fcx1q09_10q.htm
UNITED
STATES
|
SECURITIES
AND EXCHANGE COMMISSION
|
Washington,
D.C. 20549
|
|
FORM
10-Q
|
|
(Mark
One)
|
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the quarterly period ended March 31, 2009
|
OR
|
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the transition period from
|
|
To
|
Commission
File Number: 1-9916
|
|
|
|
Freeport-McMoRan
Copper & Gold Inc.
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
74-2480931
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
|
|
One
North Central Avenue
|
|
Phoenix,
AZ
|
85004-4414
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(602)
366-8100
|
(Registrant's
telephone number, including area code)
|
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer R Accelerated
filer oÿ Non-accelerated
filer o Smaller
reporting company oÿ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ÿ0 Yes
R
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such
files). ÿo Yes
ÿo
No
On April
30, 2009, there were issued and outstanding 411,754,522 shares of the
registrant’s common stock, par value $0.10 per share.
FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF
CONTENTS
|
|
|
Page
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
|
|
6
|
|
|
|
7
|
|
|
|
19
|
|
|
|
|
|
20
|
|
|
|
49
|
|
|
|
49
|
|
|
|
50
|
|
|
|
50
|
|
|
|
50
|
|
|
|
50
|
|
|
|
50
|
|
|
|
51
|
|
|
|
E-1
|
|
|
FREEPORT-McMoRan
COPPER & GOLD INC.
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
Millions)
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
644
|
|
|
$
|
872
|
|
Trade
accounts receivable
|
|
|
880
|
|
|
|
374
|
|
Other
accounts receivable
|
|
|
830
|
|
|
|
838
|
|
Product
inventories and materials and supplies, net
|
|
|
2,195
|
|
|
|
2,192
|
|
Mill
and leach stockpiles
|
|
|
571
|
|
|
|
571
|
|
Other
current assets
|
|
|
280
|
|
|
|
386
|
|
Total
current assets
|
|
|
5,400
|
|
|
|
5,233
|
|
Property,
plant, equipment and development costs, net
|
|
|
16,211
|
|
|
|
16,002
|
|
Long-term
mill and leach stockpiles
|
|
|
1,147
|
|
|
|
1,145
|
|
Intangible
assets, net
|
|
|
359
|
|
|
|
364
|
|
Trust
assets
|
|
|
139
|
|
|
|
142
|
|
Other
assets
|
|
|
452
|
|
|
|
467
|
|
Total
assets
|
|
$
|
23,708
|
|
|
$
|
23,353
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
1,941
|
|
|
$
|
2,766
|
|
Accrued
income taxes
|
|
|
442
|
|
|
|
163
|
|
Current
portion of reclamation and environmental liabilities
|
|
|
178
|
|
|
|
162
|
|
Current
portion of long-term debt and short-term borrowings
|
|
|
87
|
|
|
|
67
|
|
Total
current liabilities
|
|
|
2,648
|
|
|
|
3,158
|
|
Long-term
debt, less current portion:
|
|
|
|
|
|
|
|
|
Senior
notes
|
|
|
6,883
|
|
|
|
6,884
|
|
Project
financing, equipment loans and other
|
|
|
257
|
|
|
|
250
|
|
Revolving
credit facility
|
|
|
–
|
|
|
|
150
|
|
Total
long-term debt, less current portion
|
|
|
7,140
|
|
|
|
7,284
|
|
Deferred
income taxes
|
|
|
2,471
|
|
|
|
2,339
|
|
Reclamation
and environmental liabilities, less current portion
|
|
|
1,967
|
|
|
|
1,951
|
|
Other
liabilities
|
|
|
1,400
|
|
|
|
1,520
|
|
Total
liabilities
|
|
|
15,626
|
|
|
|
16,252
|
|
Equity:
|
|
|
|
|
|
|
|
|
FCX
stockholders’ equity:
|
|
|
|
|
|
|
|
|
5½%
Convertible Perpetual Preferred Stock
|
|
|
832
|
|
|
|
832
|
|
6¾%
Mandatory Convertible Preferred Stock
|
|
|
2,875
|
|
|
|
2,875
|
|
Common
stock
|
|
|
53
|
|
|
|
51
|
|
Capital
in excess of par value
|
|
|
14,760
|
|
|
|
13,989
|
|
Accumulated
deficit
|
|
|
(8,224
|
)
|
|
|
(8,267
|
)
|
Accumulated
other comprehensive loss
|
|
|
(237
|
)
|
|
|
(305
|
)
|
Common
stock held in treasury
|
|
|
(3,409
|
)
|
|
|
(3,402
|
)
|
Total
FCX stockholders’ equity
|
|
|
6,650
|
|
|
|
5,773
|
|
Noncontrolling
interests in subsidiaries
|
|
|
1,432
|
|
|
|
1,328
|
|
Total
equity
|
|
|
8,082
|
|
|
|
7,101
|
|
Total
liabilities and equity
|
|
$
|
23,708
|
|
|
$
|
23,353
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
(In
Millions, Except Per
|
|
|
|
|
|
|
Share
Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
$
|
2,602
|
|
$
|
5,672
|
|
Cost
of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
and delivery
|
|
|
|
|
|
|
|
1,562
|
|
|
2,721
|
|
Depreciation,
depletion and amortization
|
|
|
|
|
|
|
|
232
|
|
|
418
|
|
Lower
of cost or market inventory adjustments
|
|
|
|
|
|
|
|
19
|
|
|
1
|
|
Total
cost of sales
|
|
|
|
|
|
|
|
1,813
|
|
|
3,140
|
|
Selling,
general and administrative expenses
|
|
|
|
|
|
|
|
62
|
|
|
84
|
|
Exploration
and research expenses
|
|
|
|
|
|
|
|
30
|
|
|
52
|
|
Restructuring
and other charges
|
|
|
|
|
|
|
|
25
|
|
|
–
|
|
Total
costs and expenses
|
|
|
|
|
|
|
|
1,930
|
|
|
3,276
|
|
Operating
income
|
|
|
|
|
|
|
|
672
|
|
|
2,396
|
|
Interest
expense, net
|
|
|
|
|
|
|
|
(131
|
)
|
|
(165
|
)
|
Losses
on early extinguishment of debt
|
|
|
|
|
|
|
|
–
|
|
|
(6
|
)
|
Other
income and expense, net
|
|
|
|
|
|
|
|
(14
|
)
|
|
2
|
|
Income
before income taxes and equity in affiliated companies’
|
|
|
|
|
|
|
|
|
net
earnings
|
|
|
|
|
|
|
|
527
|
|
|
2,227
|
|
Provision
for income taxes
|
|
|
|
|
|
|
|
(331
|
)
|
|
(729
|
)
|
Equity
in affiliated companies’ net earnings
|
|
|
|
|
|
|
|
11
|
|
|
7
|
|
Net
income
|
|
|
|
|
|
|
|
207
|
|
|
1,505
|
|
Net
income attributable to noncontrolling interests in
subsidiaries
|
|
|
|
|
|
(104
|
)
|
|
(319
|
)
|
Preferred
dividends
|
|
|
|
|
|
|
|
(60
|
)
|
|
(64
|
)
|
Net
income applicable to common stock
|
|
|
|
|
|
|
$
|
43
|
|
$
|
1,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share of common stock attributable to FCX
common
|
|
|
|
|
|
|
|
|
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
$
|
0.11
|
|
$
|
2.93
|
|
Diluted
|
|
|
|
|
|
|
$
|
0.11
|
|
$
|
2.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
400
|
|
|
383
|
|
Diluted
|
|
|
|
|
|
|
|
401
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share of common stock
|
|
|
|
|
|
|
$
|
–
|
|
$
|
0.4375
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
Millions)
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
207
|
|
|
$
|
1,505
|
|
Adjustments
to reconcile net income to net cash (used in) provided by
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
232
|
|
|
|
418
|
|
Lower
of cost or market inventory adjustments
|
|
|
19
|
|
|
|
1
|
|
Stock-based
compensation
|
|
|
33
|
|
|
|
47
|
|
Charges
for reclamation and environmental liabilities, including
accretion
|
|
|
67
|
|
|
|
41
|
|
Losses
on early extinguishment of debt
|
|
|
–
|
|
|
|
6
|
|
Deferred
income taxes
|
|
|
73
|
|
|
|
(48
|
)
|
Increase
in long-term mill and leach stockpiles
|
|
|
(3
|
)
|
|
|
(47
|
)
|
Amortization
of intangible assets/liabilities and other, net
|
|
|
33
|
|
|
|
48
|
|
(Increases)
decreases in working capital:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(455
|
)
|
|
|
(950
|
)
|
Inventories
|
|
|
(35
|
)
|
|
|
(81
|
)
|
Other
current assets
|
|
|
77
|
|
|
|
1
|
|
Accounts
payable and accrued liabilities
|
|
|
(731
|
)
|
|
|
(505
|
)
|
Accrued
income and other taxes
|
|
|
249
|
|
|
|
216
|
|
Settlement
of reclamation and environmental liabilities
|
|
|
(24
|
)
|
|
|
(37
|
)
|
Net
cash (used in) provided by operating activities
|
|
|
(258
|
)
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures:
|
|
|
|
|
|
|
|
|
North
America copper mines
|
|
|
(72
|
)
|
|
|
(151
|
)
|
South
America copper mines
|
|
|
(74
|
)
|
|
|
(63
|
)
|
Indonesia
|
|
|
(55
|
)
|
|
|
(115
|
)
|
Africa
|
|
|
(251
|
)
|
|
|
(143
|
)
|
Other
|
|
|
(67
|
)
|
|
|
(36
|
)
|
Proceeds
from the sale of assets and other, net
|
|
|
3
|
|
|
|
21
|
|
Net
cash used in investing activities
|
|
|
(516
|
)
|
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities:
|
|
|
|
|
|
|
|
|
Net
proceeds from sale of common stock
|
|
|
740
|
|
|
|
–
|
|
Proceeds
from debt
|
|
|
101
|
|
|
|
473
|
|
Repayments
of revolving credit facility and other debt
|
|
|
(225
|
)
|
|
|
(118
|
)
|
Cash
dividends paid:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
–
|
|
|
|
(169
|
)
|
Preferred
stock
|
|
|
(60
|
)
|
|
|
(64
|
)
|
Noncontrolling
interests
|
|
|
–
|
|
|
|
(49
|
)
|
Net
payments for stock-based awards
|
|
|
(7
|
)
|
|
|
(8
|
)
|
Excess
tax benefit from stock-based awards
|
|
|
–
|
|
|
|
12
|
|
Bank
fees and other
|
|
|
(3
|
)
|
|
|
–
|
|
Net
cash provided by financing activities
|
|
|
546
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(228
|
)
|
|
|
205
|
|
Cash
and cash equivalents at beginning of year
|
|
|
872
|
|
|
|
1,626
|
|
Cash
and cash equivalents at end of period
|
|
$
|
644
|
|
|
$
|
1,831
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED
STATEMENT OF EQUITY (Unaudited)
|
|
Freeport-McMoRan
Copper & Gold Inc. Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Convertible
Perpetual
|
|
Mandatory
Convertible
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
Preferred
Stock
|
|
Common
Stock
|
|
|
|
|
|
Accumulated
|
|
Held
in Treasury
|
|
Noncontrolling
|
|
|
|
|
|
|
Number
|
|
|
|
Number
|
|
|
|
Number
|
|
|
|
Capital
in
|
|
Accumu-
|
|
Other
|
|
Number
|
|
|
|
Interests
|
|
|
|
|
|
|
of
|
|
At
Par
|
|
of
|
|
At
Par
|
|
of
|
|
At
Par
|
|
Excess
of
|
|
lated
|
|
Comprehensive
|
|
of
|
|
At
|
|
in
|
|
Total
|
|
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
Par
Value
|
|
Deficit
|
|
Loss
|
|
Shares
|
|
Cost
|
|
Subsidiaries
|
|
Equity
|
|
|
|
(In
Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
1
|
|
$
|
832
|
|
|
29
|
|
$
|
2,875
|
|
|
505
|
|
$
|
51
|
|
$
|
13,989
|
|
$
|
(8,267
|
)
|
$
|
(305
|
)
|
|
121
|
|
$
|
(3,402
|
)
|
$
|
1,328
|
|
$
|
7,101
|
|
Sale
of common stock
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
27
|
|
|
2
|
|
|
738
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
740
|
|
Exercised
and issued stock-based awards
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
1
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Stock-based
compensation costs
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
33
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
33
|
|
Tender
of shares for stock-based awards
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(7
|
)
|
|
–
|
|
|
(7
|
)
|
Dividends
on preferred stock
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(60
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(60
|
)
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
103
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
104
|
|
|
207
|
|
Other
comprehensive income,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on securities
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
1
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
1
|
|
Defined
benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain during period, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
taxes
of $40 million
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
62
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
62
|
|
Amortization
of unrecognized amounts
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
5
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
5
|
|
Other
comprehensive income
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
68
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
68
|
|
Total
comprehensive income
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
275
|
|
Balance
at March 31, 2009
|
|
1
|
|
$
|
832
|
|
|
29
|
|
$
|
2,875
|
|
|
533
|
|
$
|
53
|
|
$
|
14,760
|
|
$
|
(8,224
|
)
|
$
|
(237
|
)
|
|
121
|
|
$
|
(3,409
|
)
|
$
|
1,432
|
|
$
|
8,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The
accompanying unaudited consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all information
and disclosures required by generally accepted accounting principles (GAAP) in
the United States (U.S.). Therefore, this information should be read in
conjunction with Freeport-McMoRan Copper & Gold Inc.’s (FCX) consolidated
financial statements and notes contained in its 2008 Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods reported. All such adjustments are, in the opinion of
management, of a normal recurring nature. Operating results for the three-month
period ended March 31, 2009, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2009. FCX changed Phelps Dodge
Corporation’s (Phelps Dodge) legal name to Freeport-McMoRan Corporation (FMC) in
2008.
2.
|
RESTRUCTURING
AND OTHER CHARGES
|
During
the fourth quarter of 2008, there was a dramatic decline in copper and
molybdenum prices. After averaging $3.05 per pound in 2006, $3.23 per pound in
2007 and $3.61 per pound for the first nine months of 2008, London Metal
Exchange (LME) spot copper prices declined to a four-year low of $1.26 per pound
in December 2008, averaged $1.78 per pound in the fourth quarter of 2008 and
closed at $1.32 per pound on December 31, 2008. Additionally, while molybdenum
markets have been strong in recent years with prices averaging approximately $25
per pound in 2006, $30 per pound in 2007 and $33 per pound for the first nine
months of 2008, molybdenum prices declined significantly to a four-year low of
$8.75 per pound in November 2008, averaged approximately $16 per pound in the
fourth quarter of 2008 and closed at $9.50 per pound on December 31,
2008.
While
FCX’s long-term strategy of developing its resources to their full potential
remains in place,
the decline in copper and molybdenum prices in the fourth quarter of 2008
and the deterioration of the economic and credit environment have limited FCX’s
ability to invest in growth projects and required FCX to make adjustments to its
near-term operating plans. FCX responded to the sudden downturn and uncertain
near-term outlook by revising its near-term strategy to protect liquidity while
preserving its mineral resources and growth options for the longer term.
Accordingly, operating plans were revised in the fourth quarter of 2008 and
January 2009 to reflect: (i) curtailment of copper production at
higher-cost North America operations and of molybdenum production at the
Henderson molybdenum mine; (ii) capital cost reductions;
(iii) aggressive cost control, including workforce reductions, reduced
equipment purchases that were planned to support expansion projects, a reduction
in material and supplies inventory and reductions in exploration, research and
administrative costs; and (iv) suspension of FCX’s annual common stock
dividend.
Charges
recognized in first-quarter 2009 in connection with FCX’s revised operating
plans in the fourth quarter of 2008 and January 2009 include restructuring
charges of $34 million ($31 million to net income applicable to common stock or
$0.07 per diluted share) for contract termination costs, other project
cancellation costs, employee severance and benefit costs; partially offset by
pension and postretirement gains of $9 million ($9 million to net
income applicable to common stock or $0.02 per diluted share) for special
retirement benefits and curtailments. The restructuring charge reflects
workforce reductions (approximately 3,000 employees related to fourth-quarter
2008 revised operating plans and approximately 1,500 employees related to
January 2009 revised operating plans) and other charges that reflect an
approximate 50 percent total reduction in mining and crushed-leach rates at the
Morenci mine in Arizona, an approximate 50 percent reduction in mining and
stacking rates at the Safford mine in Arizona, an approximate 50 percent
reduction in the mining rate at the Tyrone mine in New Mexico, suspension of
mining and milling activities at the Chino mine in New Mexico (with limited
residual copper production from leach operations), and an approximate 40 percent
reduction in annual production (an approximate 25 percent reduction began in the
fourth quarter of 2008) at the Henderson molybdenum mine in Colorado. In
addition, the revised operating plans included decisions to defer certain
capital projects, including the (i) incremental expansion projects at the
Sierrita and Bagdad mines in Arizona, the Cerro Verde mine in Peru and the
sulfide project at the El Abra mine in Chile, (ii) the restart of the Miami
mine in Arizona and (iii) the restart of the Climax molybdenum mine in
Colorado.
The
following table reflects first-quarter 2009 activities associated with the
liabilities (included in accounts payable and accrued liabilities) incurred in
connection with the fourth quarter of 2008 restructuring (in
millions):
|
December
31,
|
|
Additions/
|
|
|
|
March
31,
|
|
|
2008
|
|
Adjustments
|
|
Payments
|
|
2009
|
|
North America Copper Mines
|
|
|
|
|
|
|
|
|
|
|
|
|
Morenci
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
$
|
2
|
|
$
|
–
|
|
$
|
(1
|
)
|
$
|
1
|
|
Contract
cancellation and other costs
|
|
–
|
|
|
5
|
a
|
|
(5
|
)
|
|
–
|
|
Other
mines
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
|
12
|
|
|
(2
|
)
|
|
(7
|
)
|
|
3
|
|
Contract
cancellation and other costs
|
|
1
|
|
|
6
|
|
|
(2
|
)
|
|
5
|
|
|
|
15
|
|
|
9
|
a
|
|
(15
|
)
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South America Copper Mines
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro
Verde
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
cancellation and other costs
|
|
1
|
|
|
–
|
|
|
(1
|
)
|
|
–
|
|
Other
mines
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
|
6
|
|
|
–
|
|
|
(3
|
)
|
|
3
|
|
Contract
cancellation and other costs
|
|
–
|
|
|
6
|
|
|
(3
|
)
|
|
3
|
|
|
|
7
|
|
|
6
|
|
|
(7
|
)
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
|
2
|
|
|
–
|
|
|
–
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Molybdenum
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
|
1
|
|
|
1
|
|
|
(2
|
)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rod & Refining
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
|
4
|
|
|
–
|
|
|
(3
|
)
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
|
6
|
|
|
–
|
|
|
(5
|
)
|
|
1
|
|
Contract
cancellation and other costs
|
|
3
|
|
|
–
|
|
|
(3
|
)
|
|
–
|
|
|
|
9
|
|
|
–
|
|
|
(8
|
)
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
38
|
|
$
|
16
|
a
|
$
|
(35
|
)
|
$
|
19
|
|
a.
|
Excludes
$3 million for the write off of other current assets in connection with a
lease cancellation.
|
The
following table reflects first-quarter 2009 activities associated with the
liabilities (included in accounts payable and accrued liabilities) incurred in
connection with the January 2009 restructuring (in millions):
|
2009
|
|
|
|
March
31,
|
|
|
Additions
|
|
Payments
|
|
2009
|
|
North America Copper Mines
|
|
|
|
|
|
|
|
|
|
Morenci
|
|
|
|
|
|
|
|
|
|
Employee
severance and benefit costs
|
$
|
12
|
|
$
|
(2
|
)
|
$
|
10
|
|
Contract
cancellation and other costs
|
|
3
|
|
|
(1
|
)
|
|
2
|
|
Total
|
$
|
15
|
|
$
|
(3
|
)
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
PENSION
AND POSTRETIREMENT BENEFITS
|
During
the first quarter of 2009, FCX remeasured its plan assets and benefit
obligations for the FMC Retirement Plan and the FMC Retiree Medical Plan as a
result of employee reductions caused by FCX’s revised operating
plans.
