Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $217 million, $0.16 per share, for
third-quarter 2016. After adjusting for net gains totaling $39
million, $0.03 per share, third-quarter 2016 adjusted net income
attributable to common stock totaled $178 million, $0.13 per
share.
- Consolidated sales (including
volumes from Tenke Fungurume (Tenke), which is being reported as
discontinued operations) totaled 1.2 billion pounds of copper, 317
thousand ounces of gold, 16 million pounds of molybdenum and 12.0
million barrels of oil equivalents (MMBOE) for third-quarter 2016,
compared with 1.0 billion pounds of copper, 294 thousand ounces of
gold, 23 million pounds of molybdenum and 13.8 MMBOE for
third-quarter 2015.
- Consolidated sales for the year
2016 are expected to approximate 4.8 billion pounds of copper
(including 485 million pounds from Tenke), 1.26 million ounces of
gold and 73 million pounds of molybdenum, including 1.3 billion
pounds of copper, 590 thousand ounces of gold and 21 million pounds
of molybdenum for fourth-quarter 2016.
- Average realized prices were
$2.18 per pound for copper, $1,327 per ounce for gold and $40.63
per barrel for oil for third-quarter 2016.
- Average unit net cash costs were
$1.14 per pound of copper for mining operations and $15.00 per
barrel of oil equivalents (BOE) for oil and gas operations for
third-quarter 2016. Unit net cash costs for the year 2016 are
expected to average $1.20 per pound of copper for mining
operations.
- Operating cash flows totaled
$980 million for third-quarter 2016. Based on current sales volume
and cost estimates and assuming average prices of $2.10 per pound
for copper, $1,250 per ounce for gold and $7 per pound for
molybdenum for fourth-quarter 2016, operating cash flows for the
year 2016 are expected to approximate $3.6 billion (including $0.3
billion in working capital sources and changes in other tax
payments).
- Capital expenditures totaled
$494 million for third-quarter 2016, consisting of $333 million for
mining operations (including $250 million for major projects) and
$160 million for oil and gas operations. Capital expenditures are
expected to approximate $2.8 billion for the year 2016, consisting
of $1.6 billion for mining operations (including $1.2 billion for
major projects) and $1.2 billion for oil and gas operations.
- At September 30, 2016,
consolidated debt totaled $19.0 billion and consolidated
cash totaled $1.1 billion. At September 30, 2016, FCX had
no borrowings and $3.5 billion available under its $3.5 billion
revolving credit facility.
- FCX expects to receive $5.2 billion
in gross proceeds during fourth-quarter 2016 in connection with
previously announced asset sale transactions.
- In July 2016, FCX commenced a
registered at-the-market offering of up to $1.5 billion of
common stock. Through October 24, 2016, FCX has sold 33.5 million
shares of its common stock for gross proceeds of $415 million
($12.39 per share average price).
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $217 million, $0.16 per share, for
third-quarter 2016 and net losses attributable to common stock of
$4.4 billion, $3.45 per share, for the first nine months of 2016,
$3.8 billion, $3.58 per share, for third-quarter 2015 and $8.2
billion, $7.77 per share, for the first nine months of 2015. FCX’s
net income attributable to common stock for third-quarter 2016
includes net gains of $39 million, $0.03 per share, primarily
reflecting net tax credits, partly offset by the impairment of oil
and gas properties. Third-quarter 2015 net loss attributable to
common stock included net charges of $3.7 billion, $3.43 per share,
primarily for the impairment of oil and gas properties. For further
discussion of these amounts and net charges impacting the nine
month periods, refer to the supplemental schedule "Adjusted Net
Income (Loss)," on page IX, which is available on FCX's website,
"fcx.com."
Richard C. Adkerson, President and Chief Executive Officer,
said, "Our actions during 2016 position us to achieve our
objectives of restoring our balance sheet strength and focusing our
strategy on our industry leading portfolio of high quality,
long-lived copper assets. Our announced asset sale
transactions totaling $6.6 billion combined with significant free
cash flow generation in the coming quarters will enable us to
achieve our debt reduction targets. Our global team continues to
execute our cost and capital management initiatives during a period
of weak copper prices in a manner that protects the long-term
values of our large resources. We remain focused on completing our
announced transactions, executing our operating plans and building
long-term values from our portfolio of low-cost, long-lived
reserves and resources for the benefit of our
shareholders."
SUMMARY FINANCIAL DATA
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015
2016 2015 (in millions,
except per share amounts) Revenuesa,b $ 3,877 $ 3,382
$ 10,453 $ 11,091 Operating income (loss)a $ 359 $
(3,964 ) $ (3,495 ) $ (9,415 ) Net income (loss) from continuing
operations $ 292 $ (3,815 ) $ (4,034 ) $ (8,090 ) Net (loss) income
from discontinued operationsc $ (6 ) $ 25 $ (191 ) $ 95 Net income
(loss) attributable to common stockd,e $ 217 $ (3,830 ) $ (4,446 )
$ (8,155 ) Diluted net income (loss) per share of common stock:
Continuing operations $ 0.18 $ (3.59 ) $ (3.27 ) $ (7.80 )
Discontinued operations (0.02 ) 0.01 (0.18 ) 0.03 $
0.16 $ (3.58 ) $ (3.45 ) $ (7.77 ) Diluted
weighted-average common shares outstanding 1,351 1,071 1,289 1,050
Operating cash flowsf $ 980 $ 822 $ 2,594 $ 2,608 Capital
expenditures $ 494 $ 1,527 $ 2,309 $ 5,055 At September 30: Cash
and cash equivalents $ 1,108 $ 233 $ 1,108 $ 233 Total debt,
including current portion $ 18,982 $ 20,698 $ 18,982 $ 20,698
a. For segment financial results, refer to
the supplemental schedules, "Business Segments," beginning on page
XII, 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 $(15) million ($(7)
million to net income attributable to common stock from continuing
operations or $(0.01) per share) in third-quarter 2016, $(117)
million ($(58) million to net loss attributable to common stock
from continuing operations or $(0.05) per share) in third-quarter
2015, $5 million ($2 million to net loss attributable to common
stock from continuing operations or less than $0.01 per share) for
the first nine months of 2016 and $(100) million ($(48) million to
net loss attributable to common stock from continuing operations or
$(0.05) per share) for the first nine months of 2015. For further
discussion, refer to the supplemental schedule, "Derivative
Instruments," on page XI, which is available on FCX's website,
"fcx.com."
c. Net income (loss) from discontinued
operations includes charges for (i) allocated interest expense
totaling $12 million in third-quarter 2016, $6 million in
third-quarter 2015, $33 million for the first nine months of 2016
and $20 million for the first nine months of 2015 associated with
the portion of the FCX term loan that is required to be repaid as a
result of the sale of FCX's interest in Tenke and (ii) income tax
(benefit) provision totaling $(2) million in third-quarter 2016,
$(11) million in third-quarter 2015, $(25) million for the first
nine months of 2016 and $20 million for the first nine months of
2015. In accordance with accounting guidelines, the first nine
months of 2016 are also net of an estimated loss on disposal, which
will be adjusted through closing of the transaction (refer to the
supplemental schedule, “Adjusted Net Income (Loss),” on page IX,
which is available on FCX’s website, “fcx.com”).
d. Includes net gains (charges) totaling
$39 million ($0.03 per share) in third-quarter 2016, $(3.7) billion
($(3.43) per share) in third-quarter 2015, $(4.4) billion ($(3.43)
per share) for the first nine months of 2016 and $(8.1) billion
($(7.71) per share) for the first nine months of 2015, which are
described in the supplemental schedule, “Adjusted Net Income
(Loss),” on page IX, 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 XI, which is
available on FCX's website, "fcx.com."
f. Includes net working capital (uses)
sources and changes in other tax payments of $(3) million in
third-quarter 2016, $507 million in third-quarter 2015, $463
million for the first nine months of 2016 and $342 million for the
first nine months of 2015.
