Freeport-McMoRan Copper & Gold Inc. Reports Third-Quarter and Nine-Month 2013 Results

PHOENIX--()--Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX):

  • Net income attributable to common stock totaled $821 million, $0.79 per share for third-quarter 2013, compared with net income of $824 million, $0.86 per share, for third-quarter 2012. Net income attributable to common stock for the first nine months of 2013 totaled $2.0 billion, $1.96 per share, compared with $2.3 billion, $2.41 per share, for the first nine months of 2012.
  • Consolidated sales for third-quarter 2013 totaled 1.04 billion pounds of copper, 305 thousand ounces of gold, 23 million pounds of molybdenum and 16.5 million barrels of oil equivalents (MMBOE). For the year 2013, sales are expected to approximate 4.1 billion pounds of copper, 1.1 million ounces of gold, 92 million pounds of molybdenum and 37.5 MMBOE (for the period from June 1, 2013 to December 31, 2013), including 1.1 billion pounds of copper, 390 thousand ounces of gold, 21 million pounds of molybdenum and 16 MMBOE for fourth-quarter 2013.
  • Average realized prices for third-quarter 2013 were $3.28 per pound for copper (compared with $3.64 per pound in third-quarter 2012), $1,329 per ounce for gold (compared with $1,728 per ounce in third-quarter 2012) and $104.33 per barrel for oil (excluding impacts of unrealized losses on derivative contracts).
  • Operating cash flows totaled $1.9 billion (net of $294 million in working capital uses and changes in other tax payments) for third-quarter 2013 and $3.7 billion (net of $489 million in working capital uses and changes in other tax payments) for the first nine months of 2013. Based on current sales volume and cost estimates and assuming average prices of $3.25 per pound for copper, $1,300 per ounce for gold, $9.50 per pound for molybdenum and $110 per barrel for Brent crude oil in fourth-quarter 2013, operating cash flows for the year 2013 are expected to approximate $6 billion (net of $0.3 billion of net working capital uses and changes in other tax payments).
  • Capital expenditures totaled $1.6 billion for third-quarter 2013 and $3.6 billion for the first nine months of 2013. Capital expenditures are expected to approximate $5.5 billion for the year 2013, including $2.4 billion for major projects at mining operations and $1.5 billion for oil and gas operations for the period from June 1, 2013 to December 31, 2013.
  • FCX is taking steps to achieve significant reductions and deferrals of capital expenditures, operating, exploration and other costs following its July 2013 announcement of $1.9 billion in targeted reductions for 2013 and 2014. FCX is reviewing its portfolio of assets for opportunities to accelerate its deleveraging plans through potential asset sales, joint venture transactions or further adjustments to capital spending plans.
  • At September 30, 2013, consolidated cash totaled $2.2 billion and consolidated debt totaled $21.1 billion. During third-quarter 2013, FCX paid $1.4 billion in common stock dividends, which included $1.0 billion for a supplemental dividend of $1.00 per share paid on July 1, 2013.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported net income attributable to common stock of $821 million, $0.79 per share, for third-quarter 2013 and $2.0 billion, $1.96 per share, for the first nine months of 2013, compared with $824 million, $0.86 per share, for third-quarter 2012 and $2.3 billion, $2.41 per share, for the first nine months of 2012. FCX’s results for the 2013 periods included net charges for unrealized losses on oil and gas derivative contracts totaling $98 million to net income attributable to common stock, $0.09 per share, for third-quarter 2013 and $120 million to net income attributable to common stock, $0.12 per share, for the first nine months of 2013 (reflecting the period from June 1, 2013 to September 30, 2013).

James R. Moffett, Chairman of the Board; Richard C. Adkerson, Vice Chairman, and FCX President and Chief Executive Officer; and James C. Flores, Vice Chairman, and FM O&G President and Chief Executive Officer, said, "Our third quarter results reflect strong operating performance from our global mining business together with an impressive and significant contribution from our recently acquired oil and gas operations. We advanced several important capital projects during the quarter which position us for significant future growth. We remain focused on solid execution of our plans to generate strong margins and cash flows which will enable us to invest prudently in financially attractive growth opportunities, execute on our commitment to achieve previously announced debt reduction targets and provide attractive cash returns to shareholders. Our portfolio of operating assets generates significant current cash flows, and our large resource position provides long-term growth opportunities to build meaningful values for shareholders."

     

SUMMARY FINANCIAL DATA

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013

a

  2012
(in millions, except per share amounts)
Revenuesb $ 6,165 c $ 4,417 $ 15,036 c $ 13,497
Operating income $ 1,707 d $ 1,411 d $ 3,701 d,e $ 4,456 d
Net income attributable to common stockf $ 821 c,d $ 824 d,g $ 1,951 c,d,e,h,i $ 2,298 d,g,i
Diluted net income per share of common stock $ 0.79 c,d $ 0.86 d,g $ 1.96 c,d,e,h,i $ 2.41 d,g,i
Diluted weighted-average common shares outstanding 1,043 953 993 953
Operating cash flowsj $ 1,878 $ 526 $ 3,743 $ 2,509
Capital expenditures $ 1,645 $ 971 $ 3,623 $ 2,518
At September 30:
Cash and cash equivalents $ 2,219 $ 3,727 $ 2,219 $ 3,727
Total debt, including current portion $ 21,123 $ 3,523 $ 21,123 $ 3,523
 

a. Includes the results of Freeport-McMoRan Oil & Gas (FM O&G) beginning June 1, 2013.

b. Includes adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods. For further discussion, refer to the supplemental schedule "Derivative Instruments" on page IX, which is available on FCX's website, "www.fcx.com."

c. Includes charges for unrealized losses on oil and gas derivative contracts totaling $158 million ($98 million to net income attributable to common stock or $0.09 per share) in third-quarter 2013 and $194 million ($120 million to net income attributable to common stock or $0.12 per share) for the first nine months of 2013 (reflecting the four-month period from June 1, 2013 to September 30, 2013). For further discussion, refer to the supplemental schedule, "Derivative Instruments" on page IX, which is available on FCX's website, "www.fcx.com."

d. Includes net credits for adjustments to environmental obligations and related litigation reserves totaling $22 million ($14 million to net income attributable to common stock or $0.01 per share) in third-quarter 2013, $85 million ($68 million to net income attributable to common stock or $0.07 per share) in third-quarter 2012, $14 million ($7 million to net income attributable to common stock or $0.01 per share) for the first nine months of 2013 and $19 million ($16 million to net income attributable to common stock or $0.02 per share) for the first nine months of 2012.

e. The first nine months of 2013 include transaction and related costs totaling $76 million ($47 million to net income attributable to common stock or $0.05 per share) principally associated with FCX's oil and gas acquisitions.

f. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. Refer to the "Consolidated Statements of Income" on page V for a summary of net impacts from changes in these deferrals.

g. The 2012 periods include a net credit of $100 million, net of noncontrolling interests, ($0.11 per share) associated with adjustments to deferred income taxes. For further discussion, refer to the supplemental schedule, "Provision for Income Taxes," on page VIII, which is available on FCX's website, "www.fcx.com."

h. The first nine months of 2013 include gains associated with FCX's oil and gas acquisitions, including (i) $128 million to net income attributable to common stock ($0.13 per share) primarily related to FCX's preferred stock investment in and the subsequent acquisition of McMoRan Exploration Co. (MMR), and (ii) $183 million to net income attributable to common stock ($0.18 per share) associated with net reductions in FCX's deferred tax liabilities and deferred tax asset valuation allowances.

i. Includes losses on early extinguishment of debt totaling $36 million to net income attributable to common stock ($0.04 per share) for the first nine months of 2013 related to the termination of the acquisition bridge loan facilities and $149 million to net income attributable to common stock ($0.16 per share) for the first nine months of 2012 associated with the redemption of FCX's remaining 8.375% senior notes.

j. Includes net working capital uses and changes in other tax payments of $294 million for third-quarter 2013, $765 million for third-quarter 2012, $489 million for the first nine months of 2013 and $1.5 billion for the first nine months of 2012.

