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| | |
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 SeptemberJune 30, 20172018 |
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: 001-11307-01 |
Freeport-McMoRan 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) | |
| |
333 North Central Avenue | |
Phoenix, AZ | 85004-2189 |
(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.
þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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).
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|
| | | |
Large accelerated filer þ | | | Accelerated filer ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
| | Emerging growth company ¨ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes þ No
On OctoberJuly 31, 2017,2018, there were issued and outstanding 1,447,590,6681,449,002,815 shares of the registrant’s common stock, par value $0.10 per share.
FREEPORT-McMoRan INC.
TABLE OF CONTENTS
| |
Part I. | FINANCIAL INFORMATION |
| |
Item 1. | Financial Statements. |
FREEPORT-McMoRan INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
| | | September 30, 2017 | | December 31, 2016 | June 30, 2018 | | December 31, 2017 |
| (In millions) | (In millions) |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | $ | 4,957 |
| | $ | 4,245 |
| $ | 3,859 |
| | $ | 4,447 |
|
Trade accounts receivable | 1,024 |
| | 1,126 |
| 1,077 |
| | 1,246 |
|
Income and other tax receivables | 522 |
| | 879 |
| 225 |
| | 325 |
|
Inventories: | | | | | | |
Materials and supplies, net | 1,276 |
| | 1,306 |
| 1,404 |
| | 1,305 |
|
Mill and leach stockpiles | 1,393 |
| | 1,338 |
| 1,435 |
| | 1,422 |
|
Product | 1,188 |
| | 998 |
| 1,337 |
| | 1,166 |
|
Other current assets | 241 |
| | 199 |
| 381 |
| | 270 |
|
Assets held for sale | 549 |
| | 344 |
| 625 |
| | 508 |
|
Total current assets | 11,150 |
| | 10,435 |
| 10,343 |
| | 10,689 |
|
Property, plant, equipment and mine development costs, net | 22,914 |
| | 23,219 |
| 22,923 |
| | 22,934 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | 20 |
| | 74 |
| |
Long-term mill and leach stockpiles | 1,453 |
| | 1,633 |
| 1,371 |
| | 1,409 |
|
Other assets | 1,790 |
| | 1,956 |
| 2,391 |
| | 2,270 |
|
Total assets | $ | 37,327 |
| | $ | 37,317 |
| $ | 37,028 |
| | $ | 37,302 |
|
| | | | | | |
LIABILITIES AND EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable and accrued liabilities | $ | 2,098 |
| | $ | 2,393 |
| $ | 2,420 |
| | $ | 2,321 |
|
Current portion of debt | 2,215 |
| | 1,232 |
| |
Accrued income taxes | 464 |
| | 66 |
| 569 |
| | 565 |
|
Current portion of environmental and asset retirement obligations | 419 |
| | 369 |
| 380 |
| | 388 |
|
Dividends payable | | 73 |
| | — |
|
Current portion of debt | | 4 |
| | 1,414 |
|
Liabilities held for sale | 321 |
| | 205 |
| 353 |
| | 323 |
|
Total current liabilities | 5,517 |
| | 4,265 |
| 3,799 |
| | 5,011 |
|
Long-term debt, less current portion | 12,567 |
| | 14,795 |
| 11,123 |
| | 11,703 |
|
Deferred income taxes | 3,771 |
| | 3,768 |
| 3,702 |
| | 3,649 |
|
Environmental and asset retirement obligations, less current portion | 3,498 |
| | 3,487 |
| 3,631 |
| | 3,631 |
|
Other liabilities | 1,744 |
| | 1,745 |
| 1,931 |
| | 2,012 |
|
Total liabilities | 27,097 |
| | 28,060 |
| 24,186 |
| | 26,006 |
|
| | | | | | |
Equity: | | | | | | |
Stockholders’ equity: | | | | | | |
Common stock | 158 |
| | 157 |
| 158 |
| | 158 |
|
Capital in excess of par value | 26,743 |
| | 26,690 |
| 26,667 |
| | 26,751 |
|
Accumulated deficit | (15,763 | ) | | (16,540 | ) | (13,161 | ) | | (14,722 | ) |
Accumulated other comprehensive loss | (443 | ) | | (548 | ) | (464 | ) | | (487 | ) |
Common stock held in treasury | (3,722 | ) | | (3,708 | ) | (3,726 | ) | | (3,723 | ) |
Total stockholders’ equity | 6,973 |
| | 6,051 |
| 9,474 |
| | 7,977 |
|
Noncontrolling interests | 3,257 |
| | 3,206 |
| 3,368 |
| | 3,319 |
|
Total equity | 10,230 |
| | 9,257 |
| 12,842 |
| | 11,296 |
|
Total liabilities and equity | $ | 37,327 |
| | $ | 37,317 |
| $ | 37,028 |
| | $ | 37,302 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF OPERATIONSINCOME (Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | | 2018 | | 2017 |
| (In millions, except per share amounts) | (In millions, except per share amounts) |
Revenues | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
| $ | 5,168 |
| | $ | 3,711 |
| | $ | 10,036 |
| | $ | 7,052 |
|
Cost of sales: | | | | | | | | | | | | | | |
Production and delivery | 2,802 |
| | 2,529 |
| | 7,497 |
| | 7,984 |
| 2,915 |
| | 2,480 |
| | 5,723 |
| | 4,668 |
|
Depreciation, depletion and amortization | 418 |
| | 643 |
| | 1,257 |
| | 1,937 |
| 442 |
| | 450 |
| | 893 |
| | 839 |
|
Impairment of oil and gas properties | — |
| | 239 |
| | — |
| | 4,317 |
| |
Total cost of sales | 3,220 |
| | 3,411 |
| | 8,754 |
| | 14,238 |
| 3,357 |
| | 2,930 |
| | 6,616 |
| | 5,507 |
|
Selling, general and administrative expenses | 106 |
| | 110 |
| | 366 |
| | 408 |
| 109 |
| | 107 |
| | 240 |
| | 258 |
|
Mining exploration and research expenses | 27 |
| | 13 |
| | 61 |
| | 46 |
| 24 |
| | 19 |
| | 45 |
| | 33 |
|
Environmental obligations and shutdown costs (credits) | 73 |
| | (3 | ) | | 81 |
| | 18 |
| |
Environmental obligations and shutdown costs | | 59 |
| | (21 | ) | | 68 |
| | 4 |
|
Net gain on sales of assets | (33 | ) | | (13 | ) | | (66 | ) | | (762 | ) | (45 | ) | | (10 | ) | | (56 | ) | | (33 | ) |
Total costs and expenses | 3,393 |
| | 3,518 |
| | 9,196 |
| | 13,948 |
| 3,504 |
| | 3,025 |
| | 6,913 |
| | 5,769 |
|
Operating income (loss) | 917 |
| | 359 |
| | 2,166 |
| | (3,495 | ) | |
Operating income | | 1,664 |
| | 686 |
| | 3,123 |
| | 1,283 |
|
Interest expense, net | (304 | ) | | (187 | ) | | (633 | ) | | (574 | ) | (142 | ) | | (162 | ) | | (293 | ) | | (329 | ) |
Net gain on exchanges and early extinguishment of debt | 11 |
| | 15 |
| | 8 |
| | 51 |
| |
Net gain (loss) on early extinguishment of debt | | 9 |
| | (4 | ) | | 8 |
| | (3 | ) |
Other income (expense), net | 2 |
| | (10 | ) | | 36 |
| | 54 |
| 20 |
| | (7 | ) | | 49 |
| | — |
|
Income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings | 626 |
| | 177 |
| | 1,577 |
| | (3,964 | ) | |
(Provision for) benefit from income taxes | (387 | ) | | 114 |
| | (747 | ) | | (79 | ) | |
Equity in affiliated companies’ net earnings | 3 |
| | 1 |
| | 6 |
| | 9 |
| |
Net income (loss) from continuing operations | 242 |
| | 292 |
| | 836 |
| | (4,034 | ) | |
Net income (loss) from discontinued operations | 3 |
| | (6 | ) | | 50 |
| | (191 | ) | |
Net income (loss) | 245 |
| | 286 |
| | 886 |
| | (4,225 | ) | |
Net loss (income) attributable to noncontrolling interests: | | | | | | | | |
Income from continuing operations before income taxes and equity in affiliated companies’ net earnings (losses) | | 1,551 |
| | 513 |
| | 2,887 |
| | 951 |
|
Provision for income taxes | | (515 | ) | | (186 | ) | | (1,021 | ) | | (360 | ) |
Equity in affiliated companies’ net earnings (losses) | | 3 |
| | (1 | ) | | 1 |
| | 3 |
|
Net income from continuing operations | | 1,039 |
| | 326 |
| | 1,867 |
| | 594 |
|
Net (loss) income from discontinued operations | | (4 | ) | | 9 |
| | (15 | ) | | 47 |
|
Net income | | 1,035 |
| | 335 |
| | 1,852 |
| | 641 |
|
Net income attributable to noncontrolling interests: | | | | | | | | |
Continuing operations | 35 |
| | (37 | ) | | (106 | ) | | (146 | ) | (166 | ) | | (66 | ) | | (291 | ) | | (141 | ) |
Discontinued operations | — |
| | (22 | ) | | (4 | ) | | (44 | ) | — |
| | (1 | ) | | — |
| | (4 | ) |
Preferred dividends attributable to redeemable noncontrolling interest | — |
| | (10 | ) | | — |
| | (31 | ) | |
Net income (loss) attributable to common stockholders | $ | 280 |
| | $ | 217 |
| | $ | 776 |
| | $ | (4,446 | ) | |
Net income attributable to common stockholders | | $ | 869 |
| | $ | 268 |
| | $ | 1,561 |
| | $ | 496 |
|
| | | | | | | | | | | | | | |
Basic and diluted net income (loss) per share attributable to common stockholders: | | | | | | | | |
Basic net income (loss) per share attributable to common stockholders: | | | | | | | | |
Continuing operations | | $ | 0.60 |
| | $ | 0.18 |
| | $ | 1.08 |
| | $ | 0.31 |
|
Discontinued operations | | — |
| | — |
| | (0.01 | ) | | 0.03 |
|
| | $ | 0.60 |
| | $ | 0.18 |
| | $ | 1.07 |
| | $ | 0.34 |
|
| | | | | | | | |
Diluted net income (loss) per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | $ | 0.59 |
| | $ | 0.18 |
| | $ | 1.08 |
| | $ | 0.31 |
|
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | — |
| | — |
| | (0.01 | ) | | 0.03 |
|
| $ | 0.19 |
| | $ | 0.16 |
| | $ | 0.53 |
| | $ | (3.45 | ) | $ | 0.59 |
| | $ | 0.18 |
| | $ | 1.07 |
| | $ | 0.34 |
|
| | | | | | | | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | | | | | | | |
Basic | 1,448 |
| | 1,346 |
| | 1,447 |
| | 1,289 |
| 1,449 |
| | 1,447 |
| | 1,449 |
| | 1,447 |
|
| | | | | | | | |
Diluted | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| 1,458 |
| | 1,453 |
| | 1,458 |
| | 1,453 |
|
| | | | | | | | | | | | | | |
Dividends declared per share of common stock | | $ | 0.05 |
| | $ | — |
| | $ | 0.10 |
| | $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In millions) |
Net income (loss) | | $ | 245 |
| | $ | 286 |
| | $ | 886 |
| | $ | (4,225 | ) |
| | | | | | | | |
Other comprehensive income, net of taxes: | | | | | | | | |
Unrealized gains on securities | | — |
| | 2 |
| | 2 |
| | 3 |
|
Defined benefit plans: | | | | | | | | |
Actuarial gains arising during the period, net of taxes of $48 million for the nine months ended September 30, 2017 | | — |
| | — |
| | 69 |
| | — |
|
Amortization or curtailment of unrecognized amounts included in net periodic benefit costs | | 12 |
| | 11 |
| | 42 |
| | 34 |
|
Foreign exchange gains (losses) | | 1 |
| | (1 | ) | | — |
| | (11 | ) |
Other comprehensive income | | 13 |
| | 12 |
| | 113 |
| | 26 |
|
| | | | | | | | |
Total comprehensive income (loss) | | 258 |
| | 298 |
| | 999 |
| | (4,199 | ) |
Total comprehensive loss (income) attributable to noncontrolling interests | | 35 |
| | (59 | ) | | (118 | ) | | (189 | ) |
Preferred dividends attributable to redeemable noncontrolling interest | | — |
| | (10 | ) | | — |
| | (31 | ) |
Total comprehensive income (loss) attributable to common stockholders | | $ | 293 |
| | $ | 229 |
| | $ | 881 |
| | $ | (4,419 | ) |
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2018 | | 2017 | | 2018 | | 2017 |
| (In millions) |
Net income | $ | 1,035 |
| | $ | 335 |
| | $ | 1,852 |
| | $ | 641 |
|
| | | | | | | |
Other comprehensive income, net of taxes: | | | | | | | |
Unrealized gains on securities | — |
| | 1 |
| | — |
| | 2 |
|
Defined benefit plans: | | | | | | | |
Actuarial gains arising during the period, net of taxes of $48 million for the three and six months ended June 30, 2017 | — |
| | 69 |
| | — |
| | 69 |
|
Amortization of unrecognized amounts included in net periodic benefit costs | 11 |
| | 19 |
| | 23 |
| | 30 |
|
Foreign exchange losses | — |
| | — |
| | (1 | ) | | (1 | ) |
Other comprehensive income | 11 |
| | 89 |
| | 22 |
| | 100 |
|
| | | | | | | |
Total comprehensive income | 1,046 |
| | 424 |
| | 1,874 |
| | 741 |
|
Total comprehensive income attributable to noncontrolling interests | (166 | ) | | (75 | ) | | (290 | ) | | (153 | ) |
Total comprehensive income attributable to common stockholders | $ | 880 |
| | $ | 349 |
| | $ | 1,584 |
| | $ | 588 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| | | Nine Months Ended | | Six Months Ended | |
| September 30, | | June 30, | |
| 2017 | | 2016 | | 2018 | | 2017 | |
| (In millions) | | (In millions) | |
Cash flow from operating activities: | | | | | | | | |
Net income (loss) | $ | 886 |
| | $ | (4,225 | ) | | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
Net income | | $ | 1,852 |
| | $ | 641 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, depletion and amortization | 1,257 |
| | 2,017 |
| | 893 |
| | 839 |
| |
Net charges for Cerro Verde royalty dispute | 359 |
| | — |
| | |
Net gain on sales of assets | | (56 | ) | | (33 | ) | |
Stock-based compensation | | 60 |
| | 44 |
| |
Payments for Cerro Verde royalty dispute | (32 | ) | | (20 | ) | | (21 | ) | | (21 | ) | |
Impairment of oil and gas properties | — |
| | 4,317 |
| | |
Oil and gas non-cash drillship settlements/idle rig costs and other adjustments | (33 | ) | | 705 |
| | |
Net gain on sales of assets | (66 | ) | | (762 | ) | | |
Net charges for environmental and asset retirement obligations, including accretion | 196 |
| | 149 |
| | 152 |
| | 87 |
| |
Payments for environmental and asset retirement obligations | (85 | ) | | (190 | ) | | (110 | ) | | (59 | ) | |
Net charges for defined pension and postretirement plans | 95 |
| | 78 |
| | 38 |
| | 70 |
| |
Pension plan contributions | (152 | ) | | (44 | ) | | (44 | ) | | (56 | ) | |
Net gain on exchanges and early extinguishment of debt | (8 | ) | | (51 | ) | | |
Net (gain) loss on early extinguishment of debt | | (8 | ) | | 3 |
| |
Deferred income taxes | 77 |
| | (22 | ) | | 61 |
| | 55 |
| |
(Gain) loss on disposal of discontinued operations | (41 | ) | | 182 |
| | |
Decrease (increase) in long-term mill and leach stockpiles | 181 |
| | (84 | ) | | |
Loss (gain) on disposal of discontinued operations | | 15 |
| | (38 | ) | |
Decrease in long-term mill and leach stockpiles | | 38 |
| | 80 |
| |
Non-cash drillship settlements/idle rig costs and other oil and gas adjustments | | — |
| | (33 | ) | |
Oil and gas contract settlement payments | (70 | ) | | — |
| | — |
| | (70 | ) | |
Other, net | 59 |
| | 61 |
| | 21 |
| | (23 | ) | |
Changes in working capital and other tax payments, excluding amounts from dispositions: | | | | | |
Changes in working capital and other tax payments: | | | | | |
Accounts receivable | 420 |
| | 257 |
| | 309 |
| | 589 |
| |
Inventories | (314 | ) | | 251 |
| | (468 | ) | | (101 | ) | |
Other current assets | (17 | ) | | (120 | ) | | (20 | ) | | (2 | ) | |
Accounts payable and accrued liabilities | (93 | ) | | (80 | ) | | 114 |
| | (267 | ) | |
Accrued income taxes and changes in other tax payments | 399 |
| | 175 |
| | |
Accrued income taxes and timing of other tax payments | | (148 | ) | | 124 |
| |
Net cash provided by operating activities | 3,018 |
| | 2,594 |
| | 2,678 |
| | 1,829 |
| |
| | | | | | | | |
Cash flow from investing activities: | | | | | | | | |
Capital expenditures: | | | | | | | | |
North America copper mines | (106 | ) | | (87 | ) | | (232 | ) | | (67 | ) | |
South America | (65 | ) | | (332 | ) | | (138 | ) | | (45 | ) | |
Indonesia | (663 | ) | | (706 | ) | | (449 | ) | | (457 | ) | |
Molybdenum mines | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | |
Other, including oil and gas operations | (182 | ) | | (1,182 | ) | | |
Net proceeds from the sale of additional interest in Morenci | — |
| | 996 |
| | |
Net proceeds from sales of other assets | 68 |
| | 410 |
| | |
Other, net | (22 | ) | | 9 |
| | |
Other | | (63 | ) | | (135 | ) | |
Intangible water rights and other, net | | (86 | ) | | 3 |
| |
Net cash used in investing activities | (974 | ) | | (894 | ) | | (970 | ) | | (703 | ) | |
| | | | | | | | |
Cash flow from financing activities: | | | | | | | | |
Proceeds from debt | 795 |
| | 3,463 |
| | 352 |
| | 606 |
| |
Repayments of debt | (1,991 | ) | | (4,539 | ) | | (2,297 | ) | | (1,250 | ) | |
Net proceeds from sale of common stock | — |
| | 442 |
| | |
Cash dividends paid: | | | | | | | | |
Common stock | (2 | ) | | (5 | ) | | (73 | ) | | (2 | ) | |
Noncontrolling interests | (67 | ) | | (87 | ) | | (241 | ) | | (39 | ) | |
Stock-based awards net payments | (10 | ) | | (5 | ) | | |
Stock-based awards net proceeds (payments) | | 5 |
| | (8 | ) | |
Debt financing costs and other, net | (12 | ) | | (17 | ) | | (23 | ) | | (11 | ) | |
Net cash used in financing activities | (1,287 | ) | | (748 | ) | | (2,277 | ) | | (704 | ) | |
| | | | | | | | |
Net increase in cash and cash equivalents | 757 |
| | 952 |
| | |
Increase in cash and cash equivalents in assets held for sale | (45 | ) | | (43 | ) | | |
Cash and cash equivalents at beginning of year | 4,245 |
| | 177 |
| | |
Cash and cash equivalents at end of period | $ | 4,957 |
| | $ | 1,086 |
| | |
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents | | (569 | ) | | 422 |
| |
Decrease in cash and cash equivalents in assets held for sale | | 44 |
| | 7 |
| |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | | 4,631 |
| | 4,403 |
| |
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | | $ | 4,106 |
| | $ | 4,832 |
| |
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENT OF EQUITY (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at December 31, 2016 | 1,574 |
| | $ | 157 |
| | $ | 26,690 |
| | $ | (16,540 | ) | | $ | (548 | ) | | 129 |
| | $ | (3,708 | ) | | $ | 6,051 |
| | $ | 3,206 |
| | $ | 9,257 |
|
Exercised and issued stock-based awards | 4 |
| | 1 |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
|
Stock-based compensation | — |
| | — |
| | 49 |
| | — |
| | — |
| | — |
| | — |
| | 49 |
| | — |
| | 49 |
|
Tender of shares for stock-based awards | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | (14 | ) | | (14 | ) | | — |
| | (14 | ) |
Dividends | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | (67 | ) | | (66 | ) |
Net income attributable to common stockholders | — |
| | — |
| | — |
| | 776 |
| | — |
| | — |
| | — |
| | 776 |
| | — |
| | 776 |
|
Net income attributable to noncontrolling interests, including discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 110 |
| | 110 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 105 |
| | — |
| | — |
| | 105 |
| | 8 |
| | 113 |
|
Balance at September 30, 2017 | 1,578 |
| | $ | 158 |
| | $ | 26,743 |
| | $ | (15,763 | ) | | $ | (443 | ) | | 130 |
| | $ | (3,722 | ) | | $ | 6,973 |
| | $ | 3,257 |
| | $ | 10,230 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at December 31, 2017 | 1,578 |
| | $ | 158 |
| | $ | 26,751 |
| | $ | (14,722 | ) | | $ | (487 | ) | | 130 |
| | $ | (3,723 | ) | | $ | 7,977 |
| | $ | 3,319 |
| | $ | 11,296 |
|
Exercised and vested stock-based awards | 1 |
| | — |
| | 8 |
| | — |
| | — |
| | — |
| | — |
| | 8 |
| | — |
| | 8 |
|
Stock-based compensation, including the tender of shares | — |
| | — |
| | 53 |
| | — |
| | — |
| | — |
| | (3 | ) | | 50 |
| | — |
| | 50 |
|
Dividends | — |
| | — |
| | (145 | ) | | — |
| | — |
| | — |
| | — |
| | (145 | ) | | (241 | ) | | (386 | ) |
Net income attributable to common stockholders | — |
| | — |
| | — |
| | 1,561 |
| | — |
| | — |
| | — |
| | 1,561 |
| | — |
| | 1,561 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 291 |
| | 291 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 23 |
| | — |
| | — |
| | 23 |
| | (1 | ) | | 22 |
|
Balance at June 30, 2018 | 1,579 |
| | $ | 158 |
| | $ | 26,667 |
| | $ | (13,161 | ) | | $ | (464 | ) | | 130 |
| | $ | (3,726 | ) | | $ | 9,474 |
| | $ | 3,368 |
| | $ | 12,842 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. GENERAL INFORMATION
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 Inc.’s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2016.2017. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. With the exception of the accounting for discontinued operations, assets held for sale, and the remeasurement of a pension plan and charges related to a continuing royalty dispute with respect to historical periods at FCX’s mine in Peru,second-quarter 2017, all such adjustments are, in the opinion of management, of a normal recurring nature. As a result of FCX’s sale of its interest in TF Holdings Limited (TFHL), FCX has reported TFHL as discontinued operations for all periods presented in the unaudited consolidated financial statements (refer to Note 2). Operating results for the nine-monthsix-month period ended SeptemberJune 30, 2017,2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
Indonesia Mining. As a result of the first-quarter 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT Freeport Indonesia (PT-FI) took actions to adjust its cost structure, reduce its workforce and slow investments in its underground development projects and new smelter. These actions included workforce reductions through furlough and voluntary retirement programs. Following the furlough and voluntary retirement programs, a significant number of employees and contractors elected to participate in an illegal strike action beginning in May 2017, and were subsequently deemed to have voluntarily resigned under existing laws and regulations. As a result, PT-FI recorded charges to operating income for employee severance and related costs totaling $9 million for third-quarter 2017 and $113 million for the first nine months of 2017.
Additionally, because of the significant reduction in workforce, PT-FI was required to remeasure its pension assets and pension benefit obligation as of June 30, 2017. The discount rate and rate of compensation increase used for the June 30, 2017, remeasurement were 7.50 percent and 4.00 percent, respectively, compared to the December 31, 2016, discount rate of 8.25 percent and the rate of compensation increase of 8.00 percent. The expected long-term rate of return on the plan assets was unchanged (7.75 percent). The remeasurement and curtailment resulted in the projected benefit obligation declining by $145 million and plan assets declining by $21 million. In addition, PT-FI recognized a curtailment loss of $4 million in second-quarter 2017 and for the first nine months of 2017. As of September 30, 2017, the funded status of PT-FI’s pension plan was a net asset of $36 million (included in other assets in the consolidated balance sheet), compared with a net liability of $90 million (included in other liabilities in the consolidated balance sheet) as of December 31, 2016.
Oil and Gas Properties. During 2016, FCX Oil & Gas LLC (FM O&G, a wholly owned subsidiary of FCX) determined the carrying values of certain of its unevaluated properties were impaired. During the first nine months of 2016, FM O&G transferred $3.2 billion of costs (including $3.1 billion in first-quarter 2016) associated with unevaluated properties to the full cost pool, mostly reflecting impairment of the carrying values of unevaluated properties. The transfer of unevaluated properties to the full cost pool, along with the impact of the reduction in twelve-month historical prices and reserve revisions in 2016 caused net capitalized costs to exceed the related ceiling test limitation under full cost accounting rules. As a result, FM O&G recognized impairment charges of $239 million in third-quarter 2016 and $4.3 billion for the first nine months of 2016. Refer to Note 1 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.
NOTE 2. DISPOSITIONS
TF Holdings Limited - Discontinued Operations.FCX hada70 percent interest in TFHL, which owns 80 percent of Tenke Fungurume Mining S.A. (TFM or Tenke) located in the Democratic Republic of Congo (DRC). On November 16, 2016, FCX completed the sale of its interest in TFHL to China Molybdenum Co., Ltd. (CMOC) for $2.65 billion in cash (before closing adjustments) and contingent consideration of up to $120 million in cash, consisting of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during calendar years 2018 and 2019. The contingent consideration is considered a derivative, and at September 30, 2017, the related fair value of $58 million was recorded in other assets on the consolidated balance sheets. During the first nine months of 2017, the fair value of the contingent consideration derivative increased by $45 million ($3 million in third-quarter 2017), primarily resulting from higher cobalt prices, and was recorded in net income (loss) from discontinued operations.
In accordance with accounting guidance, FCX has reported the results of operations of TFHL as discontinued operations in the consolidated statements of operations. The consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.
Net income (loss) from discontinued operations in the consolidated statements of operations consists of the following (in millions):
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | |
| September 30, | | September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
Revenues | $ | — |
| | $ | 261 |
| a | $ | 13 |
| a | $ | 819 |
| a |
Costs and expenses: | | | | | | | | |
Production and delivery costs | — |
| | 248 |
| | — |
| | 730 |
| |
Depreciation, depletion and amortization | — |
|
| — |
| | — |
| | 80 |
| |
Interest expense allocated from parent | — |
| | 12 |
| b | — |
| | 33 |
| b |
Other costs and expenses, net | — |
| | 4 |
| | — |
| | 10 |
| |
Income (loss) before income taxes and net gain (loss) on disposal | — |
| | (3 | ) | | 13 |
| | (34 | ) | |
Net gain (loss) on disposal | 3 |
| c | (5 | ) | d | 41 |
| c | (182 | ) | d |
Net income (loss) before income taxes | 3 |
| | (8 | ) | | 54 |
| | (216 | ) | |
Benefit from (provision for) income taxes | — |
| | 2 |
| | (4 | ) | | 25 |
| |
Net income (loss) from discontinued operations | $ | 3 |
| | $ | (6 | ) | | $ | 50 |
| | $ | (191 | ) | |
| |
a. | In accordance with accounting guidance, amounts are net of (eliminations) recognition of intercompany sales totaling $(53) million in third-quarter 2016, $13 million for the first nine months of 2017 and $(125) million for the first nine months of 2016. |
| |
b. | In accordance with accounting guidance, interest associated with FCX’s term loan that was required to be repaid as a result of the sale of TFHL has been allocated to discontinued operations. |
| |
c. | Includes a gain of $3 million in third-quarter 2017 and $45 million for the first nine months of 2017 associated with the change in the fair value of contingent consideration. |
| |
d. | In accordance with accounting guidance, an estimated loss on disposal was recorded and adjusted through closing of the transaction in November 2016. |
Cash flows from discontinued operations included in the consolidated statements of cash flows for the nine months ended September 30, 2016, follow (in millions): |
| | | | |
Net cash provided by operating activities | | $ | 213 |
|
Net cash used in investing activities | | (71 | ) |
Net cash used in financing activities | | (103 | ) |
Increase in cash and cash equivalents in assets held for sale | | $ | 39 |
|
Oil and Gas Operations.On July 31, 2017, FM O&G sold certain property interests in the Gulf of Mexico Shelf for cash consideration of $62 million, before closing adjustments, with an effective date of April 1, 2017. On March 17, 2017, FM O&G sold property interests in the Madden area in central Wyoming for cash consideration of $17.5 million, before closing adjustments. Under the full cost accounting rules, the sales resulted in the recognition of gains of $33 million in third-quarter 2017 and $49 million for the first nine months of 2017 because the reserves associated with these properties were significant to the full cost pool.
On June 17, 2016, FM O&G sold certain oil and gas royalty interests for cash consideration of $102 million, before closing adjustments. In addition, on July 25, 2016, FM O&G sold its Haynesville shale assets for cash consideration of $87 million, before closing adjustments. Under the full cost accounting rules, the proceeds from these transactions were recorded as a reduction to capitalized oil and gas properties, with no gain or loss recognition for the first nine months of 2016 because the reserves were not significant to the full cost pool.
Morenci. On May 31, 2016, FCX sold a 13 percent undivided interest in its Morenci unincorporated joint venture to SMM Morenci, Inc. for $1.0 billion in cash. FCX recorded a $576 million gain for the first nine months of 2016 and used losses to offset cash taxes on the transaction. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan and revolving credit facility. As a result of the transaction, the unincorporated joint venture is owned 72 percent by FCX, 15 percent by Sumitomo Metal Mining Arizona, Inc. and 13 percent by SMM Morenci, Inc.
Timok. On May 2, 2016, Freeport Minerals Corporation (FMC), a wholly owned subsidiary of FCX, sold an interest in the Timok exploration project in Serbia to Global Reservoir Minerals Inc. (now known as Nevsun Resources, Ltd.) for consideration of $135 million in cash and contingent consideration of up to $107 million payable to FCX in stages upon achievement of defined development milestones. As a result of this transaction, FCX recorded a gain of $133 million for the first nine months of 2016, and no amounts were recorded for contingent consideration under the loss recovery approach.2018.
Assets Held for Sale.Freeport Cobalt includes the large-scale cobalt refinery in Kokkola, Finland, and the related sales and marketing business, in which FCX owns an effective 56 percent interest.is continuing to assess opportunities for its Kisanfu is a copper and cobalt exploration project, located near Tenke, in which FCX holds a 100 percent interest. As a resultthe Democratic of Republic of Congo, including development of the project on its own or a sale of TFHL, FCX expects to sell its interestall or a minority stake in Freeport Cobalt and Kisanfu, and the project. Because management no longer believes that it is probable an outright sale will occur in the near term, the related assets and liabilities of Freeport Cobalt and Kisanfu are no longer classified as held for sale insale. The primary revisions to the consolidated balance sheets. During the first nine monthssheet as of December 31, 2017, were a favorable adjustment of $13$90 million was recorded in increase to property, plant, equipment and mine development costs, net, gain on sales of assets in the consolidated statements of operations associated with the estimated fair value less costs to sell for the Kisanfu exploration project. The adjustment was limited to thean offsetting reduction in the carrying value when the Kisanfu exploration project was initially classified ascurrent assets held for sale, and a $27 million increase to deferred income taxes, with an offsetting reduction in November 2016.current liabilities held for sale.
NOTE 3.2. EARNINGS PER SHARE
FCX calculates its basic net income (loss) per share of common stock under the two-class method and calculates its diluted net income (loss) per share of common stock using the more dilutive of the two-class method or the treasury-stock method. Basic net income (loss) per share of common stock was computed by dividing net income (loss) attributable to common stockholders (after deducting accumulated dividends and undistributed earnings to participating securities) by the weighted-average shares of common stock outstanding during the period. Diluted net income (loss) per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock, unless their effect would be anti-dilutive.
Reconciliations of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net income (loss) per share follow (in millions, except per share amounts):
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | |
| September 30, | | September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
Net income (loss) from continuing operations | $ | 242 |
| | $ | 292 |
| | $ | 836 |
| | $ | (4,034 | ) | |
Net loss (income) from continuing operations attributable to noncontrolling interests | 35 |
| | (37 | ) | | (106 | ) | | (146 | ) | |
Preferred dividends on redeemable noncontrolling interest | — |
| | (10 | ) | | — |
| | (31 | ) | |
Undistributed earnings allocated to participating securities | (3 | ) | | (3 | ) | | (3 | ) | | (3 | ) | |
Net income (loss) from continuing operations attributable to common stockholders | $ | 274 |
| | $ | 242 |
| | $ | 727 |
| | $ | (4,214 | ) | |
| | | | | | | | |
Net income (loss) from discontinued operations | $ | 3 |
| | $ | (6 | ) | | $ | 50 |
| | $ | (191 | ) | |
Net income from discontinued operations attributable to noncontrolling interests | — |
| | (22 | ) | | (4 | ) | | (44 | ) | |
Net income (loss) from discontinued operations attributable to common stockholders | $ | 3 |
| | $ | (28 | ) | | $ | 46 |
| | $ | (235 | ) | |
| | | | | | | | |
| | | | | | | | |
Net income (loss) attributable to common stockholders | $ | 277 |
| | $ | 214 |
| | $ | 773 |
| | $ | (4,449 | ) | |
| | | | | | | | |
| | | | | | | | |
Basic weighted-average shares of common stock outstanding | 1,448 |
| | 1,346 |
| | 1,447 |
| | 1,289 |
| |
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units | 6 |
| | 5 |
| | 6 |
| | — |
| a |
Diluted weighted-average shares of common stock outstanding | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| |
| | | | | | | | |
Basic and diluted net income (loss) per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | |
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | |
| $ | 0.19 |
| | $ | 0.16 |
| | $ | 0.53 |
| | $ | (3.45 | ) | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | |
| June 30, | | June 30, | |
| 2018 | | 2017 | | 2018 | | 2017 | |
Net income from continuing operations | $ | 1,039 |
| | $ | 326 |
| | $ | 1,867 |
| | $ | 594 |
| |
Net income from continuing operations attributable to noncontrolling interests | (166 | ) | | (66 | ) | | (291 | ) | | (141 | ) | |
Undistributed earnings allocated to participating securities | (3 | ) | | (3 | ) | | (4 | ) | | (3 | ) | |
Net income from continuing operations attributable to common stockholders | 870 |
| | 257 |
| | 1,572 |
| | 450 |
| |
| | | | | | | | |
Net (loss) income from discontinued operations | (4 | ) | | 9 |
| | (15 | ) | | 47 |
| |
Net income from discontinued operations attributable to noncontrolling interests | — |
| | (1 | ) | | — |
| | (4 | ) | |
Net (loss) income from discontinued operations attributable to common stockholders | (4 | ) | | 8 |
| | (15 | ) | | 43 |
| |
| | | | | | | | |
| | | | | | | | |
Net income attributable to common stockholders | $ | 866 |
| | $ | 265 |
| | $ | 1,557 |
| | $ | 493 |
| |
| | | | | | | | |
Basic weighted-average shares of common stock outstanding | 1,449 |
| | 1,447 |
| | 1,449 |
| | 1,447 |
| |
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units | 9 |
| a | 6 |
| | 9 |
| a | 6 |
| |
Diluted weighted-average shares of common stock outstanding | 1,458 |
| | 1,453 |
| | 1,458 |
| | 1,453 |
| |
| | | | | | | | |
Basic net income (loss) per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | 0.60 |
| | $ | 0.18 |
| | $ | 1.08 |
| | $ | 0.31 |
| |
Discontinued operations | — |
| | — |
| | (0.01 | ) | | 0.03 |
| |
| $ | 0.60 |
| | $ | 0.18 |
| | $ | 1.07 |
| | $ | 0.34 |
| |
Diluted net income (loss) per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | 0.59 |
| | $ | 0.18 |
| | $ | 1.08 |
| | $ | 0.31 |
| |
Discontinued operations | — |
| | — |
| | (0.01 | ) | | 0.03 |
| |
| $ | 0.59 |
| | $ | 0.18 |
| | $ | 1.07 |
| | $ | 0.34 |
| |
| |
a. | Excludes 12approximately 2 million shares of common stock for second-quarter 2018 and 3 million shares of common stock for the first ninesix months of 20162018 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock and restricted stock units that were anti-dilutive. |
Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net income (loss) per share of common stock. Stock options for 3835 million shares of common stock were excluded for third-quarter 2017, 46second-quarter 2018, 44 million for third-quarter 2016, 42second-quarter 2017, 34 million for the first ninesix months of 20172018 and 4644 million for the first ninesix months of 2016.2017.
NOTE 4.3. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):
| | | September 30, 2017 | | December 31, 2016 | | June 30, 2018 | | December 31, 2017 | |
Current inventories: | | | | | | | | |
Total materials and supplies, neta | $ | 1,276 |
| | $ | 1,306 |
| | $ | 1,404 |
| | $ | 1,305 |
| |
| | | | | | | | |
Mill stockpiles | $ | 336 |
| | $ | 259 |
| | $ | 293 |
| | $ | 360 |
| |
Leach stockpiles | 1,057 |
| | 1,079 |
| | 1,142 |
| | 1,062 |
| |
Total current mill and leach stockpiles | $ | 1,393 |
| | $ | 1,338 |
| | $ | 1,435 |
| | $ | 1,422 |
| |
| | | | | | | | |
Raw materials (primarily concentrate) | $ | 285 |
| | $ | 255 |
| | $ | 435 |
| | $ | 265 |
| |
Work-in-process | 154 |
| | 114 |
| | 179 |
| | 154 |
| |
Finished goods | 749 |
| | 629 |
| | 723 |
| | 747 |
| |
Total product inventories | $ | 1,188 |
| | $ | 998 |
| | $ | 1,337 |
| | $ | 1,166 |
| |
| | | | | | | | |
Long-term inventories: | | | | | | | | |
Mill stockpiles | $ | 346 |
| | $ | 487 |
| | $ | 288 |
| | $ | 300 |
| |
Leach stockpiles | 1,107 |
| | 1,146 |
| | 1,083 |
| | 1,109 |
| |
Total long-term mill and leach stockpilesb | $ | 1,453 |
| | $ | 1,633 |
| | |
Total long-term mill and leach stockpiles | | $ | 1,371 |
| | $ | 1,409 |
| |
| |
a. | Materials and supplies inventory was net of obsolescence reserves totaling $31$25 million at SeptemberJune 30, 2017,2018, and $29 million at December 31, 2016. |
| |
b. | Estimated metals in stockpiles not expected to be recovered within the next 12 months.2017. |
NOTE 5.4. INCOME TAXES
Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate. FCX’s consolidated effective income tax rate was 4735 percent for the first ninesix months of 20172018 and (2)38 percent for the first ninesix months of 2016.2017. Geographic sources of FCX’s (provision for) benefit from income taxes follow (in millions):
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | |
| September 30, | | September 30, | | June 30, | | June 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | | 2018 | | 2017 | | 2018 | | 2017 | |
U.S. operationsa | $ | 2 |
| | $ | 331 |
| | $ | 24 |
| | $ | 293 |
| | |
U.S. operations | | $ | 5 |
| a | $ | 29 |
| b | $ | 8 |
| a | $ | 22 |
| b |
International operations | (389 | ) | b | (217 | ) | | (771 | ) | b | (372 | ) | | (520 | ) | | (215 | ) | | (1,029 | ) | | (382 | ) | |
Total | $ | (387 | ) | | $ | 114 |
| | $ | (747 | ) | | $ | (79 | ) | | $ | (515 | ) | | $ | (186 | ) | | $ | (1,021 | ) | | $ | (360 | ) | |
| |
a. | Includes neta tax (charges) creditscredit of $(10)$5 million for third-quarter 2017in second-quarter 2018 and $21 million for the first ninesix months of 20172018 associated with alternative minimumthe settlement of a state income tax credit carryforwards. The third quarter and first nine months of 2016 include net tax credits of $332 million and $290 million, respectively, associated with alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims.examination. |
| |
b. | Includes net chargestax credits of $2$32 million in second-quarter 2017 and $31 million for the first six months of 2017 associated with the Cerro Verde mining royalties dispute, consistinganticipated recovery of alternative minimum tax charges of $127 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013.credit carryforwards. |
The December 2017 Tax Cuts and Jobs Act (the Act) included significant modifications to then-existing U.S. tax laws and created many new complex tax provisions. As a resultof December 31, 2017, FCX recorded provisional impacts of the unfavorable Peruvian Supreme Court ruling ontax effects related to specific provisions and continues to evaluate other provisions of the Cerro Verde royalty dispute,Act. During the first six months of 2018, no adjustments were made to the provisional amounts recorded at December 31, 2017, as FCX recorded pre-tax chargeshas not fully completed its analysis of $357 millionthe Act, and the provisional amounts continue to incomerepresent FCX’s best estimates. FCX’s current analysis of the Act indicates that there may be adjustments to tax receivables associated with minimum tax credit refunds resulting from continuing operationsan ongoing review of tax positions taken in prior years and $2 millionimpacts from the Act’s Global Intangible Low-Taxed Income provisions resulting in use of net operating loss (NOL) carryforwards against income that would not generate a net tax expense forliability absent the first nine monthsavailability of 2017. FCX’s consolidated effective income tax rate was 39 percent for the first nine months of 2017 excluding these charges.
As a result of the impairmentNOLs. FCX continues to U.S. oil and gas properties, FCX recorded tax charges of $1.6 billion for the first nine months of 2016 to establishcarry a valuation allowance primarily against all U.S. federal and state deferred tax assets thatNOLs. During the remainder of 2018, FCX will not generate a future benefit. FCX’s consolidated effective income tax rate was 32 percent forcontinue to refine its calculations, including quantifying potential impacts discussed above, as it completes its analysis of the first nine months of 2016 excluding these tax charges.Act.
NOTE 6.5. DEBT AND EQUITY
The components of debt follow (in millions):
| | | | September 30, 2017 | | December 31, 2016 | | June 30, 2018 | | December 31, 2017 |
Senior notes and debentures: | | | | | | | | |
Issued by FCX | | $ | 12,811 |
| | $ | 13,745 |
| | $ | 9,594 |
| | $ | 11,429 |
|
Issued by FMC | | 358 |
| | 359 |
| |
Issued by Freeport Minerals Corporation (FMC) | | | 358 |
| | 358 |
|
Issued by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC) | | 122 |
| | 267 |
| | — |
| | 54 |
|
Cerro Verde credit facility | | 1,486 |
| | 1,390 |
| | 1,171 |
| | 1,269 |
|
Cerro Verde shareholder loans | | — |
| | 261 |
| |
Other | | 5 |
| | 5 |
| | 4 |
| | 7 |
|
Total debta | | 14,782 |
| | 16,027 |
| | 11,127 |
| | 13,117 |
|
Less current portion of debt | | (2,215 | ) | | (1,232 | ) | | (4 | ) | | (1,414 | ) |
Long-term debt | | $ | 12,567 |
| | $ | 14,795 |
| | $ | 11,123 |
| | $ | 11,703 |
|
| |
a. | Includes additions for unamortized fair value adjustments totaling $131$63 million at SeptemberJune 30, 20172018 ($17997 million at December 31, 2016)2017), and is net of reductions for unamortized net discounts and unamortized debt issuance costs totaling $92$76 million at SeptemberJune 30, 20172018 ($10085 million at December 31, 2016)2017). |
Revolving Credit Facility. At SeptemberJune 30, 2017,2018, there were no borrowings outstanding and $3613 million in letters of credit issued under FCX’s revolving credit facility, resulting in availability of approximately $3.5 billion, of which approximately $1.5 billion could be used for additional letters of credit.
In April 2018, FCX, PT Freeport Indonesia (PT-FI) and FM O&G LLC entered into a new $3.5 billion, five-year, unsecured revolving credit facility, which replaced FCX’s prior revolving credit facility (scheduled to mature on May 31, 2019). The new revolving credit facility is available until April 20, 2023, with $500 million available to PT-FI, and up to $1.5 billion available in letters of credit, and has a substantially similar structure and terms as the prior revolving credit facility. Interest on loans made under the new revolving credit facility will, at the option of FCX, be determined based on the adjusted London Interbank Offered rate or the alternate base rate (each as defined in the new revolving credit facility) plus a spread to be determined by reference to FCX’s credit ratings. The new revolving credit facility contains customary affirmative covenants and representations, and also contains a number of negative covenants that, among other things, restrict, subject to certain exceptions, the ability of FCX's subsidiaries that are not borrowers or guarantors to incur additional indebtedness (including guarantee obligations) and FCX's or its subsidiaries’ ability to: create liens on assets; enter into sale and leaseback transactions; engage in mergers, liquidations and dissolutions; and sell assets. FCX’s new revolving credit facility also contains financial ratios governing maximum total leverage and minimum interest expense coverage. FCX’s total leverage ratio (ratio of total debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), as defined in the credit agreement) cannot exceed 3.75x, and the minimum interest expense coverage ratio (ratio of consolidated EBITDA to consolidated cash interest expense, as defined in the credit agreement) is 2.25x.
Senior Notes Issued by FCX.Notes. In March 2017,2018, FCX’s 2.15%2.375% Senior Notes matured, and the $500 million$1.4 billion outstanding principal balance was repaid.