Information
as of and for the three months ended March 31, 2009, on the FMC Retirement Plan
and the FMC Retiree Medical Plan follows (in millions):
|
|
FMC
|
|
FMC
|
|
|
|
Retirement
|
|
Retiree
|
|
|
|
Plan
|
|
Medical
Plan
|
|
Change
in benefit obligation:
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of period
|
|
$
|
1,289
|
|
$
|
222
|
|
Service
cost
|
|
|
6
|
|
|
–
|
|
Interest
cost
|
|
|
19
|
|
|
3
|
|
Actuarial
gains
|
|
|
(165
|
)
|
|
(9
|
)
|
Special
retirement benefits and curtailmentsa
|
|
|
(9
|
)
|
|
(3
|
)
|
Benefits
paid, net of employee contributions and
|
|
|
|
|
|
|
|
Medicare
Part D subsidy (retiree medical plan)
|
|
|
(29
|
)
|
|
(6
|
)
|
Benefit
obligation at end of period
|
|
|
1,111
|
|
|
207
|
|
|
|
|
|
|
|
|
|
Change
in plan assets:
|
|
|
|
|
|
|
|
Fair
value of plan assets at beginning of period
|
|
|
924
|
|
|
–
|
|
Actual
return on plan assets
|
|
|
(57
|
)
|
|
–
|
|
Employer
contributions
|
|
|
–
|
|
|
6
|
|
Benefits
paid, net of employee contributions
|
|
|
(29
|
)
|
|
(6
|
)
|
Fair
value of plan assets at end of period
|
|
|
838
|
|
|
–
|
|
|
|
|
|
|
|
|
|
Funded
status
|
|
$
|
(273
|
)
|
$
|
(207
|
)
|
|
|
|
|
|
|
|
|
Discount
rate assumption
|
|
|
7.30
|
%
|
|
6.90
|
%
|
a.
|
Resulted
from reductions in the workforce caused by the revised mine operating
plans (see Note 2 for further
discussion).
|
Following
is a reconciliation of the benefit obligation, fair value of plan assets and
funded status as of December 31, 2008, for FCX’s pension plans (as reported in
FCX’s 2008 Annual Report on Form 10-K) to the FMC Retirement Plan beginning
balances shown above (in millions):
|
|
|
|
Fair
Value
|
|
|
|
|
|
Benefit
|
|
of
Plan
|
|
Funded
|
|
|
|
Obligation
|
|
Assets
|
|
Status
|
|
FCX’s
pension plans as reported
|
|
$
|
1,412
|
|
$
|
959
|
|
$
|
(453
|
)
|
Less:
FMC plans other than the FMC Retirement Plan,
|
|
|
|
|
|
|
|
|
|
|
and
FCX’s SERP, director and excess benefit plans
|
|
|
(123
|
)
|
|
(35
|
)
|
|
88
|
|
FMC
Retirement Plan
|
|
$
|
1,289
|
|
$
|
924
|
|
$
|
(365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Following
is a reconciliation of the benefit obligation, fair value of plan assets and
funded status as of December 31, 2008, for FCX’s postretirement medical and life
insurance benefit plans (as reported in FCX’s 2008 Annual Report on Form 10-K)
to the FMC Retiree Medical Plan beginning balances shown above (in
millions):
|
|
|
|
Fair
Value
|
|
|
|
|
|
Benefit
|
|
of
Plan
|
|
Funded
|
|
|
|
Obligation
|
|
Assets
|
|
Status
|
|
FCX’s
postretirement medical and life insurance
|
|
|
|
|
|
|
|
|
|
|
benefit
plans as reported
|
|
$
|
257
|
|
$
|
–
|
|
$
|
(257
|
)
|
Less:
FCX’s medical and life insurance benefit plans
|
|
|
|
|
|
|
|
|
|
|
other
than the FMC Retiree Medical Plan
|
|
|
(35
|
)
|
|
–
|
|
|
35
|
|
FMC
Retiree Medical Plan
|
|
$
|
222
|
|
$
|
–
|
|
$
|
(222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The
components of net periodic benefit cost for pension and postretirement benefits
for the three-month periods ended March 31, 2009 and 2008, follow (in
millions):
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Service
cost
|
|
|
|
|
|
|
|
$
|
9
|
|
$
|
9
|
|
Interest
cost
|
|
|
|
|
|
|
|
|
27
|
|
|
27
|
|
Expected
return on plan assets
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
(32
|
)
|
Amortization
of prior service cost
|
|
|
|
|
|
|
|
|
–
|
|
|
2
|
|
Amortization
of net actuarial loss
|
|
|
|
|
|
|
|
|
8
|
|
|
–
|
|
Curtailments
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
–
|
|
Special
retirement benefits
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
–
|
|
Net
periodic benefit costs
|
|
|
|
|
|
|
|
$
|
15
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit costs increased as a result of a decrease in the expected
return on plan assets ($12 million) and amortization of actuarial losses
($8 million) primarily in connection with the losses on plan assets,
partially offset by gains on special retirement benefits and curtailments
($9 million) resulting from workforce reductions caused by the revised mine
operating plans.
FCX’s
basic net income per share of common stock was calculated by dividing net income
applicable to common stock by the weighted-average shares of common stock
outstanding during the period. The following is a reconciliation of net income
and weighted-average shares of common stock outstanding for purposes of
calculating diluted net income per share for the three months ended March 31,
2009 and 2008 (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Net
income
|
|
|
|
|
|
|
|
$
|
207
|
|
$
|
1,505
|
|
Net
income attributable to noncontrolling interests in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiaries
|
|
|
|
|
|
|
|
|
(104
|
)
|
|
(319
|
)
|
Preferred
dividends
|
|
|
|
|
|
|
|
|
(60
|
)
|
|
(64
|
)
|
Net
income applicable to common stock
|
|
|
|
|
|
|
|
|
43
|
|
|
1,122
|
|
Plus
income impact of assumed conversion of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6¾%
Mandatory Convertible Preferred Stock
|
|
|
|
|
|
|
|
|
–
|
|
|
49
|
|
5½%
Convertible Perpetual Preferred Stock
|
|
|
|
|
|
|
|
|
–
|
|
|
15
|
|
Diluted
net income applicable to common stock
|
|
|
|
|
|
|
|
$
|
43
|
|
$
|
1,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares of common stock outstanding:
|
|
|
|
|
|
|
|
|
400
|
|
|
383
|
|
Add
stock issuable upon conversion, exercise or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vesting
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6¾%
Mandatory Convertible Preferred Stocka
|
|
|
|
|
|
|
|
|
–
|
b
|
|
39
|
|
5½%
Convertible Perpetual Preferred Stock
|
|
|
|
|
|
|
|
|
–
|
b
|
|
23
|
|
Dilutive
stock options
|
|
|
|
|
|
|
|
|
–
|
|
|
2
|
|
Restricted
stock
|
|
|
|
|
|
|
|
|
1
|
|
|
2
|
|
Weighted-average
shares of common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
purposes of calculating diluted net income per share
|
|
|
|
|
|
|
|
|
401
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable
to FCX stockholders
|
|
|
|
|
|
|
|
$
|
0.11
|
|
$
|
2.64
|
|
a.
|
Preferred
stock will automatically convert on May 1, 2010, into between
approximately 39 million and 47 million shares of FCX common stock at a
conversion rate that will be determined based on FCX’s common stock price.
Prior to May 1, 2010, holders may convert at a conversion rate of 1.3654
or approximately 39 million shares.
|
b.
|
Potential
additional shares of common stock of approximately 39 million shares for
the 6¾% Mandatory Convertible Preferred Stock and 18 million shares for
the 5½% Convertible Perpetual Preferred Stock were excluded for the three
months ended March 31, 2009, because they were
anti-dilutive.
|
FCX’s
convertible instruments are excluded from the computation of diluted net income
per share of common stock when including the conversion of these instruments
results in an anti-dilutive effect on earnings per share (see footnote b above).
The quarterly dilution threshold for the 5½% Convertible Perpetual Preferred
Stock is $0.64 per share and for the 6¾% Mandatory Convertible Preferred Stock
is $1.24 per share. Outstanding stock options with exercise prices greater than
the average market price of FCX’s common stock during the period are also
excluded from the computation of diluted net income per share of common stock.
Excluded amounts were approximately nine million stock options with a
weighted-average exercise price of $67.00 for first-quarter 2009. No stock
options were excluded for first-quarter 2008.
5.
|
INVENTORIES,
AND MILL AND LEACH STOCKPILES
|
The
components of inventories follow (in millions):
|
|
March
31,
|
|
December
31,
|
|
|
|
2009
|
|
2008
|
|
Mining
Operations:
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
1
|
|
$
|
1
|
|
Work-in-process
|
|
|
145
|
|
|
128
|
|
Finished
goodsa
|
|
|
700
|
|
|
703
|
|
Atlantic
Copper:
|
|
|
|
|
|
|
|
Raw
materials (concentrates)
|
|
|
134
|
|
|
164
|
|
Work-in-process
|
|
|
132
|
|
|
71
|
|
Finished
goods
|
|
|
5
|
|
|
1
|
|
Total
product inventories
|
|
|
1,117
|
|
|
1,068
|
|
Total
materials and supplies, netb
|
|
|
1,078
|
|
|
1,124
|
|
Total
inventories
|
|
$
|
2,195
|
|
$
|
2,192
|
|
a.
|
Primarily
includes copper concentrates, anodes, cathodes and rod, and
molybdenum.
|
b.
|
Materials
and supplies inventory is net of obsolescence reserves totaling $21
million at March 31, 2009, and $22 million at December 31,
2008.
|
The
following summarizes mill and leach stockpiles (in millions):
|
|
March
31,
|
|
December
31,
|
|
|
|
2009
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
Mill
stockpiles
|
|
$
|
22
|
|
$
|
10
|
|
Leach
stockpiles
|
|
|
549
|
|
|
561
|
|
Total
current mill and leach stockpiles
|
|
$
|
571
|
|
$
|
571
|
|
|
|
|
|
|
|
|
|
Long-terma:
|
|
|
|
|
|
|
|
Mill
stockpiles
|
|
$
|
333
|
|
$
|
340
|
|
Leach
stockpiles
|
|
|
814
|
|
|
805
|
|
Total
long-term mill and leach stockpiles
|
|
$
|
1,147
|
|
$
|
1,145
|
|
a.
|
Metals
in stockpiles not expected to be recovered within the next 12
months.
|
FCX
recorded charges for lower of cost or market (LCM) molybdenum inventory
adjustments of $19 million ($19 million to net income applicable to common stock
or $0.05 per diluted share) in first-quarter 2009 resulting from lower
molybdenum prices.
FCX’s
first-quarter 2009 income tax provision resulted from taxes on international
operations ($330 million) and U.S. operations ($1 million). FCX’s effective tax
rate for 2009 is expected to be highly sensitive to changes in commodity prices
and the mix of income between U.S. and international operations. Taxes provided
on income generated from FCX’s South America and Indonesia operations are
recorded at the applicable statutory rates. However, at certain commodity
prices, FCX does not record a tax benefit for losses generated in the U.S., and
these losses cannot be used to offset income generated from international
operations. These factors have caused FCX’s consolidated effective tax rate of
63 percent to be substantially higher than the U.S. federal statutory rate of 35
percent.
FCX’s
first-quarter 2008 income tax provision resulted from taxes on international
operations ($579 million) and U.S. operations ($150 million). The difference
between FCX’s consolidated effective income tax rate of approximately 33 percent
for first-quarter 2008 and the U.S. federal statutory rate of 35 percent
primarily was attributable to a U.S. benefit for percentage depletion, partially
offset by withholding taxes and incremental U.S. income tax accrued on foreign
earnings.
Capitalized
interest totaled $45 million in first-quarter 2009 and $22 million in
first-quarter 2008.
8.
|
DERIVATIVE
FINANCIAL INSTRUMENTS AND FAIR VALUE
MEASUREMENT
|
Derivative Financial
Instruments. FCX and its subsidiaries do not purchase, hold or
sell derivative financial instruments unless there is an existing asset or
obligation or if FCX anticipates a future activity that is likely to occur and
will result in exposure to market risks. FCX does not enter into any derivative
financial instruments for speculative purposes. FCX and its subsidiaries have
entered into derivative financial instruments in limited instances to achieve
specific objectives. These objectives principally relate to managing risks
associated with commodity price, foreign currency and interest rate risks. The
fair values of FCX’s derivative financial instruments are based on widely
published market prices.
Summarized
below are unrealized gains/losses on derivative financial instruments that are
designated and qualify as fair value hedge transactions under Statement of
Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended, for the three months ended
March 31, 2009, along with the unrealized gains (losses) on the related hedged
item (in millions):
|
|
Derivative
|
|
Hedged
Item
|
|
Commodity
contracts:
|
|
|
|
|
|
|
|
Copper
futures and swap contractsa
|
|
$
|
5
|
|
$
|
(5
|
)
|
a.
|
Gains
(losses) on derivative financial instruments as well as the offsetting
gains (losses) on the hedged items (unrecognized firm commitments) are
recorded in revenues. Additionally, FCX realized gains of $3 million
during first-quarter 2009 from matured derivative financial instruments
that qualify for hedge accounting.
|
Summarized
below are the realized and unrealized gains recognized in income before income
taxes and equity in affiliated companies’ net earnings for derivative financial
instruments, including embedded derivatives, which do not qualify for
hedge accounting under SFAS No. 133, as amended, for the three months ended
March 31, 2009 (in millions):
Commodity
contracts:
|
|
|
|
|
Embedded
derivatives in provisional sales contractsa
|
|
$
|
313
|
|
Embedded
derivatives in provisional purchase contractsb
|
|
|
1
|
|
Copper
forward contractsb
|
|
|
4
|
|
Copper
futures and swap contractsa
|
|
|
32
|
|
a.
|
Amounts
recorded in revenues.
|
b.
|
Amounts
recorded in cost of sales as production and delivery
costs.
|
Summarized
below are the fair values of unsettled derivative financial instruments recorded
on the consolidated balance sheet at March 31, 2009 (in millions):
Derivatives
designated as hedging instruments under
|
|
|
|
|
|
|
|
SFAS
No. 133, as amended
|
|
|
|
|
|
|
|
Commodity
contracts:
|
|
|
|
|
|
|
|
Copper
futures and swap contracts:
|
|
|
|
|
|
|
|
Asset
positiona
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments under
|
|
|
|
|
|
|
|
SFAS
No. 133, as amended
|
|
|
|
|
|
|
|
Commodity
contracts:
|
|
|
|
|
|
|
|
Embedded
derivatives in provisional sales/purchases contracts:b
|
|
|
|
|
|
|
|
Asset
position
|
|
|
|
|
$
|
220
|
|
Liability
position
|
|
|
|
|
|
(10
|
)
|
Copper
forward contracts:
|
|
|
|
|
|
|
|
Liability
positionc
|
|
|
|
|
|
(1
|
)
|
Copper
futures and swap contracts:d
|
|
|
|
|
|
|
|
Asset
positiona
|
|
|
|
|
|
5
|
|
Liability
positione
|
|
|
|
|
|
(25
|
)
|
a.
|
Amounts
recorded in other current assets.
|
b.
|
Amounts
recorded either as a net accounts receivable or a net accounts payable
except for Atlantic Copper’s copper purchases, which are recorded to
product inventories ($(7) million).
|
c.
|
Amounts
recorded in accounts payable and accrued
liabilities.
|
d.
|
At
March 31, 2009, FCX had paid $26 million to brokers for margin
requirements, which is recorded in other current
assets.
|
e.
|
Amounts
recorded in accounts payable and accrued liabilities ($23 million) and
long-term liabilities ($2 million).
|
Commodity
Contracts. From time to time, FCX has entered into forward,
futures and swap contracts to hedge the market risk associated with fluctuations
in the prices of commodities it purchases and sells. Derivative financial
instruments used by FCX to manage its risks do not contain credit risk-related
contingent provisions. As of March 31, 2009, FCX had no price protection
contracts relating to its future mine production. A discussion of FCX’s
derivative commodity contracts and programs follows.
Fair Value
Hedges
Copper Futures and Swap
Contracts. Some of FCX’s U.S. copper rod customers request a fixed market
price instead of the New York Mercantile Exchange (COMEX) average price in the
month of shipment. FCX hedges this price exposure in a manner that allows it to
receive the COMEX average price in the month of shipment while the customers pay
the fixed price they requested. FCX accomplishes this by entering into copper
futures and swap contracts and then liquidating the copper futures contracts and
settling the copper swap contracts during the month of shipment, which generally
results in FCX receiving the COMEX average price in the month of shipment. Hedge
gains or losses from these copper futures and swap contracts are recorded in
revenues. FCX did not have any significant gains or losses during the three
months ended March 31, 2009, resulting from ineffectiveness. At March 31, 2009,
FCX held copper futures and swap contracts for 34 million pounds at an average
price of $1.69 per pound, with maturities through January 2011.
Other Derivative Financial
Instruments
Derivative
financial instruments that do not meet the criteria to qualify under FSAS No.
133, as amended, for hedge accounting are discussed below.
Embedded Derivatives. As
described in Note 1 to FCX’s 2008 Annual Report on Form 10-K under “Revenue
Recognition,” certain FCX copper concentrate, copper cathode and gold sales
contracts provide for provisional pricing primarily based on LME or COMEX prices
at the time of shipment as specified in the contract. Similarly, FCX purchases
copper and molybdenum under contracts that provide for provisional pricing. FCX
applies the normal purchase and sale exception under SFAS No. 133, as amended,
to the host sales agreements since the contracts do not allow for net settlement
and always result in physical delivery. Under SFAS No. 133, as amended,
sales and
purchases with a provisional sales price contain an embedded derivative (i.e., the price settlement
mechanism that is settled after the time of delivery) that is required to be
bifurcated from the host contract. The host contract is the sale or purchase of
the metals contained in the concentrates or cathodes at the then-current LME or
COMEX price. Mark-to-market price fluctuations recorded through the settlement
date are reflected in revenues for sales contracts and in cost of sales as
production and delivery costs for purchase contracts. At March 31, 2009, FCX had
embedded derivatives on 407 million pounds of copper sales (net of
noncontrolling interests), with maturities through August 2009 and 57 million
pounds of copper purchases, with maturities through July 2009.
In order
to reduce short-term price volatility in earnings and cash flows, FCX entered
into copper forward sales contracts (not included in the table above) in early
April 2009 to lock in prices at an average of $1.86 per pound on 355 million
pounds of PT Freeport Indonesia’s provisionally priced copper sales at March 31,
2009. These economic hedge transactions are scheduled to final price from April
2009 through July 2009. From time to time, FCX may enter into similar
transactions to lock in pricing on provisionally priced sales, but FCX does not
intend to change its long-standing policy of not hedging future copper
production.
Copper Forward Contracts.
Atlantic Copper enters into forward copper contracts designed to hedge its
copper price risk whenever its physical purchases and sales pricing periods do
not match. These economic hedge transactions are intended to hedge against
changes in copper prices, with the mark-to-market hedging gains or losses
recorded in cost of sales. At March 31, 2009, Atlantic Copper held forward
copper purchase contracts for 8 million pounds at an average price of $1.69 per
pound, with maturities through May 2009.
Copper Futures and Swap
Contracts. In addition to the contracts that qualify for fair value hedge
accounting that are discussed above, FCX also has similar contracts with its
U.S. copper rod customers that do not qualify for hedge accounting because of
certain terms in the sales contracts. Gains and losses for these economic hedge
transactions are recorded in revenues. At March 31, 2009, FCX held copper
futures and swap contracts for 49 million pounds at an average price of $2.27
per pound, with maturities through December 2010.
From time
to time, FCX or its subsidiaries may enter into foreign currency exchange
contracts to lock in or minimize the effects of fluctuations in exchange rates
or interest rate swaps to manage its exposure to interest rate changes on a
portion of its debt. FCX had no outstanding foreign currency exchange contracts
or interest rate swaps at March 31, 2009. Refer to Note 17 in FCX’s
2008 Annual Report on Form 10-K for further discussion.
Fair Value
Measurement. In September 2006, the Financial Accounting
Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements,” which
provides enhanced guidance for using fair value to measure assets and
liabilities. SFAS No. 157 does not require any new fair value measurements under
U.S. GAAP; rather this statement establishes a common definition of fair value,
provides a framework for measuring fair value under U.S. GAAP and expands
disclosure requirements about fair value measurements. In February 2008, FASB
issued FASB Staff Position (FSP) No. FAS 157-2, which delayed the effective date
of SFAS No. 157 for nonfinancial assets or liabilities that are not required or
permitted to be measured at fair value on a recurring basis to fiscal years
beginning after November 15, 2008, and interim periods within those
years. FCX adopted SFAS No. 157 for financial assets and liabilities recognized
at fair value on a recurring basis effective January 1, 2008. This partial
adoption of SFAS No. 157 did not have a material impact on FCX’s financial
reporting and disclosures as its financial assets are measured using quoted
market prices, or Level 1 inputs. FCX adopted SFAS No. 157 for nonfinancial
assets or liabilities not valued on a recurring basis (at least annually)
effective January 1, 2009, with no material impact on its financial reporting
and disclosures.
SFAS No.
157 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 inputs) and the lowest priority to unobservable inputs
(Level 3 inputs). The three levels of the fair value hierarchy under SFAS No.
157 are described below:
Level
1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or
liabilities;
|
Level
2
|
Quoted
prices in markets that are not active, quoted prices for similar assets or
liabilities in active markets, inputs other than quoted prices that are
observable for the asset or liability, or inputs that are derived
principally from or corroborated by observable market data by correlation
or other means;
|
Level
3
|
Prices
or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (supported by little or no
market activity).
|
The
following table sets forth FCX’s financial assets and liabilities measured at
fair value on a recurring basis (in millions):
|
|
Fair
Value at March 31, 2009
|
|
|
|
Total
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
Cash
equivalents
|
|
$
|
612
|
|
$
|
612
|
|
$
|
–
|
|
$
|
–
|
|
Trust
assets (current and long-term)
|
|
|
230
|
|
|
230
|
|
|
–
|
|
|
–
|
|
Available-for-sale
securities
|
|
|
68
|
|
|
68
|
|
|
–
|
|
|
–
|
|
Embedded
derivatives in provisional sales/purchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
contracts
|
|
|
210
|
|
|
210
|
|
|
–
|
|
|
–
|
|
Other
derivative financial instruments, net
|
|
|
(16
|
)
|
|
(16
|
)
|
|
–
|
|
|
–
|
|
|
|
$
|
1,104
|
|
$
|
1,104
|
|
$
|
–
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
NEW
ACCOUNTING STANDARDS
|
Noncontrolling Interests in
Consolidated Financial Statements. In December 2007, FASB issued SFAS No.