 
       
 

SUMMARY OPERATING DATA

Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013 a   2012
Copper (millions of recoverable pounds)
Production 1,063 938 2,952 2,658
Sales, excluding purchases 1,041 922 2,946 2,676
Average realized price per pound $ 3.28 $ 3.64 $ 3.31 $ 3.63
Site production and delivery costs per poundb $ 1.85 $ 2.03 $ 1.96 $ 2.00
Unit net cash costs per poundb $ 1.46 $ 1.62 $ 1.62 $ 1.46
Gold (thousands of recoverable ounces)
Production 327 204 713 707
Sales, excluding purchases 305 202 692 756
Average realized price per ounce $ 1,329 $ 1,728 $ 1,395 $ 1,666
Molybdenum (millions of recoverable pounds)
Production 25 20 71 61
Sales, excluding purchases 23 21 71 62
Average realized price per pound $ 11.21 $ 13.62 $ 12.12 $ 14.79
Oil Equivalents
Sales volumes:
MMBOE 16.5 21.5
MBOE per day 179 176
Cash operating margin per BOE:

Realized revenuesc

$ 80.93 $ 79.40
Less: Cash production costsc 16.80   16.76  
Cash operating marginc $ 64.13   $ 62.64  
 

a. Reflects the operating results of FM O&G beginning June 1, 2013.

b. 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 XIII, which is available on FCX's website, "www.fcx.com."

c. Cash operating margin for oil and gas operations reflects realized revenues less cash production costs. Realized revenues exclude unrealized gains (losses) on derivative contracts and cash production costs exclude accretion and other costs. For reconciliations of realized revenues and cash production costs per BOE to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedule “Product Revenues and Production Costs” beginning on page XIII, which is available on FCX's website, “www.fcx.com.”

 

Consolidated Sales Volumes

Third-quarter 2013 consolidated copper sales of 1.04 billion pounds were higher than third-quarter 2012 sales of 922 million pounds reflecting improved volumes throughout FCX's global mining operations, but were lower than the July 2013 estimate of 1.06 billion pounds because of lower than expected volumes in South America. Third-quarter 2013 consolidated gold sales of 305 thousand ounces were significantly higher than third-quarter 2012 sales of 202 thousand ounces reflecting anticipated higher ore grades in Indonesia, but were lower than the July 2013 estimate of 330 thousand ounces reflecting timing of shipments in Indonesia and lower South America production. Third-quarter 2013 consolidated molybdenum sales of 23 million pounds were higher than third-quarter 2012 sales of 21 million pounds and the July 2013 estimate of 22 million pounds.

Third-quarter 2013 copper and gold sales volumes also benefited from improved operational performance with the resumption of mining operations at PT Freeport Indonesia following the 38-day temporary suspension in second-quarter 2013.

Third-quarter 2013 sales from oil and gas operations of 16.5 MMBOE, including 11.5 million barrels of (MMBbls) of crude oil, 23.6 billion cubic feet (Bcf) of natural gas and 1.0 MMBbls of natural gas liquids (NGLs), were approximately 10 percent higher than the July 2013 estimate of 15 MMBOE, primarily reflecting strong performance in the Eagle Ford and Deepwater Gulf of Mexico (GOM) fields.

Consolidated sales for the year 2013 are expected to approximate 4.1 billion pounds of copper, 1.1 million ounces of gold, 92 million pounds of molybdenum and 37.5 MMBOE (for the period from June 1, 2013 to December 31, 2013), including 1.1 billion pounds of copper, 390 thousand ounces of gold, 21 million pounds of molybdenum and 16 MMBOE for fourth-quarter 2013.

Consolidated Unit Costs

Mining Unit Net Cash Costs. Consolidated average unit net cash costs (net of by-product credits) for FCX's copper mines of $1.46 per pound of copper in third-quarter 2013 were lower than unit net cash costs of $1.62 per pound in third-quarter 2012 primarily reflecting higher copper and gold volumes in Indonesia and ongoing cost control efforts.

Assuming average prices of $1,300 per ounce of gold and $9.50 per pound of molybdenum for fourth-quarter 2013 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for FCX's copper mines are expected to average approximately $1.58 per pound of copper for the year 2013. Quarterly unit net cash costs vary with fluctuations in sales volumes and average realized prices (primarily gold and molybdenum prices). Unit net cash costs are expected to decline in 2014, compared to the 2013 average, as FCX gains access to higher grade ore in Indonesia.

Oil and Gas Cash Production Costs per BOE. Cash production costs for oil and gas operations were $16.80 per BOE in third-quarter 2013 benefiting from strong production volumes and operational efficiencies. Based on current sales volume and cost estimates for fourth-quarter 2013, cash production costs per BOE are expected to approximate $17 per BOE for the period from June 1, 2013 to December 31, 2013.

MINING OPERATIONS

North America Copper Mines. FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. 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, the Sierrita, Bagdad, Morenci and Chino mines also produce molybdenum concentrates.

Operating and Development Activities. FCX has increased production from its North America copper mines in recent years and continues to evaluate a number of opportunities to invest in additional production capacity following positive exploration results. Future investments will be undertaken based on the results of economic and technical feasibility studies and taking into consideration market conditions.

At Morenci, FCX is expanding mining and milling capacity to process additional sulfide ores identified through exploratory drilling. The project is targeting incremental annual production of approximately 225 million pounds of copper in 2014 (an approximate 40 percent increase from 2012) through an increase in milling rates from 50,000 metric tons of ore per day to approximately 115,000 metric tons of ore per day and mining rates from 700,000 short tons per day to 900,000 short tons per day. The targeted increase in mining rates has been achieved and construction activities for the new mill and related facilities are being advanced. Construction is over 40 percent complete and the project is on track for completion in the first half of 2014. At September 30, 2013, approximately $0.8 billion had been incurred for this project, with approximately $0.8 billion remaining to be incurred.

Operating Data. Following is summary consolidated operating data for the North America copper mines for the third quarters and first nine months of 2013 and 2012:

       
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2012 2013   2012
Copper (millions of recoverable pounds)
Production 354 337 1,046 1,005
Sales 363 331 1,088 1,030
Average realized price per pound $ 3.27 $ 3.58 $ 3.37 $ 3.66
 
Molybdenum (millions of recoverable pounds)
Productiona 9 8 26 27
 
Unit net cash costs per pound of copperb:
Site production and delivery, excluding adjustments $ 2.00 $ 1.97 $ 2.03 $ 1.88
By-product credits (0.24 ) (0.32 ) (0.25 ) (0.37 )
Treatment charges 0.10   0.12   0.10   0.12  
Unit net cash costs $ 1.86   $ 1.77   $ 1.88   $ 1.63  
 

a. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at the North America copper mines.

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page XIII, which is available on FCX's website, "www.fcx.com."

 

North America's consolidated copper sales volumes of 363 million pounds in third-quarter 2013 were higher than third-quarter 2012 sales of 331 million pounds. Sales from the North America copper mines are expected to approximate 1.44 billion pounds of copper for the year 2013, compared with 1.35 billion pounds in 2012. North America copper production is expected to continue to improve in 2014 following the completion of the Morenci mill expansion project.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.86 per pound of copper in third-quarter 2013 were higher than unit net cash costs of $1.77 per pound in third-quarter 2012, primarily reflecting lower molybdenum credits. Average unit net cash costs (net of by-product credits) for the North America copper mines are expected to approximate $1.86 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average molybdenum price of $9.50 per pound for fourth-quarter 2013.

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 the Candelaria and Ojos del Salado mining complex. All operations in South America are consolidated in FCX's financial statements. In addition to copper, the Candelaria and Ojos del Salado mines produce gold and silver, and the Cerro Verde mine produces molybdenum concentrates.