On April 4, 2018, FCX redeemed $454 million of aggregate principal amount of outstanding senior notes (as discussed in Early Extinguishment of Debt).
Cerro Verde Credit Facility and Shareholder Loans. Facility.In June 2017,March 2018, Cerro Verde’s credit facility was amended to increase the commitment byVerde prepaid $225100 million to $1.5 billion, modify the amortization schedule and to extend the maturity date to June 19, 2022. The amended credit facility amortizes in four installments, with $225 million due on December 31, 2020, $225 million due on June 30, 2021, $525 million due on December 31, 2021, and the remaining balance due on the maturity date of June 19, 2022. All other terms, including the interest rates, remain the same. The interest rate on Cerro Verde's credit facility was 3.14 percent at September 30, 2017. Cerro Verde used proceeds from its amended credit facility plus available cash to repay the balance of its shareholder loans in June 2017. Refer to Note 8 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.credit facility.
Early Extinguishment of Debt. During second-quarter 2018, FCX redeemed in full certain senior notes, and holders received the principal amounts together with the redemption premiums and accrued and unpaid interest up to the redemption date. A summary of these redemptions follows (in millions):
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Principal Amount | | Net Adjustments | | Book Value | | Redemption Value | | Gain |
FCX 6.75% Senior Notes due 2022 | $ | 404 |
| | $ | 22 |
| | $ | 426 |
| | $ | 418 |
| | $ | 8 |
|
FM O&G LLC 67/8% Senior Notes due 2023 | 50 |
| | 4 |
| | 54 |
| | 52 |
| | 2 |
|
| $ | 454 |
| | $ | 26 |
| | $ | 480 |
| | $ | 470 |
| | $ | 10 |
|
Exchanges and Early Extinguishment of Debt. During third-quarter 2017, FCX redeemed in full certain senior notes. A summary of these early debt extinguishments follows (in millions):
|
| | | | | | | | | | | | | | | | | | | |
| Principal Amount | | Net Adjustments | | Book Value | | Redemption Value | | Gain |
FCX 6.125% Senior Notes due 2019 | $ | 179 |
| | $ | 5 |
| | $ | 184 |
| | $ | 182 |
| | $ | 2 |
|
FM O&G 6.125% Senior Notes due 2019 | 58 |
| | 2 |
| | 60 |
| | 59 |
| | 1 |
|
FCX 6.625% Senior Notes due 2021 | 228 |
| | 12 |
| | 240 |
| | 234 |
| | 6 |
|
FM O&G 6.625% Senior Notes due 2021 | 33 |
| | 2 |
| | 35 |
| | 34 |
| | 1 |
|
FM O&G 6.75% Senior Notes due 2022 | 45 |
| | 2 |
| | 47 |
| | 46 |
| | 1 |
|
| $ | 543 |
| | $ | 23 |
| | $ | 566 |
| | $ | 555 |
| | $ | 11 |
|
Partially offsetting the $11$10 million gain on early extinguishmentwere losses in second-quarter 2018 and for the first six months of certain senior notes2018, primarily associated with entering into the new revolving credit facility.
During second-quarter 2017, a $4 million loss was a net loss of $3 million, primarilyrecognized associated with the modification of Cerro Verde’s credit facility in second-quarter 2017.
During the second and third quarters of 2016, FCX redeemed certain senior notes in exchange for its common stock, which resulted in gains of $15 million in third-quarter 2016 and $54 million for the first nine months of 2016. Partially offsetting the gains were $3 million in losses, primarily associated with the modification of FCX’s revolving credit facility in first-quarter 2016. Refer to Notes 8 and 10 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.facility.
Interest Expense, Net. Consolidated interest costs from continuing operations (before capitalization and excluding $141 million of interest expense associated with disputed Cerro Verde royalties recorded in third-quarter 2017)capitalized interest) totaled $196$165 million in third-quarter 2017, $211second-quarter 2018, $192 million in third-quarter 2016, $583second-quarter 2017, $341 million for the first ninesix months of 20172018 and $647$387 million for the first ninesix months of 2016.2017. Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $33$23 million in third-quarter 2017, $24second-quarter 2018, $30 million in third-quarter 2016, $91second-quarter 2017, $48 million for the first ninesix months of 20172018 and $66$58 million for the first ninesix months of 2016. Capitalized interest added2017.
Common Stock. In February 2018, FCX’s Board of Directors (the Board) reinstated a cash dividend on FCX’s common stock. On June 27, 2018, the Board declared a quarterly cash dividend of $0.05 per share, which was paid on August 1, 2018, to oil and gas properties not subject to amortization totaled $7 million for the first nine monthscommon stockholders of 2016 (none in third-quarter 2016 or 2017).record as of July 13, 2018.
NOTE 7.6. FINANCIAL INSTRUMENTS
FCX does not purchase, hold or sell derivative financial instruments unless there is an existing asset or obligation, or it anticipates a future activity that is likely to occur and will result in exposure to market risks, which FCX intends to offset or mitigate. FCX does not enter into any derivative financial instruments for speculative purposes, but has entered into derivative financial instruments in limited instances to achieve specific objectives. These objectives principally relate to managing risks associated with commodity price changes, foreign currency exchange rates and interest rates.
Commodity Contracts. From time to time, FCX has entered into derivative 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 SeptemberJune 30, 2017,2018, and December 31, 2016,2017, FCX had no price protection contracts relating to its mine production. A discussion of FCX’s derivative contracts and programs follows.
Derivatives Designated as Hedging Instruments – 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 Commodity Exchange Inc. (COMEX) average copper 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 or swap contracts. Hedging gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the nine-monthsix-month periods ended SeptemberJune 30, 20172018 and 2016.2017. At SeptemberJune 30, 2017,2018, FCX held copper futures and swap contracts that qualified for hedge accounting for 4664 million pounds at an average contract price of $2.83$3.08 per pound, with maturities through JuneSeptember 2019.
A summary of (losses) gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, along withincluding the unrealized gains (losses) on the related hedged item follows (in millions): | | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | | 2018 | | 2017 |
Copper futures and swap contracts: | | | | | | | | | | | | | | |
Unrealized gains (losses): | | | | | | | | |
Unrealized (losses) gains: | | | | | | | | |
Derivative financial instruments | $ | — |
| | $ | 1 |
| | $ | (1 | ) | | $ | 11 |
| $ | (4 | ) | | $ | 1 |
| | $ | (19 | ) | | $ | (1 | ) |
Hedged item – firm sales commitments | — |
| | (1 | ) | | 1 |
| | (11 | ) | 4 |
| | (1 | ) | | 19 |
| | 1 |
|
| | | | | | | | | | | | | | |
Realized gains (losses): | | | | | | | | |
Realized gains: | | | | | | | | |
Matured derivative financial instruments | 12 |
| | — |
| | 21 |
| | (8 | ) | — |
| | 1 |
| | 2 |
| | 9 |
|
Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. As describedCertain FCX concentrate and cathode contracts are provisionally priced at the time of shipment. The provisional prices are finalized in Note 1a specified future month (generally one to FCX’s annual reportfour months from the shipment date) based on Form 10-K for the year ended December 31, 2016, under “Revenue Recognition,” certain FCXquoted monthly average copper concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily basedsettlement prices on the London Metal Exchange (LME) copper price or the COMEX copper price and thequoted monthly average London Bullion Market Association (London)(LBMA) gold price at the time of shipmentsettlement prices as specified in the contract. FCX receives market prices based on prices in the specified future month, which results in price fluctuations until the date of settlement. Similarly, FCX purchases copper and cobalt under contracts that provide for provisional pricing. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host sales agreements since the contracts do not allow for net settlement and always result in physical delivery. Sales and purchases with a provisional sales price contain an embedded derivative (i.e., the price settlement mechanism 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 concentrate or cathode at the then-current LME or COMEX copper price or the London goldmetal price as defined in the contract. Mark-to-market price fluctuations from these embedded derivatives related to continuing operations are recorded through the settlement date and are reflected in revenues for sales contracts and in cost of sales as production and delivery costsinventory for purchase contracts. Mark-to-market price fluctuations associated with embedded derivatives for discontinued operations, which were minimal, are included in discontinued operations for all periods presented in these financial statements.
A summary of FCX’s embedded derivatives at SeptemberJune 30, 2017,2018, follows:
| | | Open Positions | | Average Price Per Unit | | Maturities Through | Open Positions | | Average Price Per Unit | | Maturities Through |
| | Contract | | Market | | | Contract | | Market | |
Embedded derivatives in provisional sales contracts: | | | | | | | | | | | | | | |
Copper (millions of pounds) | 546 |
| | $ | 2.84 |
| | $ | 2.93 |
| | February 2018 | 532 |
| | $ | 3.12 |
| | $ | 3.01 |
| | November 2018 |
Gold (thousands of ounces) | 194 |
| | 1,318 |
| | 1,287 |
| | December 2017 | 308 |
| | 1,296.18 |
| | 1,254.91 |
| | September 2018 |
Embedded derivatives in provisional purchase contracts: | | | | | | | | | | | | |
Copper (millions of pounds) | 155 |
| | 2.83 |
| | 2.93 |
| | January 2018 | 159 |
| | 3.11 |
| | 3.01 |
| | October 2018 |
Cobalt (millions of pounds)a | | 8 |
| | 32.55 |
| | 28.60 |
| | September 2018 |
| |
a. | Relates to assets held for sale. |
Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, enters into copper forward 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 SeptemberJune 30, 2017,2018, Atlantic Copper held net copper forward purchasesales contracts for 546 million pounds at an average contract price of $2.95$3.16 per pound, with maturities through October 2017.August 2018.
Summary of Gains (Losses). Gains. A summary of the realized and unrealized (losses) gains (losses) recognized in operating income (loss) for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions): |
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Embedded derivatives in provisional copper and gold | | | | | | | |
sales contractsa | $ | 137 |
| | $ | 12 |
| | $ | 297 |
| | $ | 88 |
|
Copper forward contractsb | (9 | ) | | (1 | ) | | (14 | ) | | 4 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2018 | | 2017 | | 2018 | | 2017 |
Embedded derivatives in provisional sales contracts:a | | | | | | | |
Copper | $ | (14 | ) | | $ | 35 |
| | $ | (149 | ) | | $ | 142 |
|
Gold and other metals | (30 | ) | | (1 | ) | | (12 | ) | | 18 |
|
Copper forward contractsb | 6 |
| | (4 | ) | | 8 |
| | (5 | ) |
| |
a. | Amounts recorded in revenues. |
| |
b. | Amounts recorded in cost of sales as production and delivery costs. |
Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled commodity derivative financial instruments follows (in millions):
| | | | September 30, 2017 | | December 31, 2016 | | June 30, 2018 | | December 31, 2017 |
Commodity Derivative Assets: | | | | | | | | |
Derivatives designated as hedging instruments: | | | | | | | | |
Copper futures and swap contracts | | $ | 7 |
| | $ | 9 |
| | $ | — |
| | $ | 11 |
|
Derivatives not designated as hedging instruments: | | | | | | | | |
Embedded derivatives in provisional copper and gold | | | | | | | | |
sales/purchase contracts | | 74 |
| | 137 |
| | 17 |
| | 155 |
|
Copper forward contracts | | | 6 |
| | 1 |
|
Total derivative assets | | $ | 81 |
| | $ | 146 |
| | $ | 23 |
| | $ | 167 |
|
| | | | | | | | |
Commodity Derivative Liabilities: | | | | | | | | |
Derivatives designated as hedging instruments: | | | | | | | | |
Copper futures and swap contracts | | $ | 2 |
| | $ | 2 |
| | $ | 8 |
| | $ | — |
|
Derivatives not designated as hedging instruments: | | | | | | | | |
Embedded derivatives in provisional copper and gold | | | | | | | | |
sales/purchase contracts | | 46 |
| | 56 |
| | 73 |
| | 31 |
|
Copper forward contracts | | | — |
| | 2 |
|
Total derivative liabilities | | $ | 48 |
| | $ | 58 |
| | $ | 81 |
| | $ | 33 |
|
embedded derivatives in provisional cobalt purchase contracts at June 30, 2018, and $24 million at December 31, 2017, which are reflected in liabilities held for sale.
FCX’s commodity contracts have netting arrangements with counterparties with which the right of offset exists, and it is FCX’s policy to generally offset balances by counterparty on its balance sheet. FCX’s embedded derivatives on provisional sales/purchase contracts are netted with the corresponding outstanding receivable/payable balances. A summary of these unsettled commodity contracts that are offset in the balance sheets follows (in millions):
| | | | Assets | | Liabilities | | Assets | | Liabilities |
| | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 | | June 30, 2018 | | December 31, 2017 | | June 30, 2018 | | December 31, 2017 |
| | | | | | | | | | | | | | | | |
Gross amounts recognized: | | | | | | | | | | | | | | | | |
Commodity contracts: | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | | |
sales/purchase contracts | | $ | 74 |
| | $ | 137 |
| | $ | 46 |
| | $ | 56 |
| |
Embedded derivatives in provisional copper | | | | | | | | | |
and gold sales/purchase contracts | | | $ | 17 |
| | $ | 155 |
| | $ | 73 |
| | $ | 31 |
|
Copper derivatives | | 7 |
| | 9 |
| | 2 |
| | 2 |
| | 6 |
| | 12 |
| | 8 |
| | 2 |
|
| | 81 |
| | 146 |
| | 48 |
| | 58 |
| | 23 |
| | 167 |
| | 81 |
| | 33 |
|
| | | | | | | | | | | | | | | | |
Less gross amounts of offset: | | | | | | | | | | | | | | | | |
Commodity contracts: | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | | |
sales/purchase contracts | | 1 |
| | 12 |
| | 1 |
| | 12 |
| |
Embedded derivatives in provisional copper | | | | | | | | | |
and gold sales/purchase contracts | | | — |
| | — |
| | — |
| | — |
|
Copper derivatives | | 2 |
| | 2 |
| | 2 |
| | 2 |
| | — |
| | 1 |
| | — |
| | 1 |
|
| | 3 |
| | 14 |
| | 3 |
| | 14 |
| | — |
| | 1 |
| | — |
| | 1 |
|
| | | | | | | | | | | | | | | | |
Net amounts presented in balance sheet: | | | | | | | | | | | | | | | | |
Commodity contracts: | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | | |
sales/purchase contracts | | 73 |
| | 125 |
| | 45 |
| | 44 |
| |
Embedded derivatives in provisional copper | | | | | | | | | |
and gold sales/purchase contracts | | | 17 |
| | 155 |
| | 73 |
| | 31 |
|
Copper derivatives | | 5 |
| | 7 |
| | — |
| | — |
| | 6 |
| | 11 |
| | 8 |
| | 1 |
|
| | $ | 78 |
| | $ | 132 |
| | $ | 45 |
| | $ | 44 |
| | $ | 23 |
| | $ | 166 |
| | $ | 81 |
| | $ | 32 |
|
| | | | | | | | | | | | | | | | |
Balance sheet classification: | | | | | | | | | | | | | | | | |
Trade accounts receivable | | $ | 69 |
| | $ | 119 |
| | $ | 24 |
| | $ | 13 |
| | $ | — |
| | $ | 151 |
| | $ | 64 |
| | $ | — |
|
Other current assets | | 5 |
| | 7 |
| | — |
| | — |
| | 6 |
| | 11 |
| | — |
| | — |
|
Accounts payable and accrued liabilities | | 4 |
| | 6 |
| | 21 |
| | 31 |
| | 17 |
| | 4 |
| | 17 |
| | 32 |
|
| | $ | 78 |
| | $ | 132 |
| | $ | 45 |
| | $ | 44 |
| | $ | 23 |
| | $ | 166 |
| | $ | 81 |
| | $ | 32 |
|
Credit Risk. FCX is exposed to credit loss when financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties. FCX does not anticipate that any of the counterparties it deals with will default on their obligations. As of SeptemberJune 30, 2017,2018, the maximum amount of credit exposure associated with derivative transactions was $78$23 million.
Other Financial Instruments. Other financial instruments include cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, restricted cash, investment securities, legally restricted funds, accounts payable and accrued liabilities, dividends payable and long-term debt. The carrying value for cash and cash equivalents (which included time deposits of $1.9$2.4 billion at SeptemberJune 30, 2017,2018, and $64 million$2.9 billion at December 31, 2016)2017), restricted cash, restricted cash equivalents, accounts receivable, restricted cash, and accounts payable and accrued liabilities, and dividends payable approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 87 for the fair values of investment securities, legally restricted funds and long-term debt).
In addition, as of SeptemberJune 30, 2017,2018, FCX has contingent consideration assets related to certain 2016 asset sales (refer to Note 87 for the related fair valuevalues and to Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2016,2017, for further discussion of these instruments).
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents. The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows to the components presented in the consolidated balance sheets (in millions):
|
| | | | | | | | |
| | June 30, 2018 | | December 31, 2017 |
Balance sheet components: | | | | |
Cash and cash equivalents | | $ | 3,859 |
| | $ | 4,447 |
|
Restricted cash and restricted cash equivalents included in: | | | | |
Other current assets | | 120 |
| | 52 |
|
Other assets | | 127 |
| | 132 |
|
Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows | | $ | 4,106 |
| | $ | 4,631 |
|
FCX’s restricted cash and restricted cash equivalents are primarily related to PT-FI’s commitment for smelter development in Indonesia; guarantees and commitments for certain mine closure and reclamation obligations, and customs duty taxes; and funds held as cash collateral for surety bonds related to plugging and abandonment obligations of certain oil and gas properties. Restricted cash and restricted cash equivalents are classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. Restricted cash and restricted cash equivalents are comprised of time deposits and money market funds.
NOTE 8.7. FAIR VALUE MEASUREMENT
Fair value accounting guidance includes a 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) and the lowest priority to unobservable inputs (Level 3). FCX recognizes transfers between levels at the end of the reporting period. FCX did not have any significant transfers in or out of Level 1, 2 or 3 for third-quarter 2017.during second-quarter 2018.
FCX’s financial instruments are recorded on the consolidated balance sheets at fair value except for contingent consideration associated with the sale of the Deepwater Gulf of Mexico (GOM) oil and gas properties (which was recorded under the loss recovery approach) and debt. A summary of the carrying amount and fair value of FCX’s financial instruments (including those measured at net asset value (NAV) as a practical expedient), other than cash and cash equivalents, accounts receivable, restricted cash, andrestricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable (refer to Note 7)6) follows (in millions):
| | | At September 30, 2017 | At June 30, 2018 |
| Carrying | | Fair Value | Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 | Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | | | | | | | | | | | | |
U.S. core fixed income fund | $ | 25 |
| | $ | 25 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 24 |
| | $ | 24 |
| | $ | 24 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Money market funds | 21 |
| | 21 |
| | — |
| | 21 |
| | — |
| | — |
| |
Equity securities | 6 |
| | 6 |
| | — |
| | 6 |
| | — |
| | — |
| 5 |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
|
Total | 52 |
| | 52 |
| | 25 |
| | 27 |
| | — |
| | — |
| 29 |
| | 29 |
| | 24 |
| | 5 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | | | | | | | | | | | | |
U.S. core fixed income fund | 55 |
| | 55 |
| | 55 |
| | — |
| | — |
| | — |
| 54 |
| | 54 |
| | 54 |
| | — |
| | — |
| | — |
|
Government bonds and notes | 38 |
| | 38 |
| | — |
| | — |
| | 38 |
| | — |
| 37 |
| | 37 |
| | — |
| | — |
| | 37 |
| | — |
|
Government mortgage-backed securities | | 31 |
| | 31 |
| | — |
| | — |
| | 31 |
| | — |
|
Corporate bonds | 30 |
| | 30 |
| | — |
| | — |
| | 30 |
| | — |
| 29 |
| | 29 |
| | — |
| | — |
| | 29 |
| | — |
|
Government mortgage-backed securities | 25 |
| | 25 |
| | — |
| | — |
| | 25 |
| | — |
| |
Money market funds | 18 |
| | 18 |
| | — |
| | 18 |
| | — |
| | — |
| |
Asset-backed securities | 14 |
| | 14 |
| | — |
| | — |
| | 14 |
| | — |
| 14 |
| | 14 |
| | — |
| | — |
| | 14 |
| | — |
|
Collateralized mortgage-backed securities | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
| 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
|
Money market funds | | 4 |
| | 4 |
| | — |
| | 4 |
| | — |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 189 |
| | 189 |
| | 55 |
| | 18 |
| | 116 |
| | — |
| 178 |
| | 178 |
| | 54 |
| | 4 |
| | 120 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Derivatives: | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | | |
purchase contracts in a gross asset positionc | 74 |
| | 74 |
| | — |
| | — |
| | 74 |
| | — |
| |
Copper futures and swap contractsc | 7 |
| | 7 |
| | — |
| | 5 |
| | 2 |
| | — |
| |
Contingent consideration for the sales of TFHL | | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 80 |
| | 80 |
| | — |
| | — |
| | 80 |
| | — |
| |
Embedded derivatives in provisional copper and gold | | | | | | | | | | | | |
sales/purchase contracts in a gross asset positionc,d | | 17 |
| | 17 |
| | — |
| | — |
| | 17 |
| | — |
|
Copper forward contractsc | | 6 |
| | 6 |
| | — |
| | 3 |
| | 3 |
| | — |
|
Contingent consideration for the sales of | | | | | | | | | | | | |
TF Holdings Limited (TFHL) and onshore | | | | | | | | | | | | |
California oil and gas propertiesa | | 151 |
| | 151 |
| | — |
| | — |
| | 151 |
| | — |
|
Total | 161 |
| | 161 |
| | — |
| | 5 |
| | 156 |
| | — |
| 174 |
| | 174 |
| | — |
| | 3 |
| | 171 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 150 |
| | 138 |
| | — |
| | — |
| | — |
| | 138 |
| 150 |
| | 132 |
| | — |
| | — |
| | — |
| | 132 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Total assets | | | $ | 540 |
| | $ | 80 |
| | $ | 50 |
| | $ | 272 |
| | $ | 138 |
| |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | | |
purchase contracts in a gross liability position | 46 |
| | $ | 46 |
| | $ | — |
| | $ | — |
| | $ | 46 |
| | $ | — |
| |
Embedded derivatives in provisional copper and gold | | | | | | | | | | | | |
sales/purchase contracts in a gross liability position | | $ | 73 |
| | $ | 73 |
| | $ | — |
| | $ | — |
| | $ | 73 |
| | $ | — |
|
Copper futures and swap contracts | 2 |
| | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
| 8 |
| | 8 |
| | — |
| | 7 |
| | 1 |
| | — |
|
Total | 48 |
| | 48 |
| | — |
| | 1 |
| | 47 |
| | — |
| 81 |
| | 81 |
| | — |
| | 7 |
| | 74 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Long-term debt, including current portiond | 14,782 |
| | 14,735 |
| | — |
| | — |
| | 14,735 |
| | — |
| |
Long-term debt, including current portione | | 11,127 |
| | 10,662 |
| | — |
| | — |
| | 10,662 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | $ | 14,783 |
| | $ | — |
| | $ | 1 |
| | $ | 14,782 |
| | $ | — |
| |
| | | At December 31, 2016 | At December 31, 2017 |
| Carrying | | Fair Value | Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 | Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | | | | | | | | | | | | |
U.S. core fixed income fund | $ | 23 |
| | $ | 23 |
| | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 25 |
| | $ | 25 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Money market funds | 22 |
| | 22 |
| | — |
| | 22 |
| | — |
| | — |
| |
Equity securities | 5 |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
| 5 |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
|
Total | 50 |
| | 50 |
| | 23 |
| | 27 |
| | — |
| | — |
| 30 |
| | 30 |
| | 25 |
| | 5 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | | | | | | | | | | | | |
U.S. core fixed income fund | 53 |
| | 53 |
| | 53 |
| | — |
| | — |
| | — |
| 55 |
| | 55 |
| | 55 |
| | — |
| | — |
| | — |
|
Government bonds and notes | 36 |
| | 36 |
| | — |
| | — |
| | 36 |
| | — |
| 40 |
| | 40 |
| | — |
| | — |
| | 40 |
| | — |
|
Corporate bonds | 32 |
| | 32 |
| | — |
| | — |
| | 32 |
| | — |
| 32 |
| | 32 |
| | — |
| | — |
| | 32 |
| | — |
|
Government mortgage-backed securities | 25 |
| | 25 |
| | — |
| | — |
| | 25 |
| | — |
| 27 |
| | 27 |
| | — |
| | — |
| | 27 |
| | — |
|
Asset-backed securities | 16 |
| | 16 |
| | — |
| | — |
| | 16 |
| | — |
| 15 |
| | 15 |
| | — |
| | — |
| | 15 |
| | — |
|
Money market funds | 12 |
| | 12 |
| | — |
| | 12 |
| | — |
| | — |
| 11 |
| | 11 |
| | — |
| | 11 |
| | — |
| | — |
|
Collateralized mortgage-backed securities | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
| 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 183 |
| | 183 |
| | 53 |
| | 12 |
| | 118 |
| | — |
| 189 |
| | 189 |
| | 55 |
| | 11 |
| | 123 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Derivatives: | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | | |
purchase contracts in a gross asset positionc | 137 |
| | 137 |
| | — |
| | — |
| | 137 |
| | — |
| |
Embedded derivatives in provisional copper and gold | | | | | | | | | | | | |
sales/purchase contracts in a gross asset positionc | | 155 |
| | 155 |
| | — |
| | — |
| | 155 |
| | — |
|
Copper futures and swap contractsc | 9 |
| | 9 |
| | — |
| | 8 |
| | 1 |
| | — |
| 11 |
| | 11 |
| | — |
| | 9 |
| | 2 |
| | — |
|
Copper forward contractsc | | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Contingent consideration for the sales of TFHL | | | | | | | | | | | | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 46 |
| | 46 |
| | — |
| | — |
| | 46 |
| | — |
| 108 |
| | 108 |
| | — |
| | — |
| | 108 |
| | — |
|
Total | 192 |
| | 192 |
| | — |
| | 8 |
| | 184 |
| | — |
| 275 |
| | 275 |
| | — |
| | 9 |
| | 266 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 150 |
| | 135 |
| | — |
| | — |
| | — |
| | 135 |
| 150 |
| | 134 |
| | — |
| | — |
| | — |
| | 134 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Total assets | | | $ | 560 |
| | $ | 76 |
| | $ | 47 |
| | $ | 302 |
| | $ | 135 |
| |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | | |
purchase contracts in a gross liability position | 56 |
| | $ | 56 |
| | $ | — |
| | $ | — |
| | $ | 56 |
| | $ | — |
| |
Copper futures and swap contracts | 2 |
| | 2 |
| | — |
| | 2 |
| | — |
| | — |
| |
Embedded derivatives in provisional copper and gold | | | | | | | | | | | | |
sales/purchase contracts in a gross liability positiond | | $ | 31 |
| | $ | 31 |
| | $ | — |
| | $ | — |
| | $ | 31 |
| | $ | — |
|
Copper forward contracts | | 2 |
| | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
|
Total | 58 |
| | 58 |
| | — |
| | 2 |
| | 56 |
| | — |
| 33 |
| | 33 |
| | — |
| | 1 |
| | 32 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Contingent payments for the settlements of | | | | | | | | | | | | |
drilling rig contractse | 23 |
| | 23 |
| | — |
| | — |
| | 23 |
| | — |
| |
Long-term debt, including current portione | | 13,117 |
| | 13,269 |
| | — |
| | — |
| | 13,269 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Long-term debt, including current portiond | 16,027 |
| | 15,196 |
| | — |
| | — |
| | 15,196 |
| | — |
| |
| | | | | | | | | | | | |
Total liabilities | | | $ | 15,277 |
| | $ | — |
| | $ | 2 |
| | $ | 15,275 |
| | $ | — |
| |
| |
a. | Current portion included in other current assets and long-term portion included in other assets. |
| |
b. | Excludes time deposits (which approximated fair value) included in (i) other current assets of $41$120 million at SeptemberJune 30, 2017,2018, and $28$52 million at December 31, 2016,2017, primarily associated with PT-FI’s mine closure and reclamation guarantees and its disputed incremental export duty and (ii) other assets of $122$126 million at both SeptemberJune 30, 2017,2018, and $123 millionatDecember 31, 2016,2017, primarily associated with an assurance bond to support PT-FI’s commitment for smelter development in Indonesia. |
| |
c. | Refer to Note 76 for further discussion and balance sheet classifications. |
| |
d. | Excludes embedded derivatives in provisional cobalt purchase contracts of $31 million at June 30, 2018, and $24 million at December 31, 2017 (refer to Note 6 for further discussion). |
| |
e. | Recorded at cost except for debt assumed in acquisitions, which were recorded at fair value at the respective acquisition dates. In addition, debt excludes $150 million at June 30, 2018, and $112 millionatDecember 31, 2017, related to assets held for sale (which approximated fair value). |
| |
e. | Included in accounts payable and accrued liabilities. |
Valuation Techniques. The U.S. core fixed income fund is valued at net asset value (NAV).NAV. The fund strategy seeks total return consisting of income and capital appreciation primarily by investing in a broad range of investment-grade debt securities, including U.S. government obligations, corporate bonds, mortgage-backed securities, asset-backed securities and money market instruments. There are no restrictions on redemptions (which are usually within one business day of notice).
Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.
Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.
Fixed income securities (government securities, corporate bonds, asset-backed securities, collateralized mortgage-backed securities and municipal bonds) are valued using a bid-evaluation price or a mid-evaluation price. A bid-evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy.
FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and sales are valued using only quoted monthly LME or COMEX copper forward prices and the Londonadjusted LBMA gold forward priceprices at each reporting date based on the month of maturity (refer to Note 76 for further discussion); however, FCX’s contracts themselves are not traded on an exchange. As a result, these derivatives are classified within Level 2 of the fair value hierarchy.
FCX’s embedded derivatives on provisional cobalt purchases, included in liabilities held for sale, are valued using quoted monthly LME cobalt forward prices or average published Metals Bulletin cobalt prices, subject to certain adjustments as specified by the terms of the contracts, at each reporting date based on the month of maturity (Level 2).
FCX’s derivative financial instruments for copper futures and swap contracts and copper forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted monthly COMEX or LME prices at each reporting date based on the month of maturity (refer to Note 76 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy based on COMEX and LME forward prices.
The fair valueAs reported in Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2017, in November 2016, FCX’s sale of its interest in TFHL included contingent consideration forof up to $120 million in cash, consisting of $60 million if the salesaverage copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during the 24-month period beginning January 1, 2018. Also in 2016, FCX Oil & Gas LLC’s (FM O&G) sale of TFHL andits onshore California oil and gas properties isincluded contingent consideration of up to $150 million, consisting of $50 million per year for 2018, 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years. Future changes in the fair value of the contingent consideration derivative for the sale of TFHL will continue to be recorded in discontinued operations and for the onshore California oil and gas properties will continue to be recorded in operating income. The fair value of the contingent consideration derivative was (i) $61 million at June 30, 2018, and $74 million at December 31, 2017, associated with the sale of TFHL and (ii) $90 million at June 30, 2018, and $34 million at December 31, 2017, associated with the sale of the onshore California oil and gas properties. The contingent consideration derivative was included in other assets in the consolidated balance sheets except for $44 million included in other current assets at June 30, 2018. These fair values were calculated based on average commodity price forecasts through applicable maturity dates using a Monte Carlo simulation model. The models use various observable inputs, including Brent crude oil forward prices, historical copper and cobalt prices, volatilities, discount rates and settlement terms. As a result, these contingent consideration assets are classified within Level 2 of the fair value hierarchy.
The fair valueAs reported in Note 2 of contingent considerationFCX’s annual report on Form 10-K for the year ended December 31, 2017, in December 2016, FM O&G’s sale of its Deepwater GOM oil and gas properties isincluded up to $150 million in contingent consideration that was recorded at the total amount under the loss recovery approach. The contingent consideration will be received over time as future cash flows are realized in connection with a third-party production handling agreement for an offshore platform. The contingent consideration included in (i) other current assets totaled $28 million at June 30, 2018, and $24 million at December 31, 2017, and (ii) other assets totaled $122 million at June 30, 2018, and $126 million at December 31, 2017. The fair value of this contingent consideration was calculated based on a discounted cash flow model using inputs that include third-party reserve estimates for reserves, production rates and production timing, and discount rates. Because significant inputs are not observable in the market, the contingent consideration is classified within Level 3 of the fair value hierarchy.
The December 31, 2016, fair value
Long-term debt, including current portion, is valued using available market quotes and, as such, is classified within Level 2 of the fair value hierarchy.
The techniques described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the techniques used at SeptemberJune 30, 2017,2018, as compared to those techniques used at December 31, 2016.
A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first ninesix months of 20172018 follows (in millions):
|
| | | | |
Fair value at January 1, 2017 | $ | 135 |
| |
Net unrealized gain related to assets still held at the end of the period | 3 |
| |
Fair value at September 30, 2017 | $ | 138 |
| |
|
| | | | |
Fair value at January 1, 2018 | $ | 134 |
| |
Net unrealized loss related to assets still held at the end of the period | (2 | ) | |
Fair value at June 30, 2018 | $ | 132 |
| |
NOTE 9.8. CONTINGENCIES AND COMMITMENTS
Environmental
Historical Smelter Sites — Borough of CarteretCyprus Tohono
As reported in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, from 1920 until 1986, United States Metal Refining Company (USMR), an indirectCyprus Tohono, a wholly owned subsidiary of Cyprus Amax Minerals Company, ownedFMC, had historical mining operations in south central Arizona, and operated a copper smelter and refinery ingroundwater issues at the Borough of Carteret, New Jersey, on the banks of the Arthur Kill (a narrow waterway that separates New Jersey from Staten Island). As a result of recent off-site soil sampling in public and private areas near the former smelter,site are expected to require remediation. FCX increased its associatedrecorded environmental obligation for known and potential off-site environmental remediationthis contingency by recording$44 million with a $59 millioncorresponding charge to operating income in third-quarter 2017. Additional sampling is ongoing and could result in additional adjustmentssecond-quarter 2018 to the related environmentalreflect an updated assessment of remediation obligation.
Uranium Mining Sites
As reported in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, the Department of Justice, the U.S. Environmental Protection Agency, the Navajo Nation and two FCX-related subsidiaries reached an agreement regarding the scope of environmental investigation and remediation work for 94 former uranium mining sites on tribal lands, and the related financial contributions of the U.S. government and the FCX subsidiaries. The related Consent Decree was approved by the U.S. District Court for the District of Arizona in second-quarter 2017. Based on updated cash flow and timing estimates, FCX reduced its associated obligation for that contingency by recording a $41 million credit to operating income in second-quarter 2017 after receiving court approval of the Consent Decree.alternatives.
Litigation
During third-quarter 2017, thereThere were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016.2017, other than the matter below, which was also disclosed in Note 8 of FCX’s quarterly report on Form 10-Q for the quarter ended March 31, 2018.
On April 1, 2016, a purported class action titled David Garcia v. Freeport-McMoRan Oil & Gas LLC was filed in the Superior Court of the State of California for the County of Santa Barbara (Case No. 16CV01305) against FM O&G LLC, an indirect wholly owned subsidiary of FCX. A former FM O&G LLC employee filed the case, which alleges violations of various California employment laws and seeks relief for past wages, overtime, penalties, interest and attorney’s fees. The primary issue underlying the claims is whether compensation must be paid to non-exempt shift workers on platforms located offshore California on the outer-continental shelf for sleep time and other non-working time. In June 2016, FM O&G LLC removed the case to the U.S. District Court for the Central District of California, Santa Barbara (the District Court). In September 2016, the court dismissed the complaint on the grounds that all four FM O&G LLC platforms potentially involved are located in federal waters, that federal law, not state law, applies, and that federal law does not require an employer to compensate for non-work time. In October 2016, the plaintiff appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit. In June 2017, the Ninth Circuit stayed the Garcia case pending its decision in another case involving essentially the same legal issues, titled Newton v. Parker Drilling Management Services, Ltd. In February 2018, a three-judge panel of the Ninth Circuit ruled in favor of the plaintiffs in the Newton case. Because that decision conflicts with longstanding precedent in the Fifth Circuit and could set a precedent that will result in a reversal of the dismissal in the Garcia case, FM O&G LLC and others filed amicus briefs in April 2018 in support of Parker Drilling’s petition for an en banc rehearing in the Newton case. The Ninth Circuit denied that request on April 27, 2018, but modified its original opinion noting that the question of whether the Ninth Circuit’s holding should be applied retrospectively is reserved for the District Court’s consideration on remand. On May 16, 2018, the Ninth Circuit granted Parker Drilling’s motion to stay further proceedings in the District Court pending the possible filing of a petition for review by the U.S. Supreme Court, which would be required to be filed by late August 2018. On May 29, 2018, the Ninth Circuit also stayed further proceedings in Garcia pending the U.S. Supreme Court’s consideration of the petition for review in Newton v. Parker Drilling.
The amount of the exposure in Garciais uncertain because FM O&G LLC has potential defenses to the claims even if state law would be applied; however, absent success on those defenses, FCX estimates that the exposure could be in the range of approximately $50 million to $80 million if California wage and hour law is applied retroactively to FM O&G LLC’s operations offshore California. FCX has not established a reserve for this contingency because it believes that its legal position is correct and does not believe a loss is probable. FCX intends to vigorously defend this matter.
Tax and Other Matters
Cerro Verde Royalty Dispute and Other Peru Tax Matters
As reported in FCX’s annual report on Form 10-K for the year ended December 31, 2016, and as subsequently updated in Note 9 of FCX’s quarterly report on Form 10-Q for the quarter ended June 30, 2017, SUNAT, Peru’s national tax authority, has assessed mining royalties on ore processed by the Cerro Verde concentrator, which commenced operations in late 2006, for the period December 2006During second-quarter 2018, there were no significant updates to September 2011. Cerro Verde contested these assessments because it believes its 1998 stability agreement exempts from royalties all minerals extracted from its mining concession, irrespective of the method used for processing those minerals. No assessments have been issued for the period from October 2011 to December 2013, and no assessments can be issued for years after 2013, as Cerro Verde began paying royalties on all of its production in January 2014 under its new 15-year stability agreement. Since 2014, Cerro Verde has been paying the disputed assessments for the period December 2006 through December 2008 under an installment program ($135 million paid by Cerro Verde through September 30, 2017).
In October 2017, the Peruvian Supreme Court issued a ruling in favor of SUNAT that the assessments of royalties for the year 2008 on ore processed by the Cerro Verde concentrator were proper under Peruvian law.
As a result of the unfavorable Peruvian Supreme Court ruling on the 2008 royalty dispute, Cerro Verde recorded pre-tax charges totaling $357 million ($359 million including net tax charges and $188 million net of noncontrolling interests) in third-quarter 2017, consisting of $240 million in royalty assessments, $147 million of penalties and interest related to the December 2006 to December 2008 assessments, and $97 million for related items (primarily associated with the special mining tax and net assets tax) that Cerro Verde would have incurred under the view that its concentrator was not stabilized.
A summary of the charges recorded in third-quarter 2017 for the Cerro Verde royalty dispute follows (in millions):
|
| | | | | | |
Royalty and related assessment charges: | | | |
| Production and delivery | | $ | 216 |
| a |
| Interest expense, net | | 141 |
| |
| Provision for income taxes | | 2 |
| b |
Net loss attributable to noncontrolling interests | | (171 | ) | |
| | | $ | 188 |
| |
| |
a. | Includes $176 million related to disputed royalty assessments for the period from December 2006 to September 2011 (when royalties were determined based on revenues), $6 million of penalties related to the December 2006 to December 2008 royalty assessments and $34 million primarily associated with the net assets tax. |
| |
b. | Includes tax charges of $127 million for disputed royalties ($64 million) and other related mining taxes ($63 million) for the period October 2011 through the year 2013 when royalties were determined based on operating income, mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013. |
Cerro Verde acted in good faith in applying the provisions of its 1998 stability agreement and continues to evaluate alternatives to defend its rights. Cerro Verde intends to seek a waiver available under Peruvian law of penalties and interest associated with this matter and has not recorded charges for potential unpaid penalties and interest totaling $360 million ($193 million net of noncontrolling interests) at September 30, 2017, as FCX believes that Cerro Verde should be successful under Peruvian law in obtaining a waiver. Cerro Verde also intends to file a reimbursement claim with SUNAT for penalties and interest paid under the installment plan for the December 2006 to December 2008 assessments, and may have claims for reimbursement of payments it would not have made in the absence of the stabilization agreement, such as the overpayments made for a special (voluntary) levy (GEM), import duties and civil association contributions. No amounts have been recorded for these potential gain contingencies at September 30, 2017.
Other Peru Tax Matters
There were no significant changes to other Peru tax matters during third-quarter 2017 (refer toincluded in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016).2017.
Indonesia Tax Matters
The following information includes a discussion ofThere were no significant updates to previously reported Indonesia tax matters included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016.2017, other than the matter below, which was also updated in Note 8 of FCX’s quarterly report on Form 10-Q for the quarter ended March 31, 2018.
PT-FI received assessments from the local regional tax authority in Papua, Indonesia, for additional taxes and penalties related to surface water taxes for the period from January 2011 through September 2017.June 2018. PT-FI is filing objections tohas filed or will file appeals of these assessments.assessments with the Indonesia Tax Court. During 2017,the first half of 2018, the Indonesia Tax Court issued rulings againstruled partially in favor of PT-FI with respect to assessments for additional taxesthe period January 2016 through April 2016 by reducing these assessments that amounted to $20 million, including penalties, to $12 million, including penalties (based on the exchange rate at June 30, 2018), or an approximate 40 percent reduction. Hearings in the Indonesia Tax Court related to assessments for the period from May 2016 through September 2016 have concluded with no decisions issued, and penaltieshearings related to assessments for the period from October 2016 through April 2017 are currently underway.
During 2017, PT-FI filed reconsideration request petitions to the Indonesia Supreme Court with respect to assessments for the period from January 2011 through December 20152015; and in second-quarter 2018, filed reconsideration request petitions with respect to the amount of $402 million (based onIndonesia Tax Court decisions related to the exchange rate as of September 30, 2017, and including $240 million in penalties). The aggregate amount of assessments receivedfor the period from January 2016 through September 2017 was an additional $114 million,April 2016. In second-quarter 2018, the Indonesia Supreme Court issued favorable decisions relating to surface water tax assessments for the period January 2011 through July 2015. The Indonesia Supreme Court ruling concluded that PT-FI and the Indonesian government are bound by PT-FI’s Contract of Work (COW), which is lex specialis, and prevails as the law for the parties to the COW that should be carried out in good faith. As a result, FCX estimates the total amount of the assessments, including penalties, (based on the exchange rate asat June 30, 2018) for the period from August 2015 through June 2018 totals $169 million, including $85 million in penalties. As of SeptemberJune 30, 2017). No2018, no charges have been recorded for these assessments as of September 30, 2017, because PT-FI believes its Contract of Work (COW)COW exempts it from these payments and that it has the right to contest these assessments (in which FCX estimates the total exposure based on the exchange rate as of September 30, 2017, totals $516 million, including penalties) in the Indonesia Tax Court and ultimately the Indonesia Supreme Court.payments. As of November 7, 2017,August 8, 2018, PT-FI has not paid and does not intend to pay these assessments unless there is a mechanism established to secure a refund for any such payments upon the final court decision. Additionally, PT-FI is seeking to address this matter in connection with the ongoing negotiations with the Indonesian government to resolve PT-FI’s long-term operating rights.
Indonesia Mining Contract. The following is the latest information includes updatesrelated to the discussion of PT-FI’s COW included in(refer to Note 13 of FCX’s annual report on Form 10-K for the year ended December 31, 2016.2017, for further discussion).
In JanuaryOctober 2017, Indonesia’s Ministry of Environment and February 2017,Forestry (the Ministry) notified PT-FI of administrative sanctions related to certain activities the Ministry indicated are not reflected in PT-FI’s environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in PT-FI’s environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry that began in late 2014, and PT-FI believes that it has submitted the required documentation to update such permits. In April 2018, the Ministry issued decrees imposing unattainable environmental standards related to PT-FI’s controlled riverine tailings management system that must be complied with by October 2018. The decrees, which PT-FI believes are contrary to the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections asgovernment’s obligations under PT-FI’s COW, which remainsconflict with PT-FI’s approved environmental management programs and existing environmental permits. If these unattainable environmental standards are not modified or delayed, PT-FI could be adversely affected, including possible shutdown of its operations. PT-FI is currently engaged in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.
Following the issuance of the January and February 2017 regulations andconstructive discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same levelMinistry in working toward a resolution of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence constructionthese issues.
On January 12, 2017, PT-FI suspended exports in response to Indonesian regulations adopted in January 2014. In addition, as a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s operations (PT-FI’s 25 percent-owned smelter in Indonesia) were shut down from January 19, 2017, until early March 2017. On February 10, 2017, PT-FI was forced to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21, 2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period, and PT-FI commenced export shipments.
In mid-February 2017, pursuant to the COW’s dispute resolution process, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government's breaches and violations of the COW. PT-FI continues to reserve its rights under these provisions.
As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs.
In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK through October 10, 2017, that would allow concentrate exports to resume during this period. In April 2017, PT-FI entered into a Memorandum of Understanding with the Indonesian government confirming that the COW would continue to be valid and honored until replaced by a mutually agreed IUPK and investment stability agreement. PT-FI agreed to continue to pay a five percent export duty during this period.