160, “Noncontrolling Interests in Consolidated Financial Statements – an
amendment of ARB No. 51,” which clarifies that noncontrolling interests
(minority interests) are to be treated as a separate component of equity and any
changes in the ownership interest (in which control is retained) are to be
accounted for as capital transactions. However, a change in ownership of a
consolidated subsidiary that results in a loss of control is considered a
significant event that triggers gain or loss recognition, with the establishment
of a new fair value basis in any remaining ownership interests. SFAS No. 160
also provides additional disclosure requirements for each reporting period. SFAS
No. 160 applies to fiscal years beginning on or after December 15, 2008, with
early adoption prohibited. This statement is required to be adopted
prospectively, except for the following provisions, which are to be applied
retrospectively: (i) the reclassification of noncontrolling interests to equity
in the consolidated balance sheets and (ii) the adjustment to consolidated net
income to include net income attributable to both the controlling and
noncontrolling interests. FCX adopted SFAS No. 160 effective January 1,
2009.
Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion. In May 2008,
FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),”
which changes the accounting treatment for convertible debt securities that the
issuer may settle fully or partially in cash. FSP No. APB 14-1 requires
bifurcation of convertible debt instruments into a debt component that is
initially recorded at fair value and an equity component that represents the
difference between the initial proceeds from issuance of the instrument and the
fair value allocated to the debt component. The debt component is subsequently
accreted (as a component of interest expense) to par value over its expected
life. FSP No. APB 14-1 is effective for fiscal years and interim periods
beginning after December 15, 2008, and must be retrospectively applied to all
prior periods presented, even if an instrument has matured, converted, or
otherwise been extinguished as of the FSP’s effective date. FSP No. APB 14-1 did
not have an impact on FCX’s financial reporting.
Employers’ Disclosures about
Postretirement Benefit Plan Assets. In December 2008, FASB issued FSP No.
FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,”
which provides enhanced guidance on an employer’s disclosures about plan assets
of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1
revises disclosure requirements on pension and postretirement plan assets from
those required in the original SFAS No. 132 after the FASB decided disclosures
about fair value measurements for postretirement plan assets were not within the
scope of SFAS No. 157. The disclosures about plan assets required by FSP FAS
132(R)-1 are effective for fiscal years ending after December 15, 2009, with
early application permitted. Upon initial application, disclosures are not
required for earlier periods that are presented for comparative purposes. FCX is
currently evaluating the impact that the adoption of FSP No. FAS 132(R)-1
will have on its financial disclosures.
FCX has
organized its operations into five primary divisions – North America copper
mines, South America copper mines, Indonesia mining, Africa mining and
Molybdenum operations. Notwithstanding this structure, FCX internally reports
information on a mine-by-mine basis. Therefore, in accordance with SFAS No. 131,
“Disclosures about Segments of an Enterprise and Related Information,” FCX
concluded that its operating segments include individual mines. Operating
segments that meet certain SFAS No. 131 thresholds are reportable segments. In
accordance with this guidance, beginning in first-quarter 2009, Sierrita is no
longer a reportable segment.
In
third-quarter 2008, FCX revised its presentation of the operating divisions to
better reflect management’s view of the consolidated FCX operations.
Accordingly, FCX has revised its segment disclosures for the three months ended
March 31, 2008, to conform with the current period presentation.
Further
discussion of the reportable segments included in FCX’s primary operating
divisions, as well as FCX’s other reportable segments – Rod & Refining and
Atlantic Copper Smelting & Refining – follows.
North America Copper
Mines. FCX has five operating copper mines in North America –
Morenci, Sierrita, Bagdad and Safford in Arizona and Tyrone in New Mexico. The
North America copper mines include open-pit mining, sulfide ore concentrating,
leaching, and solution extraction and electrowinning (SX/EW) operations. A
majority of the copper produced at the North America copper mines is cast into
copper rod by FCX’s Rod & Refining operations. The North America mines
division includes the Morenci copper mine as a reportable segment.
Morenci. The Morenci open-pit
mine, located in southeastern Arizona, primarily produces copper cathodes. FCX
owns an 85 percent undivided interest in Morenci through an unincorporated joint
venture.
Other Mines. Other mines
include FCX’s other operating southwestern U.S. copper mines – Sierrita, Bagdad,
Safford and Tyrone. In addition to copper, the Sierrita and Bagdad mines produce
molybdenum concentrates as a by-product. Other mines also include FCX’s
southwestern U.S. copper mines that are currently on care-and-maintenance
status.
South America Copper
Mines. FCX has four operating copper mines in South America –
Cerro Verde in Peru, and Candelaria, Ojos del Salado and El Abra in Chile. These
operations include open-pit and underground mining, sulfide ore concentrating,
leaching and SX/EW operations. The South America mines division includes the
Cerro Verde copper mine as a reportable segment.
Cerro Verde. The Cerro Verde
open-pit copper mine, located near Arequipa, Peru, produces copper cathodes and
copper concentrates. In addition to copper, the Cerro Verde mine produces
molybdenum concentrates as a by-product. FCX owns a 53.56 percent interest in
Cerro Verde.
Other Mines. Other mines
include FCX’s Chilean copper mines – Candelaria, Ojos del Salado and El Abra –
which include open-pit and underground mining, sulfide ore concentrating,
leaching and SX/EW operations. In addition to copper, the Candelaria and Ojos
del Salado mines produce gold and silver as by-products. FCX owns an 80 percent
interest in both the Candelaria and Ojos del Salado mines, and owns a 51 percent
interest in the El Abra mine.
Indonesia. Indonesia
mining includes PT Freeport Indonesia’s Grasberg minerals district. PT Freeport
Indonesia produces copper concentrates, which contain significant quantities of
gold and silver. FCX owns 90.64 percent of PT Freeport Indonesia, including 9.36
percent owned through PT Indocopper Investama. In 1996, FCX established an
unincorporated joint venture with Rio Tinto, which covers PT Freeport
Indonesia’s mining operations in Block A and gives Rio Tinto, through 2021, a 40
percent interest in certain assets and future production exceeding specified
annual amounts of copper, gold and silver. After 2021, Rio Tinto will have a 40
percent interest in all production from Block A.
Africa. Africa
mining includes the Tenke Fungurume
copper and cobalt mining concessions in the Katanga province of the Democratic
Republic of Congo. Construction progressed during first-quarter 2009, and the
first copper cathode was produced in late March 2009 as the project entered the
commissioning and start-up phase. FCX owns an effective 57.75 percent interest
in Tenke Fungurume.
Molybdenum. The
Molybdenum segment is an integrated producer of molybdenum, with mining, sulfide
ore concentrating, roasting and processing facilities that produce high-purity,
molybdenum-based chemicals, molybdenum metal powder and metallurgical products,
which are sold to customers around the world, and includes the wholly owned
Henderson molybdenum mine in Colorado and related conversion facilities. The
Henderson underground mine produces high-purity, chemical-grade molybdenum
concentrates, which are typically further processed into value-added molybdenum
chemical products. This segment also includes a sales company that purchases and
sells molybdenum from the Henderson mine as well as from FCX’s North and South
America copper mines that produce molybdenum as a by-product. In addition, at
times this segment roasts and/or processes material on a toll basis. Toll
arrangements require the tolling customer to deliver appropriate
molybdenum-bearing material to FCX’s facilities for processing into a product
that is returned to the customer, who pays FCX for processing its material into
the specified products. The Molybdenum segment also includes FCX’s wholly owned
Climax molybdenum mine in Colorado, which has been on care-and-maintenance
status since 1995.
Rod &
Refining. The Rod & Refining segment consists of copper
conversion facilities located in North America, and includes a refinery, three
rod mills and a specialty copper products facility. These operations process
copper produced at the North America mines and purchased copper into copper
cathode, rod and custom copper shapes. At times these operations refine copper
and produce copper rod and shapes for customers on a toll basis. Toll
arrangements require the tolling customer to deliver appropriate copper-bearing
material to FCX’s facilities for processing into a product that is returned to
the customer, who pays FCX for processing its material into the specified
products.
Atlantic Copper Smelting &
Refining. Atlantic Copper, S.A. (Atlantic Copper), FCX’s
wholly owned smelting unit in Spain, smelts and refines copper concentrates and
markets refined copper and precious metals in slimes. PT Freeport Indonesia and
the South America copper mines generally sell a portion of their concentrate and
cathode (South America) production to Atlantic Copper.
Intersegment Sales.
Intersegment sales between FCX’s operations are based on similar arms-length
transactions with third parties at the time of the sale. Intersegment sales may
not be reflective of the actual prices ultimately realized because of a variety
of factors, including additional processing, timing of sales to unaffiliated
customers and transportation premiums.
Allocations. FCX allocates
certain operating costs, expenses and capital to the operating divisions and
individual segments. However, not all costs and expenses applicable to a mine or
operation are allocated. All U.S. federal and state income taxes are recorded
and managed at the corporate level, whereas foreign income taxes are recorded
and managed at the applicable mine or operation. In addition, most exploration
and research activities are managed at the corporate level, and those costs
along with some selling, general and administrative costs are not allocated to
the operating divisions or segments. Accordingly, the following segment
information reflects management determinations that may not be indicative of
what the actual financial performance of each operating division or segment
would be if it was an independent entity.
Business
Segments
(In
Millions)
|
North
America Copper Mines
|
|
South
America Copper Mines
|
|
Indonesia
|
|
Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smelting
|
|
|
|
|
|
|
Morenci
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
Grasberg
|
|
Tenke
|
|
|
|
|
|
&
Refining
|
|
|
|
|
|
First-Quarter
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaffiliated
customers
|
$
|
21
|
|
$
|
23
|
|
$
|
44
|
|
$
|
246
|
|
$
|
338
|
|
$
|
584
|
|
$
|
920
|
a
|
$
|
–
|
|
$
|
146
|
|
$
|
613
|
|
$
|
292
|
|
$
|
3
|
|
$
|
2,602
|
|
Intersegment
|
|
212
|
|
362
|
|
574
|
|
77
|
|
41
|
|
118
|
|
202
|
|
–
|
|
–
|
|
6
|
|
–
|
|
(900
|
)
|
–
|
|
Production
and delivery
|
|
190
|
|
363
|
|
553
|
|
149
|
|
218
|
|
367
|
|
350
|
|
16
|
|
119
|
|
614
|
|
293
|
|
(750
|
)
|
1,562
|
|
Depreciation,
depletion and amortization
|
|
36
|
|
39
|
|
75
|
|
35
|
|
30
|
|
65
|
|
65
|
|
3
|
|
9
|
|
2
|
|
8
|
|
5
|
|
232
|
|
LCM
inventory adjustments
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
19
|
|
–
|
|
–
|
|
–
|
|
19
|
|
Selling,
general and administrative expenses
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
18
|
|
–
|
|
4
|
|
–
|
|
2
|
|
38
|
|
62
|
|
Exploration
and research expenses
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
30
|
|
30
|
|
Restructuring
and other chargesb
|
|
24
|
|
(2
|
)
|
22
|
|
–
|
|
6
|
|
6
|
|
–
|
|
–
|
|
(1
|
)
|
(2
|
)
|
–
|
|
–
|
|
25
|
|
Operating
income (loss)
|
|
(17
|
)
|
(15
|
)
|
(32
|
)
|
139
|
|
125
|
|
264
|
|
689
|
|
(19
|
)
|
(4
|
)
|
5
|
|
(11
|
)
|
(220
|
)
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
1
|
|
2
|
|
3
|
|
–
|
|
1
|
|
1
|
|
1
|
|
(24
|
)
|
–
|
|
–
|
|
1
|
|
149
|
|
131
|
|
Provision
for (benefit from) income taxes
|
|
–
|
|
–
|
|
–
|
|
47
|
|
37
|
|
84
|
|
288
|
|
(1
|
)
|
–
|
|
–
|
|
–
|
|
(40
|
)
|
331
|
|
Total
assets at March 31, 2009
|
|
2,079
|
|
4,072
|
|
6,151
|
|
4,002
|
|
2,401
|
|
6,403
|
|
4,765
|
|
3,013
|
|
1,755
|
|
268
|
|
875
|
|
478
|
|
23,708
|
|
Capital
expenditures
|
|
29
|
|
43
|
|
72
|
|
37
|
|
37
|
|
74
|
|
55
|
|
251
|
|
44
|
|
3
|
|
6
|
|
14
|
|
519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First-Quarter
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaffiliated
customers
|
$
|
134
|
|
$
|
111
|
|
$
|
245
|
|
$
|
612
|
|
$
|
861
|
|
$
|
1,473
|
|
$
|
887
|
a
|
$
|
–
|
|
$
|
719
|
|
$
|
1,680
|
|
$
|
665
|
|
$
|
3
|
|
$
|
5,672
|
|
Intersegment
|
|
464
|
|
787
|
|
1,251
|
|
117
|
|
17
|
|
134
|
|
165
|
|
–
|
|
–
|
|
8
|
|
–
|
|
(1,558
|
)
|
–
|
|
Production
and delivery
|
|
279
|
|
366
|
|
645
|
|
162
|
|
270
|
|
432
|
|
399
|
|
3
|
|
460
|
|
1,676
|
|
651
|
|
(1,545
|
)
|
2,721
|
|
Depreciation,
depletion and amortization
|
|
81
|
|
103
|
|
184
|
|
43
|
|
87
|
|
130
|
|
45
|
|
1
|
|
39
|
|
2
|
|
9
|
|
8
|
|
418
|
|
LCM
inventory adjustments
|
|
–
|
|
1
|
|
1
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1
|
|
Selling,
general and administrative expenses
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
37
|
|
–
|
|
6
|
|
–
|
|
8
|
|
33
|
|
84
|
|
Exploration
and research expenses
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
52
|
|
52
|
|
Operating
income (loss)
|
|
238
|
|
428
|
|
666
|
|
524
|
|
521
|
|
1,045
|
|
571
|
|
(4
|
)
|
214
|
|
10
|
|
(3
|
)
|
(103
|
)
|
2,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
1
|
|
3
|
|
4
|
|
1
|
|
–
|
|
1
|
|
1
|
|
(9
|
)
|
–
|
|
1
|
|
4
|
|
163
|
|
165
|
|
Provision
for income taxes
|
|
–
|
|
–
|
|
–
|
|
173
|
|
160
|
|
333
|
|
239
|
|
–
|
|
–
|
|
–
|
|
–
|
|
157
|
|
729
|
|
Goodwill
at March 31, 2008
|
|
1,912
|
|
2,299
|
|
4,211
|
|
763
|
|
366
|
|
1,129
|
|
–
|
|
2
|
|
703
|
|
–
|
|
–
|
|
3
|
|
6,048
|
|
Total
assets at March 31, 2008
|
|
6,960
|
|
11,922
|
|
18,882
|
|
5,464
|
|
4,833
|
|
10,297
|
|
3,932
|
|
1,666
|
|
4,179
|
|
604
|
|
994
|
|
1,274
|
|
41,828
|
|
Capital
expenditures
|
|
77
|
|
74
|
|
151
|
|
17
|
|
46
|
|
63
|
|
115
|
|
143
|
|
12
|
|
3
|
|
5
|
|
16
|
|
508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a.
|
Includes
PT Freeport Indonesia’s sales to PT Smelting totaling $263 million in
first-quarter 2009 and $464 million in first-quarter
2008.
|
|
|
b.
|
The
following table summarizes restructuring and other
charges:
|
|
|
|
Restructuring
charges
|
$
|
23
|
|
$
|
4
|
|
$
|
27
|
|
$
|
–
|
|
$
|
6
|
|
$
|
6
|
|
$
|
–
|
|
$
|
–
|
|
$
|
1
|
|
$
|
–
|
|
$
|
–
|
|
$
|
–
|
|
$
|
34
|
|
|
Special
retirement benefits and curtailments
|
|
1
|
|
(6
|
)
|
(5
|
)
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(2
|
)
|
(2
|
)
|
–
|
|
–
|
|
(9
|
)
|
|
Restructuring
and other charges
|
$
|
24
|
|
$
|
(2
|
)
|
$
|
22
|
|
$
|
–
|
|
$
|
6
|
|
$
|
6
|
|
$
|
–
|
|
$
|
–
|
|
$
|
(1
|
)
|
$
|
(2
|
)
|
$
|
–
|
|
$
|
–
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
TO THE
BOARD OF DIRECTORS AND STOCKHOLDERS OF
FREEPORT-McMoRan
COPPER & GOLD INC.
We have
reviewed the condensed consolidated balance sheet of Freeport-McMoRan Copper
& Gold Inc. as of March 31, 2009, and the related consolidated statements of
income and cash flows for the three-month periods ended March 31, 2009 and 2008,
and the consolidated statement of equity for the three-month period ended March
31, 2009. These financial statements are the responsibility of the Company’s
management.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on
our review, we are not aware of any material modifications that should be made
to the condensed consolidated financial statements referred to above for them to
be in conformity with U.S. generally accepted accounting
principles.
We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
Freeport-McMoRan Copper & Gold Inc. as of December 31, 2008, and the related
consolidated statements of income, cash flows, and stockholders’ equity for the
year then ended (not presented herein), and in our report dated February 18,
2009, we expressed an unqualified opinion on those consolidated financial
statements and which report included an explanatory paragraph for the Company’s
adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109,” effective January 1, 2007;
and SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R,”
effective December 31, 2006. As described in Note 9, on January 1, 2009,
Freeport-McMoRan Copper & Gold Inc. adopted SFAS No. 160, “Noncontrolling
Interests in Consolidated Financial Statements,” on a retrospective basis
resulting in revisions of the December 31, 2008, consolidated balance sheet. We
have not audited and reported on the revised balance sheet reflecting the
adoption of SFAS No. 160.
ERNST
& YOUNG LLP
Phoenix,
Arizona
May 4,
2009
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
OVERVIEW
and OUTLOOK
In
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold
Inc. (FCX) and its consolidated subsidiaries, including, except as otherwise
stated, Phelps Dodge Corporation (Phelps Dodge) and its subsidiaries, which we
acquired on March 19, 2007. You should read this discussion in conjunction with
our financial statements, the related Management’s Discussion and Analysis of
Financial Condition and Results of Operations and the discussion of our
“Business and Properties” in our Form 10-K for the year ended December 31, 2008,
filed with the U.S. Securities and Exchange Commission (SEC). The results of
operations reported and summarized below are not necessarily indicative of
future operating results. References to “Notes” are Notes included in our “Notes
to Consolidated Financial Statements.” Throughout Management's Discussion and
Analysis of Financial Condition and Results of Operations all references to
earnings or losses per share are on a diluted basis, unless otherwise noted. FCX
changed Phelps Dodge’s legal name to Freeport-McMoRan Corporation (FMC) in 2008;
therefore, references to FMC and Phelps Dodge represent the same
entity.
We are
one of the world’s largest copper, gold and molybdenum mining companies in terms
of reserves and production. Our portfolio of assets includes the Grasberg
minerals district in Indonesia, which contains the largest single recoverable
copper reserve and the largest single gold reserve of any mine in the world
based on the latest available reserve data provided by third-party industry
consultants; significant mining operations in North and South America; and the
Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC),
which we believe is one of the world’s highest potential copper and cobalt
concessions. We also operate Atlantic Copper, our wholly owned copper smelting
and refining operation in Spain. Refer to “Operations” for further
discussion.
Our
mining revenues for first-quarter 2009 include sales of copper (approximately 71
percent), gold (approximately 17 percent) and molybdenum (approximately 5
percent). We currently have five operating copper mines in North America, four
in South America, the Grasberg minerals district in Indonesia, and in late March
2009, the first copper cathode was produced at the Tenke Fungurume minerals
district in the DRC as the project entered the commissioning and start-up phase.
We also have one operating primary molybdenum mine in North America. During
first-quarter 2009, approximately 66 percent of our consolidated copper
production was from our Grasberg, Cerro Verde and Morenci mines, and
approximately 57 percent of our mined copper was sold in concentrate,
approximately 23 percent as rod (principally from our North America operations)
and approximately 20 percent as cathodes. We produce gold as a by-product at our
copper mines, primarily at the Grasberg minerals district in Indonesia, which
accounted for approximately 96 percent of our consolidated gold production in
first-quarter 2009. During first-quarter 2009, approximately half of our
consolidated molybdenum production was from our Henderson molybdenum mine and
half was produced as a by-product primarily at our North America copper mines.
Refer to “Operations” for further discussion of our mining
operations.
Because
of the significant reduction in debt following our March 2007 acquisition of
Phelps Dodge and historically high prices for copper, molybdenum and gold, our
financial policy during most of 2008 was designed to use our cash flow to invest
in growth projects with anticipated high rates of return and to return excess
cash flows to shareholders in the form of dividends and share purchases.
However, the dramatic declines in copper and molybdenum prices and the
deterioration of the economic and credit environment have limited our ability to
invest in growth projects and required us to make adjustments to our near-term
plans. Our near-term strategy has been designed to protect liquidity while
preserving our large mineral resources and growth options for the longer term.
Revisions made to our operating and financial plans in late 2008 and early 2009
include:
·
|
Curtailment
of copper production at higher cost North America operations and of
molybdenum production at the Henderson molybdenum mine (refer to
“Operations” for further
discussion);
|
·
|
Capital
cost reductions, including deferral of most of our project development
activities and also reduced capital spending on the remaining development
projects in the Grasberg minerals district and at Tenke Fungurume (refer
to “Development Projects” for further
discussion);
|
·
|
Aggressive
cost control, including workforce reductions, reduced equipment purchases
that were planned to support expansion projects, a reduction in material
and supplies inventory and reductions in exploration, research and
administrative costs; and
|
·
|
The
suspension of our annual common stock
dividend.
|
The
completion in February 2009 of a public offering of 26.8 million shares of FCX
common stock at an average price of $28.00 per share generated total proceeds of
$750 million (net proceeds of $740 million after fees and expenses). Refer to
“Capital Resources and Liquidity – Financing Activities” for further
discussion.
