Freeport-McMoRan Copper & Gold Inc. Reports First-Quarter 2013 Results

PHOENIX--(BUSINESS WIRE)-- Freeport-McMoRan Copper & Gold Inc. (NYS: FCX) :

  • Net income attributable to common stock for first-quarter 2013 was $648 million, $0.68 per share, compared with net income of $764 million, $0.80 per share, for first-quarter 2012.
  • Consolidated sales from mines for first-quarter 2013 totaled 954 million pounds of copper, 214 thousand ounces of gold and 25 million pounds of molybdenum, compared with 827 million pounds of copper, 288 thousand ounces of gold and 21 million pounds of molybdenum for first-quarter 2012.
  • Consolidated sales from mines for the year 2013 are expected to approximate 4.3 billion pounds of copper, 1.4 million ounces of gold and 92 million pounds of molybdenum, including 1.0 billion pounds of copper, 295 thousand ounces of gold and 23 million pounds of molybdenum for second-quarter 2013.
  • Consolidated unit net cash costs (net of by-product credits) averaged $1.57 per pound of copper for first-quarter 2013, compared with $1.26 per pound for first-quarter 2012. Based on current 2013 sales volume and cost estimates and assuming average prices of $1,400 per ounce for gold and $11 per pound for molybdenum for the remainder of 2013, consolidated unit net cash costs (net of by-product credits) are estimated to average approximately $1.45 per pound of copper for the year 2013.
  • Operating cash flows totaled $831 million(net of $430 million in working capital uses and changes in other tax payments) for first-quarter 2013, compared with $801 million (net of $720 million in working capital uses and changes in other tax payments) for first-quarter 2012. Excluding results of pending acquisitions, based on current sales volume and cost estimates and assuming average prices of $3.25 per pound for copper, $1,400 per ounce for gold and $11 per pound for molybdenum for the remainder of 2013, operating cash flows are estimated to approximate $5.5 billion (including $0.4 billion in net working capital sources and changes in other tax payments) for the year 2013.
  • Capital expenditures totaled $805 million for first-quarter 2013, compared with $707 million for first-quarter 2012. Other investing activities for first-quarter 2013 included $321 million (net of cash acquired) for payments by the Freeport Cobalt joint venture to fund the acquisition of a cobalt chemical refinery. Excluding amounts for pending acquisitions, capital expenditures are expected to approximate $4.4 billion for the year 2013, including $2.6 billion for major projects and $1.8 billion for sustaining capital.
  • FCX completed $10.5 billion in debt financings associated with the pending acquisitions of Plains Exploration & Production Company (PXP) and McMoRan Exploration Co. (MMR) consisting of $4.0 billion in bank term loans (which will be funded at closing of the transactions) and $6.5 billion of senior notes. The weighted-average interest rate of these financings approximates 3.1 percent. The acquisitions of PXP and MMR are expected to close in second-quarter 2013.
  • At March 31, 2013, consolidated cash totaled $9.6 billion and total debt totaled $10.1 billion.

Freeport-McMoRan Copper & Gold Inc. (NYS: FCX) reported first-quarter 2013 net income attributable to common stock of $648 million, $0.68 per share, compared with $764 million, $0.80 per share, for first-quarter 2012. First-quarter 2013 net income attributable to common stock included charges totaling $50 million, $0.05 per share, associated with debt extinguishment costs for the termination of the acquisition bridge loan facilities and for costs associated with pending acquisitions and the March 2013 cobalt chemical refinery acquisition. First-quarter 2012 net income attributable to common stock included a charge of $149 million, $0.16 per share, associated with debt extinguishment costs for the redemption of FCX's 8.375% senior notes.


James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer, said, "Our first-quarter results reflect our focus on strong and safe production, aggressive cost management and advancing financially attractive projects to grow our copper production, increase cash flows and provide strong returns for shareholders. We also completed attractive financing transactions during the quarter, providing low-cost debt to fund the pending oil and gas acquisitions. We look forward to completing the transactions in the second quarter and to executing our strategy of developing long-term resources to generate long-term value for shareholders through expanded investment opportunities."

