Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $268 million, $0.18 per share, for
second-quarter 2017. After adjusting for net gains of $27 million,
$0.01 per share, second-quarter 2017 adjusted net income
attributable to common stock totaled $241 million, $0.17 per
share.
- Consolidated sales totaled 942
million pounds of copper, 432 thousand ounces of gold and 25
million pounds of molybdenum for second-quarter 2017.
- Consolidated sales for the year
2017 are expected to approximate 3.7 billion pounds of copper, 1.6
million ounces of gold and 93 million pounds of molybdenum,
including 940 million pounds of copper, 375 thousand ounces of gold
and 22 million pounds of molybdenum for third-quarter 2017.
- Average realized prices were
$2.65 per pound for copper, $1,243 per ounce for gold and $9.58 per
pound for molybdenum for second-quarter 2017.
- Average unit net cash costs were
$1.20 per pound of copper for second-quarter 2017 and are expected
to average $1.19 per pound of copper for the year 2017.
- Operating cash flows totaled
$1.0 billion (including $144 million in working capital sources and
changes in tax payments) for second-quarter 2017 and $1.8 billion
(including $322 million in working capital sources and changes in
tax payments) for the first six months of 2017. Based on current
sales volume and cost estimates, and assuming average prices of
$2.65 per pound for copper, $1,250 per ounce for gold and $7.50 per
pound for molybdenum for the second half of 2017, operating cash
flows for the year 2017 are expected to approximate $3.8 billion
(including $0.6 billion in working capital sources and changes in
tax payments).
- Capital expenditures totaled
$362 million (including approximately $210 million for major mining
projects) for second-quarter 2017 and $706 million for the first
six months of 2017 (including approximately $420 million for major
mining projects). Capital expenditures for the year 2017 are
expected to approximate $1.6 billion, including $0.7 billion for
underground development activities in the Grasberg minerals
district in Indonesia, which depends on a resolution of PT Freeport
Indonesia's (PT-FI) long-term operating rights.
- At June 30, 2017, consolidated
cash totaled $4.7 billion and consolidated debt totaled
$15.4 billion, compared with $4.2 billion of consolidated cash and
$16.0 billion of consolidated debt at December 31, 2016. FCX had no
borrowings and $3.5 billion available under its revolving credit
facility at June 30, 2017.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $268 million ($0.18 per share) for
second-quarter 2017 and $496 million ($0.34 per share) for the
first six months of 2017, compared with net losses attributable to
common stock of $479 million ($0.38 per share) for second-quarter
2016 and $4.7 billion ($3.70 per share) for the first six months of
2016. After adjusting for net gains (losses) of $27 million ($0.01
per share) for second-quarter 2017 and $(452) million ($(0.36) per
share) for second-quarter 2016, adjusted net income (loss)
attributable to common stock totaled $241 million ($0.17 per share)
for second-quarter 2017 and $(27) million ($(0.02) per share) for
second-quarter 2016. Additionally, FCX's second-quarter 2017 sales
from its mining operations to affiliated smelters resulted in the
deferral of $51 million ($0.04 per share) of net income
attributable to common stock, which will be recognized in future
periods. Refer to the supplemental schedules, "Adjusted Net Income
(Loss)," beginning on page VII, and "Deferred Profits," on page X,
which are available on FCX's website, "fcx.com," for additional
information.
Richard C. Adkerson, President and Chief Executive Officer,
said, "We are successfully executing our strategy of building
values in our large-scale, industry-leading portfolio of copper
assets. Our strong management of costs and ongoing capital
discipline combined with improved copper prices are providing free
cash flow to strengthen our company’s financial position. We remain
focused on protecting our past investments and supporting our
long-term investment plans at the high-grade, long-lived mineral
deposits in the Grasberg minerals district in Papua,
Indonesia. We are encouraged by recent progress in our active
negotiations with the Indonesian government to resolve issues
involving our contractual rights and by multiple opportunities to
build long-term future values for our shareholders from our
high-quality copper assets in the Americas."
SUMMARY FINANCIAL DATA
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017 2016 (in
millions, except per share amounts) Revenuesa,b $ 3,711 $ 3,334 $
7,052 $ 6,576 Operating income (loss)a $ 669 $ 18 $ 1,249 $ (3,854
) Net income (loss) from continuing operations $ 326 $ (229 ) $ 594
$ (4,326 ) Net income (loss) from discontinued operations $ 9 c $
(181 ) $ 47 c $ (185 ) Net income (loss) attributable to common
stockd,e $ 268 $ (479 ) $ 496 $ (4,663 ) Diluted net income (loss)
per share of common stock: Continuing operations $ 0.18 $ (0.23 ) $
0.31 $ (3.54 ) Discontinued operations — (0.15 ) 0.03
(0.16 ) $ 0.18 $ (0.38 ) $ 0.34 $ (3.70 ) Diluted
weighted-average common shares outstanding 1,453 1,269 1,453 1,260
Operating cash flowsf $ 1,037 $ 874 $ 1,829 $ 1,614 Capital
expenditures $ 362 $ 833 $ 706 $ 1,815 At June 30: Cash and cash
equivalents $ 4,667 $ 330 $ 4,667 $ 330 Total debt, including
current portion $ 15,354 $ 19,220 $ 15,354 $ 19,220
a. For segment financial results, refer to
the supplemental schedules, "Business Segments," beginning on page
X, which are available on FCX's website, "fcx.com."
b. Includes (unfavorable) favorable
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $(20) million ($(8)
million to net income attributable to common stock or $(0.01) per
share) in second-quarter 2017, $(28) million ($(15) million to net
loss attributable to common stock or $(0.01) per share) in
second-quarter 2016, $81 million ($35 million to net income
attributable to common stock or $0.02 per share) for the first six
months of 2017 and $5 million ($2 million to net loss attributable
to common stock or less than $0.01 per share) for the first six
months of 2016. For further discussion, refer to the supplemental
schedule, "Derivative Instruments," on page X, which is available
on FCX's website, "fcx.com."
c. Primarily reflects adjustments to the
fair value of the potential $120 million in contingent
consideration related to the November 2016 sale of FCX's interest
in TF Holdings Limited (TFHL), which totaled $55 million at June
30, 2017, and in accordance with accounting guidelines, will
continue to be adjusted through December 31, 2019.
d. Includes net gains (charges) of $27
million ($0.01 per share) in second-quarter 2017, $(452) million
($(0.36) per share) in second-quarter 2016, $34 million ($0.02 per
share) for the first six months of 2017 and $(4.4) billion ($(3.53)
per share) for the first six months of 2016 that are described in
the supplemental schedule, "Adjusted Net Income (Loss)," beginning
on page VII, which is available on FCX's website, "fcx.com."
e. FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. For a
summary of net impacts from changes in these deferrals, refer to
the supplemental schedule, "Deferred Profits," on page X, which is
available on FCX's website, "fcx.com."
f. Includes net working capital sources
and changes in tax payments of $144 million in second-quarter 2017,
$278 million in second-quarter 2016, $322 million for the first six
months of 2017 and $466 million for the first six months of
2016.
