251 | 351 | 266 | 356 | ||||||||||||||
| Less noncontrolling interests | 25 | 35 | 27 | 36 | ||||||||||||||
| Net | 226 | 316 | 239 | 320 | ||||||||||||||
| Consolidated sales from mines | 266 | 356 | ||||||||||||||||
| Purchased gold | 1 | — | ||||||||||||||||
| Total gold sales, including purchases | 267 | 356 | ||||||||||||||||
| Average realized price per ounce | $ | 1,588 | $ | 1,509 | ||||||||||||||
|
MOLYBDENUM (millions of recoverable pounds) |
||||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
| Henderson (100%) | 8 | 9 | N/A | N/A | ||||||||||||||
| Climax (100%)d | 1 | — | N/A | N/A | ||||||||||||||
| North America (100%)a | 9 | 10 | N/A | N/A | ||||||||||||||
| Cerro Verde (53.56%) | 2 | 3 | N/A | N/A | ||||||||||||||
| Consolidated | 20 | 22 | 20 | 21 | ||||||||||||||
| Less noncontrolling interests | 1 | 2 | 1 | 1 | ||||||||||||||
| Net | 19 | 20 | 19 | 20 | ||||||||||||||
| Consolidated sales from mines | 20 | 21 | ||||||||||||||||
| Purchased molybdenum | — | — | ||||||||||||||||
| Total molybdenum sales, including purchases | 20 | 21 | ||||||||||||||||
| Average realized price per pound | $ | 15.44 | $ | 18.16 | ||||||||||||||
|
COBALT (millions of contained pounds) |
||||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
| Consolidated - Tenke Fungurume (56%)c | 6 | 6 | 6 | 7 | ||||||||||||||
| Less noncontrolling interests | 2 | 2 | 3 | 3 | ||||||||||||||
| Net | 4 | 4 | 3 | 4 | ||||||||||||||
| Average realized price per pound | $ | 8.24 | $ | 11.16 | ||||||||||||||
|
a. Amounts are net of Morenci's 15 percent joint venture partner's interest. |
||||||||||||||||||
|
b. Amounts are net of Grasberg's joint venture partner's interest, which varies in accordance with the terms of the joint venture agreement. |
||||||||||||||||||
|
c. Effective March 26, 2012, FCX's interest in Tenke Fungurume was reduced from 57.75 percent to 56 percent (prospectively). |
||||||||||||||||||
|
d. Results represent Climax's mining operations since the start of commercial production in May 2012. |
||||||||||||||||||
| FREEPORT-McMoRan COPPER & GOLD INC. | ||||||||||||||||||
| SELECTED OPERATING DATA (continued) | ||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||
| Production | Sales | |||||||||||||||||
|
COPPER (millions of recoverable pounds) |
2012 | 2011 | 2012 | 2011 | ||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
|
North America |
||||||||||||||||||
| Morenci (85%)a | 259 | 257 | 273 | 260 | ||||||||||||||
| Bagdad (100%) | 96 | 97 | 101 | 104 | ||||||||||||||
| Safford (100%) | 92 | 65 | 95 | 68 | ||||||||||||||
| Sierrita (100%) | 82 | 85 | 89 | 85 | ||||||||||||||
| Miami (100%) | 37 | 29 | 39 | 25 | ||||||||||||||
| Tyrone (100%) | 40 | 37 | 41 | 41 | ||||||||||||||
| Chino (100%) | 60 | 23 | 59 | 22 | ||||||||||||||
| Other (100%) | 2 | 2 | 2 | 2 | ||||||||||||||
| Total North America | 668 | 595 | 699 | 607 | ||||||||||||||
|
South America |
||||||||||||||||||
| Cerro Verde (53.56%) | 290 | 345 | 285 | 342 | ||||||||||||||
| El Abra (51%) | 164 | 114 | 166 | 110 | ||||||||||||||
| Candelaria/Ojos del Salado (80%) | 143 | 185 | 136 | 191 | ||||||||||||||
| Total South America | 597 | 644 | 587 | 643 | ||||||||||||||
|
Indonesia |
||||||||||||||||||
| Grasberg (90.64%)b | 296 | 545 | 317 | 543 | ||||||||||||||
|
Africa |
||||||||||||||||||
| Tenke Fungurume (56%)c | 159 | 133 | 151 | 135 | ||||||||||||||
| Consolidated | 1,720 | 1,917 | 1,754 | 1,928 | ||||||||||||||