Development Activities. Construction activities associated with a large-scale expansion at Cerro Verde are in progress. Engineering is approximately 80 percent complete and earthworks have commenced. The project will 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. At September 30, 2013, approximately $1.1 billion had been incurred for this project, with approximately $3.5 billion remaining to be incurred. Project cost estimates, based on current labor contract rates, have been revised from $4.4 billion to $4.6 billion following advanced engineering and an updated cost review. Efforts are underway to mitigate cost escalation associated with the project.

FCX continues to evaluate a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results in recent years at El Abra indicate a significant sulfide resource, which could potentially support a major mill project. Future investments will be dependent on technical studies, economic factors and global copper market conditions.

Operating Data. Following is summary consolidated operating data for the South America mining operations for the third quarters and first nine months of 2013 and 2012:

       
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2012 2013   2012
Copper (millions of recoverable pounds)
Production 347 311 944 908
Sales 323 308 923 895
Average realized price per pound $ 3.30 $ 3.68 $ 3.30 $ 3.63
 
Gold (thousands of recoverable ounces)
Production 30 20 70 57
Sales 26 21 68 56
Average realized price per ounce $ 1,335 $ 1,736 $ 1,415 $ 1,678
 
Molybdenum (millions of recoverable pounds)
Productiona 4 2 8 6
 
Unit net cash costs per pound of copperb:
Site production and delivery, excluding adjustments $ 1.49 $ 1.63 $ 1.57 $ 1.58
By-product credits (0.22 ) (0.25 ) (0.25 ) (0.26 )
Treatment charges 0.16   0.17   0.17   0.16  
Unit net cash costs $ 1.43   $ 1.55   $ 1.49   $ 1.48  
 

a. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at Cerro Verde.

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedule, "Product Revenues and Production Costs," beginning on page XIII, which is available on FCX's website, "www.fcx.com."

South America's consolidated copper sales volumes of 323 million pounds in third-quarter 2013 were higher than third-quarter 2012 sales of 308 million pounds primarily reflecting increased production at Candelaria. While third-quarter 2013 sales exceeded the prior year quarter, sales were below the July 2013 estimates primarily because of lower production at Candelaria and El Abra and the timing of shipments from Cerro Verde. Sales from South America mining are expected to approximate 1.3 billion pounds of copper for the year 2013, compared with sales of 1.25 billion pounds of copper in 2012, primarily reflecting higher grade ore at Candelaria.

Average unit net cash costs (net of by-product credits) for South America mining of $1.43 per pound of copper in third-quarter 2013 were lower than unit net cash costs of $1.55 per pound in third-quarter 2012 primarily reflecting higher volumes and lower energy costs. Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $1.46 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming average prices of $1,300 per ounce of gold and $9.50 per pound of molybdenum for fourth-quarter 2013.

Indonesia Mining. Through its 90.64 percent owned and consolidated subsidiary PT Freeport Indonesia, FCX's assets include one of the world's largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT Freeport Indonesia operates a proportionately consolidated joint venture, which produces copper concentrates that contain significant quantities of gold and silver.

Development Activities. FCX has several projects in progress in the Grasberg minerals district related to the development of large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to ramp up over several years to produce approximately 240,000 metric tons of ore per day following the transition from the Grasberg open pit, currently anticipated to occur in 2017. Development of the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) mines is advancing to enable DMLZ to commence production in 2015 and the Grasberg Block Cave mine to commence production in 2017. Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $800 million per year ($630 million per year net to PT Freeport Indonesia).

Operating Data. Following is summary consolidated operating data for the Indonesia mining operations for the third quarters and first nine months of 2013 and 2012:

       
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2012 2013   2012
Copper (millions of recoverable pounds)
Production 253 199 611 495
Sales 237 195 593 512
Average realized price per pound $ 3.30 $ 3.72 $ 3.27 $ 3.64
 
Gold (thousands of recoverable ounces)
Production 297 182 640 641
Sales 278 178 620 691
Average realized price per ounce $ 1,330 $ 1,728 $ 1,393 $ 1,665
 
Unit net cash costs per pound of coppera:
Site production and delivery, excluding adjustments $ 2.30 $ 2.96 $ 2.74 $ 3.20
Gold and silver credits (1.65 ) (1.66 ) (1.52 ) (2.34 )
Treatment charges 0.23 0.22 0.23 0.21
Royalty on metals 0.11   0.13   0.12   0.13  
Unit net cash costs $ 0.99   $ 1.65   $ 1.57   $ 1.20  
 

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 XIII, which is available on FCX's website, "www.fcx.com."

 

Indonesia's third-quarter 2013 copper sales of 237 million pounds and gold sales of 278 thousand ounces were higher than third-quarter 2012 copper sales of 195 million pounds and gold sales of 178 thousand ounces resulting primarily from higher ore grades and increased mill rates. The ramp-up in production during third-quarter 2013 was in line with July 2013 estimates, with mill rates averaging 198,200 metric tons of ore per day. During third-quarter 2013, the Deep Ore Zone underground mine's rates averaged 47,600 metric tons of ore per day and are expected to reach 80,000 metric tons of ore per day by mid-2014.

As anticipated, ore grades improved from levels experienced in recent quarters and PT Freeport Indonesia expects to mine higher grade ores in 2014 through 2016 compared with average ore grades in 2012 and 2013.

At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold. Sales from Indonesia mining are expected to approximate 0.9 billion pounds of copper and 1.0 million ounces of gold for the year 2013, compared with 0.7 billion pounds of copper and 0.9 million ounces of gold for the year 2012. Sales from Indonesia mining are expected to increase in 2014 through 2016 as PT Freeport Indonesia gains access to higher grade ore.

A significant portion of PT Freeport Indonesia's costs are fixed and unit costs vary depending on production volumes. Indonesia's unit net cash costs (including gold and silver credits) of $0.99 per pound of copper in third-quarter 2013 were lower than unit net cash costs of $1.65 per pound in third-quarter 2012 reflecting higher volumes and lower operating costs.

Unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $1.46 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average gold price of $1,300 per ounce for fourth-quarter 2013. Indonesia mining's projected unit net cash costs would change by approximately $0.03 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 2013. Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on copper and gold volumes. Indonesia mining's unit net cash costs are expected to decline in future periods as it continues to gain access to higher grade ore.

During October 2013, PT Freeport Indonesia reached agreement with union officials on terms to be incorporated into its bi-annual Collective Labor Agreement. The terms provide for increased wages over the two-year period and enhanced pension and other benefits.

Africa Mining. Through its 56 percent owned and consolidated subsidiary Tenke Fungurume Mining S.A.R.L. (TFM), FCX operates the Tenke Fungurume (Tenke) minerals district 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. TFM completed its second phase expansion project in early 2013, which included optimizing the current plant and increasing mine, mill and processing capacity. The expanded mill has a design capacity of 14,000 metric tons of ore per day, enabling an increase in Tenke's copper production by an estimated 150 million pounds to over 430 million pounds per year. The expanded mill facility is performing well, with third-quarter 2013 average throughput rates of 14,500 metric tons per day. The addition of a second sulphuric acid plant is expected to be completed in 2016.

FCX continues to engage in exploration activities and metallurgical testing to evaluate the potential of the highly prospective minerals district at Tenke. These analyses are being incorporated in future plans for potential expansions of production capacity. 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 third quarters and first nine months of 2013 and 2012:

       
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2012 2013   2012
Copper (millions of recoverable pounds)
Production 109 91 351 250
Sales 118 88 342 239
Average realized price per pounda $ 3.19 $ 3.55 $ 3.22 $ 3.54
 
Cobalt (millions of contained pounds)
Production 8 8 19 20
Sales 6 8 17 19
Average realized price per pound $ 8.57 $ 8.24 $ 8.10 $ 8.36
 
Unit net cash costs per pound of copperb:
Site production and delivery, excluding adjustments $ 1.43 $ 1.63 $ 1.43 $ 1.54
Cobalt creditsc (0.27 ) (0.48 ) (0.26 ) (0.39 )
Royalty on metals 0.07   0.08   0.06   0.08  
Unit net cash costs $ 1.23   $ 1.23   $ 1.23   $ 1.23  
 

a. Includes point-of-sale transportation costs as negotiated in customer contracts.

