United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
|
| | |
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 June 30, 2019
OR
For the quarterly period ended September 30, 2017 |
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 |
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 |
Phoenix, AZ | | | 85004-2189 |
(Address of principal executive offices) | | | | | (Zip Code) |
(602)366-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(602) 366-8100 |
(Registrant’s telephone number, including area code) | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.10 per share | FCX | The New York Stock Exchange |
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.☑Yes☐ No
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☑Yeso☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growthgrown company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company"“emerging grown company” in Rule 12b-2 of the Exchange Act.
|
| | | |
Large accelerated filerþ | ☑ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | 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, 2017,2019, there were issued and outstanding 1,447,590,6681,450,890,574 shares of the registrant’s common stock, par value $0.10 per share.
FREEPORT-McMoRan INC.
Freeport-McMoRan Inc.
TABLE OF CONTENTS
| |
Part I. | FINANCIAL INFORMATION |
| |
Item 1. | Financial Statements. |
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
| | | September 30, 2017 | | December 31, 2016 | June 30, 2019 | | December 31, 2018 |
| (In millions) | (In millions) |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | $ | 4,957 |
| | $ | 4,245 |
| $ | 2,623 |
| | $ | 4,217 |
|
Trade accounts receivable | 1,024 |
| | 1,126 |
| 725 |
| | 829 |
|
Income and other tax receivables | 522 |
| | 879 |
| 245 |
| | 493 |
|
Inventories: | | | | | | |
Materials and supplies, net | 1,276 |
| | 1,306 |
| 1,634 |
| | 1,528 |
|
Mill and leach stockpiles | 1,393 |
| | 1,338 |
| 1,352 |
| | 1,453 |
|
Product | 1,188 |
| | 998 |
| 1,391 |
| | 1,778 |
|
Other current assets | 241 |
| | 199 |
| 760 |
| | 422 |
|
Assets held for sale | 549 |
| | 344 |
| |
Total current assets | 11,150 |
| | 10,435 |
| 8,730 |
| | 10,720 |
|
Property, plant, equipment and mine development costs, net | 22,914 |
| | 23,219 |
| 28,841 |
| | 28,010 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | 20 |
| | 74 |
| |
Long-term mill and leach stockpiles | 1,453 |
| | 1,633 |
| 1,347 |
| | 1,314 |
|
Other assets | 1,790 |
| | 1,956 |
| 2,168 |
| | 2,172 |
|
Total assets | $ | 37,327 |
| | $ | 37,317 |
| $ | 41,086 |
| | $ | 42,216 |
|
| | | | | | |
LIABILITIES AND EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable and accrued liabilities | $ | 2,098 |
| | $ | 2,393 |
| $ | 2,721 |
| | $ | 2,625 |
|
Current portion of environmental and asset retirement obligations | | 425 |
| | 449 |
|
Dividends payable | | 73 |
| | 73 |
|
Accrued income taxes | | 63 |
| | 165 |
|
Current portion of debt | 2,215 |
| | 1,232 |
| 4 |
| | 17 |
|
Accrued income taxes | 464 |
| | 66 |
| |
Current portion of environmental and asset retirement obligations | 419 |
| | 369 |
| |
Liabilities held for sale | 321 |
| | 205 |
| |
Total current liabilities | 5,517 |
| | 4,265 |
| 3,286 |
| | 3,329 |
|
Long-term debt, less current portion | 12,567 |
| | 14,795 |
| 9,912 |
| | 11,124 |
|
Deferred income taxes | 3,771 |
| | 3,768 |
| 4,055 |
| | 4,032 |
|
Environmental and asset retirement obligations, less current portion | 3,498 |
| | 3,487 |
| 3,617 |
| | 3,609 |
|
Other liabilities | 1,744 |
| | 1,745 |
| 2,399 |
| | 2,230 |
|
Total liabilities | 27,097 |
| | 28,060 |
| 23,269 |
| | 24,324 |
|
| | | | | | |
Equity: | | | | | | |
Stockholders’ equity: | | | | | | |
Common stock | 158 |
| | 157 |
| 158 |
| | 158 |
|
Capital in excess of par value | 26,743 |
| | 26,690 |
| 25,949 |
| | 26,013 |
|
Accumulated deficit | (15,763 | ) | | (16,540 | ) | (12,082 | ) | | (12,041 | ) |
Accumulated other comprehensive loss | (443 | ) | | (548 | ) | (582 | ) | | (605 | ) |
Common stock held in treasury | (3,722 | ) | | (3,708 | ) | (3,734 | ) | | (3,727 | ) |
Total stockholders’ equity | 6,973 |
| | 6,051 |
| 9,709 |
| | 9,798 |
|
Noncontrolling interests | 3,257 |
| | 3,206 |
| 8,108 |
| | 8,094 |
|
Total equity | 10,230 |
| | 9,257 |
| 17,817 |
| | 17,892 |
|
Total liabilities and equity | $ | 37,327 |
| | $ | 37,317 |
| $ | 41,086 |
| | $ | 42,216 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (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 | 2019 | | 2018 | | 2019 | | 2018 |
| (In millions, except per share amounts) | (In millions, except per share amounts) |
Revenues | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
| $ | 3,546 |
| | $ | 5,168 |
| | $ | 7,338 |
| | $ | 10,036 |
|
Cost of sales: | | | | | | | | | | | | | | |
Production and delivery | 2,802 |
| | 2,529 |
| | 7,497 |
| | 7,984 |
| 3,002 |
| | 2,915 |
| | 5,978 |
| | 5,723 |
|
Depreciation, depletion and amortization | 418 |
| | 643 |
| | 1,257 |
| | 1,937 |
| 352 |
| | 442 |
| | 699 |
| | 893 |
|
Impairment of oil and gas properties | — |
| | 239 |
| | — |
| | 4,317 |
| |
Total cost of sales | 3,220 |
| | 3,411 |
| | 8,754 |
| | 14,238 |
| 3,354 |
| | 3,357 |
| | 6,677 |
| | 6,616 |
|
Selling, general and administrative expenses | 106 |
| | 110 |
| | 366 |
| | 408 |
| 97 |
| | 109 |
| | 209 |
| | 240 |
|
Mining exploration and research expenses | 27 |
| | 13 |
| | 61 |
| | 46 |
| 31 |
| | 24 |
| | 58 |
| | 45 |
|
Environmental obligations and shutdown costs (credits) | 73 |
| | (3 | ) | | 81 |
| | 18 |
| |
Net gain on sales of assets | (33 | ) | | (13 | ) | | (66 | ) | | (762 | ) | |
Environmental obligations and shutdown costs | | 23 |
| | 59 |
| | 65 |
| | 68 |
|
Net loss (gain) on sales of assets | | 8 |
| | (45 | ) | | (25 | ) | | (56 | ) |
Total costs and expenses | 3,393 |
| | 3,518 |
| | 9,196 |
| | 13,948 |
| 3,513 |
| | 3,504 |
| | 6,984 |
| | 6,913 |
|
Operating income (loss) | 917 |
| | 359 |
| | 2,166 |
| | (3,495 | ) | |
Operating income | | 33 |
| | 1,664 |
| | 354 |
| | 3,123 |
|
Interest expense, net | (304 | ) | | (187 | ) | | (633 | ) | | (574 | ) | (132 | ) | | (142 | ) | | (278 | ) | | (293 | ) |
Net gain on exchanges and early extinguishment of debt | 11 |
| | 15 |
| | 8 |
| | 51 |
| |
Other income (expense), net | 2 |
| | (10 | ) | | 36 |
| | 54 |
| |
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 | ) | |
Net gain (loss) on early extinguishment of debt | | — |
| | 9 |
| | (6 | ) | | 8 |
|
Other income, net | | 5 |
| | 20 |
| | 19 |
| | 49 |
|
(Loss) income from continuing operations before income taxes and equity in affiliated companies’ net earnings | | (94 | ) | | 1,551 |
| | 89 |
| | 2,887 |
|
Benefit from (provision for) income taxes | | 15 |
| | (515 | ) | | (90 | ) | | (1,021 | ) |
Equity in affiliated companies’ net earnings | 3 |
| | 1 |
| | 6 |
| | 9 |
| 5 |
| | 3 |
| | 2 |
| | 1 |
|
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: | | | | | | | | |
Net (loss) income from continuing operations | | (74 | ) | | 1,039 |
| | 1 |
| | 1,867 |
|
Net (loss) income from discontinued operations | | — |
| | (4 | ) | | 1 |
| | (15 | ) |
Net (loss) income | | (74 | ) | | 1,035 |
| | 2 |
| | 1,852 |
|
Net loss (income) attributable to noncontrolling interests | | 2 |
| | (166 | ) | | (43 | ) | | (291 | ) |
Net (loss) income attributable to common stockholders | | $ | (72 | ) | | $ | 869 |
| | $ | (41 | ) | | $ | 1,561 |
|
| | | | | | | | |
Basic net (loss) income per share attributable to common stockholders: | | | | | | | | |
Continuing operations | 35 |
| | (37 | ) | | (106 | ) | | (146 | ) | $ | (0.05 | ) | | $ | 0.60 |
| | $ | (0.03 | ) | | $ | 1.08 |
|
Discontinued operations | — |
| | (22 | ) | | (4 | ) | | (44 | ) | — |
| | — |
| | — |
| | (0.01 | ) |
Preferred dividends attributable to redeemable noncontrolling interest | — |
| | (10 | ) | | — |
| | (31 | ) | |
Net income (loss) attributable to common stockholders | $ | 280 |
| | $ | 217 |
| | $ | 776 |
| | $ | (4,446 | ) | |
| | | | | | | | $ | (0.05 | ) | | $ | 0.60 |
| | $ | (0.03 | ) | | $ | 1.07 |
|
Basic and diluted net income (loss) per share attributable to common stockholders: | | | | | | | | |
| | | | | | | | |
Diluted net (loss) income per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | $ | (0.05 | ) | | $ | 0.59 |
| | $ | (0.03 | ) | | $ | 1.08 |
|
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | — |
| | — |
| | — |
| | (0.01 | ) |
| $ | 0.19 |
| | $ | 0.16 |
| | $ | 0.53 |
| | $ | (3.45 | ) | $ | (0.05 | ) | | $ | 0.59 |
| | $ | (0.03 | ) | | $ | 1.07 |
|
| | | | | | | | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | | | | | | | |
Basic | 1,448 |
| | 1,346 |
| | 1,447 |
| | 1,289 |
| 1,451 |
| | 1,449 |
| | 1,451 |
| | 1,449 |
|
| | | | | | | | |
Diluted | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| 1,451 |
| | 1,458 |
| | 1,451 |
| | 1,458 |
|
| | | | | | | | | | | | | | |
Dividends declared per share of common stock | | $ | 0.05 |
| | $ | 0.05 |
| | $ | 0.10 |
| | $ | 0.10 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) 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, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (In millions) |
Net (loss) income | $ | (74 | ) | | $ | 1,035 |
| | $ | 2 |
| | $ | 1,852 |
|
| | | | | | | |
Other comprehensive income, net of taxes: | | | | | | | |
Defined benefit plans: | | | | | | | |
Amortization of unrecognized amounts included in net periodic benefit costs | 13 |
| | 11 |
| | 24 |
| | 23 |
|
Foreign exchange losses | — |
| | — |
| | — |
| | (1 | ) |
Other comprehensive income | 13 |
| | 11 |
| | 24 |
| | 22 |
|
| | | | | | | |
Total comprehensive (loss) income | (61 | ) | | 1,046 |
| | 26 |
| | 1,874 |
|
Total comprehensive loss (income) attributable to noncontrolling interests | 1 |
| | (166 | ) | | (44 | ) | | (290 | ) |
Total comprehensive (loss) income attributable to common stockholders | $ | (60 | ) | | $ | 880 |
| | $ | (18 | ) | | $ | 1,584 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
| | | | | | | | |
| Nine Months Ended | |
| September 30, | |
| 2017 | | 2016 | |
| (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: | | | | |
Depreciation, depletion and amortization | 1,257 |
| | 2,017 |
| |
Net charges for Cerro Verde royalty dispute | 359 |
| | — |
| |
Payments for Cerro Verde royalty dispute | (32 | ) | | (20 | ) | |
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 |
| |
Payments for environmental and asset retirement obligations | (85 | ) | | (190 | ) | |
Net charges for defined pension and postretirement plans | 95 |
| | 78 |
| |
Pension plan contributions | (152 | ) | | (44 | ) | |
Net gain on exchanges and early extinguishment of debt | (8 | ) | | (51 | ) | |
Deferred income taxes | 77 |
| | (22 | ) | |
(Gain) loss on disposal of discontinued operations | (41 | ) | | 182 |
| |
Decrease (increase) in long-term mill and leach stockpiles | 181 |
| | (84 | ) | |
Oil and gas contract settlement payments | (70 | ) | | — |
| |
Other, net | 59 |
| | 61 |
| |
Changes in working capital and other tax payments, excluding amounts from dispositions: | | | | |
Accounts receivable | 420 |
| | 257 |
| |
Inventories | (314 | ) | | 251 |
| |
Other current assets | (17 | ) | | (120 | ) | |
Accounts payable and accrued liabilities | (93 | ) | | (80 | ) | |
Accrued income taxes and changes in other tax payments | 399 |
| | 175 |
| |
Net cash provided by operating activities | 3,018 |
| | 2,594 |
| |
| | | | |
Cash flow from investing activities: | | | | |
Capital expenditures: | | | | |
North America copper mines | (106 | ) | | (87 | ) | |
South America | (65 | ) | | (332 | ) | |
Indonesia | (663 | ) | | (706 | ) | |
Molybdenum mines | (4 | ) | | (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 |
| |
Net cash used in investing activities | (974 | ) | | (894 | ) | |
| | | | |
Cash flow from financing activities: | | | | |
Proceeds from debt | 795 |
| | 3,463 |
| |
Repayments of debt | (1,991 | ) | | (4,539 | ) | |
Net proceeds from sale of common stock | — |
| | 442 |
| |
Cash dividends paid: | | | | |
Common stock | (2 | ) | | (5 | ) | |
Noncontrolling interests | (67 | ) | | (87 | ) | |
Stock-based awards net payments | (10 | ) | | (5 | ) | |
Debt financing costs and other, net | (12 | ) | | (17 | ) | |
Net cash used in financing activities | (1,287 | ) | | (748 | ) | |
| | | | |
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 |
| |
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 |
|
|
| | | | | | | | |
| Six Months Ended | |
| June 30, | |
| 2019 | | 2018 | |
| (In millions) | |
Cash flow from operating activities: | | | | |
Net income | $ | 2 |
| | $ | 1,852 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation, depletion and amortization | 699 |
| | 893 |
| |
Metals inventory adjustments | 59 |
| | 2 |
| |
Net gain on sales of assets | (25 | ) | | (56 | ) | |
Stock-based compensation | 40 |
| | 60 |
| |
Net charges for environmental and asset retirement obligations, including accretion | 109 |
| | 152 |
| |
Payments for environmental and asset retirement obligations | (100 | ) | | (110 | ) | |
Net charges for defined pension and postretirement plans | 53 |
| | 38 |
| |
Pension plan contributions | (33 | ) | | (44 | ) | |
Net loss (gain) on early extinguishment of debt | 6 |
| | (8 | ) | |
Deferred income taxes | 20 |
| | 61 |
| |
(Income) loss on disposal of discontinued operations | (1 | ) | | 15 |
| |
(Increase) decrease in long-term mill and leach stockpiles | (33 | ) | | 38 |
| |
PT Freeport Indonesia surface water tax settlement | 28 |
| | — |
| |
Cerro Verde royalty dispute | 28 |
| | 4 |
| |
Payments for Cerro Verde royalty dispute | (86 | ) | | (21 | ) | |
Other, net | 41 |
| | 15 |
| |
Changes in working capital and other tax payments: | | | | |
Accounts receivable | 256 |
| | 309 |
| |
Inventories | 287 |
| | (468 | ) | |
Other current assets | (26 | ) | | (20 | ) | |
Accounts payable and accrued liabilities | 9 |
| | 114 |
| |
Accrued income taxes and timing of other tax payments | (245 | ) | | (148 | ) | |
Net cash provided by operating activities | 1,088 |
| | 2,678 |
| |
| | | | |
Cash flow from investing activities: | | | | |
Capital expenditures: | | | | |
North America copper mines | (417 | ) | | (232 | ) | |
South America | (108 | ) | | (138 | ) | |
Indonesia | (658 | ) | | (449 | ) | |
Molybdenum mines | (6 | ) | | (2 | ) | |
Other | (62 | ) | | (63 | ) | |
Proceeds from sales of oil and gas properties | 91 |
| | — |
| |
Intangible water rights and other, net | (7 | ) | | (86 | ) | |
Net cash used in investing activities | (1,167 | ) | | (970 | ) | |
| | | | |
Cash flow from financing activities: | | | | |
Proceeds from debt | 328 |
| | 352 |
| |
Repayments of debt | (1,563 | ) | | (2,297 | ) | |
Cash dividends and distributions paid: | | | | |
Common stock | (146 | ) | | (73 | ) | |
Noncontrolling interests | (79 | ) | | (241 | ) | |
Contributions from noncontrolling interests | 100 |
| | — |
| |
Stock-based awards net (payments) proceeds | (6 | ) | | 5 |
| |
Debt financing costs and other, net | (4 | ) | | (23 | ) | |
Net cash used in financing activities | (1,370 | ) | | (2,277 | ) | |
| | | | |
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents | (1,449 | ) | | (569 | ) | |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | 4,455 |
| | 4,710 |
| |
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | 3,006 |
| | $ | 4,141 |
| |
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
THREE MONTHS ENDED JUNE 30
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 March 31, 2019 | 1,582 |
| | $ | 158 |
| | $ | 25,963 |
| | $ | (12,010 | ) | | $ | (594 | ) | | 131 |
| | $ | (3,734 | ) | | $ | 9,783 |
| | $ | 8,058 |
| | $ | 17,841 |
|
Stock-based compensation, including the tender of shares | — |
| | — |
| | 10 |
| | — |
| | — |
| | — |
| | — |
| | 10 |
| | — |
| | 10 |
|
Dividends | — |
| | — |
| | (73 | ) | | — |
| | — |
| | — |
| | — |
| | (73 | ) | | — |
| | (73 | ) |
Contributions from noncontrolling interests | — |
| | — |
| | 49 |
| | — |
| | — |
| | — |
| | — |
| | 49 |
| | 51 |
| | 100 |
|
Net loss attributable to common stockholders | — |
| | — |
| | — |
| | (72 | ) | | — |
| | — |
| | — |
| | (72 | ) | | — |
| | (72 | ) |
Net loss attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | 12 |
| | 1 |
| | 13 |
|
Balance at June 30, 2019 | 1,582 |
| | $ | 158 |
| | $ | 25,949 |
| | $ | (12,082 | ) | | $ | (582 | ) | | 131 |
| | $ | (3,734 | ) | | $ | 9,709 |
| | $ | 8,108 |
| | $ | 17,817 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 March 31, 2018 | 1,579 |
| | $ | 158 |
| | $ | 26,729 |
| | $ | (14,030 | ) | | $ | (475 | ) | | 130 |
| | $ | (3,726 | ) | | $ | 8,656 |
| | $ | 3,270 |
| | $ | 11,926 |
|
Exercised and issued stock-based awards | — |
| | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
Stock-based compensation, including the tender of shares | — |
| | — |
| | 9 |
| | — |
| | — |
| | — |
| | — |
| | 9 |
| | — |
| | 9 |
|
Dividends | — |
| | — |
| | (73 | ) | | — |
| | — |
| | — |
| | — |
| | (73 | ) | | (68 | ) | | (141 | ) |
Net income attributable to common stockholders | — |
| | — |
| | — |
| | 869 |
| | — |
| | — |
| | — |
| | 869 |
| | — |
| | 869 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 166 |
| | 166 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 11 |
| | — |
| | — |
| | 11 |
| | — |
| | 11 |
|
Balance at June 30, 2018 | 1,579 |
| | $ | 158 |
| | $ | 26,667 |
| | $ | (13,161 | ) | | $ | (464 | ) | | 130 |
| | $ | (3,726 | ) | | $ | 9,474 |
| | $ | 3,368 |
| | $ | 12,842 |
|
Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
SIX MONTHS ENDED JUNE 30
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2018 | 1,579 |
| | $ | 158 |
| | $ | 26,013 |
| | $ | (12,041 | ) | | $ | (605 | ) | | 130 |
| | $ | (3,727 | ) | | $ | 9,798 |
| | $ | 8,094 |
| | $ | 17,892 |
|
Exercised and issued stock-based awards | 3 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
Stock-based compensation, including the tender of shares | — |
| | — |
| | 33 |
| | — |
| | — |
| | 1 |
| | (7 | ) | | 26 |
| | — |
| | 26 |
|
Dividends | — |
| | — |
| | (146 | ) | | — |
| | — |
| | — |
| | — |
| | (146 | ) | | (70 | ) | | (216 | ) |
Changes in noncontrolling interests | — |
| | — |
| | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (11 | ) | | (12 | ) |
Contributions from noncontrolling interests | — |
| | — |
| | 49 |
| | — |
| | — |
| | — |
| | — |
| | 49 |
| | 51 |
| | 100 |
|
Net loss attributable to common stockholders | — |
| | — |
| | — |
| | (41 | ) | | — |
| | — |
| | — |
| | (41 | ) | | — |
| | (41 | ) |
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 43 |
| | 43 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 23 |
| | — |
| | — |
| | 23 |
| | 1 |
| | 24 |
|
Balance at June 30, 2019 | 1,582 |
| | $ | 158 |
| | $ | 25,949 |
| | $ | (12,082 | ) | | $ | (582 | ) | | 131 |
| | $ | (3,734 | ) | | $ | 9,709 |
| | $ | 8,108 |
| | $ | 17,817 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 issued 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, 2016.2018 (2018 Form 10-K). 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, 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, allAll 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, 2017,2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2019.
Indonesia Mining. AsProperty, Plant, Equipment and Mine Development Costs. The following is an update to FCX’s property, plant, equipment and mine development costs accounting policy included in Note 1 of its 2018 Form 10-K. Development costs are capitalized beginning after proven and probable mineral reserves have been established. Development costs include costs incurred resulting from mine pre-production activities undertaken to gain access to proven and probable reserves, including shafts, adits, drifts, ramps, permanent excavations, infrastructure and removal of overburden. For underground mines certain costs related to panel development, such as undercutting and drawpoint development, are also capitalized as mine development costs until production reaches design capacity for the mine. After reaching design capacity, the mine transitions to the production phase and panel development costs are allocated to inventory and then included as a resultcomponent of the first-quarter 2017 regulatory restrictions and uncertainties regarding long-term investment stability,cost of goods sold.
Attribution of 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. FollowingNet Income or Loss. FCX has concluded that the furlough and voluntary retirement programs, a significant numberattribution 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 operatingPT-FI’s net income for employee severance and related costs totaling $9 million for third-quarter 2017 and $113 million foror loss from the first nine months of 2017.