While we
view the long-term outlook for our business positively, supported by limitations
on supplies of copper and by the requirements for copper in the world’s economy,
we have responded to the sudden downturn and uncertain near-term outlook and
will continue to adjust our operating strategy as market conditions
change.
At March
31, 2009, we had $644 million in consolidated cash ($445 million of which was
available to our parent company). We also had no borrowings and $74 million of
letters of credit issued under our $1.5 billion revolving credit facilities,
resulting in availability of approximately $1.4 billion. From time to time we
may use the facilities for working capital and short-term funding
requirements.
The sharp
declines in copper and molybdenum prices have significantly impacted our
consolidated financial results in first-quarter 2009, compared to first-quarter
2008. Refer to “Consolidated Results” for further discussion of our consolidated
financial results for the three month periods ended March 31, 2009 and
2008.
Outlook
Consolidated
sales from mines are expected to approximate 3.9 billion pounds of copper, 2.3
million ounces of gold and 50 million pounds of molybdenum for 2009, including
955 million pounds of copper, 650 thousand ounces of gold and 11 million pounds
of molybdenum for second-quarter 2009. Achievement of these sales volume
estimates is dependent on the achievement of targeted mining rates, the
successful operation of production facilities, the impact of weather conditions
and other factors.
Consolidated
revenues, operating cash flows and net income vary significantly with
fluctuations in the market prices of copper, gold and molybdenum, sales volumes
and other factors. Based on the above projected consolidated sales volumes for
2009 and assuming average prices of $2.00 per pound of copper, $900 per ounce of
gold and $8 per pound of molybdenum for the remainder of 2009, our consolidated
operating cash flows would approximate $2.5 billion in 2009, net of an estimated
$0.6 billion for working capital requirements principally reflecting settlements
with customers in first-quarter 2009 of prior year provisionally priced sales.
Operating cash flows for 2009 would be impacted by approximately $240 million
for each $0.10 per pound change in copper prices, $75 million for each $50 per
ounce change in gold prices and $30 million for each $1 per pound change in
molybdenum prices.
Assuming
average prices of $2.00 per pound of copper, $900 per ounce of gold and $8.00
per pound of molybdenum for the remainder of 2009, and using recent prices for
commodity-based input costs, we estimate our consolidated unit net cash costs
related to our copper mining operations (after by-product credits) would average
approximately $0.70 per pound of copper in 2009, compared with $1.16 per pound
of copper in 2008. Estimated consolidated unit net cash costs for 2009 are lower
when compared to 2008 primarily because of the effects of lower operating rates
and reduced energy prices and other commodity-based input costs. Refer to
“Consolidated Results – Production and Delivery Costs” for further discussion of
consolidated unit net cash costs.
COPPER,
GOLD AND MOLYBDENUM MARKETS
The
graphs below illustrate the movements in metals prices from January 1993 through
April 2009. World prices for copper, gold and molybdenum have fluctuated
significantly during this period. The London Metal Exchange (LME) spot copper
price varied from a low of $0.60 per pound in 2001 to a high of $4.08 per pound
in July 2008, the London gold price fluctuated from a low of approximately $250
per ounce in 1999 to a high of $1,011 per ounce in March 2008, and the average
weekly Metals Week
Molybdenum Dealer Oxide price ranged from $1.87 per pound in January 1993 to a
high of $39.25 per pound in June 2005. Copper, gold and molybdenum prices are
affected by numerous factors beyond our control as described further in our
“Risk Factors” contained in Part I, Item 1A of our Form 10-K for the year ended
December 31, 2008.
* Excludes
Shanghai stocks, producer, consumer and merchant stocks.
The graph
above presents LME spot copper prices and reported stocks of copper at the LME
and the New York Mercantile Exchange (COMEX) from January 1993 through April
2009. During the period 2003 to 2006, global consumption exceeded production,
evidenced by the decline in exchange warehouse inventories. Disruptions
associated with strikes and other operational issues, combined with growing
demand from China and other emerging economies resulted in low levels of
inventory from 2006 through most of 2008. However, slowing consumption has led
to increases in inventory levels, with combined LME and COMEX stocks rising to
approximately 540 thousand metric tons at March 31, 2009.
During
first-quarter 2009, LME spot copper prices ranged from $1.38 per pound to $1.85
per pound and averaged $1.56 per pound. Turmoil in the United States (U.S.)
financial markets and concerns about the global economy negatively impacted
copper prices in fourth-quarter 2008; however, copper prices have improved in
2009 because of increased Chinese buying activity, less bearish economic
sentiment and production and supply issues. While the near-term outlook is
uncertain, we believe the underlying fundamentals of the copper business remain
positive, supported by supply side constraints and the absence of significant
new development projects. Future copper prices may continue to be volatile and
are expected to be influenced by demand from China, economic activity in the
U.S. and other industrialized countries, the timing of the development of new
supplies of copper and production levels of mines and copper smelters. During
April 2009, copper prices rose as declines in inventory levels signaled an
increase in demand; the LME spot copper price closed at $2.05 per pound on April
30, 2009.
The graph
above presents London gold prices from January 1993 through April 2009. During
first-quarter 2009, the environment for gold was positive, but volatile, with
gold prices ranging from approximately $810 per ounce to $989 per ounce and
averaging approximately $908 per ounce. Growing investment demand, economic
uncertainty and a weak U.S. dollar are continuing to support gold prices. London
gold prices closed at approximately $883 per ounce on April 30,
2009.
The graph
above presents the Metals
Week Molybdenum Dealer Oxide price from January 1993 through April 2009.
Molybdenum prices have declined significantly as a result of the financial
market turmoil and a decline in demand. During first-quarter 2009, the weekly
average price of molybdenum ranged from approximately $8.13 per pound to
approximately $9.50 per pound and averaged $8.91 per pound. The weekly average
Metals Week Molybdenum
Dealer Oxide price was $8.00 per pound on April 30, 2009.
CONSOLIDATED
RESULTS
|
First-Quarter
|
|
|
2009
|
|
2008
|
|
Financial Data (in
millions, except per share amounts)
|
|
|
|
|
|
|
Revenues
|
$
|
2,602
|
a,b,c
|
$
|
5,672
|
a,b,c
|
Operating
income
|
$
|
672
|
a,b,c,d,e
|
$
|
2,396
|
a,b,c,e
|
Net
income
|
$
|
207
|
b,c,d,e
|
$
|
1,505
|
b,c,e
|
Net
income applicable to common stockf
|
$
|
43
|
b,c,d,e
|
$
|
1,122
|
b,c,e
|
Diluted
net income per share of common stock
|
$
|
0.11
|
b,c,d,e
|
$
|
2.64
|
b,c,e
|
Diluted
average common shares outstanding
g
|
|
401
|
|
|
449
|
|
|
|
|
|
|
|
|
FCX
Mining Operating Data
|
|
|
|
|
|
|
Copper (millions of
recoverable pounds)
|
|
|
|
|
|
|
Production
|
|
1,041
|
|
|
880
|
|
Sales,
excluding purchases
|
|
1,020
|
|
|
911
|
|
Average
realized price per pound
|
$
|
1.72
|
|
$
|
3.69
|
|
Site
production and delivery costs per poundh
|
$
|
1.07
|
|
$
|
1.47
|
|
Unit
net cash costs per poundh
|
$
|
0.66
|
|
$
|
1.06
|
|
Gold (thousands of
recoverable ounces)
|
|
|
|
|
|
|
Production
|
|
595
|
|
|
275
|
|
Sales,
excluding purchases
|
|
545
|
|
|
280
|
|
Average
realized price per ounce
|
$
|
904
|
|
$
|
933
|
|
Molybdenum (millions of
recoverable pounds)
|
|
|
|
|
|
|
Production
|
|
14
|
|
|
18
|
|
Sales,
excluding purchases
|
|
10
|
|
|
20
|
|
Average
realized price per pound
|
$
|
11.52
|
|
$
|
31.67
|
|
a.
|
As
discussed in Note 10, during 2008 we revised the presentation of our
operating divisions to better reflect management’s view of our
consolidated operations, and have also reclassified amounts for
first-quarter 2008 to conform to the current period presentation.
Following is a summary of revenues and operating income (loss) by
operating division (in millions):
|
|
First-Quarter
2009
|
|
First-Quarter
2008
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
Income
|
|
|
|
Revenues
|
|
|
(Loss)
|
|
|
Revenues
|
|
|
(Loss)
|
|
North
America copper mines
|
$
|
618
|
|
$
|
(32
|
)
|
$
|
1,496
|
|
$
|
666
|
|
South
America copper mines
|
|
702
|
|
|
264
|
|
|
1,607
|
|
|
1,045
|
|
Indonesia
mining
|
|
1,122
|
|
|
689
|
|
|
1,052
|
|
|
571
|
|
Africa
mining
|
|
–
|
|
|
(19
|
)
|
|
–
|
|
|
(4
|
)
|
Molybdenum
|
|
146
|
|
|
(4
|
)
|
|
719
|
|
|
214
|
|
Rod
& Refining
|
|
619
|
|
|
5
|
|
|
1,688
|
|
|
10
|
|
Atlantic
Copper Smelting & Refining
|
|
292
|
|
|
(11
|
)
|
|
665
|
|
|
(3
|
)
|
Corporate,
other & eliminations
|
|
(897
|
)
|
|
(220
|
)
|
|
(1,555
|
)
|
|
(103
|
)
|
Total
|
$
|
2,602
|
|
$
|
672
|
|
$
|
5,672
|
|
$
|
2,396
|
|
b.
|
Includes
impacts of adjustments to provisionally priced prior year copper sales.
Refer to “Revenues” for further
discussion.
|
c.
|
Includes
unrealized gains on copper derivative contracts entered into in connection
with certain of our sales contracts with U.S. copper rod customers
totaling $19 million ($19 million to net income applicable to common stock
or $0.05 per share) in first-quarter 2009 and $19 million ($12 million to
net income applicable to common stock or $0.03 per share) in first-quarter
2008. These contracts allow us to receive market prices in the month of
shipment while the customer pays the fixed price they requested. Refer to
Note 8 for further discussion.
|
d.
|
First-quarter
2009 includes charges totaling $25 million to operating income ($22
million to net income applicable to common stock or $0.05 per share) for
restructuring and other charges associated with our revised operating
plans. Refer to Note 2 for further
discussion.
|
e.
|
First-quarter
2009 includes charges of $31 million ($31 million to net income applicable
to common stock or $0.08 per share) associated with adjustments to
environmental obligations, and $19 million ($19 million to net income
applicable to common stock or $0.05 per share) for lower of cost or market
(LCM) molybdenum inventory
adjustments.
|
Also
includes a reduction in compensation expense attributable to the prior years’
financial results totaling $33 million ($29 million to net income applicable to
common stock or $0.07 per share) for first-quarter 2009 and $40 million ($23
million to net income applicable to common stock or $0.05 per share) for
first-quarter 2008.
f.
|
After
net income attributable to noncontrolling interests in subsidiaries and
preferred dividends.
|
g.
|
Reflects
assumed conversion of our 5½% Convertible Perpetual Preferred Stock and
6¾% Mandatory Convertible Preferred Stock in first-quarter 2008. These
securities were not dilutive in first-quarter
2009.
|
h.
|
Reflects
per pound weighted average production and delivery costs and unit net cash
costs (net of by-product credits) for all copper mines. For
reconciliations of the per pound costs by operating division to production
and delivery costs applicable to sales reported in our consolidated
financial statements, refer to “Operations – Unit Net Cash Costs” and to
“Product Revenues and Production
Costs.”
|
Revenues
Consolidated
revenues include the sale of copper rod, copper cathodes, copper concentrates,
molybdenum, gold and other metals by our North and South America copper mines,
the sale of copper concentrates (which also contain significant quantities of
gold and silver) by our Indonesia mining operation, the sale of molybdenum in
various forms by our Molybdenum operations, and the sale of copper anodes,
copper cathodes, and gold in anodes and slimes by Atlantic Copper. Consolidated
revenues totaled $2.6 billion in first-quarter 2009, compared with $5.7 billion
in first-quarter 2008, primarily because of the sharp declines in the price of
copper. Following is a summary of changes in our consolidated revenues between
periods (in millions):
First-quarter
2008 consolidated revenues
|
$
|
5,672
|
|
Price
realizations:
|
|
|
|
Copper
|
|
(2,009
|
)
|
Gold
|
|
(16
|
)
|
Molybdenum
|
|
(198
|
)
|
Sales
volumes:
|
|
|
|
Copper
|
|
403
|
|
Gold
|
|
247
|
|
Molybdenum
|
|
(337
|
)
|
Purchased
copper and molybdenum
|
|
(590
|
)
|
Adjustments,
primarily for copper pricing on prior year open sales
|
|
(137
|
)
|
Atlantic
Copper revenues
|
|
(372
|
)
|
Other,
net
|
|
(61
|
)
|
First-quarter
2009 consolidated revenues
|
$
|
2,602
|
|
Realized
copper prices decreased to an average of $1.72 per pound in first-quarter 2009,
compared with $3.69 per pound in first-quarter 2008; realized gold prices
decreased to an average of $904 per ounce in first-quarter 2009, compared with
$933 per ounce in first-quarter 2008; and realized molybdenum prices decreased
to an average of $11.52 per pound in first-quarter 2009, compared with $31.67
per pound in first-quarter 2008.
Consolidated
sales volumes in first-quarter 2009 totaled 1.0 billion pounds of copper, 545
thousand ounces of gold and 10 million pounds of molybdenum, compared with 911
million pounds of copper, 280 thousand ounces of gold and 20 million pounds of
molybdenum in first-quarter 2008. Higher first-quarter 2009 copper and gold
sales volumes primarily reflect expected increased production at Grasberg
because of higher ore grades. The increase in copper sales volumes was partly
offset by lower sales volumes at our North America copper mines as a result of
planned curtailed production rates at these operations to reduce production of
higher cost volumes. Lower molybdenum sales volumes in first-quarter 2009
reflect the effects of declines in demand, principally in the metallurgical
sector. Refer to “Operations” for further discussion.
During
first-quarter 2009, approximately 57 percent of our mined copper was sold in
concentrate, approximately 23 percent as rod (principally from our North America
operations) and approximately 20 percent as cathodes. Substantially all of our
concentrate sales contracts and some of our cathode sales contracts provide
final copper pricing in a specified future period (generally one to four months
from the shipment date) based primarily on quoted LME prices. We receive market
prices based on prices in the specified future period, and the accounting rules
applied to these sales result in changes recorded to revenues until the
specified future period. We record revenues and invoice customers at the time of
shipment based on then-current LME prices, which results in an embedded
derivative on our provisional priced concentrate and cathode sales that is
adjusted to fair value through earnings each period until the date of final
pricing. To the extent final prices are higher or lower than what was recorded
on a provisional basis, an increase or decrease to revenues is recorded each
reporting period until the date of final pricing.
At
December 31, 2008, we had provisionally priced copper sales of 508 million
pounds of copper (net of noncontrolling interests) recorded at an average of
$1.39 per pound. Higher prices during first-quarter 2009 resulted in adjustments
to these prior year copper sales and increased consolidated revenues by $128
million ($60 million to net income applicable to common stock or $0.15 per
share) in first-quarter 2009, compared with an increase of $263 million ($111
million to net income applicable to common stock or $0.25 per share) in
first-quarter 2008.
LME spot
copper prices averaged $1.56 per pound in first-quarter 2009, compared with our
average recorded price of $1.72 per pound. Approximately 70 percent of our
first-quarter 2009 consolidated copper sales were provisionally priced at the
time of shipment and are subject to final pricing during the remainder of 2009.
At March 31, 2009, we had provisionally priced copper sales totaling 407 million
pounds of copper (net of noncontrolling interests) recorded at an average of
$1.83 per pound, subject to final pricing over the next several
months.
In early
April 2009, we entered into forward copper sales contracts to lock in prices at
an average of $1.86 per pound on 355 million pounds of PT Freeport Indonesia’s
provisionally priced copper sales at March 31, 2009, which are scheduled to
final price from April 2009 through July 2009. From time to time, we may enter
into future transactions to lock in pricing on provisionally priced sales to
reduce short-term volatility in earnings and cash flows, but we do not intend to
change our long standing policy of not hedging future copper
production.
After
taking into account the forward sales contracts on PT Freeport Indonesia’s
provisionally priced copper sales, we estimate that each $0.05 change in the
price realized from the March 31, 2009, provisional price recorded would have a
net impact on our 2009 consolidated revenues of approximately $8 million ($4
million to net income applicable to common stock). The LME spot copper price
closed at $2.05 per pound on April 30, 2009.
Production
and Delivery Costs
Consolidated
production and delivery costs totaled $1.6 billion in first-quarter 2009
compared with $2.7 billion in first-quarter 2008. Lower production and delivery
costs in first-quarter 2009 primarily reflected the effects of lower operating
rates at our North America copper mines and declining commodity-based input
costs. Energy costs are expected to approximate 20 percent of our consolidated
copper production costs in 2009, compared with approximately 25 percent in 2008,
and include purchases of approximately 190 million gallons of diesel fuel, 800
thousand metric tons of coal, 5,700 gigawatt hours of electricity and 1 million
MMBTU (million british thermal units) of natural gas.
Consolidated
unit net cash costs, net of by-product credits, related to our copper mining
operations totaled $0.66 per pound of copper in first-quarter 2009 compared with
$1.06 per pound of copper in first-quarter 2008. The decrease in unit net cash
costs in first-quarter 2009 reflected the effects of lower operating rates
following production curtailments at our North America copper mines, higher
copper ore grades at Grasberg and decreases in energy prices and other
commodity-based input costs. Refer to “Operations – Unit Net Cash Costs” for
further discussion of unit net cash costs associated with our operating
divisions, and to “Product Revenues and Production Costs” for reconciliations of
per pound costs by operating division to production and delivery costs
applicable to sales reported in our consolidated financial
statements.
Depreciation,
Depletion and Amortization
Consolidated
depreciation, depletion and amortization expense totaled $232 million in
first-quarter 2009 compared with $418 million in first-quarter 2008. The
decrease in depreciation, depletion and amortization expense reflects the impact
of the long-lived asset impairment charges recognized in fourth-quarter 2008,
partly offset by higher expense under the unit-of-production method primarily
resulting from higher production at PT Freeport Indonesia in first-quarter
2009.
LCM
Inventory Adjustments
Inventories
are required to be recorded at the lower of cost or market. As a result of lower
molybdenum prices we recognized charges of $19 million ($19 million to net
income applicable to common stock or $0.05 per share) for LCM inventory
adjustments in first-quarter 2009.
Selling,
General and Administrative Expenses
Consolidated
selling, general and administrative expenses totaled $62 million in
first-quarter 2009 compared with $84 million in first-quarter 2008. Lower
selling, general and administrative expenses primarily reflected lower incentive
compensation costs because of weaker financial results in 2009 compared with
2008, lower stock-based compensation costs related to a lower FCX common stock
price, and changes to certain benefit plans.
Exploration
and Research Expenses
Consolidated
exploration and research expenses totaled $30 million in first-quarter 2009
compared with $52 million in first-quarter 2008. Exploration activities are
being conducted near our existing mines with a focus on opportunities to expand
reserves that will support additional future production capacity in the large
mineral districts where we currently operate. Drilling activities were
significantly expanded in 2008 and were successful in providing significant
reserve additions and in identifying potential additional ore adjacent to
existing ore bodies. Results indicate opportunities for significant future
potential reserve additions at Morenci, Sierrita and Bagdad in North America, at
Cerro Verde in South America and in the high potential Tenke Fungurume minerals
district.
During
2009, we will focus on analyzing exploratory data gained through the core
drilling previously undertaken. For 2009, exploration expenditures are expected
to approximate $75 million.
Restructuring
and Other Charges
Net
charges of $25 million ($22 million to net income applicable to common stock or
$0.05 per share) were recognized in first-quarter 2009 associated with our
revised operating plans, including contract termination costs, other project
cancellation costs and charges for employee severance and benefits, partially
offset by pension and postretirement gains for special retirement benefits and
curtailments. Refer to Note 2 for further discussion.
Interest
Expense, Net
Consolidated
interest expense (before capitalization) totaled $176 million in first-quarter
2009 and $187 million in first-quarter 2008. Capitalized interest totaled $45
million in first-quarter 2009 compared with $22 million in first-quarter 2008.
Capitalized interest is primarily related to our Tenke Fungurume development
project (refer to “Development Projects” for further discussion), which entered
the commissioning and start-up phase in late March 2009. As a result, we expect
to recognize significantly less capitalized interest beginning in second-quarter
2009.
Provision
for Income Taxes
Our
first-quarter 2009 income tax provision resulted from taxes on international
operations ($330 million) and U.S. operations ($1 million). Our effective tax
rate for 2009 is expected to be highly sensitive to changes in commodity prices
and the mix of income between U.S. and international operations. Taxes provided
on income generated from our South America and Indonesia operations are recorded
at the applicable statutory rates. However, at certain commodity prices, we do
not record a tax benefit for losses generated in the U.S., and those losses
cannot be used to offset income generated from international operations. These
factors have caused our consolidated effective tax rate of 63 percent to be
substantially higher than the U.S. federal statutory rate of 35
percent.
Our
first-quarter 2008 income tax provision resulted from taxes on international
operations ($579 million) and U.S. operations ($150 million). The difference
between our consolidated effective income tax rate of approximately 33 percent
for first-quarter 2008 and the U.S. federal statutory rate of 35 percent
primarily was attributable to a U.S. benefit for percentage depletion, partly
offset by withholding taxes and incremental U.S. income tax accrued on foreign
earnings.