In August 2017, FCX and the Indonesian government reached an understandinghave been engaged in negotiation and documentation of a special mining license (IUPK) and accompanying documentation for assurances on a framework that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from the COWlegal and fiscal terms to an IUPK providingprovide PT-FI with long-term operatingmining rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of2041. In addition, the IUPK (iii)would provide that PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreements and include agreement and (iv)for the divestment of 51 percent of the project area interests to Indonesian participants at fair market value structured sovalue.
In late 2017, the Indonesian government (including the regional government of Papua Province and Mimika Regency) and PT Indonesia Asahan Aluminium (Persero) (Inalum), a state-owned enterprise, which leads the Indonesian government’s consortium of investors, formed a special purpose company to acquire Grasberg project area interests. Inalum is wholly owned by the Indonesian government and currently holds 9.36 percent of PT-FI’s outstanding common stock.
In July 2018, FCX and PT-FI entered into a Heads of Agreement with Inalum and PT-FI’s joint venture partner Rio Tinto. Under the terms of the non-binding agreement, Inalum would acquire for aggregate cash consideration of $3.85 billion all of Rio Tinto's interests associated with its joint venture with PT-FI (Joint Venture) and all of FCX's interests in PT Indocopper Investama, which owns 9.36 percent of PT-FI.
Inalum would contribute the Rio Tinto interests to PT-FI, which would expand PT-FI’s asset base, in exchange for a 40 percent share ownership in PT-FI, pursuant to arrangements that would enable FCX retains control overand existing PT-FI shareholders to retain the economics of the revenue and cost sharing arrangements under the Joint Venture. Following completion of the transaction, Inalum's share ownership would approximate 51 percent of PT-FI (subject to an agreement between shareholders to replicate the Joint Venture economics) and FCX's ownership would approximate 49 percent.
At closing, Rio Tinto would receive $3.5 billion and FCX would receive $350 million in cash proceeds from Inalum. In addition, Rio Tinto would forego in favor of FCX an amount equivalent to Rio Tinto's share of Joint Venture cash flows since January 1, 2018, through closing.
Following completion of the ownership restructuring, FCX does not expect its economic exposure to PT-FI to change significantly. FCX expects its share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to its existing share of future cash flows under the current Joint Venture arrangement. FCX would also continue to manage the operations of PT-FI.
The transaction, which is expected to close during the second half of 2018, is subject to the negotiation and documentation of definitive agreements, including purchase and sale agreements, the extension and stability of PT-FI's long-term mining rights through 2041 in a form acceptable to FCX and Inalum, a shareholders’ agreement between FCX and Inalum providing for continuity of FCX’s management of PT-FI’s operations and addressing governance arrangements, and resolution of PT-FI.environmental regulatory matters pending before the Ministry satisfactory to the Indonesian government, FCX and Inalum. The terms of these agreements will be subject to approval by the FCX Board, and will require modification or revocation of current regulations and the implementation of new regulations by the Indonesian government. FCX cannot currently predict whether there will be any material accounting and tax implicationsimpacts associated with the divestment.transaction.
The framework requires documentationPT-FI’s export license is effective through February 15, 2019. In July 2018, PT-FI’s temporary IUPK was extended to August 31, 2018, and execution of a definitive agreement, which must be approved by the FCX Board of Directors and joint venture partner Rio Tinto. The partiesPT-FI will continue to negotiateseek extensions to reach agreement on important aspectsits temporary IUPK until definitive agreements are complete. On February 28, 2018, PT Smelting (PT-FI’s 25 percent-owned smelter and refinery in Indonesia) received an extension of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s operationsits anode slimes export license through 2041. The parties have expressed a mutual objective of completing the negotiations and documentation during 2017.
In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-termFCX cannot predict whether PT-FI will be successful in reaching satisfactory definitive agreement basedagreements on the agreed framework continue.
terms of its long-term mining rights. Until a definitive agreement isagreements are reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions.procedures.
NOTE 10.9. BUSINESS SEGMENTS
FCX has organized its mining operations into four primary divisions – North America copper mines, South America mining, Indonesia mining and Molybdenum mines, and operating segments that meet certain thresholds are reportable segments. Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.
FCX’s reportable segments previously included U.S. Oil & Gas operations. During 2016, FCX completed the sales of its Deepwater Gulf of Mexico, onshore California and Haynesville oil and gas properties. As a result, beginning in 2017, the U.S. oil and gas operations no longer qualify as a reportable segment, and oil and gas results for all periods presented have been included in Corporate, Other & Eliminations in the following tables. Refer to Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for additional information.
Intersegment sales between FCX’s business segments are based on terms similar to 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.
FCX defers recognizing profits on sales from its mines to other divisions, including Atlantic Copper (FCX’s wholly owned smelter and refinery in Spain) and on 25 percent of PT-FI’s sales to PT Smelting, (PT-FI’s 25-percent-owned smelter and refinery in Indonesia), until final sales to third parties occur. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices result in variability in FCX’s net deferred profits and quarterly earnings.
FCX allocates certain operating costs, expenses and capital expenditures to its operating divisions and individual segments. However, not all costs and expenses applicable to an operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level (included in Corporate, Other & Eliminations), whereas foreign income taxes are recorded and managed at the applicable country level. In addition, most mining exploration and research activities are managed on a consolidated basis, and those costs, along with some selling, general and administrative costs, are not allocated to the operating divisions or individual segments. Accordingly, the following segment informationFinancial Information by Business Segment 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.
Product Revenues. FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2018 and 2017 follow (in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2018 | | 2017 | | 2018 | | 2017 |
Copper: | | | | | | | |
Concentrate | $ | 1,703 |
| | $ | 1,241 |
| | $ | 3,350 |
| | $ | 2,222 |
|
Cathode | 1,465 |
| | 954 |
| | 2,888 |
| | 1,995 |
|
Rod and other refined copper products | 668 |
| | 590 |
| | 1,338 |
| | 1,214 |
|
Gold | 933 |
| | 571 |
| | 1,741 |
| | 839 |
|
Molybdenum | 310 |
| | 239 |
| | 596 |
| | 448 |
|
Othera | 400 |
| | 281 |
| | 798 |
| | 512 |
|
Adjustments to revenue: | | | | | | | |
Treatment charges | (139 | ) | | (128 | ) | | (271 | ) | | (231 | ) |
Royalty expenseb | (73 | ) | | (44 | ) | | (142 | ) | | (66 | ) |
Export dutiesc | (55 | ) | | (27 | ) | | (101 | ) | | (41 | ) |
Revenue from contracts with customers | 5,212 |
| | 3,677 |
| | 10,197 |
| | 6,892 |
|
Embedded derivativesd | (44 | ) | | 34 |
| | (161 | ) | | 160 |
|
Total consolidated revenues | $ | 5,168 |
| | $ | 3,711 |
| | $ | 10,036 |
| | $ | 7,052 |
|
| |
a. | Primarily includes revenues associated with cobalt, silver, oil, gas and natural gas liquids. |
| |
b. | Reflects royalties for sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and the prices of copper and gold. |
| |
c. | Reflects PT-FI export duties. |
| |
d. | Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts. |
Financial Information by Business SegmentsSegment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | | | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America | | | | | | | | Copper | | Other | | | | North America Copper Mines | | South America | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | | | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | | Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | |
Three Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 57 |
| | $ | 40 |
| | $ | 97 |
| | $ | 850 |
| | $ | 109 |
| | $ | 959 |
| | $ | 1,121 |
| b | $ | — |
| | $ | 1,137 |
| | $ | 554 |
| | $ | 442 |
| c | $ | 4,310 |
| | $ | 25 |
| | $ | 13 |
| | $ | 38 |
| | $ | 719 |
| | $ | 171 |
| | $ | 890 |
| | $ | 1,639 |
| b | $ | — |
| | $ | 1,387 |
| | $ | 602 |
| | $ | 612 |
| c | $ | 5,168 |
| |
Intersegment | 460 |
| | 548 |
| | 1,008 |
| | 64 |
| | — |
| | 64 |
| | — |
| | 65 |
| | 8 |
| | 1 |
| | (1,146 | ) | | — |
| | 568 |
| | 641 |
| | 1,209 |
| | 100 |
| | — |
| | 100 |
| | 1 |
| | 111 |
| | 8 |
| | — |
| | (1,429 | ) | | — |
| |
Production and delivery | 244 |
| | 414 |
| | 658 |
| | 683 |
| d | 76 |
| | 759 |
| | 406 |
| | 58 |
| | 1,141 |
| | 533 |
| | (753 | ) | | 2,802 |
| | 298 |
| | 491 |
| | 789 |
| | 445 |
| | 133 |
| | 578 |
| | 425 |
| | 71 |
| | 1,389 |
| | 579 |
| | (916 | ) | | 2,915 |
| |
Depreciation, depletion and amortization | 42 |
| | 54 |
| | 96 |
| | 116 |
| | 18 |
| | 134 |
| | 136 |
| | 20 |
| | 2 |
| | 7 |
| | 23 |
| | 418 |
| | 44 |
| | 48 |
| | 92 |
| | 109 |
| | 24 |
| | 133 |
| | 172 |
| | 21 |
| | 3 |
| | 7 |
| | 14 |
| | 442 |
| |
Selling, general and administrative expenses | 1 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | 2 |
| | 32 |
| | — |
| | — |
| | 4 |
| | 66 |
| | 106 |
| | 1 |
| | — |
| | 1 |
| | 2 |
| | — |
| | 2 |
| | 28 |
| | — |
| | — |
| | 5 |
| | 73 |
| | 109 |
| |
Mining exploration and research expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 27 |
| | 27 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 24 |
| | 24 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 73 |
| | 73 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 59 |
| | 59 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (33 | ) | | (33 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (45 | ) | | (45 | ) | |
Operating income (loss) | 230 |
| | 119 |
| | 349 |
| | 113 |
| | 15 |
| | 128 |
| | 547 |
| | (13 | ) | | 2 |
| | 11 |
| | (107 | ) | | 917 |
| | 250 |
| | 115 |
| | 365 |
| | 263 |
| | 14 |
| | 277 |
| | 1,015 |
| | 19 |
| | 3 |
| | 11 |
| | (26 | ) | | 1,664 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 156 |
| d | — |
| | 156 |
| | 1 |
| | — |
| | — |
| | 5 |
| | 141 |
| | 304 |
| | 1 |
| | — |
| | 1 |
| | 16 |
| | — |
| | 16 |
| | — |
| | — |
| | — |
| | 6 |
| | 119 |
| | 142 |
| |
Provision for income taxes | — |
| | — |
| | — |
| | 134 |
| d | 5 |
| | 139 |
| | 233 |
| | — |
| | — |
| | 1 |
| | 14 |
| | 387 |
| | |
Total assets at September 30, 2017 | 2,844 |
| | 4,223 |
| | 7,067 |
| | 8,851 |
| | 1,595 |
| | 10,446 |
| | 11,100 |
| | 1,885 |
| | 264 |
| | 751 |
| | 5,814 |
| e | 37,327 |
| | |
Provision for (benefit from) income taxes | | — |
| | — |
| | — |
| | 102 |
| | 6 |
| | 108 |
| | 429 |
| | — |
| | — |
| | — |
| | (22 | ) | | 515 |
| |
Total assets at June 30, 2018 | | 2,819 |
| | 4,374 |
| | 7,193 |
| | 8,630 |
| | 1,715 |
| | 10,345 |
| | 10,911 |
| | 1,820 |
| | 278 |
| | 931 |
| | 5,550 |
| d | 37,028 |
| |
Capital expenditures | 26 |
| | 13 |
| | 39 |
| | 17 |
| | 3 |
| | 20 |
| | 206 |
| | 2 |
| | 1 |
| | 5 |
| | 41 |
| | 314 |
| | 41 |
| | 99 |
| | 140 |
| | 68 |
| | 3 |
| | 71 |
| | 246 |
| | 1 |
| | 1 |
| | 3 |
| | 20 |
| | 482 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 115 |
| | $ | 112 |
| | $ | 227 |
| | $ | 505 |
| | $ | 112 |
| | $ | 617 |
| | $ | 984 |
| b | $ | — |
| | $ | 930 |
| | $ | 445 |
| | $ | 674 |
| c | $ | 3,877 |
| | $ | 45 |
| | $ | 32 |
| | $ | 77 |
| | $ | 567 |
| | $ | 111 |
| | $ | 678 |
| | $ | 1,065 |
| b | $ | — |
| | $ | 1,046 |
| | $ | 400 |
| | $ | 445 |
| c | $ | 3,711 |
| |
Intersegment | 358 |
| | 499 |
| | 857 |
| | 54 |
| | — |
| | 54 |
| | 2 |
| | 46 |
| | 7 |
| | — |
| | (966 | ) | | — |
| | 478 |
| | 593 |
| | 1,071 |
| | 57 |
| | — |
| | 57 |
| | — |
| | 71 |
| | 6 |
| | — |
| | (1,205 | ) | | — |
| |
Production and delivery | 275 |
| | 464 |
| | 739 |
| | 333 |
| | 91 |
| | 424 |
| | 478 |
| | 57 |
| | 931 |
| | 416 |
| | (516 | ) | f | 2,529 |
| | 266 |
| | 454 |
| | 720 |
| | 376 |
| | 87 |
| | 463 |
| | 547 |
| e | 58 |
| | 1,047 |
| | 400 |
| | (755 | ) | | 2,480 |
| f |
Depreciation, depletion and amortization | 51 |
| | 78 |
| | 129 |
| | 109 |
| | 25 |
| | 134 |
| | 110 |
| | 15 |
| | 2 |
| | 7 |
| | 246 |
| | 643 |
| | 49 |
| | 69 |
| | 118 |
| | 104 |
| | 21 |
| | 125 |
| | 153 |
| | 19 |
| | 3 |
| | 7 |
| | 25 |
| | 450 |
| |
Impairment of oil and gas properties | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 239 |
| | 239 |
| | |
Selling, general and administrative expenses | 1 |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 2 |
| | 24 |
| | — |
| | — |
| | 5 |
| | 78 |
| | 110 |
| | 1 |
| | — |
| | 1 |
| | 3 |
| | — |
| | 3 |
| | 30 |
| e | — |
| | — |
| | 4 |
| | 69 |
| | 107 |
| |
Mining exploration and research expenses | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 12 |
| | 13 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18 |
| | 19 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (21 | ) | | (21 | ) | |
Net loss (gain) on sales of assets | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | (13 | ) | | |
Net gain on sales of assets | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (10 | ) | | (10 | ) | |
Operating income (loss) | 145 |
| | 68 |
| | 213 |
| | 116 |
| | (5 | ) | | 111 |
| | 374 |
| | (26 | ) | | 4 |
| | 17 |
| | (334 | ) | | 359 |
| | 207 |
| | 101 |
| | 308 |
| | 141 |
| | 3 |
| | 144 |
| | 335 |
| | (6 | ) | | 2 |
| | (11 | ) | | (86 | ) | | 686 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 21 |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | 3 |
| | 162 |
| | 187 |
| | — |
| | 1 |
| | 1 |
| | 15 |
| | — |
| | 15 |
| | — |
| | — |
| | — |
| | 4 |
| | 142 |
| | 162 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 36 |
| | (4 | ) | | 32 |
| | 158 |
| | — |
| | — |
| | 4 |
| | (308 | ) | | (114 | ) | | — |
| | — |
| | — |
| | 56 |
| | 2 |
| | 58 |
| | 135 |
| | — |
| | — |
| | 2 |
| | (9 | ) | | 186 |
| |
Total assets at September 30, 2016 | 2,881 |
| | 4,540 |
| | 7,421 |
| | 9,139 |
| | 1,551 |
| | 10,690 |
| | 9,718 |
| | 1,953 |
| | 238 |
| | 565 |
| | 10,815 |
| e | 41,400 |
| | |
Total assets at June 30, 2017 | | 2,830 |
| | 4,314 |
| | 7,144 |
| | 8,828 |
| | 1,479 |
| | 10,307 |
| | 10,769 |
| | 1,900 |
| | 253 |
| | 739 |
| | 5,931 |
| d | 37,043 |
| |
Capital expenditures | 6 |
| | 5 |
| | 11 |
| | 38 |
| | 1 |
| | 39 |
| | 253 |
| | 1 |
| | — |
| | 5 |
| | 185 |
| g | 494 |
| | 29 |
| | 10 |
| | 39 |
| | 29 |
| | 1 |
| | 30 |
| | 213 |
| | 1 |
| | 1 |
| | 17 |
| | 61 |
| | 362 |
| |
| |
a. | Includes U.S. oil and gas operations, which were previously a reportable segment. |
| |
b. | Includes PT-FI's sales to PT Smelting totaling $652$649 million in third-quarter 2017second-quarter 2018 and $348$536 million in third-quarter 2016.second-quarter 2017. |
| |
c. | Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
| |
d. | Includes net charges of $216assets held for sale, primarily Freeport Cobalt, totaling $625 million in productionat June 30, 2018, and delivery costs, $141$373 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years.at June 30, 2017. |
| |
e. | Includes assets held for sale totaling $549 millionnet charges at September 30, 2017, primarilyPT-FI associated with Freeport Cobaltworkforce reductions totaling $82 million in production and the Kisanfu exploration project,delivery costs and $5.1 billion at September 30, 2016, which also included discontinued operations. Also includes assets associated with oil$5 million in selling, general and gas operations of $272 million at September 30, 2017, and $3.5 billion at September 30, 2016.administrative expenses. |
| |
f. | Includes net charges for oil and gas operations totaling $49a $15 million primarily for idle rig costs, inventory adjustments anddecrease related to the terminationadoption of the Morocco well commitment. |
| |
g. | Includes $160 million associated with oilnew guidance for the presentation of net periodic benefit cost for pension and gas operations and $15 million associated with discontinued operations.other postretirement benefit plans (refer to Note 11 for further discussion). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | | | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America Mining | | | | | | | | Copper | | Other | | | | North America Copper Mines | | South America Mining | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | | | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | | Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 168 |
| | $ | 122 |
| | $ | 290 |
| | $ | 2,057 |
| | $ | 332 |
| | $ | 2,389 |
| | $ | 2,720 |
| b | $ | — |
| | $ | 3,290 |
| | $ | 1,412 |
| | $ | 1,261 |
| c | $ | 11,362 |
| | $ | 28 |
| | $ | 28 |
| | $ | 56 |
| | $ | 1,344 |
| | $ | 321 |
| | $ | 1,665 |
| | $ | 3,160 |
| b | $ | — |
| | $ | 2,772 |
| | $ | 1,179 |
| | $ | 1,204 |
| c | $ | 10,036 |
| |
Intersegment | 1,354 |
| | 1,704 |
| | 3,058 |
| | 237 |
| | — |
| | 237 |
| | — |
| | 199 |
| | 22 |
| | 1 |
| | (3,517 | ) | | — |
| | 1,169 |
| | 1,330 |
| | 2,499 |
| | 202 |
| | — |
| | 202 |
| | 53 |
| | 206 |
| | 16 |
| | 2 |
| | (2,978 | ) | | — |
| |
Production and delivery | 772 |
| | 1,284 |
| | 2,056 |
| | 1,450 |
| d | 245 |
| | 1,695 |
| | 1,233 |
| e | 169 |
| | 3,299 |
| | 1,369 |
| | (2,324 | ) | | 7,497 |
| | 588 |
| | 992 |
| | 1,580 |
| | 872 |
| | 249 |
| | 1,121 |
| | 882 |
| | 138 |
| | 2,777 |
| | 1,135 |
| | (1,910 | ) | | 5,723 |
| |
Depreciation, depletion and amortization | 138 |
| | 192 |
| | 330 |
| | 332 |
| | 60 |
| | 392 |
| | 372 |
| | 58 |
| | 7 |
| | 21 |
| | 77 |
| | 1,257 |
| | 90 |
| | 96 |
| | 186 |
| | 214 |
| | 46 |
| | 260 |
| | 353 |
| | 40 |
| | 5 |
| | 14 |
| | 35 |
| | 893 |
| |
Selling, general and administrative expenses | 2 |
| | 2 |
| | 4 |
| | 7 |
| | — |
| | 7 |
| | 92 |
| e | — |
| | — |
| | 13 |
| | 250 |
| | 366 |
| | 2 |
| | 2 |
| | 4 |
| | 4 |
| | — |
| | 4 |
| | 67 |
| | — |
| | — |
| | 11 |
| | 154 |
| | 240 |
| |
Mining exploration and research expenses | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 59 |
| | 61 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 44 |
| | 45 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 81 |
| | 81 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 68 |
| | 68 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (66 | ) | | (66 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (56 | ) | | (56 | ) | |
Operating income (loss) | 610 |
| | 346 |
| | 956 |
| | 505 |
| | 27 |
| | 532 |
| | 1,023 |
| | (28 | ) | | 6 |
| | 10 |
| | (333 | ) | | 2,166 |
| | 517 |
| | 267 |
| | 784 |
| | 456 |
| | 26 |
| | 482 |
| | 1,911 |
| | 28 |
| | 6 |
| | 21 |
| | (109 | ) | | 3,123 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | 1 |
| | 3 |
| | 187 |
| d | — |
| | 187 |
| | 1 |
| | — |
| | — |
| | 13 |
| | 429 |
| | 633 |
| | 2 |
| | — |
| | 2 |
| | 33 |
| | — |
| | 33 |
| | — |
| | — |
| | — |
| | 11 |
| | 247 |
| | 293 |
| |
Provision for income taxes | — |
| | — |
| | — |
| | 288 |
| d | 10 |
| | 298 |
| | 435 |
| | — |
| | — |
| | 4 |
| | 10 |
| | 747 |
| | — |
| | — |
| | — |
| | 170 |
| | 10 |
| | 180 |
| | 830 |
| | — |
| | — |
| | 1 |
| | 10 |
| | 1,021 |
| |
Capital expenditures | 78 |
| | 28 |
| | 106 |
| | 60 |
| | 5 |
| | 65 |
| | 663 |
| | 4 |
| | 3 |
| | 30 |
| | 149 |
| | 1,020 |
| | 88 |
| | 144 |
| | 232 |
| | 131 |
| | 7 |
| | 138 |
| | 449 |
| | 2 |
| | 2 |
| | 7 |
| | 54 |
| | 884 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 356 |
| | $ | 211 |
| | $ | 567 |
| | $ | 1,485 |
| | $ | 379 |
| | $ | 1,864 |
| | $ | 2,014 |
| b | $ | — |
| | $ | 2,820 |
| | $ | 1,360 |
|
| $ | 1,828 |
| c | $ | 10,453 |
| | $ | 111 |
| | $ | 82 |
| | $ | 193 |
| | $ | 1,207 |
| | $ | 223 |
| | $ | 1,430 |
| | $ | 1,599 |
| b | $ | — |
| | $ | 2,153 |
| | $ | 858 |
|
| $ | 819 |
| c | $ | 7,052 |
| |
Intersegment | 1,119 |
| | 1,594 |
| | 2,713 |
| | 155 |
| | — |
| | 155 |
| | 59 |
| | 136 |
| | 22 |
| | 3 |
| | (3,088 | ) | | — |
| | 894 |
| | 1,156 |
| | 2,050 |
| | 173 |
| | — |
| | 173 |
| | — |
| | 134 |
| | 14 |
| | — |
| | (2,371 | ) | | — |
| |
Production and delivery | 913 |
| | 1,340 |
| | 2,253 |
| | 927 |
| | 313 |
| | 1,240 |
| | 1,228 |
| | 159 |
| | 2,820 |
| | 1,275 |
| | (991 | ) | f | 7,984 |
| | 523 |
| | 863 |
| | 1,386 |
| | 767 |
| | 169 |
| | 936 |
| | 817 |
| d | 110 |
| | 2,156 |
| | 836 |
| | (1,573 | ) | | 4,668 |
| e |
Depreciation, depletion and amortization | 170 |
| | 237 |
| | 407 |
| | 319 |
| | 83 |
| | 402 |
| | 284 |
| | 51 |
| | 7 |
| | 22 |
| | 764 |
| | 1,937 |
| | 96 |
| | 138 |
| | 234 |
| | 216 |
| | 42 |
| | 258 |
| | 236 |
| | 38 |
| | 5 |
| | 14 |
| | 54 |
| | 839 |
| |
Impairment of oil and gas properties
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,317 |
|
| 4,317 |
| | |
Selling, general and administrative expenses | 2 |
| | 2 |
| | 4 |
| | 5 |
| | 1 |
| | 6 |
| | 60 |
| | — |
| | — |
| | 13 |
| | 325 |
| f | 408 |
| | 1 |
| | 1 |
| | 2 |
| | 5 |
| | — |
| | 5 |
| | 60 |
| d | — |
| | — |
| | 9 |
| | 182 |
| | 258 |
| |
Mining exploration and research expenses | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 44 |
| | 46 |
| | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 31 |
| | 33 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18 |
| | 18 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | 4 |
| |
Net gain on sales of assets
| (576 | ) | | — |
| | (576 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (186 | ) | | (762 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (33 | ) | | (33 | ) | |
Operating income (loss) | 966 |
| | 224 |
| | 1,190 |
| | 389 |
| | (18 | ) | | 371 |
| | 501 |
| | (74 | ) | | 15 |
| | 53 |
| | (5,551 | ) | | (3,495 | ) | | 385 |
| | 234 |
| | 619 |
| | 392 |
| | 12 |
| | 404 |
| | 486 |
| | (14 | ) | | 6 |
| | (1 | ) | | (217 | ) | | 1,283 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | 1 |
| | 3 |
| | 63 |
| | — |
| | 63 |
| | — |
| | — |
| | — |
| | 11 |
| | 497 |
| | 574 |
| | 1 |
| | 1 |
| | 2 |
| | 31 |
| | — |
| | 31 |
| | — |
| | — |
| | — |
| | 8 |
| | 288 |
| | 329 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 126 |
| | (12 | ) | | 114 |
| | 212 |
| | — |
| | — |
| | 5 |
| | (252 | ) | | 79 |
| | — |
| | — |
| | — |
| | 154 |
| | 5 |
| | 159 |
| | 202 |
| | — |
| | — |
| | 3 |
| | (4 | ) | | 360 |
| |
Capital expenditures | 71 |
| | 16 |
| | 87 |
| | 329 |
| | 3 |
| | 332 |
| | 706 |
| | 2 |
| | 1 |
| | 12 |
| | 1,169 |
| g | 2,309 |
| | 52 |
| | 15 |
| | 67 |
| | 43 |
| | 2 |
| | 45 |
| | 457 |
| | 2 |
| | 2 |
| | 25 |
| | 108 |
| | 706 |
| |
| |
a. | Includes U.S. oil and gas operations, which were previously a reportable segment. |
| |
b. | Includes PT-FI’s sales to PT Smelting totaling $1.4$1.3 billion for the first ninesix months of 20172018 and $912$794 million for the first ninesix months of 2016.2017. |
| |
c. | Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
| |
d. | Includes net charges of $216at PT-FI associated with workforce reductions totaling $103 million in production and delivery costs $141and $5 million in interest expenseselling, general and $2 million in provision for income taxes associated with disputed royalties for prior years.administrative expenses. |
| |
e. | Includes a $27 million decrease related to the adoption of the new guidance for the presentation of net charges of $112 million in productionperiodic benefit cost for pension and delivery costs and $5 million in selling, general and administrative expensesother postretirement benefit plans (refer to Note 11 for PT-FI workforce reductions. |
| |
f. | Includes net charges for oil and gas operations of $942 million in production and delivery costs, primarily for drillship settlements/idle rig costs and inventory adjustments and $38 million for net restructuring charges. |
| |
g. | Includes $1.1 billion associated with oil and gas operations and $70 million associated with discontinued operations.further discussion). |
NOTE 11.10. GUARANTOR FINANCIAL STATEMENTS
All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by FM O&G LLC, as guarantor, which is a 100-percent-owned subsidiary of FM O&G and FCX. The guarantee is an unsecured obligation of the guarantor and ranks equal in right of payment with all existing and future indebtedness of FM O&G LLC, including indebtedness under FCX’s revolving credit facility. The guarantee ranks senior in right of payment with all of FM O&G LLC’s future subordinated obligations and is effectively subordinated in right of payment to any debt of FM O&G LLC’s subsidiaries. The indentures provide that FM O&G LLC’s guarantee may be released or terminated for certain obligations under the following circumstances: (i) all or substantially all of the equity interests or assets of FM O&G LLC are sold to a third party; or (ii) FM O&G LLC no longer has any obligations under any FM O&G senior notes or any refinancing thereof and no longer guarantees any obligations of FCX under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof.
The following condensed consolidating financial information includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all other non-guarantor subsidiaries of FCX. Included are the condensed consolidating balance sheets at SeptemberJune 30, 2017,2018, and December 31, 2016,2017, and the related condensed consolidating statements of comprehensive income (loss) for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, and the condensed consolidating statements of cash flows for the ninesix months ended SeptemberJune 30, 20172018 and 20162017 (in millions), which should be read in conjunction with FCX’s notes to the consolidated financial statements.
CONDENSED CONSOLIDATING BALANCE SHEET
SeptemberJune 30, 20172018
| | | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX | Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
ASSETS | | | | | | | | | | | | | | | | | | |
Current assets | $ | 197 |
| | $ | 716 |
| | $ | 10,948 |
| | $ | (711 | ) | | $ | 11,150 |
| $ | 619 |
| | $ | 783 |
| | $ | 10,220 |
| | $ | (1,279 | ) | | $ | 10,343 |
|
Property, plant, equipment and mine development costs, net | 15 |
| | 11 |
| | 22,899 |
| | (11 | ) | | 22,914 |
| 19 |
| | 4 |
| | 22,900 |
| | — |
| | 22,923 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | — |
| | — |
| | 20 |
| | — |
| | 20 |
| |
Investments in consolidated subsidiaries | 20,178 |
| | — |
| | — |
| | (20,178 | ) | | — |
| 19,003 |
| | — |
| | — |
| | (19,003 | ) | | — |
|
Other assets | 479 |
| | 36 |
| | 3,193 |
| | (465 | ) | | 3,243 |
| 547 |
| | 53 |
| | 3,239 |
| | (77 | ) | | 3,762 |
|
Total assets | $ | 20,869 |
| | $ | 763 |
| | $ | 37,060 |
| | $ | (21,365 | ) | | $ | 37,327 |
| $ | 20,188 |
| | $ | 840 |
| | $ | 36,359 |
| | $ | (20,359 | ) | | $ | 37,028 |
|
| | | | | | | | | | | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | |
Current liabilities | $ | 2,402 |
| | $ | 111 |
| | $ | 3,820 |
| | $ | (816 | ) | | $ | 5,517 |
| $ | 237 |
| | $ | 120 |
| | $ | 4,837 |
| | $ | (1,395 | ) | | $ | 3,799 |
|
Long-term debt, less current portion | 10,600 |
| | 6,428 |
| | 5,621 |
| | (10,082 | ) | | 12,567 |
| 9,594 |
| | 6,686 |
| | 5,054 |
| | (10,211 | ) | | 11,123 |
|
Deferred income taxes | 832 |
| a | — |
| | 2,939 |
| | — |
| | 3,771 |
| 727 |
| a | — |
| | 2,975 |
| | — |
| | 3,702 |
|
Environmental and asset retirement obligations, less current portion | — |
| | 208 |
| | 3,290 |
| | — |
| | 3,498 |
| — |
| | 206 |
| | 3,425 |
| | — |
| | 3,631 |
|
Investments in consolidated subsidiaries | — |
| | 850 |
| | 10,174 |
| | (11,024 | ) | | — |
| — |
| | 857 |
| | 10,368 |
| | (11,225 | ) | | — |
|
Other liabilities | 62 |
| | 3,341 |
| | 1,828 |
| | (3,487 | ) | | 1,744 |
| 156 |
| | 3,339 |
| | 1,922 |
| | (3,486 | ) | | 1,931 |
|
Total liabilities | 13,896 |
| | 10,938 |
| | 27,672 |
| | (25,409 | ) | | 27,097 |
| 10,714 |
| | 11,208 |
| | 28,581 |
| | (26,317 | ) | | 24,186 |
|
| | | | | | | | | | | | | | | | | | |
Equity: | | | | | | | | | | | | | | | | | | |
Stockholders’ equity | 6,973 |
| | (10,175 | ) | | 6,782 |
| | 3,393 |
| | 6,973 |
| 9,474 |
| | (10,368 | ) | | 4,985 |
| | 5,383 |
| | 9,474 |
|
Noncontrolling interests | — |
| | — |
| | 2,606 |
| | 651 |
| | 3,257 |
| — |
| | — |
| | 2,793 |
| | 575 |
| | 3,368 |
|
Total equity | 6,973 |
| | (10,175 | ) | | 9,388 |
| | 4,044 |
| | 10,230 |
| 9,474 |
| | (10,368 | ) | | 7,778 |
| | 5,958 |
| | 12,842 |
|
Total liabilities and equity | $ | 20,869 |
| | $ | 763 |
| | $ | 37,060 |
| | $ | (21,365 | ) | | $ | 37,327 |
| $ | 20,188 |
| | $ | 840 |
| | $ | 36,359 |
| | $ | (20,359 | ) | | $ | 37,028 |
|
| |
a. | All U.S.-related deferred income taxes are recorded at the parent company. |
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 20162017
| | | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX | Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
ASSETS | | | | | | | | | | | | | | | | | | |
Current assets | $ | 230 |
| | $ | 1,790 |
| | $ | 11,675 |
| | $ | (3,260 | ) | | $ | 10,435 |
| $ | 75 |
| | $ | 671 |
| | $ | 10,733 |
| | $ | (790 | ) | | $ | 10,689 |
|
Property, plant, equipment and mine development costs, net | 19 |
| | 24 |
| | 23,176 |
| | — |
| | 23,219 |
| 14 |
| | 11 |
| | 22,919 |
| | (10 | ) | | 22,934 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | — |
| | — |
| | 74 |
| | — |
| | 74 |
| |
Investments in consolidated subsidiaries | 21,110 |
| | — |
| | — |
| | (21,110 | ) | | — |
| 19,570 |
| | — |
| | — |
| | (19,570 | ) | | — |
|
Other assets | 1,985 |
| | 47 |
| | 3,522 |
| | (1,965 | ) | | 3,589 |
| 943 |
| | 48 |
| | 3,179 |
| | (491 | ) | | 3,679 |
|
Total assets | $ | 23,344 |
| | $ | 1,861 |
| | $ | 38,447 |
| | $ | (26,335 | ) | | $ | 37,317 |
| $ | 20,602 |
| | $ | 730 |
| | $ | 36,831 |
| | $ | (20,861 | ) | | $ | 37,302 |
|
| | | | | | | | | | | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | |
Current liabilities | $ | 3,895 |
| | $ | 308 |
| | $ | 3,306 |
| | $ | (3,244 | ) | | $ | 4,265 |
| $ | 1,683 |
| | $ | 220 |
| | $ | 4,046 |
| | $ | (938 | ) | | $ | 5,011 |
|
Long-term debt, less current portion | 12,517 |
| | 6,062 |
| | 11,297 |
| | (15,081 | ) | | 14,795 |
| 10,021 |
| | 6,512 |
| | 5,440 |
| | (10,270 | ) | | 11,703 |
|
Deferred income taxes | 826 |
| a | — |
| | 2,942 |
| | — |
| | 3,768 |
| 748 |
| a | — |
| | 2,901 |
| | — |
| | 3,649 |
|
Environmental and asset retirement obligations, less current portion | — |
| | 200 |
| | 3,287 |
| | — |
| | 3,487 |
| — |
| | 201 |
| | 3,430 |
| | — |
| | 3,631 |
|
Investments in consolidated subsidiary | — |
| | 893 |
| | 8,995 |
| | (9,888 | ) | | — |
| — |
| | 853 |
| | 10,397 |
| | (11,250 | ) | | — |
|
Other liabilities | 55 |
| | 3,393 |
| | 1,784 |
| | (3,487 | ) | | 1,745 |
| 173 |
| | 3,340 |
| | 1,987 |
| | (3,488 | ) | | 2,012 |
|
Total liabilities | 17,293 |
| | 10,856 |
| | 31,611 |
| | (31,700 | ) | | 28,060 |
| 12,625 |
| | 11,126 |
| | 28,201 |
| | (25,946 | ) | | 26,006 |
|
| | | | | | | | | | | | | | | | | | |
Equity: | | | | | | | | | | | | | | | | | | |
Stockholders’ equity | 6,051 |
| | (8,995 | ) | | 4,237 |
| | 4,758 |
| | 6,051 |
| 7,977 |
| | (10,396 | ) | | 5,916 |
| | 4,480 |
| | 7,977 |
|
Noncontrolling interests | — |
| | — |
| | 2,599 |
| | 607 |
| | 3,206 |
| — |
| | — |
| | 2,714 |
| | 605 |
| | 3,319 |
|
Total equity | 6,051 |
| | (8,995 | ) | | 6,836 |
| | 5,365 |
| | 9,257 |
| 7,977 |
| | (10,396 | ) | | 8,630 |
| | 5,085 |
| | 11,296 |
|
Total liabilities and equity | $ | 23,344 |
| | $ | 1,861 |
| | $ | 38,447 |
| | $ | (26,335 | ) | | $ | 37,317 |
| $ | 20,602 |
| | $ | 730 |
| | $ | 36,831 |
| | $ | (20,861 | ) | | $ | 37,302 |
|
| |
a. | All U.S.-related deferred income taxes are recorded at the parent company. |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended September 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 13 |
| | $ | 4,297 |
| | $ | — |
| | $ | 4,310 |
|
Total costs and expenses | 8 |
| | 25 |
| | 3,361 |
| | (1 | ) | | 3,393 |
|
Operating (loss) income | (8 | ) | | (12 | ) | | 936 |
| | 1 |
| | 917 |
|
Interest expense, net | (116 | ) | | (59 | ) | | (218 | ) | | 89 |
| | (304 | ) |
Other income (expense), net | 97 |
| | 3 |
| | 2 |
| | (89 | ) | | 13 |
|
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (27 | ) | | (68 | ) | | 720 |
| | 1 |
| | 626 |
|
Benefit from (provision for) income taxes | 21 |
| | 24 |
| | (432 | ) | | — |
| | (387 | ) |
Equity in affiliated companies’ net earnings (losses) | 286 |
| | 20 |
| | (20 | ) | | (283 | ) | | 3 |
|
Net income (loss) from continuing operations | 280 |
| | (24 | ) | | 268 |
| | (282 | ) | | 242 |
|
Net income from discontinued operations | — |
| | — |
| | 3 |
| | — |
| | 3 |
|
Net income (loss) | 280 |
| | (24 | ) | | 271 |
| | (282 | ) | | 245 |
|
Net loss (income) attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | 69 |
| | (34 | ) | | 35 |
|
Discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
|
Net income (loss) attributable to common stockholders | $ | 280 |
| | $ | (24 | ) | | $ | 340 |
| | $ | (316 | ) | | $ | 280 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 13 |
| | — |
| | 13 |
| | (13 | ) | | 13 |
|
Total comprehensive income (loss) | $ | 293 |
| | $ | (24 | ) | | $ | 353 |
| | $ | (329 | ) | | $ | 293 |
|
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | |
Three Months Ended June 30, 2018 | | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX | Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 110 |
| | $ | 3,767 |
| | $ | — |
| | $ | 3,877 |
| $ | — |
| | $ | 16 |
| | $ | 5,152 |
| | $ | — |
| | $ | 5,168 |
|
Total costs and expenses | 12 |
| | 266 |
| a | 3,239 |
| a | 1 |
| | 3,518 |
| 4 |
| | (16 | ) | | 3,525 |
| | (9 | ) | | 3,504 |
|
Operating (loss) income | (12 | ) | | (156 | ) | | 528 |
| | (1 | ) | | 359 |
| (4 | ) | | 32 |
| | 1,627 |
| | 9 |
| | 1,664 |
|
Interest expense, net | (126 | ) | | (18 | ) | | (132 | ) | | 89 |
| | (187 | ) | (97 | ) | | (76 | ) | | (92 | ) | | 123 |
| | (142 | ) |
Other income (expense), net | 91 |
| | — |
| | (10 | ) | | (76 | ) | | 5 |
| 132 |
| | 2 |
| | 18 |
| | (123 | ) | | 29 |
|
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings | (47 | ) | | (174 | ) | | 386 |
| | 12 |
| | 177 |
| |
Benefit from (provision for) income taxes | 343 |
| | (197 | ) | | (40 | ) | | 8 |
| | 114 |
| |
Equity in affiliated companies’ net (losses) earnings | (75 | ) | | (218 | ) | | (589 | ) | | 883 |
| | 1 |
| |
Income (loss) before income taxes and equity in affiliated companies’ net earnings (losses) | | 31 |
| | (42 | ) | | 1,553 |
| | 9 |
| | 1,551 |
|
(Provision for) benefit from income taxes | | (11 | ) | | 10 |
| | (512 | ) | | (2 | ) | | (515 | ) |
Equity in affiliated companies’ net earnings (losses) | | 849 |
| | 2 |
| | (45 | ) | | (803 | ) | | 3 |
|
Net income (loss) from continuing operations | 221 |
| | (589 | ) | | (243 | ) | | 903 |
| | 292 |
| 869 |
| | (30 | ) | | 996 |
| | (796 | ) | | 1,039 |
|
Net (loss) income from discontinued operations | (4 | ) | | — |
| | 10 |
| | (12 | ) | | (6 | ) | |
Net loss from discontinued operations | | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Net income (loss) | 217 |
| | (589 | ) | | (233 | ) | | 891 |
| | 286 |
| 869 |
| | (30 | ) | | 992 |
| | (796 | ) | | 1,035 |
|
Net income and preferred dividends attributable to noncontrolling interests: | | | | | | | | | | |
Net income attributable to noncontrolling interests: | | | | | | | | | | |
Continuing operations | — |
| | — |
| | (24 | ) | | (23 | ) | | (47 | ) | — |
| | — |
| | (102 | ) | | (64 | ) | | (166 | ) |
Discontinued operations | — |
| | — |
| | (22 | ) | | — |
| | (22 | ) | |
Net income (loss) attributable to common stockholders | $ | 217 |
| | $ | (589 | ) | | $ | (279 | ) | | $ | 868 |
| | $ | 217 |
| $ | 869 |
| | $ | (30 | ) | | $ | 890 |
| | $ | (860 | ) | | $ | 869 |
|
| | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | 12 |
| | — |
| | 12 |
| | (12 | ) | | 12 |
| 11 |
| | — |
| | 11 |
| | (11 | ) | | 11 |
|
Total comprehensive income (loss) | $ | 229 |
| | $ | (589 | ) | | $ | (267 | ) | | $ | 856 |
| | $ | 229 |
| $ | 880 |
| | $ | (30 | ) | | $ | 901 |
| | $ | (871 | ) | | $ | 880 |
|
| |
a. | Includes charges totaling $95 million at the FM O&G LLC guarantor and $0.2 billion at the non-guarantor subsidiaries related to impairment of FCX’s oil and gas properties pursuant to full cost accounting rules. |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended June 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 12 |
| | $ | 3,699 |
| | $ | — |
| | $ | 3,711 |
|
Total costs and expenses | 14 |
| | 11 |
| | 2,990 |
| | 10 |
| | 3,025 |
|
Operating (loss) income | (14 | ) | | 1 |
| | 709 |
| | (10 | ) | | 686 |
|
Interest expense, net | (117 | ) | | (55 | ) | | (74 | ) | | 84 |
| | (162 | ) |
Other income (expense), net | 80 |
| | — |
| | (7 | ) | | (84 | ) | | (11 | ) |
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (51 | ) | | (54 | ) | | 628 |
| | (10 | ) | | 513 |
|
(Provision for) benefit from income taxes | (72 | ) | | 19 |
| | (136 | ) | | 3 |
| | (186 | ) |
Equity in affiliated companies’ net earnings (losses) | 391 |
| | (26 | ) | | (62 | ) | | (304 | ) | | (1 | ) |
Net income (loss) from continuing operations | 268 |
| | (61 | ) | | 430 |
| | (311 | ) | | 326 |
|
Net income from discontinued operations | — |
| | — |
| | 9 |
| | — |
| | 9 |
|
Net income (loss) | 268 |
| | (61 | ) | | 439 |
| | (311 | ) | | 335 |
|
Net income attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (46 | ) | | (20 | ) | | (66 | ) |
Discontinued operations | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Net income (loss) attributable to common stockholders | $ | 268 |
| | $ | (61 | ) | | $ | 392 |
| | $ | (331 | ) | | $ | 268 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 81 |
| | — |
| | 81 |
| | (81 | ) | | 81 |
|
Total comprehensive income (loss) | $ | 349 |
| | $ | (61 | ) | | $ | 473 |
| | $ | (412 | ) | | $ | 349 |
|
| | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | | Nine Months Ended September 30, 2017 | | | | | | | | | | |
Six Months Ended June 30, 2018 | | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX | Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 38 |
| | $ | 11,324 |
| | $ | — |
| | $ | 11,362 |
| $ | — |
| | $ | 31 |
| | $ | 10,005 |
| | $ | — |
| | $ | 10,036 |
|
Total costs and expenses | 31 |
| | 86 |
| | 9,068 |
| | 11 |
| | 9,196 |
| 13 |
| | (8 | ) | | 6,918 |
| | (10 | ) | | 6,913 |
|
Operating (loss) income | (31 | ) | | (48 | ) | | 2,256 |
| | (11 | ) | | 2,166 |
| (13 | ) | | 39 |
| | 3,087 |
| | 10 |
| | 3,123 |
|
Interest expense, net | (355 | ) | | (167 | ) | | (363 | ) | | 252 |
| | (633 | ) | (201 | ) | | (140 | ) | | (177 | ) | | 225 |
| | (293 | ) |
Other income (expense), net | 256 |
| | 3 |
| | 37 |
| | (252 | ) | | 44 |
| 233 |
| | 2 |
| | 47 |
| | (225 | ) | | 57 |
|
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (130 | ) | | (212 | ) | | 1,930 |
| | (11 | ) | | 1,577 |
| |
Income (loss) before income taxes and equity in affiliated companies’ net earnings (losses) | | 19 |
| | (99 | ) | | 2,957 |
| | 10 |
| | 2,887 |
|
(Provision for) benefit from income taxes | (111 | ) | | 74 |
| | (714 | ) | | 4 |
| | (747 | ) | (94 | ) | | 22 |
| | (947 | ) | | (2 | ) | | (1,021 | ) |
Equity in affiliated companies’ net earnings (losses) | 1,017 |
| | 14 |
| | (118 | ) | | (907 | ) | | 6 |
| 1,636 |
| | (4 | ) | | (79 | ) | | (1,552 | ) | | 1 |
|
Net income (loss) from continuing operations | 776 |
| | (124 | ) | | 1,098 |
| | (914 | ) | | 836 |
| 1,561 |
| | (81 | ) | | 1,931 |
| | (1,544 | ) | | 1,867 |
|
Net income from discontinued operations | — |
| | — |
| | 50 |
| | — |
| | 50 |
| |
Net loss from discontinued operations | | — |
| | — |
| | (15 | ) | | — |
| | (15 | ) |
Net income (loss) | 776 |
| | (124 | ) | | 1,148 |
| | (914 | ) | | 886 |
| 1,561 |
| | (81 | ) | | 1,916 |
| | (1,544 | ) | | 1,852 |
|
Net income attributable to noncontrolling interests: | | | | | | | | | | | | | | | | | | |
Continuing operations | — |
| | — |
| | (42 | ) | | (64 | ) | | (106 | ) | — |
| | — |
| | (173 | ) | | (118 | ) | | (291 | ) |
Discontinued operations | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) | |
Net income (loss) attributable to common stockholders | $ | 776 |
| | $ | (124 | ) | | $ | 1,102 |
| | $ | (978 | ) | | $ | 776 |
| $ | 1,561 |
| | $ | (81 | ) | | $ | 1,743 |
| | $ | (1,662 | ) | | $ | 1,561 |
|
| | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | 105 |
| | — |
| | 105 |
| | (105 | ) | | 105 |
| 23 |
| | — |
| | 23 |
| | (23 | ) | | 23 |
|
Total comprehensive income (loss) | $ | 881 |
| | $ | (124 | ) | | $ | 1,207 |
| | $ | (1,083 | ) | | $ | 881 |
| $ | 1,584 |
| | $ | (81 | ) | | $ | 1,766 |
| | $ | (1,685 | ) | | $ | 1,584 |
|
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 294 |
| | $ | 10,159 |
| | $ | — |
| | $ | 10,453 |
|
Total costs and expenses | 56 |
| | 2,859 |
| a | 11,026 |
| a | 7 |
| | 13,948 |
|
Operating loss | (56 | ) | | (2,565 | ) | | (867 | ) | | (7 | ) | | (3,495 | ) |
Interest expense, net | (404 | ) | | (37 | ) | | (370 | ) | | 237 |
| | (574 | ) |
Other income (expense), net | 248 |
| | — |
| | 59 |
| | (202 | ) | | 105 |
|
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings | (212 | ) | | (2,602 | ) | | (1,178 | ) | | 28 |
| | (3,964 | ) |
(Provision for) benefit from income taxes | (1,785 | ) | | 725 |
| | 979 |
| | 2 |
| | (79 | ) |
Equity in affiliated companies’ net (losses) earnings | (2,450 | ) | | (3,202 | ) | | (5,072 | ) | | 10,733 |
| | 9 |
|
Net (loss) income from continuing operations | (4,447 | ) | | (5,079 | ) | | (5,271 | ) | | 10,763 |
| | (4,034 | ) |
Net income (loss) from discontinued operations | 1 |
| | — |
| | (159 | ) | | (33 | ) | | (191 | ) |
Net (loss) income | (4,446 | ) | | (5,079 | ) | | (5,430 | ) | | 10,730 |
| | (4,225 | ) |
Net income and preferred dividends attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (141 | ) | | (36 | ) | | (177 | ) |
Discontinued operations | — |
| | — |
| | (44 | ) | | — |
| | (44 | ) |
Net (loss) income attributable to common stockholders | $ | (4,446 | ) | | $ | (5,079 | ) | | $ | (5,615 | ) | | $ | 10,694 |
| | $ | (4,446 | ) |
| | | | | | | | | |
Other comprehensive income (loss) | 27 |
| | — |
| | 27 |
| | (27 | ) | | 27 |
|
Total comprehensive (loss) income | $ | (4,419 | ) | | $ | (5,079 | ) | | $ | (5,588 | ) | | $ | 10,667 |
| | $ | (4,419 | ) |
|
| | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 25 |
| | $ | 7,027 |
| | $ | — |
| | $ | 7,052 |
|
Total costs and expenses | 22 |
| | 61 |
| | 5,674 |
| | 12 |
| | 5,769 |
|
Operating (loss) income | (22 | ) | | (36 | ) | | 1,353 |
| | (12 | ) | | 1,283 |
|
Interest expense, net | (239 | ) | | (108 | ) | | (145 | ) | | 163 |
| | (329 | ) |
Other income (expense), net | 158 |
| | — |
| | 2 |
| | (163 | ) | | (3 | ) |
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (103 | ) | | (144 | ) | | 1,210 |
| | (12 | ) | | 951 |
|
(Provision for) benefit from income taxes | (132 | ) | | 50 |
| | (282 | ) | | 4 |
| | (360 | ) |
Equity in affiliated companies’ net earnings (losses) | 731 |
| | (6 | ) | | (98 | ) | | (624 | ) | | 3 |
|
Net income (loss) from continuing operations | 496 |
| | (100 | ) | | 830 |
| | (632 | ) | | 594 |
|
Net income from discontinued operations | — |
| | — |
| | 47 |
| | — |
| | 47 |
|
Net income (loss) | 496 |
| | (100 | ) | | 877 |
| | (632 | ) | | 641 |
|
Net income attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (111 | ) | | (30 | ) | | (141 | ) |
Discontinued operations | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Net income (loss) attributable to common stockholders | $ | 496 |
| | $ | (100 | ) | | $ | 762 |
| | $ | (662 | ) | | $ | 496 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 92 |
| | — |
| | 92 |
| | (92 | ) | | 92 |
|
Total comprehensive income (loss) | $ | 588 |
| | $ | (100 | ) | | $ | 854 |
| | $ | (754 | ) | | $ | 588 |
|
| | | | | | | | | |
| |
a. | Includes charges totaling $1.5 billion at the FM O&G LLC guarantor and $2.8 billion at the non-guarantor subsidiaries related to impairment of FCX’s oil and gas properties pursuant to full cost accounting rules. |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
| | Nine Months Ended September 30, 2017 | | | | | | | | | | |
Six Months Ended June 30, 2018 | | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX | Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Net cash (used in) provided by operating activities | $ | (222 | ) | | $ | (383 | ) | | $ | 3,623 |
| | $ | — |
| | $ | 3,018 |
| $ | (163 | ) | | $ | (184 | ) | | $ | 3,025 |
| | $ | — |
| | $ | 2,678 |
|
| | | | | | | | | | | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | | | | | | | | | | |
Capital expenditures | — |
| | (24 | ) | | (996 | ) | | — |
| | (1,020 | ) | (2 | ) | | — |
| | (882 | ) | | — |
| | (884 | ) |
Intercompany loans | (609 | ) | | — |
| | — |
| | 609 |
| | — |
| (442 | ) | | — |
| | — |
| | 442 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 1,757 |
| | (16 | ) | | 93 |
| | (1,834 | ) | | — |
| 2,519 |
| | — |
| | 45 |
| | (2,564 | ) | | — |
|
Asset sales and other, net | — |
| | 58 |
| | (12 | ) | | — |
| | 46 |
| 4 |
| | 1 |
| | (91 | ) | | — |
| | (86 | ) |
Net cash provided by (used in) investing activities | 1,148 |
| | 18 |
| | (915 | ) | | (1,225 | ) | | (974 | ) | 2,079 |
| | 1 |
| | (928 | ) | | (2,122 | ) | | (970 | ) |
| | | | | | | | | | | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | | | | | | | | | | |
Proceeds from debt | — |
| | — |
| | 795 |
| | — |
| | 795 |
| — |
| | — |
| | 352 |
| | — |
| | 352 |
|
Repayments of debt | (915 | ) | | (139 | ) | | (937 | ) | | — |