Additionally, becausedate of the significant reduction in workforce,divestment transaction (i.e., December 21, 2018) through December 31, 2022 (the Initial Period), should be based on the economics replacement agreement, which provides for FCX and the other pre-transaction PT-FI was requiredshareholders (i.e., PT Indonesia Asahan Aluminium (Persero) (PT Inalum) and PT Indonesia Papua Metal Dan Mineral (PTI)) to remeasure its pension assetsretain the economics of the revenue and pension benefit obligation ascost sharing arrangements under PT-FI’s joint venture formerly with Rio Tinto Plc (refer to Note 2 of June 30, 2017.FCX’s 2018 Form 10-K). The discount rate and rateeconomics replacement agreement entitles FCX to approximately 81 percent of compensation increase used forPT-FI dividends paid during the June 30, 2017, remeasurement were 7.50Initial Period, with the remaining 19 percent and 4.00 percent, respectively, compared paid 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 curtailmentnoncontrolling interests. PT-FI’s net loss of $4 million in second-quarter 20172019 totaled $56 million, of which $46 million was attributed to FCX, and for the first ninesix months of 2017. As2019 totaled $4 million, of Septemberwhich $3 million was attributed to FCX. PT-FI’s cumulative net loss since the December 21, 2018, transaction date through June 30, 2017, the funded status2019, totaled $140 million, of which $114 million was attributed to FCX.
The above-described attribution of PT-FI’s pension plan was a net assetincome or loss applies only through the Initial Period. Beginning January 1, 2023, the attribution of $36 million (included in other assets in the consolidated balance sheet), compared with aPT-FI’s net liability of $90 million (included in other liabilities in the consolidated balance sheet) as of December 31, 2016.
Oilincome or loss will be based on equity ownership percentages (48.76 percent for FCX, 26.24 percent for PT Inalum and Gas Properties. During 2016, FCX Oil & Gas LLC (FM O&G, a wholly owned subsidiary of FCX) determined the carrying values of certain25.00 percent for PTI). For all 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.other partially owned consolidated subsidiaries, 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 inattributes 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 monthsbased on equity ownership percentages.
Agreement to Sell a Portion of 2016 because the reserves were not significantCobalt Business. In second-quarter 2019, FCX entered into an agreement to the full cost pool.
Morenci. On May 31, 2016, FCX sold a 13 percent undivided interest insell 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.
Assets Held for Sale. Freeport Cobalt includes the large-scale cobalt refinery in Kokkola, Finland, and related cobalt cathode precursor business (consisting of approximately $135 million of assets and $20 million of liabilities at June 30, 2019)for total consideration of approximately $150 million, plus working capital at the related salestime of closing. FCX and marketing business, in which FCX owns an effective 56 percent interest. Kisanfu is a copper and cobalt exploration project, located near Tenke, in which FCX holds a 100 percent interest. As a result of the sale of TFHL, FCX expects to sell itscurrent noncontrolling interest partners in Freeport Cobalt and Kisanfu, andwill retain the assets and liabilitiesremaining cobalt business. The transaction is expected to close by year-end 2019. Lundin Mining Corporation, which is one of the noncontrolling interest partners, is entitled to receive 30 percent of the proceeds from this transaction. In addition to customary closing conditions, including regulatory approvals, prior to completing the transaction, Freeport Cobalt and Kisanfu are classified asis required to be segregated into two separate businesses. FCX evaluated the criteria required for assets held for sale inclassification and concluded that this transaction did not meet all of the consolidated balance sheets. During the first nine months of 2017, a favorable adjustment of $13 million was recorded in 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 the reduction in the carrying value when the Kisanfu exploration project was initially classified as held for sale in November 2016.
criteria at June 30, 2019.
NOTE 3.2. EARNINGS PER SHARE
FCX calculates its basic net (loss) income (loss) per share of common stock under the two-class method and calculates its diluted net (loss) income (loss) per share of common stock using the more dilutive of the two-class method or the treasury-stock method. Basic net (loss) income (loss) per share of common stock was computed by dividing net (loss) 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 (loss) 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 (loss) income (loss) and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net (loss) income (loss) per share follow (in millions, except per share amounts):
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | |
| June 30, | | June 30, | |
| 2019 | | 2018 | | 2019 | | 2018 | |
Net (loss) income from continuing operations | $ | (74 | ) | | $ | 1,039 |
| | $ | 1 |
| | $ | 1,867 |
| |
Net loss (income) from continuing operations attributable to noncontrolling interests | 2 |
| | (166 | ) | | (43 | ) | | (291 | ) | |
Undistributed earnings allocated to participating securities | (3 | ) | | (3 | ) | | (3 | ) | | (4 | ) | |
Net (loss) income from continuing operations attributable to common stockholders | (75 | ) | | 870 |
| | (45 | ) | | 1,572 |
| |
| | | | | | | | |
Net (loss) income from discontinued operations attributable to common stockholders | — |
| | (4 | ) | | 1 |
| | (15 | ) | |
| | | | | | | | |
| | | | | | | | |
Net (loss) income attributable to common stockholders | $ | (75 | ) | | $ | 866 |
| | $ | (44 | ) | | $ | 1,557 |
| |
| | | | | | | | |
Basic weighted-average shares of common stock outstanding | 1,451 |
| | 1,449 |
| | 1,451 |
| | 1,449 |
| |
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock unitsa | — |
| | 9 |
| | — |
| | 9 |
| |
Diluted weighted-average shares of common stock outstanding | 1,451 |
| | 1,458 |
| | 1,451 |
| | 1,458 |
| |
| | | | | | | | |
Basic net (loss) income per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | (0.05 | ) | | $ | 0.60 |
| | $ | (0.03 | ) | | $ | 1.08 |
| |
Discontinued operations | — |
| | — |
| | — |
| | (0.01 | ) | |
| $ | (0.05 | ) | | $ | 0.60 |
| | $ | (0.03 | ) | | $ | 1.07 |
| |
Diluted net (loss) income per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | (0.05 | ) | | $ | 0.59 |
| | $ | (0.03 | ) | | $ | 1.08 |
| |
Discontinued operations | — |
| | — |
| | — |
| | (0.01 | ) | |
| $ | (0.05 | ) | | $ | 0.59 |
| | $ | (0.03 | ) | | $ | 1.07 |
| |
|
| | | | | | | | | | | | | | | | |
| 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 | ) | |
| | | | | | | | |
| |
a. | Excludes 12approximately 10 million shares of common stock in second-quarter 2019, 2 million insecond-quarter2018, 12 million for the first ninesix months of 20162019 and 3 million for the first six months of 2018 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 (loss) income (loss) per share of common stock. Stock options for 3843 million shares of common stock were excluded for third-quarter 2017, 46in second-quarter 2019, 35 million for third-quarter 2016, 42shares in second-quarter 2018, 41 million shares for the first ninesix months of 20172019 and 4634 million shares for the first ninesix months of 2016.2018 were excluded.
NOTE 4.3. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):
|
| | | | | | | | |
| June 30, 2019 | | December 31, 2018 | |
Current inventories: | | | | |
Total materials and supplies, neta | $ | 1,634 |
| | $ | 1,528 |
| |
| | | | |
Mill stockpiles | $ | 227 |
| | $ | 282 |
| |
Leach stockpiles | 1,125 |
| | 1,171 |
| |
Total current mill and leach stockpiles | $ | 1,352 |
| | $ | 1,453 |
| |
| | | | |
Raw materials (primarily concentrate) | $ | 295 |
| | $ | 260 |
| |
Work-in-process | 156 |
| | 192 |
| |
Finished goods | 940 |
| | 1,326 |
| |
Total product | $ | 1,391 |
| | $ | 1,778 |
| |
| | | | |
Long-term inventories: | | | | |
Mill stockpiles | $ | 254 |
| | $ | 265 |
| |
Leach stockpiles | 1,093 |
| | 1,049 |
| |
Total long-term mill and leach stockpilesb | $ | 1,347 |
| | $ | 1,314 |
| |
|
| | | | | | | | |
| September 30, 2017 | | December 31, 2016 | |
Current inventories: | | | | |
Total materials and supplies, neta | $ | 1,276 |
| | $ | 1,306 |
| |
| | | | |
Mill stockpiles | $ | 336 |
| | $ | 259 |
| |
Leach stockpiles | 1,057 |
| | 1,079 |
| |
Total current mill and leach stockpiles | $ | 1,393 |
| | $ | 1,338 |
| |
| | | | |
Raw materials (primarily concentrate) | $ | 285 |
| | $ | 255 |
| |
Work-in-process | 154 |
| | 114 |
| |
Finished goods | 749 |
| | 629 |
| |
Total product inventories | $ | 1,188 |
| | $ | 998 |
| |
| | | | |
Long-term inventories: | | | | |
Mill stockpiles | $ | 346 |
| | $ | 487 |
| |
Leach stockpiles | 1,107 |
| | 1,146 |
| |
Total long-term mill and leach stockpilesb | $ | 1,453 |
| | $ | 1,633 |
| |
| |
a. | Materials and supplies inventory was net of obsolescence reserves totaling $31$24 million at SeptemberJune 30, 2017,2019, and $29 million at December 31, 2016.2018. |
| |
b. | Estimated metals in stockpiles not expected to be recovered within the next 12 months. |
FCX recorded charges of $2 million in second-quarter 2019 and $59 million for the first six months of 2019 to adjust metals inventory carrying values to net realizable value, primarily for cobalt inventory because of lower cobalt market prices.
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 47101 percent for the first ninesix months of 20172019 and (2)35 percent for the first ninesix months of 2016.2018. Geographic sources of FCX’s benefit from (provision for) benefit from income taxes follow (in millions):
|
| | | | | | | | |
| Six Months Ended | |
| June 30, | |
| 2019 | | 2018 | |
U.S. operations | $ | 20 |
| a | $ | 8 |
| b |
International operations | (110 | ) | | (1,029 | ) | |
Total | $ | (90 | ) | | $ | (1,021 | ) | |
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | |
| September 30, | | September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
U.S. operationsa | $ | 2 |
| | $ | 331 |
| | $ | 24 |
| | $ | 293 |
| |
International operations | (389 | ) | b | (217 | ) | | (771 | ) | b | (372 | ) | |
Total | $ | (387 | ) | | $ | 114 |
| | $ | (747 | ) | | $ | (79 | ) | |
| |
a. | Includes neta tax (charges) creditscredit of $(10)$18 million for third-quarter 2017 and $21 million for the first nine months of 2017primarily associated with alternative minimum 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.state law changes. |
| |
b. | Includes net chargesa tax credit of $2$5 million associated with the Cerro Verde mining royalties dispute, consistingsettlement of a state income 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.examination. |
As a result of the unfavorable Peruvian Supreme Court ruling on the Cerro Verde royalty dispute, FCX recorded pre-tax charges of $357 million to income from continuing operations and $2 million of net tax expense for the first nine months of 2017. FCX’sFCX's consolidated effective income tax rate was 39 percentfor the first ninesix months of 2017 excluding these charges.
As2019 is a resultfunction of the impairment to U.S. oil and gas properties, FCX recordedcombined effective tax charges of $1.6 billionrates for the jurisdictions in which FCX operates, excluding the U.S. jurisdiction. Because FCX's U.S. jurisdiction generated net losses in the first ninesix months of 2016 to establish a valuation allowance primarily against U.S. federal and state deferred tax assets2019 that will not generateresult in a future benefit. FCX’s consolidatedrealized tax benefit, applicable accounting rules require FCX to adjust its estimated annual effective income tax rate was 32 percent forto exclude the first nine monthsimpact of 2016 excluding these tax charges.U.S. net losses.
NOTE 6.5. DEBT AND EQUITY
The components of debt follow (in millions):
|
| | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
Senior notes and debentures: | | | | |
Issued by FCX | | $ | 8,595 |
| | $ | 9,594 |
|
Issued by Freeport Minerals Corporation (FMC) | | 357 |
| | 358 |
|
Cerro Verde credit facility | | 825 |
| | 1,023 |
|
Other | | 139 |
| | 166 |
|
Total debt | | 9,916 |
| | 11,141 |
|
Less current portion of debt | | (4 | ) | | (17 | ) |
Long-term debt | | $ | 9,912 |
| | $ | 11,124 |
|
|
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Senior notes and debentures: | | | | |
Issued by FCX | | $ | 12,811 |
| | $ | 13,745 |
|
Issued by FMC | | 358 |
| | 359 |
|
Issued by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC) | | 122 |
| | 267 |
|
Cerro Verde credit facility | | 1,486 |
| | 1,390 |
|
Cerro Verde shareholder loans | | — |
| | 261 |
|
Other | | 5 |
| | 5 |
|
Total debta | | 14,782 |
| | 16,027 |
|
Less current portion of debt | | (2,215 | ) | | (1,232 | ) |
Long-term debt | | $ | 12,567 |
| | $ | 14,795 |
|
| |
a. | Includes additions for unamortized fair value adjustments totaling $131 million at September 30, 2017 ($179 million at December 31, 2016), and is net of reductions for unamortized net discounts and unamortized debt issuance costs totaling $92 million at September 30, 2017 ($100 million at December 31, 2016). |
Revolving Credit Facility. At SeptemberJune 30, 2017,2019, 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.
Senior Notes Issued by FCX. In March 2017,On May 2, 2019, FCX’s 2.15% Senior Notes matured, and the $500 million outstanding principal balance was repaid.
Cerro Verde Credit Facility and Shareholder Loans. In June 2017, Cerro Verde’s$3.5 billion revolving credit facility was amended to increaseextend $3.26 billion of the commitmentfacility by $225one year to April 20, 2024. The remaining $240 million to $1.5 billion, modify matures on April 20, 2023. In addition, 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'srevolving credit facility was 3.14 percent at September 30, 2017. Cerro Verdeamended to modify the calculation of the total debt component used proceeds from its amendedto determine the total leverage ratio by increasing the amount of unrestricted cash that may be applied to reduce the amount of total debt. There were no other substantive modifications to the revolving credit facility plus available cash to repay the balancefacility.
Senior Notes. On March 27, 2019, FCX redeemed all of its shareholder loans in June 2017. Refer to Note 8outstanding $1.0 billion aggregate principal amount of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.
Exchanges and Early Extinguishment of Debt. During third-quarter 2017, FCX redeemed in full certain senior notes. A summary3.100% Senior Notes due 2020. Holders 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 offsettingsenior notes received the $11 million gainprincipal amount together with the redemption premium and accrued and unpaid interest up to the redemption date. As a result of this redemption, FCX recorded a loss on early extinguishment of certain senior notes was a net lossdebt totaling $5 million in first-quarter 2019.
Cerro Verde Credit Facility. In March 2019, Cerro Verde prepaid $200 million of $3 million, primarily associated with the modification of Cerro Verde’sits 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 gainsa $1 million loss recorded to early extinguishment of $15debt in first-quarter 2019.
Interest Expense, Net. Consolidated interest costs totaled $167 million in third-quarter 2016 and $54second-quarter 2019, $165 million in second-quarter 2018, $345 million for the first ninesix 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 82019 and 10 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.
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) totaled $196 million in third-quarter 2017, $211 million in third-quarter 2016, $583$341 million for the first ninesix months of 2017 and $647 million for the first nine months of 2016.2018. Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $33$35 million in third-quarter 2017, $24second-quarter 2019, $23 million in third-quarter 2016, $91second-quarter 2018, $67 million for the first ninesix months of 20172019 and $66$48 million for the first ninesix months of 2016. Capitalized interest added2018.
Common Stock. On June 26, 2019, FCX declared a quarterly cash dividend of $0.05 per share on its common stock, which was paid on August 1, 2019, 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 15, 2019.
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, 2017,2019, and December 31, 2016,2018, 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, 20172019 and 2016.2018. At SeptemberJune 30, 2017,2019, FCX held copper futures and swap contracts that qualified for hedge accounting for 4674 million pounds at an average contract price of $2.83$2.76 per pound, with maturities through June 2019.December 2020.
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 | | Six Months Ended |
| June 30, | | June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
Copper futures and swap contracts: | | | | | | | |
Unrealized (losses) gains: | | | | | | | |
Derivative financial instruments | $ | (13 | ) | | $ | (4 | ) | | $ | 5 |
| | $ | (19 | ) |
Hedged item – firm sales commitments | 13 |
| | 4 |
| | (5 | ) | | 19 |
|
| | | | | | | |
Realized (losses) gains: | | | | | | | |
Matured derivative financial instruments | (3 | ) | | — |
| | (1 | ) | | 2 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Copper futures and swap contracts: | | | | | | | |
Unrealized gains (losses): | | | | | | | |
Derivative financial instruments | $ | — |
| | $ | 1 |
| | $ | (1 | ) | | $ | 11 |
|
Hedged item – firm sales commitments | — |
| | (1 | ) | | 1 |
| | (11 | ) |
| | | | | | | |
Realized gains (losses): | | | | | | | |
Matured derivative financial instruments | 12 |
| | — |
| | 21 |
| | (8 | ) |
Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. As described in Note 1 to FCX’s annual report on Form 10-K for the year ended December 31, 2016, under “Revenue Recognition,” certain Certain FCX copper concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily based on the London Metal Exchange (LME) copper price or the COMEX copper price and the London Bullion Market Association (London)(LBMA) gold price at the time of shipment as specified in the contract. Similarly, FCX purchasesreceives market prices based on prices in the specified future month, which results in price fluctuations recorded in revenues until the date of settlement. FCX records revenues and invoices customers at the time of shipment based on then-current LME or COMEX copper underprices and the LBMA gold prices as specified in the contracts, which results in an embedded derivative (i.e., a pricing mechanism that provide for provisional pricing.is finalized after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale of the metals contained in the concentrate or cathode at the then-current LME or COMEX copper price, and the LBMA gold price. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host contract in its concentrate or cathode sales agreements since thethese contracts do not allow for net settlement and always result in physical delivery. Sales and purchases with a provisional sales price contain anThe embedded derivative (i.e.,does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using 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-currentperiod-end LME or COMEX copper price orforward prices and the Londonadjusted LBMA gold price as defined inprices, until the contract.date of final pricing. Similarly, FCX purchases copper and cobalt under contracts that provide for provisional pricing. 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, 2017,2019, follows:
|
| | | | | | | | | | | | |
| Open Positions | | Average Price Per Unit | | Maturities Through |
| | Contract | | Market | |
Embedded derivatives in provisional sales contracts: | | | | | | | |
Copper (millions of pounds) | 505 |
| | $ | 2.79 |
| | $ | 2.72 |
| | November 2019 |
Gold (thousands of ounces) | 74 |
| | 1,328 |
| | 1,416 |
| | August 2019 |
Embedded derivatives in provisional purchase contracts: | | | | | | | |
Copper (millions of pounds) | 86 |
| | 2.83 |
| | 2.72 |
| | September 2019 |
Cobalt (millions of pounds) | 6 |
| | 10.56 |
| | 8.88 |
| | September 2019 |
|
| | | | | | | | | | | | |
| Open Positions | | Average Price Per Unit | | Maturities Through |
| | Contract | | Market | |
Embedded derivatives in provisional sales contracts: | | | | | | | |
Copper (millions of pounds) | 546 |
| | $ | 2.84 |
| | $ | 2.93 |
| | February 2018 |
Gold (thousands of ounces) | 194 |
| | 1,318 |
| | 1,287 |
| | December 2017 |
Embedded derivatives in provisional purchase contracts: | | | | | | | |
Copper (millions of pounds) | 155 |
| | 2.83 |
| | 2.93 |
| | January 2018 |
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, 2017,2019, Atlantic Copper held net copper forward purchasesales contracts for 52 million pounds at an average contract price of $2.95$2.66 per pound, with maturities through October 2017.July 2019.
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, |
| 2019 | | 2018 | | 2019 | | 2018 |
Embedded derivatives in provisional sales contracts:a | | | | | | | |
Copper | $ | (122 | ) | | $ | (14 | ) | | $ | — |
| | $ | (149 | ) |
Gold and other metals | 13 |
| | (30 | ) | | 11 |
| | (12 | ) |
Copper forward contractsb | (4 | ) | | 6 |
| | (3 | ) | | 8 |
|
| |
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):
|
| | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
Commodity Derivative Assets: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 1 |
| | $ | — |
|
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional copper, gold and cobalt | | | | |
sales/purchase contracts | | 41 |
| | 23 |
|
Total derivative assets | | $ | 42 |
| | $ | 23 |
|
| | | | |
Commodity Derivative Liabilities: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 5 |
| | $ | 9 |
|
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional copper, gold and cobalt | | | | |
sales/purchase contracts | | 51 |
| | 39 |
|
Total derivative liabilities | | $ | 56 |
| | $ | 48 |
|
|
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Commodity Derivative Assets: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 7 |
| | $ | 9 |
|
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional copper and gold | | | | |
sales/purchase contracts | | 74 |
| | 137 |
|
Total derivative assets | | $ | 81 |
| | $ | 146 |
|
| | | | |
Commodity Derivative Liabilities: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 2 |
| | $ | 2 |
|
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional copper and gold | | | | |
sales/purchase contracts | | 46 |
| | 56 |
|
Total derivative liabilities | | $ | 48 |
| | $ | 58 |
|
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 counterpartycontract 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 |
| | June 30, 2019 | | December 31, 2018 | | June 30, 2019 | | December 31, 2018 |
| | | | | | | | |
Gross amounts recognized: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | $ | 41 |
| | $ | 23 |
| | $ | 51 |
| | $ | 39 |
|
Copper derivatives | | 1 |
| | — |
| | 5 |
| | 9 |
|
| | 42 |
| | 23 |
| | 56 |
| | 48 |
|
| | | | | | | | |
Less gross amounts of offset: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 4 |
| | 7 |
| | 4 |
| | 7 |
|
Copper derivatives | | 1 |
| | — |
| | 1 |
| | — |
|
| | 5 |
| | 7 |
| | 5 |
| | 7 |
|
| | | | | | | | |
Net amounts presented in balance sheet: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 37 |
| | 16 |
| | 47 |
| | 32 |
|
Copper derivatives | | — |
| | — |
| | 4 |
| | 9 |
|
| | $ | 37 |
| | $ | 16 |
| | $ | 51 |
| | $ | 41 |
|
| | | | | | | | |
Balance sheet classification: | | | | | | | | |
Trade accounts receivable | | $ | 26 |
| | $ | 3 |
| | $ | 22 |
| | $ | 24 |
|
Accounts payable and accrued liabilities | | 11 |
| | 13 |
| | 29 |
| | 17 |
|
| | $ | 37 |
| | $ | 16 |
| | $ | 51 |
| | $ | 41 |
|
|
| | | | | | | | | | | | | | | | |
| | Assets | | Liabilities |
| | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 |
| | | | | | | | |
Gross amounts recognized: | | | | | | | | |
Commodity contracts: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | $ | 74 |
| | $ | 137 |
| | $ | 46 |
| | $ | 56 |
|
Copper derivatives | | 7 |
| | 9 |
| | 2 |
| | 2 |
|
| | 81 |
| | 146 |
| | 48 |
| | 58 |
|
| | | | | | | | |
Less gross amounts of offset: | | | | | | | | |
Commodity contracts: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 1 |
| | 12 |
| | 1 |
| | 12 |
|
Copper derivatives | | 2 |
| | 2 |
| | 2 |
| | 2 |
|
| | 3 |
| | 14 |
| | 3 |
| | 14 |
|
| | | | | | | | |
Net amounts presented in balance sheet: | | | | | | | | |
Commodity contracts: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 73 |
| | 125 |
| | 45 |
| | 44 |
|
Copper derivatives | | 5 |
| | 7 |
| | — |
| | — |
|
| | $ | 78 |
| | $ | 132 |
| | $ | 45 |
| | $ | 44 |
|
| | | | | | | | |
Balance sheet classification: | | | | | | | | |
Trade accounts receivable | | $ | 69 |
| | $ | 119 |
| | $ | 24 |
| | $ | 13 |
|
Other current assets | | 5 |
| | 7 |
| | — |
| | — |
|
Accounts payable and accrued liabilities | | 4 |
| | 6 |
| | 21 |
| | 31 |
|
| | $ | 78 |
| | $ | 132 |
| | $ | 45 |
| | $ | 44 |
|
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, 2017,2019, the maximum amount of credit exposure associated with derivative transactions was $78$37 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$1.4 billion at SeptemberJune 30, 2017,2019, and $64 million$2.3 billion at December 31, 2016)2018), 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, 2017,2019, FCX has contingent consideration assets related to certainthe 2016 asset sales of TF Holdings Limited (TFHL), onshore California oil and gas properties and the Deepwater Gulf of Mexico (GOM) oil and gas properties (refer to Note 87 for the related fair valuevalues and to Note 2 of FCX’s annual report on2018 Form 10-K for the year ended December 31, 2016, 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 (in millions):
|
| | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
Balance sheet components: | | | | |
Cash and cash equivalents | | $ | 2,623 |
| | $ | 4,217 |
|
Restricted cash and restricted cash equivalents included in: | | | | |
Other current assets | | 218 |
| | 110 |
|
Other assets | | 165 |
| | 128 |
|
Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows | | $ | 3,006 |
| | $ | 4,455 |
|
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 2019.