SUMMARY FINANCIAL AND OPERATING DATA

  Three Months Ended
March 31,
  2013   2012
Financial Data (in millions, except per share amounts)
Revenuesa $ 4,583 $ 4,605
Operating income $ 1,355 b $ 1,734
Net income attributable to common stockc $ 648 b,d $ 764 d
Diluted net income per share of common stock $ 0.68 b,d $ 0.80 d
Diluted weighted-average common shares outstanding 953 955
Operating cash flows $ 831 e $ 801 e
Capital expenditures $ 805 $ 707
 
Mining Operating Data
Copper (millions of recoverable pounds)
Production 980 833
Sales, excluding purchases 954 827
Average realized price per pound $ 3.51 $ 3.82
Site production and delivery costs per poundf $ 1.94 $ 1.96
Unit net cash costs per poundf $ 1.57 $ 1.26
Gold (thousands of recoverable ounces)
Production 235 252
Sales, excluding purchases 214 288
Average realized price per ounce $ 1,606 $ 1,694
Molybdenum (millions of recoverable pounds)
Production 22 21
Sales, excluding purchases 25 21
Average realized price per pound $ 12.75 $ 15.34
 
a.

Includes the impact of adjustments to provisionally priced concentrate and cathode sales recognized in prior periods. Refer to the "Consolidated Statements of Income" on page III for a summary of the impacts.

b.

Includes charges of $14 million ($10 million to net income attributable to common stock or $0.01 per share) for costs associated with the pending acquisitions of PXP and MMR and for the March 2013 cobalt chemical refinery acquisition.

c.

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

d.

Includes losses on early extinguishment of debt totaling $45 million ($40 million to net income attributable to common stock or $0.04 per share) for first-quarter 2013 related to the termination of the acquisition bridge loan facilities and $168 million ($149 million to net income attributable to common stock or $0.16 per share) for first-quarter 2012 associated with the redemption of FCX's remaining 8.375% senior notes.

e.

Net of working capital uses and changes in other tax payments of $430 million for first-quarter 2013 and $720 million for first-quarter 2012.

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

OPERATIONS

Consolidated. First-quarter 2013 consolidated copper sales of 954 million pounds were higher than the January 2013 estimate of 940 million pounds (primarily reflecting higher production and sales from Africa) and also higher than first-quarter 2012 sales of 827 million pounds primarily because of higher production from Indonesia and Africa.

First-quarter 2013 consolidated gold sales of 214 thousand ounces were lower than the January 2013 estimate of 230 thousand ounces (primarily reflecting timing of shipments) and lower than first-quarter 2012 sales of 288 thousand ounces primarily because of anticipated lower ore grades in Indonesia.

First-quarter 2013 consolidated molybdenum sales of 25 million pounds were higher than the January 2013 estimate of 23 million pounds and first-quarter 2012 sales of 21 million pounds primarily because of stronger sales in the metallurgical and chemical sectors.

Consolidated sales from mines for the year 2013 are expected to approximate 4.3 billion pounds of copper, 1.4 million ounces of gold and 92 million pounds of molybdenum, including 1.0 billion pounds of copper, 295 thousand ounces of gold and 23 million pounds of molybdenum for second-quarter 2013.

As anticipated, consolidated average unit net cash costs (net of by-product credits) of $1.57 per pound of copper in first-quarter 2013 were higher than unit net cash costs of $1.26 per pound in first-quarter 2012 reflecting lower by-product credits.

Assuming average prices of $1,400 per ounce of gold and $11 per pound of molybdenum for the remainder of 2013 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 $1.45 per pound of copper for the year 2013. Projected unit net cash costs for 2013 are higher than previous estimates primarily because of lower gold credits. The impact of price changes for the remainder of 2013 on consolidated unit net cash costs would approximate $0.015 per pound for each $50 per ounce change in the average price of gold and $0.01 per pound for each $2 per pound change in the average price of molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and average realized prices (primarily gold and molybdenum prices), and are expected to decline during the second half of the year as FCX gains access to higher grade ore in Indonesia (54 percent of 2013 consolidated copper sales volumes and 63 percent of consolidated gold sales volumes are expected in the second half of 2013).