SUMMARY OPERATING DATA
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016a 2017
2016a Copper (millions of recoverable pounds)
Production 883 1,011 1,734 1,998 Sales, excluding purchases 942 987
1,751 1,987 Average realized price per pound $ 2.65 $ 2.19 $ 2.65 $
2.17 Site production and delivery costs per poundb $ 1.64 $ 1.41 $
1.62 $ 1.45 Unit net cash costs per poundb $ 1.20 $ 1.33 $ 1.29 $
1.36
Gold (thousands of recoverable ounces) Production 353
166 592 350 Sales, excluding purchases 432 156 614 357 Average
realized price per ounce $ 1,243 $ 1,292 $ 1,242 $ 1,259
Molybdenum (millions of recoverable pounds) Production 23 19
46 39 Sales, excluding purchases 25 19 49 36 Average realized price
per pound $ 9.58 $ 8.34 $ 9.16 $ 7.99
a. Excludes the results of the Tenke
Fungurume (Tenke) mine, which was sold in November 2016 and is
reported as discontinued operations. Copper sales from the Tenke
mine totaled 124 million pounds in second-quarter 2016 and 247
million for the first six months of 2016.
b. Reflects per pound weighted-average
production and delivery costs and unit net cash costs (net of
by-product credits) for all copper mines, before net noncash and
other costs. For reconciliations of per pound unit costs by
operating division to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedules, "Product Revenues and Production
Costs," beginning on page XIII, which are available on FCX's
website, "fcx.com."
Consolidated Sales Volumes
Second-quarter 2017 copper sales of 942 million pounds
were lower than the April 2017 estimate of 975 million pounds,
primarily reflecting the impact of worker absenteeism on mining and
milling rates in Indonesia. Second-quarter 2017 copper sales were
also lower than second-quarter 2016 sales of 987 million pounds,
primarily reflecting anticipated lower ore grades in North America
and lower leach production and recoveries in South America, partly
offset by higher volumes from Indonesia associated with higher ore
grades and the sale of concentrate in inventory produced in
first-quarter 2017.
Second-quarter 2017 gold sales of 432 thousand ounces
were slightly lower than the April 2017 estimate of 440 thousand
ounces, but were higher than second-quarter 2016 sales of 156
thousand ounces, primarily reflecting higher ore grades from
Indonesia.
Second-quarter 2017 molybdenum sales of 25 million pounds
were slightly higher than the April 2017 estimate of 24 million
pounds and were higher than second-quarter 2016 sales of 19 million
pounds.
Sales volumes for the year 2017 are expected to approximate 3.7
billion pounds of copper, 1.6 million ounces of gold and 93 million
pounds of molybdenum, including 940 million pounds of copper, 375
thousand ounces of gold and 22 million pounds of molybdenum in
third-quarter 2017. Estimated sales volumes for the year 2017 are
lower than April 2017 estimates by approximately 150 million pounds
of copper and 320 thousand ounces of gold, principally attributable
to lower mining rates in the Grasberg open pit associated with
reduced manpower levels and modifications to the ramp-up schedule
for the Deep Mill Level Zone (DMLZ) underground mine. These
shortfalls are expected to be recovered in future periods. Efforts
are under way to increase mining rates in the Grasberg open pit to
benefit from the high-grade ore currently available to be mined.
Refer to page 6 for a discussion of Indonesia Regulatory Matters,
which may have a significant impact on future results.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product
credits) for FCX's copper mines of $1.20 per pound of copper in
second-quarter 2017 were lower than unit net cash costs of $1.33
per pound in second-quarter 2016, primarily reflecting higher
by-product credits, partly offset by lower copper sales
volumes.
Assuming average prices of $1,250 per ounce of gold and $7.50
per pound of molybdenum for the second half of 2017 and achievement
of current sales volume and cost estimates, consolidated unit net
cash costs (net of by-product credits) for copper mines are
expected to average $1.19 per pound of copper for the year 2017.
The impact of price changes for the second half of 2017 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 realized prices, primarily for gold and
molybdenum.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit
copper mines in North America - Morenci, Bagdad, Safford, Sierrita
and Miami in Arizona, and Chino and Tyrone in New Mexico. In
addition to copper, molybdenum concentrate, gold and silver are
also produced by certain of FCX's North America copper mines.
All of the North America mining operations are wholly owned,
except for Morenci. FCX records its 72 percent undivided joint
venture interest in Morenci using the proportionate consolidation
method.
Operating and Development Activities. FCX has significant
undeveloped reserves and resources in North America and a portfolio
of potential long-term development projects. Future investments
will be undertaken based on the results of economic and technical
feasibility studies, and are dependent on market conditions. FCX
continues to evaluate opportunities to reduce the capital intensity
of its long-term development projects.
Through exploration drilling, FCX has identified a significant
resource at the Lone Star project located near the Safford
operation in eastern Arizona. Initial production from the Lone
Star oxide ores could begin in 2021 using existing infrastructure
to replace oxide production from Safford. FCX is seeking
regulatory approvals for this project and continues to evaluate
longer term opportunities available from the significant sulfide
potential in the Lone Star/Safford minerals district.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the second quarters and
first six months of 2017 and 2016:
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017 2016
Copper (millions of recoverable pounds) Production 384 469
776 956 Sales, excluding purchases 408 464 783 967 Average realized
price per pound $ 2.62 $ 2.18 $ 2.65 $ 2.17
Molybdenum (millions of recoverable pounds) Productiona 8 8
17 16
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.59 $ 1.40 $
1.56 $ 1.40 By-product credits (0.16 ) (0.11 ) (0.15 ) (0.10 )
Treatment charges 0.10 0.11 0.10 0.11
Unit net cash costs $ 1.53 $ 1.40 $ 1.51 $
1.41
a. Refer to summary operating data on page
3 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the North America copper mines.
b. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedules, "Product Revenues and Production
Costs," beginning on page XIII, which are available on FCX's
website, "fcx.com."
North America's consolidated copper sales volumes of 408 million
pounds in second-quarter 2017 were lower than second-quarter 2016
sales of 464 million pounds, primarily reflecting lower ore grades.
North America copper sales are estimated to approximate 1.5 billion
pounds for the year 2017, compared with 1.8 billion pounds in
2016.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.53 per pound of copper in
second-quarter 2017 were higher than unit net cash costs of $1.40
per pound in second-quarter 2016, primarily reflecting lower sales
volumes, partly offset by higher by-product credits.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.54 per
pound of copper for the year 2017, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $7.50 per pound for the second half of 2017. North
America's average unit net cash costs for the year 2017 would
change by approximately $0.02 per pound for each $2 per pound
change in the average price of molybdenum.
South America Mining. FCX operates two copper mines in
South America - Cerro Verde in Peru (in which FCX owns a 53.56
percent interest) and El Abra in Chile (in which FCX owns a 51
percent interest). These operations are consolidated in FCX's
financial statements. In addition to copper, the Cerro Verde mine
produces molybdenum concentrate and silver.