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)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, 2019 |
| 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 |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 26 |
| | $ | 26 |
| | $ | 26 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Money market funds | 21 |
| | 21 |
| | — |
| | 21 |
| | — |
| | — |
| |
Equity securities | 6 |
| | 6 |
| | — |
| | 6 |
| | — |
| | — |
| 4 |
| | 4 |
| | — |
| | 4 |
| | — |
| | — |
|
Total | 52 |
| | 52 |
| | 25 |
| | 27 |
| | — |
| | — |
| 30 |
| | 30 |
| | 26 |
| | 4 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | | | | | | | | | | | | |
U.S. core fixed income fund | 55 |
| | 55 |
| | 55 |
| | — |
| | — |
| | — |
| 58 |
| | 58 |
| | 58 |
| | — |
| | — |
| | — |
|
Government mortgage-backed securities | | 37 |
| | 37 |
| | — |
| | — |
| | 37 |
| | — |
|
Government bonds and notes | 38 |
| | 38 |
| | — |
| | — |
| | 38 |
| | — |
| 37 |
| | 37 |
| | — |
| | — |
| | 37 |
| | — |
|
Corporate bonds | 30 |
| | 30 |
| | — |
| | — |
| | 30 |
| | — |
| 32 |
| | 32 |
| | — |
| | — |
| | 32 |
| | — |
|
Government mortgage-backed securities | 25 |
| | 25 |
| | — |
| | — |
| | 25 |
| | — |
| |
Money market funds | 18 |
| | 18 |
| | — |
| | 18 |
| | — |
| | — |
| |
Asset-backed securities | 14 |
| | 14 |
| | — |
| | — |
| | 14 |
| | — |
| 12 |
| | 12 |
| | — |
| | — |
| | 12 |
| | — |
|
Collateralized mortgage-backed securities | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
| 7 |
| | 7 |
| | — |
| | — |
| | 7 |
| | — |
|
Money market funds | | 7 |
| | 7 |
| | — |
| | 7 |
| | — |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 189 |
| | 189 |
| | 55 |
| | 18 |
| | 116 |
| | — |
| 191 |
| | 191 |
| | 58 |
| | 7 |
| | 126 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Derivatives: | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | | |
purchase contracts in a gross asset positionc | 74 |
| | 74 |
| | — |
| | — |
| | 74 |
| | — |
| |
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross asset positionc | | 41 |
| | 41 |
| | — |
| | — |
| | 41 |
| | — |
|
Copper futures and swap contractsc | 7 |
| | 7 |
| | — |
| | 5 |
| | 2 |
| | — |
| 1 |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
|
Contingent consideration for the sales of TFHL | | | | | | | | | | | | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 80 |
| | 80 |
| | — |
| | — |
| | 80 |
| | — |
| 79 |
| | 79 |
| | — |
| | — |
| | 79 |
| | — |
|
Total | 161 |
| | 161 |
| | — |
| | 5 |
| | 156 |
| | — |
| 121 |
| | 121 |
| | — |
| | 1 |
| | 120 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 150 |
| | 138 |
| | — |
| | — |
| | — |
| | 138 |
| 132 |
| | 111 |
| | — |
| | — |
| | — |
| | 111 |
|
| | | | | | | | | | | | | | | | | | | | | | |
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, gold and cobalt sales/purchase contracts in a gross liability position | | $ | 51 |
| | $ | 51 |
| | $ | — |
| | $ | — |
| | $ | 51 |
| | $ | — |
|
Copper futures and swap contracts | 2 |
| | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
| 5 |
| | 5 |
| | — |
| | 4 |
| | 1 |
| | — |
|
Total | 48 |
| | 48 |
| | — |
| | 1 |
| | 47 |
| | — |
| 56 |
| | 56 |
| | — |
| | 4 |
| | 52 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Long-term debt, including current portiond | 14,782 |
| | 14,735 |
| | — |
| | — |
| | 14,735 |
| | — |
| 9,916 |
| | 9,861 |
| | — |
| | — |
| | 9,861 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | $ | 14,783 |
| | $ | — |
| | $ | 1 |
| | $ | 14,782 |
| | $ | — |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2018 |
| Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | |
U.S. core fixed income fund | $ | 25 |
| | $ | 25 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Equity securities | 4 |
| | 4 |
| | — |
| | 4 |
| | — |
| | — |
|
Total | 29 |
| | 29 |
| | 25 |
| | 4 |
| | — |
| | — |
|
| | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | |
U.S. core fixed income fund | 55 |
| | 55 |
| | 55 |
| | — |
| | — |
| | — |
|
Government mortgage-backed securities | 38 |
| | 38 |
| | — |
| | — |
| | 38 |
| | — |
|
Government bonds and notes | 36 |
| | 36 |
| | — |
| | — |
| | 36 |
| | — |
|
Corporate bonds | 28 |
| | 28 |
| | — |
| | — |
| | 28 |
| | — |
|
Asset-backed securities | 11 |
| | 11 |
| | — |
| | — |
| | 11 |
| | — |
|
Collateralized mortgage-backed securities | 7 |
| | 7 |
| | — |
| | — |
| | 7 |
| | — |
|
Money market funds | 5 |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 181 |
| | 181 |
| | 55 |
| | 5 |
| | 121 |
| | — |
|
| | | | | | | | | | | |
Derivatives: | | | | | | | | | | | |
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross asset positionc | 23 |
| | 23 |
| | — |
| | — |
| | 23 |
| | — |
|
Contingent consideration for the sales of TFHL | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 73 |
| | 73 |
| | — |
| | — |
| | 73 |
| | — |
|
Total | 96 |
| | 96 |
| | — |
| | — |
| | 96 |
| | — |
|
| | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 143 |
| | 127 |
| | — |
| | — |
| | — |
| | 127 |
|
| | | | | | | | | | | |
Liabilities | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross liability position | $ | 39 |
| | $ | 39 |
| | $ | — |
| | $ | — |
| | $ | 39 |
| | $ | — |
|
Copper futures and swap contracts | 9 |
| | 9 |
| | — |
| | 7 |
| | 2 |
| | — |
|
Total | 48 |
| | 48 |
| | — |
| | 7 |
| | 41 |
| | — |
|
| | | | | | | | | | | |
Long-term debt, including current portiond | 11,141 |
| | 10,238 |
| | — |
| | — |
| | 10,238 |
| | — |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2016 |
| Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | |
U.S. core fixed income fund | $ | 23 |
| | $ | 23 |
| | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Money market funds | 22 |
| | 22 |
| | — |
| | 22 |
| | — |
| | — |
|
Equity securities | 5 |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
|
Total | 50 |
| | 50 |
| | 23 |
| | 27 |
| | — |
| | — |
|
| | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | |
U.S. core fixed income fund | 53 |
| | 53 |
| | 53 |
| | — |
| | — |
| | — |
|
Government bonds and notes | 36 |
| | 36 |
| | — |
| | — |
| | 36 |
| | — |
|
Corporate bonds | 32 |
| | 32 |
| | — |
| | — |
| | 32 |
| | — |
|
Government mortgage-backed securities | 25 |
| | 25 |
| | — |
| | — |
| | 25 |
| | — |
|
Asset-backed securities | 16 |
| | 16 |
| | — |
| | — |
| | 16 |
| | — |
|
Money market funds | 12 |
| | 12 |
| | — |
| | 12 |
| | — |
| | — |
|
Collateralized mortgage-backed securities | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 183 |
| | 183 |
| | 53 |
| | 12 |
| | 118 |
| | — |
|
| | | | | | | | | | | |
Derivatives: | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | |
purchase contracts in a gross asset positionc | 137 |
| | 137 |
| | — |
| | — |
| | 137 |
| | — |
|
Copper futures and swap contractsc | 9 |
| | 9 |
| | — |
| | 8 |
| | 1 |
| | — |
|
Contingent consideration for the sales of TFHL | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 46 |
| | 46 |
| | — |
| | — |
| | 46 |
| | — |
|
Total | 192 |
| | 192 |
| | — |
| | 8 |
| | 184 |
| | — |
|
| | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 150 |
| | 135 |
| | — |
| | — |
| | — |
| | 135 |
|
| | | | | | | | | | | |
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 |
| | — |
| | — |
|
Total | 58 |
| | 58 |
| | — |
| | 2 |
| | 56 |
| | — |
|
| | | | | | | | | | | |
Contingent payments for the settlements of | | | | | | | | | | | |
drilling rig contractse | 23 |
| | 23 |
| | — |
| | — |
| | 23 |
| | — |
|
| | | | | | | | | | | |
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$218 million at SeptemberJune 30, 2017,2019, and $28$109 million at December 31, 2016,2018, and (ii) other assets of $122$164 million at both SeptemberJune 30, 2017,2019, and $126 millionatDecember 31, 2016,2018, primarily associated with an assurance bond to support PT-FI’s commitment for the development of a new smelter development in Indonesia.Indonesia and PT-FI’s closure and reclamation guarantees. |
| |
c. | Refer to Note 76 for further discussion and balance sheet classifications. |
| |
d. | Recorded at cost except for debt assumed in acquisitions, which wereare recorded at fair value at the respective acquisition dates. |
| |
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.
Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.
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. FCX’s embedded derivatives on provisional cobalt purchases 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. As a result, these derivatives are classified within Level 2 of the fair value hierarchy.
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.
As reported in Note 2 of FCX’s 2018 Form 10-K, in November 2016, FCX’s sale of its interest in TFHL included 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 the 24-month period beginning January 1, 2018. The fair value of the contingent consideration forderivative associated with the salessale of TFHL was $59 million at June 30, 2019 (included in other current assets in the consolidated balance sheet), and $57 million at December 31, 2018 (included in other assets). Future changes in the fair value of this contingent consideration derivative will continue to be recorded in discontinued operations. Also in 2016, FCX’s sale of its 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. The fair value of the contingent consideration derivative associated with the sale of the onshore California oil and gas properties was $20 million at June 30, 2019 ($7 million included in other current assets and $13 million in other assets), and $16 million at December 31, 2018 (included in other assets). Future changes in the fair value of this contingent consideration derivative will continue to be recorded in operating income. Also, contingent consideration of $50 million associated with the onshore California oil and gas properties was realized in 2018 and collected in first-quarter 2019 (included in proceeds from sales of oil and gas properties in the consolidated statements of cash flows) because the average Brent crude oil price exceeded $70 per barrel for 2018 and was included in other current assets in the consolidated balance sheet at December 31, 2018. These fair values were calculated based on average commodity price forecasts through applicable maturity dates using a Monte CarloMonte-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 consideration for theFCX’s 2018 Form 10-K, in December 2016, FCX’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 first collection occurred in third-quarter 2018. The contingent consideration included in (i) other current assets totaled $14 million at June 30, 2019, and $27 million at December 31, 2018, and (ii) other assets totaled $118 million at June 30, 2019, and $116 million at December 31, 2018. 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, 2017,2019, as compared towith those techniques used at December 31, 2016.2018.
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 20172019 follows (in millions):
|
| | | | |
Fair value at January 1, 2019 | $ | 127 |
| |
Net unrealized loss related to assets still held at the end of the period | (5 | ) | |
Settlements | (11 | ) | |
Fair value at June 30, 2019 | $ | 111 |
| |
|
| | | | |
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 |
| |
NOTE 9.8. CONTINGENCIES AND COMMITMENTS
Environmental
Historical Smelter Sites — Borough of Carteret
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 indirect wholly owned subsidiary of Cyprus Amax Minerals Company, owned and operated a copper smelter and refinery in 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, FCX increased its associated environmental obligation for known and potential off-site environmental remediation by recording a $59 million charge to operating income in third-quarter 2017. Additional sampling is ongoing and could result in additional adjustments to the related environmental 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.
Litigation
During third-quarter 2017, thereThere were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s annual2018 Form 10-K, other than the matter below, which was updated in Note 8 of FCX’s quarterly report on Form 10-K10-Q for the yearquarter ended DecemberMarch 31, 2016.2019.
As previously disclosed, there has been a significant increase in the number of cases alleging the presence of asbestos contamination in talc-based personal care products and in cases alleging exposure to talc products that are not alleged to be contaminated with asbestos. The primary targets have been the producers of those products, but defendants in many of these cases also include talc miners. Cyprus Amax Minerals Company (CAMC), an indirect wholly owned subsidiary of FCX, and Cyprus Mines Corporation (Cyprus Mines), a wholly owned subsidiary of CAMC, are among those targets. Cyprus Mines was engaged in talc mining from 1964 until 1992 when it exited its talc business by conveying it to a third party in two related transactions. Those transactions involved (i) a transfer by Cyprus Mines of the assets of its talc business to a newly formed subsidiary that assumed all pre-sale and post-sale talc liabilities, subject to limited reservations, and (ii) a sale of the stock of that subsidiary to the third party. In 2011, the third party sold that subsidiary to Imerys Talc America (Imerys), an affiliate of Imerys S.A.
Cyprus Mines has contractual indemnification rights, subject to limited reservations, against Imerys, which has historically acknowledged those indemnification obligations, and had taken responsibility for all cases tendered to it. However, on February 13, 2019, Imerys filed for Chapter 11 bankruptcy protection, which triggered an immediate automatic stay under the federal bankruptcy code prohibiting any party from continuing or initiating litigation or asserting new claims against Imerys. As a result, Imerys is no longer defending the talc lawsuits against Cyprus Mines and CAMC. In addition, Imerys has taken the position that it alone owns, and has the sole right to access, the proceeds of the legacy insurance coverage of Cyprus Mines and CAMC for talc liabilities. In late March 2019, Cyprus Mines and CAMC challenged this position and obtained emergency relief from the bankruptcy court to gain access to the insurance until the question of ownership and contractual access can be decided in an adversary proceeding before the bankruptcy court, which is currently scheduled for October 2019.
During first-quarter 2019, in a case pending at the time Imerys filed bankruptcy, a California jury entered a $29 million verdict against Johnson & Johnson and Cyprus Mines, of which approximately $2 million was attributed to Cyprus Mines. Taking advantage of the temporary access to the insurance authorized by the bankruptcy court, Cyprus Mines used the insurance to fully resolve the case. Cyprus Mines and the insurers also settled several other cases set for trial in recent months, and secured delays or dismissals in other cases. Multiple trials have been scheduled over the remainder of 2019, and others may be scheduled prior to the adversary proceeding regarding the legacy insurance.
FCX believes that Cyprus Mines and CAMC each has strong defenses to legal liability and that both should have access to the legacy insurance to cover defense costs, settlements and judgments, at least until the bankruptcy court decides otherwise or the insurance is exhausted. At this time, FCX cannot estimate the range of possible loss associated with these proceedings, but it does not currently believe the amount of any such losses are material to its consolidated financial statements. However, there can be no assurance that future developments will not alter this conclusion.
Tax and Other Matters
Cerro Verde Royalty Dispute
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 2006 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 to Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016).
Indonesia Tax Matters
The following information includes a discussion of updates to previously reported Indonesia tax matters includeddiscussed in Note 12 of FCX’s annual report on2018 Form 10-K, for the year ended December 31, 2016.
PT-FI received assessments from the local regional tax authorityauthorities in Papua, Indonesia, for additional taxes and penalties related to surface water taxes for the period from January 2011 through September 2017.taxes. In May 2019, PT-FI is filing objectionsagreed to these assessments. During 2017, the Indonesia Tax Court issued rulings against PT-FI with respect to assessments for additional taxes and penalties for the period from January 2011 through December 2015 in the amount of $402pay 1.394 trillion rupiah ($99 million (based on the exchange rate as of September 30, 2017, and including $240 million in penalties). The aggregate amount of assessments received from January 2016 through September 2017 was an additional $114 million, including penalties (based on the exchange rate as of September 30, 2017). No charges have been recorded for these assessments as of September 30, 2017, because PT-FI believes its Contract of Work (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 asat June 30, 2019), which will be paid over three years to settle historical disputes. As a result, in second-quarter 2019, PT-FI recorded charges of September 30, 2017, totals $516$28 million including penalties)to production and delivery costs ($69 million was previously accrued in the Indonesia Tax Court and ultimately the Indonesia Supreme Court. As of November 7, 2017,2018 for this matter). In accordance with PT-FI’s special mining license (IUPK), PT-FI has not paid and does not intendis also obligated 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 mattersurface water taxes of $15 million annually, beginning in connection with the ongoing negotiations with the Indonesian government to resolve PT-FI’s long-term operating rights.2019, which are recognized in production and delivery costs as incurred.
Indonesia Mining Contract. The following information includes updates to the discussion of PT-FI’s COW included in Note 13 of FCX’s annual report on Form 10-K for the year ended December 31, 2016.
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 asMarch 2019, PT-FI’s COW, which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.
Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year time frame, 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,was extended to March 8, 2020, and PT Smelting’s operationsSmelting (PT-FI’s 25 percent-owned smelter and refinery 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 ofreceived 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 certainextension of its workforce on furlough programs.anode slimes export license through March 11, 2020.
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 understanding on a framework that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from 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 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 FCX retains control over operations and governance of PT-FI. FCX cannot currently predict whether there will be any material accounting and tax implications associated with the divestment.
The framework requires documentation and execution of a definitive agreement, which must be approved by the FCX Board of Directors and joint venture partner Rio Tinto. The parties continue to negotiate 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 operations 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-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.
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,segments, including Atlantic Copper (FCX’s wholly owned smelter and refinery in Spain)Smelting & Refining 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.