| | (1,991 | ) | (1,826 | ) | | (52 | ) | | (419 | ) | | — |
| | (2,297 | ) |
Intercompany loans | — |
| | 512 |
| | 97 |
| | (609 | ) | | — |
| — |
| | 228 |
| | 214 |
| | (442 | ) | | — |
|
Cash dividends paid and contributions received, net | (2 | ) | | — |
| | (1,839 | ) | | 1,772 |
| | (69 | ) | (73 | ) | | — |
| | (2,789 | ) | | 2,548 |
| | (314 | ) |
Other, net | (9 | ) | | (11 | ) | | (64 | ) | | 62 |
| | (22 | ) | (17 | ) | | — |
| | (17 | ) | | 16 |
| | (18 | ) |
Net cash (used in) provided by financing activities | (926 | ) | | 362 |
| | (1,948 | ) | | 1,225 |
| | (1,287 | ) | (1,916 | ) | | 176 |
| | (2,659 | ) | | 2,122 |
| | (2,277 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase in cash and cash equivalents | — |
| | (3 | ) | | 760 |
| | — |
| | 757 |
| |
Increase in cash and cash equivalents in assets held for sale | — |
| | — |
| | (45 | ) | | — |
| | (45 | ) | |
Cash and cash equivalents at beginning of period | — |
| | 3 |
| | 4,242 |
| | — |
| | 4,245 |
| |
Cash and cash equivalents at end of period | $ | — |
| | $ | — |
| | $ | 4,957 |
| | $ | — |
| | $ | 4,957 |
| |
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents | | — |
| | (7 | ) | | (562 | ) | | — |
| | (569 | ) |
Decrease in cash and cash equivalents in assets held for sale | | — |
| | — |
| | 44 |
| | — |
| | 44 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | | — |
| | 7 |
| | 4,624 |
| | — |
| | 4,631 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | | $ | — |
| | $ | — |
| | $ | 4,106 |
| | $ | — |
| | $ | 4,106 |
|
| | Nine Months Ended September 30, 2016 | | | | | | | | | | |
Six Months Ended June 30, 2017 | | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX | Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Net cash (used in) provided by operating activities | $ | (264 | ) | | $ | (294 | ) | | $ | 3,151 |
| | $ | 1 |
| | $ | 2,594 |
| $ | (96 | ) | | $ | (284 | ) | | $ | 2,209 |
| | $ | — |
| | $ | 1,829 |
|
| | | | | | | | | | | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | | | | | | | | | | |
Capital expenditures | — |
| | (497 | ) | | (1,814 | ) | | 2 |
| | (2,309 | ) | — |
| | (23 | ) | | (683 | ) | | — |
| | (706 | ) |
Intercompany loans | (1,021 | ) | | (518 | ) | | — |
| | 1,539 |
| | — |
| (427 | ) | | — |
| | — |
| | 427 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 1,643 |
| | (41 | ) | | 124 |
| | (1,726 | ) | | — |
| 1,032 |
| | (16 | ) | | 62 |
| | (1,078 | ) | | — |
|
Asset sales and other, net | — |
| | 208 |
| | 1,210 |
| | (3 | ) | | 1,415 |
| — |
| | (5 | ) | | 8 |
| | — |
| | 3 |
|
Net cash provided by (used in) investing activities | 622 |
| | (848 | ) | | (480 | ) | | (188 | ) | | (894 | ) | 605 |
| | (44 | ) | | (613 | ) | | (651 | ) | | (703 | ) |
| | | | | | | | | | | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | | | | | | | | | | |
Proceeds from debt | 1,721 |
| | — |
| | 1,742 |
| | — |
| | 3,463 |
| — |
| | — |
| | 606 |
| | — |
| | 606 |
|
Repayments of debt | (2,498 | ) | | — |
| | (2,041 | ) | | — |
| | (4,539 | ) | (499 | ) | | — |
| | (751 | ) | | — |
| | (1,250 | ) |
Intercompany loans | — |
| | 1,223 |
| | 316 |
| | (1,539 | ) | | — |
| — |
| | 337 |
| | 90 |
| | (427 | ) | | — |
|
Net proceeds from sale of common stock | 442 |
| | — |
| | 374 |
| | (374 | ) | | 442 |
| |
Cash dividends paid and contributions received, net | (5 | ) | | (78 | ) | | (2,096 | ) | | 2,087 |
| | (92 | ) | (2 | ) | | — |
| | (1,064 | ) | | 1,025 |
| | (41 | ) |
Other, net | (18 | ) | | (2 | ) | | (15 | ) | | 13 |
| | (22 | ) | (8 | ) | | (9 | ) | | (55 | ) | | 53 |
| | (19 | ) |
Net cash (used in) provided by financing activities | (358 | ) | | 1,143 |
| | (1,720 | ) | | 187 |
| | (748 | ) | (509 | ) | | 328 |
| | (1,174 | ) | | 651 |
| | (704 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase in cash and cash equivalents | — |
| | 1 |
| | 951 |
| | — |
| | 952 |
| |
Increase in cash and cash equivalents in assets held for sale | — |
| | — |
| | (43 | ) | | — |
| | (43 | ) | |
Cash and cash equivalents at beginning of period | — |
| | — |
| | 177 |
| | — |
| | 177 |
| |
Cash and cash equivalents at end of period | $ | — |
| | $ | 1 |
| | $ | 1,085 |
| | $ | — |
| | $ | 1,086 |
| |
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents | | — |
| | — |
| | 422 |
| | — |
| | 422 |
|
Decrease in cash and cash equivalents in assets held for sale | | — |
| | — |
| | 7 |
| | — |
| | 7 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | | — |
| | 11 |
| | 4,392 |
| | — |
| | 4,403 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | | $ | — |
| | $ | 11 |
| | $ | 4,821 |
| | $ | — |
| | $ | 4,832 |
|
NOTE 12.11. NEW ACCOUNTING STANDARDS
Revenue Recognition. In May 2014, the Financial Accounting Standards Board (FASB) issued ana new Accounting StandardStandards Update (ASU) related to revenue recognition. FCX adopted this standard effective January 1, 2018, under the modified retrospective approach applied to contracts that provides a single comprehensiveremain in force at the adoption date. The adoption of this standard did not result in any financial statement impacts or changes to FCX’s revenue recognition model,policies or processes as revenue is primarily derived from arrangements in which will replace most existingthe transfer of control coincides with the fulfillment of performance obligations (refer to Note 1 of FCX’s annual report on Form 10-K for disclosure of FCX’s revenue recognition guidance, and also requires expanded disclosures. The core principlepolicy). In connection with the adoption of the model is that revenue is recognized whenstandard and consistent with FCX’s policy prior to adoption of the standard, FCX has elected to account for shipping and handling activities performed after control of goods or services has been transferred to customers ata customer as a fulfillment cost recorded in production and delivery costs on the consolidated statements of income.
FCX recognizes revenue for all of its products upon transfer of control in an amount that reflects the consideration to which an entityit expects to be entitledreceive in exchange for those goodsproducts. Transfer of control is in accordance with the terms of customer contracts, which is generally upon shipment or services.delivery of the product. While payment terms vary by contract, terms generally include payment to be made within 30 days, but not longer than 60 days. Certain of FCX’s concentrate and cathode sales contracts also provide for provisional pricing, which is accounted for as an embedded derivative (refer to Note 6 for further discussion). For provisionally priced sales, 90 percent to 100 percent of the provisional payment is made upon shipment or within 20 days, and final balances are settled in a contractually specified future month (generally one to four months from the shipment date) based on quoted monthly average copper settlement prices on the LME or COMEX and quoted monthly average LBMA gold settlement prices. FCX’s product revenues are also recorded net of treatment charges, royalties and export duties. Refer to Note 9 for a summary of revenue by product type.
Financial Instruments. In January 2016, FASB issued an ASU that amends the guidance on the classification and measurement of financial instruments. This ASU makes limited changes to prior guidance and amends certain disclosure requirements. FCX adopted this ASU effective January 1, 2018, and adoption did not have a material impact on its financial statements.
Leases. In February 2016, FASB issued an ASU that will require lessees to recognize most leases on the balance sheet. This ASU allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. For public entities, this ASU is effective for interim and annual reporting periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early2018, with early adoption is permittedpermitted. In July 2018, FASB issued a practical expedient, which FCX expects to elect, allowing for annual reporting periods beginning after December 15, 2016, and interim reporting periods within that reporting period. FCX will adopt this ASU January 1, 2018, and currently expectsentities to apply the modified retrospective approach under which any cumulative effect adjustment would be recorded to retained earnings asprovisions of the adoption date.updated lease guidance at the January 1, 2019, effective date, without adjusting the comparative periods presented. FCX has substantially completed its review of the impact of this guidance, and based on the termsis completing an assessment of its sales contracts, does not expectlease portfolio and is in the guidanceprocess of implementing a new system, collecting data, and designing processes and controls to have any impact onaccount for its revenue recognition policies or processes. FCX continues to review the impact ofleases in accordance with the new guidance on its financial reporting and disclosures.standard.
Statement of Cash Flows: Restricted Cash.In MarchNovember 2016, FASB issued an ASU that simplifies various aspectschanges the classification and presentation of restricted cash and restricted cash equivalents on the accounting for share-based payment transactions, includingstatement of cash flows. The ASU requires that a statement of cash flows include the income tax consequences, statutory tax withholding requirements, an accounting policy election for forfeitureschange during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the classificationbeginning-of-period and end-of-period total amounts shown on the statement of cash flows. FCX adopted this ASU effective January 1, 2018, and adjusted its consolidated statement of cash flows for the six months ended June 30, 2017, to include restricted cash and adoption did not have a material impact on its financial statements.restricted cash equivalents with cash and cash equivalents.
The impact of adopting this ASU for the six months ended June 30, 2017, follows (in millions): |
| | | | | | | | | | | | |
| | Previously Reported | | Impact of Adoption | | Current Presentation |
Other, net included in cash flow from investing activities | | $ | (4 | ) | | $ | 7 |
| | $ | 3 |
|
Cash flow from investing activities | | (710 | ) | | 7 |
| | (703 | ) |
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents | | 415 |
| | 7 |
| | 422 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | | 4,245 |
| | 158 |
| | 4,403 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | | 4,667 |
| | 165 |
| | 4,832 |
|
| | | | | | |
Net Periodic Pension and Postretirement Benefit Cost.In March 2017, FASB issued an ASU that changes how entities with a defined benefit pension or other postretirement benefit plans present net periodic benefit cost in the income statement. This ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item or items as other compensation costs for those employees who are receiving the retirement benefit. In addition, only the service cost component is eligible for capitalization when applicable (i.e., as a cost of inventory or an internally constructed asset). The other components of net periodic benefit cost are required to be presented separately from the service cost component and outside of operating income. These other components of net periodic benefit cost are not eligible for capitalization, and theFCX elected to include these other components in other income, statement line item or items must be disclosed. For public entities,net. FCX adopted this ASU is effective for annual periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early adoption is permitted. FCX will adopt this ASU on January 1, 2018, and does not expect it to have a material impact onadjusted its presentation ofin the consolidated statements of operations.income for the three- and six-month periods ended June 30, 2017, to conform with the new guidance. The impact of adopting this ASU for the three- and six-month periods ended June 30, 2017, follows (in millions):
|
| | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
| | Previously Reported | | Impact of Adoption | | Current Presentation |
Production and delivery | | $ | 2,495 |
| | $ | (15 | ) | | $ | 2,480 |
|
Total cost of sales | | 2,945 |
| | (15 | ) | | 2,930 |
|
Environmental obligations and shutdown costs | | (19 | ) | | (2 | ) | | (21 | ) |
Total costs and expenses | | 3,042 |
| | (17 | ) | | 3,025 |
|
Operating income | | 669 |
| | 17 |
| | 686 |
|
Other (expense) income, net | | 10 |
| | (17 | ) | | (7 | ) |
|
| | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | Previously Reported | | Impact of Adoption | | Current Presentation |
Production and delivery | | $ | 4,695 |
| | $ | (27 | ) | | $ | 4,668 |
|
Total cost of sales | | 5,534 |
| | (27 | ) | | 5,507 |
|
Selling, general and administrative expenses | | 260 |
| | (2 | ) | | 258 |
|
Mining exploration and research expenses | | 34 |
| | (1 | ) | | 33 |
|
Environmental obligations and shutdown costs | | 8 |
| | (4 | ) | | 4 |
|
Total costs and expenses | | 5,803 |
| | (34 | ) | | 5,769 |
|
Operating income | | 1,249 |
| | 34 |
| | 1,283 |
|
Other income, net | | 34 |
| | (34 | ) | | — |
|
NOTE 13.12. SUBSEQUENT EVENTS
FCX evaluated events after SeptemberJune 30, 2017,2018, and through the date the consolidated financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.
REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
FREEPORT-McMoRan INC.
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Freeport-McMoRan Inc. (the Company) as of SeptemberJune 30, 2017, and2018, the related consolidated statements of operationsincome and comprehensive income (loss) for the three-three and nine-monthsix-month periods ended SeptemberJune 30, 20172018 and 2016,2017, the consolidated statements of cash flows for the nine-monthsix-month periods ended SeptemberJune 30, 20172018 and 2016, and2017, the consolidated statement of equity for the nine-monthsix-month period ended SeptemberJune 30, 2017. These2018, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements are the responsibility of the Company’s management.for them to be in conformity with U.S. generally accepted accounting principles.
We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2017, the related consolidated statements of operations, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February 20, 2018, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial informationstatements 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 (United States),PCAOB, 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 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 Inc. as of December 31, 2016, and the related consolidated statements of operations, comprehensive loss, cash flows and equity for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 24, 2017. In our opinion, the accompanying consolidated balance sheet of Freeport-McMoRan Inc. as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
November 7, 2017August 8, 2018
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related Management’s Discussion and Analysis of Financial Condition and Results of OperationsMD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2016,2017, filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements.Statements (Unaudited). Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations,MD&A, all references to earningsincome or losses per share are on a diluted basis. Additionally, in accordance with accounting guidelines, TF Holdings Limited (TFHL), through which we held a controlling interest in the Tenke Fungurume (Tenke) mine until it was sold on November 16, 2016, is reported as a discontinued operation for all periods presented.
OVERVIEW
We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. We are the world’s largest publicly traded copper producer. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.
Net income (loss) attributable to common stock totaled $280 million in third-quarter 2017, $217 million in third-quarter 2016, $776 million for the first nine months of 2017 and $(4.4) billion for the first nine months of 2016. The 2017 periods, compared with the 2016 periods, benefited from higher copper prices and higher gold sales volumes, partly offset by lower copper sales volumes and higher tax expense. The 2017 periods also include a net charge of $188 million for accruals related to Peruvian government claims for disputed royalties (refer to “Operations – South America Mining” for further discussion). The first nine months of 2016 included significant charges for the impairment of oil and gas properties and other oil and gas charges for drillship settlements/idle rig costs, inventory adjustments, asset impairment and restructuring, partly offset by net gains on sales of assets. Refer to “Consolidated Results” for further discussion.
At September 30, 2017, we had $5.0 billion in consolidated cash and cash equivalents and $14.8 billion in total debt. We had no borrowings and $3.5 billion available under our revolving credit facility. Refer to Note 6 for further discussion of debt.
We continue to manage production, exploration and administrative costs and capital spending and, subject to commodity prices and operational results, expect to generate operating cash flows in excess of capital expenditures for the years 2017 and 2018.
We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We continue to advance a project to develop the Lone Star oxide ores near the Safford operation in eastern Arizona, and PT Freeport Indonesia (PT-FI) has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. We are also pursuing other opportunities to enhance our mines’ net present values, and we continue to advance studies for future development of our copper resources, the timing of which will be dependent on market conditions.
In AugustNet income attributable to common stock totaled $869 million in second-quarter 2018, $268 million in second-quarter 2017, we reached an understanding$1.6 billion for the first six months of 2018 and $496 million for the first six months of 2017. The 2018 periods, compared with the Indonesian government on a framework that would resolve PT Freeport Indonesia’s (PT-FI) long-term operating rights. This framework includes (i) conversion2017 periods, benefited from the Contract of Work (COW)higher copper and gold sales volumes and higher copper prices, partly offset by higher production and delivery costs and foreign income tax expense. Refer to a new operating license (IUPK) providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of the IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreement, and (iv) divestment of 51 percent of the project area interests to Indonesian participants at fair market value structured so that we retain control over operations and governance of PT-FI.“Consolidated Results” for further discussion.
The framework requires documentationDuring the first six months of 2018, we had net repayments of debt totaling $1.95 billion, and execution of a definitive agreement, which must be approved by our Board of Directors (Board) reinstated a cash dividend on our common stock. The Board declared quarterly cash dividends of $0.05 per share of our common stock in both the first and second quarters of 2018. Refer to Note 5 for further discussion.
In April 2018, we entered into a new $3.5 billion, five-year, unsecured revolving credit facility with substantially similar structure and terms as our prior credit facility. Refer to Note 5 for further discussion. At June 30, 2018, we had $3.9 billion in consolidated cash and cash equivalents and $11.1 billion in total debt. We had no borrowings and $3.5 billion available under our revolving credit facility.
As further discussed in Note 8, in July 2018, we and PT-FI entered into a Heads of Agreement with the Indonesian state-owned enterprise PT Indonesia Asahan Aluminium (Persero) (Inalum) and PT-FI’s joint venture partner Rio Tinto. The partiesUnder the terms of the non-binding agreement, Inalum would acquire all of Rio Tinto's interests associated with its joint venture with PT-FI and all of our interests in PT Indocopper Investama (PT-II). Until definitive agreements are reached, PT-FI has reserved all rights under its Contract of Work (COW), including pursuing arbitration under the dispute resolution procedures. PT-FI's export license is effective through February 15, 2019. In July 2018, PT-FI's temporary special mining license (IUPK) was extended to August 31, 2018, and PT-FI will continue to negotiateseek extensions to reach agreement on important aspectsits temporary IUPK until definitive agreements are complete.
PT-FI has revised its mine plans to extend mining activities in the open pit by approximately six months through the first half of implementation2019 following results of an economic analysis. PT-FI’s revised mine plans also reflect a delay in the ramp-up of the framework, including the timingDeep Mill Level Zone (DMLZ) underground mine as a result of mining-induced seismic activity, which began in 2017 and process of divestment, governance matters,continued in 2018. Refer to “Indonesia Mining – Operating and the determination of fair market value, and to complete documentation on a comprehensive agreementDevelopment Activities” for PT-FI’s operations through 2041. The parties have expressed a mutual objective offurther discussion.
completing the negotiations and documentation during 2017. In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term definitive agreement based on the agreed framework continue. Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions. Refer to “Operations – Indonesia Mining” for further discussion.
OUTLOOK
We continue to 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. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically fluctuated and are affected by numerous factors beyond our control. Refer to “Markets” for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flow and capital expenditures. In July 2018, copper prices declined because of the uncertain impact on the global economy of recent international trade actions. If copper prices continue to decline, we will be prepared to adjust our operating plans if necessary to respond to market conditions.
Projections for 2018 and other forward looking statements in this quarterly report on Form 10-Q assume resolution of PT-FI’s long-term mining rights or an extension of PT-FI’s temporary IUPK after August 31, 2018. Refer to “Operations – Indonesia Mining”Note 8 for further discussion of Indonesia regulatory matters, which could have a significant impact on future results. For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement.”
Consolidated Sales Volumes
Following are our projected consolidated sales volumes for the year 2017:2018:
|
| | | |
Copper (millions of recoverable pounds): | | |
North America copper mines | 1,4701,445 |
| |
South America mining | 1,2301,227 |
| |
Indonesia mining | 1,0101,145 |
| |
Total | 3,7103,817 |
| |
| | |
Gold (thousands of recoverable ounces) | 1,6002,416 |
| |
| | |
Molybdenum (millions of recoverable pounds) | 9495 |
| a |
| |
a. | Projected molybdenum sales include 3435 million pounds produced by our Molybdenum mines and 60 million pounds produced by our North America and South America copper mines. |
Consolidated sales volumes for fourth-quarter 2017third-quarter 2018 are expected to approximate 1.0 billion970 million pounds of copper, 625700 thousand ounces of gold and 2324 million pounds of molybdenum.
Projected sales volumes are dependent on operational performance and other factors. For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement.”
Consolidated Unit Net Cash Costs
Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum. Assuming average prices of $1,300$1,250 per ounce of gold and $8.00$11.00 per pound of molybdenum for fourth-quarter 2017the second half of 2018 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.19$1.04 per pound of copper for the year 2017.2018 (including $0.95 per pound of copper in third-quarter 2018 and $1.29 per pound of copper in fourth-quarter 2018). The impact of price changes for fourth-quarter 2017the second half of 2018 on consolidated unit net cash costs would approximate $0.01$0.015 per pound for each $50 per ounce change in the average price of gold and $0.005$0.015 per pound for each $2 per pound change in the average price of molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum. Refer to “Consolidated Results – Production and Delivery Costs” for further discussion of consolidated production costs for our mining operations.
Consolidated Operating Cash Flow
Our consolidated operating cash flows vary with sales volumes, prices realized from copper, gold and molybdenum sales, production costs, income taxes, other working capital changes and other factors. Based on current sales volume and cost estimates, and assuming average prices of $3.00$2.75 per pound of copper, $1,300$1,250 per ounce of gold and $8.00$11.00 per pound of molybdenum for fourth-quarter 2017,the second half of 2018, our consolidated operating cash flows are estimated to approximate $4.3 billion for the year 2017 (including $0.52018 (net of $0.2 billion in working capital sourcesuses and timing of other tax payments). Projected consolidated operating cash flows for the year 20172018 also reflect an estimated income tax provision of $1.3$1.7 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2017)2018). The impact of price changes during fourth-quarter 2017the second half of 2018 on operating cash flows would approximate $80
$185 million for each $0.10 per pound change in the average price of copper, $20$60 million for each $50 per ounce change in the average price of gold and $15$55 million for each $2 per pound change in the average price of molybdenum.
Consolidated Capital Expenditures
Consolidated capital expenditures are expected to approximate $1.5$2.0 billion for the year 2017,2018, including $0.9$1.1 billion for major mining projects primarily forassociated with underground development activities at Grasberg. As a resultin the Grasberg minerals district and development of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in underground development projects.Lone Star oxide project.
MARKETS
World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 20072008 through September 2017,June 2018, the London Metal Exchange (LME) spot copper settlement price varied from a low of $1.26 per pound in 2008 to a record high of $4.60 per pound in 2011; the London Bullion Market Association (London)(LBMA) PM gold price fluctuated from a low of $608$713 per ounce in 20072008 to a record high of $1,895 per ounce in 2011; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $33.88 per pound in 2008. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2016.2017.
This graph presents LME spot copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc. (COMEX), a division of the New York Mercantile Exchange (NYMEX), and the Shanghai Futures Exchange from January 20072008 through September 2017.June 2018. Beginning in mid-2014, copper prices declined because of concerns about slowing growth rates in China, a stronger U.S. dollar and a broad-based decline in commodity prices, but began to improve in fourth-quarter 2016 and intothroughout 2017. During third-quarter 2017,second-quarter 2018, LME spot copper settlement prices ranged from a low of $2.62$3.01 per pound to a high of $3.13$3.29 per pound, averaged $2.88$3.12 per pound and closedsettled at $2.94$3.01 per pound on SeptemberJune 30, 2017.2018. In July 2018, copper prices declined because of the uncertain impact on the global economy of recent international trade actions. The LME spot copper settlement price was $3.09$2.82 per pound on OctoberJuly 31, 2017.2018.
We believe the underlying long-term fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy and a challenging long-term supply environment attributable to difficulty in replacing the output of existing large minesmines’ output with new production sources. Future copper prices are expected to be volatile and are likely to be influenced by demand from China and emerging markets, as well as economic activity in the U.S. and other industrialized countries, the timing of the development of new supplies of copper and the production levels of mines and copper smelters.
This graph presents LondonLBMA PM gold prices from January 20072008 through September 2017.June 2018. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold since 2014. During third-quarter 2017, Londonsecond-quarter 2018, LBMA PM gold prices ranged from a low of $1,211$1,250 per ounce to a high of $1,346$1,351 per ounce, averaged $1,278$1,306 per ounce, and closed at $1,283$1,250 per ounce on SeptemberJune 30, 2017.2018. The LondonLBMA PM gold price was $1,270$1,221 per ounce on OctoberJuly 31, 2017.2018.
This graph presents the Metals Week Molybdenum Dealer Oxide weekly average prices from January 20072008 through September 2017.June 2018. Molybdenum prices declined beginning in mid-2014 because of weaker demand from global steel and stainless steel producers but have rebounded slightly starting in mid-2016.mid-2016 with further improvement in late-2017 and early 2018 before a decline in second-quarter 2018. During third-quarter 2017,second-quarter 2018, the weekly average price of molybdenum ranged from a low of $7.11$10.72 per pound to a high of $8.88$12.46 per pound, averaged $8.14$11.64 per pound, and was $8.49$10.72 per pound on SeptemberJune 30, 2017.2018. The Metals Week Molybdenum Dealer Oxide weekly average price was $8.38$12.02 per pound on OctoberJuly 31, 2017.2018.
CONSOLIDATED RESULTS
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | | 2018 | | 2017 | | 2018 | | 2017 | |
SUMMARY FINANCIAL DATA | (in millions, except per share amounts) | | (in millions, except per share amounts) | |
Revenuesa,b | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
| | $ | 5,168 |
| | $ | 3,711 |
| | $ | 10,036 |
| | $ | 7,052 |
| |
Operating income (loss)a,c,d,e,f | $ | 917 |
| g | $ | 359 |
| h | $ | 2,166 |
| g | $ | (3,495 | ) | h | |
Net income (loss) from continuing operationsi,j,k | $ | 242 |
| | $ | 292 |
| | $ | 836 |
| | $ | (4,034 | ) | | |
Net income (loss) from discontinued operationsl | $ | 3 |
| | $ | (6 | ) | | $ | 50 |
| | $ | (191 | ) | | |
Net income (loss) attributable to common stock | $ | 280 |
|
| $ | 217 |
|
| $ | 776 |
| | $ | (4,446 | ) | | |
Operating incomea,c,d,e | | $ | 1,664 |
| | $ | 686 |
| f | $ | 3,123 |
| | $ | 1,283 |
| f |
Net income from continuing operationsg,h,i | | $ | 1,039 |
| j | $ | 326 |
| | $ | 1,867 |
| j | $ | 594 |
| |
Net (loss) income from discontinued operationsk | | $ | (4 | ) | | $ | 9 |
| | $ | (15 | ) | | $ | 47 |
| |
Net income attributable to common stock | | $ | 869 |
|
| $ | 268 |
|
| $ | 1,561 |
| | $ | 496 |
| |
Diluted net income (loss) per share of common stock: | | | | | | | | | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | | $ | 0.59 |
| | $ | 0.18 |
| | $ | 1.08 |
| | $ | 0.31 |
| |
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | | — |
| | — |
| | (0.01 | ) | | 0.03 |
| |
| $ | 0.19 |
|
| $ | 0.16 |
|
| $ | 0.53 |
| | $ | (3.45 | ) | | $ | 0.59 |
|
| $ | 0.18 |
|
| $ | 1.07 |
| | $ | 0.34 |
| |
| | | | | | | | | |
Diluted weighted-average common shares outstanding | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| | 1,458 |
| | 1,453 |
| | 1,458 |
| | 1,453 |
| |
| | | | | | | | | | | | | | | | |
Operating cash flowsm | $ | 1,189 |
| | $ | 980 |
| | $ | 3,018 |
| | $ | 2,594 |
| | |
Operating cash flowsl | | $ | 1,309 |
| | $ | 1,037 |
| | $ | 2,678 |
| | $ | 1,829 |
| |
Capital expenditures | $ | 314 |
| | $ | 494 |
| | $ | 1,020 |
| | $ | 2,309 |
| | $ | 482 |
| | $ | 362 |
| | $ | 884 |
| | $ | 706 |
| |
At September 30: | | | | | | | | | |
At June 30: | | | | | | | | | |
Cash and cash equivalents | $ | 4,957 |
| | $ | 1,086 |
| | $ | 4,957 |
| | $ | 1,086 |
| | $ | 3,859 |
| | $ | 4,667 |
| | $ | 3,859 |
| | $ | 4,667 |
| |
Total debt, including current portion | $ | 14,782 |
| | $ | 18,882 |
| | $ | 14,782 |
| | $ | 18,882 |
| | $ | 11,127 |
| | $ | 15,354 |
| | $ | 11,127 |
| | $ | 15,354 |
| |
| | | | | | | | | | | | | | | | |
a.As further detailed in Note 10, following is a summary of revenues and operating income (loss) by operating division (in millions): |
| | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
Revenues | 2017 | | 2016 | | 2017 | | 2016 | |
North America copper mines | $ | 1,105 |
| | $ | 1,084 |
| | $ | 3,348 |
| | $ | 3,280 |
| |
South America mining | 1,023 |
| | 671 |
| | 2,626 |
| | 2,019 |
| |
Indonesia mining | 1,121 |
| | 986 |
| | 2,720 |
| | 2,073 |
| |
Molybdenum mines | 65 |
| | 46 |
| | 199 |
| | 136 |
| |
Rod & Refining | 1,145 |
| | 937 |
| | 3,312 |
| | 2,842 |
| |
Atlantic Copper Smelting & Refining | 555 |
| | 445 |
| | 1,413 |
| | 1,363 |
| |
Corporate, other & eliminations | (704 | ) | | (292 | ) | | (2,256 | ) | | (1,260 | ) | |
Total revenues | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
| |
| | | | | | | | |
Operating income (loss) | | | | | | | | |
North America copper mines | $ | 349 |
| | $ | 213 |
| | $ | 956 |
| | $ | 1,190 |
| |
South America mining | 128 |
| | 111 |
| | 532 |
| | 371 |
| |
Indonesia mining | 547 |
| | 374 |
| | 1,023 |
| | 501 |
| |
Molybdenum mines | (13 | ) | | (26 | ) | | (28 | ) | | (74 | ) | |
Rod & Refining | 2 |
| | 4 |
| | 6 |
| | 15 |
| |
Atlantic Copper Smelting & Refining | 11 |
| | 17 |
| | 10 |
| | 53 |
| |
Corporate, other & eliminations | (107 | ) | | (334 | ) | | (333 | ) | | (5,551 | ) | |
Total operating income (loss) | $ | 917 |
| | $ | 359 |
| | $ | 2,166 |
| | $ | (3,495 | ) | |
| |
a. | Refer to Note 9 for a summary of revenues and operating income by operating division. |
| |
b. | Includes favorable (unfavorable) adjustments to embedded derivatives for provisionally priced concentrate and cathode copper sales recognized in prior periods(refer to Note 6). |
| |
c. | Includes net gains on sales of assets totaling $95$45 million ($3945 million to net income attributable to common stock or $0.03 per share) in third-quarter 2017, $(15)second-quarter 2018, $10 million ($(7)10 million to net income attributable to common stock or $(0.01)$0.01 per share) in third-quarter 2016, $81second-quarter 2017, $56 million ($3556 million to net income attributable to common stock or $0.04 per share) for the first six months of 2018, and $33 million ($33 million to net income attributable to common stock or $0.02 per share) for the first ninesix months of 20172017. Refer to “Net Gain on Sales of Assets” for further discussion. |
| |
d. | Includes net charges (credits) to environmental obligations and $5related litigation reserves totaling $50 million ($250 million to net lossincome attributable to common stock or $0.03 per share) in the second quarter and first six months of 2018, $(30) million ($(30) million to net income attributable to common stock or $(0.02) per share) in second-quarter 2017, and $(11) million ($(11) million to net income attributable to common stock or $(0.01) per share) for the first six months of 2017. |
| |
e. | Includes net credits to mining operations totaling $10 million ($4 million to net income attributable to common stock or less than $0.01 per share) in the second quarter and first six months of 2018. The 2017 periods include net charges of $87 million ($46 million to net income attributable to common stock or 0.03 per share) in second-quarter 2017 and $108 million ($57 million to net income attributable to common stock or $0.04 per share) for the first ninesix months of 2016. Refer2017 associated with workforce reductions at PT-FI. The 2017 periods also include net charges to “Revenues”mining operations for further discussion.inventory adjustments and asset impairment totaling $9 million ($9 million to net income attributable to common stock or $0.01 per share) in second-quarter 2017 and $28 million ($28 million to net income attributable to common stock or $0.02 per share) for the first six months of 2017. |
| |
c.f. | Second-quarter 2017 includes net credits at oil and gas operations totaling $6 million ($6 million to net income attributable to common stock or less than $0.01 per share) primarily related to adjustments to the fair value of the contingent payments related to the 2016 drillship settlements. The first six months of 2017 include net credits at oil and gas operations totaling $4 million ($4 million to net income attributable to common stock or $0.01 per share) primarily related to drillship settlements, including adjustments to the fair value of the contingent payments, partly offset by other contract termination costs. |
| |
g. | Includes net (credits) chargesgains (losses) on early extinguishment of debt totaling $9 million ($9 million to mining operations totalingnet income attributable to common stock or $0.01 per share) in second-quarter 2018, $(4) million ($(4) million to net income attributable to common stock or less than $(0.01) per share) in third-quartersecond-quarter 2017, $40$8 million ($40 million to net income attributable to common stock or $0.02 per share) in third-quarter 2016, $24 million ($24 million to net income attributable to common stock or $0.02 per share) for the first nine months of 2017 and $44 million ($44 million to net loss attributable to common stock or $0.03 per share) for the first nine months of 2016, primarily for inventory adjustments and asset impairment/retirement. |
| |
d. | Includes net credits to oil and gas operations totaling $4 million ($48 million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2017 and $8 million ($8 million to net income attributable to common stock or |
$0.01 per share) for the first nine months of 2017, primarily related to drillship settlements, and net charges of $49 million ($49 million to net income attributable to common stock or $0.03 per share) in third-quarter 2016 and $980 million ($980 million to net loss attributable to common stock or $0.76 per share) for the first nine months of 2016, for drillship settlements, inventory adjustments, asset impairment and restructuring charges.
| |
e. | Includes a net gain on sales of assets totaling $33 million ($33 million to net income attributable to common stock or $0.02 per share) in third-quarter 2017 and $66 million ($66 million to net income attributable to common stock or $0.05 per share) for the first ninesix months of 2017, primarily associated with oil2018, and gas transactions and $13$(3) million ($13 million to net income attributable to common stock or $0.01 per share) in third quarter 2016 and $762 million ($757 million to net loss attributable to common stock or $0.59 per share) for the first nine months of 2016, primarily associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture and our interest in the Timok exploration project in Serbia. |
| |
f. | Includes net charges (credits) to environmental obligations and related litigation reserves totaling $64 million ($64 million to net income attributable to common stock or $0.04 per share) in third-quarter 2017, $(12) million ($(12) million to net income attributable to common stock or $(0.01) per share) in third-quarter 2016, $53 million ($53 million to net income attributable to common stock or $0.04 per share) for the first nine months of 2017 and $(11) million ($(11) million to net loss attributable to common stock or $(0.01) per share) for the first nine months of 2016. Refer to Note 9 for further discussion. |
| |
g. | Includes a charge of $357 million ($188 million to net income attributable to common stock or $0.13 per share) in the third-quarter and first nine months of 2017 associated with disputed Cerro Verde royalties for prior years as well as net charges of $9 million ($5(3) million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2017 and $117 million ($62 million to net income attributable to common stock or $0.04$(0.01) per share) for the first ninesix months of 2017 associated with workforce reductions at PT-FI.2017. Refer to Note 5 for further discussion. |
| |
h. | Includes $239net tax credits of $7 million ($239 million to net income attributable to common stock or $0.18 (less than $0.01 per share) in third-quarter 2016the second quarter and $4.3 billionfirst six months of 2018, $32 million ($4.3 billion to net loss attributable to common stock or $3.350.02 per share) in second-quarter 2017 and $31 million ($0.02 per share) for the first ninesix months of 20162017. Refer to reduce the carrying value“Income Taxes” for further discussion of oil and gas properties pursuant to full cost accounting rules.these net tax credits. |
| |
i. | Includes net gains on exchanges and early extinguishment of debt totaling $11 million ($11 million to net income attributable to common stock or $0.01 per share) in third-quarter 2017, $15 million ($15 million to net income attributable to common stock or $0.01 per share) in third-quarter 2016, $8 million ($8 million to net income attributable to common stock or $0.01 per share) for the first nine months of 2017 and $51 million ($51 million to net loss attributable to common stock or $0.04 per share) for the first nine months of 2016. |
| |
j. | We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations – Smelting & Refining” for a summary of net impacts from changes in these deferrals. |
| |
k.j. | Includes netinterest received on tax (charges) credits of $(10)refunds totaling $6 million ($(0.01)6 million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2017second-quarter 2018 and $21$30 million ($0.0119 million to net income attributable to common stock or $0.01 per share) for the first ninesix months of 2017 associated with alternative minimum tax credit carryforwards, and $3322018. The 2018 periods also include charges to interest expense totaling $2 million ($0.241 million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2016second-quarter 2018 and $290$6 million ($0.222 million to net income attributable to common stock or less than $0.01 per share) for the first ninesix months of 2016 associated with alternative minimum tax credits, changes2018 related to valuation allowancesthe Cerro Verde royalty and net operating loss carryback claims.related matters. |
| |
l.k. | Net income from discontinued operations for the third quarter and first nine months of 2017 primarilyPrimarily reflects adjustments to the estimated fair value of the potential $120 million in contingent consideration related to the November 2016 sale of our interest in TFHL,TF Holdings Limited (TFHL), which totaled $58 million at September 30, 2017, and will continue to be adjusted through December 31, 2019. Net loss from discontinued operations for the third quarter and first nine months of 2016 includes an estimated loss of $5 million (less than $0.01 per share) and $182 million ($0.14 per share), respectively, on the sale of our interest in TFHL. Refer to Note 2 for a summary of the components of net income (loss) from discontinued operations. |
| |
m.l. | Includes net working capital (uses) sources and changes intiming of other tax payments of $52$(192) million in third-quarter 2017, $8second-quarter 2018, $154 million in third-quarter 2016, $395second-quarter 2017, $(213) million for the first ninesix months of 20172018 and $483$343 million for the first ninesix months of 2016.2017. |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2017 | | 2016a | | 2017 | | 2016a | | 2018 | | 2017 | | 2018 | | 2017 | |
SUMMARY OPERATING DATA | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | | | |
Production | 996 |
| | 1,093 |
| | 2,730 |
| | 3,091 |
| | 1,014 |
| | 883 |
| | 1,966 |
| | 1,734 |
| |
Sales, excluding purchases | 932 |
| | 1,113 |
| | 2,683 |
| | 3,100 |
| | 989 |
| | 942 |
| | 1,982 |
| | 1,751 |
| |
Average realized price per pound | $ | 2.94 |
| | $ | 2.19 |
| | $ | 2.79 |
| | $ | 2.17 |
| | $ | 3.08 |
| | $ | 2.65 |
| | $ | 3.10 |
| | $ | 2.65 |
| |
Site production and delivery costs per poundb | $ | 1.57 |
| | $ | 1.37 |
| | $ | 1.60 |
| | $ | 1.42 |
| | |
Unit net cash costs per poundb | $ | 1.21 |
| | $ | 1.14 |
| | $ | 1.26 |
| | $ | 1.28 |
| | |
Site production and delivery costs per pounda | | $ | 1.69 |
| | $ | 1.63 |
| | $ | 1.68 |
| | $ | 1.61 |
| |
Unit net cash costs per pounda | | $ | 0.96 |
| | $ | 1.19 |
| | $ | 0.97 |
| | $ | 1.28 |
| |
Gold (thousands of recoverable ounces) | | | | | | | | | | | | | | | | |
Production | 418 |
| | 308 |
| | 1,010 |
| | 658 |
| | 746 |
| | 353 |
| | 1,345 |
| | 592 |
| |
Sales, excluding purchases | 355 |
| | 317 |
| | 969 |
| | 674 |
| | 676 |
| | 432 |
| | 1,286 |
| | 614 |
| |
Average realized price per ounce | $ | 1,290 |
| | $ | 1,327 |
| | $ | 1,261 |
| | $ | 1,292 |
| | $ | 1,274 |
| | $ | 1,243 |
| | $ | 1,291 |
| | $ | 1,242 |
| |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | | | | | | | |
Production | 24 |
| | 19 |
| | 70 |
| | 58 |
| | 24 |
| | 23 |
| | 46 |
| | 46 |
| |
Sales, excluding purchases | 22 |
| | 16 |
| | 71 |
| | 52 |
| | 24 |
| | 25 |
| | 48 |
| | 49 |
| |
Average realized price per pound | $ | 9.22 |
| | $ | 9.14 |
| | $ | 9.18 |
| | $ | 8.36 |
| | $ | 12.89 |
| | $ | 9.58 |
| | $ | 12.42 |
| | $ | 9.16 |
| |
Oil Equivalents | | | | | | | | | |
Sales volumes | | | | | | | | | |
Oil (millions of barrels (MMBbls)) | 0.4 |
| | 9.1 |
| | 1.4 |
| | 26.1 |
| | |
Natural gas (billion cubic feet (Bcf)) | 3.1 |
| | 13.8 |
| | 13.3 |
| | 52.2 |
| | |
Natural gas liquids (MMBbls) | — |
| | 0.6 |
| | 0.2 |
| | 1.8 |
| | |
Million barrels of oil equivalent (MMBOE) | 1.0 |
| | 12.0 |
| | 3.8 |
| | 36.6 |
| | |
Thousand BOE (MBOE) per day | 11 |
| | 131 |
| | 14 |
| | 133 |
| | |
| |
a. | Excludes the results of the Tenke mine, which was sold in November 2016 and is reported as a discontinued operation. Copper sales from the Tenke mine totaled 118 million pounds in third-quarter 2016 and 365 million for the first nine months of 2016. |
| |
b. | Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.” |
Revenues
Consolidated revenues totaled $4.3$5.2 billion in third-quarter 2017second-quarter 2018 and $11.4$10.0 billion for the first ninesix months of 2017,2018, compared with $3.9$3.7 billion in third-quarter 2016second-quarter 2017 and $10.5$7.1 billion for the first ninesix months of 2016.2017. Revenues from our mining operations primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum. Revenues from our oil and gas operations, most of which were sold in 2016, include the sale of oil, natural gas and natural gas liquids (NGLs).