Operating and Development Activities. The Cerro Verde expansion
project commenced operations in September 2015 and achieved
capacity operating rates during first-quarter 2016. Cerro Verde's
expanded operations benefit from its large-scale, long-lived
reserves and cost efficiencies. The project expanded the
concentrator facilities from 120,000 metric tons of ore per day to
360,000 metric tons of ore per day.
In the second half of 2015, FCX adjusted operations at its El
Abra mine to reduce mining and stacking rates by approximately 50
percent to achieve lower operating and labor costs, defer capital
expenditures and extend the life of the existing operations. El
Abra continues to operate at reduced rates.
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 at El Abra indicate
a significant sulfide resource, which could potentially support a
major mill project. Future investments will depend on technical
studies, economic factors and market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the second quarters and
first six months of 2017 and 2016:
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017 2016
Copper (millions of recoverable pounds) Production 300 334
604 669 Sales 287 327 596 650 Average realized price per pound $
2.67 $ 2.19 $ 2.65 $ 2.18
Molybdenum (millions of
recoverable pounds) Productiona 7 4 13 9
Unit net cash
costs per pound of copperb Site production and delivery,
excluding adjustments $ 1.55 $ 1.20 $ 1.52 $ 1.22 By-product
credits (0.13 ) (0.12 ) (0.16 ) (0.10 ) Treatment charges 0.22 0.23
0.22 0.23 Royalty on metals 0.01 — 0.01 0.01
Unit net cash costs $ 1.65 $ 1.31 $ 1.59
$ 1.36
a. Refer to summary operating data on page
3 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at Cerro Verde.
b. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedules, "Product Revenues and Production
Costs," beginning on page XIII, which are available on FCX's
website, "fcx.com."
South America's consolidated copper sales volumes of 287 million
pounds in second-quarter 2017 were lower than second-quarter 2016
sales of 327 million pounds primarily reflecting lower mining
rates, ore grades and recoveries. Sales from South America mining
are expected to approximate 1.2 billion pounds of copper for the
year 2017, compared with 1.3 billion pounds of copper in 2016.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.65 per pound of copper in second-quarter
2017 were higher than unit net cash costs of $1.31 per pound in
second-quarter 2016, primarily reflecting lower sales volumes and
higher maintenance costs. Average unit net cash costs (net of
by-product credits) for South America mining are expected to
approximate $1.65 per pound of copper for the year 2017, based on
current sales volume and cost estimates and assuming an average
price of $7.50 per pound of molybdenum for the second half of
2017.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT-FI, FCX's assets include one of the
world's largest copper and gold deposits at the Grasberg minerals
district in Papua, Indonesia. PT-FI operates a proportionately
consolidated joint venture, which produces copper concentrate that
contains significant quantities of gold and silver.
Regulatory Matters. In January and February 2017, the Indonesian
government issued new regulations to address the export of
unrefined metals, including copper concentrate and anode slimes,
and other matters related to the mining sector. The new regulations
permit the continuation of copper concentrate exports for a
five-year period through January 2022, subject to various
conditions, including conversion from a contract of work to a
special operating license (known as an IUPK, which does not provide
the same level of fiscal and legal protections as PT-FI's Contract
of Work (COW), which remains in effect), a commitment to the
completion of smelter construction in five years and payment of
export duties to be determined by the Ministry of Finance. In
addition, the new regulations enable application for an extension
of operating rights five years before expiration of the IUPK and
require foreign IUPK holders to divest a 51 percent interest in the
licensed entity to Indonesian interests no later than the tenth
year of production. Export licenses would be valid for one-year
periods, subject to review every six months, depending on smelter
construction progress.
Following the issuance of the January and February 2017
regulations and discussions with the Indonesian government, PT-FI
advised the government that it was prepared to convert its COW to
an IUPK, subject to obtaining an investment stability agreement
providing contractual rights with the same level of legal and
fiscal certainty enumerated under its COW, and provided that the
COW would remain in effect until it is replaced by a mutually
satisfactory alternative. PT-FI also committed to commence
construction of a new smelter during a five-year time frame,
subject to approval of the extension of its long-term operating
rights.
In mid-February 2017, pursuant to the COW's dispute resolution
provisions, PTFI provided formal notice to the Indonesian
government of an impending dispute listing the government's
breaches and violations of the COW. PT-FI continues to reserve its
rights under these provisions.
As a result of the 2017 regulatory restrictions and
uncertainties regarding long-term investment stability, PT-FI has
taken actions to adjust its cost structure, slow investments in its
underground development projects and new smelter, and place certain
of its workforce on furlough programs.
In late March 2017, the Indonesian government amended the
regulations to enable PT-FI to retain its COW until replaced with
an IUPK accompanied by an investment stability agreement, and to
grant PT-FI a temporary IUPK through October 10, 2017, that would
allow concentrate exports to resume during this period. In April
2017, PT-FI entered into a Memorandum of Understanding with the
Indonesian government confirming that the COW would continue to be
valid and honored until replaced by a mutually agreed IUPK and
investment stability agreement. PT-FI agreed to continue to pay a
five percent export duty during this period.
On April 21, 2017, the Indonesian government issued a permit to
PT-FI that allows exports to resume for a six-month period, and
PT-FI commenced export shipments.
PT-FI and the Indonesian government are now engaged in active
negotiations on the conversion of PT-FI's COW to an IUPK
accompanied by an investment stability agreement with the objective
of providing a mutually acceptable long-term investment framework.
In addition to negotiating a stability agreement, the parties are
also discussing requirements for the construction of a new smelter
and the government's request for divestment.
PT-FI and the Indonesian government are working cooperatively
with the objective of reaching a mutually acceptable long-term
resolution during 2017 to secure PT-FI's long-term investments for
the benefit of all stakeholders.
Operating and Development Activities. PT-FI is currently mining
the final phase of the Grasberg open pit, which contains high
copper and gold ore grades. PT-FI expects to mine high-grade ore
over the next several quarters prior to transitioning to the
Grasberg Block Cave underground mine in early 2019.