Financial Information by Business SegmentsProduct Revenues. FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2019 and 2018 follow (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | |
Three Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 57 |
| | $ | 40 |
| | $ | 97 |
| | $ | 850 |
| | $ | 109 |
| | $ | 959 |
| | $ | 1,121 |
| b | $ | — |
| | $ | 1,137 |
| | $ | 554 |
| | $ | 442 |
| c | $ | 4,310 |
| |
Intersegment | 460 |
| | 548 |
| | 1,008 |
| | 64 |
| | — |
| | 64 |
| | — |
| | 65 |
| | 8 |
| | 1 |
| | (1,146 | ) | | — |
| |
Production and delivery | 244 |
| | 414 |
| | 658 |
| | 683 |
| d | 76 |
| | 759 |
| | 406 |
| | 58 |
| | 1,141 |
| | 533 |
| | (753 | ) | | 2,802 |
| |
Depreciation, depletion and amortization | 42 |
| | 54 |
| | 96 |
| | 116 |
| | 18 |
| | 134 |
| | 136 |
| | 20 |
| | 2 |
| | 7 |
| | 23 |
| | 418 |
| |
Selling, general and administrative expenses | 1 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | 2 |
| | 32 |
| | — |
| | — |
| | 4 |
| | 66 |
| | 106 |
| |
Mining exploration and research expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 27 |
| | 27 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 73 |
| | 73 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (33 | ) | | (33 | ) | |
Operating income (loss) | 230 |
| | 119 |
| | 349 |
| | 113 |
| | 15 |
| | 128 |
| | 547 |
| | (13 | ) | | 2 |
| | 11 |
| | (107 | ) | | 917 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 156 |
| d | — |
| | 156 |
| | 1 |
| | — |
| | — |
| | 5 |
| | 141 |
| | 304 |
| |
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 |
| |
Capital expenditures | 26 |
| | 13 |
| | 39 |
| | 17 |
| | 3 |
| | 20 |
| | 206 |
| | 2 |
| | 1 |
| | 5 |
| | 41 |
| | 314 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 115 |
| | $ | 112 |
| | $ | 227 |
| | $ | 505 |
| | $ | 112 |
| | $ | 617 |
| | $ | 984 |
| b | $ | — |
| | $ | 930 |
| | $ | 445 |
| | $ | 674 |
| c | $ | 3,877 |
| |
Intersegment | 358 |
| | 499 |
| | 857 |
| | 54 |
| | — |
| | 54 |
| | 2 |
| | 46 |
| | 7 |
| | — |
| | (966 | ) | | — |
| |
Production and delivery | 275 |
| | 464 |
| | 739 |
| | 333 |
| | 91 |
| | 424 |
| | 478 |
| | 57 |
| | 931 |
| | 416 |
| | (516 | ) | f | 2,529 |
| |
Depreciation, depletion and amortization | 51 |
| | 78 |
| | 129 |
| | 109 |
| | 25 |
| | 134 |
| | 110 |
| | 15 |
| | 2 |
| | 7 |
| | 246 |
| | 643 |
| |
Impairment of oil and gas properties | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 239 |
| | 239 |
| |
Selling, general and administrative expenses | 1 |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 2 |
| | 24 |
| | — |
| | — |
| | 5 |
| | 78 |
| | 110 |
| |
Mining exploration and research expenses | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 12 |
| | 13 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | |
Net loss (gain) on sales of assets | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | (13 | ) | |
Operating income (loss) | 145 |
| | 68 |
| | 213 |
| | 116 |
| | (5 | ) | | 111 |
| | 374 |
| | (26 | ) | | 4 |
| | 17 |
| | (334 | ) | | 359 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 21 |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | 3 |
| | 162 |
| | 187 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 36 |
| | (4 | ) | | 32 |
| | 158 |
| | — |
| | — |
| | 4 |
| | (308 | ) | | (114 | ) | |
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 |
| |
Capital expenditures | 6 |
| | 5 |
| | 11 |
| | 38 |
| | 1 |
| | 39 |
| | 253 |
| | 1 |
| | — |
| | 5 |
| | 185 |
| g | 494 |
| |
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
Copper: | | | | | | | |
Concentrate | $ | 1,134 |
| | $ | 1,703 |
| | $ | 2,299 |
| | $ | 3,350 |
|
Cathode | 959 |
| | 1,183 |
| | 1,818 |
| | 2,368 |
|
Rod and other refined copper products | 516 |
| | 668 |
| | 1,023 |
| | 1,338 |
|
Purchased coppera | 325 |
| | 282 |
| | 662 |
| | 520 |
|
Gold | 305 |
| | 933 |
| | 696 |
| | 1,741 |
|
Molybdenum | 327 |
| | 310 |
| | 615 |
| | 596 |
|
Otherb | 218 |
| | 400 |
| | 495 |
| | 798 |
|
Adjustments to revenues: | | | | | | | |
Treatment charges | (100 | ) | | (139 | ) | | (205 | ) | | (271 | ) |
Royalty expensec | (19 | ) | | (73 | ) | | (49 | ) | | (142 | ) |
Export dutiesd | (10 | ) | | (55 | ) | | (27 | ) | | (101 | ) |
Revenues from contracts with customers | 3,655 |
| | 5,212 |
| | 7,327 |
| | 10,197 |
|
Embedded derivativese | (109 | ) | | (44 | ) | | 11 |
| | (161 | ) |
Total consolidated revenues | $ | 3,546 |
| | $ | 5,168 |
| | $ | 7,338 |
| | $ | 10,036 |
|
| |
a. | Includes U.S. oil and gas operations, which were previously a reportable segment.FCX purchases copper cathode primarily for processing by its Rod & Refining operations. |
| |
b. | Primarily includes revenues associated with cobalt and silver. |
| |
c. | Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices. |
| |
d. | Reflects PT-FI export duties. |
| |
e. | Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts. |
Financial Information by Business Segment
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | |
| North America Copper Mines | | South America | | | | | | | | Copper | | Other | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nations | | Total |
Three Months Ended June 30, 2019 | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 16 |
| | $ | 69 |
| | $ | 85 |
| | $ | 562 |
| | $ | 128 |
| | $ | 690 |
| | $ | 583 |
| a | $ | — |
| | $ | 1,171 |
| | $ | 546 |
| | $ | 471 |
| b | $ | 3,546 |
|
Intersegment | 491 |
| | 544 |
| | 1,035 |
| | 71 |
| | — |
| | 71 |
| | (1 | ) | | 109 |
| | 4 |
| | — |
| | (1,218 | ) | | — |
|
Production and delivery | 348 |
| | 477 |
| | 825 |
| | 455 |
| | 126 |
| | 581 |
| | 554 |
| | 78 |
| | 1,171 |
| | 515 |
| | (722 | ) | | 3,002 |
|
Depreciation, depletion and amortization | 43 |
| | 44 |
| | 87 |
| | 101 |
| | 18 |
| | 119 |
| | 99 |
| | 18 |
| | 3 |
| | 7 |
| | 19 |
| | 352 |
|
Selling, general and administrative expenses | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| | 30 |
| | — |
| | — |
| | 5 |
| | 60 |
| | 97 |
|
Mining exploration and research expenses | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 30 |
| | 31 |
|
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 23 |
| | 23 |
|
Net loss on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8 |
| | 8 |
|
Operating income (loss) | 116 |
| | 91 |
| | 207 |
| | 75 |
| | (16 | ) | | 59 |
| | (101 | ) | | 13 |
| | 1 |
| | 19 |
| | (165 | ) | | 33 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 25 |
| | — |
| | 25 |
| | 1 |
| | — |
| | — |
| | 6 |
| | 99 |
| | 132 |
|
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 20 |
| | (9 | ) | | 11 |
| | (35 | ) | | — |
| | — |
| | 2 |
| | 7 |
| | (15 | ) |
Total assets at June 30, 2019 | 2,917 |
| | 4,921 |
| | 7,838 |
| | 8,571 |
| | 1,699 |
| | 10,270 |
| | 16,261 |
| | 1,792 |
| | 250 |
| | 764 |
| | 3,911 |
| | 41,086 |
|
Capital expenditures | 49 |
| | 158 |
| | 207 |
| | 43 |
| | 4 |
| | 47 |
| | 339 |
| | 2 |
| | 1 |
| | 5 |
| | 28 |
| | 629 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30, 2018 | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 25 |
| | $ | 13 |
| | $ | 38 |
| | $ | 719 |
| | $ | 171 |
| | $ | 890 |
| | $ | 1,639 |
| a | $ | — |
| | $ | 1,387 |
| | $ | 602 |
| | $ | 612 |
| b | $ | 5,168 |
|
Intersegment | 568 |
| | 641 |
| | 1,209 |
| | 100 |
| | — |
| | 100 |
| | 1 |
| | 111 |
| | 8 |
| | — |
| | (1,429 | ) | | — |
|
Production and delivery | 298 |
| | 491 |
| | 789 |
| | 445 |
| | 133 |
| | 578 |
| | 425 |
| | 71 |
| | 1,389 |
| | 579 |
| | (916 | ) | | 2,915 |
|
Depreciation, depletion and amortization | 44 |
| | 48 |
| | 92 |
| | 109 |
| | 24 |
| | 133 |
| | 172 |
| | 21 |
| | 3 |
| | 7 |
| | 14 |
| | 442 |
|
Selling, general and administrative expenses | 1 |
| | — |
| | 1 |
| | 2 |
| | — |
| | 2 |
| | 28 |
| | — |
| | — |
| | 5 |
| | 73 |
| | 109 |
|
Mining exploration and research expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 24 |
| | 24 |
|
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 59 |
| | 59 |
|
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (45 | ) | | (45 | ) |
Operating income (loss) | 250 |
| | 115 |
| | 365 |
| | 263 |
| | 14 |
| | 277 |
| | 1,015 |
| | 19 |
| | 3 |
| | 11 |
| | (26 | ) | | 1,664 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 16 |
| | — |
| | 16 |
| | — |
| | — |
| | — |
| | 6 |
| | 119 |
| | 142 |
|
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 |
| | 37,028 |
|
Capital expenditures | 41 |
| | 99 |
| | 140 |
| | 68 |
| | 3 |
| | 71 |
| | 246 |
| | 1 |
| | 1 |
| | 3 |
| | 20 |
| | 482 |
|
| |
a. | Includes PT-FI's sales to PT Smelting totaling $652$470 million in third-quarter 2017second-quarter 2019 and $348$649 million in third-quarter 2016.second-quarter 2018. |
| |
c.b. | 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 $216 million in production and delivery costs, $141 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years. |
| |
e. | Includes assets held for sale totaling $549 million at September 30, 2017, primarily associated with Freeport Cobalt and the Kisanfu exploration project, and $5.1 billion at September 30, 2016, which also included discontinued operations. Also includes assets associated with oil and gas operations of $272 million at September 30, 2017, and $3.5 billion at September 30, 2016. |
| |
f. | Includes net charges for oil and gas operations totaling $49 million, primarily for idle rig costs, inventory adjustments and the termination of the Morocco well commitment. |
| |
g. | Includes $160 million associated with oil and gas operations and $15 million associated with discontinued operations. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America Mining | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nations | | Total | |
Six Months Ended June 30, 2019 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 28 |
| | $ | 164 |
| | $ | 192 |
| | $ | 1,289 |
| | $ | 226 |
| | $ | 1,515 |
| | $ | 1,288 |
| a | $ | — |
| | $ | 2,299 |
| | $ | 1,117 |
| | $ | 927 |
| b | $ | 7,338 |
| |
Intersegment | 949 |
| | 1,013 |
| | 1,962 |
| | 197 |
| | — |
| | 197 |
| | 57 |
| | 200 |
| | 10 |
| | 5 |
| | (2,431 | ) | | — |
| |
Production and delivery | 643 |
| | 925 |
| | 1,568 |
| | 894 |
| | 226 |
| | 1,120 |
| | 1,110 |
| | 149 |
| | 2,304 |
| | 1,067 |
| | (1,340 | ) | | 5,978 |
| |
Depreciation, depletion and amortization | 83 |
| | 87 |
| | 170 |
| | 201 |
| | 32 |
| | 233 |
| | 204 |
| | 34 |
| | 5 |
| | 14 |
| | 39 |
| | 699 |
| |
Selling, general and administrative expenses | 1 |
| | 1 |
| | 2 |
| | 4 |
| | — |
| | 4 |
| | 60 |
| | — |
| | — |
| | 10 |
| | 133 |
| | 209 |
| |
Mining exploration and research expenses | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 57 |
| | 58 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 65 |
| | 65 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (25 | ) | | (25 | ) | |
Operating income (loss) | 250 |
| | 163 |
| | 413 |
| | 387 |
| | (32 | ) | | 355 |
| | (29 | ) | | 17 |
| | — |
| | 31 |
| | (433 | ) | | 354 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | — |
| | 2 |
| | 54 |
| | — |
| | 54 |
| | 1 |
| | — |
| | — |
| | 12 |
| | 209 |
| | 278 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 130 |
| | (14 | ) | | 116 |
| | (9 | ) | | — |
| | — |
| | 3 |
| | (20 | ) | | 90 |
| |
Capital expenditures | 111 |
| | 306 |
| | 417 |
| | 99 |
| | 9 |
| | 108 |
| | 658 |
| | 6 |
| | 2 |
| | 9 |
| | 51 |
| | 1,251 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2018 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 28 |
| | $ | 28 |
| | $ | 56 |
| | $ | 1,344 |
| | $ | 321 |
| | $ | 1,665 |
| | $ | 3,160 |
| a | $ | — |
| | $ | 2,772 |
| | $ | 1,179 |
|
| $ | 1,204 |
| b | $ | 10,036 |
| |
Intersegment | 1,169 |
| | 1,330 |
| | 2,499 |
| | 202 |
| | — |
| | 202 |
| | 53 |
| | 206 |
| | 16 |
| | 2 |
| | (2,978 | ) | | — |
| |
Production and delivery | 588 |
| | 992 |
| | 1,580 |
| | 872 |
|
| 249 |
| | 1,121 |
| | 882 |
|
| 138 |
| | 2,777 |
| | 1,135 |
| | (1,910 | ) | | 5,723 |
| |
Depreciation, depletion and amortization | 90 |
| | 96 |
| | 186 |
| | 214 |
| | 46 |
| | 260 |
| | 353 |
| | 40 |
| | 5 |
| | 14 |
| | 35 |
| | 893 |
| |
Selling, general and administrative expenses | 2 |
| | 2 |
| | 4 |
| | 4 |
| | — |
| | 4 |
| | 67 |
| | — |
| | — |
| | 11 |
| | 154 |
| | 240 |
| |
Mining exploration and research expenses | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 44 |
| | 45 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 68 |
| | 68 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (56 | ) | | (56 | ) | |
Operating income (loss) | 517 |
| | 267 |
| | 784 |
| | 456 |
| | 26 |
| | 482 |
| | 1,911 |
| | 28 |
| | 6 |
| | 21 |
| | (109 | ) | | 3,123 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | — |
| | 2 |
| | 33 |
| | — |
| | 33 |
| | — |
| | — |
| | — |
| | 11 |
| | 247 |
| | 293 |
| |
Provision for income taxes | — |
| | — |
| | — |
| | 170 |
| | 10 |
| | 180 |
| | 830 |
| | — |
| | — |
| | 1 |
| | 10 |
| | 1,021 |
| |
Capital expenditures | 88 |
| | 144 |
| | 232 |
| | 131 |
| | 7 |
| | 138 |
| | 449 |
| | 2 |
| | 2 |
| | 7 |
| | 54 |
| | 884 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America Mining | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 168 |
| | $ | 122 |
| | $ | 290 |
| | $ | 2,057 |
| | $ | 332 |
| | $ | 2,389 |
| | $ | 2,720 |
| b | $ | — |
| | $ | 3,290 |
| | $ | 1,412 |
| | $ | 1,261 |
| c | $ | 11,362 |
| |
Intersegment | 1,354 |
| | 1,704 |
| | 3,058 |
| | 237 |
| | — |
| | 237 |
| | — |
| | 199 |
| | 22 |
| | 1 |
| | (3,517 | ) | | — |
| |
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 |
| |
Depreciation, depletion and amortization | 138 |
| | 192 |
| | 330 |
| | 332 |
| | 60 |
| | 392 |
| | 372 |
| | 58 |
| | 7 |
| | 21 |
| | 77 |
| | 1,257 |
| |
Selling, general and administrative expenses | 2 |
| | 2 |
| | 4 |
| | 7 |
| | — |
| | 7 |
| | 92 |
| e | — |
| | — |
| | 13 |
| | 250 |
| | 366 |
| |
Mining exploration and research expenses | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 59 |
| | 61 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 81 |
| | 81 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (66 | ) | | (66 | ) | |
Operating income (loss) | 610 |
| | 346 |
| | 956 |
| | 505 |
| | 27 |
| | 532 |
| | 1,023 |
| | (28 | ) | | 6 |
| | 10 |
| | (333 | ) | | 2,166 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | 1 |
| | 3 |
| | 187 |
| d | — |
| | 187 |
| | 1 |
| | — |
| | — |
| | 13 |
| | 429 |
| | 633 |
| |
Provision for income taxes | — |
| | — |
| | — |
| | 288 |
| d | 10 |
| | 298 |
| | 435 |
| | — |
| | — |
| | 4 |
| | 10 |
| | 747 |
| |
Capital expenditures | 78 |
| | 28 |
| | 106 |
| | 60 |
| | 5 |
| | 65 |
| | 663 |
| | 4 |
| | 3 |
| | 30 |
| | 149 |
| | 1,020 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 356 |
| | $ | 211 |
| | $ | 567 |
| | $ | 1,485 |
| | $ | 379 |
| | $ | 1,864 |
| | $ | 2,014 |
| b | $ | — |
| | $ | 2,820 |
| | $ | 1,360 |
|
| $ | 1,828 |
| c | $ | 10,453 |
| |
Intersegment | 1,119 |
| | 1,594 |
| | 2,713 |
| | 155 |
| | — |
| | 155 |
| | 59 |
| | 136 |
| | 22 |
| | 3 |
| | (3,088 | ) | | — |
| |
Production and delivery | 913 |
| | 1,340 |
| | 2,253 |
| | 927 |
| | 313 |
| | 1,240 |
| | 1,228 |
| | 159 |
| | 2,820 |
| | 1,275 |
| | (991 | ) | f | 7,984 |
| |
Depreciation, depletion and amortization | 170 |
| | 237 |
| | 407 |
| | 319 |
| | 83 |
| | 402 |
| | 284 |
| | 51 |
| | 7 |
| | 22 |
| | 764 |
| | 1,937 |
| |
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 |
| |
Mining exploration and research expenses | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 44 |
| | 46 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18 |
| | 18 |
| |
Net gain on sales of assets
| (576 | ) | | — |
| | (576 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (186 | ) | | (762 | ) | |
Operating income (loss) | 966 |
| | 224 |
| | 1,190 |
| | 389 |
| | (18 | ) | | 371 |
| | 501 |
| | (74 | ) | | 15 |
| | 53 |
| | (5,551 | ) | | (3,495 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | 1 |
| | 3 |
| | 63 |
| | — |
| | 63 |
| | — |
| | — |
| | — |
| | 11 |
| | 497 |
| | 574 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 126 |
| | (12 | ) | | 114 |
| | 212 |
| | — |
| | — |
| | 5 |
| | (252 | ) | | 79 |
| |
Capital expenditures | 71 |
| | 16 |
| | 87 |
| | 329 |
| | 3 |
| | 332 |
| | 706 |
| | 2 |
| | 1 |
| | 12 |
| | 1,169 |
| g | 2,309 |
| |
| |
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$879 million for the first six months of 2019 and $1.3 billion for the first ninesix months of 2017 and $912 million for the first nine months of 2016.2018. |
| |
c.b. | 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 $216 million in production and delivery costs, $141 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years. |
| |
e. | Includes net charges of $112 million in production and delivery costs and $5 million in selling, general and administrative expenses 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. |
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 FMFreeport-McMoRan Oil & Gas LLC (FM O&G LLC,LLC), as guarantor, which is a 100-percent-owned subsidiary of FMFCX Oil & Gas LLC (FM O&G&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, 2017,2019, and December 31, 2016,2018, and the related condensed consolidating statements of comprehensive (loss) income (loss) for the three and ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, and the condensed consolidating statements of cash flows for the ninesix months ended SeptemberJune 30, 20172019 and 20162018 (in millions), which should be read in conjunction with FCX’sthe other notes to thein these consolidated financial statements.
CONDENSED CONSOLIDATING BALANCE SHEET
SeptemberJune 30, 20172019
| | | 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 |
| $ | 84 |
| | $ | 570 |
| | $ | 8,634 |
| | $ | (558 | ) | | $ | 8,730 |
|
Property, plant, equipment and mine development costs, net | 15 |
| | 11 |
| | 22,899 |
| | (11 | ) | | 22,914 |
| 18 |
| | 2 |
| | 28,821 |
| | — |
| | 28,841 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | — |
| | — |
| | 20 |
| | — |
| | 20 |
| |
Investments in consolidated subsidiaries | 20,178 |
| | — |
| | — |
| | (20,178 | ) | | — |
| 17,773 |
| | — |
| | — |
| | (17,773 | ) | | — |
|
Other assets | 479 |
| | 36 |
| | 3,193 |
| | (465 | ) | | 3,243 |
| 1,335 |
| | 21 |
| | 3,252 |
| | (1,093 | ) | | 3,515 |
|
Total assets | $ | 20,869 |
| | $ | 763 |
| | $ | 37,060 |
| | $ | (21,365 | ) | | $ | 37,327 |
| $ | 19,210 |
| | $ | 593 |
| | $ | 40,707 |
| | $ | (19,424 | ) | | $ | 41,086 |
|
| | | | | | | | | | | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | |
Current liabilities | $ | 2,402 |
| | $ | 111 |
| | $ | 3,820 |
| | $ | (816 | ) | | $ | 5,517 |
| $ | 255 |
| | $ | 55 |
| | $ | 3,574 |
| | $ | (598 | ) | | $ | 3,286 |
|
Long-term debt, less current portion | 10,600 |
| | 6,428 |
| | 5,621 |
| | (10,082 | ) | | 12,567 |
| 8,595 |
| | 7,097 |
| | 5,963 |
| | (11,743 | ) | | 9,912 |
|
Deferred income taxes | 832 |
| a | — |
| | 2,939 |
| | — |
| | 3,771 |
| 561 |
| a | — |
| | 3,494 |
| | — |
| | 4,055 |
|
Environmental and asset retirement obligations, less current portion | — |
| | 208 |
| | 3,290 |
| | — |
| | 3,498 |
| — |
| | 234 |
| | 3,383 |
| | — |
| | 3,617 |
|
Investments in consolidated subsidiaries | — |
| | 850 |
| | 10,174 |
| | (11,024 | ) | | — |
| — |
| | 594 |
| | 10,728 |
| | (11,322 | ) | | — |
|
Other liabilities | 62 |
| | 3,341 |
| | 1,828 |
| | (3,487 | ) | | 1,744 |
| 90 |
| | 3,340 |
| | 2,456 |
| | (3,487 | ) | | 2,399 |
|
Total liabilities | 13,896 |
| | 10,938 |
| | 27,672 |
| | (25,409 | ) | | 27,097 |
| 9,501 |
| | 11,320 |
| | 29,598 |
| | (27,150 | ) | | 23,269 |
|
| | | | | | | | | | | | | | | | | | |
Equity: | | | | | | | | | | | | | | | | | | |
Stockholders’ equity | 6,973 |
| | (10,175 | ) | | 6,782 |
| | 3,393 |
| | 6,973 |
| 9,709 |
| | (10,727 | ) | | 8,455 |
| | 2,272 |
| | 9,709 |
|
Noncontrolling interests | — |
| | — |
| | 2,606 |
| | 651 |
| | 3,257 |
| — |
| | — |
| | 2,654 |
| | 5,454 |
| | 8,108 |
|
Total equity | 6,973 |
| | (10,175 | ) | | 9,388 |
| | 4,044 |
| | 10,230 |
| 9,709 |
| | (10,727 | ) | | 11,109 |
| | 7,726 |
| | 17,817 |
|
Total liabilities and equity | $ | 20,869 |
| | $ | 763 |
| | $ | 37,060 |
| | $ | (21,365 | ) | | $ | 37,327 |
| $ | 19,210 |
| | $ | 593 |
| | $ | 40,707 |
| | $ | (19,424 | ) | | $ | 41,086 |
|
| |
a. | All U.S.-related deferred income taxes are recorded at the parent company. |
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 20162018
| | | 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 |
| $ | 309 |
| | $ | 620 |
| | $ | 10,376 |
| | $ | (585 | ) | | $ | 10,720 |
|
Property, plant, equipment and mine development costs, net | 19 |
| | 24 |
| | 23,176 |
| | — |
| | 23,219 |
| 19 |
| | 7 |
| | 27,984 |
| | — |
| | 28,010 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | — |
| | — |
| | 74 |
| | — |
| | 74 |
| |
Investments in consolidated subsidiaries | 21,110 |
| | — |
| | — |
| | (21,110 | ) | | — |
| 19,064 |
| | — |
| | — |
| | (19,064 | ) | | — |
|
Other assets | 1,985 |
| | 47 |
| | 3,522 |
| | (1,965 | ) | | 3,589 |
| 880 |
| | 23 |
| | 3,218 |
| | (635 | ) | | 3,486 |
|
Total assets | $ | 23,344 |
| | $ | 1,861 |
| | $ | 38,447 |
| | $ | (26,335 | ) | | $ | 37,317 |
| $ | 20,272 |
| | $ | 650 |
| | $ | 41,578 |
| | $ | (20,284 | ) | | $ | 42,216 |
|
| | | | | | | | | | | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | |
Current liabilities | $ | 3,895 |
| | $ | 308 |
| | $ | 3,306 |
| | $ | (3,244 | ) | | $ | 4,265 |
| $ | 245 |
| | $ | 34 |
| | $ | 3,667 |
| | $ | (617 | ) | | $ | 3,329 |
|
Long-term debt, less current portion | 12,517 |
| | 6,062 |
| | 11,297 |
| | (15,081 | ) | | 14,795 |
| 9,594 |
| | 6,984 |
| | 5,649 |
| | (11,103 | ) | | 11,124 |
|
Deferred income taxes | 826 |
| a | — |
| | 2,942 |
| | — |
| | 3,768 |
| 524 |
| a | — |
| | 3,508 |
| | — |
| | 4,032 |
|
Environmental and asset retirement obligations, less current portion | — |
| | 200 |
| | 3,287 |
| | — |
| | 3,487 |
| — |
| | 227 |
| | 3,382 |
| | — |
| | 3,609 |
|
Investments in consolidated subsidiary | — |
| | 893 |
| | 8,995 |
| | (9,888 | ) | | — |
| |
Investments in consolidated subsidiaries | | — |
| | 578 |
| | 10,513 |
| | (11,091 | ) | | — |
|
Other liabilities | 55 |
| | 3,393 |
| | 1,784 |
| | (3,487 | ) | | 1,745 |
| 111 |
| | 3,340 |
| | 2,265 |
| | (3,486 | ) | | 2,230 |
|
Total liabilities | 17,293 |