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 XIII, which is available on FCX's website, "www.fcx.com."

c. Net of cobalt downstream processing and freight costs.

 

TFM's copper sales of 118 million pounds in third-quarter 2013 were higher than third-quarter 2012 copper sales of 88 million pounds, primarily reflecting increased mining and milling rates and higher ore grades. TFM's sales are expected to approximate 460 million pounds of copper and 24 million pounds of cobalt for the year 2013, compared with 336 million pounds of copper and 25 million pounds of cobalt for the year 2012.

During third-quarter 2013, TFM experienced several power interruptions, which impacted operating rates. While the situation has improved, TFM is working closely with its power provider and DRC authorities to address the situation.

Africa mining's unit net cash costs (net of cobalt credits) of $1.23 per pound of copper in third-quarter 2013 were consistent with third-quarter 2012 as lower cobalt credits were offset by higher volumes. Unit net cash costs (net of cobalt credits) for Africa mining are expected to approximate $1.24 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average cobalt price of $12 per pound for fourth-quarter 2013. Africa mining's projected unit net cash costs would change by approximately $0.02 per pound for each $2 per pound change in the average price of cobalt for fourth-quarter 2013.

Molybdenum Mines. FCX has two wholly owned molybdenum mines in North America - the Henderson underground mine and the Climax open-pit mine, both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrates, which are typically further processed into value-added molybdenum chemical products.

Operating Data. Following is summary consolidated operating data for the molybdenum mines for the third quarters and first nine months of 2013 and 2012:

       
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2012 2013   2012
Molybdenum production (millions of recoverable pounds)a 12 10 37 28
 
Unit net cash cost per pound of molybdenumb $ 7.15 $ 7.11 $ 7.08 $ 6.94
 

a. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at the molybdenum mines, and from the North and South America copper mines.

b. Unit net cash costs per pound of molybdenum for the 2013 periods reflect the results of the Henderson and Climax mines, and the 2012 periods reflect the results of only the Henderson mine as startup activities were still underway for the Climax mine. 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 XIII, which is available on FCX's website, "www.fcx.com."

 

Average unit net cash costs for the molybdenum mines of $7.15 per pound of molybdenum in third-quarter 2013 were similar to Henderson's unit net cash costs of $7.11 per pound in third-quarter 2012. Based on current sales volume and cost estimates, unit net cash costs for the molybdenum mines are expected to average approximately $7.15 per pound of molybdenum for the year 2013.

Market conditions for molybdenum have declined in 2013 resulting from weak demand in the metallurgical sector and increased supply. FCX will review market conditions and may make adjustments to its primary molybdenum production as market conditions warrant.

Mining 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 associated with mining operations is expected to approximate $185 million for the year 2013, compared to $251 million in 2012. Exploration activities will continue to focus primarily on the potential for future reserve additions in FCX's existing minerals districts.

OIL & GAS OPERATIONS

In late May and early June 2013, FCX completed acquisitions of Plains Exploration & Production Company (PXP) and MMR (collectively FM O&G), adding an attractive oil and gas portfolio to its global mining business. FCX's oil and gas operations provide exposure to energy markets with positive fundamentals, strong margins and cash flows and a large resource base with financially attractive exploration and development investment opportunities. The portfolio of assets includes significant oil production facilities and growth potential in the Deepwater GOM, strong oil production from the onshore Eagle Ford trend in Texas, established oil production facilities onshore and offshore California, large onshore resources in the Haynesville natural gas trend in Louisiana, and an industry leading position in the emerging shallow water, ultra-deep gas trend on the Shelf of the GOM and onshore in South Louisiana. More than 90 percent of FCX's oil and gas revenues are from oil and NGLs.

FM O&G follows the full cost method of accounting whereby all costs associated with oil and gas acquisition, exploration and development activities are capitalized. Capitalized costs, along with estimated future costs to develop proved reserves, are amortized to expense under the unit-of-production method using estimates of proved oil and natural gas reserves. The costs of unproved oil and gas properties are excluded from amortization until the properties are evaluated, at which time the related costs are subject to amortization. Under the full cost accounting rules, a "ceiling test" is conducted each quarter to review the carrying value of the oil and gas properties for impairment.

Financial and Operating Data. Following is summary financial and operating data for the oil and gas operations for third-quarter 2013 and the four-month period from June 1, 2013 to September 30, 2013:

       
Four Months From
Three Months Ended June 1, 2013 to
September 30, 2013 September 30, 2013
Financial Summary (in millions):
Realized revenuesa $ 1,333 $ 1,705
Less: Cash production costsa 277   360
Cash operating margin $ 1,056 $ 1,345
Capital expenditures $ 738 $ 928
Sales Volumes:
Oil (MMBbls) 11.5 14.9
Natural gas (Bcf) 23.6 31.3
NGLs (MMBbls) 1.0 1.3
MMBOE 16.5 21.5
Average Realizationsa:
Oil (per barrel) $ 104.33 $ 102.76
Natural gas (per MMbtu) $ 3.97 $ 3.94
NGLs (per barrel) $ 37.16 $ 36.70
Cash Operating Margin per BOEa:
Realized revenues $ 80.93 $ 79.40
Less: Cash production costs 16.80   16.76
Cash operating margin $ 64.13   $ 62.64
 

a. Cash operating margin for FCX's oil and gas operations reflects realized revenues less cash production costs. Realized revenues exclude unrealized gains (losses) on derivative contracts and cash production costs exclude accretion and other costs. For reconciliations of realized revenues and cash production costs to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedule “Product Revenues and Production Costs” beginning on page XIII, which is available on FCX's website, “www.fcx.com.”

 

Third-quarter 2013 realized revenues for oil and gas operations totaled $1.3 billion ($80.93 per BOE) and cash production costs totaled $277 million ($16.80 per BOE).

Third-quarter 2013 average realized price for oil was $104.33 per barrel. Excluding the impact of derivative contracts, the third-quarter 2013 average realized price for crude oil was $106.00 per barrel, or 97 percent of the average Brent crude oil price of $109.59 per barrel.

Third-quarter 2013 average realized price for natural gas was $3.97 per million British thermal units (MMBtu), compared to the New York Mercantile Exchange (NYMEX) gas price for the September 2013 contract of $3.58 per MMBtu. Excluding the impact of derivative contracts, the third-quarter 2013 average realized price for natural gas was $3.67 per MMBtu.

Following is a summary of sales volumes per day by region for oil and gas operations for third-quarter 2013 and the four-month period from June 1, 2013 to September 30, 2013:

       
Four Months From
Three Months Ended June 1, 2013 to
September 30, 2013 September 30, 2013
Sales Volumes (MBOE per day):
GOMa 73 71
Eagle Ford 46 45
California 39 38
Haynesville/Madden/Other 21 22
Total oil and gas operations 179 176
 

a. Includes sales from properties on the GOM Shelf and in the Deepwater GOM. Production from the GOM Shelf totaled 13 MBOE per day (18 percent of the GOM total) for both third-quarter 2013 and the four-month period from June 1, 2013 to September 30, 2013.

 

Third-quarter 2013 daily sales volumes averaged 179 MBOE, including 125 MBbls of crude oil per day, 256 MMcf of natural gas per day and 11 MBbls of NGLs per day. Production volumes were approximately 10 percent above the July 2013 estimate, reflecting strong performance from the Eagle Ford and Deepwater GOM and continued stable production from California. For fourth-quarter 2013, sales volumes from oil and gas operations are expected to average 175 MBOE per day, comprised of 70 percent oil, 24 percent natural gas and 6 percent NGLs.

Cash production costs averaged $16.80 per BOE in third-quarter 2013 and benefited from improved production performance and operational efficiency. Based on current sales volume and cost estimates for fourth-quarter 2013, cash production costs are expected to approximate $17 per BOE for the year 2013 (reflecting results beginning June 1, 2013).