PT-FI has several projects in the Grasberg minerals district
related to the development of its large-scale, long-lived,
high-grade underground ore bodies. In aggregate, these underground
ore bodies are expected to produce large-scale quantities of copper
and gold following the transition from the Grasberg open pit. As a
result of regulatory uncertainty, PT-FI has slowed investments in
its underground development projects in 2017. Assuming an agreement
is reached to support PT-FI's long-term investment plans, estimated
annual capital spending on these projects would average $1.0
billion per year ($0.8 billion per year net to PT-FI) over the next
five years. Considering the long-term nature and size of these
projects, actual costs could vary from these estimates. In response
to market conditions and Indonesian regulatory uncertainty, timing
of these expenditures continues to be reviewed. If PT-FI is unable
to reach agreement with the Indonesian government on its long-term
mining rights, FCX intends to reduce or defer investments
significantly in its underground development projects and pursue
arbitration under its COW.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the second quarters and
first six months of 2017 and 2016:
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017 2016
Copper (millions of recoverable pounds) Production 199 208
354 373 Sales 247 196 372 370 Average realized price per pound $
2.67 $ 2.20 $ 2.64 $ 2.17
Gold (thousands of
recoverable ounces) Production 348 158 580 336 Sales 427 151 604
346 Average realized price per ounce $ 1,243 $ 1,292 $ 1,242 $
1,260
Unit net cash costs per pound of coppera
Site production and delivery, excluding adjustments $ 1.80 b $ 1.77
$ 1.91 b $ 1.99 Gold and silver credits (2.21 ) (1.05 ) (2.10 )
(1.27 ) Treatment charges 0.26 0.29 0.27 0.30 Export duties 0.11
0.08 0.11 0.08 Royalty on metals 0.17 0.11 0.17
0.12 Unit net cash costs $ 0.13 $ 1.20
$ 0.36 $ 1.22
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 schedules, "Product Revenues and Production
Costs," beginning on page XIII, which are available on FCX's
website, "fcx.com."
b. Excludes fixed costs charged directly
to production and delivery costs totaling $82 million ($0.33 per
pound of copper) for second-quarter 2017 and $103 million ($0.28
per pound of copper) for the first six months of 2017 associated
with workforce reductions.
Beginning in mid-April 2017, PT-FI experienced a high level of
worker absenteeism, which has unfavorably impacted mining and
milling rates. During May 2017, a significant number of employees
and contractors participated in an illegal strike and did not
respond to PT-FI's multiple summons to return to work. As a result,
these workers were deemed to have voluntarily resigned pursuant to
Indonesian laws and regulations. During second-quarter 2017, PT-FI
took steps to mitigate the impacts of worker absenteeism, including
producing from available mine and mill stockpiles and selling
concentrate in inventory produced in first-quarter 2017. PT-FI is
also taking steps to increase its workforce in order to restore
normal operating rates.
In June 2017, production from the DMLZ underground mine, which
is currently being developed, was impacted by mining-induced
seismic activity. Mining-induced seismic activity is not uncommon
in block cave mining. To mitigate the impact of these events, PT-FI
has adjusted the DMLZ mine plans while it evaluates the appropriate
start-up schedule. PT-FI expects DMLZ to ramp up to full capacity
of 80,000 metric tons of ore per day in 2021, but at a slower pace
than previous estimates.
PT-FI is also evaluating opportunities to mine a section of
high-grade ore from the Grasberg open pit in 2018 and 2019
currently planned to be mined in future periods from the Grasberg
Block Cave underground mine. These plans are expected to be
evaluated through the remainder of 2017.
Indonesia's consolidated sales of 247 million pounds of copper
and 427 thousand ounces of gold in second-quarter 2017 were higher
than second-quarter 2016 sales of 196 million pounds of copper and
151 thousand ounces of gold, primarily reflecting the sale of
concentrate in inventory and higher ore grades, partly offset by
lower mill rates.
Assuming achieving planned operating rates for the second half
of 2017, consolidated sales volumes from Indonesia mining are
expected to approximate 1.0 billion pounds of copper and 1.6
million ounces of gold for the year 2017, compared with 1.1 billion
pounds of copper and 1.1 million ounces of gold for the year
2016.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes and other factors. Indonesia's
unit net cash costs (including gold and silver credits) of $0.13
per pound of copper in second-quarter 2017 were lower than unit net
cash costs of $1.20 per pound in second-quarter 2016, primarily
reflecting higher gold and silver credits.
Assuming an average gold price of $1,250 per ounce for the
second half of 2017 and achievement of current sales volume and
cost estimates, unit net cash costs (net of gold and silver
credits) for Indonesia mining are expected to approximate $0.13 per
pound of copper for the year 2017. Indonesia mining's unit net cash
credits for the year 2017 would change by approximately $0.05 per
pound for each $50 per ounce change in the average price of gold.
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 projected sales volumes are dependent on a
number of factors, including operational performance, workforce
productivity, the timing of shipments and its ability to continue
to export copper concentrate.
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 concentrate,
which is typically further processed into value-added molybdenum
chemical products. The majority of molybdenum concentrate produced
at the Henderson and Climax mines, as well as from FCX's North
America and South America copper mines, is processed at FCX's
conversion facilities.
Operating and Development Activities. In response to market
conditions, the Henderson molybdenum mine continues to operate at
reduced rates. Production from the Molybdenum mines totaled 8
million pounds of molybdenum in second-quarter 2017 and 7 million
pounds in second-quarter 2016. 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
FCX's North America and South America copper mines.
Average unit net cash costs for the Molybdenum mines of $7.81
per pound of molybdenum in second-quarter 2017 approximated
second-quarter 2016 costs. Based on current sales volume and cost
estimates, unit net cash costs for the Molybdenum mines are
expected to average approximately $7.85 per pound of molybdenum for
the year 2017.
For a reconciliation of unit net cash costs per pound to
production and delivery costs applicable to sales reported in FCX's
consolidated financial statements, refer to the supplemental
schedules, "Product Revenues and Production Costs," beginning on
page XIII, which are available on FCX's website, "fcx.com."
Mining Exploration Activities. FCX's mining exploration
activities are generally associated with its existing mines,
focusing on opportunities to expand reserves and resources to
support development of additional future production capacity.
Exploration results continue to indicate opportunities for
significant future potential reserve additions in North America and
South America. Exploration spending continues to be constrained by
market conditions and is expected to approximate $70 million for
the year 2017, compared to $44 million in 2016.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.0
billion (including $144 million in working capital sources and
changes in tax payments) in second-quarter 2017 and $1.8 billion
(including $322 million in working capital sources and changes in
tax payments) for the first six months of 2017.
Based on current sales volume and cost estimates, and assuming
average prices of $2.65 per pound of copper, $1,250 per ounce of
gold and $7.50 per pound of molybdenum for the second half of 2017,
FCX's consolidated operating cash flows are estimated to
approximate $3.8 billion for the year 2017 (including $0.6 billion
in working capital sources and tax payments). The impact of price
changes during the second half of 2017 on operating cash flows
would approximate $180 million for each $0.10 per pound change in
the average price of copper, $40 million for each $50 per ounce
change in the average price of gold and $40 million for each $2 per
pound change in the average price of molybdenum. Refer to page 6
for discussion of Indonesian Regulatory Matters, which may have a
significant impact on future results.
Capital Expenditures. Capital expenditures totaled $362 million
for second-quarter 2017 (including approximately $210 million for
major mining projects) and $706 million for the first six months of
2017 (including approximately $420 million for major mining
projects). Capital expenditures are expected to approximate $1.6
billion for the year 2017, including $0.9 billion for major mining
projects, primarily for underground development activities at
Grasberg.