Following is a summary of changes in our consolidated revenues between periods (in millions):
| | | Three Months Ended September 30 | | Nine Months Ended September 30 | Three Months Ended June 30 | | Six Months Ended June 30 |
| | | | | | |
Revenues - 2016 period | $ | 3,877 |
| | $ | 10,453 |
| |
(Lower) higher sales volumes: | | | | |
Consolidated revenues - 2017 period | | $ | 3,711 |
| | $ | 7,052 |
|
Higher (lower) sales volumes: | | | | |
Copper | (394 | ) | | (903 | ) | 127 |
| | 615 |
|
Gold | 50 |
| | 381 |
| 303 |
| | 832 |
|
Molybdenum | 56 |
| | 161 |
| (10 | ) | | (10 | ) |
Oil and gas | (394 | ) | | (1,031 | ) | |
Higher (lower) average realized prices: | | | | |
Higher average realized prices: | | | | |
Copper | 700 |
| | 1,664 |
| 426 |
| | 892 |
|
Gold | (13 | ) | | (29 | ) | 20 |
| | 62 |
|
Molybdenum | 2 |
| | 59 |
| 79 |
| | 155 |
|
Net adjustments for prior period provisionally priced copper sales | 110 |
| | 76 |
| |
Lower treatment charges | 38 |
| | 83 |
| |
Adjustments for prior period provisionally priced copper sales | | 43 |
| | (151 | ) |
Higher treatment charges | | (11 | ) | | (40 | ) |
Higher revenues from purchased copper | 87 |
| | 256 |
| 119 |
| | 200 |
|
Higher Atlantic Copper revenues | 110 |
| | 50 |
| 202 |
| | 323 |
|
Other, including intercompany eliminations | 81 |
| | 142 |
| 159 |
| | 106 |
|
Revenues - 2017 period | $ | 4,310 |
| | $ | 11,362 |
| |
Consolidated revenues - 2018 period | | $ | 5,168 |
| | $ | 10,036 |
|
| | | | | | |
Sales Volumes. Consolidated copper sales decreasedincreased to 932989 million pounds in third-quarter 2017,second-quarter 2018, compared with 1.1 billion942 million pounds in third-quarter 2016,second-quarter 2017, primarily reflecting lowerhigher mining and milling rates and higher ore grades in North America and Indonesia and the timing of shipments.Indonesia. Consolidated copper sales decreasedincreased to 2.72.0 billion pounds for the first ninesix months of 2018, compared with 1.75 billion for the first six months of 2017, compared with 3.1 billion pounds for the first nine months of 2016, primarily reflecting lower ore gradeshigher operating rates in North America and the impact of the May 2016 sale of an additional 13 percent interest in Morenci.Indonesia.
Consolidated gold sales volumes increased to 355676 thousand ounces in third-quartersecond-quarter 2018 and 1.3 million ounces for the first six months of 2018, compared with 432 thousand ounces in second-quarter 2017 and 969614 thousand ounces for the first ninesix months of 2017, compared with 317 thousand ounces in third-quarter 2016 and 674 thousand ounces for the first nine months of 2016, primarily reflecting higher ore grades and operating rates in Indonesia.
Consolidated molybdenum sales volumes increased to 22of 24 million pounds in third-quarter 2017second-quarter 2018 and 7148 million pounds for the first ninesix months of 2017, compared with 162018 were slightly lower than sales of 25 million pounds in third-quarter 2016second-quarter 2017 and 5249 million pounds for the first ninesix months of 2016, primarily reflecting higher demand.2017.
Refer to “Operations” for further discussion of sales volumes at our mining operations.
Oil and gas sales volumes of 1.0 MMBOE in third-quarter 2017 and 3.8 MMBOE for the first nine months of 2017, were lower than oil and gas sales volumes of 12.0 MMBOE in third-quarter 2016 and 36.6 MMBOE for the first nine months of 2016, primarily reflecting the sales of significant oil and gas properties in 2016.
Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Third-quarter 2017Second-quarter 2018 average realized prices, compared with third-quarter 2016,second-quarter 2017, were 3416 percent higher for copper, 32 percent lowerhigher for gold and 135 percent higher for molybdenum, and average realized prices for the first ninesix months of 2017,2018, compared with the first ninesix months of 2016,2017, were 2917 percent higher for copper, 24 percent lowerhigher for gold and 1036 percent higher for molybdenum. Refer to “Markets” for further discussion.
As discussed below, substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period until final pricing on the date of settlement. Average realized copper prices include net adjustments to current period provisionally priced copper sales totaling $(37) million in second-quarter 2018 and $(79) million for the first six months of 2018, compared with $55 million in second-quarter 2017 and $61 million for the first six months of 2017. Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.
Prior Period Provisionally Priced Copper Sales. Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average spot copper prices. We receive market prices based on prices in the specified future period, which results in price fluctuations recorded through revenues until the date of settlement. 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 provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of
settlement. 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. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs. Favorable (unfavorable)
impacts of netNet adjustments to prior periods’ provisionally priced copper sales from continuing operationsrecorded in consolidated revenues totaled $95$23 million in third-quartersecond-quarter 2018 and $(70) million for the first six months of 2018, compared with $(20) million in second-quarter 2017 and $81 million for the first ninesix months of 2017, compared with $(15) million in third-quarter 20162017. Refer to Notes 6 and $5 million9 for the first nine monthsa summary of 2016, primarily reflecting higher copper prices in the 2017 periods.total adjustments to prior period and current period provisionally priced sales.
At SeptemberJune 30, 2017,2018, we had provisionally priced copper sales at our copper mining operations totaling 338336 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.93$3.01 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the SeptemberJune 30, 2017,2018, provisional price recorded would have an approximate $11$10 million effect on our 20172018 net income attributable to common stock. The LME spot copper price was $3.09settled at $2.82 per pound on OctoberJuly 31, 2017.2018.
Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges. LowerHigher treatment charges in the 20172018 periods, compared with the 20162017 periods, primarily reflect lower concentratehigher sales volumes at North America copper mines.from Indonesia.
Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. In addition to higher copper prices, we had higher purchasedPurchased copper volumes in the 2017 periods (75totaled 90 million pounds in third-quarter 2017second-quarter 2018 and 195 million for the first nine months of 2017, compared with 61 million pounds in third-quarter 2016 and 131164 million pounds for the first ninesix months of 2016).2018, compared with 62 million pounds in second-quarter 2017 and 120 million for the first six months of 2017.
Atlantic Copper Revenues. Atlantic Copper revenues totaled $555$602 million in third-quarter 2017second-quarter 2018 and $1.4$1.2 billion for the first ninesix months of 2017,2018, compared with $445$400 million in third-quarter 2016second-quarter 2017 and $1.4 billion$858 million for the first ninesix months of 2016.2017. Higher revenues in third-quarter 2017,the 2018 periods, compared with third-quarter 2016,the 2017 periods, primarily reflect higher copper sales volumes and higher copper prices.
Production and Delivery Costs
Consolidated production and delivery costs totaled $2.8$2.9 billion in third-quarter 2017,second-quarter 2018, $2.5 billion in third-quarter 2016, $7.5second-quarter 2017, $5.7 billion for the first ninesix months of 20172018 and $8.0$4.7 billion for the first ninesix months of 2016.2017. Production and delivery costs for the third quarter2017 periods included charges totaling $82 million in second-quarter 2017 and $103 million for the first ninesix months of 2017 included charges totaling $216 million at Cerro Verde associated with disputed royalties for prior years (refer to “Operations – South America Mining” for further discussion). ProductionPT-FI workforce reductions. Higher consolidated production and delivery costs forin the first nine months of 2016 included charges totaling $942 million2018 periods, compared with the 2017 periods, primarily reflect higher concentrate purchases at oilAtlantic Copper and gascopper purchases at Rod & Refining operations, primarily for drillship settlementsas well as higher mining, repairs and inventory adjustments.maintenance costs in North America and South America.
Mining Unit Site Production and Delivery Costs. Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulphuric acid, reagents, liners, tires and explosives. Consolidated unit site production and delivery costs (before net noncash and other costs) for our copper mines averaged $1.57$1.69 per pound of copper in third-quarter 2017second-quarter 2018 and $1.60$1.68 per pound of copper for the first ninesix months of 2017,2018, compared with $1.37$1.63 per pound of copper in third-quarter 2016second-quarter 2017 and $1.42$1.61 per pound of copper for the first ninesix months of 2016.2017. Higher consolidated unit site production and delivery costs forin the 20172018 periods, compared with the 20162017 periods, primarily reflect lowerhigher mining, repairs and maintenance costs in North America and South America, partly offset by higher copper sales volumes.volumes at PT-FI. 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
Depreciation will vary under the unit-of-production (UOP) method as a result of changes in sales volumes and the related UOP rates at our individual mines.mining operations. Consolidated depreciation, depletion and amortization (DD&A) totaled $418$442 million in third-quarter 2017second-quarter 2018 and $1.3 billion$893 million for the first ninesix months of 2017,2018, compared with $643$450 million in third-quarter 2016second-quarter 2017 and $1.9 billion$839 million for the first ninesix months of 2016. Lower DD&A in the 2017 periods, compared with the 2016 periods, primarily reflects lower DD&A from oil and gas operations resulting from sales of significant oil and gas properties in 2016.
Impairment of Oil and Gas Properties
The review of the carrying value of our oil and gas properties for impairment under full cost accounting rules resulted in the recognition of impairment charges totaling $239 million for third-quarter 2016 and $4.3 billion for the first nine months of 2016.2017.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled $106$109 million in third-quarter 2017, $110second-quarter 2018, $107 million in third-quarter 2016, $366second-quarter 2017, $240 million for the first ninesix months of 20172018 and $408$258 million for the first ninesix months of 2016. Selling, general and administrative expenses include net oil and gas-related charges totaling $17 million for the first nine months of 2017 for contract termination and $38 million for the first nine months of 2016 for restructuring.
Consolidated selling, general and administrative expenses were net of capitalized general and administrative expenses at our oil and gas operations totaling $16 million in third-quarter 2016 and $66 million for the first nine months of 2016.2017.
Mining Exploration and Research Expenses
Consolidated exploration and research expenses for our mining operations totaled $27$24 million in third-quarter 2017, $13second-quarter 2018, $19 million in third-quarter 2016, $61second-quarter 2017, $45 million for the first ninesix months of 20172018 and $46$33 million for the first ninesix months of 2016.2017. Our mining exploration activities are generally associated with our existing mines, and focusfocusing on opportunities to expand reserves and resources to support development of additional future production capacity. Exploration results continue to indicate opportunities for significant future potential reserve additions in North America and South America. Exploration spending is expected to approximate $75$90 million for the year 2017.2018.
Environmental Obligations and Shutdown Costs
Environmental obligation costs reflect net revisions to our long-term environmental obligations, which vary from period to period because of changes to environmental laws and regulations, the settlement of environmental matters and/or circumstances affecting our operations that could result in significant changes in our estimates. Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations. Net charges (credits) for environmental obligations and shutdown costs totaled $73$59 million in third-quarter 2017, $(3)second-quarter 2018, $(21) million in third-quarter 2016, $81second-quarter 2017, $68 million for the first ninesix months of 20172018 and $18$4 million for the first ninesix months of 2016.2017. Refer to Note 98 for further discussion.
Net Gain on Sales of Assets
Net gain on sales of assets totaled $33$45 million in third-quarter 2017second-quarter 2018 and $66$56 million for the first ninesix months of 2017,2018, primarily associated withreflecting adjustments to the fair value of the potential $150 million in contingent consideration related to the 2016 sale of onshore California oil and gas transactions. properties, which will continue to be adjusted through December 31, 2020.
Net gain on sales of assets totaled $13$10 million in third-quarter 2016second-quarter 2017 and $762$33 million for the first ninesix months of 2017, primarily reflecting an adjustment to assets held for sale, partly offset by an adjustment to the estimated fair value of the contingent consideration related to the 2016 primarilysale of onshore California oil and gas properties. The first six months of 2017 also included gains associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint ventureoil and a portion of our interest in the Timok exploration project in Serbia.gas transactions.
Interest Expense, Net
Interest expense, net, for the third quarter and first nine months of 2017 includes $141 million associated with disputed Cerro Verde royalties (refer to Note 9 for additional discussion). Consolidated interest costs (before capitalization and excluding interest expense associated with disputed Cerro Verde royalties)capitalization) totaled $196$165 million in third-quarter 2017, $211second-quarter 2018, $192 million in third-quarter 2016, $583second-quarter 2017, $341 million for the first ninesix months of 20172018 and $647$387 million for the first ninesix months of 2016.2017. Lower interest cost forcosts in the 2018 periods, compared with the 2017 periods, compared to the 2016 periods, reflectsreflect a decrease in total debt .debt.
Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $33$23 million in third-quarter 2017, $24second-quarter 2018, $30 million in third-quarter 2016, $91second-quarter 2017, $48 million for the first ninesix months of 20172018 and $73$58 million for the first ninesix months of 2016.
Income Taxes
Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision from continuing operations for the 2017 and 2016 periods (in millions, except percentages):
| | | Nine Months Ended September 30, | | Six Months Ended June 30, | |
| 2017 | | 2016 | | 2018 | | 2017 | |
| Income (Loss)a | | Effective Tax Rate | | Income Tax Benefit (Provision) | | Income (Loss)a | | Effective Tax Rate | | Income Tax Benefit (Provision) | | Incomea | | Effective Tax Rate | | Income Tax (Provision) Benefit | | Incomea | | Effective Tax Rate | | Income Tax (Provision) Benefit | |
U.S. | $ | 66 |
| | (40)% | | $ | 27 |
| b | $ | (616 | ) | | 47% | | $ | 292 |
| c | $ | 311 |
| | (3)% | | $ | 9 |
| b | $ | 61 |
| | (39)% | | $ | 24 |
| c |
South America | 709 |
| | 42% | | (296 | ) | | 290 |
| | 39% | | (114 | ) | | 459 |
| | 39% | | (180 | ) | d | 386 |
| | 41% | | (159 | ) | |
Indonesia | 1,035 |
| | 42% | | (435 | ) | | 544 |
| | 39% | | (212 | ) | | 1,945 |
| | 43% | | (830 | ) | | 487 |
| | 41% | | (202 | ) | |
Cerro Verde royalty dispute | (357 | ) | | N/A | | (2 | ) | d | — |
| | N/A | | — |
| | |
Impairment of oil and gas properties | — |
| | N/A | | — |
| | (4,317 | ) | | 38% | | 1,632 |
| | |
Valuation allowance, net | — |
| | N/A | | — |
| | — |
| | N/A | | (1,632 | ) | e | |
Eliminations and other | 124 |
| | N/A | | (38 | ) | | 135 |
| | N/A | | (46 | ) | | 172 |
| | N/A | | (31 | ) | | 17 |
| | N/A | | (24 | ) | |
Rate adjustmentf | — |
| | N/A | | (3 | ) | | — |
| | N/A | | 1 |
| | |
Rate adjustmente | | — |
| | N/A | | 11 |
| | — |
| | N/A | | 1 |
| |
Consolidated FCX | $ | 1,577 |
| | 47% | g | $ | (747 | ) | | $ | (3,964 | ) | | (2)% | | $ | (79 | ) | | $ | 2,887 |
| | 35% | f | $ | (1,021 | ) | | $ | 951 |
| | 38% | | $ | (360 | ) | |
| |
a. | Represents income (loss) from continuing operations by geographic location before income taxes and equity in affiliated companies’ net earnings.earnings (losses). |
| |
b. | Includes neta tax creditscredit of $21$5 million associated with alternative minimumthe settlement of a state income tax credit carryforwards.examination. |
| |
c. | Includes net tax credits of $290$31 million associated with anticipated recovery of alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims.credit carryforwards. |
| |
d. | Includes a tax chargescredit of $127$5 million for($2 million net of noncontrolling interest) associated with Cerro Verde’s disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013.taxes. |
| |
e. | As a result of the impairment to U.S. oil and gas properties, we recorded tax charges to establish valuation allowances against U.S. federal and state deferred tax assets that will not generate a future benefit. |
| |
f. | In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate. |
| |
g.f. | The consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. Accordingly, variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Assuming achievement of current sales volume and cost estimates and average prices of $3.00$2.75 per pound for copper, $1,300$1,250 per ounce for gold and $8.00$11.00 per pound for molybdenum for fourth-quarter 2017,the second half of 2018, we estimate our consolidated effective tax rate related to continuing operations for the year 2017 will2018 would approximate 4538 percent, which would result in a consolidated effective tax rate of approximately 46 percent in third-quarter 2018 and 38 percent in fourth-quarter 2018. We expect that our consolidated effective tax rate for the year 2018 would decrease with higher prices. |
Net (Loss) Income (Loss) from Discontinued Operations
In November 2016, we completed the sale of our interest in TFHL, through which we had an effective 56 percent interest in the Tenke copper and cobalt concessions in the Democratic Republic of Congo. In accordance with accounting guidelines, the results of TFHL have been reported as discontinued operations for all periods presented. Net (loss) income from discontinued operations totaled $3of $(4) million in third-quartersecond-quarter 2018, $9 million in second-quarter 2017, and $50$15 million for the first ninesix months of 2018 and $47 million for the first six months of 2017, which primarily reflected adjustments to the fair value of the potential $120 million contingent consideration related to the November 2016 sale of our interest in TFHL, which totaled $58 million at September 30, 2017, and will continue to be adjusted through December 31, 2019. Net loss from discontinued operations of $6 million in third-quarter 2016 and $191 million for the first nine months of 2016 include an estimated loss on disposal of $5 million for third-quarter 2016 and $182 million for the first nine months of 2016. Refer to Note 2 for a summary of the components of net income (loss) from discontinued operations.
OPERATIONS
North America Copper Mines
We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. All of the North America mining operations are wholly owned, except for Morenci.
We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. On May 31, 2016, we completed the sale of an additional 13 percent undivided interest in Morenci. As a result of the transaction, our undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent.
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 segment. The remainder of our North America copper sales is in the form of copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines.
Operating and Development Activities. We have significant undeveloped reserves and resources in North America and a portfolio of potential long-term development projects. Future investments will be undertaken based on the results of economic and technical feasibility studies, and are dependent on market conditions. We continue to study opportunities to reduce the capital intensity of our potential long-term development projects.
Through exploration drilling, we have identified a significant resource at our wholly owned Lone Star project located near the Safford operation in eastern Arizona. The Safford mine is expectedAn initial project to have copper production through 2024. Initial production fromdevelop the Lone Star oxide ores could begincommenced in 2021 assuming anfirst-quarter 2018, with first production expected by the end of 2020. Total capital costs, including mine equipment and pre-production stripping, are expected to approximate three-year development period$850 million and usingwill benefit from the utilization of existing infrastructure at the adjacent Safford operation. Total preliminary capital cost estimatesAs of June 30, 2018, $113 million has been incurred for development, including mine equipment and pre-production stripping, approximates $850 million. Projected productionthis project. Production from the Lone Star oxide ores wouldis expected to average approximately 200 million pounds of copper per year with an approximate 20-year mine life. Considering the long-term nature and size of the project, results could vary from these estimates. The project would also advanceadvances the potential for development of a larger-scale district opportunity. We have obtained regulatory approvals for this project and are assessing the timing to commence pre-stripping activities. We are conducting additional drilling as wefollowing positive exploration results and continue to evaluate longer term opportunities available from the significant long-term sulfide potential in the Lone Star/Safford minerals district.
For further discussion of the risks associated with development projects, refer to Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2017, as updated by Part II, Item 1A. “Risk Factors” of this quarterly report on Form 10-Q.
Operating Data. Following is a summary of consolidated operating data for the North America copper mines for the thirdsecond quarters and first ninesix months of 20172018 and 2016:2017:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | | 2018 | | 2017 |
Operating Data, Net of Joint Venture Interests | | | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | |
Production | 375 |
| | 455 |
| | 1,151 |
| | 1,411 |
| 354 |
| | 384 |
| | 702 |
| | 776 |
|
Sales, excluding purchases | 347 |
| | 458 |
| | 1,130 |
| | 1,425 |
| 361 |
| | 408 |
| | 745 |
| | 783 |
|
Average realized price per pound | $ | 2.92 |
| | $ | 2.19 |
| | $ | 2.74 |
| | $ | 2.18 |
| $ | 3.12 |
| | $ | 2.62 |
| | $ | 3.14 |
| | $ | 2.65 |
|
| | | | | | | | | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | | | | | |
Productiona | 8 |
| | 9 |
| | 25 |
| | 25 |
| 8 |
| | 8 |
| | 15 |
| | 17 |
|
| | | | | | | | | | | | | | |
100% Operating Data | | | | | | | | | | | | | | |
SX/EW operations | | | | | | | | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 655,600 |
| | 681,400 |
| | 681,200 |
| | 764,900 |
| 689,500 |
| | 692,700 |
| | 682,100 |
| | 697,300 |
|
Average copper ore grade (percent) | 0.27 |
| | 0.31 |
| | 0.28 |
| | 0.32 |
| 0.24 |
| | 0.29 |
| | 0.26 |
| | 0.28 |
|
Copper production (millions of recoverable pounds) | 280 |
| | 316 |
| | 839 |
| | 921 |
| 268 |
| | 282 |
| | 530 |
| | 559 |
|
| | | | | | | | | | | | | | |
Mill operations | | | | | | | | | | | | | | |
Ore milled (metric tons per day) | 297,200 |
| | 300,500 |
| | 300,000 |
| | 299,900 |
| 307,000 |
| | 299,100 |
| | 297,900 |
| | 301,400 |
|
Average ore grade (percent): | | | | | | | | | | | | | | |
Copper | 0.38 |
| | 0.47 |
| | 0.40 |
| | 0.48 |
| 0.35 |
| | 0.39 |
| | 0.35 |
| | 0.40 |
|
Molybdenum | 0.03 |
| | 0.03 |
| | 0.03 |
| | 0.03 |
| 0.02 |
| | 0.03 |
| | 0.02 |
| | 0.03 |
|
Copper recovery rate (percent) | 86.6 |
| | 87.8 |
| | 86.6 |
| | 86.3 |
| 89.1 |
| | 86.7 |
| | 88.5 |
| | 86.6 |
|
Copper production (millions of recoverable pounds) | 167 |
| | 216 |
| | 527 |
| | 661 |
| 157 |
| | 174 |
| | 308 |
| | 360 |
|
| |
a. | Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. |
North America’s consolidated copper sales volumes of 347361 million pounds in third-quarter 2017second-quarter 2018 and 1.1 billion745 million pounds for the first ninesix months of 20172018 were lower than third-quarter 2016second-quarter 2017 sales of 458408 million pounds and 1.4 billion783 million pounds for the first ninesix months of 2016,2017, primarily reflecting lower ore grades. Additionally, third-quarter 2017 was impacted by the timing of shipments.
North America copper sales are estimated to approximate 1.51.45 billion pounds for the year 2017,2018, compared with 1.81.5 billion pounds in 2016.2017.
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 metals 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 table summarizes unit net cash costs and gross profit per pound at our North America copper mines for the third quarters and first nine months of 2017 and 2016.mines. 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Three Months Ended September 30, | |
| 2017 | | 2016 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 2.92 |
| | $ | 2.92 |
| | $ | 7.59 |
| | $ | 2.19 |
| | $ | 2.19 |
| | $ | 7.39 |
| |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.67 |
| | 1.56 |
| | 5.58 |
| | 1.44 |
| | 1.34 |
| | 5.51 |
| |
By-product credits | (0.17 | ) | | — |
| | — |
| | (0.17 | ) | | — |
| | — |
| |
Treatment charges | 0.11 |
| | 0.11 |
| | — |
| | 0.10 |
| | 0.09 |
| | — |
| |
Unit net cash costs | 1.61 |
| | 1.67 |
| | 5.58 |
| | 1.37 |
| | 1.43 |
| | 5.51 |
| |
DD&A | 0.28 |
| | 0.27 |
| | 0.49 |
| | 0.28 |
| | 0.26 |
| | 0.70 |
| |
Noncash and other costs, net | 0.04 |
| | 0.04 |
| | 0.05 |
| | 0.06 |
| | 0.05 |
| | 0.13 |
| |
Total unit costs | 1.93 |
| | 1.98 |
| | 6.12 |
| | 1.71 |
| | 1.74 |
| | 6.34 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.03 |
| | 0.03 |
| | — |
| | — |
| | — |
| | — |
| |
Gross profit per pound | $ | 1.02 |
| | $ | 0.97 |
| | $ | 1.47 |
| | $ | 0.48 |
| | $ | 0.45 |
| | $ | 1.05 |
| |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 345 |
| | 345 |
| | | | 457 |
| | 457 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 8 |
| | | | | | 9 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Three Months Ended June 30, | |
| 2018 | | 2017 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 3.12 |
| | $ | 3.12 |
| | $ | 12.13 |
| | $ | 2.62 |
| | $ | 2.62 |
| | $ | 8.17 |
| |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.94 |
| | 1.78 |
| | 9.09 |
| | 1.58 |
| | 1.49 |
| | 6.12 |
| |
By-product credits | (0.25 | ) | | — |
| | — |
| | (0.16 | ) | | — |
| | — |
| |
Treatment charges | 0.10 |
| | 0.10 |
| | — |
| | 0.10 |
| | 0.09 |
| | — |
| |
Unit net cash costs | 1.79 |
| | 1.88 |
| | 9.09 |
| | 1.52 |
| | 1.58 |
| | 6.12 |
| |
DD&A | 0.25 |
| | 0.23 |
| | 0.80 |
| | 0.29 |
| | 0.27 |
| | 0.66 |
| |
Noncash and other costs, net | 0.07 |
| | 0.06 |
| | 0.15 |
| | 0.05 |
| | 0.04 |
| | 0.05 |
| |
Total unit costs | 2.11 |
| | 2.17 |
| | 10.04 |
| | 1.86 |
| | 1.89 |
| | 6.83 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Gross profit per pound | $ | 1.01 |
| | $ | 0.95 |
| | $ | 2.09 |
| | $ | 0.76 |
| | $ | 0.73 |
| | $ | 1.34 |
| |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 361 |
| | 361 |
| | | | 408 |
| | 408 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 8 |
| | | | | | 8 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Six Months Ended June 30, | |
| 2017 | | 2016 | | 2018 | | 2017 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 2.74 |
| | $ | 2.74 |
| | $ | 7.57 |
| | $ | 2.18 |
| | $ | 2.18 |
| | $ | 6.24 |
| | $ | 3.14 |
| | $ | 3.14 |
| | $ | 11.52 |
| | $ | 2.65 |
| | $ | 2.65 |
| | $ | 7.56 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.59 |
| | 1.50 |
| | 5.62 |
| | 1.41 |
| | 1.34 |
| | 4.86 |
| | 1.89 |
| | 1.75 |
| | 8.47 |
| | 1.54 |
| | 1.45 |
| | 5.62 |
| |
By-product credits | (0.16 | ) | | — |
| | — |
| | (0.12 | ) | | — |
| | — |
| | (0.22 | ) | | — |
| | — |
| | (0.15 | ) | | — |
| | — |
| |
Treatment charges | 0.11 |
| | 0.10 |
| | — |
| | 0.11 |
| | 0.10 |
| | — |
| | 0.10 |
| | 0.10 |
| | — |
| | 0.10 |
| | 0.10 |
| | — |
| |
Unit net cash costs | 1.54 |
| | 1.60 |
| | 5.62 |
| | 1.40 |
| | 1.44 |
| | 4.86 |
| | 1.77 |
| | 1.85 |
| | 8.47 |
| | 1.49 |
| | 1.55 |
| | 5.62 |
| |
DD&A | 0.29 |
| | 0.27 |
| | 0.56 |
| | 0.29 |
| | 0.27 |
| | 0.61 |
| | 0.25 |
| | 0.23 |
| | 0.74 |
| | 0.30 |
| | 0.28 |
| | 0.59 |
| |
Noncash and other costs, net | 0.06 |
| b | 0.06 |
| | 0.06 |
| | 0.05 |
| | 0.05 |
| | 0.06 |
| | 0.05 |
| | 0.05 |
| | 0.12 |
| | 0.07 |
| | 0.07 |
| | 0.06 |
| |
Total unit costs | 1.89 |
| | 1.93 |
| | 6.24 |
| | 1.74 |
| | 1.76 |
| | 5.53 |
| | 2.07 |
| | 2.13 |
| | 9.33 |
| | 1.86 |
| | 1.90 |
| | 6.27 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (0.01 | ) | | (0.01 | ) | | — |
| | 0.01 |
| | 0.01 |
| | — |
| |
Gross profit per pound | $ | 0.85 |
| | $ | 0.81 |
| | $ | 1.33 |
| | $ | 0.44 |
| | $ | 0.42 |
| | $ | 0.71 |
| | $ | 1.06 |
| | $ | 1.00 |
| | $ | 2.19 |
| | $ | 0.80 |
| | $ | 0.76 |
| | $ | 1.29 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 1,127 |
| | 1,127 |
| | | | 1,421 |
| | 1,421 |
| | | | 744 |
| | 744 |
| | | | 782 |
| | 782 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 25 |
| | | | | | 25 |
| | | | | | 15 |
| | | | | | 17 |
| |
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes $21 million ($0.02 per pound of copper) for asset impairment charges at Morenci. |
Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.611.79 per pound of copper in third-quartersecond-quarter 20172018 and $1.54 per pound$1.77 for the first ninesix months of 20172018 were higher than unit net cash costs of $1.371.52 per pound in third-quartersecond-quarter 20162017 and $1.40 per pound$1.49 for the first ninesix months of 2016,2017, primarily reflecting lower sales volumes.volumes and higher mining and milling costs, partly offset by higher by-product credits.
Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales.
Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.581.78 per pound of copper for the year 2017,2018, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $8.0011.00 per pound for fourth-quarter 2017.the second half of 2018. North
America’s average unit net cash costs for the year 20172018 would change by approximately $0.0070.02 per pound for each $2 per pound change in the average price of molybdenum.molybdenum for the second half of 2018.
South America Mining
We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest). These operations, which are consolidated in our financial statements.
South America mining includes open-pit mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.
In August 2018, Cerro Verde Royalty Dispute.In October 2017, the Peruvian Supreme Court issuedand its workers’ union agreed to a ruling in favor of SUNAT, Peru’s national tax authority,new three year collective labor agreement effective September 1, 2018. The terms include bonuses that the assessments of royalties for the year 2008 on ore processed by the Cerro Verde concentrator were proper under Peruvian law. As previously reported in our annual report on Form 10-K for the year ended December 31, 2016, SUNAT has assessed mining royalties on ore processed by the Cerro Verde concentrator for the period December 2006are expected to September 2011, which Cerro Verde has contested on the basis that its 1998 stability agreement exempts from royalties all minerals extracted from its mining concessions, irrespective of the method used for processing those minerals.
As a result of the unfavorable Peruvian Supreme Court decision on the 2008 royalty dispute, Cerro Verde recorded pre-tax charges totaling $357 million ($359 million including net tax charges and $188 million net of noncontrolling interests)be paid in third-quarter 2017 associated with prior assessments and potential royalty and related assessments for December 2006 through the year 2013. Effective January 1, 2014, Cerro Verde entered into a new 15-year stability agreement and has been paying royalties in accordance with the new stability agreement.
Cerro Verde acted in good faith in applying the provisions of its 1998 stability agreement and continues to evaluate alternatives to defend its rights. Cerro Verde intends to seek a waiver available under Peruvian law of penalties and interest associated with this dispute and has not recorded charges for potential unpaid penalties and interest totaling $360 million ($193 million net of noncontrolling interests) at September 30, 2017, as we believe that Cerro Verde should be successful under Peruvian law in obtaining a waiver. Refer to Note 9 for additional discussion.2018.
Operating and Development Activities. The Cerro Verde expansion project commenced operations in September 2015 and achieved capacity operating rates during first-quarter 2016. Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. The Cerro Verde expansion project, which achieved capacity operating rates in early 2016, expanded the concentrator facilitiesfacilities’ capacity from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day. In March 2018, Cerro Verde received a modified environmental permit allowing it to operate its existing concentrator facilities at rates up to 409,500 metric tons of ore per day. Cerro Verde's concentrator facilities have continued to perform well, with average mill throughput rates of 385,300 metric tons of ore per day for the first six months of 2018.
We continue to evaluate a major expansion at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra indicate a significant sulfide resource, which could potentially support a major mill project similar to facilities recently constructed at Cerro Verde. We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher recoveries. Future investments will depend on technical studies, which are being advanced, economic factors and market conditions.
Operating Data. Following is a summary of consolidated operating data for our South America mining operations for the third quarters and first nine months of 2017 and 2016:operations:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | | 2018 | | 2017 |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | |
Production | 328 |
| | 317 |
| | 932 |
| | 986 |
| 313 |
| | 300 |
| | 606 |
| | 604 |
|
Sales | 327 |
| | 323 |
| | 923 |
| | 973 |
| 312 |
| | 287 |
| | 602 |
| | 596 |
|
Average realized price per pound | $ | 2.95 |
| | $ | 2.19 |
| | $ | 2.82 |
| | $ | 2.17 |
| $ | 3.07 |
| | $ | 2.67 |
| | $ | 3.09 |
| | $ | 2.65 |
|
| | | | | | | | | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | | | | | |
Productiona | 8 |
| | 5 |
| | 21 |
| | 14 |
| 7 |
| | 7 |
| | 13 |
| | 13 |
|
| | | | | | | | | | | | | | |
SX/EW operations | | | | | | | | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 180,400 |
| | 163,000 |
| | 153,100 |
| | 158,100 |
| 246,700 |
| | 126,000 |
| | 207,600 |
| | 123,100 |
|
Average copper ore grade (percent) | 0.36 |
| | 0.41 |
| | 0.37 |
| | 0.41 |
| 0.30 |
| | 0.36 |
| | 0.32 |
| | 0.39 |
|
Copper production (millions of recoverable pounds) | 65 |
| | 78 |
| | 190 |
| | 250 |
| 75 |
| | 59 |
| | 142 |
| | 125 |
|
| | | | | | | | | | | | | | |
Mill operations | | | | | | | | | | | | | | |
Ore milled (metric tons per day) | 379,200 |
| | 355,300 |
| | 355,400 |
| | 348,900 |
| 385,200 |
| | 347,600 |
| | 385,300 |
| | 343,300 |
|
Average ore grade (percent): | | | | | | | | | | | | | | |
Copper | 0.44 |
| | 0.41 |
| | 0.44 |
| | 0.42 |
| 0.38 |
| | 0.44 |
| | 0.39 |
| | 0.44 |
|
Molybdenum | 0.02 |
| | 0.02 |
| | 0.02 |
| | 0.02 |
| 0.01 |
| | 0.02 |
| | 0.01 |
| | 0.02 |
|
Copper recovery rate (percent) | 80.9 |
| | 84.4 |
| | 82.7 |
| | 86.1 |
| 84.4 |
| | 83.0 |
| | 81.7 |
| | 83.8 |
|
Copper production (millions of recoverable pounds) | 263 |
| | 239 |
| | 742 |
| | 736 |
| 238 |
| | 241 |
| | 464 |
| | 479 |
|
| |
a. | Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde. |
South America’s consolidated copper sales volumes of 327312 million pounds in third-quartersecond-quarter 2017 approximated third-quarter2016 sales of 323 million pounds. South America’s lower consolidated copper sales volumes of 9232018 and 602 million pounds for the first ninesix months of 2018 were higher than sales of 287 million pounds in second-quarter2017 and 596 million for the first six months of 2017, compared with 973 million pounds forprimarily reflecting higher mining and milling rates, partly offset by lower ore grades. Lower second-quarter2017 sales volumes also reflected the first nine monthsimpact of 2016, reflect the Cerro Verde operation being unfavorably impacted by unusually high rainfall and a 21-day labor strike during first-quarter 2017.
timing of shipments. Copper sales from South America mines are expected to approximate 1.2 billion pounds of copper for the year 2017,2018, compared with 1.31.2 billion pounds of copper in 20162017.
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 metals 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 table summarizes unit net cash costs and gross profit per pound of copper at the South America mining operations for the third quarters and first nine months of 2017 and 2016.operations. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver. 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. |
| | | | | | | | | | | | | | | | |
| | | | | | | | |
| Three Months Ended September 30, | |
| 2017 | | 2016 | |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | |
Revenues, excluding adjustments | $ | 2.95 |
| | $ | 2.95 |
| | $ | 2.19 |
| | $ | 2.19 |
| |
| | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.60 |
| | 1.50 |
| | 1.27 |
| | 1.20 |
| |
By-product credits | (0.19 | ) | | — |
| | (0.12 | ) | | — |
| |
Treatment charges | 0.22 |
| | 0.22 |
| | 0.24 |
| | 0.24 |
| |
Royalty on metals | 0.01 |
| | 0.01 |
| | 0.01 |
| | — |
| |
Unit net cash costs | 1.64 |
| | 1.73 |
| | 1.40 |
| | 1.44 |
| |
DD&A | 0.41 |
| | 0.38 |
| | 0.41 |
| | 0.39 |
| |
Noncash and other costs, net | 0.69 |
| a | 0.63 |
| | 0.01 |
| | 0.01 |
| |
Total unit costs | 2.74 |
| | 2.74 |
| | 1.82 |
| | 1.84 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.18 |
| | 0.18 |
| | (0.02 | ) | | (0.02 | ) | |
Gross profit per pound | $ | 0.39 |
| | $ | 0.39 |
| | $ | 0.35 |
| | $ | 0.33 |
| |
| | | | | | | | |
Copper sales (millions of recoverable pounds) | 327 |
| | 327 |
| | 323 |
| | 323 |
| |
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | Three Months Ended June 30, | |
| 2017 | | 2016 | 2018 | | 2017 | |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | |
Revenues, excluding adjustments | $ | 2.82 |
| | $ | 2.82 |
| | $ | 2.17 |
| | $ | 2.17 |
| $ | 3.07 |
| | $ | 3.07 |
| | $ | 2.67 |
| | $ | 2.67 |
| |
| | | | | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.55 |
| | 1.45 |
| | 1.23 |
| | 1.17 |
| 1.77 |
| | 1.65 |
| | 1.55 |
| | 1.47 |
| |
By-product credits | (0.17 | ) | | — |
| | (0.10 | ) | | — |
| (0.22 | ) | | — |
| | (0.13 | ) | | — |
| |
Treatment charges | 0.22 |
| | 0.22 |
| | 0.24 |
| | 0.24 |
| 0.18 |
| | 0.18 |
| | 0.22 |
| | 0.22 |
| |
Royalty on metals | 0.01 |
| | 0.01 |
| | — |
| | — |
| 0.01 |
| | 0.01 |
| | 0.01 |
| | 0.01 |
| |
Unit net cash costs | 1.61 |
| | 1.68 |
| | 1.37 |
| | 1.41 |
| 1.74 |
| | 1.84 |
| | 1.65 |
| | 1.70 |
| |
DD&A | 0.42 |
| | 0.40 |
| | 0.41 |
| | 0.39 |
| 0.43 |
| | 0.40 |
| | 0.44 |
| | 0.41 |
| |
Noncash and other costs, net | 0.25 |
| a | 0.23 |
| | 0.02 |
| | 0.02 |
| 0.05 |
| | 0.05 |
| | 0.02 |
| | 0.02 |
| |
Total unit costs | 2.28 |
| | 2.31 |
| | 1.80 |
| | 1.82 |
| 2.22 |
| | 2.29 |
| | 2.11 |
| | 2.13 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.04 |
| | 0.04 |
| | 0.01 |
| | 0.01 |
| 0.04 |
| | 0.04 |
| | (0.05 | ) | | (0.05 | ) | |
Gross profit per pound | $ | 0.58 |
| | $ | 0.55 |
| | $ | 0.38 |
| | $ | 0.36 |
| $ | 0.89 |
| | $ | 0.82 |
| | $ | 0.51 |
| | $ | 0.49 |
| |
| | | | |
| |
| | | | | | | | |
Copper sales (millions of recoverable pounds) | 923 |
| | 923 |
| | 973 |
| | 973 |
| 312 |
| | 312 |
| | 287 |
| | 287 |
| |
| |
a. | Includes charges totaling $216 million ($0.66 per pound of copper in third-quarter 2017 and $0.23 per pound of copper for the first nine months of 2017) associated with disputed Cerro Verde royalties for prior years. |
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2018 | | 2017 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
Revenues, excluding adjustments | $ | 3.09 |
| | $ | 3.09 |
| | $ | 2.65 |
| | $ | 2.65 |
|
| | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.78 |
| | 1.64 |
| | 1.52 |
| | 1.42 |
|
By-product credits | (0.24 | ) | | — |
| | (0.16 | ) | | — |
|
Treatment charges | 0.19 |
| | 0.19 |
| | 0.22 |
| | 0.22 |
|
Royalty on metals | 0.01 |
| | 0.01 |
| | 0.01 |
| | 0.01 |
|
Unit net cash costs | 1.74 |
| | 1.84 |
| | 1.59 |
| | 1.65 |
|
DD&A | 0.43 |
| | 0.40 |
| | 0.43 |
| | 0.40 |
|
Noncash and other costs, net | 0.05 |
| | 0.05 |
| | 0.02 |
| | 0.02 |
|
Total unit costs | 2.22 |
| | 2.29 |
| | 2.04 |
| | 2.07 |
|
Other revenue adjustments, primarily for pricing on prior period open sales | (0.06 | ) | | (0.06 | ) | | 0.07 |
| | 0.07 |
|
Gross profit per pound | $ | 0.81 |
| | $ | 0.74 |
| | $ | 0.68 |
| | $ | 0.65 |
|
| | | | |
| |
|
Copper sales (millions of recoverable pounds) | 602 |
| | 602 |
| | 596 |
| | 596 |
|
Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) of $1.64$1.74 per pound of copper in third-quartersecond-quarter 20172018 and $1.61 per pound for the first ninesix months of 20172018 were higher than unit net cash costs of $1.40$1.65 per pound in third-quartersecond-quarter 20162017 and $1.37 per pound$1.59 for the first ninesix months of 2016,2017, primarily reflecting higher mining milling and employeeinput costs, at Cerro Verde.partly offset by higher by-product credits.