| | 10,856 |
| | 31,611 |
| | (31,700 | ) | | 28,060 |
| 10,474 |
| | 11,163 |
| | 28,984 |
| | (26,297 | ) | | 24,324 |
|
| | | | | | | | | | | | | | | | | | |
Equity: | | | | | | | | | | | | | | | | | | |
Stockholders’ equity | 6,051 |
| | (8,995 | ) | | 4,237 |
| | 4,758 |
| | 6,051 |
| 9,798 |
| | (10,513 | ) | | 9,912 |
| | 601 |
| | 9,798 |
|
Noncontrolling interests | — |
| | — |
| | 2,599 |
| | 607 |
| | 3,206 |
| — |
| | — |
| | 2,682 |
| | 5,412 |
| | 8,094 |
|
Total equity | 6,051 |
| | (8,995 | ) | | 6,836 |
| | 5,365 |
| | 9,257 |
| 9,798 |
| | (10,513 | ) | | 12,594 |
| | 6,013 |
| | 17,892 |
|
Total liabilities and equity | $ | 23,344 |
| | $ | 1,861 |
| | $ | 38,447 |
| | $ | (26,335 | ) | | $ | 37,317 |
| $ | 20,272 |
| | $ | 650 |
| | $ | 41,578 |
| | $ | (20,284 | ) | | $ | 42,216 |
|
| |
a. | All U.S.-related deferred income taxes are recorded at the parent company. |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) 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 June 30, 2019 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 13 |
| | $ | 3,533 |
| | $ | — |
| | $ | 3,546 |
|
Total costs and expenses | 4 |
| | 26 |
| | 3,481 |
| | 2 |
| | 3,513 |
|
Operating (loss) income | (4 | ) | | (13 | ) | | 52 |
| | (2 | ) | | 33 |
|
Interest expense, net | (83 | ) | | (82 | ) | | (102 | ) | | 135 |
| | (132 | ) |
Other (expense) income, net | (1 | ) | | — |
| | 7 |
| | (1 | ) | | 5 |
|
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (88 | ) | | (95 | ) | | (43 | ) | | 132 |
| | (94 | ) |
(Provision for) benefit from income taxes | (7 | ) | | 22 |
| | — |
| | — |
| | 15 |
|
Equity in affiliated companies’ net earnings (losses) | 23 |
| | (21 | ) | | (89 | ) | | 92 |
| | 5 |
|
Net (loss) income | (72 | ) | | (94 | ) | | (132 | ) | | 224 |
| | (74 | ) |
Net (income) loss attributable to noncontrolling interests | — |
| | — |
| | (8 | ) | | 10 |
| | 2 |
|
Net (loss) income attributable to common stockholders | $ | (72 | ) | | $ | (94 | ) | | $ | (140 | ) | | $ | 234 |
| | $ | (72 | ) |
| | | | | | | | | |
Other comprehensive income (loss) | 12 |
| | — |
| | 12 |
| | (12 | ) | | 12 |
|
Total comprehensive (loss) income | $ | (60 | ) | | $ | (94 | ) | | $ | (128 | ) | | $ | 222 |
| | $ | (60 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended June 30, 2018 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 16 |
| | $ | 5,152 |
| | $ | — |
| | $ | 5,168 |
|
Total costs and expenses | 4 |
| | (16 | ) | | 3,525 |
| | (9 | ) | | 3,504 |
|
Operating (loss) income | (4 | ) | | 32 |
| | 1,627 |
| | 9 |
| | 1,664 |
|
Interest expense, net | (97 | ) | | (76 | ) | | (92 | ) | | 123 |
| | (142 | ) |
Other income (expense), net | 132 |
| | 2 |
| | 18 |
| | (123 | ) | | 29 |
|
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 | 869 |
| | (30 | ) | | 996 |
| | (796 | ) | | 1,039 |
|
Net loss from discontinued operations | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Net income (loss) | 869 |
| | (30 | ) | | 992 |
| | (796 | ) | | 1,035 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | (102 | ) | | (64 | ) | | (166 | ) |
Net income (loss) attributable to common stockholders | $ | 869 |
| | $ | (30 | ) | | $ | 890 |
| | $ | (860 | ) | | $ | 869 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 11 |
| | — |
| | 11 |
| | (11 | ) | | 11 |
|
Total comprehensive income (loss) | $ | 880 |
| | $ | (30 | ) | | $ | 901 |
| | $ | (871 | ) | | $ | 880 |
|
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 110 |
| | $ | 3,767 |
| | $ | — |
| | $ | 3,877 |
|
Total costs and expenses | 12 |
| | 266 |
| a | 3,239 |
| a | 1 |
| | 3,518 |
|
Operating (loss) income | (12 | ) | | (156 | ) | | 528 |
| | (1 | ) | | 359 |
|
Interest expense, net | (126 | ) | | (18 | ) | | (132 | ) | | 89 |
| | (187 | ) |
Other income (expense), net | 91 |
| | — |
| | (10 | ) | | (76 | ) | | 5 |
|
(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 |
|
Net income (loss) from continuing operations | 221 |
| | (589 | ) | | (243 | ) | | 903 |
| | 292 |
|
Net (loss) income from discontinued operations | (4 | ) | | — |
| | 10 |
| | (12 | ) | | (6 | ) |
Net income (loss) | 217 |
| | (589 | ) | | (233 | ) | | 891 |
| | 286 |
|
Net income and preferred dividends attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (24 | ) | | (23 | ) | | (47 | ) |
Discontinued operations | — |
| | — |
| | (22 | ) | | — |
| | (22 | ) |
Net income (loss) attributable to common stockholders | $ | 217 |
| | $ | (589 | ) | | $ | (279 | ) | | $ | 868 |
| | $ | 217 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 12 |
| | — |
| | 12 |
| | (12 | ) | | 12 |
|
Total comprehensive income (loss) | $ | 229 |
| | $ | (589 | ) | | $ | (267 | ) | | $ | 856 |
| | $ | 229 |
|
| |
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. |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS) |
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 38 |
| | $ | 11,324 |
| | $ | — |
| | $ | 11,362 |
|
Total costs and expenses | 31 |
| | 86 |
| | 9,068 |
| | 11 |
| | 9,196 |
|
Operating (loss) income | (31 | ) | | (48 | ) | | 2,256 |
| | (11 | ) | | 2,166 |
|
Interest expense, net | (355 | ) | | (167 | ) | | (363 | ) | | 252 |
| | (633 | ) |
Other income (expense), net | 256 |
| | 3 |
| | 37 |
| | (252 | ) | | 44 |
|
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (130 | ) | | (212 | ) | | 1,930 |
| | (11 | ) | | 1,577 |
|
(Provision for) benefit from income taxes | (111 | ) | | 74 |
| | (714 | ) | | 4 |
| | (747 | ) |
Equity in affiliated companies’ net earnings (losses) | 1,017 |
| | 14 |
| | (118 | ) | | (907 | ) | | 6 |
|
Net income (loss) from continuing operations | 776 |
| | (124 | ) | | 1,098 |
| | (914 | ) | | 836 |
|
Net income from discontinued operations | — |
| | — |
| | 50 |
| | — |
| | 50 |
|
Net income (loss) | 776 |
| | (124 | ) | | 1,148 |
| | (914 | ) | | 886 |
|
Net income attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (42 | ) | | (64 | ) | | (106 | ) |
Discontinued operations | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Net income (loss) attributable to common stockholders | $ | 776 |
| | $ | (124 | ) | | $ | 1,102 |
| | $ | (978 | ) | | $ | 776 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 105 |
| | — |
| | 105 |
| | (105 | ) | | 105 |
|
Total comprehensive income (loss) | $ | 881 |
| | $ | (124 | ) | | $ | 1,207 |
| | $ | (1,083 | ) | | $ | 881 |
|
| | Nine Months Ended September 30, 2016 | | | | | | | | | | |
Six Months Ended June 30, 2019 | | | | | | | | | | |
| 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 | $ | — |
| | $ | 294 |
| | $ | 10,159 |
| | $ | — |
| | $ | 10,453 |
| $ | — |
| | $ | 16 |
| | $ | 7,322 |
| | $ | — |
| | $ | 7,338 |
|
Total costs and expenses | 56 |
| | 2,859 |
| a | 11,026 |
| a | 7 |
| | 13,948 |
| 17 |
| | 26 |
| | 6,941 |
| | — |
| | 6,984 |
|
Operating loss | (56 | ) | | (2,565 | ) | | (867 | ) | | (7 | ) | | (3,495 | ) | |
Operating (loss) income | | (17 | ) | | (10 | ) | | 381 |
| | — |
| | 354 |
|
Interest expense, net | (404 | ) | | (37 | ) | | (370 | ) | | 237 |
| | (574 | ) | (173 | ) | | (168 | ) | | (211 | ) | | 274 |
| | (278 | ) |
Other income (expense), net | 248 |
| | — |
| | 59 |
| | (202 | ) | | 105 |
| 64 |
| | — |
| | 23 |
| | (74 | ) | | 13 |
|
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings | (212 | ) | | (2,602 | ) | | (1,178 | ) | | 28 |
| | (3,964 | ) | |
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | | (126 | ) | | (178 | ) | | 193 |
| | 200 |
| | 89 |
|
(Provision for) benefit from income taxes | (1,785 | ) | | 725 |
| | 979 |
| | 2 |
| | (79 | ) | (8 | ) | | 40 |
| | (122 | ) | | — |
| | (90 | ) |
Equity in affiliated companies’ net (losses) earnings | (2,450 | ) | | (3,202 | ) | | (5,072 | ) | | 10,733 |
| | 9 |
| |
Equity in affiliated companies’ net earnings (losses) | | 93 |
| | (16 | ) | | (152 | ) | | 77 |
| | 2 |
|
Net (loss) income from continuing operations | (4,447 | ) | | (5,079 | ) | | (5,271 | ) | | 10,763 |
| | (4,034 | ) | (41 | ) | | (154 | ) | | (81 | ) | | 277 |
| | 1 |
|
Net income (loss) from discontinued operations | 1 |
| | — |
| | (159 | ) | | (33 | ) | | (191 | ) | |
Net income from discontinued operations | | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
Net (loss) income | (4,446 | ) | | (5,079 | ) | | (5,430 | ) | | 10,730 |
| | (4,225 | ) | (41 | ) | | (154 | ) | | (80 | ) | | 277 |
| | 2 |
|
Net income and preferred dividends attributable to noncontrolling interests: | | | | | | | | | | |
Continuing operations | — |
| | — |
| | (141 | ) | | (36 | ) | | (177 | ) | |
Discontinued operations | — |
| | — |
| | (44 | ) | | — |
| | (44 | ) | |
Net income attributable to noncontrolling interests | | — |
| | — |
| | (42 | ) | | (1 | ) | | (43 | ) |
Net (loss) income attributable to common stockholders | $ | (4,446 | ) | | $ | (5,079 | ) | | $ | (5,615 | ) | | $ | 10,694 |
| | $ | (4,446 | ) | $ | (41 | ) | | $ | (154 | ) | | $ | (122 | ) | | $ | 276 |
| | $ | (41 | ) |
| | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | 27 |
| | — |
| | 27 |
| | (27 | ) | | 27 |
| 23 |
| | — |
| | 23 |
| | (23 | ) | | 23 |
|
Total comprehensive (loss) income | $ | (4,419 | ) | | $ | (5,079 | ) | | $ | (5,588 | ) | | $ | 10,667 |
| | $ | (4,419 | ) | $ | (18 | ) | | $ | (154 | ) | | $ | (99 | ) | | $ | 253 |
| | $ | (18 | ) |
| | | | | | | | | | |
| |
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. |
|
| | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2018 | FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 31 |
| | $ | 10,005 |
| | $ | — |
| | $ | 10,036 |
|
Total costs and expenses | 13 |
| | (8 | ) | | 6,918 |
| | (10 | ) | | 6,913 |
|
Operating (loss) income | (13 | ) | | 39 |
| | 3,087 |
| | 10 |
| | 3,123 |
|
Interest expense, net | (201 | ) | | (140 | ) | | (177 | ) | | 225 |
| | (293 | ) |
Other income (expense), net | 233 |
| | 2 |
| | 47 |
| | (225 | ) | | 57 |
|
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 | (94 | ) | | 22 |
| | (947 | ) | | (2 | ) | | (1,021 | ) |
Equity in affiliated companies’ net earnings (losses) | 1,636 |
| | (4 | ) | | (79 | ) | | (1,552 | ) | | 1 |
|
Net income (loss) from continuing operations | 1,561 |
| | (81 | ) | | 1,931 |
| | (1,544 | ) | | 1,867 |
|
Net loss from discontinued operations | — |
| | — |
| | (15 | ) | | — |
| | (15 | ) |
Net income (loss) | 1,561 |
| | (81 | ) | | 1,916 |
| | (1,544 | ) | | 1,852 |
|
Net income attributable to noncontrolling interests
| — |
| | — |
| | (173 | ) | | (118 | ) | | (291 | ) |
Net income (loss) attributable to common stockholders | $ | 1,561 |
| | $ | (81 | ) | | $ | 1,743 |
| | $ | (1,662 | ) | | $ | 1,561 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 23 |
| | — |
| | 23 |
| | (23 | ) | | 23 |
|
Total comprehensive income (loss) | $ | 1,584 |
| | $ | (81 | ) | | $ | 1,766 |
| | $ | (1,685 | ) | | $ | 1,584 |
|
| | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
| | Nine Months Ended September 30, 2017 | | | | | | | | | | |
Six Months Ended June 30, 2019 | | | | | | | | | | |
| 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 |
| |
Net cash provided by (used in) operating activities | | $ | 330 |
| | $ | (204 | ) | | $ | 962 |
| | $ | — |
| | $ | 1,088 |
|
| | | | | | | | | | | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | | | | | | | | | | |
Capital expenditures | — |
| | (24 | ) | | (996 | ) | | — |
| | (1,020 | ) | — |
| | — |
| | (1,251 | ) | | — |
| | (1,251 | ) |
Intercompany loans | (609 | ) | | — |
| | — |
| | 609 |
| | — |
| (640 | ) | | — |
| | — |
| | 640 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 1,757 |
| | (16 | ) | | 93 |
| | (1,834 | ) | | — |
| 1,470 |
| | — |
| | 47 |
| | (1,519 | ) | | (2 | ) |
Asset sales and other, net | — |
| | 58 |
| | (12 | ) | | — |
| | 46 |
| (1 | ) | | 91 |
| | (4 | ) | | — |
| | 86 |
|
Net cash provided by (used in) investing activities | 1,148 |
| | 18 |
| | (915 | ) | | (1,225 | ) | | (974 | ) | 829 |
| | 91 |
| | (1,208 | ) | | (879 | ) | | (1,167 | ) |
| | | | | | | | | | | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | | | | | | | | | | |
Proceeds from debt | — |
| | — |
| | 795 |
| | — |
| | 795 |
| — |
| | — |
| | 328 |
| | — |
| | 328 |
|
Repayments of debt | (915 | ) | | (139 | ) | | (937 | ) | | — |
| | (1,991 | ) | (1,003 | ) | | — |
| | (560 | ) | | — |
| | (1,563 | ) |
Intercompany loans | — |
| | 512 |
| | 97 |
| | (609 | ) | | — |
| — |
| | 113 |
| | 527 |
| | (640 | ) | | — |
|
Cash dividends paid and contributions received, net | (2 | ) | | — |
| | (1,839 | ) | | 1,772 |
| | (69 | ) | (146 | ) | | — |
| | (1,478 | ) | | 1,499 |
| | (125 | ) |
Other, net | (9 | ) | | (11 | ) | | (64 | ) | | 62 |
| | (22 | ) | (10 | ) | | — |
| | (20 | ) | | 20 |
| | (10 | ) |
Net cash (used in) provided by financing activities | (926 | ) | | 362 |
| | (1,948 | ) | | 1,225 |
| | (1,287 | ) | (1,159 | ) | | 113 |
| | (1,203 | ) | | 879 |
| | (1,370 | ) |
| | | | | | | | | | | | | | | | | | |
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 | | — |
| | — |
| | (1,449 | ) | | — |
| | (1,449 | ) |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | | — |
| | — |
| | 4,455 |
| | — |
| | 4,455 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | | $ | — |
| | $ | — |
| | $ | 3,006 |
| | $ | — |
| | $ | 3,006 |
|
|
| | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2018 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Net cash (used in) provided by operating activities | $ | (163 | ) | | $ | (184 | ) | | $ | 3,025 |
| | $ | — |
| | $ | 2,678 |
|
| | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | |
Capital expenditures | (2 | ) | | — |
| | (882 | ) | | — |
| | (884 | ) |
Intercompany loans | (442 | ) | | — |
| | — |
| | 442 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 2,519 |
| | — |
| | 45 |
| | (2,564 | ) | | — |
|
Asset sales and other, net | 4 |
| | 1 |
| | (91 | ) | | — |
| | (86 | ) |
Net cash provided by (used in) investing activities | 2,079 |
| | 1 |
| | (928 | ) | | (2,122 | ) | | (970 | ) |
| | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | |
Proceeds from debt | — |
| | — |
| | 352 |
| | — |
| | 352 |
|
Repayments of debt | (1,826 | ) | | (52 | ) | | (419 | ) | | — |
| | (2,297 | ) |
Intercompany loans | — |
| | 228 |
| | 214 |
| | (442 | ) | | — |
|
Cash dividends paid and contributions received, net | (73 | ) | | — |
| | (2,789 | ) | | 2,548 |
| | (314 | ) |
Other, net | (17 | ) | | — |
| | (17 | ) | | 16 |
| | (18 | ) |
Net cash (used in) provided by financing activities | (1,916 | ) | | 176 |
| | (2,659 | ) | | 2,122 |
| | (2,277 | ) |
| | | | | | | | | |
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents | — |
| | (7 | ) | | (562 | ) | | — |
| | (569 | ) |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | — |
| | 7 |
| | 4,703 |
| | — |
| | 4,710 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | — |
| | $ | — |
| | $ | 4,141 |
| | $ | — |
| | $ | 4,141 |
|
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Net cash (used in) provided by operating activities | $ | (264 | ) | | $ | (294 | ) | | $ | 3,151 |
| | $ | 1 |
| | $ | 2,594 |
|
| | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | |
Capital expenditures | — |
| | (497 | ) | | (1,814 | ) | | 2 |
| | (2,309 | ) |
Intercompany loans | (1,021 | ) | | (518 | ) | | — |
| | 1,539 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 1,643 |
| | (41 | ) | | 124 |
| | (1,726 | ) | | — |
|
Asset sales and other, net | — |
| | 208 |
| | 1,210 |
| | (3 | ) | | 1,415 |
|
Net cash provided by (used in) investing activities | 622 |
| | (848 | ) | | (480 | ) | | (188 | ) | | (894 | ) |
| | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | |
Proceeds from debt | 1,721 |
| | — |
| | 1,742 |
| | — |
| | 3,463 |
|
Repayments of debt | (2,498 | ) | | — |
| | (2,041 | ) | | — |
| | (4,539 | ) |
Intercompany loans | — |
| | 1,223 |
| | 316 |
| | (1,539 | ) | | — |
|
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 | ) |
Other, net | (18 | ) | | (2 | ) | | (15 | ) | | 13 |
| | (22 | ) |
Net cash (used in) provided by financing activities | (358 | ) | | 1,143 |
| | (1,720 | ) | | 187 |
| | (748 | ) |
| | | | | | | | | |
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 |
|
NOTE 12.11. NEW ACCOUNTING STANDARDS
In May 2014,Leases.Effective January 1, 2019, FCX adopted the Financial Accounting Standards BoardBoard’s (FASB) issued an Accounting StandardStandards Update (ASU) that providesrequires lessees to recognize most leases on the balance sheet. FCX elected the practical expedients allowing it to (i) apply the provisions of the updated lease guidance at the effective date, without adjusting the comparative periods presented and (ii) not reassess lease contracts, lease classification and initial direct costs of leases existing at adoption. FCX also elected an accounting policy to not recognize a single comprehensive revenuelease asset and liability for leases with a term of 12 months or less and a purchase option that is not expected to be exercised.
FCX leases various types of properties, including offices and equipment under non-cancelable leases. Nearly all of FCX’s leases were considered operating leases under the new ASU. Adoption of this ASU resulted in the recognition of $243 million in lease right-of-use assets and lease liabilities as of January 1, 2019.
The components of FCX’s leases presented in the consolidated balance sheet as of June 30, 2019, follow (in millions):
|
| | | |
Lease right-of-use assets (included in property, plant, equipment and mine development costs, net) | $ | 242 |
|
| |
Short-term lease liabilities (included in accounts payable and accrued liabilities) | $ | 47 |
|
Long-term lease liabilities (included in other liabilities) | 216 |
|
Total lease liabilities | $ | 263 |
|
Operating lease costs, primarily included in production and delivery expense in the consolidated statement of operations, are as follows (in millions):
|
| | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2019 | | June 30, 2019 |
| | | |
Operating leases | $ | 21 |
| | $ | 33 |
|
Variable and short-term leases | 19 |
| | 40 |
|
Total lease costs | $ | 40 |
| | $ | 73 |
|
Lease costs totaled $80 million for the year 2018.
FCX paid $20 million during the first six months of 2019 for lease liabilities recorded in the consolidated balance sheet (primarily included in operating cash flows in the consolidated statements of cash flows). As of June 30, 2019, the weighted-average discount rate used to determine the lease liabilities was 5.2 percent and the weighted-average remaining lease term was 8.8 years.
The future minimum payments for leases presented in the consolidated balance sheets at June 30, 2019, follow (in millions):
|
| | | |
Remaining six months of 2019 | $ | 27 |
|
2020 | 54 |
|
2021 | 40 |
|
2022 | 33 |
|
2023 | 30 |
|
Thereafter | 158 |
|
Total payments | 342 |
|
Less amount representing interest | (79 | ) |
Present value of net minimum lease payments | 263 |
|
Less current portion | (47 | ) |
Long-term portion | $ | 216 |
|
Financial Instruments.In June 2016, FASB issued an ASU that requires entities to estimate all expected credit losses for most financial assets held at the reporting date based on an expected loss model, which will replace most existing revenue recognition guidance,requires consideration of historical experience, current conditions, and reasonable and supportable forecasts. This ASU also requires expanded disclosures. The core principleenhanced disclosure requirements to enable users of financial statements to understand the model is that revenue is recognized when control of goods or services has been transferred to customers at an amount that reflects the consideration to which an entity expects to be entitled in exchangeentity’s assumptions, models and methods for those goods or services.estimating expected credit losses. For public entities,companies, this ASU is effective for interim and annual reporting periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early2019, with early adoption is permitted for annual reporting periods beginning after December 15, 2016, and interim reporting periods within that reporting period.permitted. FCX will adopt this ASU January 1, 2018, and currently expects to apply the modified retrospective approach under which any cumulative effect adjustment would be recorded to retained earnings as of the adoption date. FCX has substantially completed its review of the impact of this guidance, and based on the terms of its sales contracts, does not expect thethis guidance to have any impact on its revenue recognition policies or processes. FCX continues to review the impact of the new guidance on its financial reporting and disclosures.
In March 2016, FASB issued an ASU that simplifies various aspects of the accounting for share-based payment transactions, including the income tax consequences, statutory tax withholding requirements, an accounting policy election for forfeitures and the classification on the statement of cash flows. FCX adopted this ASU effective January 1, 2017, and adoption did not have a material impact on its financial statements.
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 the income statement line item or items must be disclosed. For public entities, 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 on its presentation of the statements of operations.consolidated financial statements.
NOTE 13.12. SUBSEQUENT EVENTS
On August 1, 2019, FCX agreed to sell $600 million of 5.00% Senior Notes due 2027 and $600 million of 5.25% Senior Notes due 2029 for total net proceeds of $1.187 billion. The sale is expected to settle on August 15, 2019, subject to customary closing conditions. Interest on these senior notes is payable semiannually on September 1 and March 1 of each year. These senior notes rank equally with FCX’s other existing and future unsecured and unsubordinated indebtedness. FCX intends to use the net proceeds from this offering to fund the redemption of all of its outstanding 6.875% Senior Notes due 2023 (book value of $764 million as of June 30, 2019) and its concurrent cash tender offers for up to $430 million aggregate purchase price of its 4.00% Senior Notes due 2021, 3.55% Senior Notes due 2022 and 3.875% Senior Notes due 2023, and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with these transactions. As a result of the redemption and tender offers, FCX expects to record a loss on early extinguishment of debt of approximately $15 million in third-quarter 2019.