As a result of regulatory uncertainty, PT-FI has slowed
investments in its underground development projects. If PT-FI is
unable to reach an agreement with the Indonesian government on its
long-term mining rights, FCX intends to reduce or defer investments
significantly in underground development projects and pursue
arbitration under its COW.
Cash. Following is a summary of the U.S. and international
components of consolidated cash and cash equivalents available to
the parent company, net of noncontrolling interests' share, taxes
and other costs at June 30, 2017 (in billions):
Cash at domestic companies $ 3.8 Cash at
international operations 0.9 Total consolidated cash and
cash equivalents 4.7 Noncontrolling interests' share (0.2 ) Cash,
net of noncontrolling interests' share 4.5 Withholding taxes and
other (0.1 )
Net cash available $ 4.4
Debt. Following is a summary of total debt and the related
weighted-average interest rates at June 30, 2017 (in billions,
except percentages):
Weighted- Average
Interest Rate Senior Notes $ 13.9 4.4% Cerro Verde credit
facility 1.5 3.1% Total debt $ 15.4 4.3%
In June 2017, the Cerro Verde credit facility was amended to
increase the commitment by $225 million to $1.5 billion, modify the
amortization schedule and to extend the maturity date to June 2022.
All other terms, including interest rates, remain the same.
At June 30, 2017, FCX had no borrowings, $37 million in
letters of credit issued and $3.5 billion available under its
revolving credit facility.
FINANCIAL POLICY
In December 2015, FCX's common stock dividend was suspended. The
declaration of dividends is at the discretion of the Board of
Directors (Board) and will depend upon FCX’s financial results,
cash requirements, future prospects and other factors deemed
relevant by the Board.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
second-quarter 2017 results is scheduled for today at 10:00 a.m.
Eastern Time. The conference call will be broadcast on the Internet
along with slides. Interested parties may listen to the conference
call live and view the slides by accessing “fcx.com.” A replay of
the webcast will be available through Friday, August 25,
2017.
FCX is a leading international mining company with headquarters
in Phoenix, Arizona. FCX operates large, long-lived, geographically
diverse assets with significant proven and probable reserves of
copper, gold and molybdenum. FCX is the world's largest publicly
traded copper producer. FCX’s portfolio of assets includes the
Grasberg minerals district in Indonesia, one of the world's largest
copper and gold deposits; and significant mining operations in the
Americas, including the large-scale Morenci minerals district in
North America and the Cerro Verde operation in South America.
Additional information about FCX is available on FCX's website at
"fcx.com."
Cautionary Statement and Regulation G Disclosure: This
press release contains forward-looking statements in which FCX
discusses its potential future performance. Forward-looking
statements are all statements other than statements of historical
facts, such as projections or expectations relating to ore grades
and milling rates, production and sales volumes, unit net cash
costs, operating cash flows, capital expenditures, exploration
efforts and results, development and production activities and
costs, liquidity, tax rates, the impact of copper, gold and
molybdenum price changes, the impact of deferred intercompany
profits on earnings, reserve estimates, future dividend payments,
and share purchases and sales. The words “anticipates,” “may,”
“can,” “plans,” “believes,” “estimates,” “expects,” “projects,”
"targets," “intends,” “likely,” “will,” “should,” “to be,”
”potential" and any similar expressions are intended to identify
those assertions as forward-looking statements.
FCX cautions readers that forward-looking statements are not
guarantees of future performance and 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 supply of and demand for, and
prices of, copper, gold and molybdenum; mine sequencing; production
rates; potential effects of cost and capital expenditure reductions
and production curtailments on financial results and cash flow;
potential inventory adjustments; potential impairment of long-lived
mining assets; the outcome of negotiations with the Indonesian
government regarding PT-FI's COW; the potential effects of violence
in Indonesia generally and in the province of Papua; industry
risks; regulatory changes (including adoption of financial
assurance regulations as proposed by the U.S. Environmental
Protection Agency under CERCLA for the hard rock mining industry);
political risks; labor relations; weather- and climate-related
risks; environmental risks; litigation results (including the final
disposition of the unfavorable Indonesian Tax Court ruling relating
to surface water taxes); 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, 2016, filed with the U.S.
Securities and Exchange Commission (SEC) as updated by FCX's
subsequent filings with the SEC. With respect to FCX's operations
in Indonesia, such factors include whether PT-FI will be able to
resolve complex regulatory matters in Indonesia.
Investors are cautioned that many of the assumptions upon which
FCX's forward-looking statements are based are likely to change
after the forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its assumptions, changes
in business plans, actual experience or other changes, and FCX
undertakes no obligation to update any forward-looking
statements.
This press release also contains certain financial measures such
as unit net cash costs per pound of copper and molybdenum, which
are not recognized under U.S. generally accepted accounting
principles. As required by SEC Regulation G, reconciliations of
these measures to amounts reported in FCX's consolidated financial
statements are in the supplemental schedules of this press release,
which are also available on FCX's website, "fcx.com."
FREEPORT-McMoRan INC. SELECTED OPERATING DATA
Three Months Ended June 30,
MINING OPERATIONS: Production Sales
COPPER (millions of recoverable pounds) 2017
2016 2017 2016 (FCX's net interest in %)
North
America
Morenci (72%)a 187 224 196 221 Bagdad (100%) 43 44 43 45 Safford
(100%) 37 53 42 52 Sierrita (100%) 40 41 42 40 Miami (100%) 5 6 5 7
Chino (100%) 58 80 63 78 Tyrone (100%) 14 19 17 19 Other (100%) —
2 — 2 Total North America 384
469 408 464
South
America
Cerro Verde (53.56%) 260 278 244 270 El Abra (51%) 40 56
43 57 Total South America 300 334
287 327
Indonesia
Grasberg (90.64%)b 199 208 247 196
Consolidated - continuing operations 883 1,011
942 c
987 c Discontinued operations - Tenke Fungurume
(Tenke) (56%)d — 122 — 124
Total
883 1,133 942 1,111 Less noncontrolling
interests 159 229 158 226
Net
724 904 784 885
Average realized price per pound (continuing
operations) $ 2.65 $ 2.19
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 5 8 5 5 Indonesia
(90.64%)b 348 158 427 151
Consolidated 353 166 432
156 Less noncontrolling interests 32 14
40 14
Net 321 152
392 142 Average realized
price per ounce $ 1,243 $ 1,292
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 3 3 N/A N/A Climax
(100%) 5 4 N/A N/A North America copper mines (100%)a 8 8 N/A N/A
Cerro Verde (53.56%) 7 4 N/A N/A
Consolidated
23 19 25 19
Less noncontrolling interests 3 2 3 2
Net 20 17 22
17 Average realized price per pound $ 9.58 $
8.34
U.S. OIL AND GAS OPERATIONS: Sales Volumes Sales
per Day Oil (thousand barrels, or MBbls) 468 8,654 5 95 Natural gas
(million cubic feet or MMcf) 4,281 18,795 47 207 Natural gas
liquids (NGLs) (MBbls) 62 596 1 6 Thousand barrels of oil
equivalents (MBOE) 1,244 12,382 14 136
a. Amounts are net of Morenci's undivided
joint venture partners' interest; effective May 31, 2016, FCX's
undivided interest in Morenci was prospectively reduced from 85
percent to 72 percent.
b. Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
c. Consolidated sales volumes exclude
purchased copper of 62 million pounds in second-quarter 2017 and 43
million pounds in second-quarter 2016.
d. On November 16, 2016, FCX completed the
sale of its interest in the Tenke mine.