Revenues from Cerro Verde’s concentrate sales are recorded net of treatment charges. Accordingly, treatment charges, which will vary with Cerro Verde’s sales volumes and the price of copper.
Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales.
Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.
Average unit net cash costs (net of by-product credits) for our South America mining operations are expected to approximate $1.641.67 per pound of copper for the year 2017,2018, based on current sales volume and cost estimates and assuming an average price of $8.0011.00 per pound of molybdenum for fourth-quarter 2017.the second half of 2018.
Indonesia Mining
Indonesia mining includes PT-FI’s Grasberg minerals district, one of the world’s largest copper and gold deposits, in Papua, Indonesia. We own 90.64 percent of PT-FI, including 9.36 percent owned through our wholly owned subsidiary, PT Indocopper Investama.PT-II.
PT-FI operates a proportionately consolidates anconsolidated unincorporated joint venture with Rio Tinto plc (Rio Tinto)(Joint Venture), under which Rio Tinto has a 40 percent interest in certain assets and a 40 percent interest through 2022 in production exceeding specified annual amounts of copper, gold and silver. After 2022, all production and related revenues and costs are shared 60 percent PT-FI and 40 percent Rio Tinto. Refer to Note 3 in our annual report on Form 10-K for the year ended December 31, 2016,2017, for discussion of our joint venture with Rio Tinto.the Joint Venture.
PT-FI produces copper concentrate that contains significant quantities of gold and silver. Substantially all of PT-FI’s copper concentrate is sold under long-term contracts, and during the first ninesix months of 2017,2018, approximately half40 percent of PT-FI’s concentrate production was sold to PT Smelting its(PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia.Indonesia).
Regulatory Matters. In January and February 2017, the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections as PT-FI’s Contract of Work (COW), which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.
Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year timeframe, following approval of the extension of its long-term operating rights.
On January 12, 2017, PT-FI suspended exports in response to Indonesian regulations adopted in January 2014. In addition, as a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s operations were shut down from January 19, 2017, until early March 2017. On February 10, 2017, PT-FI was forced to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21,
2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period,Regulatory Matters. In July 2018, we and PT-FI commenced export shipments.
In mid-February 2017, pursuant to the COW’s dispute resolution process, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government’s breaches and violations of the COW. PT-FI continues to reserve its rights under these provisions.
As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs.
In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK through October 10, 2017, that would allow concentrate exports to resume during this period. In April 2017, PT-FI entered into a MemorandumHeads of UnderstandingAgreement with Inalum and PT-FI’s joint venture partner Rio Tinto. Under the terms of the non-binding agreement, Inalum would acquire for aggregate cash consideration of $3.85 billion all of Rio Tinto's interests associated with the Indonesian government confirming that the COW would continue to be validJoint Venture and honored until replaced by a mutually agreed IUPK and investment stability agreement. PT-FI agreed to continue to pay a five percent export duty during this period.all of our interests in PT-II.
In August 2017, we reached an understanding withInalum would contribute the Indonesian government onRio Tinto interests to PT-FI, which would expand PT-FI’s asset base, in exchange for a framework40 percent share ownership in PT-FI, pursuant to arrangements that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion fromenable us and existing PT-FI shareholders to retain the COW to an IUPK providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the termeconomics of the IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five yearsrevenue and cost sharing arrangements under the Joint Venture. Following completion of reaching a definitive agreement, and (iv) divestment ofthe transaction, Inalum's share ownership would approximate 51 percent of PT-FI (subject to an agreement between shareholders to replicate the project area interestsJoint Venture economics) and our ownership would approximate 49 percent.
At closing, Rio Tinto would receive $3.5 billion and we would receive $350 million in cash proceeds from Inalum. In addition, Rio Tinto would forego in favor of us an amount equivalent to Indonesian participants at fair market value structured so thatits share of Joint Venture cash flows since January 1, 2018, through closing.
Following completion of the ownership restructuring, we retain control overdo not expect our economic exposure to PT-FI to change significantly. We expect our share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to our existing share of future cash flows under the current Joint Venture arrangement. We would also continue to manage the operations and governance of PT-FI.
The framework requirestransaction, which is expected to close during the second half of 2018, is subject to the negotiation and documentation of definitive agreements, including purchase and executionsale agreements, the extension and stability of PT-FI's long-term mining rights through 2041 in a definitiveform acceptable to us and Inalum, a shareholders’ agreement which mustbetween us and Inalum providing for continuity of our management of PT-FI’s operations and addressing governance arrangements, and resolution of environmental regulatory matters pending before Indonesia's Ministry of Environment and Forestry satisfactory to the Indonesian government, us and Inalum (refer to Note 8 for further discussion of these environmental regulatory matters). The terms of these agreements will be approvedsubject to approval by our Board, and joint venture partner Rio Tinto. The partieswill require modification or revocation of current regulations and the implementation of new regulations by the Indonesian government.
PT-FI's export license is effective through February 15, 2019. In July 2018, PT-FI's temporary IUPK was extended to August 31, 2018, and PT-FI will continue to negotiateseek extensions to reach agreement on important aspects of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s extended operations through 2041. The parties have expressed a mutual objective of completing the negotiations and documentation during 2017.its temporary IUPK until definitive agreements are complete.
In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-termWe cannot predict whether PT-FI will be successful in reaching satisfactory definitive agreement basedagreements on the agreed framework continue.terms of its long-term mining rights. Until a definitive agreement isagreements are reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions.procedures.
We cannot predict whether PT-FI will be successfulFor further discussion of the regulatory matters and risks associated with operations in reaching a satisfactory definitive agreement on the terms of its long-term mining rights. ReferIndonesia, refer to “Risk Factors” contained in Part I, Item 1A.IA. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2016, for further discussion of risks associated with our operations in Indonesia.2017.
Operating and Development Activities. PT-FI is currently mining the final phase of the Grasberg open pit, which contains high copper and gold ore grades. PT-FI has revised its mine plans to extend mining activities in the open pit by approximately six months through the first half of 2019 following results of an economic analysis. PT-FI expects to mine high-grade ore overfrom the next several quarters prior toopen pit until transitioning to the Grasberg Block Cave underground mine in earlythe first half of 2019. Lower copper and gold production from Indonesia mining is expected during the transition period in 2019 and 2020.
PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to produce large-scale quantities of copper and gold following the transition from the Grasberg open pit. Assuming aSubstantial progress has been made to prepare for the transition to mining of the Grasberg Block Cave underground mine. Mine development activities are sufficiently advanced to commence caving in the first half of 2019. The ore flow and underground rail haulage systems are expected to be fully commissioned and operational in the second half of 2018.
Subject to reaching definitive agreement is reached to supportagreements with the Indonesian government on PT-FI’s long-term investment plans,mining rights, estimated annual capital spending on thesePT-FI’s development projects would average $1.0$0.8 billion per year ($0.80.7 billion per year net to PT-FI) over the next five years. Considering the long-term nature and size of these projects, actual costs could vary from these estimates. In response to market conditions and Indonesian regulatory uncertainty, the timing of these expenditures continues to be reviewed. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reducereviewed and could be reduced or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.deferred significantly.
The following provides additional information on the continued development of the Common Infrastructure project, the Grasberg Block Cave underground mine and the Deep Mill Level Zone (DMLZ)DMLZ ore body that lies below the
Deep Ore Zone (DOZ) underground mine. Our current plans and mineral reserves in Indonesia assume that PT-FI’s long-term mining rights will be extended through 2041, as stated in the COW.
For further discussion of the risks associated with development projects, refer to Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2017, as updated by Part II, Item 1A. “Risk Factors” of this quarterly report on Form 10-Q.
Common Infrastructure and Grasberg Block Cave Mine. In 2004, PT-FI 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-FI to conduct future exploration in prospective areas associated with currently identified ore bodies. The tunnel system was completed to the Big Gossan terminal, and the Big Gossan mine was brought into production in 2010. The Big Gossan underground mine is currently preparing to restart production.was on care-and-maintenance status during most of 2017 and production restarted in fourth-quarter 2017. Development of the DMLZ and Grasberg Block Cave and DMLZ underground mines is advancing using the Common Infrastructure project tunnels as access.
The Grasberg Block Cave underground mine accounts for approximately half of our recoverable proven and probable reserves in Indonesia. Production from the Grasberg Block Cave underground mine is expected to commence in earlythe first half of 2019, following the end of mining of the Grasberg open pit. Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity in 2023 are expected to approximate 130,000-160,000130,000 to 160,000 metric tons of ore per day. PT-FI is reviewingcontinues to review its operating plans to determine the optimum mine plan for the Grasberg Block Cave underground mine.
Aggregate mine development capital for the Grasberg Block Cave underground mine and associated Common Infrastructure is expected to approximate $6.3$6.4 billion (incurred between 2008 and 2022)2023), with PT-FI’s share totaling approximately $5.8$5.9 billion. Aggregate project costs totaling $3.2$3.6 billion have been incurred through SeptemberJune 30, 2017,2018, including $118 million$0.3 billion during third-quarter 2017. As a resultthe first six months of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.2018.
DMLZ. The DMLZ ore body lies below the DOZ mine at the 2,590-meter elevation and represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry. In September 2015, PT-FI initiated pre-commercial production that representsrepresented ore extracted during the development phase for the purpose of obtaining access to the ore body. In June 2017, production from the DMLZ underground mine was impacted byFollowing mining-induced seismic activity, which is not uncommonbegan in 2017 and continued in 2018, PT-FI revised its mine plans, which resulted in a delay in the ramp-up of the DMLZ underground mine. During second-quarter 2018, PT-FI initiated plans to conduct hydraulic fracturing activities to address rock stresses and pre-condition the DMLZ with an objective of enabling commencement of large-scale production. PT-FI's revised mine plans for DMLZ, which will continue to be reviewed, currently project block cave mining. To mitigatemining activities in the impact of these events, PT-FI implemented a revised mine sequence and start-up plan in third-quarter 2017. PT-FI expects DMLZ to ramp upcommence in mid-2019 following a period of hydraulic fracturing activities designed to safely manage production. PT-FI continues to expect the DMLZ to reach full capacityproduction rates of 80,000 metric tons of ore per day in 2021, but at a slower pace than previous estimates.2022. The current outlook for future DMLZ production reflects management’s expectations based on currently available information and involves uncertainties. Estimates of future production will be revised as additional information becomes available.
Drilling efforts continue to determine the extent of the ore body. Aggregate mine development capital costs for the DMLZ underground mine are expected to approximate $3.2$3.1 billion (incurred between 2009 and 2021), with PT-FI’s share totaling approximately $1.9 billion. Aggregate project costs totaling $2.1$2.3 billion have been incurred through SeptemberJune 30, 2017,2018, including $62$159 million during third-quarter 2017. As a resultthe first six months of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.2018.
Other Matters. In late October 2017, Indonesia’s Ministry of Environment and Forestry (the Ministry) notified PT-FI of administrative sanctions related to certain activities the Ministry indicated are not reflected in its environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in its environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry, which began in late 2014. PT-FI believes that it has submitted the required documentation to update its permits, and is in the process of addressing other points raised by the Ministry.
As further discussed in “Risk Factors” contained in Part I. Item 1A of our annual report on Form 10-K for the year ended December 31, 2016, in 2009,2017, there werehave been a series of shooting incidents within the PT-FI project area with sporadicand in nearby areas. During the first six months of 2018, there were 11 additional shooting incidents, continuing through January 1, 2015. From August 2017 through November 3, 2017, there were six shooting incidents within the PT-FI project area and five shooting incidents in nearby areas, which resulted
in one fatality and 12four injuries. The safety of our workforce is a critical concern, and PT-FI is working
cooperativelycontinues to work with the Indonesian government to address security issues. We also continue to limit the use of the road leading to our mining and milling operations to secured convoys.
Operating Data. Following is a summary of consolidated operating data for our Indonesia mining operations for the third quarters and first nine months of 2017 and 2016:operations:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | | 2018 | | 2017 |
Operating Data, Net of Joint Venture Interest | | | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | |
Production | 293 |
| | 321 |
| | 647 |
| | 694 |
| 347 |
| | 199 |
| | 658 |
| | 354 |
|
Sales | 258 |
| | 332 |
| | 630 |
| | 702 |
| 316 |
| | 247 |
| | 635 |
| | 372 |
|
Average realized price per pound | $ | 2.95 |
| | $ | 2.20 |
| | $ | 2.81 |
| | $ | 2.17 |
| $ | 3.05 |
| | $ | 2.67 |
| | $ | 3.07 |
| | $ | 2.64 |
|
| | | | | | | | | | | | | | |
Gold (thousands of recoverable ounces) | | | | | | | | | | | | | | |
Production | 412 |
| | 301 |
| | 992 |
| | 637 |
| 740 |
| | 348 |
| | 1,335 |
| | 580 |
|
Sales | 352 |
| | 307 |
| | 956 |
| | 653 |
| 671 |
| | 427 |
| | 1,274 |
| | 604 |
|
Average realized price per ounce | $ | 1,290 |
| | $ | 1,327 |
| | $ | 1,261 |
| | $ | 1,292 |
| $ | 1,274 |
| | $ | 1,243 |
| | $ | 1,291 |
| | $ | 1,242 |
|
| | | | | | | | | | | | | | |
100% Operating Data | | | | | | | | | | | | | | |
Ore milled (metric tons per day):a | | | | | | | | | | | | | | |
Grasberg open pit | 130,500 |
| | 135,600 |
| | 91,200 |
| | 117,200 |
| 148,400 |
| | 88,600 |
| | 136,800 |
| | 71,200 |
|
DOZ underground mineb | 34,500 |
| | 35,100 |
| | 29,400 |
| | 38,700 |
| |
DOZ underground mine | | 29,200 |
| | 27,300 |
| | 34,300 |
| | 26,800 |
|
DMLZ underground mine | 2,400 |
| | 6,000 |
| | 3,100 |
| | 5,000 |
| 2,700 |
| | 3,800 |
| | 2,700 |
| | 3,500 |
|
Grasberg Block Cave | 4,200 |
| | 2,800 |
| | 3,600 |
| | 2,600 |
| |
Grasberg Block Cave underground mine | | 3,800 |
| | 3,800 |
| | 3,900 |
| | 3,200 |
|
Big Gossan underground mine | — |
| | 1,000 |
| | 500 |
| | 700 |
| 3,800 |
| | — |
| | 3,100 |
| | 800 |
|
Total | 171,600 |
| | 180,500 |
| | 127,800 |
| | 164,200 |
| 187,900 |
| | 123,500 |
| | 180,800 |
| | 105,500 |
|
Average ore grades: | | | | | | | | | | | | | | |
Copper (percent) | 0.91 |
| | 1.02 |
| | 1.00 |
| | 0.86 |
| 1.06 |
| | 1.03 |
| | 1.09 |
| | 1.08 |
|
Gold (grams per metric ton) | 0.98 |
| | 0.69 |
| | 1.08 |
| | 0.58 |
| 1.77 |
| | 1.16 |
| | 1.71 |
| | 1.17 |
|
Recovery rates (percent): | | | | | | | | | | | | | | |
Copper | 91.1 |
| | 91.4 |
| | 91.6 |
| | 90.5 |
| 92.7 |
| | 91.8 |
| | 92.4 |
| | 92.0 |
|
Gold | 84.7 |
| | 82.7 |
| | 84.9 |
| | 81.4 |
| 86.1 |
| | 85.3 |
| | 85.5 |
| | 85.1 |
|
Production: | | | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | 277 |
| | 327 |
| | 670 |
| | 736 |
| 353 |
| | 221 |
| | 693 |
| | 393 |
|
Gold (thousands of recoverable ounces) | 405 |
| | 300 |
| | 993 |
| | 664 |
| 816 |
| | 347 |
| | 1,489 |
| | 588 |
|
| |
a. | Amounts represent the approximate average daily throughput processed at PT-FI’s mill facilities from each producing mine and from development activities that result in metal production. |
| |
b. | Ore milled from the DOZ underground mine is expected to ramp up to 60,000 metric tons of ore per day in 2018. |
Indonesia mining’s consolidated copper sales volumes of 258316 million pounds of copper and 671 thousand ounces of gold in third-quartersecond-quarter 20172018 and 635 million pounds of copper and 1.3 million ounces of gold for the first six months of 2018 were lowerhigher than sales of 332247 million pounds of copper and 427 thousand ounces of gold in third-quartersecond-quarter 2016, primarily reflecting lower2017 and 372 million pounds of copper ore grades and timing604 thousand ounces of shipments. Indonesia mining’s consolidated copper sales volumes of 630 million poundsgold for the first ninesix months of 2017, were lower than sales of 702 million poundsprimarily reflecting higher operating rates and ore grades. Lower operating rates for the first nine months of 2016, primarily reflecting2017 periods reflected the impact of regulatory restrictions on PT-FI’s concentrate exports at the beginning offrom mid-January 2017 (see discussion above in “Regulatory Matters”).
Indonesia’s consolidated gold sales of 352 thousand ounces in third-quarterto mid-April 2017 and 956 thousand ounces for the first nine monthsimpact of 2017 were higher than sales of 307 thousand ounces in third-quarter 2016 and 653 thousand ounces for the first nine months of 2016, primarily reflecting higher gold ore grades, partly offset by timing of shipments.
During third-quarter 2017, PT-FI's labor productivity improved significantly following a recovery from disruptions that occurred in the first half of the year. Mining and milling rates improved throughout the quarter, and PT-FI continues to assess opportunities to advance mining of a section of high-grade material during 2018 and 2019 through open-pit mining rather than over time through the Grasberg Block Cave underground mine.
In October 2017, PT-FI and union officials commenced discussions for a new two-year labor agreement. The existing agreement will continue in effect until a new agreement is consummated.disruptions.
Assuming achievingachievement of planned operating rates for fourth-quarter 2017,the second half of 2018, consolidated sales volumes from Indonesia mining are expected to approximate 1.01.15 billion pounds of copper and 1.62.4 million ounces of gold for the year 2017,2018, compared with 1.11.0 billion pounds of copper and 1.11.5 million ounces of gold for the year 2016. At2017. Because of the Grasberg mine, the sequencing oftransition to underground mining, areas with varying ore grades causes fluctuationsPT-FI’s production is expected to be significantly lower in quarterly2019 and annual production of copper and gold.2020, compared to 2018.
Indonesia mining’smining's projected sales volumes and unit net cash credits for the year 20172018 are dependent on a number of factors, including operational performance, workforce productivity, and the timing of shipments.shipments, and Indonesia regulatory matters.
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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Gross Profit per Pound of Copper and per Ounce of Gold
The following table summarizes the unit net cash costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the third quarters and first nine months of 2017 and 2016.operations. Refer to “Product 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.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 2.95 |
| | $ | 2.95 |
| | $ | 1,290 |
| | $ | 2.20 |
| | $ | 2.20 |
| | $ | 1,327 |
|
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.41 |
| | 0.87 |
| | 383 |
| | 1.37 |
| | 0.86 |
| | 520 |
|
Gold and silver credits | (1.80 | ) | | — |
| | — |
| | (1.29 | ) | | — |
| | — |
|
Treatment charges | 0.27 |
| | 0.17 |
| | 74 |
| | 0.27 |
| | 0.17 |
| | 104 |
|
Export duties | 0.08 |
| | 0.05 |
| | 22 |
| | 0.10 |
| | 0.07 |
| | 39 |
|
Royalty on metals | 0.17 |
| | 0.10 |
| | 48 |
| | 0.12 |
| | 0.07 |
| | 50 |
|
Unit net cash costs | 0.13 |
| | 1.19 |
| | 527 |
| | 0.57 |
| | 1.17 |
| | 713 |
|
DD&A | 0.53 |
| | 0.33 |
| | 143 |
| | 0.33 |
| | 0.21 |
| | 125 |
|
Noncash and other costs, net | 0.09 |
| a | 0.06 |
| | 25 |
| | 0.05 |
| b | 0.03 |
| | 19 |
|
Total unit costs | 0.75 |
| | 1.58 |
| | 695 |
| | 0.95 |
| | 1.41 |
| | 857 |
|
Revenue adjustments, primarily for pricing on prior period open sales | 0.11 |
| | 0.11 |
| | 4 |
| | (0.02 | ) | | (0.02 | ) | | 1 |
|
PT Smelting intercompany loss | (0.07 | ) | | (0.04 | ) | | (19 | ) | | (0.03 | ) | | (0.02 | ) | | (10 | ) |
Gross profit per pound/ounce | $ | 2.24 |
| | $ | 1.44 |
| | $ | 580 |
| | $ | 1.20 |
| | $ | 0.75 |
| | $ | 461 |
|
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 258 |
| | 258 |
| | | | 332 |
| | 332 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 352 |
| | | | | | 307 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended June 30, |
| 2018 | | 2017 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 3.05 |
| | $ | 3.05 |
| | $ | 1,274 |
| | $ | 2.67 |
| | $ | 2.67 |
| | $ | 1,243 |
|
| | | | | | | | | | | |
Site production and delivery, before net noncash and other (credits) costs shown below | 1.33 |
| | 0.70 |
| | 291 |
| | 1.77 |
| | 0.97 |
| | 451 |
|
Gold and silver credits | (2.76 | ) | | — |
| | — |
| | (2.21 | ) | | — |
| | — |
|
Treatment charges | 0.26 |
| | 0.14 |
| | 57 |
| | 0.26 |
| | 0.14 |
| | 67 |
|
Export duties | 0.18 |
| | 0.09 |
| | 38 |
| | 0.11 |
| | 0.06 |
| | 28 |
|
Royalty on metals | 0.22 |
| | 0.11 |
| | 51 |
| | 0.17 |
| | 0.09 |
| | 47 |
|
Unit net cash (credits) costs | (0.77 | ) | | 1.04 |
| | 437 |
| | 0.10 |
| | 1.26 |
| | 593 |
|
DD&A | 0.54 |
| | 0.28 |
| | 119 |
| | 0.62 |
| | 0.34 |
| | 158 |
|
Noncash and other (credits) costs, net | (0.01 | ) | | — |
| | (2 | ) | | 0.34 |
| a | 0.18 |
| | 86 |
|
Total unit (credits) costs | (0.24 | ) | | 1.32 |
| | 554 |
| | 1.06 |
| | 1.78 |
| | 837 |
|
Revenue adjustments, primarily for pricing on prior period open sales | 0.04 |
| | 0.04 |
| | (2 | ) | | (0.03 | ) | | (0.03 | ) | | 5 |
|
PT Smelting intercompany loss | (0.03 | ) | | (0.01 | ) | | (6 | ) | | (0.10 | ) | | (0.06 | ) | | (26 | ) |
Gross profit per pound/ounce | $ | 3.30 |
| | $ | 1.76 |
| | $ | 712 |
| | $ | 1.48 |
| | $ | 0.80 |
| | $ | 385 |
|
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 316 |
| | 316 |
| | | | 247 |
| | 247 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 671 |
| | | | | | 427 |
|
| | | Nine Months Ended September 30, | Six Months Ended June 30, |
| 2017 | | 2016 | 2018 | | 2017 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | Copper | | Gold | | Copper | | Gold | | Copper | | Gold |
Revenues, excluding adjustments | $ | 2.81 |
| | $ | 2.81 |
| | $ | 1,261 |
| | $ | 2.17 |
| | $ | 2.17 |
| | $ | 1,292 |
| $ | 3.07 |
| | $ | 3.07 |
| | $ | 1,291 |
| | $ | 2.64 |
| | $ | 2.64 |
| | $ | 1,242 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.71 |
| | 1.01 |
| | 451 |
| | 1.70 |
| | 1.08 |
| | 639 |
| 1.34 |
| | 0.72 |
| | 304 |
| | 1.89 |
| | 1.05 |
| | 497 |
|
Gold and silver credits | (1.98 | ) | | — |
| | — |
| | (1.28 | ) | | — |
| | — |
| (2.67 | ) | | — |
| | — |
| | (2.10 | ) | | — |
| | — |
|
Treatment charges | 0.27 |
| | 0.16 |
| | 71 |
| | 0.29 |
| | 0.18 |
| | 109 |
| 0.25 |
| | 0.14 |
| | 57 |
| | 0.27 |
| | 0.15 |
| | 71 |
|
Export duties | 0.10 |
| | 0.06 |
| | 26 |
| | 0.09 |
| | 0.06 |
| | 34 |
| 0.16 |
| | 0.09 |
| | 36 |
| | 0.11 |
| | 0.06 |
| | 29 |
|
Royalty on metals | 0.16 |
| | 0.09 |
| | 47 |
| | 0.12 |
| | 0.07 |
| | 48 |
| 0.22 |
| | 0.11 |
| | 50 |
| | 0.17 |
| | 0.10 |
| | 47 |
|
Unit net cash costs | 0.26 |
| | 1.32 |
| | 595 |
| | 0.92 |
| | 1.39 |
| | 830 |
| |
Unit net cash (credits) costs | | (0.70 | ) | | 1.06 |
| | 447 |
| | 0.34 |
| | 1.36 |
| | 644 |
|
DD&A | 0.59 |
| | 0.35 |
| | 156 |
| | 0.40 |
| | 0.25 |
| | 152 |
| 0.55 |
| | 0.30 |
| | 125 |
| | 0.63 |
| | 0.35 |
| | 167 |
|
Noncash and other costs, net | 0.22 |
| a | 0.13 |
| | 58 |
| | 0.04 |
| b | 0.03 |
| | 16 |
| 0.02 |
| | 0.01 |
| | 4 |
| | 0.32 |
| a | 0.18 |
| | 82 |
|
Total unit costs | 1.07 |
| | 1.80 |
| | 809 |
| | 1.36 |
| | 1.67 |
| | 998 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.06 |
| | 0.06 |
| | 9 |
| | — |
| | — |
| | 25 |
| |
PT Smelting intercompany loss | (0.03 | ) | | (0.01 | ) | | (7 | ) | | (0.01 | ) | | (0.01 | ) | | (4 | ) | |
Total unit (credits) costs | | (0.13 | ) | | 1.37 |
| | 576 |
| | 1.29 |
| | 1.89 |
| | 893 |
|
Other revenue adjustments, primarily for pricing on prior period open sales | | (0.05 | ) | | (0.05 | ) | | 13 |
| | 0.11 |
| | 0.11 |
| | 15 |
|
PT Smelting intercompany (loss) profit | | (0.04 | ) | | (0.01 | ) | | (7 | ) | | — |
| | — |
| | 1 |
|
Gross profit per pound/ounce | $ | 1.77 |
| | $ | 1.06 |
| | $ | 454 |
| | $ | 0.80 |
| | $ | 0.49 |
| | $ | 315 |
| $ | 3.11 |
| | $ | 1.64 |
| | $ | 721 |
| | $ | 1.46 |
| | $ | 0.86 |
| | $ | 365 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 630 |
| | 630 |
| | | | 702 |
| | 702 |
| | | 635 |
| | 635 |
| | | | 372 |
| | 372 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 956 |
| | | | | | 653 |
| | | | | 1,274 |
| | | | | | 604 |
|
| |
a. | Includes fixed costs charged directly to production and delivery costs totaling $9$82 million ($0.030.33 per pound of copper) for third-quartersecond-quarter 2017 and $112$103 million ($0.180.28 per pound of copper) for the first ninesix months of 2017 as a result ofassociated with workforce reductions. |
| |
b. | Includes asset retirement charges of $17 million ($0.05 per pound of copper in third-quarter 2016 and $0.02 per pound of copper for the first nine months of 2016). |
A significant portion of PT-FI’s costs are fixed, and unit costs vary depending on production volumes and other factors. Indonesia’sAs a result of higher sales volumes and gold and silver credits, Indonesia had unit net cash costscredits (including gold and silver credits) of $0.13$0.77 per pound of copper in third-quartersecond-quarter 20172018 and $0.26$0.70 per pound of copper for the first ninesix months of 2017 were lower than2018, compared with unit net cash costs of $0.57$0.10 per pound of copper in third-quartersecond-quarter 20162017 and $0.92$0.34 per pound of copper for the first ninesix months of 2016, primarily reflecting higher gold and silver credits, partly offset by lower copper sales volumes.2017.
Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold.
PT-FI’s royalties totaled $43$71 million in third-quarter 2017, $40 million in third-quarter 2016, $106second-quarter 2018 and $138 million for the first ninesix months of 2017 and $84 million for the first nine months of 2016. Export duties totaled $212018, compared with $43 million in third-quarter 2017, $34 million in third-quarter 2016, $62 million for the first nine months ofsecond-quarter 2017 and $63 million for the first ninesix months of 2016. As further discussed above2017. Export duties totaled $55 million in “Regulatory Matters,” PT-FI agreed to continue to pay a five percent export duty.second-quarter 2018 and $101 million for the first six months of 2018, compared with $27 million in second-quarter 2017 and $41 million for the first six months of 2017.
Higher depreciation rates for the 2017 periods, compared with the 2016 periods, primarily relate to higher amortization of asset retirement costs associated with revised estimates at the end of 2016 for an overburden stockpile. Additionally, becauseBecause certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate varies with the level of copper production and sales.production.
Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.
PT Smelting intercompany loss(loss) profit represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting. Refer to “Operations – Smelting“Smelting & Refining” below for further discussion.
Assuming an average gold price of $1,300 per ounce for fourth-quarter 2017 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.07 per pound of copper for the year 2017. Indonesia mining’s unit net cash costs for the year 2017 would change by approximately $0.04 per pound for each $50 per ounce change in the average price of gold.
Because of the fixed nature of a large portion of Indonesia’s costs, unit net cash credits/costs vary from quarter to quarter depending on copper and gold volumes. Assuming an average gold price of $1,250 per ounce for the second half of 2018 and achievement of current sales volume and cost estimates, unit net cash credits (including gold and silver credits) for Indonesia mining are expected to approximate $0.58 per pound of copper for the year 2018. Indonesia mining’s unit net cash credits for the year 2018 would change by approximately $0.06 per pound for each $50 per ounce change in the average price of gold for the second half of 2018. As a result of lower expected copper and gold production during the transition from the open pit to the Grasberg Block Cave underground mine, Indonesia mining's unit net cash costs are expected to be higher in 2019 and 2020.
Molybdenum Mines
We have two wholly owned molybdenum mines in North America – the Henderson underground mine and the Climax open-pit mine, both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities.
Operating and Development Activities. In response to market conditions, the Henderson molybdenum mine continues to operate at reduced rates. Production from the Molybdenum mines totaled 89 million pounds of molybdenum in third-quartersecond-quarter 20172018, 58 million pounds in third-quartersecond-quarter 2016, 242017, 18 million pounds for the first ninesix months of 20172018 and 1916 million pounds for the first ninesix months of 2016.2017. Refer to “Consolidated Results” for our consolidated molybdenum operating data, which includes sales of molybdenum produced at our Molybdenum mines, and from our North America and South America copper mines, and refer to “Outlook” for projected consolidated molybdenum sales volumes.
Unit Net Cash Costs Per Pound of Molybdenum. 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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Average unit net cash costs for our Molybdenum mines of $7.90$8.36 per pound of molybdenum in third-quartersecond-quarter 20172018 and $7.60$8.46 per pound of molybdenum for the first ninesix months of 20172018 were lowerhigher than average unit net cash costs of $10.28$7.73 per pound of molybdenum in third-quartersecond-quarter 20162017 and $8.39$7.38 per pound of molybdenum for the first ninesix months of 2016,2017, primarily reflecting higher volumes. Assuming achievement ofmilling rates. Based on current sales volume and cost estimates, we estimateaverage unit net
cash costs for the Molybdenum mines are expected to average $7.85approximate $8.75 per pound of molybdenum for the year 2017.2018. 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.
Smelting and Refining
We wholly own and operate a smelter in Arizona (Miami smelter), a refinery in Texas (El Paso refinery) and a smelter and refinery in Spain (Atlantic Copper). Additionally, PT-FI owns 25 percent of a smelter and refinery in Gresik, Indonesia (PT Smelting). Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter.smelter and El Paso refinery. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.
Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During the first ninesix months of 2017,2018, Atlantic Copper’s concentrate purchases from our copper mining operations included 1614 percent from our North America copper mines and 109 percent from our South America copper mining operations, with the remainder purchased from third parties.
In March 2017, PT Smelting’s anode slimes export license was renewed through March 1, 2018. PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually. During the first ninesix months of 2017,2018, PT-FI supplied substantially all of PT Smelting’s concentrate requirements. Minimum and maximum treatment charge rates have been approved through April 2020.
We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to net income attributable to common stock of $24$27 million in third-quartersecond-quarter 20172018, $17$(51) million forin third-quartersecond-quarter 2016, less than $12017, $20 million for the first ninesix months of 20172018 and $6$(24) million for the first ninesix months of 2016.2017. Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $62$71 million at SeptemberJune 30, 2017.2018. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings.
CAPITAL RESOURCES AND LIQUIDITY
Our consolidated operating cash flows vary with sales volumes, prices realized from copper, gold and molybdenummolybdenum; our sales volumes; production costs,costs; income taxes,taxes; other working capital changeschanges; and other factors. We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We have commenced a project to develop the Lone Star oxide ores near the Safford operation in eastern Arizona, and PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. We are also pursuing other opportunities to enhance our mines’ net present values, and we continue to advance studies for future development of our copper resources, the timing of which will be dependent on market conditions.
Cash
Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at SeptemberJune 30, 20172018 (in billions):
| | Cash at domestic companies | $ | 3.7 |
| $ | 2.9 |
|
Cash at international operations | 1.3 |
| 1.0 |
|
Total consolidated cash and cash equivalents | 5.0 |
| 3.9 |
|
Noncontrolling interests’ share | (0.4 | ) | (0.4 | ) |
Cash, net of noncontrolling interests’ share | 4.6 |
| 3.5 |
|
Withholding taxes and other | (0.1 | ) | (0.1 | ) |
Net cash available | $ | 4.5 |
| $ | 3.4 |
|
Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayment, working capital and other tax payments, or other cash needs. Management believes that
sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share.
Debt
Following is a summary of our total debt and the related weighted-average interest rates at SeptemberJune 30, 20172018 (in billions, except percentages):
|
| | | | | |
| | | Weighted- |
| | | Average |
| | | Interest Rate |
Senior Notes | $ | 13.3 |
| | 4.4% |
Cerro Verde credit facility | 1.5 |
| | 3.1% |
Total debt | $ | 14.8 |
| | 4.2% |
| | | |
In September 2017, we redeemed $543 million aggregate principal amount of senior notes, resulting in annual cash interest savings of approximately $35 million. We recognized an $11 million gain on early extinguishment of debt in connection with the redemptions. During the first nine months of 2017, we have reduced our total debt balance by $1.25 billion. Maturities of debt at September 30, 2017, total $0.7 billion in fourth-quarter 2017, $1.5 billion in 2018, $1.9 billion in 2020, $1.3 billion in 2021 and $9.4 billion thereafter. |
| | | | | |
| | | Weighted- |
| | | Average |
| | | Interest Rate |
Senior Notes | $ | 9.9 |
| | 4.6% |
Cerro Verde credit facility | 1.2 |
| | 4.0% |
Total debt | $ | 11.1 |
| | 4.5% |
| | | |
At SeptemberJune 30, 2017,2018, we had no borrowings, $36$13 million in letters of credit issued and availability of $3.5 billion under our revolving credit facility. In April 2018, we entered into a new $3.5 billion, five-year, unsecured revolving credit facility with substantially similar structure and terms as our prior facility, which matures onwas scheduled to mature in May 31, 2019.
Refer to Note 65 for further discussion of debt.
Operating Activities
We generated consolidated operating cash flows of $3.0$2.7 billion (net of $0.2 billion in working capital uses and timing of other tax payments) for the first six months of 2018 and $1.8 billion (including $0.4$0.3 billion in working capital sources and changes intiming of other tax payments) for the first ninesix months of 2017. Higher operating cash flows for the first six months of 2018, compared to the first six months of 2017, primarily reflect higher copper and $2.6 billion (including $0.5 billion in working capital sourcesgold sales volumes and changes in tax payments) for the first nine months of 2016.higher metal prices, partly offset by higher inventories.
Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows for the years 2017 andyear 2018, plus available cash and availability under our credit facility, and uncommitted lines of credit, to be sufficient to fund our budgeted capital expenditures, scheduled debt maturities,cash dividends, noncontrolling interest distributions and other cash requirements for the year. Refer to “Outlook” for further discussion of projected operating cash flows for the year 2017, and2018. For a discussion of regulatory matters in Indonesia that could have a significant impact on future results, refer to “Risk Factors,” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2016, for discussion of regulatory matters in Indonesia, which could have a significant impact on future results.2017.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized interest, totaled $1.0$0.9 billion for the first ninesix months of 2017,2018, including $0.6$0.5 billion for major mining projects. Capital expenditures, including capitalized interest, totaled $2.3$0.7 billion for the first ninesix months of 2016, consisting of $1.2 billion for mining operations (including approximately $0.92017, including $0.4 billion for major projects) and $1.1 billion for oil and gas operations.
Lowermining projects. Higher capital expenditures for the first ninesix months of 2017,2018, compared with the first ninesix months of 2016,2017, primarily reflect a decrease in oil and gas activities as a result of the sales of significant oil and gas properties in 2016 and a decrease inincreased spending on major mining projects mostly associated with the completiondevelopment of the Cerro Verde expansion.Lone Star oxide project. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2017.
Dispositions. Net proceeds from asset sales totaled $1.4 billion for the first nine months of 2016 primarily associated with the $1.0 billion sale of an additional 13 percent undivided interest in Morenci, the sale of an interest in the Timok exploration project in Serbia and from oil and gas asset sales, including the Haynesville shale assets and certain oil and gas royalty interests. Refer to Note 2 for further discussion of these transactions.2018.
Financing Activities
Debt Transactions. Net repayments of debt for the first ninesix months of 2018 totaled $1.95 billion, primarily consisting of $1.4 billion for senior notes due March 2018 and $454 million for senior notes due in 2022 and 2023. Refer to Note 5 for further discussion.
Net repayments of debt for the first six months of 2017 totaled $1.2 billion$644 million primarily for the redemption and repayment of senior notes due March 2017 and the repayment of Cerro Verde’s shareholder loans, partly offset by the additional borrowings on Cerro Verde’s credit facility.
Dividends. TheIn February 2018, the Board suspendedreinstated a cash dividend on our annualcommon stock. We paid dividends on our common stock totaling $73 million for the first six months of 2018. On June 27, 2018, FCX declared a quarterly cash dividend in December 2015.of $0.05 per share, which was paid August 1, 2018, to shareholders of record as of July 13, 2018. The declaration of dividends is at the discretion of our Board and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by our Board.
Common stock dividends of $2 million for the first ninesix months of 2017 and $5 million for the first nine months of 2016 related to accumulated dividends paid for vested stock-based compensation.
Cash dividends paid to noncontrolling interests totaled $67$241 million for the first ninesix months of 20172018 and $87$39 million for the first ninesix months of 2016.2017. These payments will vary based on the operating results and cash requirements of our consolidated subsidiaries.
CONTRACTUAL OBLIGATIONS
As further discussed in Note 6, during the first nine months of 2017, we have reduced our December 31, 2016, total debt balance by $1.25 billion. There have been no other material changes in our contractual obligations since December 31, 2016.2017. Refer to Part II, Items 7. and 7A. in our annual report on Form 10-K for the year ended December 31, 2016,2017, for information regarding our contractual obligations.
CONTINGENCIES
Environmental and Asset Retirement Obligations
Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly.
Other than as discloseddiscussed in Note 9,8, there have been no material changes to our environmental and asset retirement obligations since December 31, 2016.2017. Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental obligations. Refer to Note 12 in our annual report on Form 10-K for the year ended December 31, 2016,2017, for further information regarding our environmental and asset retirement obligations.
Litigation and Other Contingencies
Other than as discussed in Note 9,8, there have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2016.2017. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our annual report on Form 10-K for the year ended December 31, 2016,2017, as updated inby Note 9 in8 and Part II, Item 1. “Legal Proceedings” of our quarterly reportsreport on Form 10-Q for the quarters ended March 31, 2017,2018, and June 30, 2017,2018, for further information regarding legal proceedings, environmental and other matters.
NEW ACCOUNTING STANDARDS
Refer to Note 1211 for a summary of recently adopted accounting standards.
PRODUCT REVENUES AND PRODUCTION COSTS
Mining Product Revenues and Unit Net Cash Cost
Unit net cash costs (credits) 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. These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies.
We present gross profit per pound of copper in the following tables 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 and (iv) it is the method used by our management and our Board to monitor our mining operations and to compare mining operations in certain industry publications. In the co-product method presentations, shared 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.
We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period
sales. Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit
net cash costs (credits), consist of items such as stock-based compensation costs, start-up costs, inventory adjustments,
long-lived asset impairments, restructuring and/or unusual charges. 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. The following schedules are presentations under both the by-product and co-product methods
together with reconciliations to amounts reported in our consolidated financial statements.