| Less noncontrolling interests | 340 | 360 | 336 | 359 | ||||||||||||||
| Net | 1,380 | 1,557 | 1,418 | 1,569 | ||||||||||||||
| Consolidated sales from mines | 1,754 | 1,928 | ||||||||||||||||
| Purchased copper | 52 | 134 | ||||||||||||||||
| Total copper sales, including purchases | 1,806 | 2,062 | ||||||||||||||||
| Average realized price per pound | $ | 3.61 | $ | 4.24 | ||||||||||||||
|
GOLD (thousands of recoverable ounces) |
||||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
| North America (100%) | 7 | 3 | 6 | 3 | ||||||||||||||
| South America (80%) | 37 | 48 | 35 | 49 | ||||||||||||||
| Indonesia (90.64%)b | 459 | 766 | 513 | 784 | ||||||||||||||
| Consolidated | 503 | 817 | 554 | 836 | ||||||||||||||
| Less noncontrolling interests | 50 | 81 | 55 | 83 | ||||||||||||||
| Net | 453 | 736 | 499 | 753 | ||||||||||||||
| Consolidated sales from mines | 554 | 836 | ||||||||||||||||
| Purchased gold | 1 | — | ||||||||||||||||
| Total gold sales, including purchases | 555 | 836 | ||||||||||||||||
| Average realized price per ounce | $ | 1,639 | $ | 1,466 | ||||||||||||||
|
MOLYBDENUM (millions of recoverable pounds) |
||||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
| Henderson (100%) | 17 | 19 | N/A | N/A | ||||||||||||||
| Climax (100%)d | 1 | — | N/A | N/A | ||||||||||||||
| North America (100%)a | 19 | 17 | N/A | N/A | ||||||||||||||
| Cerro Verde (53.56%) | 4 | 6 | N/A | N/A | ||||||||||||||
| Consolidated | 41 | 42 | 41 | 41 | ||||||||||||||
| Less noncontrolling interests | 2 | 3 | 2 | 2 | ||||||||||||||
| Net | 39 | 39 | 39 | 39 | ||||||||||||||
| Consolidated sales from mines | 41 | 41 | ||||||||||||||||
| Purchased molybdenum | — | — | ||||||||||||||||
| Total molybdenum sales, including purchases | 41 | 41 | ||||||||||||||||
| Average realized price per pound | $ | 15.39 | $ | 18.13 | ||||||||||||||
|
COBALT (millions of contained pounds) |
||||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||||
| Consolidated - Tenke Fungurume (56%)c | 12 | 12 | 11 | 13 | ||||||||||||||
| Less noncontrolling interests | 5 | 5 | 5 | 6 | ||||||||||||||
| Net | 7 | 7 | 6 | 7 | ||||||||||||||
| Average realized price per pound | $ | 8.40 | $ | 11.02 | ||||||||||||||
|
a. Amounts are net of Morenci's 15 percent joint venture partner's interest. |
||||||||||||||||||
|
b. Amounts are net of Grasberg's joint venture partner's interest, which varies in accordance with the terms of the joint venture agreement. |
||||||||||||||||||
|
c. Effective March 26, 2012, FCX's interest in Tenke Fungurume was reduced from 57.75 percent to 56 percent (prospectively). |
||||||||||||||||||
|
d. Results represent Climax's mining operations since the start of commercial production in May 2012. |
||||||||||||||||||
| FREEPORT-McMoRan COPPER & GOLD INC. | |||||||||||
| SELECTED OPERATING DATA (continued) | |||||||||||
| Three Months Ended | Six Months Ended | ||||||||||
| June 30, | June 30, | ||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||
| 100% North America Copper Mines | |||||||||||
|
Solution Extraction/Electrowinning (SX/EW) Operations |
|||||||||||
| Leach ore placed in stockpiles (metric tons per day) | 948,600 | 847,500 | 990,800 | 829,700 | |||||||
| Average copper ore grade (percent) | 0.21 | 0.24 | 0.22 | 0.24 | |||||||
| Copper production (millions of recoverable pounds) | 210 | 201 | 428 | 383 | |||||||
|
Mill Operations |
|||||||||||