DEBT REDUCTION INITIATIVES
FCX is taking actions to restore its balance sheet strength
through a combination of asset sale transactions, cash flow from
operations and capital market transactions. During 2016, FCX has
announced $6.6 billion in asset sale transactions and has received
aggregate cash consideration of $1.4 billion. The remaining $5.2
billion in gross proceeds is expected to be received in
fourth-quarter 2016 associated with the pending Tenke and oil and
gas transactions. In September 2016, FCX agreed to sell its
Deepwater Gulf of Mexico (GOM) properties for cash consideration of
$2.0 billion and up to $150 million of contingent payments, and in
October 2016, FCX agreed to sell its onshore California oil and gas
properties for cash consideration of $592 million and up to $150
million of contingent consideration. Following provides a summary
of FCX’s completed and pending asset sales (in billions):
Cash
Completed
Transactions:
Consideration a Morenci (13 percent interest) $ 1.00 Timok
exploration project in Serbia 0.13 b Oil and gas transactions 0.19
Other land sales 0.06 1.38
Pending
Transactions:
Tenke 2.65 b Deepwater GOM 2.00 b,c Onshore California 0.59
b 5.24 Total, excluding potential transactions and
contingent consideration 6.62 Potential Freeport Cobalt/Kinsanfu
transactionsd 0.15 Contingent considerationb 0.53 Total $
7.30
a. Reflects aggregate cash consideration,
before purchase price adjustments.
b. Excludes contingent consideration of
(i) up to $107 million associated with the Timok transaction, which
is payable to FCX in stages based upon achievement of defined
development milestones, (ii) up to $120 million for the Tenke
transaction, consisting of $60 million if the average copper price
exceeds $3.50 per pound and $60 million if the average cobalt price
exceeds $20 per pound, both for the 24-month period ending December
31, 2019, (iii) up to $150 million for the Deepwater GOM
transaction payable to FCX as the buyer realizes future cash flows
in connection with FCX's third-party production handling agreement
for the Marlin platform, and (iv) up to $150 million for the
onshore California transaction, consisting of $50 million per year
for 2018, 2019 and 2020, if the price of Brent crude oil averages
$70 per barrel or higher in that calendar year.
c. In connection with the Deepwater GOM
transaction, FCX Oil & Gas LLC (FM O&G) entered into an
agreement to amend the terms of the Plains Offshore Operations Inc.
preferred stock to provide FM O&G the right to call these
securities for $582 million. FM O&G expects to exercise this
option at the time the Deepwater GOM sale closes.
d. FCX has agreed to negotiate exclusively
with China Molybdenum Co., Ltd. (CMOC) until December 31, 2016, to
enter into a definitive agreement to sell its interests in Freeport
Cobalt for $100 million and the Kinsanfu exploration project in the
Democratic Republic of Congo (DRC) for $50 million in separate
transactions.
In July 2016, FCX commenced a registered at-the-market (ATM)
offering of up to $1.5 billion of common stock. Through October 24,
2016, FCX has sold 33.5 million shares of its common stock for
gross proceeds of $415 million ($12.39 per share average
price).
FCX continues to aggressively manage production, exploration and
administrative costs and capital spending. With the successful
completion of the Cerro Verde expansion and anticipated access to
higher grade ore from the Grasberg mine in future quarters, FCX
expects to generate substantial cash flows for debt reduction.
FCX remains focused on retaining a high-quality portfolio of
long-lived copper assets positioned to generate value as market
conditions improve. In addition to debt reduction plans, FCX is
pursuing opportunities to create additional value through mine
designs that would increase copper reserves, reduce costs and
provide opportunities to enhance net present values, and continues
to advance studies for future development of its copper resources,
the timing of which will be dependent on market conditions.
SUMMARY OPERATING DATA
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015
2016 2015 Copper (millions of
recoverable pounds)a Production 1,217 1,003 3,447 2,895 Sales,
excluding purchases 1,231 1,001 3,465 2,925 Average realized price
per pound $ 2.18 $ 2.38 $ 2.16 $ 2.54 Site production and delivery
costs per poundb $ 1.39 $ 1.74 $ 1.44 $ 1.84 Unit net cash costs
per poundb $ 1.14 $ 1.52 $ 1.28 $ 1.56
Gold (thousands of
recoverable ounces) Production 308 281 658 907 Sales, excluding
purchases 317 294 674 909 Average realized price per ounce $ 1,327
$ 1,117 $ 1,292 $ 1,149
Molybdenum (millions of recoverable
pounds) Production 19 23 58 72 Sales, excluding purchases 16 23 52
69 Average realized price per pound $ 9.14 $ 7.91 $ 8.36 $ 9.21
Oil Equivalents Sales volumes MMBOE 12.0 13.8 36.6 39.4
Thousand BOE (MBOE) per day 131 150 133 144 Cash operating margin
per BOEc Realized revenues $ 34.99 $ 43.00 d $ 30.50 $ 45.57 d Cash
production costs (15.00 ) (18.85 ) (15.28 ) (19.42 ) Cash operating
margin $ 19.99 $ 24.15 $ 15.22 $ 26.15
a. Includes production and sales volumes
from Tenke, which is reported as discontinued operations. Copper
sales from Tenke totaled 118 million pounds in third-quarter 2016,
113 million pounds in third-quarter 2015, 365 million pounds for
the first nine months of 2016 and 350 million pounds for the first
nine months of 2015. Average realized copper prices (excluding
Tenke) were $2.19 per pound in third-quarter 2016, $2.39 per pound
in third-quarter 2015, $2.17 per pound for the first nine months of
2016 and $2.54 per pound for the first nine months of 2015.
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. Excluding Tenke, mining unit net cash costs averaged
$1.14 per pound in third-quarter 2016, $1.57 per pound in
third-quarter 2015, $1.28 per pound for the first nine months of
2016 and $1.61 per pound for the first nine months of 2015. 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 XV, which are available on FCX's website, "fcx.com."
c. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
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
schedules, “Product Revenues and Production Costs,” beginning on
page XV, which are available on FCX's website, “fcx.com.”
d. Includes realized cash gains on crude
oil derivative contracts of $7.44 per BOE in third-quarter 2015 and
$7.72 per BOE for the first nine months of 2015.
Consolidated Sales Volumes
Third-quarter 2016 consolidated copper sales (including
Tenke) of 1.23 billion pounds were approximately six percent lower
than the July 2016 estimate of 1.3 billion pounds principally
reflecting lower mining rates at the Grasberg mine operated by PT
Freeport Indonesia (PT-FI), which affected the timing of access to
higher grade ore. Third-quarter 2016 consolidated copper sales were
higher than third-quarter 2015 sales of 1.0 billion pounds,
primarily reflecting higher volumes from Cerro Verde and PT-FI.
Third-quarter 2016 consolidated gold sales of 317
thousand ounces were lower than the July 2016 estimate of 410
thousand ounces primarily reflecting lower mining rates which
reflected timing of access to higher grade ore at PT-FI, but were
higher than third-quarter 2015 sales of 294 thousand ounces.
Third-quarter 2016 consolidated molybdenum sales of 16
million pounds were lower than the July 2016 estimate of 20 million
pounds and third-quarter 2015 sales of 23 million pounds, primarily
reflecting weak demand.
Third-quarter 2016 sales from oil and gas operations of 12.0
MMBOE, including 9.1 million barrels (MMBbls) of crude oil,
13.8 billion cubic feet (Bcf) of natural gas and 0.6 MMBbls
of natural gas liquids (NGLs), were higher than the July
2016 estimate of 11.4 MMBOE, primarily reflecting higher than
anticipated oil sales volumes from GOM, but were lower than
third-quarter 2015 sales of 13.8 MMBOE, primarily reflecting the
July 2016 sale of Haynesville.
Sales volumes for the year 2016 are expected to approximate 4.8
billion pounds of copper (including 485 million pounds for Tenke),
1.26 million ounces of gold and 73 million pounds of molybdenum,
including 1.3 billion pounds of copper (including 120 million
pounds for Tenke), 590 thousand ounces of gold and 21 million
pounds of molybdenum for fourth-quarter 2016. Projected sales
volumes are dependent on a number of factors, including operational
performance, shipping schedules and the timing of completing the
pending Tenke transaction.
Consolidated Unit Costs
Mining Unit Net Cash Costs. Consolidated average unit net cash
costs (net of by-product credits) for FCX's copper mines (including
Tenke) of $1.14 per pound of copper in third-quarter 2016 were
lower than unit net cash costs of $1.52 per pound in third-quarter
2015, primarily reflecting higher copper sales volumes and the
impact of ongoing cost reduction initiatives.
Assuming average prices of $1,250 per ounce of gold and $7 per
pound of molybdenum for fourth-quarter 2016 and achievement of
current sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) for copper mines (including
Tenke) are expected to average $0.99 per pound of copper in
fourth-quarter 2016 and $1.20 per pound for the year 2016. The
impact of price changes for fourth-quarter 2016 on consolidated
unit net cash costs would approximate $0.0075 per pound for each
$50 per ounce change in the average price of gold and $0.004 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.
Oil and Gas Cash Production Costs per BOE. Cash production costs
for oil and gas operations of $15.00 per BOE in third-quarter 2016
were lower than cash production costs of $18.85 per BOE in
third-quarter 2015, primarily reflecting ongoing cost reduction
efforts in California.
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 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 long-term development projects. In the near term, FCX is
deferring development of new projects as a result of current market
conditions. Future investments will be undertaken based on the
results of economic and technical feasibility studies, and market
conditions.
During 2015, FCX revised plans for its North America copper
mines to incorporate reductions in mining rates to reduce operating
and capital costs. In addition, FCX curtailed operations at the
Miami and Tyrone mines and is operating its Sierrita mine at
reduced rates. The revised plans at each of the operations
incorporate the impacts of lower energy, acid and other
consumables, reduced labor costs and a significant reduction in
capital spending plans. These operating plans will continue to be
reviewed and additional adjustments will be made as market
conditions warrant.