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2017 | | | | | | |
Three Months Ended June 30, 2018 | | | | | | |
(In millions) | | By-Product | | Co-Product Method | | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | | | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 1,011 |
| | $ | 1,011 |
| | $ | 62 |
| | $ | 19 |
| | $ | 1,092 |
| | | $ | 1,126 |
| | $ | 1,126 |
| | $ | 91 |
| | $ | 22 |
| | $ | 1,239 |
| |
Site production and delivery, before net noncash and other costs shown below | | 576 |
| | 541 |
| | 45 |
| | 11 |
| | 597 |
| | | 701 |
| | 644 |
| | 68 |
| | 12 |
| | 724 |
| |
By-product credits | | (60 | ) | | — |
| | — |
| | — |
| | — |
| | | (90 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 39 |
| | 38 |
| | — |
| | 1 |
| | 39 |
| | | 37 |
| | 36 |
| | — |
| | 1 |
| | 37 |
| |
Net cash costs | | 555 |
| | 579 |
| | 45 |
| | 12 |
| | 636 |
| | | 648 |
| | 680 |
| | 68 |
| | 13 |
| | 761 |
| |
DD&A | | 96 |
| | 90 |
| | 4 |
| | 2 |
| | 96 |
| | | 91 |
| | 83 |
| | 6 |
| | 2 |
| | 91 |
| |
Noncash and other costs, net | | 15 |
| | 14 |
| | 1 |
| | — |
| | 15 |
| | | 23 |
| | 21 |
| | 1 |
| | 1 |
| | 23 |
| |
Total costs | | 666 |
| | 683 |
| | 50 |
| | 14 |
| | 747 |
| | | 762 |
| | 784 |
| | 75 |
| | 16 |
| | 875 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | | 7 |
| | 7 |
| | — |
| | — |
| | 7 |
| | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| |
Gross profit | | $ | 352 |
| | $ | 335 |
| | $ | 12 |
| | $ | 5 |
| | $ | 352 |
| | | $ | 365 |
| | $ | 343 |
| | $ | 16 |
| | $ | 6 |
| | $ | 365 |
| |
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 345 |
| | 345 |
| | | | | | | | | 361 |
| | 361 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 8 |
| | | | | | | | | | | 8 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | Gross profit per pound of copper/molybdenum: | | | | | | | Gross profit per pound of copper/molybdenum: | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.92 |
| | $ | 2.92 |
| | $ | 7.59 |
| | | | | | | $ | 3.12 |
| | $ | 3.12 |
| | $ | 12.13 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.67 |
| | 1.56 |
| | 5.58 |
| | | | | | | 1.94 |
| | 1.78 |
| | 9.09 |
| | | | | |
By-product credits | | (0.17 | ) | | — |
| | — |
| | | | | | | (0.25 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.11 |
| | — |
| | | | | | | 0.10 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.61 |
| | 1.67 |
| | 5.58 |
| | | | | | | 1.79 |
| | 1.88 |
| | 9.09 |
| | | | | |
DD&A
| | 0.28 |
| | 0.27 |
| | 0.49 |
| | | | | | | 0.25 |
| | 0.23 |
| | 0.80 |
| | | | | |
Noncash and other costs, net | | 0.04 |
| | 0.04 |
| | 0.05 |
| | | | | | | 0.07 |
| | 0.06 |
| | 0.15 |
| | | | | |
Total unit costs | | 1.93 |
| | 1.98 |
| | 6.12 |
| | | | | | | 2.11 |
| | 2.17 |
| | 10.04 |
| | | | | |
Revenue adjustments, primarily for pricing on prior period open sales | | 0.03 |
| | 0.03 |
| | — |
| | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | — |
| | — |
| | — |
| | | | | |
Gross profit per pound | | $ | 1.02 |
| | $ | 0.97 |
| | $ | 1.47 |
| | | | | | | $ | 1.01 |
| | $ | 0.95 |
| | $ | 2.09 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | Revenues | | Production and Delivery | | DD&A | | | | | | | Revenues | | Production and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,092 |
| | $ | 597 |
| | $ | 96 |
| | | | | | | $ | 1,239 |
| | $ | 724 |
| | $ | 91 |
| | | | | |
Treatment charges | | (8 | ) | | 31 |
| | — |
| | | | | | | (5 | ) | | 32 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 15 |
| | — |
| | | | | | | — |
| | 23 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on prior period open sales | | 7 |
| | — |
| | — |
| | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 1 |
| | — |
| | — |
| | | | | |
Eliminations and other | | 14 |
| | 15 |
| | — |
| | | | | | | 12 |
| | 10 |
| | 1 |
| | | | | |
North America copper mines | | 1,105 |
| | 658 |
| | 96 |
| | | | | | | 1,247 |
| | 789 |
| | 92 |
| | | | | |
Other miningc | | 3,909 |
| | 2,897 |
| | 299 |
| | | | | | | 4,738 |
| | 3,042 |
| | 336 |
| | | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | | | | (817 | ) | | (916 | ) | | 14 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | | | | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| | | | | |
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. |
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | |
Three Months Ended June 30, 2017 | | | | |
(In millions) | By-Product | | Co-Product Method | By-Product | | Co-Product Method |
| Method | | Copper | | Molybdenuma | | Otherb | | Total | Method | | Copper | | Molybdenuma | | Otherb | | Total |
Revenues, excluding adjustments | $ | 1,002 |
| | $ | 1,002 |
| | $ | 65 |
| | $ | 35 |
| | $ | 1,102 |
| $ | 1,068 |
| | $ | 1,068 |
| | $ | 63 |
| | $ | 23 |
| | $ | 1,154 |
|
Site production and delivery, before net noncash and other costs shown below | 659 |
| | 610 |
| | 48 |
| | 25 |
| | 683 |
| 645 |
| | 605 |
| | 47 |
| | 14 |
| | 666 |
|
By-product credits | (76 | ) | | — |
| | — |
| | — |
| | — |
| (65 | ) | | — |
| | — |
| | — |
| | — |
|
Treatment charges | 45 |
| | 42 |
| | — |
| | 3 |
| | 45 |
| 40 |
| | 38 |
| | — |
| | 2 |
| | 40 |
|
Net cash costs | 628 |
| | 652 |
| | 48 |
| | 28 |
| | 728 |
| 620 |
| | 643 |
| | 47 |
| | 16 |
| | 706 |
|
DD&A
| 127 |
| | 117 |
| | 6 |
| | 4 |
| | 127 |
| 117 |
| | 110 |
| | 5 |
| | 2 |
| | 117 |
|
Noncash and other costs, net | 26 |
|
| 25 |
| | 1 |
| | — |
| | 26 |
| 19 |
| | 18 |
| | 1 |
| | — |
| | 19 |
|
Total costs | 781 |
| | 794 |
| | 55 |
| | 32 |
| | 881 |
| 756 |
| | 771 |
| | 53 |
| | 18 |
| | 842 |
|
Revenue adjustments, primarily for pricing on prior period open sales | (3 | ) | | (3 | ) | | — |
| | — |
| | (3 | ) | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (2 | ) | | (2 | ) | | — |
| | — |
| | (2 | ) |
Gross profit | $ | 218 |
| | $ | 205 |
| | $ | 10 |
| | $ | 3 |
| | $ | 218 |
| $ | 310 |
| | $ | 295 |
| | $ | 10 |
| | $ | 5 |
| | $ | 310 |
|
| | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 457 |
| | 457 |
| | | | | | | 408 |
| | 408 |
| | | | | | |
Molybdenum sales (millions of recoverable pounds)a | Molybdenum sales (millions of recoverable pounds)a | | | | 9 |
| | | | | Molybdenum sales (millions of recoverable pounds)a | | | | 8 |
| | | | |
| | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | Gross profit per pound of copper/molybdenum: | | | | | | Gross profit per pound of copper/molybdenum: | | | | | |
| | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | $ | 2.19 |
| | $ | 2.19 |
| | $ | 7.39 |
| | | | | $ | 2.62 |
| | $ | 2.62 |
| | $ | 8.17 |
| | | | |
Site production and delivery, before net noncash and other costs shown below | 1.44 |
| | 1.34 |
| | 5.51 |
| | | | | 1.58 |
| | 1.49 |
| | 6.12 |
| | | | |
By-product credits | (0.17 | ) | | — |
| | — |
| | | | | (0.16 | ) | | — |
| | — |
| | | | |
Treatment charges | 0.10 |
| | 0.09 |
| | — |
| | | | | 0.10 |
| | 0.09 |
| | — |
| | | | |
Unit net cash costs | 1.37 |
| | 1.43 |
| | 5.51 |
| | | | | 1.52 |
| | 1.58 |
| | 6.12 |
| | | | |
DD&A
| 0.28 |
| | 0.26 |
| | 0.70 |
| | | | | 0.29 |
| | 0.27 |
| | 0.66 |
| | | | |
Noncash and other costs, net | 0.06 |
|
| 0.05 |
| | 0.13 |
| | | | | 0.05 |
| | 0.04 |
| | 0.05 |
| | | | |
Total unit costs | 1.71 |
| | 1.74 |
| | 6.34 |
| | | | | 1.86 |
| | 1.89 |
| | 6.83 |
| | | | |
Revenue adjustments, primarily for pricing on prior period open sales | — |
| | — |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | — |
| | — |
| | — |
| | | | |
Gross profit per pound | $ | 0.48 |
| | $ | 0.45 |
| | $ | 1.05 |
| | | | | $ | 0.76 |
| | $ | 0.73 |
| | $ | 1.34 |
| | | | |
| | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | |
(In millions) | Revenues | | Production and Delivery | | DD&A | | | | | Revenues | | Production and Delivery | | DD&A | | | | |
Totals presented above | $ | 1,102 |
| | $ | 683 |
| | $ | 127 |
| | | | | $ | 1,154 |
| | $ | 666 |
| | $ | 117 |
| | | | |
Treatment charges | (26 | ) | | 19 |
| | — |
| | | | | (19 | ) | | 21 |
| | — |
| | | | |
Noncash and other costs, net | — |
| | 26 |
| | — |
| | | | | — |
| | 19 |
| | — |
| | | | |
Revenue adjustments, primarily for pricing on prior period open sales | (3 | ) | | — |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (2 | ) | | — |
| | — |
| | | | |
Eliminations and other | 11 |
| | 11 |
| | 2 |
| | | | | 15 |
| | 14 |
| | 1 |
| | | | |
North America copper mines | 1,084 |
| | 739 |
| | 129 |
| | | | | 1,148 |
| | 720 |
| | 118 |
| | | | |
Other miningc | 3,085 |
| | 2,306 |
| | 268 |
| | | | | 3,323 |
| | 2,515 |
| | 307 |
| | | | |
Corporate, other & eliminations | (292 | ) | | (516 | ) | | 246 |
| | | | | (760 | ) | | (755 | ) | | 25 |
| | | | |
As reported in FCX’s consolidated financial statements | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | | $ | 3,711 |
| | $ | 2,480 |
| | $ | 450 |
| | | | |
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. |
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 3,091 |
| | $ | 3,091 |
| | $ | 184 |
| | $ | 62 |
| | $ | 3,337 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1,794 |
| | 1,688 |
| | 137 |
| | 34 |
| | 1,859 |
| |
By-product credits | | (181 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 121 |
| | 116 |
| | — |
| | 5 |
| | 121 |
| |
Net cash costs | | 1,734 |
| | 1,804 |
| | 137 |
| | 39 |
| | 1,980 |
| |
DD&A | | 329 |
| | 309 |
| | 14 |
| | 6 |
| | 329 |
| |
Noncash and other costs, net | | 68 |
| c | 66 |
| | 1 |
| | 1 |
| | 68 |
| |
Total costs | | 2,131 |
| | 2,179 |
| | 152 |
| | 46 |
| | 2,377 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 4 |
| | 4 |
| | — |
| | — |
| | 4 |
| |
Gross profit | | $ | 964 |
| | $ | 916 |
| | $ | 32 |
| | $ | 16 |
| | $ | 964 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 1,127 |
| | 1,127 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 25 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.74 |
| | $ | 2.74 |
| | $ | 7.57 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.59 |
| | 1.50 |
| | 5.62 |
| | | | | |
By-product credits | | (0.16 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.54 |
| | 1.60 |
| | 5.62 |
| | | | | |
DD&A | | 0.29 |
| | 0.27 |
| | 0.56 |
| | | | | |
Noncash and other costs, net | | 0.06 |
| c | 0.06 |
| | 0.06 |
| | | | | |
Total unit costs | | 1.89 |
| | 1.93 |
| | 6.24 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | — |
| | — |
| | — |
| | | | | |
Gross profit per pound | | $ | 0.85 |
| | $ | 0.81 |
| | $ | 1.33 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | | | | | | | | |
| | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,337 |
| | $ | 1,859 |
| | $ | 329 |
| | | | | |
Treatment charges | | (36 | ) | | 85 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 68 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 4 |
| | — |
| | — |
| | | | | |
Eliminations and other | | 43 |
| | 44 |
| | 1 |
| | | | | |
North America copper mines | | 3,348 |
| | 2,056 |
| | 330 |
| | | | | |
Other miningd | | 10,270 |
| | 7,765 |
| | 850 |
| | | | | |
Corporate, other & eliminations | | (2,256 | ) | | (2,324 | ) | | 77 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | | | | |
|
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Includes $21 million ($0.02 per pound of copper) for asset impairment charges at Morenci. |
| |
d. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | |
Six Months Ended June 30, 2018 | | | | | | |
(In millions) | | By-Product | | Co-Product Method | | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | | | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 3,092 |
| | $ | 3,092 |
| | $ | 155 |
| | $ | 76 |
| | $ | 3,323 |
| | | $ | 2,337 |
| | $ | 2,337 |
| | $ | 167 |
| | $ | 45 |
| | $ | 2,549 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | | | | | | | |
and other costs shown below | | 2,008 |
| | 1,904 |
| | 121 |
| | 46 |
| | 2,071 |
| | | 1,405 |
| | 1,304 |
| | 123 |
| | 25 |
| | 1,452 |
| |
By-product credits | | (168 | ) | | — |
| | — |
| | — |
| | — |
| | | (165 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 148 |
| | 142 |
| | — |
| | 6 |
| | 148 |
| | | 74 |
| | 71 |
| | — |
| | 3 |
| | 74 |
| |
Net cash costs | | 1,988 |
| | 2,046 |
| | 121 |
| | 52 |
| | 2,219 |
| | | 1,314 |
| | 1,375 |
| | 123 |
| | 28 |
| | 1,526 |
| |
DD&A | | 405 |
| | 381 |
| | 15 |
| | 9 |
| | 405 |
| | | 185 |
| | 171 |
| | 10 |
| | 4 |
| | 185 |
| |
Noncash and other costs, net | | 74 |
| | 72 |
| | 1 |
| | 1 |
| | 74 |
| | | 42 |
| | 40 |
| | 2 |
| | — |
| | 42 |
| |
Total costs | | 2,467 |
| | 2,499 |
| | 137 |
| | 62 |
| | 2,698 |
| | | 1,541 |
| | 1,586 |
| | 135 |
| | 32 |
| | 1,753 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | | |
on prior period open sales | | (1 | ) | | (1 | ) | | — |
| | — |
| | (1 | ) | | | (5 | ) | | (5 | ) | | — |
| | — |
| | (5 | ) | |
Gross profit | | $ | 624 |
| | $ | 592 |
| | $ | 18 |
| | $ | 14 |
| | $ | 624 |
| | | $ | 791 |
| | $ | 746 |
| | $ | 32 |
| | $ | 13 |
| | $ | 791 |
| |
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 1,421 |
| | 1,421 |
| | | | | | | | | 744 |
| | 744 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 25 |
| | | | | | | | | | | 15 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | Gross profit per pound of copper/molybdenum: | | | | | | | | Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.18 |
| | $ | 2.18 |
| | $ | 6.24 |
| | | | | | | $ | 3.14 |
| | $ | 3.14 |
| | $ | 11.52 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | | | | | | | |
and other costs shown below | | 1.41 |
| | 1.34 |
| | 4.86 |
| | | | | | | 1.89 |
| | 1.75 |
| | 8.47 |
| | | | | |
By-product credits | | (0.12 | ) | | — |
| | — |
| | | | | | | (0.22 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.10 |
| | — |
| | | | | | | 0.10 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.40 |
| | 1.44 |
| | 4.86 |
| | | | | | | 1.77 |
| | 1.85 |
| | 8.47 |
| | | | | |
DD&A | | 0.29 |
| | 0.27 |
| | 0.61 |
| | | | | | | 0.25 |
| | 0.23 |
| | 0.74 |
| | | | | |
Noncash and other costs, net | | 0.05 |
| | 0.05 |
| | 0.06 |
| | | | | | | 0.05 |
| | 0.05 |
| | 0.12 |
| | | | | |
Total unit costs | | 1.74 |
| | 1.76 |
| | 5.53 |
| | | | | | | 2.07 |
| | 2.13 |
| | 9.33 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | | |
on prior period open sales | | — |
| | — |
| | — |
| | | | | | | (0.01 | ) | | (0.01 | ) | | — |
| | | | | |
Gross profit per pound | | $ | 0.44 |
| | $ | 0.42 |
| | $ | 0.71 |
| | | | | | | $ | 1.06 |
| | $ | 1.00 |
| | $ | 2.19 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | | | | | | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | | | | | Production | | | | | | | |
| | | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,323 |
| | $ | 2,071 |
| | $ | 405 |
| | | | | | | $ | 2,549 |
| | $ | 1,452 |
| | $ | 185 |
| | | | | |
Treatment charges | | (74 | ) | | 74 |
| | — |
| | | | | | | (13 | ) | | 61 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 74 |
| | — |
| | | | | | | — |
| | 42 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | | |
on prior period open sales | | (1 | ) | | — |
| | — |
| | | | | | | (5 | ) | | — |
| | — |
| | | | | |
Eliminations and other | | 32 |
| | 34 |
| | 2 |
| | | | | | | 24 |
| | 25 |
| | 1 |
| | | | | |
North America copper mines | | 3,280 |
| | 2,253 |
| | 407 |
| | | | | | | 2,555 |
| | 1,580 |
| | 186 |
| | | | | |
Other miningc | | 8,433 |
| | 6,722 |
| | 766 |
| | | | | | | 9,255 |
| | 6,053 |
| | 672 |
| | | | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | | | | | (1,774 | ) | | (1,910 | ) | | 35 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | | | | | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| | | | | |
|
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. |
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 2,072 |
| | $ | 2,072 |
| | $ | 122 |
| | $ | 43 |
| | $ | 2,237 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1,207 |
| | 1,135 |
| | 91 |
| | 24 |
| | 1,250 |
| |
By-product credits | | (122 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 82 |
| | 79 |
| | — |
| | 3 |
| | 82 |
| |
Net cash costs | | 1,167 |
| | 1,214 |
| | 91 |
| | 27 |
| | 1,332 |
| |
DD&A | | 233 |
| | 219 |
| | 10 |
| | 4 |
| | 233 |
| |
Noncash and other costs, net | | 52 |
| | 51 |
| | 1 |
| | — |
| | 52 |
| |
Total costs | | 1,452 |
| | 1,484 |
| | 102 |
| | 31 |
| | 1,617 |
| |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 4 |
| | 4 |
| | — |
| | — |
| | 4 |
| |
Gross profit | | $ | 624 |
| | $ | 592 |
| | $ | 20 |
| | $ | 12 |
| | $ | 624 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 782 |
| | 782 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 17 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.65 |
| | $ | 2.65 |
| | $ | 7.56 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.54 |
| | 1.45 |
| | 5.62 |
| | | | | |
By-product credits | | (0.15 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.10 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.49 |
| | 1.55 |
| | 5.62 |
| | | | | |
DD&A | | 0.30 |
| | 0.28 |
| | 0.59 |
| | | | | |
Noncash and other costs, net | | 0.07 |
| | 0.07 |
| | 0.06 |
| | | | | |
Total unit costs | | 1.86 |
| | 1.90 |
| | 6.27 |
| | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 0.01 |
| | 0.01 |
| | — |
| | | | | |
Gross profit per pound | | $ | 0.80 |
| | $ | 0.76 |
| | $ | 1.29 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 2,237 |
| | $ | 1,250 |
| | $ | 233 |
| | | | | |
Treatment charges | | (28 | ) | | 54 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 52 |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 4 |
| | — |
| | — |
| | | | | |
Eliminations and other | | 30 |
| | 30 |
| | 1 |
| | | | | |
North America copper mines | | 2,243 |
| | 1,386 |
| | 234 |
| | | | | |
Other miningc | | 6,361 |
| | 4,855 |
| | 551 |
| | | | | |
Corporate, other & eliminations | | (1,552 | ) | | (1,573 | ) | | 54 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 7,052 |
| | $ | 4,668 |
| | $ | 839 |
| | | | | |
|
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | Three Months Ended September 30, 2017 | | | | | |
Three Months Ended June 30, 2018 | | | | | |
(In millions) | | By-Product | | Co-Product Method | | By-Product | | Co-Product Method |
| | Method | | Copper | | Othera | | Total | | Method | | Copper | | Othera | | Total |
Revenues, excluding adjustments | | $ | 965 |
| | $ | 965 |
| | $ | 75 |
| | $ | 1,040 |
| | $ | 958 |
| | $ | 958 |
| | $ | 81 |
| | $ | 1,039 |
|
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | |
and other costs shown below | | 524 |
| | 490 |
| | 46 |
| | 536 |
| | 552 |
| | 513 |
| | 50 |
| | 563 |
|
By-product credits | | (63 | ) | | — |
| | — |
| | — |
| | (70 | ) | | — |
| | — |
| | — |
|
Treatment charges | | 73 |
| | 73 |
| | — |
| | 73 |
| | 59 |
| | 59 |
| | — |
| | 59 |
|
Royalty on metals | | 2 |
| | 2 |
| | — |
| | 2 |
| | 2 |
| | 2 |
| | — |
| | 2 |
|
Net cash costs | | 536 |
| | 565 |
| | 46 |
| | 611 |
| | 543 |
| | 574 |
| | 50 |
| | 624 |
|
DD&A | | 134 |
| | 125 |
| | 9 |
| | 134 |
| | 133 |
| | 123 |
| | 10 |
| | 133 |
|
Noncash and other costs, net | | 225 |
| b | 207 |
| | 18 |
| | 225 |
| | 17 |
| | 17 |
| | — |
| | 17 |
|
Total costs | | 895 |
| | 897 |
| | 73 |
| | 970 |
| | 693 |
| | 714 |
| | 60 |
| | 774 |
|
Revenue adjustments, primarily for pricing | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 59 |
| | 59 |
| | — |
| | 59 |
| | 13 |
| | 13 |
| | — |
| | 13 |
|
Gross profit | | $ | 129 |
| | $ | 127 |
| | $ | 2 |
| | $ | 129 |
| | $ | 278 |
| | $ | 257 |
| | $ | 21 |
| | $ | 278 |
|
| | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 327 |
| | 327 |
| | | | | | 312 |
| | 312 |
| | | | |
| | | | | | | | | | | | | | | | |
Gross profit per pound of copper: | Gross profit per pound of copper: | | | | | Gross profit per pound of copper: | | | | |
| | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.95 |
| | $ | 2.95 |
| | | | | | $ | 3.07 |
| | $ | 3.07 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | |
and other costs shown below | | 1.60 |
| | 1.50 |
| | | | | | 1.77 |
| | 1.65 |
| | | | |
By-product credits | | (0.19 | ) | | — |
| | | | | | (0.22 | ) | | — |
| | | | |
Treatment charges | | 0.22 |
| | 0.22 |
| | | | | | 0.18 |
| | 0.18 |
| | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | | | 0.01 |
| | 0.01 |
| | | | |
Unit net cash costs | | 1.64 |
| | 1.73 |
| | | | | | 1.74 |
| | 1.84 |
| | | | |
DD&A | | 0.41 |
| | 0.38 |
| | | | | | 0.43 |
| | 0.40 |
| | | | |
Noncash and other costs, net | | 0.69 |
| b | 0.63 |
| | | | | | 0.05 |
| | 0.05 |
| | | | |
Total unit costs | | 2.74 |
| | 2.74 |
| | | | | | 2.22 |
| | 2.29 |
| | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 0.18 |
| | 0.18 |
| | | | | | 0.04 |
| | 0.04 |
| | | | |
Gross profit per pound | | $ | 0.39 |
| | $ | 0.39 |
| | | | | | $ | 0.89 |
| | $ | 0.82 |
| | | | |
| | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | | | | | |
| | | | Production | | | | | | | | Production | | | | |
| | Revenues | | and Delivery | | DD&A | | | | Revenues | | and Delivery | | DD&A | | |
Totals presented above | | $ | 1,040 |
| | $ | 536 |
| | $ | 134 |
| | | | $ | 1,039 |
| | $ | 563 |
| | $ | 133 |
| | |
Treatment charges | | (73 | ) | | — |
| | — |
| | | | (59 | ) | | — |
| | — |
| | |
Royalty on metals | | (2 | ) | | — |
| | — |
| | | | (2 | ) | | — |
| | — |
| | |
Noncash and other costs, net | | — |
| | 225 |
| | — |
| | | | — |
| | 17 |
| | — |
| | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 59 |
| | — |
| | — |
| | | | 13 |
| | — |
| | — |
| | |
Eliminations and other | | (1 | ) | | (2 | ) | | — |
| | | | (1 | ) | | (2 | ) | | — |
| | |
South America mining | | 1,023 |
| | 759 |
| | 134 |
| | | | 990 |
| | 578 |
| | 133 |
| | |
Other miningc | | 3,991 |
| | 2,796 |
| | 261 |
| | | |
Other miningb | | | 4,995 |
| | 3,253 |
| | 295 |
| | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | (817 | ) | | (916 | ) | | 14 |
| | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| | |
| | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 1.01.1 million ounces ($16.15 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Includes charges totaling $216 million ($0.66 per pound of copper) associated with disputed Cerro Verde royalties for prior years. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | |
| | | | | |
Three Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 709 |
| | $ | 709 |
| | $ | 50 |
| | $ | 759 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 409 |
| | 386 |
| | 35 |
| | 421 |
| |
By-product credits | | (38 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 79 |
| | 79 |
| | — |
| | 79 |
| |
Royalty on metals | | 2 |
| | 2 |
| | — |
| | 2 |
| |
Net cash costs | | 452 |
| | 467 |
| | 35 |
| | 502 |
| |
DD&A | | 134 |
| | 126 |
| | 8 |
| | 134 |
| |
Noncash and other costs, net | | 4 |
| | 3 |
| | 1 |
| | 4 |
| |
Total costs | | 590 |
| | 596 |
| | 44 |
| | 640 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | (7 | ) | | (7 | ) | | — |
| | (7 | ) | |
Gross profit | | $ | 112 |
| | $ | 106 |
| | $ | 6 |
| | $ | 112 |
| |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 323 |
| | 323 |
| | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.19 |
| | $ | 2.19 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.27 |
| | 1.20 |
| | | | | |
By-product credits | | (0.12 | ) | | — |
| | | | | |
Treatment charges | | 0.24 |
| | 0.24 |
| | | | | |
Royalty on metals | | 0.01 |
| | — |
| | | | | |
Unit net cash costs | | 1.40 |
| | 1.44 |
| | | | | |
DD&A | | 0.41 |
| | 0.39 |
| | | | | |
Noncash and other costs, net | | 0.01 |
| | 0.01 |
| | | | | |
Total unit costs | | 1.82 |
| | 1.84 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | (0.02 | ) | | (0.02 | ) | | | | | |
Gross profit per pound | | $ | 0.35 |
| | $ | 0.33 |
| | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 759 |
| | $ | 421 |
| | $ | 134 |
| | | |
Treatment charges | | (79 | ) | | — |
| | — |
| | | |
Royalty on metals | | (2 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 4 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | (7 | ) | | — |
| | — |
| | | |
Eliminations and other | | — |
| | (1 | ) | | — |
| | | |
South America mining | | 671 |
| | 424 |
| | 134 |
| | | |
Other miningb | | 3,498 |
| | 2,621 |
| | 263 |
| | | |
Corporate, other & eliminations | | (292 | ) | | (516 | ) | | 246 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | |
| | | | | | | | | |
| |
a. | Includes silver sales of 952 thousand ounces ($21.7216.38 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | |
| | | | |
Nine Months Ended September 30, 2017 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Othera | | Total |
Revenues, excluding adjustments | | $ | 2,605 |
| | $ | 2,605 |
| | $ | 190 |
| | $ | 2,795 |
|
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1,429 |
| | 1,340 |
| | 123 |
| | 1,463 |
|
By-product credits | | (156 | ) | | — |
| | — |
| | — |
|
Treatment charges | | 204 |
| | 204 |
| | — |
| | 204 |
|
Royalty on metals | | 6 |
| | 5 |
| | 1 |
| | 6 |
|
Net cash costs | | 1,483 |
| | 1,549 |
| | 124 |
| | 1,673 |
|
DD&A | | 392 |
| | 365 |
| | 27 |
| | 392 |
|
Noncash and other costs, net | | 234 |
| b | 217 |
| | 17 |
| | 234 |
|
Total costs | | 2,109 |
| | 2,131 |
| | 168 |
| | 2,299 |
|
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 40 |
| | 40 |
| | — |
| | 40 |
|
Gross profit | | $ | 536 |
| | $ | 514 |
| | $ | 22 |
| | $ | 536 |
|
| | | | | | | | |
Copper sales (millions of recoverable pounds) | | 923 |
| | 923 |
| | | | |
| | | | | | | | |
Gross profit per pound of copper: | | | | |
| | | | | | | | |
Revenues, excluding adjustments | | $ | 2.82 |
| | $ | 2.82 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1.55 |
| | 1.45 |
| | | | |
By-product credits | | (0.17 | ) | | — |
| | | | |
Treatment charges | | 0.22 |
| | 0.22 |
| | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | |
Unit net cash costs | | 1.61 |
| | 1.68 |
| | | | |
DD&A | | 0.42 |
| | 0.40 |
| | | | |
Noncash and other costs, net | | 0.25 |
| b | 0.23 |
| | | | |
Total unit costs | | 2.28 |
| | 2.31 |
| | | | |
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 0.04 |
| | 0.04 |
| | | | |
Gross profit per pound | | $ | 0.58 |
| | $ | 0.55 |
| | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
(In millions) | | | | Production | | | | |
| | Revenues | | and Delivery | | DD&A | | |
Totals presented above | | $ | 2,795 |
| | $ | 1,463 |
| | $ | 392 |
| | |
Treatment charges | | (204 | ) | | — |
| | — |
| | |
Royalty on metals | | (6 | ) | | — |
| | — |
| | |
Noncash and other costs, net | | — |
| | 234 |
| | — |
| | |
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 40 |
| | — |
| | — |
| | |
Eliminations and other | | 1 |
| | (2 | ) | | — |
| | |
South America mining | | 2,626 |
| | 1,695 |
| | 392 |
| | |
Other miningc | — |
| 10,992 |
| | 8,126 |
| | 788 |
| | |
Corporate, other & eliminations | — |
| (2,256 | ) | | (2,324 | ) | | 77 |
| | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | |
| | | | | | | | |
| |
a. | Includes silver sales of 2.8 million ounces ($16.66 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Includes charges totaling $216 million ($0.23 per pound of copper) associated with disputed Cerro Verde royalties for prior years. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | |
Three Months Ended June 30, 2017 | | | | | | |
(In millions) | | By-Product | | Co-Product Method | | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | | | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 2,115 |
| | $ | 2,115 |
| | $ | 129 |
| | $ | 2,244 |
| | | $ | 766 |
| | $ | 766 |
| | $ | 47 |
| | $ | 813 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | | | |
and other costs shown below | | 1,199 |
| | 1,140 |
| | 88 |
| | 1,228 |
| | | 448 |
| | 424 |
| | 34 |
| | 458 |
| |
By-product credits | | (100 | ) | | — |
| | — |
| | — |
| | | (37 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 230 |
| | 230 |
| | — |
| | 230 |
| | | 63 |
| | 63 |
| | — |
| | 63 |
| |
Royalty on metals | | 5 |
| | 5 |
| | — |
| | 5 |
| | | 2 |
| | 2 |
| | — |
| | 2 |
| |
Net cash costs | | 1,334 |
| | 1,375 |
| | 88 |
| | 1,463 |
| | | 476 |
| | 489 |
| | 34 |
| | 523 |
| |
DD&A | | 401 |
| | 379 |
| | 22 |
| | 401 |
| | | 125 |
| | 118 |
| | 7 |
| | 125 |
| |
Noncash and other costs, net | | 15 |
| | 14 |
| | 1 |
| | 15 |
| | | 5 |
| | 5 |
| | — |
| | 5 |
| |
Total costs | | 1,750 |
| | 1,768 |
| | 111 |
| | 1,879 |
| | | 606 |
| | 612 |
| | 41 |
| | 653 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | 9 |
| | 9 |
| | — |
| | 9 |
| | | (14 | ) | | (14 | ) | | — |
| | (14 | ) | |
Gross profit | | $ | 374 |
| | $ | 356 |
| | $ | 18 |
| | $ | 374 |
| | | $ | 146 |
| | $ | 140 |
| | $ | 6 |
| | $ | 146 |
| |
| | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 973 |
| | 973 |
| | | | | | | 287 |
| | 287 |
| | | | | |
| | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper: | Gross profit per pound of copper: | | | | | | Gross profit per pound of copper: | | | | | |
| | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.17 |
| | $ | 2.17 |
| | | | | | | $ | 2.67 |
| | $ | 2.67 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | | | |
and other costs shown below | | 1.23 |
| | 1.17 |
| | | | | | | 1.55 |
| | 1.47 |
| | | | | |
By-product credits | | (0.10 | ) | | — |
| | | | | | | (0.13 | ) | | — |
| | | | | |
Treatment charges | | 0.24 |
| | 0.24 |
| | | | | | | 0.22 |
| | 0.22 |
| | | | | |
Royalty on metals | | — |
| | — |
| | | | | | | 0.01 |
| | 0.01 |
| | | | | |
Unit net cash costs | | 1.37 |
| | 1.41 |
| | | | | | | 1.65 |
| | 1.70 |
| | | | | |
DD&A | | 0.41 |
| | 0.39 |
| | | | | | | 0.44 |
| | 0.41 |
| | | | | |
Noncash and other costs, net | | 0.02 |
| | 0.02 |
| | | | | | | 0.02 |
| | 0.02 |
| | | | | |
Total unit costs | | 1.80 |
| | 1.82 |
| | | | | | | 2.11 |
| | 2.13 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | 0.01 |
| | 0.01 |
| | | | | | | (0.05 | ) | | (0.05 | ) | | | | | |
Gross profit per pound | | $ | 0.38 |
| | $ | 0.36 |
| | | | | | | $ | 0.51 |
| | $ | 0.49 |
| | | | | |
| | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 2,244 |
| | $ | 1,228 |
| | $ | 401 |
| | | | | $ | 813 |
| | $ | 458 |
| | $ | 125 |
| | | |
Treatment charges | | (230 | ) | | — |
| | — |
| | | | | (63 | ) | | — |
| | — |
| | | |
Royalty on metals | | (5 | ) | | — |
| | — |
| | | | | (2 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 15 |
| | — |
| | | | | — |
| | 5 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | 9 |
| | — |
| | — |
| | | | | (14 | ) | | — |
| | — |
| | | |
Eliminations and other | | 1 |
| | (3 | ) | | 1 |
| | | | | 1 |
| | — |
| | — |
| | | |
South America mining | | 2,019 |
| | 1,240 |
| | 402 |
| | | | | 735 |
| | 463 |
| | 125 |
| | | |
Other miningb | | 9,694 |
| | 7,735 |
|
| 771 |
| | | | | 3,736 |
| | 2,772 |
| | 300 |
| | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | | | (760 | ) | | (755 | ) | | 25 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | | | $ | 3,711 |
| | $ | 2,480 |
| | $ | 450 |
| | | |
| | | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 2.8 million848 thousand ounces ($17.9917.97 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | |
| | | | |
Six Months Ended June 30, 2018 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Othera | | Total |
Revenues, excluding adjustments | | $ | 1,859 |
| | $ | 1,859 |
| | $ | 167 |
| | $ | 2,026 |
|
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1,069 |
| | 990 |
| | 102 |
| | 1,092 |
|
By-product credits | | (144 | ) | | — |
| | — |
| | — |
|
Treatment charges | | 117 |
| | 117 |
| | — |
| | 117 |
|
Royalty on metals | | 4 |
| | 4 |
| | — |
| | 4 |
|
Net cash costs | | 1,046 |
| | 1,111 |
| | 102 |
| | 1,213 |
|
DD&A | | 260 |
| | 239 |
| | 21 |
| | 260 |
|
Noncash and other costs, net | | 32 |
| | 32 |
| | — |
| | 32 |
|
Total costs | | 1,338 |
| | 1,382 |
| | 123 |
| | 1,505 |
|
Other revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | (37 | ) | | (37 | ) | | — |
| | (37 | ) |
Gross profit | | $ | 484 |
| | $ | 440 |
| | $ | 44 |
| | $ | 484 |
|
| | | | | | | | |
Copper sales (millions of recoverable pounds) | | 602 |
| | 602 |
| | | | |
| | | | | | | | |
Gross profit per pound of copper: | | | | |
| | | | | | | | |
Revenues, excluding adjustments | | $ | 3.09 |
| | $ | 3.09 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1.78 |
| | 1.64 |
| | | | |
By-product credits | | (0.24 | ) | | — |
| | | | |
Treatment charges | | 0.19 |
| | 0.19 |
| | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | |
Unit net cash costs | | 1.74 |
| | 1.84 |
| | | | |
DD&A | | 0.43 |
| | 0.40 |
| | | | |
Noncash and other costs, net | | 0.05 |
| | 0.05 |
| | | | |
Total unit costs | | 2.22 |
| | 2.29 |
| | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | (0.06 | ) | | (0.06 | ) | | | | |
Gross profit per pound | | $ | 0.81 |
| | $ | 0.74 |
| | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
(In millions) | | | | Production | | | | |
| | Revenues | | and Delivery | | DD&A | | |
Totals presented above | | $ | 2,026 |
| | $ | 1,092 |
| | $ | 260 |
| | |
Treatment charges | | (117 | ) | | — |
| | — |
| | |
Royalty on metals | | (4 | ) | | — |
| | — |
| | |
Noncash and other costs, net | | — |
| | 32 |
| | — |
| | |
Other revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | (37 | ) | | — |
| | — |
| | |
Eliminations and other | | (1 | ) | | (3 | ) | | — |
| | |
South America mining | | 1,867 |
| | 1,121 |
| | 260 |
| | |
Other miningb | — |
| 9,943 |
| | 6,512 |
| | 598 |
| | |
Corporate, other & eliminations | — |
| (1,774 | ) | | (1,910 | ) | | 35 |
| | |
As reported in FCX’s consolidated financial statements | | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| | |
| | | | | | | | |
| |
a. | Includes silver sales of 2.1 million ounces ($16.45 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 1,581 |
| | $ | 1,581 |
| | $ | 115 |
| | $ | 1,696 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 905 |
| | 850 |
| | 77 |
| | 927 |
| |
By-product credits | | (93 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 130 |
| | 130 |
| | — |
| | 130 |
| |
Royalty on metals | | 4 |
| | 4 |
| | — |
| | 4 |
| |
Net cash costs | | 946 |
| | 984 |
| | 77 |
| | 1,061 |
| |
DD&A | | 258 |
| | 241 |
| | 17 |
| | 258 |
| |
Noncash and other costs, net | | 10 |
| | 10 |
| | — |
| | 10 |
| |
Total costs | | 1,214 |
| | 1,235 |
| | 94 |
| | 1,329 |
| |
Other revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 41 |
| | 41 |
| | — |
| | 41 |
| |
Gross profit | | $ | 408 |
| | $ | 387 |
| | $ | 21 |
| | $ | 408 |
| |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 596 |
| | 596 |
| | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.65 |
| | $ | 2.65 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.52 |
| | 1.42 |
| | | | | |
By-product credits | | (0.16 | ) | | — |
| | | | | |
Treatment charges | | 0.22 |
| | 0.22 |
| | | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | | |
Unit net cash costs | | 1.59 |
| | 1.65 |
| | | | | |
DD&A | | 0.43 |
| | 0.40 |
| | | | | |
Noncash and other costs, net | | 0.02 |
| | 0.02 |
| | | | | |
Total unit costs | | 2.04 |
| | 2.07 |
| | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 0.07 |
| | 0.07 |
| | | | | |
Gross profit per pound | | $ | 0.68 |
| | $ | 0.65 |
| | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 1,696 |
| | $ | 927 |
| | $ | 258 |
| | | |
Treatment charges | | (130 | ) | | — |
| | — |
| | | |
Royalty on metals | | (4 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 10 |
| | — |
| | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 41 |
| | — |
| | — |
| | | |
Eliminations and other | | — |
| | (1 | ) | | — |
| | | |
South America mining | | 1,603 |
| | 936 |
| | 258 |
| | | |
Other miningb | | 7,001 |
| | 5,305 |
|
| 527 |
| | | |
Corporate, other & eliminations | | (1,552 | ) | | (1,573 | ) | | 54 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 7,052 |
| | $ | 4,668 |
| | $ | 839 |
| | | |
| | | | | | | | | |
| |
a. | Includes silver sales of 1.8 million ounces ($16.95 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs | | | | | | | | | | |
Three Months Ended September 30, 2017 | | | | | |
Three Months Ended June 30, 2018 | | | | | |
(In millions) | | By-Product | | Co-Product Method | | By-Product | | Co-Product Method |
| | Method | | Copper | | Gold | | Silvera | | Total | | Method | | Copper | | Gold | | Silvera | | Total |
Revenues, excluding adjustments | | $ | 762 |
| | $ | 762 |
| | $ | 453 |
| | $ | 11 |
| | $ | 1,226 |
| | $ | 965 |
| | $ | 965 |
| | $ | 855 |
| | $ | 17 |
| | $ | 1,837 |
|
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | | | | | |
and other costs shown below | | 364 |
| | 226 |
| | 134 |
| | 4 |
| | 364 |
| |
and other credits shown below | | | 420 |
| | 221 |
| | 195 |
| | 4 |
| | 420 |
|
Gold and silver credits | | (466 | ) | | — |
| | — |
| | — |
| | — |
| | (871 | ) | | — |
| | — |
| | — |
| | — |
|
Treatment charges | | 71 |
| | 44 |
| | 26 |
| | 1 |
| | 71 |
| | 82 |
| | 43 |
| | 38 |
| | 1 |
| | 82 |
|
Export duties | | 21 |
| | 13 |
| | 8 |
| | — |
| | 21 |
| | 55 |
| | 29 |
| | 26 |
| | — |
| | 55 |
|
Royalty on metals | | 43 |
| | 26 |
| | 17 |
| | — |
| | 43 |
| | 71 |
| | 36 |
| | 34 |
| | 1 |
| | 71 |
|
Net cash costs | | 33 |
| | 309 |
| | 185 |
| | 5 |
| | 499 |
| |
Net cash (credits) costs | | | (243 | ) | | 329 |
| | 293 |
| | 6 |
| | 628 |
|
DD&A | | 136 |
| | 85 |
| | 50 |
| | 1 |
| | 136 |
| | 172 |
| | 90 |
| | 80 |
| | 2 |
| | 172 |
|
Noncash and other costs, net | | 24 |
| b | 15 |
| | 9 |
| | — |
| | 24 |
| |
Total costs | | 193 |
| | 409 |
| | 244 |
| | 6 |
| | 659 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
Noncash and other credits, net | | | (3 | ) | | (1 | ) | | (2 | ) | | — |
| | (3 | ) |
Total (credits) costs | | | (74 | ) | | 418 |
| | 371 |
| | 8 |
| | 797 |
|
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
prior period open sales | | 28 |
| | 28 |
| | 2 |
| | — |
| | 30 |
| | 12 |
| | 12 |
| | (2 | ) | | 1 |
| | 11 |
|
PT Smelting intercompany loss | | (18 | ) | | (11 | ) | | (7 | ) | | — |
| | (18 | ) | | (8 | ) | | (4 | ) | | (4 | ) | | — |
| | (8 | ) |
Gross profit | | $ | 579 |
| | $ | 370 |
| | $ | 204 |
| | $ | 5 |
| | $ | 579 |
| | $ | 1,043 |
| | $ | 555 |
| | $ | 478 |
| | $ | 10 |
| | $ | 1,043 |
|
| | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 258 |
| | 258 |
| | | | | | | | 316 |
| | 316 |
| | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 352 |
| | | | | | | | | | 671 |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | Gross profit per pound of copper/per ounce of gold: | | | | | | | Gross profit per pound of copper/per ounce of gold: | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.95 |
| | $ | 2.95 |
| | $ | 1,290 |
| | | | | | $ | 3.05 |
| | $ | 3.05 |
| | $ | 1,274 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | | | | | | | | | | | | | |
and other costs shown below | | 1.41 |
| | 0.87 |
| | 383 |
| | | | | |
and other credits shown below | | | 1.33 |
| | 0.70 |
| | 291 |
| | | | |
Gold and silver credits | | (1.80 | ) | | — |
| | — |
| | | | | | (2.76 | ) | | — |
| | — |
| | | | |
Treatment charges | | 0.27 |
| | 0.17 |
| | 74 |
| | | | | | 0.26 |
| | 0.14 |
| | 57 |
| | | | |
Export duties | | 0.08 |
| | 0.05 |
| | 22 |
| | | | | | 0.18 |
| | 0.09 |
| | 38 |
| | | | |
Royalty on metals | | 0.17 |
| | 0.10 |
| | 48 |
| | | | | | 0.22 |
| | 0.11 |
| | 51 |
| | | | |
Unit net cash costs | | 0.13 |
| | 1.19 |
| | 527 |
| | | | | |
Unit net cash (credits) costs | | | (0.77 | ) | | 1.04 |
| | 437 |
| | | | |
DD&A | | 0.53 |
| | 0.33 |
| | 143 |
| | | | | | 0.54 |
| | 0.28 |
| | 119 |
| | | | |
Noncash and other costs, net | | 0.09 |
| b | 0.06 |
| | 25 |
| | | | | |
Total unit costs | | 0.75 |
| | 1.58 |
| | 695 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
Noncash and other credits, net | | | (0.01 | ) | | — |
| | (2 | ) | | | | |
Total unit (credits) costs | | | (0.24 | ) | | 1.32 |
| | 554 |
| | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
prior period open sales | | 0.11 |
| | 0.11 |
| | 4 |
| | | | | | 0.04 |
| | 0.04 |
| | (2 | ) | | | | |
PT Smelting intercompany loss | | (0.07 | ) | | (0.04 | ) | | (19 | ) | | | | | | (0.03 | ) | | (0.01 | ) | | (6 | ) | | | | |
Gross profit per pound/ounce | | $ | 2.24 |
| | $ | 1.44 |
| | $ | 580 |
| | | | | | $ | 3.30 |
| | $ | 1.76 |
| | $ | 712 |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | | | | Production | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | | Revenues | | and Delivery | | DD&A | | | | |
Totals presented above | | $ | 1,226 |
| | $ | 364 |
| | $ | 136 |
| | | | | | $ | 1,837 |
| | $ | 420 |
| | $ | 172 |
| | | | |
Treatment charges | | (71 | ) | | — |
| | — |
| | | | | | (82 | ) | | — |
| | — |
| | | | |
Export duties | | (21 | ) | | — |
| | — |
| | | | | | (55 | ) | | — |
| | — |
| | | | |
Royalty on metals | | (43 | ) | | — |
| | — |
| | | | | | (71 | ) | | — |
| | — |
| | | | |
Noncash and other costs, net | | — |
| | 24 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
Noncash and other credits, net | | | — |
| | (3 | ) | | — |
| | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
prior period open sales | | 30 |
| | — |
| | — |
| | | | | | 11 |
| | — |
| | — |
| | | | |
PT Smelting intercompany loss | | — |
| | 18 |
| | — |
| | | | | | — |
| | 8 |
| | — |
| | | | |
Indonesia mining | | 1,121 |
| | 406 |
| | 136 |
| | | | | | 1,640 |
| | 425 |
| | 172 |
| | | | |
Other miningc | | 3,893 |
| | 3,149 |
| | 259 |
| | | | | |
Other miningb | | | 4,345 |
| | 3,406 |
| | 256 |
| | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | | | (817 | ) | | (916 | ) | | 14 |
| | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | | | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 6661.1 million ounces ($15.89 per ounce average realized price). |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | | | | | |
|
Three Months Ended June 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 660 |
| | $ | 660 |
| | $ | 531 |
| | $ | 14 |
| | $ | 1,205 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 437 |
| | 239 |
| | 193 |
| | 5 |
| | 437 |
| |
Gold and silver credits | | (547 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 65 |
| | 35 |
| | 29 |
| | 1 |
| | 65 |
| |
Export duties | | 27 |
| | 15 |
| | 12 |
| | — |
| | 27 |
| |
Royalty on metals | | 43 |
| | 22 |
| | 20 |
| | 1 |
| | 43 |
| |
Net cash costs | | 25 |
| | 311 |
| | 254 |
| | 7 |
| | 572 |
| |
DD&A | | 153 |
| | 84 |
| | 67 |
| | 2 |
| | 153 |
| |
Noncash and other costs, net | | 84 |
| b | 46 |
| | 37 |
| | 1 |
| | 84 |
| |
Total costs | | 262 |
| | 441 |
| | 358 |
| | 10 |
| | 809 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (7 | ) | | (7 | ) | | 2 |
| | — |
| | (5 | ) | |
PT Smelting intercompany loss | | (26 | ) | | (15 | ) | | (11 | ) | | — |
| | (26 | ) | |
Gross profit | | $ | 365 |
| | $ | 197 |
| | $ | 164 |
| | $ | 4 |
| | $ | 365 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 247 |
| | 247 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 427 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.67 |
| | $ | 2.67 |
| | $ | 1,243 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.77 |
| | 0.97 |
| | 451 |
| | | | | |
Gold and silver credits | | (2.21 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.26 |
| | 0.14 |
| | 67 |
| | | | | |
Export duties | | 0.11 |
| | 0.06 |
| | 28 |
| | | | | |
Royalty on metals | | 0.17 |
| | 0.09 |
| | 47 |
| | | | | |
Unit net cash costs | | 0.10 |
| | 1.26 |
| | 593 |
| | | | | |
DD&A | | 0.62 |
| | 0.34 |
| | 158 |
| | | | | |
Noncash and other costs, net | | 0.34 |
| b | 0.18 |
| | 86 |
| | | | | |
Total unit costs | | 1.06 |
| | 1.78 |
| | 837 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (0.03 | ) | | (0.03 | ) | | 5 |
| | | | | |
PT Smelting intercompany loss | | (0.10 | ) | | (0.06 | ) | | (26 | ) | | | | | |
Gross profit per pound/ounce | | $ | 1.48 |
| | $ | 0.80 |
| | $ | 385 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,205 |
| | $ | 437 |
| | $ | 153 |
| | | | | |
Treatment charges | | (65 | ) | | — |
| | — |
| | | | | |
Export duties | | (27 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (43 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 84 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (5 | ) | | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 26 |
| | — |
| | | | | |
Indonesia mining | | 1,065 |
| | 547 |
| | 153 |
| | | | | |
Other miningc | | 3,406 |
| | 2,688 |
|
| 272 |
| | | | | |
Corporate, other & eliminations | | (760 | ) | | (755 | ) | | 25 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 3,711 |
| | $ | 2,480 |
| | $ | 450 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 851 thousand ounces ($16.6416.26 per ounce average realized price). |