| Ore milled (metric tons per day) | 228,300 | 221,100 | 232,200 | 217,300 | |||||||
| Average ore grades (percent): | |||||||||||
| Copper | 0.37 | 0.38 | 0.37 | 0.37 | |||||||
| Molybdenum | 0.03 | 0.03 | 0.03 | 0.03 | |||||||
| Copper recovery rate (percent) | 85.3 | 84.3 | 82.6 | 83.2 | |||||||
| Production (millions of recoverable pounds): | |||||||||||
| Copper | 144 | 136 | 286 | 258 | |||||||
| Molybdenum | 9 | 10 | 19 | 17 | |||||||
| 100% South America Mining | |||||||||||
|
SX/EW Operations |
|||||||||||
| Leach ore placed in stockpiles (metric tons per day) | 242,700 | 241,200 | 219,500 | 251,600 | |||||||
| Average copper ore grade (percent) | 0.54 | 0.47 | 0.55 | 0.43 | |||||||
| Copper production (millions of recoverable pounds) | 113 | 113 | 231 | 203 | |||||||
|
Mill Operations |
|||||||||||
| Ore milled (metric tons per day) | 192,600 | 197,600 | 189,300 | 194,700 | |||||||
| Average ore grades: | |||||||||||
| Copper (percent) | 0.58 | 0.62 | 0.57 | 0.65 | |||||||
| Gold (grams per metric ton) | 0.08 | 0.11 | 0.09 | 0.11 | |||||||
| Molybdenum (percent) | 0.02 | 0.02 | 0.02 | 0.02 | |||||||
| Copper recovery rate (percent) | 88.6 | 89.3 | 88.9 | 90.4 | |||||||
| Production (recoverable): | |||||||||||
| Copper (millions of pounds) | 191 | 214 | 366 | 441 | |||||||
| Gold (thousands of ounces) | 18 | 24 | 37 | 48 | |||||||
| Molybdenum (millions of pounds) | 2 | 3 | 4 | 6 | |||||||
| 100% Indonesia Mining | |||||||||||
| Ore milled (metric tons per day) | 179,500 | 220,000 | 147,100 | 221,100 | |||||||
| Average ore grades: | |||||||||||
| Copper (percent) | 0.57 | 0.77 | 0.59 | 0.77 | |||||||
| Gold (grams per metric ton) | 0.58 | 0.79 | 0.68 | 0.84 | |||||||
| Recovery rates (percent): | |||||||||||
| Copper | 88.9 | 87.8 | 89.2 | 87.5 | |||||||
| Gold | 76.2 | 79.5 | 79.0 | 80.8 | |||||||
| Production (recoverable): | |||||||||||
| Copper (millions of pounds) | 173 | 282 | 296 | 566 | |||||||
| Gold (thousands of ounces) | 230 | 394 | 459 | 853 | |||||||
| 100% Africa Mining | |||||||||||
| Ore milled (metric tons per day) | 12,900 | 9,700 | 12,500 | 10,200 | |||||||
| Average ore grades (percent): | |||||||||||
| Copper | 3.45 | 3.67 | 3.53 | 3.54 | |||||||
| Cobalt | 0.36 | 0.41 | 0.37 | 0.40 | |||||||
| Copper recovery rate (percent) | 90.6 | 92.9 | 90.9 | 92.3 | |||||||
| Production (millions of pounds): | |||||||||||
| Copper (recoverable) | 79 | 66 | 159 | 133 | |||||||
| Cobalt (contained) | 6 | 6 | 12 | 12 | |||||||
| 100% Henderson Molybdenum Mine | |||||||||||
| Ore milled (metric tons per day) | 22,000 | 22,000 | 20,900 | 22,700 | |||||||
| Average molybdenum ore grade (percent) | 0.22 | 0.24 | 0.24 | 0.24 | |||||||
| Molybdenum production (millions of recoverable pounds) | 8 | 9 | 17 | 19 | |||||||
| FREEPORT-McMoRan COPPER & GOLD INC. | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||
| (In Millions, Except Per Share Amounts) | ||||||||||||||||||||
| Revenues | $ | 4,475 | a | $ | 5,814 | a | $ | 9,080 | a | $ | 11,523 | a | ||||||||
| Cost of sales: | ||||||||||||||||||||
| Production and delivery | 2,622 | 2,557 | 5,050 | 4,934 | ||||||||||||||||
| Depreciation, depletion and amortization | 291 | 267 | 558 | 499 | ||||||||||||||||
| Total cost of sales | 2,913 | 2,824 | 5,608 | 5,433 | ||||||||||||||||
| Selling, general and administrative expenses | 97 | 107 | 201 | 221 | ||||||||||||||||
| Exploration and research expenses | 73 | 66 | 135 | 116 | ||||||||||||||||