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, certain of FCX's North America copper mines (Sierrita, Bagdad, Morenci and Chino) also produce molybdenum concentrates, which are sold to FCX's molybdenum sales company at market-based pricing.

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 at several of its North America copper mines in response to positive exploration results in recent years.

At Morenci, FCX is expanding mining and milling capacity to process additional sulfide ores identified through exploratory drilling. The approximate $1.4 billion 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, engineering activities are nearing completion and construction activities for the new mill and related facilities are in progress.

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

  Three Months Ended
March 31,
  2013   2012
Copper (millions of recoverable pounds)
Production 343 337
Sales, excluding purchases 353 338
Average realized price per pound $ 3.60 $ 3.82
 
Molybdenum (millions of recoverable pounds)
Productiona 8 10
 
Unit net cash costs per pound of copper b :
Site production and delivery, excluding adjustments $ 1.99 $ 1.80
By-product credits, primarily molybdenum (0.26 ) (0.41 )
Treatment charges 0.13   0.12  
Unit net cash costs $ 1.86   $ 1.51  
a.

Refer to consolidated 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 VI, which is available on FCX's website, "www.fcx.com."

 

Consolidated copper sales volumes from North America of 353 million pounds in first-quarter 2013 were higher than first-quarter 2012 sales of 338 million pounds primarily reflecting increased production at the Chino mine.

FCX expects sales from the North America copper mines to approximate 1.45 billion pounds of copper for the year 2013, compared with 1.35 billion pounds in 2012, primarily reflecting higher production at Morenci and Chino.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.86 per pound of copper in first-quarter 2013 were higher than unit net cash costs of $1.51 per pound in first-quarter 2012 primarily reflecting higher mining rates and lower molybdenum credits.

FCX estimates that average unit net cash costs (net of by-product credits) for the North America copper mines would approximate $1.89 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average molybdenum price of $11 per pound for the remainder of 2013. North America's average projected unit net cash costs would change by approximately $0.025 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 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 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 Candelaria and Ojos del Salado mines produce gold and silver, and the Cerro Verde mine produces molybdenum concentrates that are sold to FCX's molybdenum sales company at market-based pricing.

Operating and Development Activities. FCX has commenced initial construction activities associated with a large-scale expansion at Cerro Verde. The project, with an estimated cost of $4.4 billion, 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.

FCX continues to engage in studies to evaluate 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.

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

  Three Months Ended
March 31,
  2013   2012
Copper (millions of recoverable pounds)
Production 298 293
Sales 285 286
Average realized price per pound $ 3.48 $ 3.83
 
Gold (thousands of recoverable ounces)
Production 21 19
Sales 21 19
Average realized price per ounce $ 1,617 $ 1,680
 
Molybdenum (millions of recoverable pounds)
Productiona 2 2
 
Unit net cash costs per pound of copper b :
Site production and delivery, excluding adjustments $ 1.62 $ 1.53
By-product credits (0.29 ) (0.29 )
Treatment charges 0.18   0.16  
Unit net cash costs $ 1.51   $ 1.40  
a.

Refer to consolidated 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 VI, which is available on FCX's website, "www.fcx.com."

 

Consolidated copper sales volumes from South America of 285 million pounds in first-quarter 2013 approximated first-quarter 2012 sales of 286 million pounds as higher grade ore at Candelaria offset lower grade ore at Cerro Verde.

FCX expects South America's sales to approximate 1.34 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 of $1.51 per pound of copper in first-quarter 2013 were higher than unit net cash costs of $1.40 per pound in first-quarter 2012 primarily reflecting higher costs for maintenance and repairs.

FCX estimates that average unit net cash costs (net of by-product credits) for South America mining would approximate $1.44 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming average prices of $1,400 per ounce of gold and $11 per pound of molybdenum for the remainder of 2013.

Indonesia Mining. Through its 90.64 percent owned and wholly 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 produces copper concentrates, which contain significant quantities of gold and silver.