A summary
of the approximate amounts in the calculation of our consolidated provision for
income taxes for first-quarter 2009 and first-quarter 2008 follows (in millions,
except percentages):
|
|
First-Quarter
2009
|
|
First-Quarter
2008
|
|
|
|
|
|
|
|
|
Income
Tax
|
|
|
|
|
|
|
Income
Tax
|
|
|
|
Income
|
|
|
Effective
|
|
Provision
|
|
Income
|
|
|
Effective
|
|
Provision
|
|
|
|
(Loss)a
|
|
|
Tax
Rate
|
|
(Benefit)
|
|
(Loss)a
|
|
|
Tax
Rate
|
|
(Benefit)
|
|
U.S.
|
|
$
|
(288
|
)
|
|
–
|
|
$
|
1
|
|
$
|
778
|
|
|
19%
|
|
$
|
150
|
|
South
America
|
|
|
253
|
|
|
33%
|
|
|
84
|
|
|
1,024
|
|
|
33%
|
|
|
333
|
|
Indonesia
|
|
|
689
|
|
|
42%
|
|
|
288
|
|
|
570
|
|
|
42%
|
|
|
239
|
|
Africa
|
|
|
(2
|
)
|
|
30%
|
|
|
(1
|
)
|
|
-
|
|
|
30%
|
|
|
-
|
|
Eliminations
and other
|
|
|
(125
|
)
|
|
N/A
|
|
|
(41
|
)
|
|
(145
|
)
|
|
N/A
|
|
|
(3
|
)
|
Annualized
rate adjustmentb
|
|
|
N/A
|
|
|
N/A
|
|
|
–
|
|
|
N/A
|
|
|
N/A
|
|
|
10
|
|
Consolidated
FCX
|
|
$
|
527
|
|
|
63%c
|
|
$
|
331
|
|
$
|
2,227
|
|
|
33%
|
|
$
|
729
|
|
a.
|
Represents
income (loss) before income taxes and equity in affiliated companies’ net
earnings.
|
b.
|
In
accordance with applicable accounting rules, we adjust our interim
provision for income taxes to equal our estimated annualized tax
rate.
|
c.
|
Our
estimated consolidated effective tax rate for 2009 will vary with
commodity price changes and the mix of income from international and U.S.
operations. Following is a summary of our estimated annual consolidated
effective tax rate using currently projected sales volumes for 2009 and
based on various commodity price assumptions for the remainder of
2009:
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
Copper
|
|
|
Gold
|
|
|
Molybdenum
|
|
Effective
|
|
(per
pound)
|
|
|
(per
ounce)
|
|
|
(per
pound)
|
|
Tax
Rate(1)
|
$
|
1.50
|
|
$
|
900
|
|
$
|
8.00
|
|
72%
|
$
|
2.00
|
|
$
|
900
|
|
$
|
8.00
|
|
48%
|
$
|
2.50
|
|
$
|
900
|
|
$
|
8.00
|
|
42%
|
(1) Quarterly effective tax rates may vary
depending on the mix of income for the quarterly period.
OPERATIONS
North
America Copper Mines
We
currently have five operating open-pit copper mines in North America – Morenci,
Sierrita, Bagdad and Safford in Arizona, and Tyrone in New Mexico. In addition
to copper, the Sierrita and Bagdad mines produce molybdenum as a by-product. All of these mining
operations are wholly owned, except for Morenci, an unincorporated joint
venture, in which we own an 85 percent undivided interest.
The North
America copper mines include open-pit mining, sulfide ore concentrating,
leaching and solution extraction/electrowinning (SX/EW) operations. A majority
of the copper produced at our North America copper mines is cast into copper rod
by our Rod & Refining operations. The remainder of our North America copper
sales is primarily in the form of copper cathode or copper
concentrate.
In
response to weak market conditions, we revised operating plans at our North
America copper mines at the end of 2008 and in early 2009, which included an
approximate 50 percent reduction in mining and crushed-leach rates at Morenci;
an approximate 50 percent reduction in mining and stacking rates at the Safford
mine; an approximate 50 percent reduction in the mining rate at the Tyrone mine;
and the suspension of mining and milling activities at the Chino mine (with
limited residual copper production from leach operations). Operating plans for
the North America copper mines will continue to be reviewed and additional
adjustments may be made as market conditions warrant.
Operating Data.
Following is summary operating data for the North America copper mines for the
first quarters of 2009 and 2008.
|
|
First-Quarter
|
|
|
|
2009
|
|
2008
|
|
Operating
Data, Net of Joint Venture Interest
|
|
|
|
|
|
|
|
Copper (millions of
recoverable pounds)
|
|
|
|
|
|
|
|
Production
|
|
|
289
|
|
|
327
|
|
Sales,
excluding purchases
|
|
|
301
|
|
|
339
|
|
Average
realized price per pound
|
|
$
|
1.59
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
Molybdenum (millions of
recoverable pounds)
|
|
|
|
|
|
|
|
Production
(by-product)a
|
|
|
6
|
|
|
8
|
|
|
|
|
|
|
|
|
|
100%
Operating Data, Including Joint Venture Interest
|
|
|
|
|
|
|
|
SX/EW operations
|
|
|
|
|
|
|
|
Leach
ore placed in stockpiles (metric tons per day)
|
|
|
669,200
|
|
|
1,134,900
|
|
Average
copper ore grade (percent)
|
|
|
0.30
|
|
|
0.19
|
|
Copper
production (millions of recoverable pounds)
|
|
|
222
|
|
|
217
|
|
|
|
|
|
|
|
|
|
Mill operations
|
|
|
|
|
|
|
|
Ore
milled (metric tons per day)
|
|
|
180,800
|
|
|
244,000
|
|
Average
ore grade (percent):
|
|
|
|
|
|
|
|
Copper
|
|
|
0.35
|
|
|
0.39
|
|
Molybdenum
|
|
|
0.02
|
|
|
0.02
|
|
Copper
recovery rate (percent)
|
|
|
85.2
|
|
|
81.2
|
|
Production
(millions of recoverable pounds):
|
|
|
|
|
|
|
|
Copper
|
|
|
88
|
|
|
136
|
|
Molybdenum
(by-product)
|
|
|
6
|
|
|
8
|
|
a.
|
Reflects
by-product molybdenum production from the North America copper mines.
Sales of by-product molybdenum are reflected in the Molybdenum
division.
|
Copper
sales from the North America mines totaled 301 million pounds in first-quarter
2009 compared with 339 million pounds in first-quarter 2008. The decrease in
copper sales volumes in first-quarter 2009 primarily reflected planned curtailed
production rates to reduce production of higher cost volumes, partly offset by
higher production at the Safford copper mine. Production commenced at Safford in
December 2007 and was ramped up to design capacity during 2008 before we revised
operating plans to curtail production in fourth-quarter 2008.
For 2009,
copper sales volumes from our North America copper mines are expected to
approximate 1.1 billion pounds and by-product molybdenum production is expected
to approximate 27 million pounds, compared with 1.4 billion pounds of copper and
30 million pounds of by-product molybdenum production in 2008. Production from
the North America copper mines in 2010 is currently expected to decline by
approximately an additional 200 million pounds because of impacts of 2009 mining
activities on 2010 leaching operations.
Unit Net Cash Costs.
Unit net cash costs per pound of copper is a measure intended to provide
investors with information about the cash-generating capacity of our mining
operations expressed on a basis relating to the primary metal product for our
respective operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This information
differs from measures of performance determined in accordance with generally
accepted accounting principles (GAAP) in the U.S. and should not be considered
in isolation or as a substitute for measures of performance determined in
accordance with U.S. GAAP. This measure is presented by other mining companies,
although our measure may not be comparable to similarly titled measures reported
by other companies.
Gross Profit per Pound of
Copper and Molybdenum
The
following tables summarize unit net cash costs and gross profit at the North
America copper mines for the first quarters of 2009 and 2008. Refer to “Product
Revenues and Production Costs” for an explanation of the “by-product” and
“co-product” methods and a reconciliation of unit net cash costs per pound to
production and delivery costs applicable to sales reported in our consolidated
financial statements.
|
First-Quarter
2009
|
|
First-Quarter
2008
|
|
|
By-
|
|
Co-Product
Method
|
|
By-
|
|
Co-Product
Method
|
|
|
Product
|
|
|
|
|
Molyb-
|
|
Product
|
|
|
|
|
Molyb-
|
|
|
Method
|
|
Copper
|
|
denuma
|
|
Method
|
|
Copper
|
|
denuma
|
|
Revenues,
excluding adjustments shown below
|
$
|
1.59
|
|
$
|
1.59
|
|
$
|
9.71
|
|
$
|
3.50
|
|
$
|
3.50
|
|
$
|
32.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
1.32
|
|
|
1.26
|
|
|
4.28
|
|
|
1.64
|
|
|
1.43
|
|
|
9.75
|
|
By-product
creditsa
|
|
(0.18
|
)
|
|
–
|
|
|
–
|
|
|
(0.77
|
)
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
0.08
|
|
|
0.08
|
|
|
–
|
|
|
0.09
|
|
|
0.09
|
|
|
–
|
|
Unit
net cash costs
|
|
1.22
|
|
|
1.34
|
|
|
4.28
|
|
|
0.96
|
|
|
1.52
|
|
|
9.75
|
|
Depreciation,
depletion and amortization
|
|
0.24
|
|
|
0.23
|
|
|
0.21
|
|
|
0.53
|
|
|
0.47
|
|
|
2.47
|
|
Noncash
and nonrecurring costs, net
|
|
0.15
|
|
|
0.15
|
|
|
0.15
|
|
|
0.09
|
|
|
0.09
|
|
|
0.11
|
|
Total
unit costs
|
|
1.61
|
|
|
1.72
|
|
|
4.64
|
|
|
1.58
|
|
|
2.08
|
|
|
12.33
|
|
Revenue
adjustments, primarily for hedging
|
|
0.24
|
|
|
0.24
|
|
|
–
|
|
|
0.13
|
|
|
0.13
|
|
|
–
|
|
Idle
facility and other non-inventoriable costs
|
|
(0.13
|
)
|
|
(0.13
|
)
|
|
–
|
|
|
(0.04
|
)
|
|
(0.04
|
)
|
|
(0.02
|
)
|
Gross
profit (loss)
|
$
|
0.09
|
|
$
|
(0.02
|
)
|
$
|
5.07
|
|
$
|
2.01
|
|
$
|
1.51
|
|
$
|
20.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
sales (millions of recoverable pounds)
|
|
301
|
|
|
301
|
|
|
|
|
|
337
|
|
|
337
|
|
|
|
|
Molybdenum
sales (millions of recoverable pounds)b
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
8
|
|
a.
|
Molybdenum
by-product credits and revenues reflect volumes produced at market-based
pricing and also include tolling revenues at
Sierrita.
|
b.
|
Reflects
molybdenum produced by the North America copper
mines.
|
Unit net
cash costs, after by-product credits, for our North America copper mines
increased to $1.22 per pound of copper in first-quarter 2009, compared with
$0.96 per pound of copper in first-quarter 2008, primarily reflecting lower
molybdenum credits ($0.59 per pound decrease) resulting from lower molybdenum
prices and volumes, partly offset by a decrease in site production and delivery
costs ($0.32 per pound decrease, including $0.48 per pound associated with lower
operating rates and $0.17 per pound for reduced energy costs, partly offset by
increases of $0.25 per pound related to draw downs of inventory with higher
average costs).
Our five
operating North America copper mines have varying cost structures because of
differences in ore grades and ore characteristics, processing costs, by-products
and other factors. During first-quarter 2009, the Morenci mine, which accounts
for approximately 40 percent of North America’s production, had unit net cash
costs of $1.18 per pound. Based on current operating plans and assuming average
prices of $2.00 per pound of copper and $8.00 per pound of molybdenum for the
remainder of 2009, we estimate that average unit net cash costs, including
molybdenum credits, for our North America copper mines would approximate $1.22
per pound of copper for the year 2009, compared with $1.33 per pound in 2008.
Each $1 per pound change in the molybdenum price during the remainder of 2009
would have an approximate $0.015 per pound impact on the North America copper
mines’ 2009 unit net cash costs.
The
decrease in depreciation, depletion and amortization in first-quarter 2009,
compared with first-quarter 2008, reflects the impact of the long-lived asset
impairment charges recognized in fourth-quarter 2008.
South
America Copper Mines
We have
four operating copper mines in South America – Cerro Verde in Peru, and
Candelaria, Ojos del Salado and El Abra in Chile. We own a 53.56 percent
interest in Cerro Verde, an 80 percent interest in both Candelaria and Ojos del
Salado and a 51 percent interest in El Abra.
The South
America copper mines include open-pit and underground mining, sulfide ore
concentrating, leaching and SX/EW operations. In addition to copper, the Cerro
Verde mine produces molybdenum concentrates as a by-product, and the Candelaria
and Ojos del Salado mines produce gold and silver as by-products. Production
from our South America copper mines is sold as copper concentrate or copper
cathode under long-term contracts.
In
response to weak market conditions, we revised operating plans at our South
America copper mines at the end of 2008 and in early 2009. The revised operating
plans for 2009 principally reflect the incorporation of reduced input costs; a
significant reduction in capital spending plans, including deferral of the
planned incremental expansion project at the Cerro Verde mine and a delay in the
sulfide project at El Abra; and reduced spending for discretionary items. In
addition, we have temporarily curtailed the molybdenum circuit at Cerro Verde.
Operating plans for the South America copper mines will continue to be reviewed
and additional adjustments may be made as market conditions
warrant.
Operating Data.
Following is summary operating data for the South America copper mines for the
first quarters of 2009 and 2008.
|
|
First-Quarter
|
|
|
|
2009
|
|
2008
|
|
Copper (millions of
recoverable pounds)
|
|
|
|
|
|
|
|
Production
|
|
|
348
|
|
|
353
|
|
Sales
|
|
|
350
|
|
|
365
|
|
Average
realized price per pound
|
|
$
|
1.76
|
|
$
|
3.78
|
|
|
|
|
|
|
|
|
|
Gold (thousands of
recoverable ounces)
|
|
|
|
|
|
|
|
Production
|
|
|
23
|
|
|
26
|
|
Sales
|
|
|
23
|
|
|
27
|
|
Average
realized price per ounce
|
|
$
|
902
|
|
$
|
936
|
|
|
|
|
|
|
|
|
|
Molybdenum (millions of
recoverable pounds)
|
|
|
|
|
|
|
|
Production
(by-product)a
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
SX/EW operations
|
|
|
|
|
|
|
|
Leach
ore placed in stockpiles (metric tons per day)
|
|
|
250,500
|
|
|
274,100
|
|
Average
copper ore grade (percent)
|
|
|
0.45
|
|
|
0.39
|
|
Copper
production (millions of recoverable pounds)
|
|
|
137
|
|
|
135
|
|
|
|
|
|
|
|
|
|
Mill operations
|
|
|
|
|
|
|
|
Ore
milled (metric tons per day)
|
|
|
182,400
|
|
|
170,700
|
|
Average
copper ore grade (percent):
|
|
|
|
|
|
|
|
Copper
|
|
|
0.68
|
|
|
0.74
|
|
Molybdenum
|
|
|
0.02
|
|
|
0.02
|
|
Copper
recovery rate (percent)
|
|
|
88.9
|
|
|
90.6
|
|
Production
(millions of recoverable pounds):
|
|
|
|
|
|
|
|
Copper
|
|
|
211
|
|
|
218
|
|
Molybdenum
|
|
|
1
|
|
|
1
|
|
a.
|
Reflects
by-product molybdenum production from our Cerro Verde copper mine. Sales
of by-product molybdenum are reflected in the Molybdenum
segment.
|
Copper
sales from the South America mines totaled 350 million pounds in first-quarter
2009, compared with 365 million pounds in first-quarter 2008. Lower sales
volumes in first-quarter 2009 primarily reflect the mining of lower ore grades
at El Abra and Candelaria.
For 2009,
consolidated sales volumes from our South America mines are expected to
approximate 1.4 billion pounds of copper and 100 thousand ounces of gold,
compared with 1.5 billion pounds of copper and 116 thousand ounces of gold in
2008. Lower copper volumes in 2009, compared with 2008, reflect the impact of
previously expected mining of lower ore grades at Candelaria. While the revised
operating plans for our South America copper mines do not have a significant
effect on 2009 production volumes, they are expected to result in lower 2010
production by approximately 100 million pounds of copper.
Unit Net Cash Costs.
Unit net cash costs per pound of copper is a measure intended to provide
investors with information about the cash-generating capacity of our mining
operations expressed on a basis relating to the primary metal product for our
respective operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This information
differs from measures of performance determined in accordance with U.S. GAAP and
should not be considered in isolation or as a substitute for measures of
performance determined in accordance with U.S. GAAP. This measure is presented
by other mining companies, although our measure may not be comparable to
similarly titled measures reported by other companies.
Gross Profit per Pound of
Copper
The
following tables summarize unit net cash costs and gross profit at the South
America copper mines for the first quarters of 2009 and 2008. The below tables
reflect unit net cash costs per pound of copper under the by-product and
co-product methods as the South America copper mines also had small amounts of
molybdenum, gold and silver sales. Refer to “Product Revenues and Production
Costs” for an explanation of the “by-product” and “co-product” methods and a
reconciliation of unit net cash costs per pound to production and delivery costs
applicable to sales reported in our consolidated financial
statements.
|
First-Quarter
2009
|
|
First-Quarter
2008
|
|
|
By-Product
|
|
Co-Product
|
|
By-Product
|
|
Co-Product
|
|
|
Method
|
|
Method
|
|
Method
|
|
Method
|
|
Revenues,
excluding adjustments shown below
|
$
|
1.76
|
|
$
|
1.76
|
|
$
|
3.78
|
|
$
|
3.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
1.00
|
|
|
0.92
|
|
|
1.08
|
|
|
1.05
|
|
By-product
credits
|
|
(0.11
|
)
|
|
–
|
|
|
(0.14
|
)
|
|
–
|
|
Treatment
charges
|
|
0.14
|
|
|
0.14
|
|
|
0.21
|
|
|
0.21
|
|
Unit
net cash costs
|
|
1.03
|
|
|
1.06
|
|
|
1.15
|
|
|
1.26
|
|
Depreciation,
depletion and amortization
|
|
0.18
|
|
|
0.17
|
|
|
0.35
|
|
|
0.34
|
|
Noncash
and nonrecurring costs, net
|
|
0.02
|
|
|
0.02
|
|
|
0.07
|
|
|
0.07
|
|
Total
unit costs
|
|
1.23
|
|
|
1.25
|
|
|
1.57
|
|
|
1.67
|
|
Revenue
adjustments, primarily for pricing on
|
|
|
|
|
|
|
|
|
|
|
|
|
prior
period open sales
|
|
0.25
|
|
|
0.25
|
|
|
0.63
|
|
|
0.63
|
|
Idle
facility and other non-inventoriable costs
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
Gross
profit
|
$
|
0.76
|
|
$
|
0.74
|
|
$
|
2.82
|
|
$
|
2.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
sales (millions of recoverable pounds)
|
|
350
|
|
|
350
|
|
|
365
|
|
|
365
|
|
Unit net
cash costs, after by-product credits, for our South America copper mines
decreased to $1.03 per pound of copper in first-quarter 2009, compared with
$1.15 per pound in first-quarter 2008, primarily reflecting lower site
production and delivery costs ($0.08 per pound decrease, including $0.15 per
pound for lower operating costs reflecting the impacts of revised operating
plans and $0.07 per pound for lower energy costs, partly offset by an increase
of $0.12 per pound for draw downs of inventory with higher average costs). In
addition, lower treatment charges ($0.07 per pound decrease) associated with
lower price participation because of lower copper prices contributed to lower
unit net cash costs for our South America copper mines.
Our South
America copper mines have varying cost structures because of differences in ore
grades and ore characteristics, processing costs, by-products and other factors.
During first-quarter 2009, the Cerro Verde mine, which accounts for almost half
of South America’s production had unit net cash costs for of $0.97 per pound.
Assuming average prices of $2.00 per pound of copper for the remainder of 2009
and achievement of current 2009 sales, we estimate that average unit net cash
costs, after by-product credits, for our South America copper mines would
approximate $1.05 per pound of copper in 2009, compared with $1.14 per pound in
2008.
The
decrease in depreciation, depletion and amortization in first-quarter 2009,
compared with first-quarter 2008, reflects the impact of the long-lived asset
impairment charges recognized in fourth-quarter 2008.
Indonesia
Mining
We own
90.64 percent of PT Freeport Indonesia, including 9.36 percent owned through our
wholly owned subsidiary, PT Indocopper Investama. The Government of Indonesia
owns the remaining 9.36 percent of PT Freeport Indonesia. PT Freeport Indonesia
operates under an agreement, called a Contract of Work, with the Government of
Indonesia that allows us to conduct exploration, mining and production
activities in a 24,700-acre area called Block A located in Papua, Indonesia.
Under the Contract of Work, PT Freeport Indonesia also conducts exploration
activities in an approximate 500,000-acre area called Block B in Papua. All of
PT Freeport Indonesia’s proven and probable mineral reserves and current mining
operations, including the Grasberg minerals district, are located in Block
A.
PT
Freeport Indonesia produces copper concentrates, which contain significant
quantities of gold and silver. Substantially all of PT Freeport Indonesia’s
copper concentrates are sold under long-term contracts.
We have
established certain unincorporated joint ventures with Rio Tinto plc (Rio
Tinto), an international mining company with headquarters in London, England.
Pursuant to the joint venture agreement, Rio Tinto has a 40
percent
interest in certain assets and future production exceeding specified annual
amounts of copper, gold and silver through 2021 in Block A of PT Freeport
Indonesia’s Contract of Work, and, after 2021, a 40 percent interest in all
production from Block A.
