Freeport-McMoRan Copper & Gold Inc. Reports Second-Quarter and Six-Month 2010 Results
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):
- Net income attributable to common stock for second-quarter 2010
was $649 million, $1.40 per share, compared with net income of $588
million, $1.38 per share, for second-quarter 2009. Net income
attributable to common stock for the first six months of 2010 was $1.5
billion, $3.40 per share, compared with $631 million, $1.54 per share,
for the first six months of 2009.
- Consolidated sales from mines for second-quarter 2010 totaled
914 million pounds of copper, 298 thousand ounces of gold and 16
million pounds of molybdenum, compared with 1.1 billion pounds of
copper, 837 thousand ounces of gold and 16 million pounds of
molybdenum for second-quarter 2009.
- Consolidated sales from mines for the year 2010 are expected to
approximate 3.8 billion pounds of copper, 1.8 million ounces of gold
and 63 million pounds of molybdenum, including 970 million pounds of
copper, 410 thousand ounces of gold and 15 million pounds of
molybdenum for third-quarter 2010.
- Consolidated unit net cash costs (net of by-product credits)
averaged $0.97 per pound for second-quarter 2010, compared with $0.43
per pound for second-quarter 2009. Assuming average prices of $1,200
per ounce for gold and $14 per pound for molybdenum for the second
half of 2010, consolidated unit net cash costs (net of by-product
credits) are estimated to average approximately $0.86 per pound for
the year 2010. Quarterly unit net cash costs will vary with
fluctuations in sales volumes of copper and by-products.
- Operating cash flows totaled $1.1 billion for second-quarter
2010 and $2.9 billion for the first six months of 2010. Using
estimated 2010 sales volumes and assuming average prices of $3.00 per
pound for copper, $1,200 per ounce for gold and $14 per pound for
molybdenum for the second half of 2010, operating cash flows for the
year 2010 are estimated to exceed $5 billion.
- Capital expenditures totaled $296 million for second-quarter
2010 and $527 million for the first six months of 2010. FCX currently
expects capital expenditures to approximate $1.7 billion for the year
2010, including $0.9 billion for sustaining capital and $0.8 billion
for major projects. A number of studies are ongoing, which may result
in increased capital spending programs.
At June 30, 2010, total debt approximated $4.8 billion and consolidated
cash approximated $3.0 billion. During the second quarter of 2010,
FCX repaid $1.3 billion in debt, including the April 1st
redemption of $1.0 billion of outstanding Senior Floating Rate Notes
due 2015.
During the second quarter of 2010, FCX′s 6 ¾% Mandatory Convertible
Preferred Stock converted into 39 million shares of FCX common
stock.
FCX′s Board of Directors declared a common stock dividend of
$0.30 per share payable on August 1, 2010, to holders of record as of
July 15, 2010. As previously announced, during the second quarter of
2010, FCX′s Board of Directors authorized an increase in the annual
cash dividend on its common stock from $0.60 per share to $1.20 per
share ($0.30 per share quarterly).
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported second-quarter
2010 net income attributable to common stock of $649 million, $1.40 per
share, compared with net income of $588 million, $1.38 per share, for
the second quarter of 2009. For the six months ended June 30, 2010, FCX
reported net income attributable to common stock of $1.5 billion, $3.40
per share, compared with $631 million, $1.54 per share, in the 2009
six-month period.
James R. Moffett, Chairman of the Board, and Richard C. Adkerson,
President and Chief Executive Officer, said, 'Our second-quarter results
reflect continued strong production and cost management throughout our
global portfolio of mining operations.During the quarter, we
executed our operating plans effectively, strengthened our balance sheet
and advanced projects to enhance our future growth options.We
remain positive about the outlook for our business based on the
fundamentals of global supply and demand.We anticipate
generating strong cash flows, which would enable us to invest in future
growth and return cash to shareholders.?