FCX evaluated events after SeptemberJune 30, 2017,2019, 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 OFTo the Board of Directors and Stockholders of
FREEPORT-McMoRan INC.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, and2019, the related consolidated statements of operations, comprehensive (loss) income, and comprehensive income (loss)equity for the three- and nine-monthsix-month periods ended SeptemberJune 30, 20172019 and 2016,2018, the consolidated statements of cash flows for the nine-month periodssix-month period ended SeptemberJune 30, 20172019 and 2016,2018, 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 statement of equity for the nine-month period ended September 30, 2017. Theseinterim 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, 2018, the related consolidated statements of operations, comprehensive income (loss), cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February 15, 2019, 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, 2018, 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/ ERNSTErnst & YOUNGYoung LLP
Phoenix, Arizona
November 7, 2017August 6, 2019
| |
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, 2016,2018 (2018 Form 10-K), 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 one of the world’s largest publicly traded copper producer.producers. 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,North America and South America, including the large-scale Morenci minerals district in North AmericaArizona and the Cerro Verde operation in South America.Peru.
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 leachable 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 August 2017, we reached an understandingDuring second-quarter 2019, PT-FI achieved important milestones with respect to its underground mining operations in the Indonesian government on a framework that would resolve PT Freeport Indonesia’s (PT-FI) long-term operating rights. This framework includes (i) conversion from the Contract of Work (COW) 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.
The framework requires documentation and execution of a definitive agreement, which must be approved by our Board of Directors (Board) and joint venture partner Rio Tinto. The parties continue to negotiate 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 operations 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-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. ReferGrasberg minerals district (refer to “Operations –- Indonesia Mining” for further discussion).
Net (loss) income attributable to common stock totaled $(72) million in second-quarter 2019, $869 million in second-quarter 2018, $(41) million for the first six months of 2019 and $1.6 billion for the first six months of 2018. The results for the 2019 periods, compared with 2018 periods, primarily reflect lower copper and gold sales volumes resulting from anticipated lower mill rates and ore grades in Indonesia as PT-FI transitions mining from the open pit to underground, and lower copper prices. Refer to “Consolidated Results” for further discussion.
At June 30, 2019, we had $2.6 billion in consolidated cash and cash equivalents and $9.9 billion in total debt. At June 30, 2019, we had no borrowings, and $3.5 billion was available under our $3.5 billion, unsecured revolving credit facility. Refer to Note 5 for discussion of debt and Note 12 for discussion of the August 2019 debt transactions.
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 priceprices 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.
Refer to “Operations – Indonesia Mining” for further discussion
Consolidated Sales Volumes
Following are our projected consolidated sales volumes for the year 2017:2019 (which is a transition year for Indonesia mining):
|
| | | |
Copper (millions of recoverable pounds): | | |
North America copper mines | 1,4701,394 |
| |
South America mining | 1,2301,237 |
| |
Indonesia mining | 1,010630 |
| |
Total | 3,7103,261 |
| |
| | |
Gold (thousands of recoverable ounces) | 1,600841 |
| |
| | |
Molybdenum (millions of recoverable pounds) | 94 |
| a |
| |
a. | Projected molybdenum sales include 3436 million pounds produced by our Molybdenum mines and 6058 million pounds produced by our North America and South America copper mines. |
Consolidated sales volumes for fourth-quarter 2017third-quarter 2019 are expected to approximate 1.0 billion830 million pounds of copper, 625230 thousand ounces of gold and 2325 million pounds of molybdenum. As PT-FI transitions mining from the open pit to underground, metal production is expected to improve by 2021.
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
Assuming average prices of $1,300$1,400 per ounce of gold and $8.00$12.00 per pound of molybdenum for fourth-quarter 2017the second half of 2019 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$1.75 per pound of copper for the year 2017.2019 (including $1.67 per pound for the second half of 2019). The impact of price changes for fourth-quarter 2017 on consolidated unit net cash costs for the year 2019 would approximate $0.01 per pound for each $50 per ounce change in the average price of gold for the second half of 2019 and $0.005$0.015 per pound for each $2 per pound change in the average price of molybdenum.molybdenum for the second half of 2019. 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,volumes; prices realized from copper, gold and molybdenum sales,sales; production costs,costs; income taxes,taxes; other working capital changeschanges; 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$1,400 per ounce of gold and $8.00$12.00 per pound of molybdenum for fourth-quarter 2017,the second half of 2019, our consolidated operating cash flows are estimated to approximate $4.3$1.9 billion for the year 2017 (including $0.5$0.3 billion inof working capital sources and timing of other tax payments). Projected for the year 2019. Estimated consolidated operating cash flows for the year 20172019 also reflect an estimated income tax provision of $1.3$0.4 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2017)2019). The impact of price changes during fourth-quarter 2017the second half of 2019 on operating cash flows would approximate $80
$185 million for each $0.10 per pound change in the average price of copper, $20 million for each $50 per ounce change in the average price of gold 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$2.6 billion for the year 2017,2019, including $0.9$1.6 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 agreementthe Lone Star copper leach project, and exclude estimates associated with the Indonesian governmentnew smelter in Indonesia. A large portion of the capital expenditures relates to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. We have cash on its long-term mining rights, we intendhand and the financial flexibility to reduce or defer investments significantlyfund these expenditures and will continue to be disciplined in underground development projects.deploying capital.
MARKETS
World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 20072009 through September 2017,June 2019, the London Metal Exchange (LME) spot copper settlement price varied from a low of $1.26$1.38 per pound in 20082009 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$810 per ounce in 20072009 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$18.60 per pound in 2008.2010. 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 on2018 Form 10-K for the year ended December 31, 2016.10-K.
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 20072009 through September 2017. Beginning in mid-2014,June 2019. During second-quarter 2019, LME 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 into 2017. During third-quarter 2017, LME spot coppersettlement prices ranged from a low of $2.62$2.61 per pound to a high of $3.13$2.95 per pound, averaged $2.88$2.77 per pound and closedsettled at $2.94$2.71 per pound on September 30, 2017.June 28, 2019. During the first six months of 2019, copper prices continued to be negatively impacted by the trade dispute between the U.S. and China. The LME spot copper settlement price was $3.09$2.69 per pound on OctoberJuly 31, 2017.2019.
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 20072009 through September 2017. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold since 2014.June 2019. During third-quarter 2017, Londonsecond-quarter 2019, LBMA PM gold prices ranged from a low of $1,211$1,270 per ounce to a high of $1,346$1,431 per ounce, averaged $1,278$1,309 per ounce, and closed at $1,283$1,409 per ounce on September 30, 2017.June 28, 2019. The LondonLBMA PM gold price was $1,270$1,428 per ounce on OctoberJuly 31, 2017.2019.
This graph presents the Metals Week Molybdenum Dealer Oxide weekly average pricesprice from January 20072009 through September 2017. 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.June 2019. During third-quarter 2017,second-quarter 2019, the weekly average price of molybdenum ranged from a low of $7.11$11.96 per pound to a high of $8.88$12.35 per pound, averaged $8.14$12.18 per pound, and was $8.49$12.10 per pound on September 30, 2017.June 28, 2019. The Metals Week Molybdenum Dealer Oxide weekly average price was $8.38$11.90 per pound on OctoberJuly 31, 2017.2019.
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 | | 2019 | | 2018 | | 2019 | | 2018 | |
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 |
| | $ | 3,546 |
| | $ | 5,168 |
| | $ | 7,338 |
| | $ | 10,036 |
| |
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 | ) | | |
Diluted net income (loss) per share of common stock: | | | | | | | | | |
Operating incomea,c,d | | $ | 33 |
| e | $ | 1,664 |
| | $ | 354 |
| e,f | $ | 3,123 |
| |
Net (loss) income from continuing operationsg,h | | $ | (74 | ) | | $ | 1,039 |
| | $ | 1 |
| | $ | 1,867 |
| |
Net (loss) income from discontinued operationsi | | $ | — |
| | $ | (4 | ) | | $ | 1 |
| | $ | (15 | ) | |
Net (loss) income attributable to common stock | | $ | (72 | ) |
| $ | 869 |
|
| $ | (41 | ) | | $ | 1,561 |
| |
Diluted net (loss) income per share of common stock: | | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | | $ | (0.05 | ) | | $ | 0.59 |
| | $ | (0.03 | ) | | $ | 1.08 |
| |
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | | — |
| | — |
| | — |
| | (0.01 | ) | |
| $ | 0.19 |
|
| $ | 0.16 |
|
| $ | 0.53 |
| | $ | (3.45 | ) | | $ | (0.05 | ) |
| $ | 0.59 |
|
| $ | (0.03 | ) | | $ | 1.07 |
| |
| | | | | | | | | |
Diluted weighted-average common shares outstanding | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| | 1,451 |
| | 1,458 |
| | 1,451 |
| | 1,458 |
| |
| | | | | | | | | | | | | | | | |
Operating cash flowsm | $ | 1,189 |
| | $ | 980 |
| | $ | 3,018 |
| | $ | 2,594 |
| | |
Operating cash flowsj | | $ | 554 |
| | $ | 1,309 |
| | $ | 1,088 |
| | $ | 2,678 |
| |
Capital expenditures | $ | 314 |
| | $ | 494 |
| | $ | 1,020 |
| | $ | 2,309 |
| | $ | 629 |
| | $ | 482 |
| | $ | 1,251 |
| | $ | 884 |
| |
At September 30: | | | | | | | | | |
At June 30: | | | | | | | | | |
Cash and cash equivalents | $ | 4,957 |
| | $ | 1,086 |
| | $ | 4,957 |
| | $ | 1,086 |
| | $ | 2,623 |
| | $ | 3,894 |
| | $ | 2,623 |
| | $ | 3,894 |
| |
Total debt, including current portion | $ | 14,782 |
| | $ | 18,882 |
| | $ | 14,782 |
| | $ | 18,882 |
| | $ | 9,916 |
| | $ | 11,277 |
| | $ | 9,916 |
| | $ | 11,277 |
| |
| | | | | | | | | | | | | | | | |
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 (losses) gains on sales of assets totaling $95$(8) million ($39(8) million to net loss attributable to common stock or $(0.01) per share) in second-quarter 2019, $45 million ($45 million to net income attributable to common stock or $0.03 per share) in third-quarter 2017, $(15)second-quarter 2018, $25 million ($(7)25 million to net income attributable to common stock or $(0.01) per share) in third-quarter 2016, $81 million ($35 million to net incomeloss attributable to common stock or $0.02 per share) for the first ninesix months of 20172019 and $5$56 million ($256 million to net income attributable to common stock or $0.04 per share) for the first six months of 2018, associated with sales of oil and gas assets, including adjustments to the estimated fair value of contingent consideration related to the 2016 sale of onshore California oil and gas properties (refer to Note 7). |
| |
d. | Includes net charges to environmental obligations and related litigation reserves totaling $9 million ($9 million to net loss attributable to common stock or less than $0.01 per share) for the first nine months of 2016. Refer to “Revenues” for further discussion. |
| |
c. | Includes net (credits) charges to mining operations totaling $(4) million ($(4) million to net income attributable to common stock or less than $(0.01) per share) in third-quarter 2017, $40 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 andsecond-quarter 2019, $44 million ($44 million to net loss attributable to common stock or $0.03 per share) for the first ninesix months of 2016, primarily for inventory adjustments2019 and asset impairment/retirement. |
| |
d. | Includes net credits to oil and gas operations totaling $4$50 million ($450 million to net income attributable to common stock or less than $0.01$0.03 per share) in third-quarter 2017for the second quarter and $8 million ($8 million to net income attributable to common stock orfirst six months of 2018. |
$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 salescharges of assets totaling $33$28 million ($3314 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 nine months of 2017, primarily associated with oil and gas transactions and $13 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 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 per share) for the first nine months of 2017 associated with workforce reductions at PT-FI. |
| |
h. | Includes $239 million ($239 million to net income attributable to common stock or $0.18 per share) in third-quarter 2016 and $4.3 billion ($4.3 billion to net loss attributable to common stock or $3.35 per share) for the first nine months of 2016 to reduce the carrying value of oil and gas properties pursuant to full cost accounting rules. |
| |
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 second quarter and first ninesix months of 2017 and $512019 for an adjustment to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. Refer to Note 8 for further discussion. |
| |
f. | Includes metals inventory adjustments of $59 million ($5127 million to net loss attributable to common stock or $0.04$0.02 per share), primarily for the first nine months of 2016.cobalt inventory, and charges totaling $23 million ($9 million to net loss attributable to common stock or $0.01 per share) associated with weather-related issues at El Abra and for non-recurring employee costs at PT-FI. |
| |
j.g. | Includes net tax credits of $18 million ($0.01 per share) in second-quarter 2019, $24 million ($0.02 per share) for the first six months of 2019 and $7 million (less than $0.01 per share) for the second quarter and first six months of 2018. Refer to “Income Taxes” for further discussion of these net tax credits. |
| |
h. | We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations – Smelting &and Refining” for a summary of net impacts from changes in these deferrals. |
| |
k.i. | Includes net tax (charges) credits of $(10) million ($(0.01) per share) in third-quarter 2017 and $21 million ($0.01 per share) for the first nine months of 2017 associated with alternative minimum tax credit carryforwards, and $332 million ($0.24 per share) in third-quarter 2016 and $290 million ($0.22 per share) for the first nine months of 2016 associated with alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims. |
| |
l. | 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, 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.j. | Includes net working capital sources (uses) and changes intiming of other tax payments of $52$308 million in third-quarter 2017, $8second-quarter 2019, $(192) million in third-quarter 2016, $395second-quarter 2018, $281 million for the first ninesix months of 20172019 and $483$(213) million for the first ninesix months of 2016.2018. |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2017 | | 2016a | | 2017 | | 2016a | | 2019 | | 2018 | | 2019 | | 2018 | |
SUMMARY OPERATING DATA | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | | | |
Production | 996 |
| | 1,093 |
| | 2,730 |
| | 3,091 |
| | 776 |
| | 1,014 |
| | 1,556 |
| | 1,966 |
| |
Sales, excluding purchases | 932 |
| | 1,113 |
| | 2,683 |
| | 3,100 |
| | 807 |
| | 989 |
| | 1,591 |
| | 1,982 |
| |
Average realized price per pound | $ | 2.94 |
| | $ | 2.19 |
| | $ | 2.79 |
| | $ | 2.17 |
| | $ | 2.75 |
| | $ | 3.08 |
| | $ | 2.78 |
| | $ | 3.10 |
| |
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 | | $ | 2.26 |
| | $ | 1.69 |
| | $ | 2.21 |
| | $ | 1.68 |
| |
Unit net cash costs per pounda | | $ | 1.92 |
| | $ | 0.96 |
| | $ | 1.85 |
| | $ | 0.97 |
| |
Gold (thousands of recoverable ounces) | | | | | | | | | | | | | | | | |
Production | 418 |
| | 308 |
| | 1,010 |
| | 658 |
| | 160 |
| | 746 |
| | 326 |
| | 1,345 |
| |
Sales, excluding purchases | 355 |
| | 317 |
| | 969 |
| | 674 |
| | 189 |
| | 676 |
| | 431 |
| | 1,286 |
| |
Average realized price per ounce | $ | 1,290 |
| | $ | 1,327 |
| | $ | 1,261 |
| | $ | 1,292 |
| | $ | 1,351 |
| | $ | 1,274 |
| | $ | 1,315 |
| | $ | 1,291 |
| |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | | | | | | | |
Production | 24 |
| | 19 |
| | 70 |
| | 58 |
| | 25 |
| | 24 |
| | 48 |
| | 46 |
| |
Sales, excluding purchases | 22 |
| | 16 |
| | 71 |
| | 52 |
| | 24 |
| | 24 |
| | 46 |
| | 48 |
| |
Average realized price per pound | $ | 9.22 |
| | $ | 9.14 |
| | $ | 9.18 |
| | $ | 8.36 |
| | $ | 13.15 |
| | $ | 12.89 |
| | $ | 12.93 |
| | $ | 12.42 |
| |
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$3.5 billion in third-quarter 2017 and $11.4second-quarter 2019, $5.2 billion in second-quarter 2018, $7.3 billion for the first ninesix months of 2017, compared with $3.9 billion in third-quarter 20162019 and $10.5$10.0 billion for the first ninesix months of 2016.2018. 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, mostRefer to Note 9 for a summary of which were sold in 2016, include the sale of oil, natural gas and natural gas liquids (NGLs).
product revenues. 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 |
| |
Consolidated revenues - 2018 period | | $ | 5,168 |
| | $ | 10,036 |
|
(Lower) higher sales volumes: | | | | | | |
Copper | (394 | ) | | (903 | ) | (563 | ) | | (1,214 | ) |
Gold | 50 |
| | 381 |
| (620 | ) | | (1,102 | ) |
Molybdenum | 56 |
| | 161 |
| 4 |
| | (19 | ) |
Oil and gas | (394 | ) | | (1,031 | ) | |
Higher (lower) average realized prices: | | | | |
(Lower) higher average realized prices: | | | | |
Copper | 700 |
| | 1,664 |
| (266 | ) | | (509 | ) |
Gold | (13 | ) | | (29 | ) | 15 |
| | 10 |
|
Molybdenum | 2 |
| | 59 |
| 6 |
| | 23 |
|
Net adjustments for prior period provisionally priced copper sales | 110 |
| | 76 |
| |
Adjustments for prior period provisionally priced copper sales | | (106 | ) | | 128 |
|
Lower treatment charges | 38 |
| | 83 |
| 39 |
| | 66 |
|
Higher revenues from purchased copper | 87 |
| | 256 |
| 43 |
| | 142 |
|
Higher Atlantic Copper revenues | 110 |
| | 50 |
| |
Lower Atlantic Copper revenues | | (56 | ) | | (59 | ) |
Lower royalties and export duties | | 99 |
| | 167 |
|
Other, including intercompany eliminations | 81 |
| | 142 |
| (217 | ) | | (331 | ) |
Revenues - 2017 period | $ | 4,310 |
| | $ | 11,362 |
| |
Consolidated revenues - 2019 period | | $ | 3,546 |
| | $ | 7,338 |
|
| | | | | | |
Sales Volumes.Consolidated copper and gold sales volumes decreased in the 2019 periods, compared to 932 million pounds in third-quarter 2017, compared with 1.1 billion pounds in third-quarter 2016,the 2018 periods, primarily reflecting anticipated lower mill rates and ore grades in North America and Indonesia andas PT-FI transitions mining from the timing of shipments. Consolidated copper sales decreasedopen pit to 2.7 billion pounds for the first nine months of 2017, compared with 3.1 billion pounds for the first nine months of 2016, primarily reflecting lower ore grades in North America and the impact of the May 2016 sale of an additional 13 percent interest in Morenci.
Consolidated gold sales volumes increased to 355 thousand ounces in third-quarter 2017 and 969 thousand ounces for the first nine 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 in Indonesia.
Consolidated molybdenum sales volumes increased to 22 million pounds in third-quarter 2017 and 71 million pounds for the first nine months of 2017, compared with 16 million pounds in third-quarter 2016 and 52 million pounds for the first nine months of 2016, primarily reflecting higher demand.
underground. 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 2017 averageAverage realized prices in second-quarter 2019, compared with third-quarter 2016,second-quarter 2018, were 3411 percent lower for copper, 6 percent higher for copper, 3 percent lower for gold and 12 percent higher for molybdenum, and average realized prices for the first ninesix months of 2017,2019, compared with the first ninesix months of 2016,2018, were 2910 percent higherlower for copper, 2 percent lowerhigher for gold and 104 percent higher for molybdenum. Refer
Average realized copper prices include net unfavorable adjustments to “Markets”current period provisionally priced copper sales totaling $39 million in second-quarter 2019 and $58 million for further discussion.
Provisionally Priced Copper Sales.Substantiallythe first six months of 2019, compared with $37 million in second-quarter 2018 and $79 million for the first six months of 2018. As discussed in Note 6, 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
Prior Period Provisionally Priced Copper Sales.Net (unfavorable)
impacts of net favorable adjustments to prior periods’ provisionally priced copper sales from continuing operations(i.e., provisionally priced sales at March 31, 2019 and 2018 and December 31, 2018 and 2017) recorded in consolidated revenues totaled $95$(83) million in third-quarter 2017second-quarter 2019 and $81$58 million for the first ninesix months of 2017,2019, compared with $(15)$23 million in third-quarter 2016second-quarter 2018 and $5$(70) million for the first ninesix months of 2016, primarily reflecting higher copper prices in the 2017 periods.2018. Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.
At SeptemberJune 30, 2017,2019, we had provisionally priced copper sales at our copper mining operations totaling 338285 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.93$2.72 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, 2017,2019, provisional price recorded would have an approximate $11$10 million effect on our 20172019 net income attributable to common stock. The LME spot copper price was $3.09settled at $2.69 per pound on OctoberJuly 31, 2017.2019.
Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges. Lower treatment charges, in the 2017 periods, comparedwhich will vary with the 2016 periods, primarily reflect lower concentrate sales volumes at North America copper mines.and the price of copper.
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 114 million pounds in third-quarter 2017second-quarter 2019 and 195 million for the first nine months of 2017, compared with 61 million pounds in third-quarter 2016 and 131231 million pounds for the first ninesix months of 2016).2019, compared with 90 million pounds in second-quarter 2018 and 164 million pounds for the first six months of 2018.
Atlantic Copper Revenues.Atlantic Copper revenues totaled $555$546 million in third-quarter 2017second-quarter 2019 and $1.4$1.1 billion for the first ninesix months of 2017,2019, compared with $445$602 million in third-quarter 2016second-quarter 2018 and $1.4$1.2 billion for the first ninesix months of 2016. Higher2018. Lower revenues in third-quarter 2017,the 2019 periods, compared with third-quarter 2016,the 2018 periods, primarily reflect higherlower copper sales volumes and lower copper prices.
Royalties and Export Duties. Royalties are primarily for sales from PT-FI and vary with the volume of metal sold and the prices of copper and gold. PT-FI also pays export duties until development progress for the new smelter in Indonesia exceeds 50 percent. Refer to Note 9 for a summary of royalty expense and export duties.
Production and Delivery Costs
Consolidated production and delivery costs totaled $2.8$3.0 billion in third-quarter 2017, $2.5second-quarter 2019, $2.9 billion in third-quarter 2016, $7.5second-quarter 2018, $6.0 billion for the first ninesix months of 20172019 and $8.0$5.7 billion for the first ninesix months of 2016. Production2018. Higher consolidated production and delivery costs forin the third quarter and first nine months of 2017 included charges totaling $216 million2019 periods, compared with the 2018 periods, primarily reflect costs at Cerro Verde associatedPT-FI that were historically shared under the joint venture formerly with disputed royalties for prior years (refer to “Operations – South America Mining” for further discussion). Production and delivery costs for the first nine months of 2016 included charges totaling $942 million at oil and gas operations primarily for drillship settlements and inventory adjustments.Rio Tinto plc.