Operating Data. Following is a summary of consolidated operating
data for the North America copper mines for the third quarters and
first nine months of 2016 and 2015:
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Copper (millions of recoverable pounds)
Production 455 499 1,411 1,420 Sales 458 483 1,425 1,441 Average
realized price per pound $ 2.19 $ 2.42 $ 2.18 $ 2.59
Molybdenum (millions of recoverable pounds) Productiona 9 9
25 28
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.44 $ 1.68 $
1.41 $ 1.76 By-product credits (0.17 ) (0.12 ) (0.12 ) (0.15 )
Treatment charges 0.10 0.12 0.11 0.12
Unit net cash costs $ 1.37 $ 1.68 $ 1.40 $
1.73
a. Refer to summary operating data on page
4 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 XV, which are available on FCX's website,
"fcx.com."
North America's consolidated copper sales volumes of 458 million
pounds in third-quarter 2016 were less than third-quarter 2015
sales of 483 million pounds, primarily attributable to the May 2016
sale of a portion of FCX's interest in Morenci. North America
copper sales are estimated to approximate 1.8 billion pounds for
the year 2016, compared with 2.0 billion pounds in 2015.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.37 per pound of copper in
third-quarter 2016 were lower than the unit net cash costs of $1.68
per pound in third-quarter 2015, primarily reflecting cost
reduction initiatives.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.41 per
pound of copper for the year 2016, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $7 per pound for fourth-quarter 2016. North America's
average unit net cash costs would change by approximately $0.005
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 and is on track to provide
incremental annual production of approximately 600 million pounds
of copper and 15 million pounds of molybdenum.
During 2015, FCX revised plans for its South America copper
mines, principally to reflect adjustments to the mine plan at El
Abra 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.
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
depend on technical studies, economic factors and global copper
market conditions.
Operating Data. Following is a summary of consolidated operating
data for the South America mining operations for the third quarters
and first nine months of 2016 and 2015:
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Copper (millions of recoverable pounds)
Production 317 204 986 585 Sales 323 207 973 585 Average realized
price per pound $ 2.19 $ 2.37 $ 2.17 $ 2.52
Molybdenum (millions of recoverable pounds) Productiona 5 1
14 5
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.27 $ 1.54 $
1.23 $ 1.68 By-product credits (0.12 ) (0.04 ) (0.10 ) (0.05 )
Treatment charges 0.24 0.18 0.24 0.17 Royalty on metals 0.01
— — — Unit net cash costs $ 1.40 $ 1.68
$ 1.37 $ 1.80
a. Refer to summary operating data on page
4 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 XV, which are available on FCX's website,
"fcx.com."
South America's consolidated copper sales volumes of 323 million
pounds in third-quarter 2016 were significantly higher than
third-quarter 2015 sales of 207 million pounds, reflecting Cerro
Verde's expanded operations. Sales from South America mining are
expected to approximate 1.3 billion pounds of copper for the year
2016, compared with 871 million pounds of copper in 2015.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.40 per pound of copper in third-quarter
2016 were lower than unit net cash costs of $1.68 per pound in
third-quarter 2015, primarily reflecting higher copper sales
volumes and efficiencies associated with the Cerro Verde expansion
and higher by-product credits. Average unit net cash costs (net of
by-product credits) for South America mining are expected to
approximate $1.42 per pound of copper for the year 2016, based on
current sales volume and cost estimates and assuming average prices
of $7 per pound of molybdenum for fourth-quarter 2016.
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. PT-FI continues to engage with Indonesian
government officials regarding its long-term operating rights under
its Contract of Work (COW), and its rights to export concentrate
without restriction.
PT-FI and the Indonesian government entered into a Memorandum of
Understanding in July 2014, in which subject to concluding an
agreement to extend PT-FI's operations beyond 2021 on acceptable
terms, PT-FI agreed to construct new smelter capacity in Indonesia
and to divest an additional 20.64 percent interest in PT-FI at fair
market value. PT-FI also agreed to pay higher royalties and to pay
export duties until certain smelter development milestones were
met.
In October 2015, the Indonesian government provided a letter of
assurance to PT-FI indicating that it would revise regulations
allowing it to approve the extension of operations beyond 2021, and
provide the same rights and the same level of legal and fiscal
certainty provided under its current COW.
In August 2016, PT-FI's export permit was renewed through
January 11, 2017. Current regulations published by the Indonesian
government prohibit exports of copper concentrate and anode slimes
after January 12, 2017. Indonesian government officials have
indicated an intent to revise this regulation to protect employment
and government revenues. PT-FI is actively engaged with Indonesian
government officials on this matter.
Operating and Development Activities. PT-FI is currently mining
the final phase of the Grasberg open pit, which contains very 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 the first half of 2018.
PT-FI has several projects in progress 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. From
2017 to 2020, estimated aggregate capital spending on these
projects is currently expected to average $1.0 billion per year
($0.8 billion per year net to PT-FI). 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, the timing of these expenditures continues
to be reviewed.
Operating Data. Following is a summary of consolidated operating
data for the Indonesia mining operations for the third quarters and
first nine months of 2016 and 2015:
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Copper (millions of recoverable pounds)
Production 321 192 694 551 Sales 332 198 702 549 Average realized
price per pound $ 2.20 $ 2.35 $ 2.17 $ 2.45
Gold
(thousands of recoverable ounces) Production 301 272 637 887 Sales
307 285 653 891 Average realized price per ounce $ 1,327 $ 1,117 $
1,292 $ 1,149
Unit net cash costs per pound of
coppera Site production and delivery, excluding
adjustments $ 1.37 $ 2.16 $ 1.70 $ 2.39 Gold and silver credits
(1.29 ) (1.59 ) (1.28 ) (1.93 ) Treatment charges 0.27 0.31 0.29
0.31 Export duties 0.10 0.17 0.09 0.16 Royalty on metals 0.12
0.13 0.12 0.16 Unit net cash costs $
0.57 $ 1.18 $ 0.92 $ 1.09
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 XV, which are available on FCX's website,
"fcx.com."
Indonesia's consolidated copper sales totaled 332 million pounds
in third-quarter 2016 and were higher than third-quarter 2015 sales
of 198 million pounds, primarily reflecting higher copper ore
grades. Indonesia's third-quarter 2016 gold sales of 307 thousand
ounces were higher than third-quarter 2015 sales of 285 thousand
ounces. Third-quarter 2016 sales volumes were below previous
estimates because of lower mining rates that affected the timing of
access to higher grade ore and a deferral of production into future
periods resulting from labor productivity issues and a 10-day work
stoppage beginning in late September.
At the Grasberg mine, the sequencing of mining areas with
varying ore grades causes fluctuations in quarterly and annual
production of copper and gold. Consolidated sales volumes from
Indonesia mining operations are expected to approximate 1.2 billion
pounds of copper and 1.24 million ounces of gold for the year 2016,
compared with 744 million pounds of copper and 1.2 million ounces
of gold for the year 2015. Ore grades are expected to further
improve in 2017 because of increased access to higher grade
sections of the Grasberg open pit.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on volumes and other factors. Indonesia's unit net
cash costs (including gold and silver credits) of $0.57 per pound
of copper in third-quarter 2016 were lower than unit net cash costs
of $1.18 per pound in third-quarter 2015, primarily reflecting
higher sales volumes, partly offset by lower by-product
credits.
Based on current sales volume and cost estimates, and assuming
an average gold price of $1,250 per ounce for fourth-quarter 2016,
unit net cash costs (net of gold and silver credits) for Indonesia
mining are expected to approximate $0.19 per pound of copper for
fourth-quarter 2016 and $0.62 per pound for the year 2016.
Indonesia mining's unit net cash costs for the year 2016 would
change by approximately $0.03 per pound for each $50 per ounce
change in the average price of gold for fourth-quarter 2016.
Because of the fixed nature of a large portion of Indonesia
mining's costs, unit costs vary from quarter to quarter depending
on copper and gold volumes. Anticipated higher ore grades from the
Grasberg mine are expected to result in lower unit net cash costs
in fourth-quarter 2016 and for the year 2017.
Indonesia mining's projected sales volumes are dependent on a
number of factors, including operational performance, the timing of
shipments and approval by the Indonesian government to continue the
export of copper concentrate and anode slimes.
Africa Mining. In May 2016, FCX entered into an agreement
to sell its interest in TF Holdings Limited (TFHL), through which
FCX holds an effective 56 percent interest in the Tenke copper and
cobalt mining concessions in the Southeast region of the DRC. In
accordance with accounting guidelines, the operating results of
Africa mining have been separately reported as discontinued
operations in FCX’s consolidated statements of operations for all
periods presented. The transaction is expected to close in
fourth-quarter 2016.