SUMMARY FINANCIAL AND OPERATING DATA | ||||||||||||||||
| Three Months | Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Financial Data (in millions, except per share amounts) | ||||||||||||||||
Revenuesa | $ | 3,864 | $ | 3,684 | $ | 8,227 | $ | 6,286 | ||||||||
Operating income | $ | 1,424 | $ | 1,508 | $ | 3,472 | $ | 2,180 | ||||||||
Net income | $ | 832 | $ | 812 | $ | 2,047 | $ | 1,019 | ||||||||
| $ | 649 | c | $ | 588 | $ | 1,546 | c | $ | 631 | ||||||
Diluted net income per share of common stock | $ | 1.40 | c | $ | 1.38 | $ | 3.40 | c | $ | 1.54 | ||||||
Diluted weighted-average common shares outstanding | 473 | 471 | 474 | 426 | ||||||||||||
Operating cash flowsd | $ | 1,064 | $ | 1,154 | $ | 2,882 | $ | 896 | ||||||||
Capital expenditures | $ | 296 | $ | 375 | $ | 527 | $ | 894 | ||||||||
| FCX Operating Data | ||||||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
Production | 930 | 1,069 | 1,859 | 2,110 | ||||||||||||
Sales, excluding purchased metal | 914 | 1,102 | 1,874 | 2,122 | ||||||||||||
Average realized price per pound | $ | 3.06 | $ | 2.22 | $ | 3.13 | $ | 2.03 | ||||||||
Site production and delivery unit costs per pounde | $ | 1.41 | $ | 1.04 | f | $ | 1.38 | $ | 1.05 | f | ||||||
Unit net cash costs per pounde | $ | 0.97 | $ | 0.43 | f | $ | 0.89 | $ | 0.54 | f | ||||||
| Gold (thousands of recoverable ounces) | ||||||||||||||||
Production | 316 | 802 | 765 | 1,397 | ||||||||||||
Sales, excluding purchased metal | 298 | 837 | 776 | 1,382 | ||||||||||||
Average realized price per ounce | $ | 1,234 | $ | 932 | $ | 1,171 | $ | 919 | ||||||||
| Molybdenum (millions of recoverable pounds) | ||||||||||||||||
Production | 17 | 13 | 34 | 27 | ||||||||||||
Sales, excluding purchased metal | 16 | 16 | 33 | 26 | ||||||||||||
Average realized price per pound | $ | 18.18 | $ | 10.11 | $ | 16.62 | $ | 10.65 | ||||||||
a.Includes impacts of adjustments to provisionally | ||||||||||||||||
b.After noncontrolling interests and preferred | ||||||||||||||||
c.Includes losses on early extinguishment of debt | ||||||||||||||||
d.Includes working capital sources (uses) of $(173) | ||||||||||||||||
e.Reflects per pound weighted-average site production | ||||||||||||||||
f.Excludes results from Tenke Fungurume, where start-up | ||||||||||||||||
OPERATIONS
Consolidated. Second-quarter 2010 consolidated copper sales of
914 million pounds were higher than the April 2010 estimate of 830
million pounds but lower than the second-quarter 2009 copper sales of
1.1 billion pounds. The variance to the April 2010 estimate primarily
reflects favorable production performance in North and South America and
Indonesia and the timing of shipments, principally in North America. The
variance to the 2009 period primarily reflects the anticipated lower
copper ore grades at Grasberg resulting from planned mine sequencing and
anticipated lower sales from South America mines, partially offset by
higher sales from the Tenke Fungurume mine in Africa.
Second-quarter 2010 consolidated gold sales of 298 thousand ounces were
higher than the April 2010 estimate of 270 thousand ounces but
significantly lower than the second-quarter 2009 gold sales of 837
thousand ounces. The favorable variance to the April 2010 estimate
primarily reflects timing of mine sequencing at Grasberg. The variance
to the 2009 period primarily reflects anticipated lower gold ore grades
at Grasberg resulting from planned mine sequencing.