As
reported in January 2006, we received and responded to requests from U.S.
governmental authorities related to PT Freeport Indonesia’s support of
Indonesian security institutions. In May 2009, we were notified by the SEC
that the U.S. government's investigation has been completed and no action has
been recommended.
Operating Data.
Following is summary operating data for our Indonesia mining operations for the
first quarters of 2009 and 2008.
|
|
First-Quarter
|
|
|
|
2009
|
|
2008
|
|
Consolidated
Operating Data, Net of Joint Venture Interest
|
|
|
|
|
|
|
|
Copper (millions of
recoverable pounds)
|
|
|
|
|
|
|
|
Production
|
|
|
404
|
|
|
200
|
|
Sales
|
|
|
369
|
|
|
207
|
|
Average
realized price per pound
|
|
$
|
1.80
|
|
$
|
3.82
|
|
|
|
|
|
|
|
|
|
Gold (thousands of
recoverable ounces)
|
|
|
|
|
|
|
|
Production
|
|
|
570
|
|
|
246
|
|
Sales
|
|
|
521
|
|
|
251
|
|
Average
realized price per ounce
|
|
$
|
904
|
|
$
|
932
|
|
|
|
|
|
|
|
|
|
100%
Operating Data, Including Joint Venture Interest
|
|
|
|
|
|
|
|
Ore
milled (metric tons per day):
|
|
|
|
|
|
|
|
Grasberg
open pita
|
|
|
165,000
|
|
|
118,600
|
|
Deep
Ore Zone (DOZ) underground minea
|
|
|
72,400
|
|
|
61,200
|
|
Total
|
|
|
237,400
|
|
|
179,800
|
|
Average
ore grade:
|
|
|
|
|
|
|
|
Copper
(percent)
|
|
|
1.12
|
|
|
0.70
|
|
Gold
(grams per metric ton)
|
|
|
1.13
|
|
|
0.61
|
|
Recovery
rates (percent):
|
|
|
|
|
|
|
|
Copper
|
|
|
90.7
|
|
|
89.7
|
|
Gold
|
|
|
81.9
|
|
|
79.0
|
|
Production
(recoverable):
|
|
|
|
|
|
|
|
Copper
(millions of pounds)
|
|
|
456
|
|
|
214
|
|
Gold
(thousands of ounces)
|
|
|
619
|
|
|
246
|
|
a.
|
Amounts
represent the approximate average daily throughput processed at PT
Freeport Indonesia’s mill facilities from each producing
mine.
|
At the
Grasberg mine, the sequencing in mining areas with varying ore grades causes
fluctuations in the timing of ore production resulting in varying quarterly and
annual sales of copper and gold. PT Freeport Indonesia’s share of sales totaled
369 million pounds of copper and 521 thousand ounces of gold in first-quarter
2009, compared with 207 million pounds of copper and 251 thousand ounces of gold
in first-quarter 2008. Higher copper and gold sales volumes in first-quarter
2009 resulted from mining in a higher-grade section of the Grasberg open pit,
which is expected to continue in 2009 and 2010.
For 2009,
PT Freeport Indonesia’s sales are expected to approximate 1.3 billion pounds of
copper and 2.2 million ounces of gold, compared with 1.1 billion pounds of
copper and 1.2 million ounces of gold in 2008.
Unit Net Cash Costs.
Unit net cash costs per pound of copper is a measure intended to provide
investors with information about the cash-generating capacity of our mining
operations expressed on a basis relating to the primary metal product for our
respective operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This information
differs from measures of performance determined in accordance with U.S. GAAP and
should not be considered in isolation or as a substitute for measures of
performance determined in accordance with U.S. GAAP. This measure is presented
by other mining companies, although our measure may not be comparable to
similarly titled measures reported by other companies.
Gross Profit per Pound of
Copper/per Ounce of Gold
The
following tables summarize the unit net cash (credits) costs and gross profit at
our Indonesia mining operations. Refer to “Production Revenues and Production
Costs” for an explanation of “by-product” and “co-product” methods and a
reconciliation of unit net cash costs per pound to production and delivery costs
applicable to sales reported in our consolidated financial
statements.
|
First-Quarter
2009
|
|
First-Quarter
2008
|
|
|
By-Product
|
|
Co-Product
Method
|
|
By-Product
|
|
Co-Product
Method
|
|
|
Method
|
|
Copper
|
|
Gold
|
|
Method
|
|
Copper
|
|
Gold
|
|
Revenues,
after adjustments shown below
|
$
|
1.80
|
|
$
|
1.80
|
|
$
|
904.18
|
|
$
|
3.82
|
|
$
|
3.82
|
|
$
|
931.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
0.92
|
|
|
0.53
|
|
|
268.28
|
|
|
1.86
|
|
|
1.41
|
|
|
349.08
|
|
Gold
and silver credits
|
|
(1.34
|
)
|
|
–
|
|
|
–
|
|
|
(1.23
|
)
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
0.20
|
|
|
0.11
|
|
|
59.27
|
|
|
0.33
|
|
|
0.25
|
|
|
61.71
|
|
Royalty
on metals
|
|
0.07
|
|
|
0.04
|
|
|
19.48
|
|
|
0.12
|
|
|
0.09
|
|
|
22.69
|
|
Unit
net cash (credits) costs
|
|
(0.15
|
)
|
|
0.68
|
|
|
347.03
|
|
|
1.08
|
|
|
1.75
|
|
|
433.48
|
|
Depreciation
and amortization
|
|
0.18
|
|
|
0.10
|
|
|
51.27
|
|
|
0.22
|
|
|
0.17
|
|
|
40.82
|
|
Noncash
and nonrecurring costs, net
|
|
0.03
|
|
|
0.02
|
|
|
8.69
|
|
|
0.07
|
|
|
0.05
|
|
|
12.76
|
|
Total
unit costs
|
|
0.06
|
|
|
0.80
|
|
|
406.99
|
|
|
1.37
|
|
|
1.97
|
|
|
487.06
|
|
Revenue
adjustments, primarily for pricing on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
prior
period open sales
|
|
0.17
|
|
|
0.17
|
|
|
11.85
|
|
|
0.48
|
|
|
0.48
|
|
|
27.32
|
|
PT
Smelting intercompany profit
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(5.46
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
(4.27
|
)
|
Gross
profit
|
$
|
1.90
|
|
$
|
1.16
|
|
$
|
503.58
|
|
$
|
2.91
|
|
$
|
2.31
|
|
$
|
467.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
(millions of recoverable pounds)
|
|
369
|
|
|
369
|
|
|
|
|
|
207
|
|
|
207
|
|
|
|
|
Gold
(thousands of recoverable ounces)
|
|
|
|
|
|
|
|
521
|
|
|
|
|
|
|
|
|
251
|
|
Because
of the fixed nature of a large portion of PT Freeport Indonesia’s costs, unit
costs vary significantly from period to period depending on volumes of copper
and gold sold during the period. Unit net cash costs, after gold and silver
credits, decreased to a net credit of $0.15 per pound of copper in first-quarter
2009, compared with $1.08 per pound in first-quarter 2008, primarily reflecting
lower site production and delivery costs ($0.94 per pound decrease, including
$0.70 per pound associated with higher copper sales volumes and $0.19 per pound
related to changes in inventory) and higher gold credits ($0.11 per pound
increase) resulting from higher gold sales volumes in first-quarter
2009.
The
decrease in unit net cash costs also reflected lower treatment charges ($0.13
per pound decrease), which vary with the volume of metals sold and the price of
copper, and lower royalties on metals ($0.05 per pound decrease), which vary
with the volume of metals sold and the prices of copper and gold.
Because
certain assets are depreciated on a straight-line basis, PT Freeport Indonesia’s
unit depreciation rate varies with the level of copper production and
sales.
Assuming
average copper prices of $2.00 per pound and average gold prices of $900 per
ounce for the remainder of 2009 and achievement of current 2009 sales estimates,
we estimate that average unit net cash costs for PT Freeport Indonesia,
including gold and silver credits, would approximate a net credit of $0.13 per
pound of copper in 2009, compared with $0.96 per pound in 2008. Each $50 per
ounce change in gold prices during the remainder of 2009 would have an
approximate $0.06 per pound impact on PT Freeport Indonesia’s 2009 unit net cash
costs.
Africa
Mining
We hold
an effective 57.75 percent interest in the Tenke Fungurume copper and cobalt
mining concessions in the Katanga province of the DRC and are the operator of
the project. Significant progress on the construction of the project was
achieved during first-quarter 2009, and the first copper cathode was produced in
late March 2009 as the project entered the commissioning and start-up phase.
Construction activities for the initial development project are nearing
completion, and production is expected to ramp up to full annual capacity in the
second half of 2009. Annual production in the initial years is expected to
approximate 250 million pounds of copper and 18 million pounds of cobalt in the
second half of 2009. The initial project at Tenke Fungurume is based on mining
and processing ore reserves approximating 119 million metric tons with average
ore grades of 2.6 percent copper and 0.35 percent cobalt. Refer to “Development
Projects” for further discussion.
Molybdenum
Our
Molybdenum operation is an integrated producer of molybdenum, with mining,
sulfide ore concentrating, roasting and processing facilities that produce
high-purity, molybdenum-based chemicals, molybdenum metal powder and
metallurgical products, which are sold to customers around the world, and
includes the wholly owned Henderson molybdenum mine in Colorado and related
conversion facilities. The Henderson underground mine produces high-purity,
chemical-grade molybdenum concentrates, which are typically further processed
into value-added molybdenum chemical products. The Molybdenum operation also
includes the wholly owned Climax molybdenum mine in Colorado, which has been on
care-and-maintenance status since 1995; a sales company that purchases and sells
molybdenum from our Henderson mine and from our North and South America copper
mines that produce molybdenum as a by-product; and related conversion facilities
that, at times, roast and/or process material on a toll basis. Toll arrangements
require the tolling customer to deliver appropriate molybdenum-bearing material
to our facilities for processing into a product that is returned to the
customer, who pays us for processing their material into the specified
products.
Molybdenum
markets have been significantly affected by the downturn in economic conditions,
which began in fourth-quarter 2008, and demand for molybdenum, principally in
the metallurgical sector, remains very weak. During fourth-quarter 2008, the
Henderson molybdenum mine began operating at a curtailed rate, reflecting an
approximate 25 percent reduction in annual production. In response to further
weakness in market conditions, we have taken additional steps to adjust
molybdenum production and further revised Henderson’s operating plans to reflect
an approximate 40 percent reduction in Henderson’s annual production, which
totaled 40 million pounds in 2008. In addition, we have made adjustments to
molybdenum production plans at certain by-product mines, including the
suspension of molybdenum processing at our Cerro Verde mine. We are continuing
to monitor market conditions and may make further adjustments to our molybdenum
production and sales plans.
Operating Data.
Following is summary operating data for the Molybdenum operations for the first
quarters of 2009 and 2008.
|
|
First-Quarter
|
|
|
|
2009
|
|
2008
|
|
Molybdenum (millions of
recoverable pounds)
|
|
|
|
|
|
|
|
Production
|
|
|
7
|
|
|
9
|
|
Sales,
excluding purchasesa
|
|
|
10
|
|
|
20
|
|
Average
realized price per pound
|
|
$
|
11.52
|
|
$
|
31.67
|
|
|
|
|
|
|
|
|
|
Henderson
molybdenum mine
|
|
|
|
|
|
|
|
Ore
milled (metric tons per day)
|
|
|
15,200
|
|
|
25,000
|
|
Average
molybdenum ore grade (percent)
|
|
|
0.25
|
|
|
0.22
|
|
Molybdenum
production (millions of recoverable pounds)
|
|
|
7
|
|
|
9
|
|
a.
|
Includes
sales of molybdenum produced as a by-product at our North and South
America copper mines.
|
Molybdenum
sales volumes decreased to 10 million pounds in first-quarter 2009, compared
with 20 million pounds in first-quarter 2008, primarily reflecting curtailed
production in response to lower demand, principally in the metallurgical sector.
For 2009, molybdenum sales volumes are expected to approximate 50 million
pounds, compared with 71 million pounds in 2008. For 2009, approximately 85
percent of our molybdenum sales are expected to be priced at prevailing market
prices.
Unit Net Cash Costs.
Unit net cash costs per pound of molybdenum is a measure intended to provide
investors with information about the cash-generating capacity of our mining
operations expressed on a basis relating to the primary metal product for our
respective operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This information
differs from measures of performance determined in accordance with U.S. GAAP and
should not be considered in isolation or as a substitute for measures of
performance determined in accordance with U.S. GAAP. This measure is presented
by other mining companies, although our measure may not be comparable to
similarly titled measures reported by other companies.
Gross Profit per Pound of
Molybdenum
The
following tables summarize the unit net cash costs and gross profit at our
Henderson molybdenum mine for the first quarters of 2009 and 2008. Refer to
“Product Revenues and Production Costs” for a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to sales reported in
our consolidated financial statements.
|
First-Quarter
|
|
|
2009
|
|
2008
|
|
Revenues
|
$
|
10.55
|
|
$
|
29.45
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
5.61
|
|
|
5.14
|
|
Unit
net cash costs
|
|
5.61
|
|
|
5.14
|
|
Depreciation,
depletion and amortization
|
|
0.93
|
|
|
4.26
|
|
Noncash
and nonrecurring costs, net
|
|
0.03
|
|
|
0.06
|
|
Total
unit costs
|
|
6.57
|
|
|
9.46
|
|
Gross
profita
|
$
|
3.98
|
|
$
|
19.99
|
|
|
|
|
|
|
|
|
Molybdenum
sales (millions of recoverable pounds)b
|
|
7
|
|
|
9
|
|
a.
|
Gross
profit reflects sales of Henderson products based on volumes produced at
market-based pricing. On a consolidated basis, the Molybdenum segment
includes profits on sales as they are made to third parties and
realizations based on actual contract terms. As a result, the actual gross
profit realized will differ from the amounts reported in this
table.
|
b.
|
Reflects
molybdenum produced by the Henderson molybdenum
mine.
|
Henderson’s
unit net cash costs were $5.61 per pound of molybdenum in first-quarter 2009,
compared with $5.14 per pound of molybdenum in first-quarter 2008. The increase
in Henderson’s unit net cash costs primarily reflects lower molybdenum
production. Assuming achievement of current 2009 sales estimates, we estimate
that the 2009 average unit net cash costs for Henderson would approximate $6.00
per pound of molybdenum, compared with $5.36 per pound in 2008.
The
decrease in Henderson’s depreciation, depletion and amortization reflects the
impact of the long-lived asset impairment charges recognized in fourth-quarter
2008.
Rod
& Refining
The Rod
& Refining operations consist of copper conversion facilities located in
North America, including a refinery, three rod mills and a specialty copper
products facility. These operations process copper produced at our North America
mines and purchased copper into copper cathode, rod and custom copper shapes. At
times these operations refine copper and produce copper rod and shapes for
customers on a toll basis. Toll arrangements require the tolling customer to
deliver appropriate copper-bearing material to our facilities for processing
into a product that is returned to the customer, who pays us for processing
their material into the specified products.
Atlantic
Copper Smelting & Refining
Atlantic
Copper is our wholly owned subsidiary located in Spain. Atlantic Copper’s
operations involve the smelting and refining of copper concentrates and the
marketing of refined copper and precious metals in slimes. Our investment in
smelters serves an important role in our concentrate marketing strategy. PT
Freeport Indonesia generally sells, under long-term contracts, approximately
one-half of its concentrate production to its affiliated smelters, Atlantic
Copper and PT Smelting, and the remainder to other customers. Additionally,
certain of our South America mining operations sell a portion of their copper
concentrate and cathode inventories to Atlantic Copper. Treatment charges for
smelting and refining copper concentrates represent a cost to PT Freeport
Indonesia and our South America mining operations and income to Atlantic Copper
and PT Smelting. Through downstream integration, we are assured placement of a
significant portion of our concentrate production. Smelting and refining charges
consist of a base rate and, in certain contracts, price participation based on
copper prices. Higher treatment and refining charges benefit our smelter
operations at Atlantic Copper and adversely affect our mining operations in
Indonesia and South America. Our North America copper mines are not
significantly affected by changes in treatment and refining charges because
these operations are fully integrated with our Miami smelter located in
Arizona.
Atlantic
Copper has a labor contract covering certain employees, which expired in
December 2007. During March 2009, we successfully negotiated a new four-year
labor contract, retroactive to January 1, 2008.
We defer
recognizing profits on PT Freeport Indonesia’s and our South America copper
mines’ sales to Atlantic Copper and on 25 percent of PT Freeport Indonesia’s
sales to PT Smelting (PT Freeport Indonesia’s 25-percent owned copper smelter
and refinery in Indonesia) until final sales to third parties occur. Changes in
these net deferrals resulted in net reductions to net income applicable to
common stock totaling $62 million ($0.15 per share) in first-quarter 2009 and
net additions of $6 million ($0.01 per share) in first-quarter 2008. At March
31, 2009, our net deferred profits on PT Freeport Indonesia’s and the South
America copper mines’ inventories at Atlantic Copper and PT Smelting to be
recognized in future periods’ net income after taxes and noncontrolling
interests totaled $90 million.
DEVELOPMENT
PROJECTS
We have
several projects and potential opportunities to expand our production volumes,
extend our mine lives and develop large-scale underground ore bodies. In
response to the declines in copper and molybdenum prices and the weak economic
environment, we have deferred most of our project development activities,
including incremental expansion projects at the Sierrita and Bagdad mines in
North America and at the Cerro Verde concentrator in South America; the planned
restart of the Miami mine; development of the El Abra sulfide project; and the
restart of the Climax molybdenum mine. Current major development projects
include underground development in the Grasberg minerals district and the Tenke
Fungurume project in the DRC, although we have also reduced capital spending on
these projects. Capital spending plans continue to be reviewed and may be
revised based on market conditions.
Indonesia. We have several
projects in progress in the Grasberg minerals district, including developing the
large-scale, high-grade underground ore bodies located beneath and adjacent to
the Grasberg open pit. Following provides additional discussion of these current
projects, including the continued development of the Common Infrastructure
project, the Grasberg Block Cave and Big Gossan underground mines and a further
expansion of the DOZ underground mine.
·
|
Common
Infrastructure. In 2004, PT
Freeport Indonesia commenced its Common Infrastructure project to provide
access to its large undeveloped underground ore bodies located in the
Grasberg minerals district through a tunnel system located approximately
400 meters deeper than its existing underground tunnel system. In addition
to providing access to our underground ore bodies, the tunnel system will
enable PT Freeport Indonesia to conduct future exploration in prospective
areas associated with currently identified ore bodies. The tunnel system
has reached the Big Gossan terminal and we are proceeding with development
of the lower Big Gossan infrastructure. We have also advanced development
of the Grasberg spur, and as of December 31, 2008, we completed the
tunneling required to reach the Grasberg underground ore body. During
first-quarter 2009, we continued development of the Grasberg Block Cave
terminal infrastructure and mine
access.
|
·
|
Grasberg Block
Cave. In 2008, we completed the feasibility study for the
development of the Grasberg Block Cave, which accounts for over one-third
of our reserves in Indonesia. Production at the Grasberg Block Cave is
currently scheduled to commence at the end of mining the Grasberg open
pit, which is expected to continue until the end of 2015. The timing of the
underground Grasberg Block Cave development will continue to be
assessed.
|
Based on
the 2008 feasibility study, aggregate mine development capital for the Grasberg
Block Cave and associated Common Infrastructure is expected to approximate $3.1
billion to be incurred between 2008 and 2021, with PT Freeport Indonesia’s share
totaling approximately $2.8 billion. Aggregate project costs incurred through
March 31, 2009, total $222 million.
·
|
Big
Gossan. The Big Gossan
underground mine is a high-grade deposit located near PT Freeport
Indonesia’s existing milling complex. The Big Gossan mine is being
developed as an open-stope mine with backfill consisting of mill tailings
and cement, an established mining methodology expected to be higher cost
than the block-cave method used at the DOZ mine. Production is designed to
ramp up to 7,000 metric tons per day by late 2012 (equal to average annual
aggregate incremental production of 125 million pounds of copper and
65,000 ounces of gold, with PT Freeport Indonesia receiving 60 percent of
these amounts). The total capital investment for this project is currently
estimated at approximately $480 million, of which $345 million has been
incurred through March 31, 2009.
|
·
|
DOZ
Expansion. In mid-2007, PT
Freeport Indonesia completed the expansion of the capacity of the DOZ
underground operation to allow a sustained rate of 50,000 metric tons per
day. PT Freeport Indonesia’s further expansion of the DOZ mine to 80,000
metric tons of ore per day is under way with completion targeted by 2010.
The capital cost for this expansion is expected to approximate $100
million, with PT Freeport Indonesia’s 60 percent share totaling
approximately $60 million. The success of the development of the DOZ mine,
one of the world’s largest underground mines, provides confidence in the
future development of PT Freeport Indonesia’s large-scale undeveloped
underground ore bodies.
|
Tenke Fungurume. Significant
progress on the construction of the project was achieved during first-quarter
2009, and the first copper cathode was produced in late March 2009 as the
project entered the commissioning and start-up phase. Construction activities
for the initial development project are nearing completion and production is
expected to ramp up to full annual capacity in the second half of 2009. Annual
production in the initial years is expected to approximate 250 million pounds of
copper and 18 million pounds of cobalt. The initial project is based on mining
and processing ore reserves approximating 119 million metric tons with average
ore grades of 2.6 percent copper and 0.35 percent cobalt. We also continue to
engage in drilling activities, exploration analyses and metallurgical testing to
evaluate the potential of this highly prospective district. As a result, we
expect its ore reserves to increase significantly over time, enabling future
expansions of the initial production facilities. The timing of these expansions
will depend on a number of factors, including general economic and market
conditions.