Exploration, Operating and Development Activities. FCX's oil and gas business has significant proved, probable and possible reserves, and a large resource position with financially attractive organic growth opportunities. The portfolio includes a broad range of relatively low-risk development opportunities and high-potential exploration prospects. The business will be managed to reinvest its cash flows in projects with attractive rates of returns and risk profiles.

Capital expenditures for oil and gas operations approximated $0.7 billion for third-quarter 2013, including $221 million in Eagle Ford, $180 million in GOM (including GOM Shelf), $81 million in California and $86 million in the Ultra-deep Trend. Capital expenditures for oil and gas operations, which are expected to be funded by FM O&G's operating cash flows, are projected to approximate $1.5 billion for the period from June 1, 2013 to December 31, 2013, including $0.4 billion in the Deepwater GOM, $0.5 billion in Eagle Ford and $0.2 billion in the Ultra-deep Trend.

Gulf of Mexico. Multiple development and exploration opportunities have been identified in the Deepwater GOM that are expected to benefit from tieback opportunities to available production capacity at the FM O&G operated large-scale Holstein, Marlin and Horn Mountain deepwater production platforms. Third-quarter 2013 production performance benefited from successful well stimulation activities and lower than expected downtime. In third-quarter 2013, FM O&G conducted activities to prepare the platform rig at Holstein for drilling in 2014.

At the Lucius development in Keathley Canyon (in which FM O&G has a 23.33 percent working interest) the sixth planned well, which encountered approximately 600 net feet of oil pay in the Pliocene with all sands full to base, has been drilled and is currently being completed. The geologic results from the six wells drilled confirm a significant oil resource. During third-quarter 2013 the truss spar hull was anchored in place. The sanctioned development of Lucius is a subsea development consisting of a truss spar hull located in 7,200 feet of water with a topside capacity of 80 MBbls of oil per day and 450 MMcf of gas per day. First production is anticipated in the second half of 2014.

Eagle Ford. FM O&G has an attractive position in an oil and NGLs rich section of the Eagle Ford shale play, located in South Texas. Production from the field has grown significantly in recent years and averaged 46 MBOE per day in third-quarter 2013. At the end of third-quarter 2013, there were seven drilling rigs operating (of which four were operated by FM O&G) and 35 wells were drilled but waiting on completion or connection to pipelines. The current drilling program decreases the number of drilling rigs which FM O&G operates to three in fourth-quarter 2013.

California. Development plans are principally focused on maintaining stable production levels in the long established producing fields principally onshore California. Production averaged 39 MBOE per day in third-quarter 2013, with 95 percent from oil.

Haynesville. FM O&G has rights to a substantial natural gas resource, estimated to exceed five trillion cubic feet (Tcf), located in the Haynesville shale play in north Louisiana. Drilling activities in recent years have been significantly reduced as a result of low natural gas prices. The field is currently being operated to maximize cash flows in a low natural gas price environment. FM O&G has flexibility to manage its drilling program and large resource to benefit from potentially higher future natural gas prices.

Ultra-deep Trend. FM O&G has a industry leading position in the emerging ultra-deep trend with a significant onshore and offshore lease acreage position with high quality prospects and the potential to develop a significant long-term, low-cost source of natural gas. Data from seven wells drilled to date indicate the presence of geologic formations that are analogous to productive formations in the Deepwater GOM and onshore in the Gulf Coast region. The near-term focus is on further defining the trend onshore. FM O&G currently has one onshore ultra-deep exploration prospect in-progress, and plans to complete and perform production tests on three wells in 2014, including one onshore well.

The Lomond North exploratory well in the Highlander area (in which FM O&G has a 72 percent working interest) is currently drilling below 26,800 feet towards a proposed total depth of 30,000 feet to evaluate Lower Wilcox and Cretaceous objectives below the salt weld. The Lineham Creek exploration well (in which FM O&G has a 36 percent working interest) located in Cameron Parish was sidetracked and drilled to 24,600 feet. The results of the Lineham Creek well are under review, and FM O&G plans to propose a completion operation in the sands above 24,000 feet under the Operating Agreement. During 2014, FCX also plans to complete the Davy Jones No. 2 well (in which FM O&G has a 75 percent working interest) located on South Marsh Island Block 234, and the Blackbeard West No.2 well (in which FM O&G has a 69 percent working interest) located on Ship Shoal Block 188.

Gulf of Mexico Shelf. During third-quarter 2013, FCX initiated a process to evaluate alternatives for its shelf oil and gas properties, including a possible divestment. Evaluation of these alternatives is ongoing.

CASH FLOWS, CASH and DEBT

Operating Cash Flows. FCX generated operating cash flows of $1.9 billion (net of $294 million in working capital uses and changes in other tax payments) for third-quarter 2013 and $3.7 billion (net of $489 million in working capital uses and changes in other tax payments) for the first nine months of 2013.

Based on current sales volume and cost estimates and assuming average prices of $3.25 per pound of copper, $1,300 per ounce of gold, $9.50 per pound of molybdenum, and $110 per barrel of Brent crude oil for fourth-quarter 2013, FCX's consolidated operating cash flows are estimated to approximate $6 billion (net of $0.3 billion in net working capital uses and changes in other tax payments) for the year 2013. The impact of price changes during fourth-quarter 2013 on operating cash flows would approximate $90 million for each $0.10 per pound change in the average price of copper, $15 million for each $50 per ounce change in the average price of gold, $15 million for each $2 per pound change in the average price of molybdenum and $30 million for each $5 per barrel increase in the price of Brent crude oil.

Capital Expenditures. Capital expenditures totaled $1.6 billion for third-quarter 2013 and $3.6 billion for the first nine months of 2013, including capital expenditures for oil and gas operations totaling $0.7 billion for the third-quarter and $0.9 billion for the four-month period from June 1, 2013 to September 30, 2013.

Capital expenditures are currently expected to approximate $5.5 billion for the year 2013, including $2.4 billion for major projects at mining operations and $1.5 billion for oil and gas operations (for the period from June 1, 2013 to December 31, 2013). Major projects at mining operations for the year 2013 primarily include the expansions at Cerro Verde and Morenci and underground development activities at Grasberg. Capital expenditures for FCX's oil and gas operations are expected to be funded by its operating cash flows.

FCX has taken steps during 2013 to reduce or defer capital expenditures in response to market conditions. Capital spending plans remain under review and will be revised as market conditions warrant.

Cash. Following is a summary of cash available to the parent company, net of noncontrolling interests' share, taxes and other costs at September 30, 2013 (in billions):

   
Cash at domestic companies $ 0.1
Cash at international operations 2.1  
Total consolidated cash and cash equivalents 2.2
Less: Noncontrolling interests' share (0.8 )
Cash, net of noncontrolling interests' share 1.4
Less: Withholding taxes and other (0.1 )
Net cash available $ 1.3  
 

Debt. Following is a summary of total debt and related weighted-average interest rates at September 30, 2013:

     
Weighted-
September 30, 2013 Average
(in billions) Interest Rate
Acquisition-related debt $ 10.5

a

3.1%
Assumed debt of PXP and MMR 7.1 7.0%
FCX's previously existing debt 3.5   3.5%
$ 21.1   4.4%
 

a.  FCX used the proceeds from the issuance of $6.5 billion of senior notes and a $4.0 billion bank term loan to finance the acquisitions of PXP and MMR and repay certain PXP debt.

 

FCX is targeting reductions in total debt to $12 billion over the next three years. FCX will continue to review its portfolio of assets and will consider opportunities to accelerate its deleveraging plans through potential asset sales, joint venture transactions or further adjustments to capital spending plans.

Upon closing of the PXP acquisition, FCX replaced its revolving credit facility that was scheduled to expire in March 2016 with a new $3.0 billion senior unsecured revolving credit facility, which is available through May 2018. At September 30, 2013, FCX had no borrowings outstanding and $46 million of letters of credit issued under its revolving credit facility, resulting in availability of approximately $3.0 billion.