Operating Data. Following is a summary of operating data for the
Africa mining operations for the third quarters and first nine
months of 2016 and 2015:
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Copper (millions of recoverable pounds)
Production 124 108 356 339 Sales 118 113 365 350 Average realized
price per pounda $ 2.07 $ 2.32 $ 2.07 $ 2.52
Cobalt
(millions of contained pounds) Production 9 9 28 25 Sales 9 10 29
26 Average realized price per pound $ 7.83 $ 8.96 $ 7.15 $ 9.04
Unit net cash costs per pound of copperb Site
production and delivery, excluding adjustments $ 1.57 $ 1.63 $ 1.61
$ 1.58 Cobalt creditsc (0.46 ) (0.53 ) (0.39 ) (0.47 ) Royalty on
metals 0.05 0.05 0.05 0.06 Unit net
cash costs $ 1.16 $ 1.15 $ 1.27 $ 1.17
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 net income (loss) from discontinued operations in
FCX's consolidated financial statements, refer to the supplemental
schedules, "Product Revenues and Production Costs," beginning on
page XV, which are available on FCX's website, "fcx.com."
c. Net of cobalt downstream processing and
freight costs.
Africa mining's copper sales of 118 million pounds in
third-quarter 2016 were slightly higher than third-quarter 2015
copper sales of 113 million pounds. Africa mining's sales for 2016
are expected to approximate 485 million pounds of copper and 38
million pounds of cobalt, compared with 467 million pounds of
copper and 35 million pounds of cobalt for the year 2015. Africa
mining's projected sales for the year 2016 would be impacted by the
timing of the completion of the sale of FCX's interest in TFHL.
Africa mining's unit net cash costs (net of cobalt credits) of
$1.16 per pound of copper in third-quarter 2016 were slightly
higher than unit net cash costs of $1.15 per pound of copper in
third-quarter 2015. Unit net cash costs (net of cobalt credits) for
Africa mining are expected to approximate $1.26 per pound of copper
for 2016, based on current sales volume and cost estimates and
assuming an average cobalt price of $11 per pound for
fourth-quarter of 2016.
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 and
South America copper mines, is processed at FCX's conversion
facilities.
Operating and Development Activities. In response to market
conditions, the revised plans for the Henderson molybdenum mine
incorporate lower operating rates, resulting in an approximate 65
percent reduction in Henderson's annual production volumes. FCX
also adjusted production plans at its by-product mines, including
reduced production at its Sierrita mine. Additionally, FCX
incorporated changes in the commercial pricing structure for its
chemicals products to promote continuation of chemical-grade
production.
Production from the Molybdenum mines totaled 5 million pounds of
molybdenum in third-quarter 2016 and 13 million pounds in
third-quarter 2015. Refer to summary operating data on page 4 for
FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the Molybdenum mines, and from FCX's North
and South America copper mines.
Average unit net cash costs for the Molybdenum mines of $10.28
per pound of molybdenum in third-quarter 2016 were higher than
average unit net cash costs of $6.93 per pound in third-quarter
2015, primarily reflecting lower volumes. Based on current sales
volume and cost estimates, unit net cash costs for the Molybdenum
mines are expected to average approximately $8.50 per pound of
molybdenum for the year 2016.
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 XV, 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 and South
America. Exploration spending continues to be constrained by market
conditions and is expected to approximate $45 million for the year
2016.
OIL AND GAS OPERATIONS
Through its wholly owned oil and gas subsidiary, FM O&G,
FCX's principal oil and gas assets include oil production
facilities in the Deepwater GOM and California.
In September 2016, FCX entered into an agreement to sell its
Deepwater GOM properties to Anadarko Petroleum Corporation
(Anadarko) for cash consideration of $2.0 billion (before closing
adjustments) and up to $150 million in contingent payments. The
contingent payments would be received over time as Anadarko
realizes future cash flows in connection with FCX's third-party
production handling agreement for the Marlin platform. The
transaction has an effective date of August 1, 2016, and is
expected to close in fourth-quarter 2016, subject to customary
closing conditions. In connection with the sale of the Deepwater
GOM properties, FM O&G entered into an agreement to amend the
terms of the Plains Offshore Operations Inc. preferred stock to
provide FM O&G the right to call these securities for $582
million. FM O&G expects to exercise this option at the time the
Deepwater GOM sale closes.
In October 2016, FCX entered into an agreement to sell its
onshore California oil and gas properties to Sentinel Peak
Resources California LLC for cash consideration of $592 million
(before closing adjustments) and contingent consideration of up to
$150 million, consisting of $50 million per year for 2018, 2019 and
2020 if the price of Brent crude oil averages $70 per barrel or
higher in each of these calendar years. The transaction has an
effective date of July 1, 2016, and is expected to close in
fourth-quarter 2016, subject to customary closing conditions.
Impairment of Oil and Gas Properties. FCX follows the full cost
method of accounting for its oil and gas operations, whereby all
costs associated with oil and gas property acquisition, exploration
and development activities are capitalized and amortized to expense
under the unit-of-production method on a country-by-country basis
using estimates of proved oil and gas reserves relating to each
country where such activities are conducted. The costs of unproved
oil and gas properties are excluded from amortization until the
properties are evaluated.
Under full cost accounting rules, a "ceiling test" is conducted
each quarter to review the carrying value of oil and gas properties
for impairment. The U.S. Securities and Exchange Commission (SEC)
requires the twelve-month average of the first-day-of-the-month
historical reference oil price be used in determining the ceiling
test limitation. Using West Texas Intermediate (WTI) as the
reference oil price, the average price was $41.68 per barrel at
September 30, 2016, compared with $43.12 per barrel at June
30, 2016. As a result of the impact of the reduction in
twelve-month historical prices and reserve revisions, net
capitalized costs exceeded the ceiling test limitation under full
cost accounting rules, which resulted in the recognition of a
third-quarter 2016 impairment charge of $239 million.
Financial and Operating Data. Following is a summary of
financial and operating data for the U.S. oil and gas operations
for the third quarters and first nine months of 2016 and 2015:
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Financial Summary (in millions) Realized
revenuesa $ 421 $ 593 b $ 1,115 $ 1,796 b Cash production costsa
(180 ) (260 ) (558 ) (765 ) Cash operating margin $ 241 $ 333 $ 557
$ 1,031 Capital expendituresc $ 160 $ 635 $ 1,028 $ 2,430
Sales
Volumes Oil (MMBbls) 9.1 9.3 26.1 26.3 Natural gas (Bcf) 13.8
22.8 52.2 68.1 NGLs (MMBbls) 0.6 0.7 1.8 1.8 MMBOE 12.0 13.8 36.6
39.4
Average Realized Pricesa Oil (per barrel) $
40.63 $ 55.88 b $ 37.11 $ 59.92 b Natural gas (per million British
thermal units, or MMBtu) $ 2.84 $ 2.72 $ 2.24 $ 2.74 NGLs (per
barrel) $ 17.65 $ 16.68 $ 16.85 $ 19.78
Cash Operating Margin
per BOEa Realized revenues $ 34.99 $ 43.00 b $ 30.50 $
45.57 b Cash production costs (15.00 ) (18.85 ) (15.28 ) (19.42 )
Cash operating margin $ 19.99 $ 24.15 $ 15.22
$ 26.15
a. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Cash production costs exclude accretion and other costs. For
reconciliations of realized revenues (including average realized
prices for oil, natural gas and NGLs) and cash production costs to
revenues and production and delivery costs reported in FCX's
consolidated financial statements, refer to the supplemental
schedules, “Product Revenues and Production Costs,” beginning on
page XV, which are available on FCX's website, “fcx.com.”
b. Includes realized cash gains on crude
oil derivative contracts of $103 million ($11.03 per barrel of oil
and $7.44 per BOE) in third-quarter 2015 and $304 million ($11.58
per barrel of oil and $7.72 per BOE) for the first nine months of
2015.
c. Excludes international oil and gas
expenditures totaling $37 million in third-quarter 2015, $47
million for the first nine months of 2016 and $81 million for the
first nine months of 2015, primarily related to the Morocco oil and
gas properties.
The average realized price for crude oil was $40.63 per barrel
in third-quarter 2016 (86 percent of the average Brent crude oil
price of $46.99 per barrel). The average realized price for natural
gas was $2.84 per MMBtu in third-quarter 2016, compared to the New
York Mercantile Exchange natural gas price average of $2.81 per
MMBtu for the July through September 2016 contracts.
Lower realized revenues for oil and gas operations of $34.99 per
BOE in third-quarter 2016, compared to $43.00 per BOE in
third-quarter 2015, primarily reflects the impact of realized cash
gains on derivative contracts of $7.44 per BOE in third-quarter
2015.
Cash production costs for oil and gas operations of $15.00 per
BOE in third-quarter 2016 were lower than cash production costs of
$18.85 per BOE in third-quarter 2015, primarily reflecting ongoing
cost reduction efforts.
Following is a summary of average oil and gas sales volumes per
day by region for the third quarters and first nine months of 2016
and 2015:
Three Months Ended
Nine Months Ended September 30, September 30,
Sales Volumes (MBOE per day) 2016
2015 2016 2015 GOMa 92 91 87 82
Californiab 33 35 32 37 Haynesville/Madden/Otherc 6 24
14 25 Total oil and gas operations 131 150
133 144
a. In September 2016, FCX entered into an
agreement to sell its Deepwater GOM properties; this transaction is
expected to close in fourth-quarter 2016.
b. In October 2016, FCX entered into an
agreement to sell its onshore California properties; this
transaction is expected to close in fourth-quarter 2016.
c. In July 2016, FCX completed the sale of
its Haynesville shale assets.