FREEPORT-McMoRan INC. SELECTED OPERATING DATA
(continued) Six Months Ended June
30,
MINING OPERATIONS: Production Sales
Copper
(millions of recoverable pounds) 2017 2016 2017 2016 (FCX's net
interest in %)
North
America
Morenci (72%)a 368 456 368 459 Bagdad (100%) 83 92 81 95 Safford
(100%) 79 109 85 111 Sierrita (100%) 81 82 80 83 Miami (100%) 10 14
10 16 Chino (100%) 120 161 123 161 Tyrone (100%) 34 39 35 39 Other
(100%) 1 3 1 3 Total North America 776
956 783 967
South
America
Cerro Verde (53.56%) 522 550 512 526 El Abra (51%) 82 119
84 124 Total South America 604 669
596 650
Indonesia
Grasberg (90.64%)b 354 373 372 370
Consolidated - continuing operations 1,734
1,998 1,751 c
1,987 c Discontinued operations
- Tenke (56%)d — 232 — 247
Total
1,734 2,230 1,751 2,234 Less
noncontrolling interests 316 450 314 448
Net 1,418 1,780
1,437 1,786 Average realized
price per pound (continuing operations) $ 2.65 $ 2.17
Gold (thousands of recoverable ounces) (FCX's net interest
in %) North America (100%) 12 14 10 11 Indonesia (90.64%)b 580
336 604 346
Consolidated
592 350 614 357
Less noncontrolling interests 54 31 57
32
Net 538 319 557
325 Average realized price per ounce $
1,242 $ 1,259
Molybdenum (millions of recoverable
pounds) (FCX's net interest in %) Henderson (100%) 6 5 N/A N/A
Climax (100%) 10 9 N/A N/A North America (100%)a 17 16 N/A N/A
Cerro Verde (53.56%) 13 9 N/A N/A
Consolidated
46 39 49 36
Less noncontrolling interests 6 4 6 3
Net 40 35 43
33 Average realized price per pound $ 9.16 $
7.99
U.S. OIL AND GAS OPERATIONS: Sales Volumes Sales
per Day Oil (MBbls) 949 16,952 5 93 Natural gas (MMcf) 10,280
38,434 57 211 NGLs (MBbls) 151 1,170 1 6 MBOE 2,814 24,528 15 135
a. Amounts are net of Morenci's undivided
joint venture partners' interest; effective May 31, 2016, FCX's
undivided interest in Morenci was prospectively reduced from 85
percent to 72 percent.
b. Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
c. Consolidated sales volumes exclude
purchased copper of 120 million pounds for the first six months of
2017 and 70 million pounds for the first six months of 2016.
d. On November 16, 2016, FCX completed the
sale of its interest in the Tenke mine.
FREEPORT-McMoRan INC. SELECTED OPERATING
DATA (continued) Three
Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016
100% North America Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 688,000
780,700 694,300 807,100 Average copper ore grade (percent) 0.29
0.33 0.28 0.32 Copper production (millions of recoverable pounds)
282 303 559 605
Mill
Operations
Ore milled (metric tons per day) 299,100 300,400 301,400 299,500
Average ore grades (percent): Copper 0.39 0.48 0.40 0.49 Molybdenum
0.03 0.03 0.03 0.03 Copper recovery rate (percent) 86.7 86.6 86.6
85.6 Production (millions of recoverable pounds): Copper 174 219
360 445 Molybdenum 8 8 17 16
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 152,400
170,400 139,200 155,500 Average copper ore grade (percent) 0.36
0.39 0.39 0.40 Copper production (millions of recoverable pounds)
59 82 125 172
Mill
Operations
Ore milled (metric tons per day) 347,600 352,000 343,300 345,700
Average ore grades (percent): Copper 0.44 0.42 0.44 0.43 Molybdenum
0.02 0.02 0.02 0.02 Copper recovery rate (percent) 83.0 88.0 83.8
87.1 Production (millions of recoverable pounds): Copper 241 252
479 497 Molybdenum 7 4 13 9
100% Indonesia Mining Ore
milled (metric tons per day):a Grasberg open pit 88,600 110,200
71,200 108,000 Deep Ore Zone underground mine 27,300 36,700 26,800
40,500 Deep Mill Level Zone (DMLZ) underground mineb 3,800 4,900
3,500 4,500 Grasberg Block Cave underground mineb 3,800 2,600 3,200
2,400 Big Gossan underground mineb — 1,000 800
600 Total 123,500 155,400 105,500 156,000
Average ore grades: Copper (percent) 1.03 0.84 1.08 0.77 Gold
(grams per metric ton) 1.16 0.48 1.17 0.50 Recovery rates
(percent): Copper 91.8 90.4 92.0 89.9 Gold 85.3 80.0 85.1 80.3
Production (recoverable): Copper (millions of pounds) 221 226 393
409 Gold (thousands of ounces) 347 174 588 364
100%
Molybdenum Mines Ore milled (metric tons per day) 22,000 18,600
21,800 18,500 Average molybdenum ore grade (percent) 0.20 0.19 0.21
0.21 Molybdenum production (millions of recoverable pounds) 8 7 16
14
a. Amounts represent the approximate
average daily throughput processed at PT Freeport Indonesia's
(PT-FI) mill facilities from each producing mine and from
development activities that result in metal production.