| Environmental obligations and shutdown costs | 81 |
b |
60 |
b |
91 |
b |
60 |
b |
||||||||||||
| Total costs and expenses | 3,164 | 3,057 | 6,035 | 5,830 | ||||||||||||||||
| Operating income | 1,311 |
c |
2,757 |
c |
3,045 |
c |
5,693 |
c |
||||||||||||
| Interest expense, net | (43 | ) |
d |
(74 | ) |
d |
(106 | ) |
d |
(172 | ) |
d |
||||||||
| Losses on early extinguishment of debt | — | (61 | ) | (168 | ) | (68 | ) | |||||||||||||
| Other income, net | 51 | 2 | 38 | 12 | ||||||||||||||||
| Income before income taxes and equity in | ||||||||||||||||||||
| affiliated companies' net (losses) earnings | 1,319 | 2,624 | 2,809 | 5,465 | ||||||||||||||||
| Provision for income taxes | (422 | ) | (906 | ) | (913 | ) | (1,890 | ) | ||||||||||||
| Equity in affiliated companies' net (losses) earnings | (3 | ) | 8 | (1 | ) | 12 | ||||||||||||||
| Net income | 894 | 1,726 | 1,895 | 3,587 | ||||||||||||||||
| Net income attributable to noncontrolling interests | (184 | ) | (358 | ) | (421 | ) | (720 | ) | ||||||||||||
| Net income attributable to FCX common stockholders | $ | 710 |
a,b,c |
$ | 1,368 |
a,b,c |
$ | 1,474 |
a,b,c |
$ | 2,867 |
a,b,c |
||||||||
| Net income per share attributable to FCX | ||||||||||||||||||||
| common stockholders: | ||||||||||||||||||||
| Basic | $ | 0.75 | $ | 1.44 | $ | 1.55 | $ | 3.03 | ||||||||||||
| Diluted | $ | 0.74 | $ | 1.43 | $ | 1.55 | $ | 3.00 | ||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||
| Basic | 949 | 947 | 949 | 947 | ||||||||||||||||
| Diluted | 953 | 956 | 954 | 956 | ||||||||||||||||
| Dividends declared per share of common stock | $ | 0.3125 | $ | 0.75 | $ | 0.625 | $ | 1.00 | ||||||||||||
a. Includes (unfavorable) favorable adjustments to provisionally priced copper sales recognized in the prior periods totaling $(75) million ($(31) million to net income attributable to common stockholders) in second-quarter 2012, $(47) million ($(23) million to net income attributable to common stockholders) in second-quarter 2011, $101 million ($43 million to net income attributable to common stockholders) for the first six months of 2012 and $(12) million ($(5) million to net income attributable to common stockholders) for the first six months of 2011.
b. Includes charges for adjustments to environmental obligations and related litigation reserves totaling $66 million ($53 million to net income) for the second quarter and first six months of 2012 and $49 million ($40 million to net income) for the second quarter and first six months of 2011.
c. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) of $14 million ($17 million to net income attributable to common stockholders) in second-quarter 2012, $13 million ($17 million to net income attributable to common stockholders) in second-quarter 2011, $(64) million ($(35) million to net income attributable to common stockholders) for the first six months of 2012 and $36 million ($18 million to net income attributable to common stockholders) for the first six months of 2011.
d. Consolidated interest expense, excluding capitalized interest, totaled $55 million in second-quarter 2012, $97 million in second-quarter 2011, $154 million for the first six months of 2012 and $220 million for the first six months of 2011. Lower interest expense primarily reflects the impact of the first-quarter 2012 refinancing transaction and other debt repayments during 2011.