Daily sales volumes averaged 131 MBOE for third-quarter 2016,
including 99 thousand barrels (MBbls) of crude oil, 150 million
cubic feet (MMcf) of natural gas and 7 MBbls of NGLs.
Following completion of the Deepwater GOM and onshore California
transactions, FCX’s portfolio of oil and gas assets would include
oil and natural gas production onshore in South Louisiana and on
the GOM Shelf, oil production offshore California and natural gas
production from the Madden area in Central Wyoming. In
third-quarter 2016, these properties produced an average of 7 MBbls
of oil and NGLs per day and 74 MMcf of natural gas per day.
Oil and Gas Capital Expenditures. Capital expenditures for oil
and gas operations in third-quarter 2016 totaled $160 million
(including $75 million incurred for GOM and $97 million associated
with the change in capital expenditure accruals).
CASH FLOWS, CASH, DEBT and EQUITY TRANSACTIONS
Operating Cash Flows. FCX generated operating cash flows of $980
million for third-quarter 2016 and $2.6 billion (including $463
million in working capital sources and changes in other tax
payments) for the first nine months of 2016.
Based on current sales volume and cost estimates and assuming
average prices of $2.10 per pound of copper, $1,250 per ounce of
gold, $7 per pound of molybdenum and $51 per barrel of Brent crude
oil for fourth-quarter 2016, FCX's consolidated operating cash
flows are estimated to approximate $3.6 billion for the year 2016
(including $0.3 billion in working capital sources and other tax
payments). The impact of price changes during fourth-quarter 2016
on operating cash flows would approximate $150 million for each
$0.10 per pound change in the average price of copper, $20 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 $28 million for each $5 per barrel change in the
average Brent crude oil price.
Capital Expenditures. Capital expenditures totaled $494 million
for third-quarter 2016, consisting of $333 million for mining
operations (including $250 million for major projects primarily for
the development of underground mines by PT-FI) and $160 million for
oil and gas operations. Capital expenditures for the first nine
months of 2016 totaled $2.3 billion, consisting of $1.2 billion for
mining operations (including $0.9 billion for major projects) and
$1.1 billion for oil and gas operations.
Capital expenditures are expected to approximate $2.8 billion
for the year 2016, consisting of $1.6 billion for mining operations
(including $1.2 billion for major projects, primarily for the
development of underground mines by PT-FI and for the Cerro Verde
expansion, which was completed earlier in the year) and $1.2
billion for oil and gas operations.
Cash. Following is a summary of the U.S. and international
components of consolidated cash and cash equivalents available to
the parent company (excluding cash and cash equivalents of $68
million in assets held for sale), net of noncontrolling interests'
share, taxes and other costs at September 30, 2016 (in
millions):
Cash at domestic companies $ 709 Cash at
international operations 399 Total consolidated cash and
cash equivalents 1,108 Noncontrolling interests' share (97 ) Cash,
net of noncontrolling interests' share 1,011 Withholding taxes and
other (30 )
Net cash available $ 981
Debt. FCX continues to focus on cost and capital management and
cash flow generation from its operations and is taking actions to
reduce debt through asset sales, available cash flows and other
transactions. Following is a summary of total debt and the related
weighted-average interest rates at September 30, 2016 (in
billions, except percentages):
Weighted- Average
Interest Rate FCX Senior Notes $ 11.5 3.8 % FCX Term Loana 2.5 3.3
% FM O&G Senior Notes 2.5 6.6 % Cerro Verde Credit Facility 1.6
2.7 % Other debt 0.9 4.9 % $ 19.0 4.0 %
a. In accordance with the mandatory
prepayment provision of the amended Term Loan, 50 percent of the
proceeds associated with FCX's pending asset sale transactions must
be applied toward repaying the Term Loan.
At September 30, 2016, FCX had no borrowings, $43 million
in letters of credit issued and availability of $3.5 billion under
its revolving credit facility.
Equity. In July 2016, FCX commenced a registered ATM offering of
up to $1.5 billion of common stock. Through October 24, 2016, FCX
has sold 33.5 million shares of its common stock for gross proceeds
of $415 million ($12.39 per share average price). As of September
30, 2016, FCX has 1.36 billion common shares outstanding.
FINANCIAL POLICY
FCX intends to continue to seek to strengthen its financial
position, with a focus on significant debt reduction. In December
2015, FCX's common stock dividend was suspended. FCX's Board of
Directors will continue to review its financial policy on an
ongoing basis.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
third-quarter 2016 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, November 25,
2016.
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FCX is a premier U.S.-based natural resources company with an
industry-leading global portfolio of mineral assets. 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, debt reduction
initiatives, including FCX's ability to complete pending asset
sales and the anticipated timing thereof, and to sell additional
assets, exploration efforts and results, development and production
activities and costs, liquidity, tax rates, the impact of copper,
gold, molybdenum, cobalt, crude oil and natural gas 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. Under its term loan and revolving credit facility, as
amended, FCX is not permitted to pay dividends on common stock on
or prior to March 31, 2017. The declaration of dividends is at the
discretion of FCX's Board of Directors (Board), subject to
restrictions under FCX's credit agreements, 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 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, molybdenum, cobalt, crude oil and natural
gas, mine sequencing, production rates, drilling results, potential
effects of cost and capital expenditure reductions and production
curtailments on financial results and cash flow, the outcome of
FCX's debt reduction initiatives, FCX's ability to secure
regulatory approvals, satisfy closing conditions and consummate
pending asset sales, potential additional oil and gas property
impairment charges, potential inventory adjustments, potential
impairment of long-lived mining assets, the outcome of ongoing
discussions with the Indonesian government regarding PT-FI's
Contract of Work (COW), the potential effects of violence in
Indonesia generally and in the province of Papua, the resolution of
administrative disputes in the Democratic Republic of Congo,
industry risks, regulatory changes, political risks, labor
relations, 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, 2015, 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
continue to export its copper concentrate directly and indirectly
through PT Smelting (PT-FI's 25 percent-owned Indonesian smelting
unit) after the January 12, 2017, effective date of regulations
prohibiting exports of copper concentrate and anode slimes,
including whether and when those regulations may be revised and
whether any such revisions would impose additional conditions on
PT-FI. PT-FI's inability to export copper concentrate itself and
through PT Smelting for any extended period of time would lead to
the suspension of all of FCX's production 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, oil and
gas realized revenues, cash production costs and cash operating
margin, 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 MINING OPERATING DATA
Three Months Ended September 30, Production Sales
COPPER (millions of
recoverable pounds)
2016 2015 2016 2015
(FCX's net interest in %)
North America Morenci (72%)a 202 232 208 224 Bagdad
(100%) 47 53 46 52 Safford (100%) 64 57 62 51 Sierrita (100%) 40 45
40 46 Miami (100%) 6 10 5 10 Chino (100%) 78 82 78 79 Tyrone (100%)
17 20 18 21 Other (100%) 1 — 1 — Total
North America 455 499 458 483
South America Cerro Verde (53.56%) 265 123 272 128 El
Abra (51%) 52 81 51 79 Total South
America 317 204 323 207
Indonesia Grasberg (90.64%)b 321 192 332
198
Consolidated - continuing operations
1,093 895 1,113
c
888
c
Discontinued operations - Tenke Fungurume (Tenke) (56%) 124
108 118 113
Total 1,217
1,003 1,231 1,001 Less noncontrolling
interests 234 162 235 167
Net
983 841 996 834
Average realized price per pound $ 2.19 $ 2.39
Average realized price per pound (including Tenke) $ 2.18 $ 2.38
GOLD (thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 7 9 10 9 Indonesia
(90.64%)b 301 272 307 285
Consolidated 308 281 317
294 Less noncontrolling interests 28 25
29 27
Net 280 256
288 267 Average realized
price per ounce $ 1,327 $ 1,117
MOLYBDENUM (millions of recoverable pounds)
(FCX's net interest in %) Henderson (100%) 2 7 N/A N/A Climax
(100%) 3 6 N/A N/A North America copper mines (100%)a 9 9 N/A N/A
Cerro Verde (53.56%) 5 1 N/A N/A
Consolidated
19 23 16 23
Less noncontrolling interests 2 — 1 1
Net 17 23 15
22 Average realized price per pound $ 9.14 $
7.91
COBALT (millions of contained
pounds) (FCX's net interest in %)
Discontinued operations -
Tenke (56%)
9 9 9 10 Less
noncontrolling interests 4 4 4 4
Net 5 5 5 6
Average realized price per pound $ 7.83 $ 8.96
a. Amounts are net of Morenci's undivided
joint venture partner's 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 61 million pounds in third-quarter 2016 and 28
million pounds in third-quarter 2015.