Operating and Development Activities. FCX has several projects in progress in the Grasberg minerals district, primarily related to the development of large-scale, 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 currently anticipated transition from the Grasberg open pit in 2017. Development of the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) is advancing according to schedule, which would enable the 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 $735 million per year ($585 million per year net to PT Freeport Indonesia).

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

  Three Months Ended
March 31,
  2013   2012
Copper (millions of recoverable pounds)
Production 219 123
Sales 198 134
Average realized price per pound $ 3.43 $ 3.81
 
Gold (thousands of recoverable ounces)
Production 212 229
Sales 191 266
Average realized price per ounce $ 1,604 $ 1,695
 
Unit net cash costs per pound of copper a :
Site production and delivery, excluding adjustments $ 2.61 $ 3.51
Gold and silver credits (1.63 ) (3.51 )
Treatment charges 0.23 0.19
Royalty on metals 0.13   0.14  
Unit net cash costs $ 1.34   $ 0.33  
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 VI, which is available on FCX's website, "www.fcx.com."

 

Indonesia's first-quarter 2013 copper sales of 198 million pounds were higher than first-quarter 2012 copper sales of 134 million pounds when labor-related disruptions affected operations. Productivity measures have continued to improve resulting in first-quarter 2013 daily mill throughput averaging 199,400 metric tons per day, including 59,000 metric tons per day from the Deep Ore Zone (DOZ) underground mine.

As expected, Indonesia's first-quarter 2013 gold sales of 191 thousand ounces were lower than first-quarter 2012 gold sales of 266 thousand ounces primarily as a result of lower ore grades from mine sequencing.

At the Grasberg mine, the sequencing of mining areas with varying ore grades 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 1.1 billion pounds of copper and 1.25 million ounces of gold for the year 2013, compared with 716 million pounds of copper and 915 thousand ounces of gold for the year 2012. FCX expects sales from Indonesia to increase in the second half of 2013 as PT Freeport Indonesia gains access to higher ore grades and achieves the targeted ramp up in production from the DOZ underground mine to approximately 80,000 metric tons per day (57 percent of Indonesia's projected copper sales and 63 percent of Indonesia's projected gold sales are expected in the second half of 2013).

Indonesia's unit net cash costs (including gold and silver credits) of $1.34 per pound of copper in first-quarter 2013 were higher than unit net cash costs of $0.33 per pound in first-quarter 2012 primarily reflecting lower gold credits, partly offset by higher copper sales volumes.

FCX estimates Indonesia's average unit net cash costs (net of gold and silver credits) would approximate $1.00 per pound of copper for the year 2013, based on current sales volume and cost estimates and assuming an average gold price of $1,400 per ounce for the remainder of 2013. Projected unit net cash costs for 2013 are higher than previous estimates primarily because of lower gold credits. Indonesia's projected unit net cash costs would change by approximately $0.05 per pound for each $50 per ounce change in the average price of gold for the remainder of 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 sales volumes, as well as average realized gold prices for the quarterly period. Indonesia's unit net cash costs are expected to decline during the second half of the year as it gains access to higher grade ore.

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. TFM has completed its second phase expansion project, which included optimizing the current plant and increasing mine, mill and processing capacity. The expanded mill is capable of throughput of 14,000 metric tons of ore per day to enable increasing copper production by 150 million pounds to over 430 million pounds per year. Costs incurred to date total approximately $615 million and included mill upgrades, additional mining equipment and a new tankhouse. A second sulphuric acid plant, which was included in the $850 million total estimated project capital cost, is expected to be installed in 2015. The expanded mill facility is performing well, with first-quarter 2013 average throughput rates of 14,600 metric tons per day.

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 first quarters of 2013 and 2012:

  Three Months Ended
March 31,
  2013   2012
Copper (millions of recoverable pounds)
Production 120 80
Sales 118 69
Average realized price per pounda $ 3.40 $ 3.74
 
Cobalt (millions of contained pounds)
Production 6 6
Sales 6 5
Average realized price per pound $ 7.28 $ 8.46
 
Unit net cash costs per pound of copper b :
Site production and delivery, excluding adjustments $

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hope u do betterr

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