b. Targeted production rates once the DMLZ
underground mine reaches full capacity are expected to approximate
80,000 metric tons of ore per day in 2021; production from the
Grasberg Block Cave underground mine is expected to commence in
early 2019, and production from the Big Gossan underground mine is
on care-and-maintenance.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017 2016 (In Millions, Except Per Share
Amounts) Revenuesa $ 3,711 $ 3,334 $ 7,052 $ 6,576 Cost of sales:
Production and deliveryb 2,495 c 2,956 4,695 c 5,455 Depreciation,
depletion and amortization 450 632 839 1,294 Impairment of oil and
gas properties — 291 — 4,078 Total cost
of sales 2,945 3,879 5,534 10,827 Selling, general and
administrative expensesd 107 c 160 260 c 298 Mining exploration and
research expenses 19 15 34 33 Environmental obligations and
shutdown costs (19 ) 11 8 21 Net gain on sales of assetse (10 )
(749 ) (33 ) (749 ) Total costs and expenses 3,042 3,316
5,803 10,430 Operating income (loss) 669 18
1,249 (3,854 ) Interest expense, netf (162 ) (196 ) (329 ) (387 )
Net (loss) gain on exchanges and early extinguishment of debt (4 )
39 (3 ) 36 Other income, net 10 25 34 64
Income (loss) from continuing operations before income taxes
and equity in affiliated companies' net (losses) earnings 513 (114
) 951 (4,141 ) Provision for income taxesg (186 ) (116 ) (360 )
(193 ) Equity in affiliated companies' net (losses) earnings (1 ) 1
3 8 Net income (loss) from continuing
operations 326 (229 ) 594 (4,326 ) Net income (loss) from
discontinued operationsh 9 (181 ) 47 (185 ) Net
income (loss) 335 (410 ) 641 (4,511 ) Net income attributable to
noncontrolling interests: Continuing operations (66 ) (47 ) (141 )
(109 ) Discontinued operations (1 ) (12 ) (4 ) (22 ) Preferred
dividends attributable to redeemable noncontrolling interest —
(10 ) — (21 ) Net income (loss) attributable to FCX
common stocki $ 268 $ (479 ) $ 496 $ (4,663 )
Basic and diluted net income (loss) per share attributable to
common stock: Continuing operations $ 0.18 $ (0.23 ) $ 0.31 $ (3.54
) Discontinued operations — (0.15 ) 0.03 (0.16 ) $
0.18 $ (0.38 ) $ 0.34 $ (3.70 )
Weighted-average common shares outstanding: Basic 1,447
1,269 1,447 1,260 Diluted 1,453 1,269
1,453 1,260
a. Includes adjustments to
provisionally priced concentrate and cathode copper sales
recognized in prior periods, which are summarized in the
supplemental schedule, "Derivative Instruments," on page X.
b. Includes oil and gas net (credits)
charges primarily associated with drillship settlements, inventory
adjustments and asset impairment, which are summarized in the
supplemental schedule, “Adjusted Net Income (Loss),” beginning on
page VII.
c. Includes net charges at mining
operations primarily for workforce reductions at PT-FI, which are
summarized in the supplemental schedule, "Adjusted Net Income
(Loss)," beginning on page VII.
d. Includes oil and gas net (credits)
charges for contract termination and restructuring, which are
summarized in the supplemental schedule, "Adjusted Net Income
(Loss)," beginning on page VII.
e. Refer to the supplemental
schedule, "Adjusted Net Income (Loss)," beginning on page VII, for
a summary of net gain on sales of assets.
f. Consolidated interest expense,
excluding capitalized interest, totaled $192 million in
second-quarter 2017, $218 million in second-quarter 2016, $387
million for the first six months of 2017 and $436 million for the
first six months of 2016.
g. Refer to the supplemental
schedule, "Income Taxes," on page IX for a summary of FCX's
provision for income taxes.
h. Refer to the supplemental
schedule, “Adjusted Net Income (Loss),” beginning on page VII for a
summary of gains (losses) on discontinued operations.
i. FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. Refer
to the supplemental schedule, "Deferred Profits," on page X for a
summary of net impacts from changes in these deferrals.
FREEPORT-McMoRan INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) June 30, December 31,
2017 2016 (In Millions) ASSETS Current assets: Cash and cash
equivalents $ 4,667 $ 4,245 Trade accounts receivable 802 1,126
Income and other tax receivables 632 879 Inventories: Mill and
leach stockpiles 1,359 1,338 Materials and supplies, net 1,264
1,306 Product 1,019 998 Other current assets 211 199 Held for sale
463 344 Total current assets 10,417 10,435 Property,
plant, equipment and mine development costs, net 23,067 23,219 Oil
and gas properties, subject to amortization, less accumulated
amortization and impairments 48 74 Long-term mill and leach
stockpiles 1,554 1,633 Other assets 1,957 1,956 Total
assets $ 37,043 $ 37,317 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 1,880 $ 2,393 Current portion of debt 2,216 1,232
Current portion of environmental and asset retirement obligations
379 369 Accrued income taxes 196 66 Held for sale 273 205
Total current liabilities 4,944 4,265 Long-term debt, less
current portion 13,138 14,795 Deferred income taxes 3,870 3,768
Environmental and asset retirement obligations, less current
portion 3,512 3,487 Other liabilities 1,586 1,745
Total liabilities 27,050 28,060 Equity: Stockholders'
equity: Common stock 158 157 Capital in excess of par value 26,734
26,690 Accumulated deficit (16,043 ) (16,540 ) Accumulated other
comprehensive loss (456 ) (548 ) Common stock held in treasury
(3,720 ) (3,708 ) Total stockholders' equity 6,673 6,051
Noncontrolling interests 3,320 3,206 Total equity
9,993 9,257 Total liabilities and equity $ 37,043
$ 37,317
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 2017 2016 (In
Millions) Cash flow from operating activities: Net income (loss) $
641 $ (4,511 ) Adjustments to reconcile net income (loss) to net
cash provided by operating activities: Depreciation, depletion and
amortization 839 1,374 Impairment of oil and gas properties — 4,078
Non-cash drillship settlements/idle rig costs and other oil and gas
adjustments (33 ) 694 Net gain on sales of assets (33 ) (749 )
Stock-based compensation 44 42 Net charges for environmental and
asset retirement obligations, including accretion 87 107 Payments
for environmental and asset retirement obligations (59 ) (116 ) Net
loss (gain) on exchanges and early extinguishment of debt 3 (36 )
Deferred income taxes 55 169 (Gain) loss on disposal of
discontinued operations (38 ) 177 Decrease (increase) in long-term
mill and leach stockpiles 80 (99 ) Oil and gas contract settlement
payments (70 ) — Other, net (9 ) 18 Changes in working capital and
tax payments, excluding amounts from dispositions: Accounts
receivable 589 259 Inventories (101 ) 190 Other current assets (2 )
(53 ) Accounts payable and accrued liabilities (267 ) 44 Accrued
income taxes and changes in other tax payments 103 26
Net cash provided by operating activities 1,829 1,614
Cash flow from investing activities: Capital expenditures:
North America copper mines (67 ) (76 ) South America (45 ) (293 )
Indonesia (457 ) (453 ) Molybdenum mines (2 ) (1 ) Other, including
oil and gas operations (135 ) (992 ) Net proceeds from the sale of
additional interest in Morenci — 996 Net proceeds from sales of
other assets 4 290 Other, net (8 ) (6 ) Net cash used in investing
activities (710 ) (535 ) Cash flow from financing
activities: Proceeds from debt 598 2,811 Repayments of debt (1,242
) (3,649 ) Net proceeds from sale of common stock — 32 Cash
dividends paid: Common stock (2 ) (5 ) Noncontrolling interests (39
) (39 ) Stock-based awards net payments (8 ) (5 ) Debt financing
costs and other, net (11 ) (18 ) Net cash used in financing
activities (704 ) (873 ) Net increase in cash and cash
equivalents 415 206 Decrease (increase) in cash and cash
equivalents in assets held for sale 7 (53 ) Cash and cash
equivalents at beginning of year 4,245 177 Cash and
cash equivalents at end of period $ 4,667 $ 330
FREEPORT-McMoRan INC.