FREEPORT-McMoRan INC. SELECTED MINING OPERATING DATA
(continued) Nine Months Ended September 30, Production
Sales
COPPER (millions of recoverable pounds)
2016 2015 2016 2015 (FCX's net interest in %)
North
America Morenci (72%)a 658 656 667 660 Bagdad (100%) 139 157
141 166 Safford (100%) 173 136 173 132 Sierrita (100%) 122 140 123
146 Miami (100%) 20 33 21 35 Chino (100%) 239 231 239 232 Tyrone
(100%) 56 65 57 68 Other (100%) 4 2 4 2
Total North America 1,411 1,420 1,425 1,441
South America Cerro Verde (53.56%) 815
334 798 335 El Abra (51%) 171 251 175 250
Total South America 986 585 973 585
Indonesia Grasberg (90.64%)b 694
551 702 549
Consolidated - continuing
operations 3,091 2,556 3,100 c
2,575 c Discontinued operations - Tenke (56%) 356 339
365 350
Total 3,447 2,895
3,465 2,925 Less noncontrolling interests 684
479 683 484
Net 2,763
2,416 2,782 2,441
Average realized price per pound $ 2.17 $ 2.54 Average
realized price per pound (including Tenke) $ 2.16 $ 2.54
GOLD (thousands of recoverable ounces) (FCX's
net interest in %) North America (100%) 21 20 21 18 Indonesia
(90.64%)b 637 887 653 891
Consolidated 658 907 674
909 Less noncontrolling interests 59 83
61 84
Net 599 824
613 825 Average realized
price per ounce $ 1,292 $ 1,149
MOLYBDENUM (millions of recoverable pounds)
(FCX's net interest in %) Henderson (100%) 7 21 N/A N/A Climax
(100%) 12 18 N/A N/A North America copper mines (100%)a 25 28 N/A
N/A Cerro Verde (53.56%) 14 5 N/A N/A
Consolidated 58 72 52
69 Less noncontrolling interests 6 2
4 3
Net 52 70
48 66 Average realized
price per pound $ 8.36 $ 9.21
COBALT
(millions of contained pounds) (FCX's net interest in %)
Discontinued operations - Tenke (56%)
28 25
29 26 Less noncontrolling interests 12 11
13 11
Net 16 14
16 15 Average realized
price per pound $ 7.15 $ 9.04
a. Amounts are net of Morenci's undivided
joint venture partner's 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 131 million pounds for the first nine months of
2016 and 92 million pounds for the first nine months of 2015.
FREEPORT-McMoRan INC. SELECTED MINING OPERATING DATA
(continued) Three Months Ended September 30, Nine Months
Ended September 30, 2016 2015 2016 2015
100% North America
Copper Mines Solution Extraction/Electrowinning (SX/EW)
Operations Leach ore placed in stockpiles (metric tons per
day) 681,400 927,900 764,900 911,100 Average copper ore grade
(percent) 0.31 0.27 0.32 0.26 Copper production (millions of
recoverable pounds) 316 300 921 808
Mill
Operations Ore milled (metric tons per day) 300,500 311,500
299,900 309,700 Average ore grades (percent): Copper 0.47 0.50 0.48
0.48 Molybdenum 0.03 0.03 0.03 0.03 Copper recovery rate (percent)
87.8 85.6 86.3 85.6 Production (millions of recoverable pounds):
Copper 216 240 661 728 Molybdenum 9 9 25 28
100% South
America Mining SX/EW Operations Leach ore placed
in stockpiles (metric tons per day) 163,000 192,300 158,100 220,800
Average copper ore grade (percent) 0.41 0.46 0.41 0.43 Copper
production (millions of recoverable pounds) 78 107 250 330
Mill Operations Ore milled (metric tons per day)
355,300 131,200 348,900 122,400 Average ore grades: Copper
(percent) 0.41 0.49 0.42 0.46 Molybdenum (percent) 0.02 0.02 0.02
0.02 Copper recovery rate (percent) 84.4 79.2 86.1 79.0 Production
(recoverable): Copper (millions of pounds) 239 97 736 255
Molybdenum (millions of pounds) 5 1 14 5
100% Indonesia
Mining
Ore milled (metric tons per day)a
Grasberg open pit 135,600 117,300 117,200 118,400 Deep Ore Zone
underground mine 35,100 40,400 38,700 44,000 Deep Mill Level Zone
(DMLZ) underground mineb 6,000 3,800 5,000 2,700 Grasberg Block
Cave underground mineb 2,800 — 2,600 — Big Gossan underground mineb
1,000 — 700 — Total 180,500 161,500
164,200 165,100 Average ore grades: Copper (percent)
1.02 0.68 0.86 0.65 Gold (grams per metric ton) 0.69 0.71 0.58 0.76
Recovery rates (percent): Copper 91.4 89.6 90.5 90.2 Gold 82.7 81.1
81.4 83.1 Production (recoverable): Copper (millions of pounds) 327
192 736 551 Gold (thousands of ounces) 300 272 664 887
100% Africa Mining (Discontinued Operations) Ore milled
(metric tons per day) 15,300 14,000 15,400 14,600 Average ore
grades (percent): Copper 4.31 4.02 4.11 4.13 Cobalt 0.43 0.43 0.45
0.41 Copper recovery rate (percent) 93.5 94.0 93.6 94.0 Production
(millions of pounds): Copper (recoverable) 124 108 356 339 Cobalt
(contained) 9 9 28 25
100% Molybdenum Mines Ore
milled (metric tons per day) 16,100 36,800 17,700 37,700 Average
molybdenum ore grade (percent) 0.19 0.20 0.21 0.20 Molybdenum
production (millions of recoverable pounds) 5 13 19 39
a. Amounts represent the approximate
average daily throughput processed at PT-FI's 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 Big
Gossan underground mine is expected to restart in the first half of
2017 and production from the Grasberg Block Cave underground mine
is expected to commence in 2018.
FREEPORT-McMoRan INC. SELECTED U.S. OIL AND GAS OPERATING
DATA Three Months Ended September 30, Sales Volumes
Sales per Day 2016 2015 2016 2015
Gulf of Mexico
(GOM)a Oil (thousand barrels or MBbls) 6,272 6,168 68 67
Natural gas (million cubic feet or MMcf) 9,922 9,513 108 103
Natural gas liquids (NGLs, in MBbls) 554 632 6 7 Thousand barrels
of oil equivalents (MBOE) 8,479 8,386 92 b 91 b Average realized
price per BOEc $ 35.70 $ 38.99 Cash production costs per BOEc $
12.77 $ 15.96 Capital expenditures (in millions) $ 75 $ 630
CALIFORNIAa Oil (MBbls) 2,873 3,073 31 33 Natural gas
(MMcf) 438 518 5 6 NGLs (MBbls) 38 44 1 1 MBOE 2,983 3,203 33 b 35
b Average realized price per BOEc $ 36.72 $ 39.84 Cash production
costs per BOEc $ 23.75 $ 32.82 Capital expenditures (in millions) $
6 $ 19
HAYNESVILLE/MADDEN/OTHERd Oil (MBbls) 1
46 — e 1 Natural gas (MMcf) 3,439 12,788 37 139 NGLs (MBbls) 1 14 —
e — e MBOE 576 2,191 6 b 24 b Average realized price per BOEc $
15.55 $ 16.20 Cash production costs per BOEc $ 2.45 $ 9.49 Capital
expenditures (in millions) $ — $
2
TOTAL U.S. OIL AND GAS OPERATIONS Oil (MBbls) 9,146
9,287
99 101 Natural gas (MMcf) 13,799 22,819 150 248 NGLs (MBbls) 593
690 7 8 MBOE 12,038 13,780 131 150 Cash operating margin per BOE:c
Realized revenues $ 34.99 $ 43.00 f Less: cash production costs
15.00 18.85 Cash operating margin $ 19.99 $ 24.15
Depreciation, depletion and amortization per BOE $ 18.54 $ 32.71
Capital expenditures (in millions) $ 160 g $ 635 g
a. FCX has entered into agreements to sell
its Deepwater GOM and onshore California properties; these
transactions are expected to close in fourth-quarter 2016.
b. Production following the completion of
the pending oil and gas transactions would include (i) GOM Shelf,
which totaled 12 MBOE per day for third-quarter 2016 and 15 MBOE
per day for third-quarter 2015, (ii) offshore California, which
totaled 4 MBOE per day for both third quarter 2016 and 2015 and
(iii) the Madden area, which totaled 3 MBOE per day for
third-quarter 2016 and 4 MBOE per day for third-quarter 2015.
c. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
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 schedules, “Product Revenues and Production Costs,”
beginning on page XV, which are available on FCX's website,
“fcx.com.”
d. In July 2016, FCX completed the sale of
its Haynesville shale assets.
e. Rounds to less than 1 MBbl per day.
f. Includes realized cash gains on crude
oil derivative contracts of $7.44 per BOE. These contracts were
managed on a consolidated basis; accordingly, the average realized
price per BOE by region did not reflect adjustments for crude oil
derivative contracts.
g. Consolidated capital expenditures for
U.S. oil and gas operations reflect total spending, which includes
changes in capital expenditure accruals and other adjustments
totaling $79 million for third-quarter 2016 and $(16) million for
third-quarter 2015 that are not specifically allocated to the above
regions. Excludes international oil and gas capital expenditures
totaling $37 million for third-quarter 2015, primarily related to
the Morocco oil and gas properties.