On October 15, 2013, FCX announced its intent to redeem the $0.3 billion of MMR's outstanding 11.875% Senior Notes due 2014 on November 15, 2013. Holders will receive the principal amount together with accrued and unpaid interest to the redemption date.

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 paid common stock dividends of $2.0 billion in the first nine months of 2013, which included $1.0 billion for a supplemental dividend of $1.00 per share paid on July 1, 2013.

FCX's current annual dividend rate for its common stock is $1.25 per share. On September 25, 2013, FCX's Board of Directors (the Board) declared a regular quarterly dividend of $0.3125 per share, which will be paid on November 1, 2013. The declaration of dividends is at the discretion of the Board and will depend upon FCX's financial results, cash requirements, future prospects and other factors deemed relevant by the Board.

FCX intends to continue to maintain a strong financial position, with a focus on reducing debt while continuing to invest in attractive growth projects and providing 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 third-quarter 2013 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, November 22, 2013.

FCX is a premier U.S.-based natural resource company with an industry leading global portfolio of mineral assets, significant oil and gas resources and a growing production profile. FCX is the world's largest publicly traded copper producer.

FCX's portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world's largest copper and gold deposits; 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; the Tenke Fungurume minerals district in the DRC; and significant oil and natural gas assets in North America, including reserves in the Deepwater GOM, onshore and offshore California and in the Eagle Ford and Haynesville shale plays, and an industry leading position in the emerging shallow water, ultra-deep gas trend on the Shelf of the GOM and onshore in South Louisiana. 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 projections or expectations relating to ore grades and milling rates, production and sales volumes, unit net cash costs, operating cash flows, capital expenditures, exploration efforts and results, development and production activities and costs, liquidity, tax rates, the impact of copper, gold, molybdenum, cobalt, oil and gas price changes, the impact of derivative positions, the impact of deferred intercompany profits on earnings, reserve estimates, future dividend payments and potential share purchases. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “intends,” “likely,” “will,” “should,” “to be," ”potential" and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration of dividends is at the discretion of FCX's 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 demand for, and prices of, copper, gold, molybdenum, cobalt, oil and gas, mine sequencing, production rates, drilling results, 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, labor relations, the ability to retain current or future lease acreage rights, unanticipated hazards for which we have limited or no insurance coverage, failure of third party partners to fulfill their capital and other commitments, adverse conditions that could lead to structural or mechanical failures or increased costs, changes in reserve estimates, currency translation risks, risks associated with the integration of recently acquired oil and gas operations, industry risks, regulatory changes, political risks, weather- and climate-related risks, environmental risks, litigation results, 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, 2012, 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 FCX's 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, oil and gas realized revenues, cash production costs and cash operating margin, which are not recognized under generally accepted accounting principles in the U.S. As required by SEC Regulation G, reconciliations of these measures to amounts reported in FCX's consolidated financial statements are in the supplemental schedules of this press release, which are also available on FCX's website, "www.fcx.com."

 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED MINING OPERATING DATA
           
Three Months Ended September 30,
Production Sales

COPPER (millions of recoverable pounds)

2013 2012 2013 2012
(FCX's net interest in %)

North America

Morenci (85%)a 137 136 141 132
Bagdad (100%) 56 51 56 49
Safford (100%) 38 37 39 40
Sierrita (100%) 47 38 47 38
Miami (100%) 15 14 16 15
Chino (100%) 36 39 39 35
Tyrone (100%) 24 21 24 21
Other (100%) 1 1   1 1
Total North America 354 337   363 331
 

South America

Cerro Verde (53.56%) 147 153 133 155
El Abra (51%) 81 85 84 74
Candelaria/Ojos del Salado (80%) 119 73   106 79
Total South America 347 311   323 308
 

Indonesia

Grasberg (90.64%)b 253 199   237 195
 

Africa

Tenke Fungurume (56%) 109 91   118 88
 
Consolidated 1,063 938   1,041 922
Less noncontrolling interests 203 186   198 181
Net 860 752   843 741
 
Consolidated sales from mines 1,041 922
Purchased copper 79 45
Total copper sales, including purchases 1,120 967
 
Average realized price per pound $ 3.28 $ 3.64
 

GOLD (thousands of recoverable ounces)

(FCX's net interest in %)
North America (100%)

2

1 3
South America (80%) 30 20 26 21
Indonesia (90.64%)b 297 182   278 178
Consolidated 327 204   305 202
Less noncontrolling interests 34 21   31 21
Net 293 183   274 181
 
Average realized price per ounce $ 1,329 $ 1,728
 

MOLYBDENUM (millions of recoverable pounds)

(FCX's net interest in %)
Henderson (100%) 7 9 N/A N/A
Climax (100%) 5 1 N/A N/A
North America copper mines (100%)a 9 8 N/A N/A
Cerro Verde (53.56%) 4 2   N/A N/A
Consolidated 25 20   23 21
Less noncontrolling interests 2 1   1 1
Net 23 19   22 20
 
Average realized price per pound $ 11.21 $ 13.62
 

COBALT (millions of contained pounds)

(FCX's net interest in %)
Consolidated - Tenke Fungurume (56%) 8 8   6 8
Less noncontrolling interests 3 4   3 3
Net 5 4   3 5
 
Average realized price per pound $ 8.57 $ 8.24
 

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.

 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED MINING OPERATING DATA (continued)
         
Nine Months Ended September 30,
Production Sales

COPPER (millions of recoverable pounds)

2013 2012 2013 2012
(FCX's net interest in %)

North America

Morenci (85%)a 411 395 429 405
Bagdad (100%) 157 147 161 150
Safford (100%) 111 129 119 135
Sierrita (100%) 130 120 132 127
Miami (100%) 43 51 45 54
Chino (100%) 119 99 126 94
Tyrone (100%) 71 61 72 62
Other (100%) 4 3 4 3
Total North America 1,046 1,005 1,088 1,030
 

South America

Cerro Verde (53.56%) 405 443 391 440
El Abra (51%) 255 249 256 240
Candelaria/Ojos del Salado (80%) 284 216 276 215
Total South America 944 908 923 895
 

Indonesia

Grasberg (90.64%)b 611 495 593 512
 

Africa

Tenke Fungurume (56%) 351 250 342 239
 
Consolidated 2,952 2,658 2,946 2,676
Less noncontrolling interests 581 526 568 517
Net 2,371 2,132 2,378 2,159
 
Consolidated sales from mines 2,946 2,676
Purchased copper 182 97
Total copper sales, including purchases 3,128 2,773
 
Average realized price per pound $ 3.31 $ 3.63
 

GOLD (thousands of recoverable ounces)

(FCX's net interest in %)
North America (100%) 3 9 4 9
South America (80%) 70 57 68 56
Indonesia (90.64%)b 640 641 620 691
Consolidated 713 707 692 756
Less noncontrolling interests 74 71 71 76
Net 639 636 621 680
 
Average realized price per ounce $ 1,395 $ 1,666
 

MOLYBDENUM (millions of recoverable pounds)

(FCX's net interest in %)
Henderson (100%) 22 26 N/A N/A
Climax (100%) 15 2 c N/A N/A
North America copper mines (100%)a 26 27 N/A N/A
Cerro Verde (53.56%) 8 6 N/A N/A
Consolidated 71 61 71 62
Less noncontrolling interests 4 3 3 3

Net

67 58 68 59
 
Average realized price per pound $ 12.12 $ 14.79
 

COBALT (millions of contained pounds)

(FCX's net interest in %)
Consolidated - Tenke Fungurume (56%) 19 20 17 19

Less noncontrolling interests

8 9 8 8
Net 11 11 9 11
 
Average realized price per pound $ 8.10 $ 8.36
 

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. Includes results from the Climax mine since the start of commercial operations in May 2012.