ADJUSTED NET INCOME (LOSS)
Adjusted net income (loss) is intended to
provide investors and others with information about FCX's recurring
operating performance. This information differs from net income
(loss) attributable to common stock determined in accordance with
U.S. generally accepted accounting principles (GAAP) and should not
be considered in isolation or as a substitute for measures of
performance determined in accordance with U.S. GAAP. FCX's adjusted
net income (loss) follows, which may not be comparable to similarly
titled measures reported by other companies (in millions, except
per share amounts).
Three Months Ended June 30, 2017 2016
Pre-tax After-tax Per Share Pre-tax
After-tax Per Share
Net income (loss)
attributable to common stock N/A $ 268
$ 0.18 N/A $ (479
) $ (0.38 ) Mining charges:
PT-FI net charges for workforce reductions $ (87 ) a $ (46 ) $
(0.03 ) $ — $ — $ — Inventory adjustments and asset impairment (9 )
(9 ) (0.01 ) (2 ) (2 ) — Oil and gas charges: Drillship
settlement/idle rig credits (costs) 6 b 6 — (639 ) (639 ) (0.50 )
Inventory adjustments and asset impairment — — — (53 ) (53 ) (0.04
) Other contract termination credits 4 4 — — — — Restructuring
charges (4 ) (4 ) — (37 ) (37 ) (0.03 ) Impairment of oil and gas
properties — — — (291 ) (291 ) (0.23 ) Net adjustments to
environmental obligations and related litigation reserves 30 30
0.02 — — — Net gain on sales of assetsc 10 10 0.01 749 744 0.59 Net
(loss) gain on exchanges and early extinguishment of debt (4 ) (4 )
— 39 39 0.03 Net tax credits (charges)d N/A 32 0.02 N/A (36 ) (0.03
) Gain (loss) on discontinued operationse 10 8 —
(177 ) (177 ) (0.14 ) $ (44 ) $ 27 $ 0.01 $
(411 ) $ (452 ) $ (0.36 ) f
Adjusted net income (loss)
attributable to common stock N/A $ 241
$ 0.17 N/A $ (27 )
$ (0.02 )
a. Includes $82 million in production
and delivery costs and $5 million in selling, general and
administrative expenses.
b. Reflects adjustments to the fair
value of the contingent payments related to the 2016 drillship
settlements. The 12-month contingency period associated with the
drillship settlements ended June 30, 2017, and no additional
amounts were paid.
c. Net gains in second-quarter 2017
primarily reflect an adjustment of $13 million to assets held for
sale, partly offset by a net charge of $2 million to adjust the
estimated fair value of the potential $150 million in contingent
consideration related to the December 2016 onshore California sale,
which totaled $21 million at June 30, 2017, and in accordance with
accounting guidelines, will continue to be adjusted through
December 31, 2020. Second-quarter 2016 reflects gains associated
with the sales of a 13 percent undivided interest in the Morenci
unincorporated joint venture and an interest in the Timok
exploration project in Serbia.
d. Refer to “Income Taxes,” on page IX,
for further discussion of net tax charges.
e. The second-quarter 2017 gain primarily
reflects an adjustment to the estimated fair value of the potential
$120 million in contingent consideration related to the November
2016 sale of FCX’s interest in TFHL, which totaled $55 million at
June 30, 2017, and in accordance with accounting guidelines, will
continue to be adjusted through December 31, 2019. Second-quarter
2016 reflects the estimated loss on the sale of FCX’s interest in
TFHL.
f. Per share amount does not foot down
because of rounding.
FREEPORT-McMoRan INC.
ADJUSTED NET INCOME (LOSS)
(continued)
Six Months Ended June 30, 2017 2016 Pre-tax After-tax
Per Share Pre-tax After-tax Per Share
Net income
(loss) attributable to common stock N/A $
496 $ 0.34 N/A $
(4,663 ) $ (3.70 ) Mining
charges: PT-FI net charges for workforce reductions $ (108 ) a $
(57 ) $ (0.04 ) $ — $ — $ — Inventory adjustments and asset
impairment (28 ) (28 ) (0.02 ) (7 ) (7 ) (0.01 ) Oil and gas
charges: Drillship settlements/idle rig credits (costs) 26 b 26
0.02 (804 ) (804 ) (0.64 ) Inventory adjustments and asset
impairment — — — (88 ) (88 ) (0.07 ) Other contract termination
charges (17 ) (17 ) (0.01 ) — — — Restructuring charges (5 ) (5 ) —
(39 ) (39 ) (0.03 ) Impairment of oil and gas properties — — —
(4,078 ) (4,078 ) (3.24 ) Net adjustments to environmental
obligations and related litigation reserves 11 11 0.01 — — — Net
gain on sales of assetsc 33 33 0.02 749 744 0.59 Net (loss) gain on
exchanges and early extinguishment of debt (3 ) (3 ) — 36 36 0.03
Net tax credits (charges)d N/A 31 0.02 N/A (36 ) (0.03 ) Gain
(loss) on discontinued operationse 51 43 0.03
(177 ) (177 ) (0.14 ) $ (40 ) $ 34 $ 0.02 f $ (4,408
) $ (4,449 ) $ (3.53 ) f
Adjusted net income (loss)
attributable to common stock N/A $ 462
$ 0.32 N/A $ (214 )
$ (0.17 )
a. Includes $103 million in
production and delivery costs and $5 million in selling, general
and administrative expenses.
b. Reflects adjustments to the fair
value of the contingent payments related to the 2016 drillship
settlements. The 12-month contingency period associated with the
drillship settlements ended June 30, 2017, and no additional
amounts were paid.
c. Net gains for the first six
months of 2017 primarily reflect adjustments of $32 million
associated with oil and gas transactions and an adjustment of $13
million to assets held for sale, partly offset by a net charge of
$12 million to adjust the estimated fair value of the potential
$150 million in contingent consideration related to the December
2016 onshore California sale, which totaled $21 million at June 30,
2017, and in accordance with accounting guidelines, will continue
to be adjusted through December 31, 2020. The first six months of
2016 reflects gains associated with the sales of a 13 percent
undivided interest in the Morenci unincorporated joint venture and
an interest in the Timok exploration project in Serbia.
d. Refer to “Income Taxes,” on page
IX, for further discussion of net tax charges.
e. The gain for the first six months
of 2017 primarily reflects an adjustment to the estimated fair
value of the potential $120 million in contingent consideration
related to the November 2016 sale of FCX’s interest in TFHL, which
totaled $55 million at June 30, 2017, and in accordance with
accounting guidelines, will continue to be adjusted through
December 31, 2019. The first six months of 2016 reflects the
estimated loss on the sale of FCX’s interest in TFHL.
f. Per share amount does not foot
down because of rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170725005750/en/
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Eric E.
Kinneberg, 602-366-7994
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