Mining Unit Site Production and Delivery Costs.Costs Per Pound. 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$2.26 per pound of copper in third-quarter 2017 and $1.60second-quarter 2019, $1.69 per pound of copper in second-quarter 2018, $2.21 per pound of copper for the first ninesix months of 2017, compared with $1.37 per pound of copper in third-quarter 20162019 and $1.42$1.68 per pound of copper for the first ninesix months of 2016.2018. Higher consolidated unit site production and delivery costs forper pound in the 20172019 periods, compared with the 20162018 periods, primarily reflect lower copper sales volumes.volumes associated with PT-FI’s transition from mining the open pit to underground. 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$352 million in third-quarter 2017 and $1.3 billionsecond-quarter 2019, $442 million in second-quarter 2018, $699 million for the first ninesix months of 2017, compared with $6432019 and $893 million in third-quarter 2016 and $1.9 billion for the first ninesix months of 2016.2018. Lower DD&A in the 20172019 periods, compared with the 20162018 periods, primarily reflectsreflect lower DD&A from oilsales volumes at PT-FI and gas operations resulting from saleslower UOP rates because 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.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled $106 million in third-quarter 2017, $110 million in third-quarter 2016, $366 million for the first nine months of 2017 and $408 million for the first nine 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 expensesincreased reserves at our oilNorth America and gas operations totaling $16 million in third-quarter 2016 and $66 million for the first nine months of 2016.South America mines.
Mining Exploration and Research Expenses
Consolidated exploration and research expenses for our mining operations totaled $27$31 million in third-quarter 2017, $13second-quarter 2019, $24 million in third-quarter 2016, $61second-quarter 2018, $58 million for the first ninesix months of 20172019 and $46$45 million for the first ninesix months of 2016.2018. 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 continueA drilling program to further delineate the Lone Star resource continues to indicate opportunities for significant future potential reserve additionsadditional mineralization in this district, with higher ore grades than our other North America and South America.copper mines. Exploration spending is expected to approximate $75 million for the year 2017.2019.
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$23 million in third-quarter 2017, $(3)second-quarter 2019, $59 million in third-quarter 2016, $81second-quarter 2018, $65 million for the first ninesix months of 20172019 and $18$68 million for the first ninesix months of 2016. Refer to Note 9 for further discussion.2018.
Interest Expense, Net Gain on Sales of Assets
Net gain on sales of assetsConsolidated interest costs (before capitalization) totaled $33$167 million in third-quarter 2017 and $66second-quarter 2019, $165 million in second-quarter 2018, $345 million for the first ninesix months of 2017, primarily associated with oil2019 and gas transactions. Net gain on sales of assets totaled $13 million in third-quarter 2016 and $762$341 million for the first ninesix months of 2016, primarily associated with the sales of a 13 percent undivided interest2018. The increase in the Morenci unincorporated joint venture and a portion of our2019 periods, compared to the 2018 periods, primarily reflects interest in the Timok exploration project in Serbia.
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) totaled $196 million in third-quarter 2017, $211 million in third-quarter 2016, $583 million for the first nine months of 2017 and $647 million for the first nine months of 2016. Lower interest cost for the 2017 periods, compared to the 2016 periods, reflects a decrease in totalprior years, partly offset by lower debt .
balances. Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $33$35 million in third-quarter 2017, $24second-quarter 2019, $23 million in third-quarter 2016, $91second-quarter 2018, $67 million for the first ninesix months of 20172019 and $73$48 million for the first ninesix months of 2016.2018.
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 | | 2019 | | 2018 | |
| Income (Loss)a | | Effective Tax Rate | | Income Tax Benefit (Provision) | | Income (Loss)a | | Effective Tax Rate | | Income Tax Benefit (Provision) | | Income (Loss)a | | 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 | |
U.S.b | | $ | (183 | ) | | 10% | | $ | 19 |
| c | $ | 311 |
| | (3)% | | $ | 9 |
| c |
South America | 709 |
| | 42% | | (296 | ) | | 290 |
| | 39% | | (114 | ) | | 294 |
| | 40% | | (117 | ) | | 459 |
| | 39% | | (180 | ) | d |
Indonesia | 1,035 |
| | 42% | | (435 | ) | | 544 |
| | 39% | | (212 | ) | | (13 | ) | | 69% | | 9 |
| e | 1,945 |
| | 43% | | (830 | ) | |
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 | ) | | (9 | ) | | N/A | | (10 | ) | | 172 |
| | N/A | | (31 | ) | |
Rate adjustmentf | — |
| | N/A | | (3 | ) | | — |
| | N/A | | 1 |
| | — |
| | N/A | | 9 |
| | — |
| | N/A | | 11 |
| |
Consolidated FCX | $ | 1,577 |
| | 47% | g | $ | (747 | ) | | $ | (3,964 | ) | | (2)% | | $ | (79 | ) | | $ | 89 |
| | 101% | g | $ | (90 | ) | | $ | 2,887 |
| | 35% | | $ | (1,021 | ) | |
| |
a. | Represents income (loss) from continuing operations by geographic location before income taxes and equity in affiliated companies’ net earnings. |
| |
b. | Includes net tax credits of $21 millionIn addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with alternative minimum tax credit carryforwards.senior notes, general and administrative expenses, and environmental obligations and shutdown costs. |
| |
c. | Includes netThe first six months of 2019 include tax credits totaling $18 million primarily associated with state law changes. The first six months of $2902018 include a tax credit of $5 million associated with alternative minimumthe settlement of a state income tax credits, changes to valuation allowances and net operating loss carryback claims.examination. |
| |
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. | AsIncludes a resulttax credit of $8 million ($6 million net of noncontrolling interest) associated with the impairment to U.S. oil and gas properties, we recordedreduction in PT-FI's statutory tax charges to establish valuation allowances against U.S. federal and state deferred tax assets that will not generate a future benefit.rates in accordance with its special mining license (IUPK). |
| |
f. | In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate. |
| |
g. | TheOur consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. Accordingly, variationsoperate, excluding the U.S. jurisdiction. Because our U.S. jurisdiction generated net losses in the relative proportionsfirst six months of jurisdictional income2019 that will not result in fluctuationsa realized tax benefit, applicable accounting rules require us to adjust our consolidated effective income tax rate. Assuming achievement of current sales volume and cost estimates and average prices of $3.00 per pound for copper, $1,300 per ounce for gold and $8.00 per pound for molybdenum for fourth-quarter 2017, we estimate our consolidatedestimated annual effective tax rate related to continuing operations forexclude the year 2017 will approximate 45 percent and would decrease with higher prices.impact of U.S. net losses. |
Net Income (Loss) from Discontinued Operations
In November 2016,Assuming achievement of current sales volume and cost estimates and average prices of $2.75 per pound for copper, $1,400 per ounce for gold and $12.00 per pound for molybdenum for the second half of 2019, we completedestimate our consolidated effective tax rate for the saleyear 2019 would approximate 57 percent (comprised of an estimated effective rate of 42 percent on South America income, 39 percent on Indonesia income and 0 percent for the U.S.). Variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Because of our interest in TFHL, through whichU.S. tax position, we had an effective 56 percent interestdo not record a financial statement impact for income or losses generated in the TenkeU.S.; therefore, the consolidated effective tax rate is generally higher than the international rates at lower copper prices 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 income from discontinued operations totaled $3 million in third-quarter 2017 and $50 million for the first nine months of 2017, which primarily reflected adjustments to the fair value of the potential $120 million contingent consideration related to the sale, which totaled $58 millionlower than international rates 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.higher copper prices.
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 pursue projects to enhance productivity through innovative technologies and 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 copper leach project located near the Safford operation in eastern Arizona. The Safford mine isAn initial project to develop the Lone Star leachable ores commenced in 2018, with first production expected to have copper production through 2024.by the end of 2020. Initial production from the Lone Star oxideleachable ores could begin in 2021 assuming an approximate three-year development period and using existing infrastructure at the adjacent Safford operation. Total preliminary capital cost estimates for development, including mine equipment and pre-production stripping, approximates $850 million. Projected 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 advance the potential for developmentfuture expansion options. Total capital costs for the initial project, including mine equipment and pre-production stripping, are expected to approximate $850 million and will benefit from the utilization of a larger-scale district opportunity. We have obtained regulatory approvalsexisting infrastructure at the adjacent Safford operation. As of June 30, 2019, approximately $480 million has been incurred for this project. The project and are assessing the timingalso advances exposure to commence pre-stripping activities. We are conducting additional drilling as we continue to evaluate longer term opportunities available from thea significant sulfide potentialresource. We expect to incorporate recent positive drilling and ongoing results in the Lone Star/Safford minerals district. our future development plans.
Operating Data. Following is a summary of consolidated operating data for the North America copper mines for the third quarters and first nine months of 2017 and 2016:mines:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 | | 2019 | | 2018 |
Operating Data, Net of Joint Venture Interests | | | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | |
Production | 375 |
| | 455 |
| | 1,151 |
| | 1,411 |
| 370 |
| | 354 |
| | 706 |
| | 702 |
|
Sales, excluding purchases | 347 |
| | 458 |
| | 1,130 |
| | 1,425 |
| 369 |
| | 361 |
| | 689 |
| | 745 |
|
Average realized price per pound | $ | 2.92 |
| | $ | 2.19 |
| | $ | 2.74 |
| | $ | 2.18 |
| $ | 2.78 |
| | $ | 3.12 |
| | $ | 2.80 |
| | $ | 3.14 |
|
| | | | | | | | | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | | | | | |
Productiona | 8 |
| | 9 |
| | 25 |
| | 25 |
| 9 |
| | 8 |
| | 16 |
| | 15 |
|
| | | | | | | | | | | | | | |
100% Operating Data | | | | | | | | | | | | | | |
SX/EW operations | | | | | | | | |
Leach operations | | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 655,600 |
| | 681,400 |
| | 681,200 |
| | 764,900 |
| 797,600 |
| | 689,500 |
| | 751,600 |
| | 682,100 |
|
Average copper ore grade (percent) | 0.27 |
| | 0.31 |
| | 0.28 |
| | 0.32 |
| 0.23 |
| | 0.24 |
| | 0.23 |
| | 0.26 |
|
Copper production (millions of recoverable pounds) | 280 |
| | 316 |
| | 839 |
| | 921 |
| 245 |
| | 241 |
| | 471 |
| | 480 |
|
| | | | | | | | | | | | | | |
Mill operations | | | | | | | | | | | | | | |
Ore milled (metric tons per day) | 297,200 |
| | 300,500 |
| | 300,000 |
| | 299,900 |
| 320,300 |
| | 307,000 |
| | 317,900 |
| | 297,900 |
|
Average ore grade (percent): | | | | | | | | | | | | | | |
Copper | 0.38 |
| | 0.47 |
| | 0.40 |
| | 0.48 |
| 0.36 |
| | 0.35 |
| | 0.34 |
| | 0.35 |
|
Molybdenum | 0.03 |
| | 0.03 |
| | 0.03 |
| | 0.03 |
| 0.02 |
| | 0.02 |
| | 0.02 |
| | 0.02 |
|
Copper recovery rate (percent) | 86.6 |
| | 87.8 |
| | 86.6 |
| | 86.3 |
| 87.4 |
| | 89.1 |
| | 87.6 |
| | 88.5 |
|
Copper production (millions of recoverable pounds) | 167 |
| | 216 |
| | 527 |
| | 661 |
| 195 |
| | 184 |
| | 371 |
| | 358 |
|
| |
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 347totaled 369 million pounds in third-quarter 2017 and 1.1 billionsecond-quarter 2019, 361 million pounds in second-quarter 2018, 689 million pounds for the first ninesix months of 2017 were lower than third-quarter 2016 sales of 4582019 and 745 million pounds and 1.4 billion pounds for the first ninesix months of 2016,2018. Lower sales volumes for the first six months of 2019, compared with the first six months of 2018, primarily reflecting lower ore grades. Additionally, third-quarter 2017 was impacted by thereflect timing of shipments.
North America copper sales are estimated to approximate 1.51.4 billion pounds for the year 2017, compared with 1.8 billion pounds in 2016.2019.
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 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Three Months Ended June 30, | |
| 2017 | | 2016 | | 2019 | | 2018 | |
| 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 |
| | $ | 2.78 |
| | $ | 2.78 |
| | $ | 12.39 |
| | $ | 3.12 |
| | $ | 3.12 |
| | $ | 12.13 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.59 |
| | 1.50 |
| | 5.62 |
| | 1.41 |
| | 1.34 |
| | 4.86 |
| | 2.05 |
| | 1.88 |
| | 9.53 |
| | 1.94 |
| | 1.78 |
| | 9.09 |
| |
By-product credits | (0.16 | ) | | — |
| | — |
| | (0.12 | ) | | — |
| | — |
| | (0.26 | ) | | — |
| | — |
| | (0.25 | ) | | — |
| | — |
| |
Treatment charges | 0.11 |
| | 0.10 |
| | — |
| | 0.11 |
| | 0.10 |
| | — |
| | 0.11 |
| | 0.10 |
| | — |
| | 0.10 |
| | 0.10 |
| | — |
| |
Unit net cash costs | 1.54 |
| | 1.60 |
| | 5.62 |
| | 1.40 |
| | 1.44 |
| | 4.86 |
| | 1.90 |
| | 1.98 |
| | 9.53 |
| | 1.79 |
| | 1.88 |
| | 9.09 |
| |
DD&A | 0.29 |
| | 0.27 |
| | 0.56 |
| | 0.29 |
| | 0.27 |
| | 0.61 |
| | 0.24 |
| | 0.22 |
| | 0.77 |
| | 0.25 |
| | 0.23 |
| | 0.80 |
| |
Noncash and other costs, net | 0.06 |
| b | 0.06 |
| | 0.06 |
| | 0.05 |
| | 0.05 |
| | 0.06 |
| | 0.03 |
| | 0.02 |
| | 0.23 |
| | 0.07 |
| | 0.06 |
| | 0.15 |
| |
Total unit costs | 1.89 |
| | 1.93 |
| | 6.24 |
| | 1.74 |
| | 1.76 |
| | 5.53 |
| | 2.17 |
| | 2.22 |
| | 10.53 |
| | 2.11 |
| | 2.17 |
| | 10.04 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (0.04 | ) | | (0.04 | ) | | — |
| | — |
| | — |
| | — |
| |
Gross profit per pound | $ | 0.85 |
| | $ | 0.81 |
| | $ | 1.33 |
| | $ | 0.44 |
| | $ | 0.42 |
| | $ | 0.71 |
| | $ | 0.57 |
| | $ | 0.52 |
| | $ | 1.86 |
| | $ | 1.01 |
| | $ | 0.95 |
| | $ | 2.09 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 1,127 |
| | 1,127 |
| | | | 1,421 |
| | 1,421 |
| | | | 369 |
| | 369 |
| | | | 361 |
| | 361 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 25 |
| | | | | | 25 |
| | | | | | 9 |
| | | | | | 8 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | |
| 2019 | | 2018 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 2.80 |
| | $ | 2.80 |
| | $ | 12.06 |
| | $ | 3.14 |
| | $ | 3.14 |
| | $ | 11.52 |
| |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 2.05 |
| | 1.87 |
| | 9.69 |
| | 1.89 |
| | 1.75 |
| | 8.47 |
| |
By-product credits | (0.26 | ) | | — |
| | — |
| | (0.22 | ) | | — |
| | — |
| |
Treatment charges | 0.11 |
| | 0.11 |
| | — |
| | 0.10 |
| | 0.10 |
| | — |
| |
Unit net cash costs | 1.90 |
| | 1.98 |
| | 9.69 |
| | 1.77 |
| | 1.85 |
| | 8.47 |
| |
DD&A | 0.25 |
| | 0.22 |
| | 0.75 |
| | 0.25 |
| | 0.23 |
| | 0.74 |
| |
Noncash and other costs, net | 0.05 |
| | 0.04 |
| | 0.22 |
| | 0.05 |
| | 0.05 |
| | 0.12 |
| |
Total unit costs | 2.20 |
| | 2.24 |
| | 10.66 |
| | 2.07 |
| | 2.13 |
| | 9.33 |
| |
Other revenue adjustments, primarily for pricing on prior period open sales | 0.01 |
| | 0.01 |
| | — |
| | (0.01 | ) | | (0.01 | ) | | — |
| |
Gross profit per pound | $ | 0.61 |
| | $ | 0.57 |
| | $ | 1.40 |
| | $ | 1.06 |
| | $ | 1.00 |
| | $ | 2.19 |
| |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 689 |
| | 689 |
| | | | 744 |
| | 744 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 16 |
| | | | | | 15 |
| |
| |
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 were $1.611.90 per pound of copper for the second quarter and first six months of 2019, $1.79 per pound in third-quarter2017second-quarter2018 and $1.54$1.77 per pound for the first ninesix months of 2017 were2018. The increase in the 2019 periods, compared to the 2018 periods, primarily reflects higher thanmining rates, maintenance activities and higher cost of consumables, primarily sulphuric acid. The increase in average unit net cash costs of $1.37 per pound in third-quarter2016 and $1.40 per pound for the first ninesix months of 2016, primarily reflecting2019 also reflects lower sales volumes.
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 $1.581.91 per pound of copper for the year 2017,2019, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $8.0012.00 per pound for fourth-quarter 2017.the second half of 2019. North
America’s average unit net cash costs for the year 20172019 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 2019.
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.
Cerro Verde Royalty Dispute.In October 2017, the Peruvian Supreme Court issued a ruling in favor of SUNAT, Peru’s national tax authority, 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 2006 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) 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.
Operating and Development Activities. The Cerro Verde expansion project commenced operations in September 2015 and achieved capacity operating rates during first-quarter 2016. Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. The project expanded theCerro Verde's concentrator facilities from 120,000have continued to perform well, with average mill throughput rates of 407,700 metric tons of ore per day to 360,000in second-quarter 2019 and 397,200 metric tons of ore per day.day for the first six months of 2019. Debottlenecking projects and additional initiatives to enhance operating rates continue to be advanced.
We continue to evaluate a majorlarge-scale expansion at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra indicate a significantAbra’s large sulfide resource which could potentially support a major mill project similar to facilities recently constructed at Cerro Verde. Future investments will depend on technicalTechnical and economic studies which are beingcontinue to be advanced economic factorsto determine the optimal scope and market conditions.timing for the project.
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:mining:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 | | 2019 | | 2018 |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | |
Production | 328 |
| | 317 |
| | 932 |
| | 986 |
| 281 |
| | 313 |
| | 580 |
| | 606 |
|
Sales | 327 |
| | 323 |
| | 923 |
| | 973 |
| 287 |
| | 312 |
| | 577 |
| | 602 |
|
Average realized price per pound | $ | 2.95 |
| | $ | 2.19 |
| | $ | 2.82 |
| | $ | 2.17 |
| $ | 2.72 |
| | $ | 3.07 |
| | $ | 2.75 |
| | $ | 3.09 |
|
| | | | | | | | | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | | | | | |
Productiona | 8 |
| | 5 |
| | 21 |
| | 14 |
| 7 |
| | 7 |
| | 15 |
| | 13 |
|
| | | | | | | | | | | | | | |
SX/EW operations | | | | | | | | |
Leach operations | | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 180,400 |
| | 163,000 |
| | 153,100 |
| | 158,100 |
| 187,000 |
| | 246,700 |
| | 178,400 |
| | 207,600 |
|
Average copper ore grade (percent) | 0.36 |
| | 0.41 |
| | 0.37 |
| | 0.41 |
| 0.38 |
| | 0.30 |
| | 0.36 |
| | 0.32 |
|
Copper production (millions of recoverable pounds) | 65 |
| | 78 |
| | 190 |
| | 250 |
| 63 |
| | 75 |
| | 122 |
| | 142 |
|
| | | | | | | | | | | | | | |
Mill operations | | | | | | | | | | | | | | |
Ore milled (metric tons per day) | 379,200 |
| | 355,300 |
| | 355,400 |
| | 348,900 |
| 407,700 |
| | 385,200 |
| | 397,200 |
| | 385,300 |
|
Average ore grade (percent): | | | | | | | | | | | | | | |
Copper | 0.44 |
| | 0.41 |
| | 0.44 |
| | 0.42 |
| 0.34 |
| | 0.38 |
| | 0.36 |
| | 0.39 |
|
Molybdenum | 0.02 |
| | 0.02 |
| | 0.02 |
| | 0.02 |
| 0.02 |
| | 0.01 |
| | 0.02 |
| | 0.01 |
|
Copper recovery rate (percent) | 80.9 |
| | 84.4 |
| | 82.7 |
| | 86.1 |
| 81.7 |
| | 84.4 |
| | 84.5 |
| | 81.7 |
|
Copper production (millions of recoverable pounds) | 263 |
| | 239 |
| | 742 |
| | 736 |
| 218 |
| | 238 |
| | 458 |
| | 464 |
|
| |
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 327totaled 287 million pounds in third-quarter 2017 approximated third-quarter2016 sales of 323second-quarter 2019, 312 million pounds. South America’s lower consolidated copper sales volumes of 923pounds in second-quarter2018, 577 million pounds for the first ninesix months of 2017, compared with 9732019 and 602 million pounds for the first ninesix months of 2016,2018. Lower sales volumes for the 2019 periods, compared to the 2018 periods, reflect lower ore grades at Cerro Verde. Sales volumes for the Cerro Verde operation being unfavorablyfirst six months of 2019 were also impacted by unusually highheavy rainfall and electrical storms that resulted in a 21-day labor strike duringsuspension of El Abra’s crushed leach stacking operations for approximately 35 days in first-quarter 2017.2019.
Copper sales from South America mines are expected to approximate 1.2 billion pounds of copper for the year 2017, compared with 1.3 billion pounds of copper in 2016.2019.
Protests in connection with an unaffiliated copper development project have resulted in restricted access to certain areas and roads in Peru used by the mining community, including Cerro Verde, to transport fuel, concentrate and other critical supplies. Our team at Cerro Verde is monitoring the situation and executing contingency plans as needed. There have been limited impacts to our mining and milling operations to date.