 
 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED MINING OPERATING DATA (continued)
         
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
100% North America Copper Mines

Solution Extraction/Electrowinning (SX/EW) Operations

Leach ore placed in stockpiles (metric tons per day) 993,100 922,100 1,015,400 967,700
Average copper ore grade (percent) 0.22 0.22 0.22 0.22
Copper production (millions of recoverable pounds) 216 211 651 639
 

Mill Operations

Ore milled (metric tons per day) 247,400 242,700 246,300 235,700
Average ore grades (percent):
Copper 0.38 0.37 0.39 0.37
Molybdenum 0.03 0.03 0.03 0.03
Copper recovery rate (percent) 86.3 85.4 84.6 83.5
Production (millions of recoverable pounds):

Copper

163 150 469 436
Molybdenum 9 8 26 27
 
100% South America Mining

SX/EW Operations

Leach ore placed in stockpiles (metric tons per day) 287,500 248,100 276,600 229,100
Average copper ore grade (percent) 0.48 0.55 0.49 0.55
Copper production (millions of recoverable pounds) 110 115 329 346
 

Mill Operations

Ore milled (metric tons per day) 189,900 191,400 191,000 190,000
Average ore grades:
Copper (percent) 0.71 0.59 0.62 0.58
Gold (grams per metric ton) 0.14 0.09 0.11 0.09
Molybdenum (percent) 0.03 0.02 0.02 0.02
Copper recovery rate (percent) 90.5 90.7 90.4 89.5
Production (recoverable):
Copper (millions of pounds) 237 196 615 562
Gold (thousands of ounces) 30 20 70 57
Molybdenum (millions of pounds) 4 2 8 6
 
100% Indonesia Mining
Ore milled (metric tons per day)a
Grasberg open pit 149,000 136,500 122,700 116,700
DOZ underground mine 47,600 48,300 45,900 42,300
Big Gossan underground mine 1,600 1,900 2,000 1,400
Total 198,200 186,700 170,600 160,400
Average ore grades:
Copper (percent) 0.74 0.63 0.71 0.61
Gold (grams per metric ton) 0.65 0.46 0.57 0.60
Recovery rates (percent):
Copper 89.7 87.7 89.1 88.6
Gold 80.3 71.4 76.3 76.7
Production (recoverable):
Copper (millions of pounds) 253 199 611 495
Gold (thousands of ounces) 297 182 640 641
 
100% Africa Mining
Ore milled (metric tons per day) 14,500 13,600 14,700 12,900
Average ore grades (percent):
Copper 3.94 3.60 4.32 3.56
Cobalt 0.43 0.38 0.36 0.37
Copper recovery rate (percent) 91.6 92.9 91.7 91.6
Production (millions of pounds):
Copper (recoverable) 109 91 351 250
Cobalt (contained) 8 8 19 20
 
100% Molybdenum Minesb
Ore milled (metric tons per day) 34,700 21,400 36,500 21,100
Average molybdenum ore grade (percent) 0.20 0.23 0.19 0.23
Molybdenum production (millions of recoverable pounds) 12 9 37 26
 

a. Amounts represent the approximate average daily throughput processed at PT Freeport Indonesia's mill facilities from each producing mine.

b. The 2013 periods reflect the results of the Henderson and Climax mines; the 2012 periods reflect the results of only the Henderson mine, as startup activities were still underway for the Climax mine.

 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OIL AND GAS OPERATING DATA
           

Four Months From

Three Months Ended

June 1, 2013 to

September 30, 2013

September 30, 2013

Sales Volumes

(in MMBbls, Bcf and MMBOE)a

Sales per Day

(in MBbls, MMcf and MBOE)a

Sales Volumes

(in MMBbls, Bcf and MMBOE)a

    Sales per Day

(in MBbls, MMcf and MBOE)a

 
FCX CONSOLIDATED OIL AND GAS OPERATIONS
Oil (barrels) 11.5 125 14.9 122
Natural gas (cubic feet) 23.6 256 31.3 258
Natural gas liquids (NGLs, in barrels) 1.0 11 1.3 11
Barrels of oil equivalents (BOE) 16.5 179 21.5 176
Cash operating margin per BOEb:
Realized revenue $ 80.93 $ 79.40
Less: Cash production costs 16.80 16.76
Cash operating margin $ 64.13 $ 62.64
Depreciation, depletion and amortization per BOE $ 34.15

 

$ 34.07
Capital expenditures (in millions) $ 738 c $ 928 c
 
GULF OF MEXICO (GOM)d
Oil (barrels) 4.9 54 6.3 52
Natural gas (cubic feet) 7.7 84 10.1 84
NGLs (barrels) 0.5 5 0.6 5
BOE 6.7 73 8.6 71
Average realized price per BOEb $ 89.05 $ 86.61
Cash production costs per BOEb $ 14.00 $ 14.01
Capital expenditures (in millions) $ 266

c

$ 360 c
 
EAGLE FORD
Oil (barrels) 3.1 33 4.0 33
Natural gas (cubic feet) 3.7 40 4.8 40
NGLs (barrels) 0.5 6 0.7 6
BOE 4.2 46 5.5 45
Average realized price per BOEb $ 83.47 $ 81.95
Cash production costs per BOEb $ 12.30 $ 12.42
Capital expenditures (in millions) $ 221 c $ 299 c
 
CALIFORNIA
Oil (barrels) 3.4 37 4.5 37
Natural gas (cubic feet) 0.6 7 0.8 6
BOE 3.6 39 4.7 38
Average realized price per BOEb $ 98.75 $ 97.71
Cash production costs per BOEb $ 30.22 $ 30.40
Capital expenditures (in millions) $ 81 c $ 110 c
 
HAYNESVILLE/MADDEN/OTHER
Oil (barrels) 0.1 1 0.1 e
Natural gas (cubic feet) 11.6 125 15.6 128
BOE 2.0 21 2.7 22
Average realized price per BOEb $ 22.08 $ 22.52
Cash production costs per BOEb $ 11.58 $ 10.38
Capital expenditures (in millions) $ 24 c $ 31 c
 

a. MMBbls = million barrels; MBbls = thousand barrels; Bcf = billion cubic feet; MMcf = million cubic feet; MMBOE = million BOE; MBOE = thousand BOE

b. Cash operating margin for FCX's oil and gas operations reflects realized revenues less cash production costs. Realized revenues exclude unrealized gains (losses) on derivative contracts and cash production costs exclude accretion and other costs. In addition, derivative instruments for FCX's oil and gas operations are managed on a consolidated basis; accordingly, the average realized price per BOE by region does not reflect adjustments for derivative contracts. For reconciliations of average realized price and cash production costs per BOE to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedule “Product Revenues and Production Costs” beginning on page XIII, which is available on FCX's website, “www.fcx.com.”

c. Consolidated capital expenditures for oil and gas operations reflect total spending and include amounts totaling $146 million in third-quarter 2013 and $128 million for the four-month period from June 1, 2013 to September 30, 2013, which are not specifically allocated to the regions; capital expenditures by region reflect amounts incurred for the respective periods.

d. Includes properties on the Shelf and in the Deepwater GOM.

e. Rounds to less than 1 MBbl per day.