| FREEPORT-McMoRan COPPER & GOLD INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (In Millions) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 4,508 | $ | 4,822 | ||||
| Trade accounts receivable | 1,052 | 892 | ||||||
| Other accounts receivable | 263 | 250 | ||||||
| Inventories: | ||||||||
| Mill and leach stockpiles | 1,466 | 1,289 | ||||||
| Materials and supplies, net | 1,377 | 1,354 | ||||||
| Product | 1,182 | 1,226 | ||||||
| Other current assets | 328 | 214 | ||||||
| Total current assets | 10,176 | 10,047 | ||||||
| Property, plant, equipment and development costs, net | 19,613 | 18,449 | ||||||
| Long-term mill and leach stockpiles | 1,848 | 1,686 | ||||||
| Long-term receivables | 860 | 675 | ||||||
| Intangible assets, net | 324 | 325 | ||||||
| Other assets | 868 | 888 | ||||||
| Total assets | $ | 33,689 | $ | 32,070 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 2,364 | $ | 2,297 | ||||
| Dividends payable | 299 | 240 | ||||||
| Current portion of reclamation and environmental obligations | 227 | 236 | ||||||
| Accrued income taxes | 48 | 163 | ||||||
| Current portion of debt | 4 | 4 | ||||||
| Total current liabilities | 2,942 | 2,940 | ||||||
| Deferred income taxes | 3,550 | 3,255 | ||||||
| Long-term debt, less current portion | 3,519 | 3,533 | ||||||
| Reclamation and environmental obligations, less current portion | 2,235 | 2,138 | ||||||
| Other liabilities | 1,553 | 1,651 | ||||||
| Total liabilities | 13,799 | 13,517 | ||||||
| Equity: | ||||||||
| FCX stockholders' equity: | ||||||||
| Common stock | 107 | 107 | ||||||
| Capital in excess of par value | 19,068 | 19,007 | ||||||
| Retained earnings | 1,426 | 546 | ||||||
| Accumulated other comprehensive loss | (448 | ) | (465 | ) | ||||
| Common stock held in treasury | (3,575 | ) | (3,553 | ) | ||||
| Total FCX stockholders' equity | 16,578 | 15,642 | ||||||
| Noncontrolling interests | 3,312 | 2,911 | ||||||
| Total equity | 19,890 | 18,553 | ||||||
| Total liabilities and equity | $ | 33,689 | $ | 32,070 | ||||
| FREEPORT-McMoRan COPPER & GOLD INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2012 | 2011 | |||||||
| (In Millions) | ||||||||
| Cash flow from operating activities: | ||||||||
| Net income | $ | 1,895 | $ | 3,587 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 558 | 499 | ||||||
| Stock-based compensation | 54 | 69 | ||||||
| Pension plans contributions | (75 | ) | — | |||||
| Charges for reclamation and environmental obligations, including accretion | 112 | 79 | ||||||
| Payments of reclamation and environmental obligations | (98 | ) | (88 | ) | ||||
| Losses on early extinguishment of debt | 168 | 68 | ||||||
| Deferred income taxes | 288 | 337 | ||||||
| Increase in long-term mill and leach stockpiles | (162 | ) | (98 | ) | ||||
| Other, net | 17 | (32 | ) | |||||
| (Increases) decreases in working capital and other tax payments: | ||||||||
| Accounts receivable | (182 | ) | 577 | |||||
| Inventories | (160 | ) | (346 | ) | ||||
| Other current assets | (11 | ) | — | |||||
| Accounts payable and accrued liabilities | (117 | ) | (184 | ) | ||||
| Accrued income taxes and other tax payments | (304 | ) | (429 | ) | ||||
| Net cash provided by operating activities | 1,983 | 4,039 | ||||||
| Cash flow from investing activities: | ||||||||
| Capital expenditures: | ||||||||
| North America copper mines | (297 | ) | (204 | ) | ||||
| South America | (392 | ) | (257 | ) | ||||
| Indonesia | (387 | ) | (301 | ) | ||||
| Africa | (297 | ) | (40 | ) | ||||
| Molybdenum | (153 | ) | (162 | ) | ||||
| Other | (21 | ) | (68 | ) | ||||
| Other, net | (4 | ) | 19 | |||||
| Net cash used in investing activities | (1,551 | ) | (1,013 | ) | ||||
| Cash flow from financing activities: | ||||||||
| Proceeds from debt | 3,016 | 23 | ||||||
| Repayments of debt | (3,171 | ) | (1,288 | ) | ||||
| Cash dividends paid: | ||||||||
| Common stock | (535 | ) | (949 | ) | ||||
| Noncontrolling interests | (38 | ) | (195 | ) | ||||
| Contributions from noncontrolling interests | — | 13 | ||||||
| Net payments for stock-based awards | (3 | ) | (3 | ) | ||||
| Excess tax benefit from stock-based awards | 7 | 22 | ||||||
| Other, net | (22 | ) | (9 | ) | ||||
| Net cash used in financing activities | (746 | ) | (2,386 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | (314 | ) | 640 | |||||
| Cash and cash equivalents at beginning of year | 4,822 | 3,738 | ||||||
| Cash and cash equivalents at end of period | $ | 4,508 | $ | 4,378 | ||||