Approximately
$1.6 billion of the budgeted $1.75 billion in aggregate project costs have been
incurred through March 31, 2009. We are responsible for funding 70 percent of
project development costs and are also responsible for financing our partner’s
share of certain project overruns on the initial project. In response to current
market conditions, we have deferred spending on certain expenditures not
required for the initial project.
The
project has been designed and constructed in a world-class fashion, using modern
technology and following international standards for environmental management,
occupational safety and social responsibility. The facilities include
impermeable lined tailing storage and waste-water treatment ponds, and we are
making significant investments in infrastructure in the region, including a
national road and improvements in power generation and transmission systems. Our
social programs continue to expand, including local micro-enterprise businesses,
agricultural capacity building initiatives, malaria abatement, potable drinking
water wells, new medical facilities and several new schools. The project will
continue to provide important benefits to the Congolese through employment and
the provision of local services and to the DRC government through substantial
tax, royalty and dividend revenues.
In
February 2008, the Ministry of Mines, Government of the DRC, sent a letter
seeking comment on proposed material modifications to the mining contracts for
the Tenke Fungurume concession. FCX responded to this letter indicating that its
mining contracts were negotiated transparently and approved by the Government of
the DRC following extended negotiations, and that FCX believes they are fair and
equitable, comply with Congolese law and are enforceable without modifications.
We are continuing to work cooperatively with the Government of the DRC to
resolve these matters. This review process has not affected the development
schedule or production plans associated with the Tenke Fungurume
project.
CAPITAL
RESOURCES AND LIQUIDITY
Our
operating cash flows vary with prices realized from copper, gold and molybdenum
sales, our production levels, production costs, cash payments for income taxes
and interest, other working capital changes and other factors. As a result of
weak economic conditions, there is significant uncertainty about the near-term
price outlook for our principal products. While we view the long-term outlook
for our business positively, supported by limitations on supplies of copper and
by the requirements for copper in the world’s economy, we have responded to the
uncertain near-term outlook and will continue to adjust our operating strategy
as market conditions change. Operating plans were revised at the end of 2008 and
in early 2009 to curtail production at higher cost operations, defer or
eliminate capital projects and target reductions in costs, including reduced
exploration, research and administrative costs. We also suspended our annual
common stock dividend.
Based on
current mine plans and subject to future copper, gold and molybdenum prices, we
expect estimated operating cash flows combined with net proceeds from the
first-quarter 2009 equity offering (refer to “Financing Activities” for further
discussion) to be greater than our budgeted capital expenditures, scheduled debt
maturities, preferred dividends, noncontrolling interest distributions and other
cash requirements. From time to time we may use our credit facilities for
working capital and short-term funding requirements.
Cash
and Cash Equivalents
At March
31, 2009, we had consolidated cash and cash equivalents of $644 million. The
following table reflects the U.S. and international components of consolidated
cash and cash equivalents at March 31, 2009, and December 31, 2008 (in
millions):
|
March
31,
|
|
December
31,
|
|
|
2009
|
|
2008
|
|
Cash
at domestic companiesa
|
$
|
261
|
|
$
|
95
|
|
Cash
at international operations
|
|
383
|
|
|
777
|
|
Total
consolidated cash and cash equivalents
|
|
644
|
|
|
872
|
|
Less:
Noncontrolling interests’ share
|
|
(126
|
)
|
|
(267
|
)
|
Cash,
net of noncontrolling interests’ share
|
|
518
|
|
|
605
|
|
Taxes
and other costs if distributed
|
|
(73
|
)
|
|
(151
|
)
|
Net
cash available to FCX parent
|
$
|
445
|
|
$
|
454
|
|
a.
|
Includes
cash at our parent company and North America
operations.
|
Operating
Activities
Net cash
used for operating activities totaled $258 million in first-quarter 2009,
including $919 million used for working capital requirements, which primarily
related to settlement of final pricing with customers on 2008 provisionally
priced copper sales ($573 million). Operating cash flows provided in
first-quarter 2008 totaled $615 million, net of $1.4 billion used for working
capital requirements, including $598 million to settle the 2007 copper price
protection program contract. Consolidated revenues, operating cash flows and net
income vary significantly with fluctuations in the market prices of copper, gold
and molybdenum, sales volumes and other factors.
Refer to
“Overview and Outlook” for further discussion of projected 2009 operating cash
flows.
Investing
Activities
Capital
expenditures, including capitalized interest, totaled $519 million in
first-quarter 2009, compared with $508 million in first-quarter 2008.
First-quarter 2009 capital expenditures, compared to first-quarter 2008, include
an increase associated with spending on the Tenke Fungurume development project
in Africa, partly offset by decreases associated with the effects of the
decision to defer capital spending for most of our project development
activities and also reduced spending for sustaining capital. Refer to
“Development Projects” for further discussion.
Capital
expenditures are expected to approximate $1.3 billion for 2009, including $0.6
billion for sustaining capital and $0.7 billion for the Tenke Fungurume
development project and development projects in Indonesia, compared with $2.7
billion in 2008. Capital spending plans continue to be reviewed and may be
revised based on market conditions.
Financing
Activities
Total
debt approximated $7.2 billion at March 31, 2009, and $7.4 billion at December
31, 2008. We have no significant debt maturities in the near term; however, we
may consider opportunities to prepay debt in advance of scheduled
maturities.
We have
revolving credit facilities available through March 2012, which are composed of
a (i) $1.0 billion revolving credit facility available to FCX and (ii) $0.5
billion revolving credit facility available to both FCX and PT Freeport
Indonesia. At March 31, 2009, we had no borrowings and $74 million of letters of
credit issued under the facilities, resulting in availability of approximately
$1.4 billion. The revolving credit facilities contain restrictions on the amount
available for dividend payments, purchases of our common stock and certain debt
prepayments. However, these restrictions do not apply as long as availability
under the revolvers plus domestic cash exceeds $750 million. As of March 31,
2009, we had availability under the revolvers plus available domestic cash
totaling approximately $1.7 billion.
In April
2008, Standard & Poor’s Rating Services and Fitch Ratings raised our
corporate credit rating and the ratings on our unsecured debt to BBB-
(investment grade). As a result of the upgrade of our unsecured notes to
investment grade, the restricted payment covenants contained in our $6.0 billion
in senior notes used to finance the acquisition of Phelps Dodge and in our 6⅞%
Senior Notes were suspended. To the extent the rating is downgraded below
investment grade, the covenants would again become effective.
In
February 2009, we completed a public offering of 26.8 million shares of our
common stock at an average price of $28.00 per share, which generated gross
proceeds of $750 million (net proceeds of $740 million after fees and expenses).
Net proceeds were used for general corporate purposes, including the repayment
of amounts outstanding under our revolving credit facilities, working capital
and capital expenditures. As of March 31, 2009, we had 412 million common shares
outstanding. Assuming conversion of our 5½% Convertible Perpetual Preferred
Stock and 6¾% Mandatory Convertible Preferred Stock prior to May 1, 2010, we
would have approximately 469 million common shares outstanding; assuming the 6¾%
Mandatory Convertible Preferred Stock automatically converts on May 1, 2010, we
would have between 469 million and 477 million common shares outstanding
(depending on the applicable market price of our common stock).
In
February 2008, we purchased, in an open market transaction, $33 million of our
9½% Senior Notes for $46 million.
Because
of financial market turmoil and declines in copper and molybdenum prices, in
September 2008 we suspended purchases of shares under the open-market share
purchase program. There are 23.7 million shares remaining under this program.
The timing of future purchases of our common stock is dependent on many factors,
including our operating results; cash flows and financial position; copper, gold
and molybdenum prices; the price of our common shares; and general economic and
market conditions.
The
declaration and payment of dividends is at the discretion of our Board of
Directors (the Board). The amount of our cash dividend on our common stock is
dependent upon our financial results, cash requirements, future prospects and
other factors deemed relevant by the Board. Because of the deterioration in
copper and molybdenum prices and in general economic conditions, in December
2008 the Board suspended the cash dividend on our common stock; accordingly,
there were no common dividends paid in first-quarter 2009, compared to $169
million paid in first-quarter 2008. The Board will continue to review our
financial policy on an ongoing basis.
Preferred
stock dividends paid totaled $60 million in first-quarter 2009 and $64 million
in first-quarter 2008 representing dividends on our 5½% Convertible Perpetual
Preferred Stock and 6¾% Mandatory Convertible Preferred Stock. On March 26,
2009, FCX declared a regular quarterly dividend of $1.6875 per share on our 6¾%
Mandatory Convertible Preferred Stock and a regular quarterly dividend of $13.75
per share on our 5½% Convertible Perpetual Preferred Stock, which were paid on
May 1, 2009, to shareholders of record at the close of business on April 15,
2009.
Cash
dividends paid to noncontrolling interests totaled less than $1 million in
first-quarter 2009 and $49 million in first-quarter 2008, which reflected
dividends paid to the noncontrolling interest owners of PT Freeport Indonesia
and of our South America copper mines.
CONTRACTUAL
OBLIGATIONS
There
have been no material changes in our contractual obligations since year-end
2008. Refer to Item 7 in our report on Form 10-K for the year ended December 31,
2008, for further information regarding our contractual
obligations.
ENVIRONMENTAL
AND RECLAMATION MATTERS
Our
mining, exploration, production and historical operating activities are subject
to stringent laws and regulations governing the protection of the environment.
There have been no material changes to our environmental and reclamation
obligations since year-end 2008. Refer to Note 15 in our report on Form 10-K for
the year ended December 31, 2008, for further information regarding our
environmental and reclamation obligations.
Refer to
Note 9 for information on new accounting standards.
PRODUCT
REVENUES AND PRODUCTION COSTS
Unit net
cash costs per pound of copper and molybdenum are measures intended to provide
investors with information about the cash-generating capacity of our mining
operations expressed on a basis relating to the primary metal product for the
respective operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This information
differs from measures of performance determined in accordance with U.S. GAAP and
should not be considered in isolation or as a substitute for measures of
performance determined in accordance with U.S. GAAP. This measure is presented
by other mining companies, although our measure may not be comparable to
similarly titled measures reported by other companies.
We
present gross profit per pound of copper using both a “by-product” method and a
“co-product” method. We use the by-product method in our presentation of gross
profit per pound of copper because (i) the majority of our revenues are copper
revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other
metals, (iii) it is not possible to specifically assign all of our costs to
revenues from the copper, gold, molybdenum and other metals we produce, (iv) it
is the method used to compare mining operations in certain industry publications
and (v) it is the method used by our management and Board of Directors to
monitor operations. In the co-product method presentation below, costs are
allocated to the different products based on their relative revenue values,
which will vary to the extent our metals sales volumes and realized prices
change.
In both
the by-product and the co-product method calculations, we show adjustments to
copper revenues for prior period open sales as separate line items. Because the
copper pricing adjustments do not result from current period sales, we have
reflected these separately from revenues on current period sales. Noncash and
nonrecurring costs consist of items such as LCM inventory adjustments,
stock-based compensation costs and/or unusual charges. They are removed from
site production and delivery costs in the calculation of unit net cash costs. As
discussed above, gold, molybdenum and other metal revenues at copper mines are
reflected as credits against site production and delivery costs in the
by-product method. Presentations under both the by-product and co-product
methods are shown below together with reconciliations to amounts reported in our
consolidated financial statements.
North America Copper Mines
Product Revenues and Production Costs
Three Months Ended March 31,
2009
|
|
|
|
|
|
By-Product
|
|
Co-Product
Method
|
|
(In
millions)
|
Method
|
|
Copper
|
|
Molybdenuma
|
|
Otherb
|
|
Total
|
|
Revenues,
excluding adjustments shown below
|
$
|
480
|
|
$
|
480
|
|
$
|
59
|
|
$
|
6
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
396
|
|
|
378
|
|
|
26
|
|
|
2
|
|
|
406
|
|
By-product
creditsa
|
|
(55
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
25
|
|
|
25
|
|
|
–
|
|
|
–
|
|
|
25
|
|
Net
cash costs
|
|
366
|
|
|
403
|
|
|
26
|
|
|
2
|
|
|
431
|
|
Depreciation,
depletion and amortization
|
|
71
|
|
|
69
|
|
|
1
|
|
|
1
|
|
|
71
|
|
Noncash
and nonrecurring costs, net
|
|
46
|
|
|
45
|
|
|
1
|
|
|
–
|
|
|
46
|
|
Total
costs
|
|
483
|
|
|
517
|
|
|
28
|
|
|
3
|
|
|
548
|
|
Revenue
adjustments, primarily for hedging
|
|
69
|
|
|
69
|
|
|
–
|
|
|
–
|
|
|
69
|
|
Idle
facility and other non-inventoriable costs
|
|
(38
|
)
|
|
(38
|
)
|
|
–
|
|
|
–
|
|
|
(38
|
)
|
Gross
profit (loss)
|
$
|
28
|
|
$
|
(6
|
)
|
$
|
31
|
|
$
|
3
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
Depletion
and
|
|
|
|
|
|
|
|
|
Revenues
|
|
and
Delivery
|
|
|
Amortization
|
|
|
|
|
|
|
|
Totals
presented above
|
$
|
545
|
|
$
|
406
|
|
$
|
71
|
|
|
|
|
|
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
46
|
|
|
N/A
|
|
|
|
|
|
|
|
Treatment
charges per above
|
|
N/A
|
|
|
25
|
|
|
N/A
|
|
|
|
|
|
|
|
Revenue
adjustments, primarily for hedging per above
|
|
69
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Eliminations
and other
|
|
4
|
|
|
76
|
|
|
4
|
|
|
|
|
|
|
|
North
America copper mines
|
|
618
|
|
|
553
|
|
|
75
|
|
|
|
|
|
|
|
South
America copper mines
|
|
702
|
|
|
367
|
|
|
65
|
|
|
|
|
|
|
|
Indonesia
mining
|
|
1,122
|
|
|
350
|
|
|
65
|
|
|
|
|
|
|
|
Africa
mining
|
|
–
|
|
|
16
|
|
|
3
|
|
|
|
|
|
|
|
Molybdenum
|
|
146
|
|
|
138
|
c
|
|
9
|
|
|
|
|
|
|
|
Rod
& Refining
|
|
619
|
|
|
614
|
|
|
2
|
|
|
|
|
|
|
|
Atlantic
Copper Smelting & Refining
|
|
292
|
|
|
293
|
|
|
8
|
|
|
|
|
|
|
|
Corporate,
other & eliminations
|
|
(897
|
)
|
|
(750
|
)
|
|
5
|
|
|
|
|
|
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
2,602
|
|
$
|
1,581
|
c
|
$
|
232
|
|
|
|
|
|
|
|
a.
|
Molybdenum
by-product credits and revenues reflect volumes produced at market-based
pricing and also include tolling revenues at
Sierrita.
|
b.
|
Includes
gold and silver product revenues and production
costs.
|
c.
|
Includes
LCM molybdenum inventory adjustments totaling $19
million.
|
North America Copper Mines
Product Revenues and Production Costs (continued)
Three Months Ended March 31,
2008
|
|
|
|
|
|
By-Product
|
|
Co-Product
Method
|
|
(In
millions)
|
Method
|
|
Copper
|
|
Molybdenuma
|
|
Otherb
|
|
Total
|
|
Revenues,
excluding adjustments shown below
|
$
|
1,179
|
|
$
|
1,179
|
|
$
|
256
|
|
$
|
16
|
|
$
|
1,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
553
|
|
|
481
|
|
|
76
|
|
|
7
|
|
|
564
|
|
By-product
creditsa
|
|
(261
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
31
|
|
|
31
|
|
|
–
|
|
|
–
|
|
|
31
|
|
Net
cash costs
|
|
323
|
|
|
512
|
|
|
76
|
|
|
7
|
|
|
595
|
|
Depreciation,
depletion and amortization
|
|
180
|
|
|
159
|
|
|
19
|
|
|
2
|
|
|
180
|
|
Noncash
and nonrecurring costs, net
|
|
30
|
|
|
29
|
|
|
1
|
|
|
–
|
|
|
30
|
|
Total
costs
|
|
533
|
|
|
700
|
|
|
96
|
|
|
9
|
|
|
805
|
|
Revenue
adjustments, primarily for hedging
|
|
42
|
|
|
42
|
|
|
–
|
|
|
–
|
|
|
42
|
|
Idle
facility and other non-inventoriable costs
|
|
(13
|
)
|
|
(13
|
)
|
|
–
|
|
|
–
|
|
|
(13
|
)
|
Gross
profit
|
$
|
675
|
|
$
|
508
|
|
$
|
160
|
|
$
|
7
|
|
$
|
675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
Depletion
and
|
|
|
|
|
|
|
|
|
Revenues
|
|
and
Delivery
|
|
|
Amortization
|
|
|
|
|
|
|
|
Totals
presented above
|
$
|
1,451
|
|
$
|
564
|
|
$
|
180
|
|
|
|
|
|
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
30
|
|
|
N/A
|
|
|
|
|
|
|
|
Treatment
charges per above
|
|
N/A
|
|
|
31
|
|
|
N/A
|
|
|
|
|
|
|
|
Revenue
adjustments, primarily for hedging per above
|
|
42
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Eliminations
and other
|
|
3
|
|
|
21
|
|
|
4
|
|
|
|
|
|
|
|
North
America copper mines
|
|
1,496
|
|
|
646
|
|
|
184
|
|
|
|
|
|
|
|
South
America copper mines
|
|
1,607
|
|
|
432
|
|
|
130
|
|
|
|
|
|
|
|
Indonesia
mining
|
|
1,052
|
|
|
399
|
|
|
45
|
|
|
|
|
|
|
|
Africa
mining
|
|
–
|
|
|
3
|
|
|
1
|
|
|
|
|
|
|
|
Molybdenum
|
|
719
|
|
|
460
|
|
|
39
|
|
|
|
|
|
|
|
Rod
& Refining
|
|
1,688
|
|
|
1,676
|
|
|
2
|
|
|
|
|
|
|
|
Atlantic
Copper Smelting & Refining
|
|
665
|
|
|
651
|
|
|
9
|
|
|
|
|
|
|
|
Corporate,
other & eliminations
|
|
(1,555
|
)
|
|
(1,545
|
)
|
|
8
|
|
|
|
|
|
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
5,672
|
|
$
|
2,722
|
c
|
$
|
418
|
|
|
|
|
|
|
|
a.
|
Molybdenum
by-product credits and revenues reflect volumes produced at market-based
pricing and also include tolling revenues at
Sierrita.
|
b.
|
Includes
gold and silver product revenues and production
costs.
|
c.
|
Includes
LCM inventory adjustments of $1
million.
|
South America Copper Mines
Product Revenues and Production Costs
Three Months Ended March 31,
2009
|
|
|
|
|
|
|
|
|
|
By-Product
|
|
Co-Product
Method
|
|
(In
millions)
|
Method
|
|
Copper
|
|
Other
a
|
|
Total
|
|
Revenues,
excluding adjustments shown below
|
$
|
617
|
|
$
|
617
|
|
$
|
44
|
|
$
|
661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
nonrecurring
costs shown below
|
|
352
|
|
|
323
|
|
|
34
|
|
|
357
|
|
By-product
credits
|
|
(39
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
48
|
|
|
48
|
|
|
–
|
|
|
48
|
|
Net
cash costs
|
|
361
|
|
|
371
|
|
|
34
|
|
|
405
|
|
Depreciation,
depletion and amortization
|
|
65
|
|
|
62
|
|
|
3
|
|
|
65
|
|
Noncash
and nonrecurring costs, net
|
|
5
|
|
|
5
|
|
|
–
|
|
|
5
|
|
Total
costs
|
|
431
|
|
|
438
|
|
|
37
|
|
|
475
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales
|
|
88
|
|
|
88
|
|
|
–
|
|
|
88
|
|
Other
non-inventoriable costs
|
|
(9
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
(9
|
)
|
Gross
profit
|
$
|
265
|
|
$
|
259
|
|
$
|
6
|
|
$
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
Production
|
|
Depletion
and
|
|
|
|
|
|
Revenues
|
|
and
Delivery
|
|
Amortization
|
|
|
|
|
Totals
presented above
|
$
|
661
|
|
$
|
357
|
|
$
|
65
|
|
|
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
5
|
|
|
N/A
|
|
|
|
|
Less:
Treatment charges per above
|
|
(48
|
)
|
|
N/A
|
|
|
N/A
|
|
|
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales per above
|
|
88
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
Eliminations
and other
|
|
1
|
|
|
5
|
|
|
–
|
|
|
|
|
South
America copper mines
|
|
702
|
|
|
367
|
|
|
65
|
|
|
|
|
North
America copper mines
|
|
618
|
|
|
553
|
|
|
75
|
|
|
|
|
Indonesia
mining
|
|
1,122
|
|
|
350
|
|
|
65
|
|
|
|
|
Africa
mining
|
|
–
|
|
|
16
|
|
|
3
|
|
|
|
|
Molybdenum
|
|
146
|
|
|
138
|
b
|
|
9
|
|
|
|
|
Rod
& Refining
|
|
619
|
|
|
614
|
|
|
2
|
|
|
|
|
Atlantic
Copper Smelting & Refining
|
|
292
|
|
|
293
|
|
|
8
|
|
|
|
|
Corporate,
other & eliminations
|
|
(897
|
)
|
|
(750
|
)
|
|
5
|
|
|
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
2,602
|
|
$
|
1,581
|
b
|
$
|
232
|
|
|
|
|
a.