FREEPORT-McMoRan INC. SELECTED U.S. OIL AND GAS OPERATING
DATA (continued) Nine Months Ended September 30, Sales
Volumes Sales per Day 2016 2015 2016 2015
GOMa Oil
(MBbls) 17,470 16,365 64 60 Natural gas (MMcf) 28,634 26,147 105 96
NGLs (MBbls) 1,638 1,633 6 6 MBOE 23,880 22,356 87 b 82 b Average
realized price per BOEc $ 32.38 $ 42.37 Cash production costs per
BOEc $ 12.44 $ 16.72 Capital expenditures (in millions) $ 557 $
2,011
CALIFORNIAa Oil (MBbls) 8,546 9,773 31
36 Natural gas (MMcf) 1,323 1,664 5 6 NGLs (MBbls) 104 128 — d — d
MBOE 8,870 10,178 32 b 37 b Average realized price per BOEc $ 33.08
$ 42.33 Cash production costs per BOEc $ 25.23 $ 30.71 Capital
expenditures (in millions) $ 22 $ 72
HAYNESVILLE/MADDEN/OTHERe Oil (MBbls) 82 120 — d — d
Natural gas (MMcf) 22,276 40,309 81 148 NGLs (MBbls) 21 39 — d — d
MBOE 3,816 6,877 14 b 25 b Average realized price per BOEc $ 12.69
$ 16.52 Cash production costs per BOEc $ 9.88 $ 11.48 Capital
expenditures (in millions) $ 2 $ 29
TOTAL U.S. OIL AND
GAS OPERATIONS Oil (MBbls) 26,098 26,258 95 96 Natural gas
(MMcf) 52,233 68,120 191 250 NGLs (MBbls) 1,763 1,800 6 6 MBOE
36,566 39,411 133 144 Cash operating margin per BOE:c Realized
revenue $ 30.50 $ 45.57 f Less: cash production costs 15.28
19.42 Cash operating margin $ 15.22 $ 26.15 Depreciation,
depletion and amortization per BOE $ 19.03 $ 37.18 Capital
expenditures (in millions) $ 1,028 g $ 2,430 g
a. FCX has entered into agreements to sell
its Deepwater GOM and onshore California properties; these
transactions are expected to close in fourth-quarter 2016.
b. Production following the completion of
the pending oil and gas transactions would include (i) GOM Shelf,
which totaled 13 MBOE per day for the first nine months of 2016 and
14 MBOE per day for the first nine months of 2015, (ii) offshore
California, which totaled 4 MBOE per day for the first nine months
of 2016 and 6 MBOE per day for the first nine months of 2015 and
(iii) the Madden area, which totaled 3 MBOE per day for the first
nine months of 2016 and 4 MBOE per day for the first nine months of
2015.
c. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
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 schedules, “Product Revenues and Production Costs,”
beginning on page XV, which are available on FCX's website,
“fcx.com.”
d. Rounds to less than 1 MBbl per day.
e. In July 2016, FCX completed the sale of
its Haynesville shale assets.
f. Includes realized cash gains on crude
oil derivative contracts of $7.72 per BOE. These contracts were
managed on a consolidated basis; accordingly, the average realized
price per BOE by region did not reflect adjustments for crude oil
derivative contracts.
g. Consolidated capital expenditures for
U.S. oil and gas operations reflect total spending, which includes
changes in capital expenditure accruals and other adjustments
totaling $447 million for the first nine months of 2016 and $318
million for the first nine months of 2015 that are not specifically
allocated to the above regions. Excludes international oil and gas
capital expenditures totaling $47 million for the first nine months
of 2016 and $81 million for the first nine months of 2015,
primarily related to the Morocco oil and gas properties.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine
Months Ended September 30, September 30, 2016 2015 2016 2015 (In
millions, except per share amounts) Revenuesa $ 3,877 $ 3,382 $
10,453 $ 11,091 Cost of sales: Production and deliveryb 2,509 2,595
7,957 7,862 Depreciation, depletion and amortization 643 823 1,937
2,522 Impairment of oil and gas properties 239 3,652 4,317 9,442
Metals inventory adjustments 20 91 27 154
Total cost of sales 3,411 7,161 14,238 19,980 Selling,
general and administrative expenses 110 c 122 408 c 421 Mining
exploration and research expenses 13 26 46 83 Environmental
obligations and shutdown (credits) costs (3 ) 37 18 61 Net gain on
sales of assets (13 ) — (762 ) (39 ) Total costs and
expenses 3,518 7,346 13,948 20,506
Operating income (loss) 359 (3,964 ) (3,495 ) (9,415 ) Interest
expense, netd (187 ) (157 ) (574 ) (438 ) Net gain on early
extinguishment of debt 15 — 51 — Other (expense) income, net (10 )
(41 ) 54 2 e Income (loss) from continuing operations
before income taxes and equity in affiliated companies' net
earnings (losses) 177 (4,162 ) (3,964 ) (9,851 ) Benefit from
(provision for) income taxesf 114 349 (79 ) 1,762 Equity in
affiliated companies' net earnings (losses) 1 (2 ) 9
(1 ) Net income (loss) from continuing operations 292 (3,815 )
(4,034 ) (8,090 ) Net (loss) income from discontinued operationsg
(6 ) 25 (191 ) 95 Net income (loss) 286 (3,790 )
(4,225 ) (7,995 ) Net income attributable to noncontrolling
interests: Continuing operations (37 ) (13 ) (146 ) (61 )
Discontinued operations (22 ) (16 ) (44 ) (68 ) Preferred dividends
attributable to redeemable noncontrolling interest (10 ) (11 ) (31
) (31 ) Net income (loss) attributable to common stockholdersh $
217 $ (3,830 ) $ (4,446 ) $ (8,155 ) Basic and
diluted net income (loss) per share attributable to common
stockholders: Continuing operations $ 0.18 $ (3.59 ) $ (3.27 ) $
(7.80 ) Discontinued operations (0.02 ) 0.01 (0.18 ) 0.03
$ 0.16 $ (3.58 ) $ (3.45 ) $ (7.77 ) Basic
weighted-average common shares outstanding 1,346 1,071
1,289 1,050 Diluted weighted-average common
shares outstanding 1,351 1,071
1,289
1,050 Dividends declared per share of common
stock $ — $ 0.05 $ — $ 0.2605
a. Revenues include favorable
(unfavorable) adjustments to provisionally priced concentrate and
cathode copper sales recognized in prior periods (refer to the
supplemental schedule, "Derivative Instruments," on page XI for a
summary of these amounts). Revenues for the 2015 periods also
include net noncash mark-to-market losses associated with crude oil
derivative contracts (refer to the supplemental schedule, "Adjusted
Net Income (Loss)," on Page IX for a summary of these amounts).
b. Includes charges (i) at oil and gas
operations associated with drillship settlements/idle rigs,
inventory adjustments, asset impairments and other net charges and
(ii) at mining operations for asset retirement/impairment and
restructuring charges. Refer to the supplemental schedule,
"Adjusted Net Income (Loss)," on page IX for a summary of these
charges.
c. Includes net restructuring-related
charges at oil and gas operations. Refer to the supplemental
schedule, "Adjusted Net Income (Loss)," on page IX.
d. Consolidated interest expense,
excluding capitalized interest, totaled $211 million in each of
third quarter 2016 and 2015, $647 million for the first nine months
of 2016 and $622 million for the first nine months of 2015.
e. Includes a gain for the proceeds
received from insurance carriers and other third parties related to
a shareholder derivative litigation settlement. Refer to the
supplemental schedule, "Adjusted Net Income (Loss)," on page
IX.
f. Refer to the supplemental schedule,
"Income Taxes," on page X for a summary of FCX's benefit from
(provision for) income taxes.
g. Net of charges for (i) allocated
interest expense associated with FCX's term loan that is required
to be repaid as a result of the sale of FCX's interest in TF
Holdings Limited totaling $12 million in third-quarter 2016, $6
million in third-quarter 2015, $33 million for the first nine
months of 2016 and $20 million for the first nine months of 2015
and (ii) income tax (benefit from) provision for totaling $(2)
million in third-quarter 2016, $(11) million in third-quarter 2015,
$(25) million for the first nine months of 2016 and $20 million for
the first nine months of 2015. In accordance with accounting
guidelines, the first nine months of 2016 also include an estimated
loss on disposal, which will be adjusted through closing of the
transaction (refer to the supplemental schedule, "Adjusted Net
Income (Loss)," on page IX.
h. FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. Refer
to the supplemental schedule, "Deferred Profits," on page XI for a
summary of net impacts from changes in these deferrals.