| |
b. | Includes $9$82 million ($0.030.33 per pound of copper) of costs charged directly to production and delivery costs as a result of the impact of workforce reductions. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs |
| | | | | | | | | | | | | | | | | | | | |
| | | | |
Six Months Ended June 30, 2018 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Gold | | Silvera | | Total |
Revenues, excluding adjustments | | $ | 1,949 |
| | $ | 1,949 |
| | $ | 1,644 |
| | $ | 36 |
| | $ | 3,629 |
|
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 853 |
| | 458 |
| | 387 |
| | 8 |
| | 853 |
|
Gold and silver credits | | (1,697 | ) | | — |
| | — |
| | — |
| | — |
|
Treatment charges | | 160 |
| | 86 |
| | 72 |
| | 2 |
| | 160 |
|
Export duties | | 101 |
| | 54 |
| | 46 |
| | 1 |
| | 101 |
|
Royalty on metals | | 138 |
| | 73 |
| | 64 |
| | 1 |
| | 138 |
|
Net cash (credits) costs | | (445 | ) | | 671 |
| | 569 |
| | 12 |
| | 1,252 |
|
DD&A | | 353 |
| | 189 |
| | 160 |
| | 4 |
| | 353 |
|
Noncash and other costs, net | | 12 |
| | 7 |
| | 5 |
| | — |
| | 12 |
|
Total (credits) costs | | (80 | ) | | 867 |
| | 734 |
| | 16 |
| | 1,617 |
|
Other revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | (34 | ) | | (34 | ) | | 17 |
| | — |
| | (17 | ) |
PT Smelting intercompany loss | | (17 | ) | | (9 | ) | | (8 | ) | | — |
| | (17 | ) |
Gross profit | | $ | 1,978 |
| | $ | 1,039 |
| | $ | 919 |
| | $ | 20 |
| | $ | 1,978 |
|
| | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 635 |
| | 635 |
| | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 1,274 |
| | | | |
| | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | |
| | | | | | | | | | |
Revenues, excluding adjustments | | $ | 3.07 |
| | $ | 3.07 |
| | $ | 1,291 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1.34 |
| | 0.72 |
| | 304 |
| | | | |
Gold and silver credits | | (2.67 | ) | | — |
| | — |
| | | | |
Treatment charges | | 0.25 |
| | 0.14 |
| | 57 |
| | | | |
Export duties | | 0.16 |
| | 0.09 |
| | 36 |
| | | | |
Royalty on metals | | 0.22 |
| | 0.11 |
| | 50 |
| | | | |
Unit net cash (credits) costs | | (0.70 | ) | | 1.06 |
| | 447 |
| | | | |
DD&A | | 0.55 |
| | 0.30 |
| | 125 |
| | | | |
Noncash and other costs, net | | 0.02 |
| | 0.01 |
| | 4 |
| | | | |
Total unit (credits) costs | | (0.13 | ) | | 1.37 |
| | 576 |
| | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | (0.05 | ) | | (0.05 | ) | | 13 |
| | | | |
PT Smelting intercompany loss | | (0.04 | ) | | (0.01 | ) | | (7 | ) | | | | |
Gross profit per pound/ounce | | $ | 3.11 |
| | $ | 1.64 |
| | $ | 721 |
| | | | |
| | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | |
(In millions) | | | | Production | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | |
Totals presented above | | $ | 3,629 |
| | $ | 853 |
| | $ | 353 |
| | | | |
Treatment charges | | (160 | ) | | — |
| | — |
| | | | |
Export duties | | (101 | ) | | — |
| | — |
| | | | |
Royalty on metals | | (138 | ) | | — |
| | — |
| | | | |
Noncash and other costs, net | | — |
| | 12 |
| | — |
| | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | (17 | ) | | — |
| | — |
| | | | |
PT Smelting intercompany loss | | — |
| | 17 |
| | — |
| | | | |
Indonesia mining | | 3,213 |
| | 882 |
| | 353 |
| | | | |
Other miningb | | 8,597 |
| | 6,751 |
| | 505 |
| | | | |
Corporate, other & eliminations | | (1,774 | ) | | (1,910 | ) | | 35 |
| | | | |
As reported in FCX’s consolidated financial statements | | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| | | | |
| | | | | | | | | | |
| |
a. | Includes silver sales of 2.3 million ounces ($15.93 per ounce average realized price). |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 982 |
| | $ | 982 |
| | $ | 752 |
| | $ | 21 |
| | $ | 1,755 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 702 |
| | 393 |
| | 301 |
| | 8 |
| | 702 |
| |
Gold and silver credits | | (782 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 100 |
| | 56 |
| | 43 |
| | 1 |
| | 100 |
| |
Export duties | | 41 |
| | 23 |
| | 18 |
| | — |
| | 41 |
| |
Royalty on metals | | 63 |
| | 34 |
| | 28 |
| | 1 |
| | 63 |
| |
Net cash costs | | 124 |
| | 506 |
| | 390 |
| | 10 |
| | 906 |
| |
DD&A | | 236 |
| | 132 |
| | 101 |
| | 3 |
| | 236 |
| |
Noncash and other costs, net | | 116 |
| b | 65 |
| | 49 |
| | 2 |
| | 116 |
| |
Total costs | | 476 |
| | 703 |
| | 540 |
| | 15 |
| | 1,258 |
| |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 39 |
| | 39 |
| | 9 |
| | — |
| | 48 |
| |
PT Smelting intercompany profit | | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| |
Gross profit | | $ | 546 |
| | $ | 319 |
| | $ | 221 |
| | $ | 6 |
| | $ | 546 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 372 |
| | 372 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 604 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.64 |
| | $ | 2.64 |
| | $ | 1,242 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.89 |
| | 1.05 |
| | 497 |
| | | | | |
Gold and silver credits | | (2.10 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.27 |
| | 0.15 |
| | 71 |
| | | | | |
Export duties | | 0.11 |
| | 0.06 |
| | 29 |
| | | | | |
Royalty on metals | | 0.17 |
| | 0.10 |
| | 47 |
| | | | | |
Unit net cash costs | | 0.34 |
| | 1.36 |
| | 644 |
| | | | | |
DD&A | | 0.63 |
| | 0.35 |
| | 167 |
| | | | | |
Noncash and other costs, net | | 0.32 |
| b | 0.18 |
| | 82 |
| | | | | |
Total unit costs | | 1.29 |
| | 1.89 |
| | 893 |
| | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 0.11 |
| | 0.11 |
| | 15 |
| | | | | |
PT Smelting intercompany profit | | — |
| | — |
| | 1 |
| | | | | |
Gross profit per pound/ounce | | $ | 1.46 |
| | $ | 0.86 |
| | $ | 365 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,755 |
| | $ | 702 |
| | $ | 236 |
| | | | | |
Treatment charges | | (100 | ) | | — |
| | — |
| | | | | |
Export duties | | (41 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (63 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 116 |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 48 |
| | — |
| | — |
| | | | | |
PT Smelting intercompany profit | | — |
| | (1 | ) | | — |
| | | | | |
Indonesia mining | | 1,599 |
| | 817 |
| | 236 |
| | | | | |
Other miningc | | 7,005 |
| | 5,424 |
| | 549 |
| | | | | |
Corporate, other & eliminations | | (1,552 | ) | | (1,573 | ) | | 54 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 7,052 |
| | $ | 4,668 |
| | $ | 839 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 1.3 million ounces ($16.66 per ounce average realized price). |
| |
b. | Includes $103 million ($0.28 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs |
| | | | | | | | | | | | | | | | | | | | | |
|
Three Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 729 |
| | $ | 729 |
| | $ | 408 |
| | $ | 18 |
| | $ | 1,155 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 453 |
| | 286 |
| | 160 |
| | 7 |
| | 453 |
| |
Gold and silver credits | | (427 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 90 |
| | 57 |
| | 32 |
| | 1 |
| | 90 |
| |
Export duties | | 34 |
| | 21 |
| | 12 |
| | 1 |
| | 34 |
| |
Royalty on metals | | 40 |
| | 24 |
| | 15 |
| | 1 |
| | 40 |
| |
Net cash costs | | 190 |
| | 388 |
| | 219 |
| | 10 |
| | 617 |
| |
DD&A | | 110 |
| | 69 |
| | 39 |
| | 2 |
| | 110 |
| |
Noncash and other costs, net | | 16 |
| b | 11 |
| | 5 |
| | — |
| | 16 |
| |
Total costs | | 316 |
| | 468 |
| | 263 |
| | 12 |
| | 743 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (6 | ) | | (6 | ) | | — |
| | 1 |
| | (5 | ) | |
PT Smelting intercompany loss | | (9 | ) | | (6 | ) | | (3 | ) | | — |
| | (9 | ) | |
Gross profit | | $ | 398 |
| | $ | 249 |
| | $ | 142 |
| | $ | 7 |
| | $ | 398 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 332 |
| | 332 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 307 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.20 |
| | $ | 2.20 |
| | $ | 1,327 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.37 |
| | 0.86 |
| | 520 |
| | | | | |
Gold and silver credits | | (1.29 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.27 |
| | 0.17 |
| | 104 |
| | | | | |
Export duties | | 0.10 |
| | 0.07 |
| | 39 |
| | | | | |
Royalty on metals | | 0.12 |
| | 0.07 |
| | 50 |
| | | | | |
Unit net cash costs | | 0.57 |
| | 1.17 |
| | 713 |
| | | | | |
DD&A | | 0.33 |
| | 0.21 |
| | 125 |
| | | | | |
Noncash and other costs, net | | 0.05 |
| b | 0.03 |
| | 19 |
| | | | | |
Total unit costs | | 0.95 |
| | 1.41 |
| | 857 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (0.02 | ) | | (0.02 | ) | | 1 |
| | | | | |
PT Smelting intercompany loss | | (0.03 | ) | | (0.02 | ) | | (10 | ) | | | | | |
Gross profit per pound/ounce | | $ | 1.20 |
| | $ | 0.75 |
| | $ | 461 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,155 |
| | $ | 453 |
| | $ | 110 |
| | | | | |
Treatment charges | | (90 | ) | | — |
| | — |
| | | | | |
Export duties | | (34 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (40 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 16 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (5 | ) | | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 9 |
| | — |
| | | | | |
Indonesia mining | | 986 |
| | 478 |
| | 110 |
| | | | | |
Other miningc | | 3,183 |
| | 2,567 |
|
| 287 |
| | | | | |
Corporate, other & eliminations | | (292 | ) | | (516 | ) | | 246 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 928 thousand ounces ($18.97 per ounce average realized price). |
| |
b. | Includes asset retirement charges of $17 million ($0.05 per pound of copper). |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | | | | |
| | | | |
Nine Months Ended September 30, 2017 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Gold | | Silvera | | Total |
Revenues, excluding adjustments | | $ | 1,772 |
| | $ | 1,772 |
| | $ | 1,206 |
| | $ | 32 |
| | $ | 3,010 |
|
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1,076 |
| | 634 |
| | 431 |
| | 11 |
| | 1,076 |
|
Gold and silver credits | | (1,247 | ) | | — |
| | — |
| | — |
| | — |
|
Treatment charges | | 170 |
| | 100 |
| | 68 |
| | 2 |
| | 170 |
|
Export duties | | 62 |
| | 36 |
| | 25 |
| | 1 |
| | 62 |
|
Royalty on metals | | 106 |
| | 60 |
| | 45 |
| | 1 |
| | 106 |
|
Net cash costs | | 167 |
| | 830 |
| | 569 |
| | 15 |
| | 1,414 |
|
DD&A | | 372 |
| | 219 |
| | 149 |
| | 4 |
| | 372 |
|
Noncash and other costs, net | | 140 |
| b | 82 |
| | 56 |
| | 2 |
| | 140 |
|
Total costs | | 679 |
| | 1,131 |
| | 774 |
| | 21 |
| | 1,926 |
|
Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 39 |
| | 39 |
| | 9 |
| | — |
| | 48 |
|
PT Smelting intercompany loss | | (17 | ) | | (10 | ) | | (7 | ) | | — |
| | (17 | ) |
Gross profit | | $ | 1,115 |
| | $ | 670 |
| | $ | 434 |
| | $ | 11 |
| | $ | 1,115 |
|
| | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 630 |
| | 630 |
| | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 956 |
| | | | |
| | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | |
| | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.81 |
| | $ | 2.81 |
| | $ | 1,261 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1.71 |
| | 1.01 |
| | 451 |
| | | | |
Gold and silver credits | | (1.98 | ) | | — |
| | — |
| | | | |
Treatment charges | | 0.27 |
| | 0.16 |
| | 71 |
| | | | |
Export duties | | 0.10 |
| | 0.06 |
| | 26 |
| | | | |
Royalty on metals | | 0.16 |
| | 0.09 |
| | 47 |
| | | | |
Unit net cash costs | | 0.26 |
| | 1.32 |
| | 595 |
| | | | |
DD&A | | 0.59 |
| | 0.35 |
| | 156 |
| | | | |
Noncash and other costs, net | | 0.22 |
| b | 0.13 |
| | 58 |
| | | | |
Total unit costs | | 1.07 |
| | 1.80 |
| | 809 |
| | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 0.06 |
| | 0.06 |
| | 9 |
| | | | |
PT Smelting intercompany loss | | (0.03 | ) | | (0.01 | ) | | (7 | ) | | | | |
Gross profit per pound/ounce | | $ | 1.77 |
| | $ | 1.06 |
| | $ | 454 |
| | | | |
| | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | |
(In millions) | | | | Production | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | |
Totals presented above | | $ | 3,010 |
| | $ | 1,076 |
| | $ | 372 |
| | | | |
Treatment charges | | (170 | ) | | — |
| | — |
| | | | |
Export duties | | (62 | ) | | — |
| | — |
| | | | |
Royalty on metals | | (106 | ) | | — |
| | — |
| | | | |
Noncash and other costs, net | | — |
| | 140 |
| | — |
| | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 48 |
| | — |
| | — |
| | | | |
PT Smelting intercompany loss | | — |
| | 17 |
| | — |
| | | | |
Indonesia mining | | 2,720 |
| | 1,233 |
| | 372 |
| | | | |
Other miningc | | 10,898 |
| | 8,588 |
| | 808 |
| | | | |
Corporate, other & eliminations | | (2,256 | ) | | (2,324 | ) | | 77 |
| | | | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | | | |
| | | | | | | | | | |
| |
a. | Includes silver sales of 1.9 million ounces ($16.70 per ounce average realized price). |
| |
b. | Includes $112 million ($0.18 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 1,525 |
| | $ | 1,525 |
| | $ | 844 |
| | $ | 36 |
| | $ | 2,405 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1,190 |
| | 754 |
| | 418 |
| | 18 |
| | 1,190 |
| |
Gold and silver credits | | (897 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 202 |
| | 128 |
| | 71 |
| | 3 |
| | 202 |
| |
Export duties | | 63 |
| | 40 |
| | 22 |
| | 1 |
| | 63 |
| |
Royalty on metals | | 84 |
| | 51 |
| | 32 |
| | 1 |
| | 84 |
| |
Net cash costs | | 642 |
| | 973 |
| | 543 |
| | 23 |
| | 1,539 |
| |
DD&A | | 284 |
| | 180 |
| | 100 |
| | 4 |
| | 284 |
| |
Noncash and other costs, net | | 31 |
| b | 20 |
| | 10 |
| | 1 |
| | 31 |
| |
Total costs | | 957 |
| | 1,173 |
| | 653 |
| | 28 |
| | 1,854 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | — |
| | — |
| | 17 |
| | — |
| | 17 |
| |
PT Smelting intercompany loss | | (7 | ) | | (5 | ) | | (2 | ) | | — |
| | (7 | ) | |
Gross profit | | $ | 561 |
| | $ | 347 |
| | $ | 206 |
| | $ | 8 |
| | $ | 561 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 702 |
| | 702 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 653 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.17 |
| | $ | 2.17 |
| | $ | 1,292 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.70 |
| | 1.08 |
| | 639 |
| | | | | |
Gold and silver credits | | (1.28 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.29 |
| | 0.18 |
| | 109 |
| | | | | |
Export duties | | 0.09 |
| | 0.06 |
| | 34 |
| | | | | |
Royalty on metals | | 0.12 |
| | 0.07 |
| | 48 |
| | | | | |
Unit net cash costs | | 0.92 |
| | 1.39 |
| | 830 |
| | | | | |
DD&A | | 0.40 |
| | 0.25 |
| | 152 |
| | | | | |
Noncash and other costs, net | | 0.04 |
| b | 0.03 |
| | 16 |
| | | | | |
Total unit costs | | 1.36 |
| | 1.67 |
| | 998 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | — |
| | — |
| | 25 |
| | | | | |
PT Smelting intercompany loss | | (0.01 | ) | | (0.01 | ) | | (4 | ) | | | | | |
Gross profit per pound/ounce | | $ | 0.80 |
| | $ | 0.49 |
| | $ | 315 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 2,405 |
| | $ | 1,190 |
| | $ | 284 |
| | | | | |
Treatment charges | | (202 | ) | | — |
| | — |
| | | | | |
Export duties | | (63 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (84 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 31 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 17 |
| | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 7 |
| | — |
| | | | | |
Indonesia mining | | 2,073 |
| | 1,228 |
| | 284 |
| | | | | |
Other miningc | | 9,640 |
| | 7,747 |
| | 889 |
| | | | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 2.0 million ounces ($17.95 per ounce average realized price). |
| |
b. | Includes asset retirement charges of $17 million ($0.02 per pound of copper). |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. |
Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Three Months Ended June 30, | | | |
(In millions) | 2017 | | 2016 | | | | 2018 | | 2017 | | | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 72 |
| | $ | 51 |
| | | | $ | 119 |
| | $ | 78 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 56 |
| | 53 |
| | | | 71 |
| | 56 |
| | | |
Treatment charges and other | 7 |
| | 5 |
| | | | 8 |
| | 7 |
| | | |
Net cash costs | 63 |
| | 58 |
| | | | 79 |
| | 63 |
| | | |
DD&A | 20 |
| | 15 |
| | | | 21 |
| | 19 |
| | | |
Noncash and other costs, net | 2 |
| | 4 |
| | | | — |
| | 2 |
| | | |
Total costs | 85 |
| | 77 |
| | | | 100 |
| | 84 |
| | | |
Gross loss | $ | (13 | ) | | $ | (26 | ) | | | | |
Gross profit (loss) | | $ | 19 |
| | $ | (6 | ) | | | |
| | | | | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 8 |
| | 5 |
| | | | 9 |
| | 8 |
| | | |
| | | | | | | | | | | | |
Gross loss per pound of molybdenum: | | |
Gross profit (loss) per pound of molybdenum: | | Gross profit (loss) per pound of molybdenum: | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 9.02 |
| | $ | 9.08 |
| | | | $ | 12.72 |
| | $ | 9.57 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 7.05 |
| | 9.42 |
| | | | 7.51 |
| | 6.88 |
| | | |
Treatment charges and other | 0.85 |
| | 0.86 |
| | | | 0.85 |
| | 0.85 |
| | | |
Unit net cash costs | 7.90 |
| | 10.28 |
| | | | 8.36 |
| | 7.73 |
| | | |
DD&A | 2.44 |
| | 2.63 |
| | | | 2.24 |
| | 2.32 |
| | | |
Noncash and other costs, net | 0.28 |
| | 0.77 |
| | | | 0.05 |
| | 0.27 |
| | | |
Total unit costs | 10.62 |
| | 13.68 |
| | | | 10.65 |
| | 10.32 |
| | | |
Gross loss per pound | $ | (1.60 | ) | | $ | (4.60 | ) | | | | |
Gross profit (loss) per pound | | $ | 2.07 |
| | $ | (0.75 | ) | | | |
| | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Production | | | | | | Production | | | |
Three Months Ended September 30, 2017 | Revenues | | and Delivery | | DD&A | | |
Three Months Ended June 30, 2018 | | Revenues | | and Delivery | | DD&A | |
Totals presented above | $ | 72 |
| | $ | 56 |
| | $ | 20 |
| | $ | 119 |
| | $ | 71 |
| | $ | 21 |
| |
Treatment charges and other | (7 | ) | | — |
| | — |
| | (8 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| |
Molybdenum mines | 65 |
| | 58 |
| | 20 |
| | 111 |
| | 71 |
| | 21 |
| |
Other miningb | 4,949 |
| | 3,497 |
| | 375 |
| | 5,874 |
| | 3,760 |
| | 407 |
| |
Corporate, other & eliminations | (704 | ) | | (753 | ) | | 23 |
| | (817 | ) | | (916 | ) | | 14 |
| |
As reported in FCX’s consolidated financial statements | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| |
| | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | |
Three Months Ended June 30, 2017 | | | | | | | |
Totals presented above | $ | 51 |
| | $ | 53 |
| | $ | 15 |
| | $ | 78 |
| | $ | 56 |
| | $ | 19 |
| |
Treatment charges and other | (5 | ) | | — |
| | — |
| | (7 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 4 |
| | — |
| | — |
| | 2 |
| | — |
| |
Molybdenum mines | 46 |
| | 57 |
| | 15 |
| | 71 |
| | 58 |
| | 19 |
| |
Other miningb | 4,123 |
| | 2,988 |
| | 382 |
| | 4,400 |
| | 3,177 |
| | 406 |
| |
Corporate, other & eliminations | (292 | ) | | (516 | ) | | 246 |
| | (760 | ) | | (755 | ) | | 25 |
| |
As reported in FCX’s consolidated financial statements | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | $ | 3,711 |
| | $ | 2,480 |
| | $ | 450 |
| |
| | | | | | | | | | | | |
| |
a. | Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Indonesia mining, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | | Six Months Ended June 30, | | | |
(In millions) | 2017 | | 2016 | | | | 2018 | | 2017 | | | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 220 |
| | $ | 153 |
| | | | $ | 221 |
| | $ | 148 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 164 |
| | 146 |
| | | | 136 |
| | 107 |
| | | |
Treatment charges and other | 21 |
| | 17 |
| | | | 15 |
| | 14 |
| | | |
Net cash costs | 185 |
| | 163 |
| | | | 151 |
| | 121 |
| | | |
DD&A | 58 |
| | 51 |
| | | | 40 |
| | 38 |
| | | |
Noncash and other costs, net | 5 |
| | 13 |
| | | | 2 |
| | 3 |
| | | |
Total costs | 248 |
| | 227 |
| | | | 193 |
| | 162 |
| | | |
Gross loss | $ | (28 | ) | | $ | (74 | ) | | | | |
Gross profit (loss) | | $ | 28 |
| | $ | (14 | ) | | | |
| | | | | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 24 |
| | 19 |
| | | | 18 |
| | 16 |
| | | |
| | | | | | | | | | | | |
Gross loss per pound of molybdenum: | | |
Gross profit (loss) per pound of molybdenum: | | Gross profit (loss) per pound of molybdenum: | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 9.05 |
| | $ | 7.94 |
| | | | $ | 12.38 |
| | $ | 9.07 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 6.75 |
| | 7.53 |
| | | | 7.61 |
| | 6.53 |
| | | |
Treatment charges and other | 0.85 |
| | 0.86 |
| | | | 0.85 |
| | 0.85 |
| | | |
Unit net cash costs | 7.60 |
| | 8.39 |
| | | | 8.46 |
| | 7.38 |
| | | |
DD&A | 2.38 |
| | 2.65 |
| | | | 2.24 |
| | 2.34 |
| | | |
Noncash and other costs, net | 0.23 |
| | 0.72 |
| | | | 0.10 |
| | 0.21 |
| | | |
Total unit costs | 10.21 |
| | 11.76 |
| | | | 10.80 |
| | 9.93 |
| | | |
Gross loss per pound | $ | (1.16 | ) | | $ | (3.82 | ) | | | | |
Gross profit (loss) per pound | | $ | 1.58 |
| | $ | (0.86 | ) | | | |
| | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Production | | | | | | Production | | | |
Nine Months Ended September 30, 2017 | Revenues | | and Delivery | | DD&A | | |
Six Months Ended June 30, 2018 | | Revenues | | and Delivery | | DD&A | |
Totals presented above | $ | 220 |
| | $ | 164 |
| | $ | 58 |
| | $ | 221 |
| | $ | 136 |
| | $ | 40 |
| |
Treatment charges and other | (21 | ) | | — |
| | — |
| | (15 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 5 |
| | — |
| | — |
| | 2 |
| | — |
| |
Molybdenum mines | 199 |
| | 169 |
| | 58 |
| | 206 |
| | 138 |
| | 40 |
| |
Other miningb | 13,419 |
| | 9,652 |
| | 1,122 |
| | 11,604 |
| | 7,495 |
| | 818 |
| |
Corporate, other & eliminations | (2,256 | ) | | (2,324 | ) | | 77 |
| | (1,774 | ) | | (1,910 | ) | | 35 |
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As reported in FCX’s consolidated financial statements | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | |
Six Months Ended June 30, 2017 | | | | | | | |
Totals presented above | $ | 153 |
| | $ | 146 |
| | $ | 51 |
| | $ | 148 |
| | $ | 107 |
| | $ | 38 |
| |
Treatment charges and other | (17 | ) | | — |
| | — |
| | (14 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 13 |
| | — |
| | — |
| | 3 |
| | — |
| |
Molybdenum mines | 136 |
| | 159 |
| | 51 |
| | 134 |
| | 110 |
| | 38 |
| |
Other miningb | 11,577 |
| | 8,816 |
| | 1,122 |
| | 8,470 |
| | 6,131 |
| | 747 |
| |
Corporate, other & eliminations | (1,260 | ) | | (991 | ) | | 764 |
| | (1,552 | ) | | (1,573 | ) | | 54 |
| |
As reported in FCX’s consolidated financial statements | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | $ | 7,052 |
| | $ | 4,668 |
| | $ | 839 |
| |
| | | | | | | | | | | | |
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a. | Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. |
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b. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Indonesia mining, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
CAUTIONARY STATEMENT
Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relating to ore grades and milling rates, production and sales volumes, unit net cash costs, operating cash flows, capital expenditures, the transaction contemplated by the non-binding Heads of Agreement between FCX, PT-FI, Inalum and Rio Tinto, exploration efforts and results, development and production activities and costs, liquidity, tax rates, the impact of copper, gold and molybdenum price changes, the impact of deferred intercompany profits on earnings, reserve estimates, future dividend payments, and share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be,” “potential” and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration of dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.
We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; production rates; potential effects of cost and capital expenditure reductions and production curtailments on financial results and cash flow; potential inventory adjustments; potential impairment of long-lived mining assets; our ability to complete the outcometransaction contemplated by the non-binding Heads of negotiations withAgreement, which is subject to the negotiation and documentation of definitive agreements, including purchase and sale agreements, the extension and stability of PT-FI's long-term mining rights through 2041 in a form acceptable to us and Inalum, a shareholders’ agreement between us and Inalum providing for continuity of our management of PT-FI’s operations and addressing governance arrangements, and resolution of administrative sanctions and environmental regulatory matters pending before Indonesia’s Ministry of Environment and Forestry satisfactory to the Indonesian government, regardingus and Inalum, the terms of all of which will be subject to Board approval; PT-FI’s long-term operating rights;ability to obtain an extension of its temporary IUPK after August 31, 2018; the potential effects of violence in Indonesia generally and in the province of Papua; industry risks; regulatory changes (including adoption of financial assurance regulations as proposed by the U.S. Environmental Protection Agency under CERCLA for the hard rock mining industry);changes; political risks; labor relations; weather- and climate-related risks; environmental risks;risks (including resolution of the administrative sanctions and other environmental matters pending before Indonesia's Ministry of Environment and Forestry); litigation results (including the final disposition of the unfavorable Indonesia Tax Court ruling relating to surface water taxesIndonesian tax disputes and the outcome of Cerro Verde’s royalty dispute with the Peruvian national tax authority); and other factors described in more detail in Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2016,2017, and Part II, Item 1A. “Risk Factors” of this quarterly report on Form 10-Q, filed with the SEC as updated by our subsequent filings with the SEC. With respect to our operations in Indonesia, such factors include whether PT-FI will be able to resolve complex regulatory matters in Indonesia and continue to export copper after December 31, 2017.
Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may not be able to control. Further, we may make changes to our business plans that could affect our results. We caution investors that we do not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes, and we undertake no obligation to update any forward-looking statements.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
There have been no material changes in our market risks during the nine-monthsix-month period ended SeptemberJune 30, 2017.2018. For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Items 7. and 7A. of our annual report on Form 10-K for the year ended December 31, 2016.2017. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook” in Part I, Item 2. of this quarterly report on Form 10-Q for the period ended SeptemberJune 30, 2017;2018; for projected sensitivities of our provisionally priced copper sales and derivative instruments to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 2. of this quarterly report on Form 10-Q for the period ended SeptemberJune 30, 2017.2018.
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Item 4. | Controls and Procedures. |
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(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 15d-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 SeptemberJune 30, 2017.2018. |
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(b) | Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting that occurred during the quarter ended SeptemberJune 30, 2017,2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
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Part II. | OTHER INFORMATION |
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Item 1. | Legal Proceedings. |
We are involved in numerous legal proceedings that arise in the ordinary course of our business or that are associated with environmental issues arising from legacy operations conducted over the years by Freeport Minerals Corporation and its affiliates. We are also involved from time to time in other reviews, investigations and proceedings by government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
Management does not believe, based on currently available information, that the outcome of any proceeding reported in Note 98 of this quarterly report on Form 10-Q for the periodquarter ended SeptemberJune 30, 2017,2018, Part II, Item 1. “Legal Proceedings” and inNote 8 of our quarterly report on Form 10-Q for the quarter ended March 31, 2018, and Part I, Item 3. “Legal Proceedings” and Note 12 of our annual report on Form 10-K for the year ended December 31, 2016, as updated in Note 9 in our quarterly reports on Form 10-Q for the quarters ended March 31, 2017, and June 30, 2017, will have a material adverse effect on our financial condition; although individual outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period.
Environmental Proceedings
Notices of Violation - Cerro Verde
In September 2017, Cerro Verde paid approximately $148,000, including interest, in connection with final resolution of a Notice of Violation (NOV) issued in December 2006 by Peru’s Agency for Environmental Assessment and Enforcement (OEFA) alleging a spill of dry tailings from a pipeline near the Enlozada tailings dam and findings of dissolved oxidized copper in excess of permissible limits near the Hyuarondo dam. In September 2017, Cerro Verde also paid approximately $169,000, including interest, in connection with final resolution of an NOV issued in October 2008 by OEFA alleging findings of dissolved oxidized copper in excess of permissible limits, that sprinklers were not being used to moisten stockpiles or the conveyer belt at a concentrator plant, and that the uncleanliness of septic tanks at the transfer station resulted in findings of raw sewage in the treated water used for landscaping around administrative buildings.
Item 1A. Risk Factors.
The risk factor titled “Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business,” which was included in our annual report on Form 10-K for the year ended December 31, 2017, is amended and restated as follows:
Development projects are inherently risky and could require more time and capital than anticipated, which could adversely affect our business.
Currently, our major mining projects include underground development activities in the Grasberg minerals district and development of the Lone Star oxide project in Arizona. There are many risks and uncertainties inherent in all development projects including, but not limited to, unexpected or difficult geological formations or conditions, potential delays, cost overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property. The development of our underground mines and operations are also subject to other unique risks including, but not limited to, underground fires or floods, ventilating harmful gases, fall-of-ground accidents, and seismic activity resulting from unexpected or difficult geological formations or conditions. While we anticipate taking all measures that we deem reasonable and prudent in connection with the development of our underground mines to safely manage production, there is no assurance that these risks will not cause schedule delays, revised mine plans, injuries to persons and property, or increased capital costs, any of which may have a material adverse
impact on our cash flows, results of operations and financial condition. Additionally, although we devote significant time and resources to our project planning, approval and review processes, many of our development projects are highly complex and rely on factors that are outside of our control, which may cause us to underestimate the time and capital required to complete a development project.
In September 2015, we initiated pre-commercial production at the Deep Mill Level Zone (DMLZ) underground mine. Following mining-induced seismic activity, which began in 2017 and continued in 2018, PT Freeport Indonesia (PT-FI) revised its mine plan, which resulted in a delay in the ramp-up of the DMLZ underground mine. During second-quarter 2018, PT-FI initiated plans to conduct hydraulic fracturing activities to address rock stress encountered during cave development and pre-condition the DMLZ with an objective of enabling commencement of large-scale production. The current outlook for future DMLZ production reflects management’s expectations based on currently available information and involves uncertainties. PT-FI's revised mine plans for DMLZ will continue to be reviewed, and estimates of future production will be revised as additional information becomes available.
In addition, the economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, estimated capital and operating costs, and estimated future prices of the relevant commodity. Consolidated capital expenditures are expected to approximate $2.0 billion for the year 2018, including $1.1 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the Lone Star oxide project. Refer to the risk factor “Because our Grasberg mining operation in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia” for further discussion of regulatory matters in Indonesia that may impact future investments in PT-FI’s underground development projects. The capital expenditures and time required to develop new mines or other projects are considerable, and changes in costs or timing can adversely affect project economics.
New development projects have no operating history upon which to base estimates of future cash flow. The actual costs, production rates and economic returns of our development projects may differ materially from our estimates, which may have a material adverse impact on our cash flows, results of operations and financial condition.
Except as described above, there have been no material changes to our risk factors previously disclosed induring the six-month period ended June 30, 2018. For additional information on risk factors, refer to Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2016, except as disclosed in Part II, Item 1A. “Risk Factors” of our quarterly report on Form 10-Q for the quarter ended March 31, 2017, which provided as follows:
The risk factor “Mine closure and reclamation regulations impose substantial costs on our operations and include requirements that we provide financial assurance supporting those obligations. We also have plugging and abandonment obligations related to our remaining oil and gas properties, and are required to provide bonds or other forms of financial assurance in connection with those operations. Changes in or the failure to comply with these requirements could have a material adverse effect on us” which was included in our annual report on Form 10-K for the year ended December 31, 2016, is updated to add the following:
The United States (U.S.) Environmental Protection Agency extended the comment period for the proposed regulations under Section 108(b) of CERCLA to July 11, 2017. Since filing our annual report on Form 10-K in February 2017, we have evaluated the potential impact of these proposed rules. Based on this evaluation, we believe that, if adopted without material modification, the rules would impose financial responsibility obligations on U.S. hard rock mining operations that are unnecessary, duplicative of existing state and other federal requirements, and unreasonable. Our initial calculations also suggest that the financial responsibility amounts would be difficult, if not impossible, for us and others to meet with corporate resources, and would be extremely expensive, if not impossible, to finance with third-party financial instruments such as letters of credit, bonds or insurance. We and others in the industry will continue to participate in the public comment process and oppose the adoption of these rules in anything like their proposed form, as adoption in that form would severely harm the international competitiveness of the U.S. hard rock mining industry and would materially and adversely affect our cash flows, results of operations and financial condition.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
There were no unregistered sales of equity securities during the three months ended SeptemberJune 30, 2017.2018.
There were no shares of common stock purchased by us during the three months ended SeptemberJune 30, 2017.2018. On July 21, 2008, our Board of Directors approved an increase in our open-market share purchase program for up to 30 million shares. There have been no purchases under this program since 2008. This program does not have an expiration date. At SeptemberJune 30, 2017,2018, there were 23.7 million shares that could still be purchased under the program.
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Item 4. | Mine Safety Disclosures. |
The safety and health of all employees is our highest priority. Management believes that safety and health considerations are integral to, and compatible with, all other functions in the organization and that proper safety and health management will enhance production and reduce costs. Our approach towards the safety and health of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report on Form 10-Q.
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| | Filed | |
Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Amended and Restated Certificate of Incorporation of FCX, effective as of June 8, 2016. | | 8-K | 001-11307-01 | 6/9/2016 |
| Amended and Restated By-Laws of FCX, effective as of June 8, 2016. | | 8-K | 001-11307-01 | 6/9/2016 |
| Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022, the 2.30% Senior Notes due 2017, the 4.00% Senior Notes due 2021, the 4.55% Senior Notes due 2024, and the 5.40% Senior Notes due 2034). | | 8-K | 001-11307-01 | 2/13/2012 |
| Third Supplemental Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022). | | 8-K | 001-11307-01 | 2/13/2012 |
| Fourth Supplemental Indenture dated as of May 31, 2013, among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022, the 2.30% Senior Notes due 2017, the 4.00% Senior Notes due 2021, the 4.55% Senior Notes due 2024, and the 5.40% Senior Notes due 2034). | | 8-K | 001-11307-01 | 6/3/2013 |
| Fifth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 2.30% Senior Notes due 2017). | | 8-K | 001-11307-01 | 11/14/2014 |
| Sixth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 4.00% Senior Notes due 2021). | | 8-K | 001-11307-01 | 11/14/2014 |
| Seventh Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as (relating to the 4.55% Senior Notes due 2024). | | 8-K | 001-11307-01 | 11/14/2014 |
| Eighth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 5.40% Senior Notes due 2034). | | 8-K | 001-11307-01 | 11/14/2014 |
| Indenture dated as of March 7, 2013, between FCX and U.S. Bank National Association, as Trustee (relating to the 2.375% Senior Notes due 2018, the 3.100% Senior Notes due 2020, the 3.875% Senior Notes due 2023, and the 5.450% Senior Notes due 2043). | | 8-K | 001-11307-01 | 3/7/2013 |
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| | Filed | |
Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 8-K | 001-31470 | 3/13/2007 |
| Sixteenth Supplemental Indenture dated as of October 26, 2012 to the Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020). | | 8-K | 001-31470 | 10/26/2012 |
| Seventeenth Supplemental Indenture dated as of October 26, 2012 to the Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto and Wells Fargo Bank, N.A., as Trustee (relating to the 6.875% Senior Notes due 2023). | | 8-K | 001-31470 | 10/26/2012 |
| Eighteenth Supplemental Indenture dated as of May 31, 2013 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas Inc., as Co-Issuer, FCX, as Parent Guarantor, Plains Exploration & Production Company, as Original Issuer, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 8-K | 001-11307-01 | 6/3/2013 |
| Nineteenth Supplemental Indenture dated as of September 30, 2016 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas Inc., as Co-Issuer, FMSTP Inc., as Additional Co-Issuer, FCX, as Parent Guarantor, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.50% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 10-Q | 001-11307-01 | 11/9/2016 |
| Twentieth Supplemental Indenture dated as of December 13, 2016 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas LLC, as Co-Issuer, FMSTP Inc., as Additional Co-Issuer, FCX, as Parent Guarantor, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.50% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 8-K | 001-11307-01 | 12/13/2016 |
| Form of Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and The Chase Manhattan Bank, as Trustee (relating to the 7.125% Senior Notes due 2027, the 9.50% Senior Notes due 2031, and the 6.125% Senior Notes due 2034). | | S-3 | 333-36415 | 9/25/1997 |
| Form of 7.125% Debenture due November 1, 2027 of Phelps Dodge Corporation issued on November 5, 1997, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and The Chase Manhattan Bank, as Trustee (relating to the 7.125% Senior Notes due 2027). | | 8-K | 01-00082 | 11/3/1997 |
| Form of 9.5% Note due June 1, 2031 of Phelps Dodge Corporation issued on May 30, 2001, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and First Union National Bank, as successor Trustee (relating to the 9.50% Senior Notes due 2031). | | 8-K | 01-00082 | 5/30/2001 |
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| | Filed | |
Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Form of 6.125% Note due March 15, 2034 of Phelps Dodge Corporation issued on March 4, 2004, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and First Union National Bank, as successor Trustee (relating to the 6.125% Senior Notes due 2034). | | 10-K | 01-00082 | 3/7/2005 |
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Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Supplemental Indenture dated as of April 4, 2007 to the Indenture dated as of September 22, 1997, among Phelps Dodge Corporation, as Issuer, Freeport-McMoRan Copper & Gold Inc., as Parent Guarantor, and U.S. Bank National Association, as Trustee (relating to the 7.125% Senior Notes due 2027, the 9.50% Senior Notes due 2031, and the 6.125% Senior Notes due 2034).
| | 10-K | 001-11307-01 | 2/26/2016 |
| Indenture dated as of December 13, 2016, among FCX, Freeport-McMoRan Oil & Gas LLC, as guarantor, and U.S. Bank National Association, as Trustee (relating to the 6.125% Senior Notes due 2019, the 6.50% Senior Notes due 2020, the 6.625% Senior Notes due 2021, the 6.75% Senior Notes due 2022, and the 6.875% Senior Notes due 2023). | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration RightsRevolving Credit Agreement dated as of December 13, 2016April 20, 2018, among FCX, PT Freeport Indonesia, Freeport-McMoRan Oil & Gas LLC, JPMorgan Chase Bank, N.A., as Guarantor,administrative agent, Bank of America, N.A., as syndication agent, and J.P. Morgan Securities LLCeach of the lenders and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.125% Senior Notes due 2019.issuing banks party thereto. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.50% Senior Notes due 2020. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.625% Senior Notes due 2021. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.75% Senior Notes due 2022. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.875% Senior Notes due 2023. | | 8-K | 001-11307-01 | 12/13/20164/23/2018 |
| 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 | | | |
| Mine Safety and Health Administration Safety Data. | X | | | |
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Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
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 | | | |
* Indicates management contract or compensatory plan or arrangement.
Note: Certain instruments with respect to long-term debt of FCX have not been filed as exhibits to this Quarterly Report on Form 10-Q since the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of FCX and its subsidiaries on a consolidated basis. FCX agrees to furnish a copy of each such instrument upon request of the Securities and Exchange Commission.
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 thereunto duly authorized.
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| FREEPORT-McMoRan INC.Freeport-McMoRan Inc. |
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| By: | /s/ C. Donald Whitmire, Jr. |
| | C. Donald Whitmire, Jr. |
| | Vice President and |
| | Controller - Financial Reporting |
| | (authorized signatory |
| | and Principal Accounting Officer) |
Date: November 7, 2017August 8, 2018