|
Includes
molybdenum, gold and silver product revenues and production
costs.
|
b.
|
Includes
LCM molybdenum inventory adjustments totaling $19
million.
|
South America Copper Mines
Product Revenues and Production Costs (continued)
Three Months Ended March 31,
2008
|
|
|
|
|
|
|
|
|
|
By-Product
|
|
Co-Product
Method
|
|
(In
millions)
|
Method
|
|
Copper
|
|
Other
a
|
|
Total
|
|
Revenues,
excluding adjustments shown below
|
$
|
1,380
|
|
$
|
1,380
|
|
$
|
59
|
|
$
|
1,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
nonrecurring
costs shown below
|
|
395
|
|
|
381
|
|
|
20
|
|
|
401
|
|
By-product
credits
|
|
(53
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
76
|
|
|
76
|
|
|
–
|
|
|
76
|
|
Net
cash costs
|
|
418
|
|
|
457
|
|
|
20
|
|
|
477
|
|
Depreciation,
depletion and amortization
|
|
130
|
|
|
126
|
|
|
4
|
|
|
130
|
|
Noncash
and nonrecurring costs, net
|
|
25
|
|
|
25
|
|
|
–
|
|
|
25
|
|
Total
costs
|
|
573
|
|
|
608
|
|
|
24
|
|
|
632
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales
|
|
230
|
|
|
230
|
|
|
–
|
|
|
230
|
|
Other
non-inventoriable costs
|
|
(9
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
(9
|
)
|
Gross
profit
|
$
|
1,028
|
|
$
|
994
|
|
$
|
34
|
|
$
|
1,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
Production
|
|
Depletion
and
|
|
|
|
|
|
Revenues
|
|
and
Delivery
|
|
Amortization
|
|
|
|
|
Totals
presented above
|
$
|
1,439
|
|
$
|
401
|
|
$
|
130
|
|
|
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
25
|
|
|
N/A
|
|
|
|
|
Less:
Treatment charges per above
|
|
(76
|
)
|
|
N/A
|
|
|
N/A
|
|
|
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales per above
|
|
230
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
Eliminations
and other
|
|
14
|
|
|
6
|
|
|
–
|
|
|
|
|
South
America copper mines
|
|
1,607
|
|
|
432
|
|
|
130
|
|
|
|
|
North
America copper mines
|
|
1,496
|
|
|
646
|
|
|
184
|
|
|
|
|
Indonesia
mining
|
|
1,052
|
|
|
399
|
|
|
45
|
|
|
|
|
Africa
mining
|
|
–
|
|
|
3
|
|
|
1
|
|
|
|
|
Molybdenum
|
|
719
|
|
|
460
|
|
|
39
|
|
|
|
|
Rod
& Refining
|
|
1,688
|
|
|
1,676
|
|
|
2
|
|
|
|
|
Atlantic
Copper Smelting & Refining
|
|
665
|
|
|
651
|
|
|
9
|
|
|
|
|
Corporate,
other & eliminations
|
|
(1,555
|
)
|
|
(1,545
|
)
|
|
8
|
|
|
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
5,672
|
|
$
|
2,722
|
b
|
$
|
418
|
|
|
|
|
a.
|
Includes
molybdenum, gold and silver product revenues and production
costs.
|
b.
|
Includes
LCM inventory adjustments totaling $1
million.
|
Indonesia Mining Product
Revenues and Production Costs
Three Months Ended March 31,
2009
|
|
|
|
|
|
By-Product
|
|
Co-Product
Method
|
|
(In
millions)
|
Method
|
|
Copper
|
|
Gold
|
|
Silver
|
|
Total
|
|
Revenues,
after adjustments shown below
|
$
|
665
|
|
$
|
665
|
|
$
|
477
|
|
$
|
17
|
|
$
|
1,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
339
|
|
|
195
|
|
|
140
|
|
|
4
|
|
|
339
|
|
Gold
and silver credits
|
|
(494
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
75
|
|
|
43
|
|
|
31
|
|
|
1
|
|
|
75
|
|
Royalty
on metals
|
|
25
|
|
|
14
|
|
|
10
|
|
|
1
|
|
|
25
|
|
Net
cash (credits) costs
|
|
(55
|
)
|
|
252
|
|
|
181
|
|
|
6
|
|
|
439
|
|
Depreciation
and amortization
|
|
65
|
|
|
37
|
|
|
27
|
|
|
1
|
|
|
65
|
|
Noncash
and nonrecurring costs, net
|
|
11
|
|
|
7
|
|
|
4
|
|
|
–
|
|
|
11
|
|
Total
costs
|
|
21
|
|
|
296
|
|
|
212
|
|
|
7
|
|
|
515
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales
|
|
63
|
|
|
63
|
|
|
–
|
|
|
–
|
|
|
63
|
|
PT
Smelting intercompany loss
|
|
(7
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
–
|
|
|
(7
|
)
|
Gross
profit
|
$
|
700
|
|
$
|
428
|
|
$
|
262
|
|
$
|
10
|
|
$
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
Depletion
and
|
|
|
|
|
|
|
|
|
Revenues
|
|
and
Delivery
|
|
Amortization
|
|
|
|
|
|
|
|
Totals
presented above
|
$
|
1,159
|
|
$
|
339
|
|
$
|
65
|
|
|
|
|
|
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
11
|
|
|
N/A
|
|
|
|
|
|
|
|
Less:
Treatment charges per above
|
|
(75
|
)
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Less:
Royalty per above
|
|
(25
|
)
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales per above
|
|
63
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Indonesia
mining
|
|
1,122
|
|
|
350
|
|
|
65
|
|
|
|
|
|
|
|
North
America copper mines
|
|
618
|
|
|
553
|
|
|
75
|
|
|
|
|
|
|
|
South
America copper mines
|
|
702
|
|
|
367
|
|
|
65
|
|
|
|
|
|
|
|
Africa
mining
|
|
–
|
|
|
16
|
|
|
3
|
|
|
|
|
|
|
|
Molybdenum
|
|
146
|
|
|
138
|
a
|
|
9
|
|
|
|
|
|
|
|
Rod
& Refining
|
|
619
|
|
|
614
|
|
|
2
|
|
|
|
|
|
|
|
Atlantic
Copper Smelting & Refining
|
|
292
|
|
|
293
|
|
|
8
|
|
|
|
|
|
|
|
Corporate,
other & eliminations
|
|
(897
|
)
|
|
(750
|
)
|
|
5
|
|
|
|
|
|
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
2,602
|
|
$
|
1,581
|
a
|
$
|
232
|
|
|
|
|
|
|
|
a.
|
Includes
total LCM molybdenum inventory adjustments totaling $19
million.
|
Indonesia Mining Product
Revenues and Production Costs (continued)
Three Months Ended March 31,
2008
|
|
|
|
|
|
By-Product
|
|
Co-Product
Method
|
|
(In
millions)
|
Method
|
|
Copper
|
|
Gold
|
|
Silver
|
|
Total
|
|
Revenues,
after adjustments shown below
|
$
|
802
|
|
$
|
802
|
|
$
|
241
|
|
$
|
15
|
|
$
|
1,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
385
|
|
|
292
|
|
|
88
|
|
|
5
|
|
|
385
|
|
Gold
and silver credits
|
|
(256
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Treatment
charges
|
|
68
|
|
|
52
|
|
|
15
|
|
|
1
|
|
|
68
|
|
Royalty
on metals
|
|
25
|
|
|
19
|
|
|
6
|
|
|
–
|
|
|
25
|
|
Net
cash costs
|
|
222
|
|
|
363
|
|
|
109
|
|
|
6
|
|
|
478
|
|
Depreciation
and amortization
|
|
45
|
|
|
34
|
|
|
10
|
|
|
1
|
|
|
45
|
|
Noncash
and nonrecurring costs, net
|
|
14
|
|
|
11
|
|
|
3
|
|
|
–
|
|
|
14
|
|
Total
costs
|
|
281
|
|
|
408
|
|
|
122
|
|
|
7
|
|
|
537
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales
|
|
87
|
|
|
87
|
|
|
–
|
|
|
–
|
|
|
87
|
|
PT
Smelting intercompany loss
|
|
(5
|
)
|
|
(3
|
)
|
|
(2
|
)
|
|
–
|
|
|
(5
|
)
|
Gross
profit
|
$
|
603
|
|
$
|
478
|
|
$
|
117
|
|
$
|
8
|
|
$
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions)
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
Depletion
and
|
|
|
|
|
|
|
|
|
Revenues
|
|
and
Delivery
|
|
Amortization
|
|
|
|
|
|
|
|
Totals
presented above
|
$
|
1,058
|
|
$
|
385
|
|
$
|
45
|
|
|
|
|
|
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
14
|
|
|
N/A
|
|
|
|
|
|
|
|
Less:
Treatment charges per above
|
|
(68
|
)
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Less:
Royalty per above
|
|
(25
|
)
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Revenue
adjustments, primarily for pricing on prior
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
open sales per above
|
|
87
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
Indonesia
mining
|
|
1,052
|
|
|
399
|
|
|
45
|
|
|
|
|
|
|
|
North
America copper mines
|
|
1,496
|
|
|
646
|
|
|
184
|
|
|
|
|
|
|
|
South
America copper mines
|
|
1,607
|
|
|
432
|
|
|
130
|
|
|
|
|
|
|
|
Africa
mining
|
|
–
|
|
|
3
|
|
|
1
|
|
|
|
|
|
|
|
Molybdenum
|
|
719
|
|
|
460
|
|
|
39
|
|
|
|
|
|
|
|
Rod
& Refining
|
|
1,688
|
|
|
1,676
|
|
|
2
|
|
|
|
|
|
|
|
Atlantic
Copper Smelting & Refining
|
|
665
|
|
|
651
|
|
|
9
|
|
|
|
|
|
|
|
Corporate,
other & eliminations
|
|
(1,555
|
)
|
|
(1,545
|
)
|
|
8
|
|
|
|
|
|
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
5,672
|
|
$
|
2,722
|
a
|
$
|
418
|
|
|
|
|
|
|
|
a.
|
Includes
LCM inventory adjustments totaling $1
million.
|
Henderson Molybdenum Mine
Product Revenues and Production Costs
|
Three
Months Ended March 31,
|
|
|
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
Revenues
|
$
|
70
|
|
$
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Site
production and delivery, before net noncash
|
|
|
|
|
|
|
|
|
|
and
nonrecurring costs shown below
|
|
37
|
|
|
49
|
|
|
|
|
Net
cash costs
|
|
37
|
|
|
49
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
6
|
|
|
41
|
|
|
|
|
Noncash
and nonrecurring costs, net
|
|
–
|
|
|
1
|
|
|
|
|
Total
costs
|
|
43
|
|
|
91
|
|
|
|
|
Gross
profita
|
$
|
27
|
|
$
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Amounts Reported
|
|
|
|
Production
|
|
Depreciation,
|
|
(In
millions)
|
|
|
|
and
|
|
Depletion
and
|
|
|
|
Revenues
|
|
Delivery
|
|
Amortization
|
|
Three Months Ended March 31,
2009
|
|
|
|
|
|
|
|
|
|
Totals
presented above
|
$
|
70
|
|
$
|
37
|
|
$
|
6
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
–
|
|
|
N/A
|
|
Henderson
mine
|
|
70
|
|
|
37
|
|
|
6
|
|
Other
molybdenum operations and eliminationsb
|
|
76
|
|
|
101
|
c
|
|
3
|
|
Molybdenum
|
|
146
|
|
|
138
|
|
|
9
|
|
North
America copper mines
|
|
618
|
|
|
553
|
|
|
75
|
|
South
America copper mines
|
|
702
|
|
|
367
|
|
|
65
|
|
Indonesia
mining
|
|
1,122
|
|
|
350
|
|
|
65
|
|
Africa
mining
|
|
–
|
|
|
16
|
|
|
3
|
|
Rod
& Refining
|
|
619
|
|
|
614
|
|
|
2
|
|
Atlantic
Copper Smelting & Refining
|
|
292
|
|
|
293
|
|
|
8
|
|
Corporate,
other & eliminations
|
|
(897
|
)
|
|
(750
|
)
|
|
5
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
2,602
|
|
$
|
1,581
|
c
|
$
|
232
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
2008
|
|
|
|
|
|
|
|
|
|
Totals
presented above
|
$
|
282
|
|
$
|
49
|
|
$
|
41
|
|
Net
noncash and nonrecurring costs per above
|
|
N/A
|
|
|
1
|
|
|
N/A
|
|
Henderson
mine
|
|
282
|
|
|
50
|
|
|
41
|
|
Other
molybdenum operations and eliminationsb
|
|
437
|
|
|
410
|
|
|
(2
|
)
|
Molybdenum
|
|
719
|
|
|
460
|
|
|
39
|
|
North
America copper mines
|
|
1,496
|
|
|
646
|
|
|
184
|
|
South
America copper mines
|
|
1,607
|
|
|
432
|
|
|
130
|
|
Indonesia
mining
|
|
1,052
|
|
|
399
|
|
|
45
|
|
Africa
mining
|
|
–
|
|
|
3
|
|
|
1
|
|
Rod
& Refining
|
|
1,688
|
|
|
1,676
|
|
|
2
|
|
Atlantic
Copper Smelting & Refining
|
|
665
|
|
|
651
|
|
|
9
|
|
Corporate,
other & eliminations
|
|
(1,555
|
)
|
|
(1,545
|
)
|
|
8
|
|
As
reported in FCX’s consolidated financial statements
|
$
|
5,672
|
|
$
|
2,722
|
d
|
$
|
418
|
|
a.
|
Gross
profit reflects sales of Henderson products based on volumes produced at
market-based pricing. On a consolidated basis, the Molybdenum segment
includes profits on sales as they are made to third parties and
realizations based on actual contract terms. As a result, the actual gross
profit realized will differ from the amounts reported in this
table.
|
b.
|
Primarily
includes amounts associated with the molybdenum sales company, which
includes sales of molybdenum produced as a by-product at our North and
South America copper mines.
|
c.
|
First-quarter
2009 includes LCM inventory molybdenum adjustments totaling $19
million.
|
d.
|
First-quarter
2008 includes LCM inventory adjustments totaling $1
million.
|
CAUTIONARY
STATEMENT
Our
discussion and analysis contains forward-looking statements in which we discuss
our expectations regarding future performance. Forward-looking statements are
all statements other than statements of historical facts, such as those
statements regarding anticipated production volumes, sales volumes, unit net
cash costs, ore grades, milling rates, commodity prices, development and other
capital expenditures, mine production and development plans, environmental
liabilities, potential future dividend payments, reserve estimates, projected
exploration efforts and results, operating cash flows, the impact of copper,
gold and molybdenum price changes, the impact of deferred intercompany profits
on earnings, liquidity, other financial commitments and tax rates. The words
“anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,”
“projects,” “intends,” “likely,” “will,” “should,” “to be” and any similar
expressions and/or statements that are not historical facts, in each case as
they relate to us or our management, are intended to identify those assertions
as forward-looking statements.
In making
any of those statements, the person making them believes that the expectations
are based on reasonable assumptions. We caution readers that those statements
are not guarantees of future performance, and our actual results may differ
materially from those anticipated, projected or assumed in the forward-looking
statements. Important factors that can cause our actual results to differ
materially from those anticipated in the forward-looking statements include
commodity prices, mine sequencing, production rates, industry risks, regulatory
changes, political risks, weather-related risks, labor relations, environmental
risks, litigation results, currency translation risks and other factors
described in more detail under the heading “Risk Factors” in our Form 10-K for
the year ended December 31, 2008.
Accordingly,
no assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them do so,
what impact they will have on our results of operations or financial condition.
Except for our ongoing obligations under the federal securities laws, we do not
intend and undertake no obligation to update or revise any forward-looking
statements.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk.
In early
April 2009, we entered into forward copper sales contracts to lock in prices at
an average of $1.86 per pound on 355 million pounds of PT Freeport Indonesia’s
provisionally priced copper sales at March 31, 2009, which are scheduled to
final price from April 2009 through July 2009. From time to time, we may enter
into future transactions to lock in pricing on provisionally priced sales to
reduce short-term volatility in earnings and cash flows, but we do not intend to
change our long standing policy of not hedging future copper
production.
For
additional information on market risks, refer to “Disclosures About Market
Risks” included in Part II, Item 7A of our report on Form 10-K for the year
ended December 31, 2008.
Item 4. Controls and
Procedures.
(a)
|
Evaluation of
disclosure controls and procedures. Our chief executive officer and
chief financial officer, with the participation of management, have
evaluated the effectiveness of our “disclosure controls and procedures”
(as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this
quarterly report on Form 10-Q. Based on their evaluation, they have
concluded that our disclosure controls and procedures are effective as of
the end of the period covered by this
report.
|
(b)
|
Changes in internal
control. There has been no change in our internal control over
financial reporting that occurred during the three months ended March 31,
2009, that has materially affected, or is reasonably likely to materially
affect our internal control over financial
reporting.
|
Environmental
Proceedings
Arizona Notice of Violation
(NOV) – Sierrita operations. Information
regarding this legal proceeding is incorporated by reference to Item 3. Legal
Proceedings of Part I of the FCX Form 10-K for the year ended December 31,
2008.
In
January 2009, Phelps Dodge Sierrita, Inc. (Sierrita) and the Arizona Department
of Environmental Quality (ADEQ) entered into a consent decree relating to two
NOVs associated with dust emissions from Sierrita’s tailing facility. The
consent decree, which obligates Sierrita to pay a $45,000 fine and $60,000 for a
supplemental environmental project, was entered by the court in April 2009. It
will be terminated after the payment of the required sums and filing of a report
with ADEQ.
New Mexico Environment
Department – Chino Mines. Information
regarding this legal proceeding is incorporated by reference to Item 3. Legal
Proceedings of Part I of the FCX Form 10-K for the year ended December 31,
2008.
In 2007,
Chino Mines Co. (Chino) notified New Mexico Environmental Department (NMED) that
heavy rains led to a release of diluted leach solutions through a storm water
outfall to an ephemeral stream on Chino’s property; Chino also identified the
interim corrective actions taken as a result of the discharge. In April 2009,
Chino and NMED entered a Settlement Agreement and Stipulated Final Order
obligating Chino to pay a $276,000 penalty and to implement a corrective action
plan.
There
have been no material changes to our risk factors during the three months ended
March 31, 2009. For additional information on risk factors, refer to “Risk
Factors” included in Part I, Item 1A of our report on Form 10-K for the year
ended December 31, 2008.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
(c)
|
The
following table sets forth information with respect to shares of common
stock of FCX purchased by FCX during the three months ended March 31,
2009:
|
|
|
|
|
|
|
|
(c)
Total Number of
|
|
(d)
Maximum Number
|
|
|
(a)
Total Number
|
|
(b)
Average
|
|
Shares
Purchased as Part
|
|
of
Shares That May
|
|
|
of
Shares
|
|
Price
Paid
|
|
of
Publicly Announced
|
|
Yet
Be Purchased Under
|
Period
|
|
Purchaseda
|
|
Per
Share
|
|
Plans
or Programsb
|
|
the
Plans or Programsb
|
January
1-31, 2009
|
|
935
|
|
$
|
27.42
|
|
–
|
|
23,685,500
|
February
1-28, 2009
|
|
273
|
|
$
|
29.00
|
|
–
|
|
23,685,500
|
March
1-31, 2009
|
|
498
|
|
$
|
33.98
|
|
–
|
|
23,685,500
|
Total
|
|
1,706
|
|
$
|
29.59
|
|
–
|
|
23,685,500
|
|
|
|
|
|
|
|
|
|
|
a.
|
Consists
of shares repurchased under FCX’s applicable stock incentive plans, which
were repurchased to satisfy tax obligations on restricted stock awards and
to cover the cost of option
exercises.
|
b.
|
On
July 21, 2008, FCX’s Board of Directors approved an increase in FCX’s
open-market share purchase program for up to 30 million shares. This
program does not have an expiration
date.
|
The
exhibits to this report are listed in the Exhibit Index beginning on Page E-1
hereof.
FREEPORT-McMoRan COPPER & GOLD INC.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
FREEPORT-McMoRan
COPPER & GOLD INC.
By: /s/ Kathleen L.
Quirk
Kathleen
L. Quirk
Executive
Vice President,
Chief
Financial Officer and
Treasurer
(authorized
signatory and
Principal
Financial Officer)
Date: May 11,
2009
FREEPORT-McMoRan COPPER & GOLD
INC.
|
EXHIBIT
INDEX
|
|
|
Filed
|
|
Exhibit
|
|
with
this
|
Incorporated
by Reference
|
|
|
|
|
|
|
3.1
|
Composite
Certificate of Incorporation of FCX.
|
|
8-A/A
|
001-11307-01
|
01/26/2009
|
3.2
|
Amended
and Restated By-Laws of FCX, as amended through May 1,
2007.
|
|
8-K
|
001-11307-01
|
05/04/2007
|
|
FCX
Director Compensation.
|
X
|
|
|
|
|
Letter
from Ernst & Young LLP regarding unaudited interim financial
statements.
|
X
|
|
|
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a)/15d –
14(a).
|
X
|
|
|
|
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a)/15d –
14(a).
|
X
|
|
|
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section
1350.
|
X
|
|
|
|
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C Section
1350.
|
X
|
|
|
|
101.INS
|
XBRL
Instance Document.
|
X
|
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema.
|
X
|
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase.
|
X
|
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase.
|
X
|
|
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase.
|
X
|
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase.
|
X
|
|
|
|
101.REF
|
XBRL
Taxonomy Extension Reference Linkbase.
|
X
|
|
|
|
* Indicates
management contract or compensatory plan or arrangement.