FREEPORT-McMoRan INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) September 30,
December 31, 2016 2015 (In millions) ASSETS Current assets: Cash
and cash equivalents $ 1,108 $ 195 Trade accounts receivable 788
660 Income and other tax receivables 857 1,341 Other accounts
receivable 97 154 Inventories: Materials and supplies, net 1,349
1,594 Mill and leach stockpiles 1,312 1,539 Product 1,025 1,071
Other current assets 299 164 Held for sale 4,663 744
Total current assets 11,498 7,462 Property, plant, equipment and
mining development costs, net 23,415 24,246 Oil and gas properties,
net - full cost method: Subject to amortization, less accumulated
amortization and impairment 979 2,262 Not subject to amortization
1,644 4,831 Long-term mill and leach stockpiles 1,723 1,663 Other
assets 2,141 1,989 Held for sale — 4,124 Total assets
$ 41,400 $ 46,577 LIABILITIES AND EQUITY
Current liabilities: Accounts payable and accrued liabilities $
2,347 $ 3,255 Current portion of debt 802 649 Current portion of
environmental and asset retirement obligations 357 272 Accrued
income taxes 161 23 Held for sale 821 108 Total
current liabilities 4,488 4,307 Long-term debt, less current
portion 18,180 19,779 Deferred income taxes 3,549 3,607
Environmental and asset retirement obligations, less current
portion 3,725 3,717 Other liabilities 1,618 1,641 Held for sale —
718 Total liabilities 31,560 33,769 Redeemable
noncontrolling interest 774 764 Equity: Stockholders'
equity: Common stock 149 137 Capital in excess of par value 25,601
24,283 Accumulated deficit (16,832 ) (12,387 ) Accumulated other
comprehensive loss (476 ) (503 ) Common stock held in treasury
(3,710 ) (3,702 ) Total stockholders' equity 4,732 7,828
Noncontrolling interestsa 4,334 4,216 Total equity
9,066 12,044 Total liabilities and equity $ 41,400
$ 46,577
a. Includes noncontrolling interests of
$1.2 billion at September 30, 2016, and December 31, 2015,
associated with Tenke.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) Nine Months
Ended September 30, 2016 2015 (In millions)
Cash flow from operating activities: Net loss $ (4,225 ) $ (7,995 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation, depletion and amortization 2,017 2,717
Impairment of oil and gas properties 4,317 9,442 Non-cash oil and
gas drillship settlements 606 — Other asset impairments, inventory
adjustments, restructuring and other 119 104 Metals inventory
adjustments 27 154 Net gain on sales of assets (762 ) (39 ) Net
charges for environmental and asset retirement obligations,
including accretion 149 174 Payments for environmental and asset
retirement obligations (190 ) (135 ) Net gain on early
extinguishment of debt (51 ) — Deferred income taxes (22 ) (1,926 )
Estimated loss on disposal of discontinued operations 182 —
Increase in long-term mill and leach stockpiles (84 ) (183 ) Net
gains on crude oil derivative contracts — (87 ) Other, net 48 40
Changes in working capital and other tax payments, excluding
amounts from dispositions: Accounts receivable 257 990 Inventories
251 83 Other current assets (120 ) (13 ) Accounts payable and
accrued liabilities (80 ) (150 ) Accrued income taxes and changes
in other tax payments 155 (568 ) Net cash provided by
operating activities 2,594 2,608 Cash flow
from investing activities: Capital expenditures: North America
copper mines (87 ) (308 ) South America (332 ) (1,339 ) Indonesia
(715 ) (660 ) Molybdenum mines (2 ) (10 ) U.S. oil and gas
operations (1,028 ) (2,430 ) Other (145 ) (308 ) Net proceeds from
sale of additional interest in Morenci 996 — Net proceeds from
sales of other assets 410 151 Other, net 9 (37 ) Net cash
used in investing activities (894 ) (4,941 ) Cash flow from
financing activities: Proceeds from debt 3,463 6,552 Repayments of
debt (4,539 ) (4,693 ) Net proceeds from sale of common stock 442
999 Cash dividends and distributions paid: Common stock (5 ) (547 )
Noncontrolling interests (87 ) (89 ) Stock-based awards net
payments, including excess tax benefit (5 ) (8 ) Debt financing
costs and other, net (17 ) (7 ) Net cash (used in) provided by
financing activities (748 ) 2,207 Net increase
(decrease) in cash and cash equivalents 952 (126 ) (Increase)
decrease in cash and cash equivalents in assets held for sale (39 )
42 Cash and cash equivalents at beginning of year 195 317
Cash and cash equivalents at end of period $ 1,108 $
233
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 stockholders 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 September 30, 2016 2015
Pre-tax After-tax Per Share Pre-tax
After-tax Per Share
Net income
(loss) attributable to common stock N/A $
217 $ 0.16 N/A $
(3,830 ) $ (3.58 ) Net noncash
mark-to-market losses on crude oil derivative contracts $ — $ — $ —
$ (74 ) $ (46 ) $ (0.04 ) Impairment of oil and gas properties (239
) (239 ) a (0.18 ) (3,652 ) (3,481 ) a (3.25 ) Other oil and gas
net (charges) credits: Drillship settlements/idle rig (costs)
credits (19 ) (19 ) (0.01 ) 3 2 — Inventory adjustments, asset
impairments and other net chargesb (31 ) (31 ) (0.02 ) (24 ) (15 )
(0.01 ) Net restructuring-related credits 1 1 — — — — Metals
inventory adjustments (20 ) (20 ) (0.01 ) (91 ) (58 ) (0.05 )
Mining asset retirement/impairment and restructuring charges (20 )
(20 ) (0.01 ) (92 ) (56 ) (0.05 ) Adjustments to environmental
obligations and related litigation reserves 12 12 0.01 (28 ) (18 )
(0.02 ) Net gain on sales of assets 13 13 0.01 — — — Net gain on
early extinguishment of debt 15 15 0.01 — — — Net tax creditsc N/A
332 0.24 N/A — — Estimated loss on disposal of discontinued
operations (5 ) (5 ) — — — — $ (293 ) $
39 $ 0.03 d $ (3,958 ) $ (3,672 ) $ (3.43 ) d
Adjusted net income (loss) attributable to common stock
N/A $ 178 $ 0.13 N/A
$ (158 ) $ (0.15 )
Nine Months Ended September 30, 2016 2015 Pre-tax After-tax
Per Share Pre-tax After-tax Per Share
Net loss attributable to
common stock N/A $ (4,446 )
$ (3.45 ) N/A $ (8,155
) $ (7.77 ) Net noncash mark-to-market
losses on crude oil derivative contracts $ — $ — $ — $ (217 ) $
(135 ) $ (0.13 ) Impairment of oil and gas properties (4,317 )
(4,317 ) a (3.35 ) (9,442 ) (7,855 ) a (7.48 ) Other oil and gas
net charges: Drillship settlements/idle rig costs (823 ) (823 )
(0.64 ) (13 ) (8 ) (0.01 ) Inventory adjustments, asset impairments
and other net chargesb (119 ) (119 ) (0.09 ) (46 ) (29 ) (0.03 )
Net restructuring-related charges (38 ) (38 ) (0.03 ) — — — Metals
inventory adjustments (27 ) (27 ) (0.02 ) (154 ) (99 ) (0.09 )
Mining asset retirement/impairment and restructuring charges (17 )
(17 ) (0.01 ) (92 ) (56 ) (0.05 ) Adjustments to environmental
obligations and related litigation reserves 11 11 0.01 (36 ) (23 )
(0.02 ) Net gain on sales of assets 762 757 0.59 39 25 0.02 Net
gain on early extinguishment of debt 51 51 0.04 — — — Gain on
shareholder derivative litigation settlement — — — 92 92 0.09 Net
tax creditsc N/A 290 0.22 N/A — — Estimated loss on disposal of
discontinued operations (182 ) (182 ) (0.14 ) — — —
$ (4,699 ) $ (4,414 ) $
(3.43
)
d
$ (9,869 ) $ (8,088 ) $
(7.71
)
d
Adjusted net loss attributable to common stock
N/A $ (32 ) $ (0.02
)
N/A $ (67 ) $ (0.06
)
a. As a result of the impairment to oil
and gas properties, FCX recorded tax charges to establish a
valuation allowance against deferred tax assets that will not
generate a future benefit. These tax charges have been reflected in
the above after-tax impacts for the impairment of oil and gas
properties.
b. Other net charges for oil and gas
operations include $17 million in the 2016 periods for the
termination of the Morocco well commitment, and $14 million in
third-quarter 2015 and $13 million for the first nine months of
2015 for prior period tax assessments related to California
properties.
c. For further discussion of net tax
credits impacting the third quarter and first nine months of 2016,
refer to "Income Taxes," on page X.
d. Per share amounts do not foot down
because of rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161025005893/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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