Consolidated molybdenum sales totaled 16 million pounds in each of the
second quarter periods. The second-quarter 2010 sales were higher than
the April 2010 estimate of 15 million pounds because of improved demand
in the chemicals sector.
Consolidated unit site production and delivery costs averaged $1.41 per
pound of copper in the second quarter of 2010, compared with
second-quarter 2009 unit costs of $1.04 per pound. Second-quarter 2010
unit net cash costs, net of by-product credits, averaged $0.97 per
pound, compared with $0.43 per pound in the year-ago period. The higher
unit net cash costs primarily reflected anticipated lower copper and
gold volumes at Grasberg and South America, partly offset by higher
by-product gold and molybdenum prices.
Assuming average prices of $1,200 per ounce for gold and $14 per pound
for molybdenum for the second half of 2010 and using current 2010 sales
and costs estimates; consolidated unit net cash costs (net of by-product
credits and including Tenke Fungurume) are expected to average
approximately $0.86 per pound for the year 2010. Quarterly unit net cash
costs will vary with fluctuations in sales volumes. Unit net cash costs
for 2010 would change by approximately $0.01 per pound for each $50 per
ounce change in the average price of gold for the second half of 2010
and by approximately $0.005 per pound for each $2 per pound change in
the average price of molybdenum for the second half of 2010.
Development Activities. FCX has significant reserves and future
development opportunities within its portfolio of assets. At December
31, 2009, in addition to estimated proven and probable reserves of 104
billion pounds of copper (determined using a long-term average price of
$1.60 per pound for copper), FCX identified estimated mineralized
material (assessed using a long-term average price of $2.00 per pound
for copper) with incremental contained copper of an additional 122
billion pounds. FCX continues to evaluate opportunities to convert this
material into reserves, future production volumes and cash flow.
FCX is undertaking major development projects, including the development
of the El Abra sulfide reserves and the massive underground ore bodies
at Grasberg. FCX is also advancing development activities at the Climax
primary molybdenum project.
In addition, studies are under way to evaluate the potential to more
than double the concentrator capacity at the large Cerro Verde mine, a
major mill project in the El Abra district, various mill projects to
process significant sulfide ore in North America and staged expansion
options at Tenke Fungurume. The advancement of these studies will
provide flexibility in initiating expansion projects as market
conditions warrant, enabling FCX to continue to maintain its position as
one of the largest copper producers in the world.
North America Copper Mines. FCX operates six open-pit copper
mines in North America (Morenci, Sierrita, Bagdad, Safford and Miami in
Arizona and Tyrone in New Mexico). By-product molybdenum is produced
primarily at Sierrita and Bagdad. All of the North America mining
operations are wholly owned, except for Morenci. FCX records its 85
percent joint venture interest in Morenci using the proportionate
consolidation method.
| Three Months | Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| North America Copper Mining Operations | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
Production | 263 | 272 | 527 | 561 | ||||||||||||
Sales, excluding purchased metal | 289 | 281 | 580 | 582 | ||||||||||||
Average realized price per pound | $ | 3.21 | $ | 2.18 | $ | 3.27 | $ | 1.88 | ||||||||
| Molybdenum (millions of recoverable pounds)a | ||||||||||||||||
Production | 5 | 7 | 11 | 13 | ||||||||||||
| Unit net cash costs per pound of copper: | ||||||||||||||||
Site production and delivery, excluding adjustments | $ | 1.46 | $ | 1.24 | $ | 1.39 | $ | 1.28 | ||||||||
By-product credits, primarily molybdenum | (0.38 | ) | (0.21 | ) | (0.32 | ) | (0.19 | ) | ||||||||
Treatment charges | 0.09 | 0.09 | 0.08 | 0.08 | ||||||||||||
Unit net cash costsb | $ | 1.17 | $ | 1.12 | $ | 1.15 | $ | 1.17 | ||||||||
| ||||||||||||||||
a.Represents by-product production.Sales of | ||||||||||||||||
b.For a reconciliation of unit net cash costs per pound | ||||||||||||||||
| ||||||||||||||||
Second-quarter 2010 consolidated copper sales in North America of 289
million pounds were higher than second-quarter 2009 sales of 281 million
pounds.