 
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
         
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
(In Millions, Except Per Share Amounts)
Revenues $ 6,165 a,b $ 4,417 a $ 15,036 a,b $ 13,497 a
Cost of sales:
Production and delivery 3,332 2,592 8,904 7,642
Depreciation, depletion and amortization 919   298   1,778   856  
Total cost of sales 4,251 2,890 10,682 8,498
Selling, general and administrative expenses 158 110 457 c 311
Mining exploration and research expenses 57 79 173 214
Environmental obligations and shutdown costs (8 ) d (73 ) d 23   d 18   d
Total costs and expenses 4,458   3,006   11,335   9,041  
Operating income 1,707 1,411 3,701 4,456
Interest expense, net (162 ) e (42 ) e (351 ) e (148 ) e
Losses on early extinguishment of debt (45 ) (168 )
Gain on investment in MMR 128 f
Other income (expense), net 3   (15 ) 13   23  

Income before income taxes and equity in affiliated companies' net earnings (losses)

1,548 1,354 3,446 4,163
Provision for income taxes (499 ) (215 ) g (967 ) f (1,128 ) g
Equity in affiliated companies' net earnings (losses) (1 ) 1   3    
Net income 1,048 1,140 2,482 3,035
Net income attributable to noncontrolling interests (227 ) (316 ) g (531 ) (737 ) g
Net income attributable to FCX common stock $ 821   h $ 824   h $ 1,951   h $ 2,298   h
 
Net income per share attributable to FCX common stock:
Basic $ 0.79   $ 0.87   $ 1.97   $ 2.42  
Diluted $ 0.79   $ 0.86   $ 1.96   $ 2.41  
 
Weighted-average common shares outstanding:
Basic 1,038   949   989   949  
Diluted 1,043   953   993   953  
 
Dividends declared per share of common stock $ 0.3125   $ 0.3125   $ 1.9375   $ 0.9375  
 

a. Includes favorable (unfavorable) adjustments to provisionally priced copper sales recognized in prior periods totaling $73 million ($35 million to net income attributable to common stock) in third-quarter 2013, $24 million ($12 million to net income attributable to common stock) in third-quarter 2012, $(26) million ($(12) million to net income attributable to common stock) for the first nine months of 2013 and $101 million ($43 million to net income attributable to common stock) for the first nine months of 2012. For further discussion, refer to the supplemental schedule, "Derivative Instruments" on page IX.

b. Includes charges for unrealized losses on oil and gas derivative contracts totaling $158 million ($98 million to net income attributable to common stock) in third-quarter 2013 and $194 million ($120 million to net income attributable to common stock) for the first nine months of 2013 (reflecting the four-month period from June 1, 2013, to September 30, 2013). For further discussion, refer to the supplemental schedule, "Derivative Instruments" on page IX.

c. The first nine months of 2013 include charges totaling $76 million ($47 million to net income attributable to common stock) for transaction and related costs principally associated with oil and gas acquisitions.

d. Includes net credits for adjustments to environmental obligations and related litigation reserves totaling $22 million ($14 million to net income attributable to common stockholders) for third-quarter 2013, $85 million ($68 million to net income attributable to common stockholders) for third-quarter 2012, $14 million ($7 million to net income attributable to common stockholders) for the first nine months of 2013 and $19 million ($16 million to net income attributable to common stockholders) for the first nine months of 2012.

e. Consolidated interest expense, excluding capitalized interest, totaled $223 million in third-quarter 2013, $56 million in third-quarter 2012, $465 million for the first nine months of 2013 and $210 million for the first nine months of 2012. Higher interest expense in the 2013 periods primarily reflected additional expense associated with acquisition-related debt.

f. The first nine months of 2013 include gains associated with the oil and gas acquisitions, including (i) $128 million to net income attributable to common stock primarily related to FCX's preferred stock investment in and the subsequent acquisition of MMR, and (ii) $183 million to net income attributable to common stock associated with net reductions in FCX's deferred tax liabilities and deferred tax asset valuation allowances.

g. The 2012 periods includes a net tax credit of $208 million ($108 million attributable to noncontrolling interests and $100 million to net income attributable to common stockholders) associated with adjustments to deferred income taxes. For further discussion, refer to the supplemental schedule, "Provision for Income Taxes" on page VIII.

h. 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) to net income attributable to common stock of $2 million in third-quarter 2013, $(34) million in third- quarter 2012, $28 million for the first nine months of 2013 and $(69) million for the first nine months of 2012. For further discussion, refer to the supplemental schedule, "Deferred Profits" on page X.

 
 
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
       
September 30, December 31,
2013 2012
(In Millions)
ASSETS
Current assets:
Cash and cash equivalents $ 2,219 $ 3,705
Trade accounts receivable 1,749 927
Other accounts receivable 480 702
Inventories:
Materials and supplies, net 1,762 1,504
Mill and leach stockpiles 1,744 1,672
Product 1,347 1,400
Other current assets 305   387  
Total current assets 9,606 10,297
Property, plant, equipment and development costs, net 46,647 20,999
Long-term mill and leach stockpiles 2,304 1,955
Goodwill 1,932
Other assets 2,109   2,189  
Total assets $ 62,598   $ 35,440  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,728 $ 2,708
Dividends payable 332 299
Current portion of reclamation and environmental obligations 257 241
Accrued income taxes 141 93
Current portion of debt 70   2  
Total current liabilities 4,528 3,343
Long-term debt, less current portion 21,053 3,525
Deferred income taxes 6,892 3,490
Reclamation and environmental obligations, less current portion 3,077 2,127
Other liabilities 1,774   1,644  
Total liabilities 37,324 14,129
 
Redeemable noncontrolling interest 720
 
Equity:
FCX stockholders' equity:
Common stock 117 107
Capital in excess of par value 22,092 19,119
Retained earnings 2,361 2,399
Accumulated other comprehensive loss (484 ) (506 )
Common stock held in treasury (3,681 ) (3,576 )
Total FCX stockholders' equity 20,405 17,543
Noncontrolling interests 4,149   3,768  
Total equity 24,554   21,311  
Total liabilities and equity $ 62,598   $ 35,440  
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
   
Nine Months Ended
September 30,
2013     2012
(In Millions)
Cash flow from operating activities:
Net income $ 2,482 $ 3,035
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 1,778 856
Net losses on oil and gas derivative contracts 205
Gain on investment in MMR (128 )
Stock-based compensation 94 77
Pension plan contributions (62 ) (114 )
Net charges for reclamation and environmental obligations, including accretion 98 64
Payments for reclamation and environmental obligations (166 ) (148 )
Losses on early extinguishment of debt 45 168
Deferred income taxes 169 223
Increase in long-term mill and leach stockpiles (348 ) (184 )
Other, net 65 71
(Increases) decreases in working capital and other tax payments, excluding amounts from acquisitions:
Accounts receivable 51 (603 )
Inventories (66 ) (581 )
Other current assets 162 (33 )
Accounts payable and accrued liabilities (596 ) 78
Accrued income taxes and other tax payments (40 ) (400 )
Net cash provided by operating activities 3,743   2,509  
 
Cash flow from investing activities:
Capital expenditures:
North America copper mines (795 ) (568 )
South America (734 ) (659 )
Indonesia (720 ) (624 )
Africa (155 ) (428 )
Molybdenum mines (128 ) (189 )
Oil and gas operations (928 )
Other (163 ) (50 )
Acquisition of PXP, net of cash acquired (3,465 )
Acquisition of MMR, net of cash acquired (1,628 )
Acquisition of cobalt chemical business, net of cash acquired (348 )
Other, net (24 ) (19 )
Net cash used in investing activities (9,088 ) (2,537 )
 
Cash flow from financing activities:
Proceeds from debt 11,229 3,023
Repayments of debt (4,816 ) (3,179 )
Redemption of MMR preferred stock (227 )
Cash dividends and distributions paid:
Common stock (1,957 ) (832 )
Noncontrolling interests (157 ) (76 )
Debt financing costs (113 ) (22 )
Net payments for stock-based awards (101 ) (3 )
Other, net 1   22  
Net cash provided by (used in) financing activities 3,859   (1,067 )
 
Net decrease in cash and cash equivalents (1,486 ) (1,095 )
Cash and cash equivalents at beginning of year 3,705   4,822  
Cash and cash equivalents at end of period $ 2,219   $ 3,727  

Contacts

Freeport-McMoRan Copper & Gold Inc.
Financial Contacts:
Kathleen L. Quirk, 602-366-8016
or
David P. Joint, 504-582-4203
or
Media Contact:
Eric E. Kinneberg, 602-366-7994

Sharing

Contacts

Freeport-McMoRan Copper & Gold Inc.
Financial Contacts:
Kathleen L. Quirk, 602-366-8016
or
David P. Joint, 504-582-4203
or
Media Contact:
Eric E. Kinneberg, 602-366-7994