For the year 2010, FCX expects sales from North America copper mines to
approximate 1.1 billion pounds of copper, compared with 1.2 billion
pounds of copper for 2009. FCX is increasing mining and milling rates at
its Morenci mine and is restarting its Miami mine, which are expected to
result in higher production in future periods (see 'Operating and
Development Activities? below).
North America unit site production and delivery costs were higher in the
second quarter of 2010, compared with the second quarter of 2009,
primarily because of higher input costs and increased mining and milling
activities at certain mines. Second-quarter 2010 unit net cash costs
benefited from higher by-product credits primarily because of higher
molybdenum prices.
Based on current operating plans, assuming an average molybdenum price
of $14 per pound for the second half of 2010 and using current 2010
sales and costs estimates, FCX estimates that average unit net cash
costs, including molybdenum credits, for its North America copper mines
would approximate $1.24 per pound of copper for the year 2010. Unit net
cash costs for 2010 would change by approximately $0.02 per pound for
each $2 per pound change in the average price of molybdenum for the
second half of 2010.
Operating and Development Activities. At Morenci, FCX has
commenced a staged ramp up from the current mining rate of 450,000
metric tons of ore per day to 635,000 metric tons per day. In addition,
FCX restarted the Morenci mill in March 2010 to process available
sulfide material currently being mined. Mill throughput averaged 28,000
metric tons of ore per day during the second quarter of 2010 and is
expected to increase to approximately 50,000 metric tons per day by
2011. The increased mining and milling activities are expected to expose
additional ore and enable copper production to increase by approximately
125 million pounds annually beginning in 2011. Further increases to
Morenci′s mining rate are being evaluated.
FCX has initiated mining activities at the Miami mine in Arizona to
improve efficiencies of ongoing reclamation projects associated with
historical mining operations at the site. During an approximate
five-year mine life, FCX expects to ramp up production at Miami to
approximately 100 million pounds of copper per year by the second half
of 2011. FCX is investing $40 million in this project, which is
benefiting from the use of existing mining equipment.
FCX is advancing plans to construct a sulphur burner at Safford, which
will provide a more cost effective source of sulphuric acid used in
solution extraction/electrowinning operations and lower transportation
costs. This project is expected to be complete during 2011 at a capital
investment of approximately $150 million.
FCX is evaluating the restart of mining and milling activities at the
Chino mine in New Mexico, which were suspended in late 2008 in response
to global economic conditions. The preliminary economics of the project
appear attractive and would increase copper production by approximately
150 to 200 million pounds per year. At December 31, 2009, Chino′s
reserves, excluding metal in stockpiles, totaled 1.1 billion pounds of
copper (determined using a long-term average price of $1.60 per pound
for copper) and reserves would increase with higher prices.
Operating plans at the other North America sites are being assessed and
adjustments will be made based on market conditions.
South America Mining. FCX operates four copper mines in South
America ? Cerro Verde in Peru and Candelaria, Ojos del Salado and El
Abra in Chile. FCX owns a 53.56 percent interest in Cerro Verde, an
open-pit mine currently producing both electrowon copper cathodes and
copper concentrates. FCX owns 80 percent of the Candelaria and Ojos del
Salado mining complexes, which include the Candelaria open-pit and
underground mines and the Ojos del Salado underground mines. These mines
use common processing facilities to produce copper concentrates. FCX
owns a 51 percent interest in El Abra, an open-pit mine producing
electrowon copper cathodes. All operations in South America are
consolidated in FCX′s financial statements.
| Three Months | ||||||||||