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 | 2019 | | 2018 | |
| 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 |
| $ | 2.72 |
| | $ | 2.72 |
| | $ | 3.07 |
| | $ | 3.07 |
| |
| | | | | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.55 |
| | 1.45 |
| | 1.23 |
| | 1.17 |
| 1.92 |
| | 1.74 |
| | 1.77 |
| | 1.65 |
| |
By-product credits | (0.17 | ) | | — |
| | (0.10 | ) | | — |
| (0.28 | ) | | — |
| | (0.22 | ) | | — |
| |
Treatment charges | 0.22 |
| | 0.22 |
| | 0.24 |
| | 0.24 |
| 0.18 |
| | 0.18 |
| | 0.18 |
| | 0.18 |
| |
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 |
| 1.83 |
| | 1.93 |
| | 1.74 |
| | 1.84 |
| |
DD&A | 0.42 |
| | 0.40 |
| | 0.41 |
| | 0.39 |
| 0.41 |
| | 0.37 |
| | 0.43 |
| | 0.40 |
| |
Noncash and other costs, net | 0.25 |
| a | 0.23 |
| | 0.02 |
| | 0.02 |
| 0.07 |
| a | 0.07 |
| | 0.05 |
| | 0.05 |
| |
Total unit costs | 2.28 |
| | 2.31 |
| | 1.80 |
| | 1.82 |
| 2.31 |
| | 2.37 |
| | 2.22 |
| | 2.29 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.04 |
| | 0.04 |
| | 0.01 |
| | 0.01 |
| (0.20 | ) | | (0.20 | ) | | 0.04 |
| | 0.04 |
| |
Gross profit per pound | $ | 0.58 |
| | $ | 0.55 |
| | $ | 0.38 |
| | $ | 0.36 |
| $ | 0.21 |
| | $ | 0.15 |
| | $ | 0.89 |
| | $ | 0.82 |
| |
| | | | |
| |
| | | | | | | | |
Copper sales (millions of recoverable pounds) | 923 |
| | 923 |
| | 973 |
| | 973 |
| 287 |
| | 287 |
| | 312 |
| | 312 |
| |
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
Revenues, excluding adjustments | $ | 2.75 |
| | $ | 2.75 |
| | $ | 3.09 |
| | $ | 3.09 |
|
| | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.82 |
| | 1.64 |
| | 1.78 |
| | 1.64 |
|
By-product credits | (0.31 | ) | | — |
| | (0.24 | ) | | — |
|
Treatment charges | 0.19 |
| | 0.19 |
| | 0.19 |
| | 0.19 |
|
Royalty on metals | 0.01 |
| | 0.01 |
| | 0.01 |
| | 0.01 |
|
Unit net cash costs | 1.71 |
| | 1.84 |
| | 1.74 |
| | 1.84 |
|
DD&A | 0.40 |
| | 0.35 |
| | 0.43 |
| | 0.40 |
|
Noncash and other costs, net | 0.08 |
| a | 0.08 |
| | 0.05 |
| | 0.05 |
|
Total unit costs | 2.19 |
| | 2.27 |
| | 2.22 |
| | 2.29 |
|
Other revenue adjustments, primarily for pricing on prior period open sales | 0.06 |
| | 0.06 |
| | (0.06 | ) | | (0.06 | ) |
Gross profit per pound | $ | 0.62 |
| | $ | 0.54 |
| | $ | 0.81 |
| | $ | 0.74 |
|
| | | | |
| |
|
Copper sales (millions of recoverable pounds) | 577 |
| | 577 |
| | 602 |
| | 602 |
|
| |
a. | Includes charges totaling $216 million ($0.66of $0.01 per pound of copper in third-quarter 2017second-quarter 2019 and $0.23$0.03 per pound of copper for the first ninesix months of 2017)2019 associated with disputed Cerro Verde royalties for prior years.weather-related impacts at El Abra. |
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$1.83 per pound of copper in third-quarter2017 and $1.61 per pound for the first nine months of 2017second-quarter2019 were higher than unit net cash costs of $1.40$1.74 per pound in third-quarter2016 and $1.37second-quarter2018, primarily reflecting lower copper volumes, partly offset by higher by-product credits. Average unit net cash costs (net of by-product credits) of $1.71 per pound for the first ninesix months of 2016,2019 were lower than unit net cash costs of $1.74 per pound for the first six months of 2018, primarily reflecting higher mining, milling and employee costs at Cerro Verde.by-product credits, partly offset by lower copper volumes.
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 $1.641.68 per pound of copper for the year 2017,2019, based on current sales volume and cost estimates and assuming an average price of $8.0012.00 per pound of molybdenum for fourth-quarter 2017.the second half of 2019.
Indonesia Mining
Indonesia mining includes PT-FI’s Grasberg minerals district,assets include one of the world’s largest copper and gold deposits at the Grasberg minerals district 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-FI proportionately consolidates an unincorporated joint venture with Rio Tinto plc (Rio Tinto), 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. Refer to Note 3 in our annual report on Form 10-K for the year ended December 31, 2016, for discussion of our joint venture with Rio Tinto.
PT-FI produces copper concentrate that contains significant quantities of gold and silver. Effective December 21, 2018, our ownership interest in PT-FI is 48.76 percent. We manage PT-FI’s mining operations and consolidate PT-FI in our financial statements. As further discussed in Note 1, our economic interest in PT-FI is expected to approximate 81 percent through 2022.
Substantially all of PT-FI’s copper concentrate is sold under long-term contracts, and duringcontracts. During the first ninesix months of 2017, approximately half2019, 64 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 JanuaryOperating 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, 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.Development Activities. 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, we reached an understanding with the Indonesian government on a framework that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from 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 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.
The framework requires documentation and execution of a definitive agreement, which must be approved by our Board and joint venture partner Rio Tinto. The parties continue to negotiate 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.
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.
We cannot predict whether PT-FI will be successful in reaching a satisfactory definitive agreement on the terms of its long-term mining rights. 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 further discussion of risks associated with our operations in Indonesia.
Operating and Development Activities. PT-FI is currently miningmine the final phasestages of the Grasberg open pit. During second-quarter 2019, PT-FI opened an additional area to extend mining in the Grasberg open pit which contains highinto third-quarter 2019 and potentially longer. The mine sequencing changes in the open pit delayed access to the high-grade material previously expected to be produced during second-quarter 2019, but are expected to meet previous estimates for copper and gold ore grades.production for the year 2019. PT-FI expectswill continue to mine high-grade ore overmonitor geotechnical conditions to determine the next several quarters priorextent of mining in the open pit. Material not mined from the open pit is expected to transitioningbe available to be mined from the Grasberg Block Cave underground mine in early 2019.mine.
During second-quarter 2019, PT-FI has several projects in the Grasberg minerals districtachieved important milestones 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 a definitive agreement is reached to support PT-FI’s long-term investment plans,PT-FI's estimated annual capital spending on theseunderground mine development projects wouldis expected to average $1.0$0.7 billion per year ($0.8for the four-year period 2019 through 2022, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum). In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $0.9 billion per year net to PT-FI) overfor the next five years.four-year period 2019 through 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity. Considering the long-term nature and size of these projects, actual costs could vary from these estimates. In response to market conditions and Indonesian regulatory uncertainty, timing of these expenditures continues to be reviewed. If PT-FI is unable to reach 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.
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) ore body that lies belowunderground mine and the new Indonesian smelter. Estimates of timing of future production from the underground mines continue to be reviewed and may be modified as additional information becomes available.
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.
Common Infrastructure and Grasberg Block Cave Mine. In 2004, Cave. PT-FI has commenced its Common Infrastructure project to provide access to its large undeveloped undergroundextraction of 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. Development of the DMLZ and Grasberg Block Cave 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, which is expected to commencethe same ore body historically mined from the surface in early 2019, following the end of mining of the Grasberg open pit. Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity are expected to approximate 130,000-160,000 metric tons ofDuring second-quarter 2019, undercutting, drawbell construction and ore per day. PT-FI is reviewing its operating plans to determine the optimum mine plan for the Grasberg Block Cave underground mine.
Aggregate mine development capital forextraction activities in the Grasberg Block Cave underground mine exceeded expectations. Ore extraction from the Grasberg Block Cave underground mine averaged 7,400 metric tons per day in second-quarter 2019 and associated Common Infrastructure is expected to approximate $6.3 billion (incurred between 2008ramp up to 15,000 metric tons per day by the end of 2019. Monitoring data on cave propagation in the Grasberg Block Cave underground mine is providing increased confidence in growing production rates over time. As existing drawpoints mature and 2022), with PT-FI’s share totaling approximately $5.8 billion. Aggregate project costs totaling $3.2 billionadditional drawpoints are added, cave expansion is expected to accelerate production rates from an average of 30,000 metric tons of ore per day in 2020 to 130,000 metric tons of ore per day in 2023 from five production blocks spanning 335,000 square meters.
DMLZ. The DMLZ underground mine, located east of the Grasberg ore body and below the Deep Ore Zone (DOZ) underground mine, has commenced production. Hydraulic fracturing operations have been incurred through September 30,effective in managing rock stresses and pre-conditioning the cave following mining-induced seismic activity experienced in 2017 including $118 million during third-quarter 2017. As a result of regulatory uncertainty, PT-FI has slowed investmentsand 2018. In second-quarter 2019, undercutting and drawbell construction were in its underground development projects. If PT-FI is unable to reach a definitive agreementline with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projectsexpectations, and pursue arbitration under PT-FI’s COW.
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 represents ore extracted during the development phase for the purpose of obtaining access to the ore body. In June 2017, productionextraction exceeded expectations. Ore extraction from the DMLZ underground mine was impacted by mining-induced seismic activity, whichaveraged 7,700 metric tons per day in second-quarter 2019 and is not uncommon in block cave mining. To mitigate the impact of these events, PT-FI implemented a revised mine sequence and start-up plan in third-quarter 2017. PT-FI expects DMLZexpected to ramp up to full capacity11,000 metric tons of ore per day by the end of 2019. Ongoing hydraulic fracturing operations combined with continued undercutting and drawbell openings in the two production blocks are expected to expand the cave, supporting higher production rates that are expected to average 28,000 metric tons of ore per day in 2020 and 80,000 metric tons of ore per day in 2021, but at2022 from three production blocks.
Indonesian Smelter. In connection with the extension of PT-FI’s mining rights from 2031 to 2041, PT-FI committed to construct a slower pace than previous estimates.
Drilling efforts continue to determinenew smelter in Indonesia by December 21, 2023. A site for the extentnew smelter has been selected in Gresik near PT Smelting and ground preparation is in progress. Engineering and front-end engineering and design for the selected process technology are ongoing, with construction of the ore body. Aggregate mine developmentsmelter expected to begin in 2020. The preliminary capital costscost estimate for the DMLZ underground mine are expected to approximate $3.2 billion (incurred between 2009 and 2021), with PT-FI’s share totaling approximately $1.9 billion. Aggregate project costs totaling $2.1 billion have been incurred through September 30, 2017, including $62 million during third-quarter 2017. As a result 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.
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, there were a series of shooting incidents within the PT-FI project area, with sporadic 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 12 injuries. The safety of our workforce is a critical concern,$3 billion range, and PT-FI is workingpursuing financing, commercial and potential partner arrangements for this project. The economics of PT-FI’s share of the new smelter will be shared by PT-FI’s shareholders according to their respective share ownership percentages.
cooperatively 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:mining:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 | | 2019 | | 2018 |
Operating Data, Net of Joint Venture Interest | | | | | | | | |
Operating Data | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | | | | | |
Production | 293 |
| | 321 |
| | 647 |
| | 694 |
| 125 |
| | 347 |
| | 270 |
| | 658 |
|
Sales | 258 |
| | 332 |
| | 630 |
| | 702 |
| 151 |
| | 316 |
| | 325 |
| | 635 |
|
Average realized price per pound | $ | 2.95 |
| | $ | 2.20 |
| | $ | 2.81 |
| | $ | 2.17 |
| $ | 2.71 |
| | $ | 3.05 |
| | $ | 2.77 |
| | $ | 3.07 |
|
| | | | | | | | | | | | | | |
Gold (thousands of recoverable ounces) | | | | | | | | | | | | | | |
Production | 412 |
| | 301 |
| | 992 |
| | 637 |
| 154 |
| | 740 |
| | 316 |
| | 1,335 |
|
Sales | 352 |
| | 307 |
| | 956 |
| | 653 |
| 185 |
| | 671 |
| | 420 |
| | 1,274 |
|
Average realized price per ounce | $ | 1,290 |
| | $ | 1,327 |
| | $ | 1,261 |
| | $ | 1,292 |
| $ | 1,350 |
| | $ | 1,274 |
| | $ | 1,314 |
| | $ | 1,291 |
|
| | | | | | | | | | | | | | |
100% Operating Data | | | | | | | | | | | | | | |
Ore milled (metric tons per day):a | | | | | | | | |
Grasberg open pit | 130,500 |
| | 135,600 |
| | 91,200 |
| | 117,200 |
| |
Ore extracted and milled (metric tons per day): | | | | | | | | |
Grasberg open pita | | 54,000 |
| | 148,400 |
| | 78,300 |
| | 136,800 |
|
DOZ underground mineb | 34,500 |
| | 35,100 |
| | 29,400 |
| | 38,700 |
| 21,100 |
| | 29,200 |
| | 25,700 |
| | 34,300 |
|
DMLZ underground mine | 2,400 |
| | 6,000 |
| | 3,100 |
| | 5,000 |
| |
Grasberg Block Cave | 4,200 |
| | 2,800 |
| | 3,600 |
| | 2,600 |
| |
Big Gossan underground mine | — |
| | 1,000 |
| | 500 |
| | 700 |
| |
DMLZ underground mineb | | 7,700 |
| | 2,700 |
| | 7,200 |
| | 2,700 |
|
Grasberg Block Cave underground mineb | | 7,400 |
| | 3,800 |
| | 6,200 |
| | 3,900 |
|
Big Gossan underground mineb | | 5,400 |
| | 3,800 |
| | 5,500 |
| | 3,100 |
|
Total | 171,600 |
| | 180,500 |
| | 127,800 |
| | 164,200 |
| 95,600 |
| | 187,900 |
| | 122,900 |
| | 180,800 |
|
Average ore grades: | | | | | | | | | | | | | | |
Copper (percent) | 0.91 |
| | 1.02 |
| | 1.00 |
| | 0.86 |
| 0.80 |
| | 1.06 |
| | 0.69 |
| | 1.09 |
|
Gold (grams per metric ton) | 0.98 |
| | 0.69 |
| | 1.08 |
| | 0.58 |
| 0.79 |
| | 1.77 |
| | 0.66 |
| | 1.71 |
|
Recovery rates (percent): | | | | | | | | | | | | | | |
Copper | 91.1 |
| | 91.4 |
| | 91.6 |
| | 90.5 |
| 88.3 |
| | 92.7 |
| | 86.3 |
| | 92.4 |
|
Gold | 84.7 |
| | 82.7 |
| | 84.9 |
| | 81.4 |
| 74.9 |
| | 86.1 |
| | 71.6 |
| | 85.5 |
|
Production: | | | | | | | | | | | | | | |
Copper (millions of recoverable pounds) | 277 |
| | 327 |
| | 670 |
| | 736 |
| 125 |
| | 353 |
| | 270 |
| | 693 |
|
Gold (thousands of recoverable ounces) | 405 |
| | 300 |
| | 993 |
| | 664 |
| 154 |
| | 816 |
| | 316 |
| | 1,489 |
|
| |
a. | Amounts represent the approximate average daily throughput processed at PT-FI’s mill facilitiesIncludes ore from each producing mine andrelated stockpiles. |
| |
b. | Reflects ore extracted, including ore 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’sPT-FI’s consolidated copper sales volumes of 258 million pounds in third-quarter 2017 were lower than sales of 332151 million pounds in third-quarter 2016, primarily reflecting lower copper ore grades and timing of shipments. Indonesia mining’s consolidated copper sales volumes of 630 million pounds for the first nine months of 2017 were lower than sales of 702 million pounds for the first nine months of 2016, primarily reflecting the impact of regulatory restrictions on PT-FI’s concentrate exports at the beginning of 2017 (see discussion above in “Regulatory Matters”).
Indonesia’s consolidated gold sales of 352 thousand ounces in third-quarter 2017 and 956 thousand ounces for the first nine months 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.
Assuming achieving planned operating rates for fourth-quarter 2017, consolidated sales volumes from Indonesia mining are expected to approximate 1.0 billion pounds of copper and 1.6185 thousand ounces of gold in second-quarter 2019 and 325 million pounds of copper and 420 thousand ounces of gold for the first six months of 2019 were lower than second-quarter 2018 sales of 316 million pounds of copper and 671 thousand ounces of gold and 635 million pounds of copper and 1.3 million ounces of gold for the year 2017, compared with 1.1 billionfirst six months of 2018, primarily reflecting anticipated lower mill rates and ore grades as PT-FI transitions mining from the open pit to underground.
Consolidated sales volumes from PT-FI are expected to approximate 630 million pounds of copper and 1.1 million830 thousand ounces of gold in 2019. PT-FI will continue to monitor geotechnical conditions to determine the extent of mining in the Grasberg open pit. As PT-FI transitions mining from the open pit to underground, metal production is expected to improve by 2021.
During the first half of 2019, PT-FI utilized its approved export quota of approximately 180,000 dry metric tons of concentrate for the year 2016. Atcurrent export period, which expires March 8, 2020. PT-FI has requested approval from the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold.
Indonesia mining’s projected sales volumesIndonesian government to increase its export quota for the year 2017 are dependent on a number of factors, including operational performance, workforce productivity and the timing of shipments.current export period for expected higher production volumes associated with changes to PT-FI's production plan. PT-FI expects to receive approval during third-quarter 2019.
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 (Loss) Profit per Pound of Copper and per Ounce of Gold
The following table summarizes the unit net cash costs (credits) and gross (loss) 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 (credits) per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Three Months Ended June 30, |
| 2017 | | 2016 | 2019 | | 2018 |
| 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 | $ | 2.95 |
| | $ | 2.95 |
| | $ | 1,290 |
| | $ | 2.20 |
| | $ | 2.20 |
| | $ | 1,327 |
| $ | 2.71 |
| | $ | 2.71 |
| | $ | 1,350 |
| | $ | 3.05 |
| | $ | 3.05 |
| | $ | 1,274 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.41 |
| | 0.87 |
| | 383 |
| | 1.37 |
| | 0.86 |
| | 520 |
| |
Site production and delivery, before net noncash and other costs (credits) shown below | | 3.40 |
| | 2.09 |
| | 1,041 |
| | 1.33 |
| | 0.70 |
| | 291 |
|
Gold and silver credits | (1.80 | ) | | — |
| | — |
| | (1.29 | ) | | — |
| | — |
| (1.69 | ) | | — |
| | — |
| | (2.76 | ) | | — |
| | — |
|
Treatment charges | 0.27 |
| | 0.17 |
| | 74 |
| | 0.27 |
| | 0.17 |
| | 104 |
| 0.26 |
| | 0.16 |
| | 80 |
| | 0.26 |
| | 0.14 |
| | 57 |
|
Export duties | 0.08 |
| | 0.05 |
| | 22 |
| | 0.10 |
| | 0.07 |
| | 39 |
| 0.07 |
| | 0.04 |
| | 20 |
| | 0.18 |
| | 0.09 |
| | 38 |
|
Royalty on metals | 0.17 |
| | 0.10 |
| | 48 |
| | 0.12 |
| | 0.07 |
| | 50 |
| 0.11 |
| | 0.08 |
| | 28 |
| | 0.22 |
| | 0.11 |
| | 51 |
|
Unit net cash costs | 0.13 |
| | 1.19 |
| | 527 |
| | 0.57 |
| | 1.17 |
| | 713 |
| |
Unit net cash costs (credits) | | 2.15 |
| | 2.37 |
| | 1,169 |
| | (0.77 | ) | | 1.04 |
| | 437 |
|
DD&A | 0.53 |
| | 0.33 |
| | 143 |
| | 0.33 |
| | 0.21 |
| | 125 |
| 0.65 |
| | 0.40 |
| | 199 |
| | 0.54 |
| | 0.28 |
| | 119 |
|
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 |
| |
Noncash and other costs (credits), net | | 0.30 |
| a | 0.18 |
| | 91 |
| | (0.01 | ) | | — |
| | (2 | ) |
Total unit costs (credits) | | 3.10 |
| | 2.95 |
| | 1,459 |
| | (0.24 | ) | | 1.32 |
| | 554 |
|
Revenue adjustments, primarily for pricing on prior period open sales | 0.11 |
| | 0.11 |
| | 4 |
| | (0.02 | ) | | (0.02 | ) | | 1 |
| (0.13 | ) | | (0.13 | ) | | (7 | ) | | 0.04 |
| | 0.04 |
| | (2 | ) |
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 |
| |
PT Smelting intercompany profit (loss) | | 0.06 |
| | 0.03 |
| | 16 |
| | (0.03 | ) | | (0.01 | ) | | (6 | ) |
Gross (loss) profit per pound/ounce | | $ | (0.46 | ) | | $ | (0.34 | ) | | $ | (100 | ) | | $ | 3.30 |
| | $ | 1.76 |
| | $ | 712 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 258 |
| | 258 |
| | | | 332 |
| | 332 |
| | | 151 |
| | 151 |
| | | | 316 |
| | 316 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 352 |
| | | | | | 307 |
| | | | | 185 |
| | | | | | 671 |
|
Table of Contents |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 2.77 |
| | $ | 2.77 |
| | $ | 1,314 |
| | $ | 3.07 |
| | $ | 3.07 |
| | $ | 1,291 |
|
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 3.24 |
| | 1.99 |
| | 944 |
| | 1.34 |
| | 0.72 |
| | 304 |
|
Gold and silver credits | (1.75 | ) | | — |
| | — |
| | (2.67 | ) | | — |
| | — |
|
Treatment charges | 0.28 |
| | 0.17 |
| | 81 |
| | 0.25 |
| | 0.14 |
| | 57 |
|
Export duties | 0.08 |
| | 0.05 |
| | 24 |
| | 0.16 |
| | 0.09 |
| | 36 |
|
Royalty on metals | 0.14 |
| | 0.09 |
| | 38 |
| | 0.22 |
| | 0.11 |
| | 50 |
|
Unit net cash costs (credits) | 1.99 |
| | 2.30 |
| | 1,087 |
| | (0.70 | ) | | 1.06 |
| | 447 |
|
DD&A | 0.63 |
| | 0.38 |
| | 183 |
| | 0.55 |
| | 0.30 |
| | 125 |
|
Noncash and other costs, net | 0.14 |
| a | 0.09 |
| | 43 |
| | 0.02 |
| | 0.01 |
| | 4 |
|
Total unit costs (credits) | 2.76 |
| | 2.77 |
| | 1,313 |
| | (0.13 | ) | | 1.37 |
| | 576 |
|
Other revenue adjustments, primarily for pricing on prior period open sales | 0.05 |
| | 0.05 |
| | 5 |
| | (0.05 | ) | | (0.05 | ) | | 13 |
|
PT Smelting intercompany profit (loss) | 0.04 |
| | 0.02 |
| | 10 |
| | (0.04 | ) | | (0.01 | ) | | (7 | ) |
Gross profit per pound/ounce | $ | 0.10 |
| | $ | 0.07 |
| | $ | 16 |
| | $ | 3.11 |
| | $ | 1.64 |
| | $ | 721 |
|
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 325 |
| | 325 |
| | | | 635 |
| | 635 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 420 |
| | | | | | 1,274 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine 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 | $ | 2.81 |
| | $ | 2.81 |
| | $ | 1,261 |
| | $ | 2.17 |
| | $ | 2.17 |
| | $ | 1,292 |
|
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.71 |
| | 1.01 |
| | 451 |
| | 1.70 |
| | 1.08 |
| | 639 |
|
Gold and silver credits | (1.98 | ) | | — |
| | — |
| | (1.28 | ) | | — |
| | — |
|
Treatment charges | 0.27 |
| | 0.16 |
| | 71 |
| | 0.29 |
| | 0.18 |
| | 109 |
|
Export duties | 0.10 |
| | 0.06 |
| | 26 |
| | 0.09 |
| | 0.06 |
| | 34 |
|
Royalty on metals | 0.16 |
| | 0.09 |
| | 47 |
| | 0.12 |
| | 0.07 |
| | 48 |
|
Unit net cash costs | 0.26 |
| | 1.32 |
| | 595 |
| | 0.92 |
| | 1.39 |
| | 830 |
|
DD&A | 0.59 |
| | 0.35 |
| | 156 |
| | 0.40 |
| | 0.25 |
| | 152 |
|
Noncash and other costs, net | 0.22 |
| a | 0.13 |
| | 58 |
| | 0.04 |
| b | 0.03 |
| | 16 |
|
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 | ) |
Gross profit per pound/ounce | $ | 1.77 |
| | $ | 1.06 |
| | $ | 454 |
| | $ | 0.80 |
| | $ | 0.49 |
| | $ | 315 |
|
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 630 |
| | 630 |
| | | | 702 |
| | 702 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 956 |
| | | | | | 653 |
|
| |
a. | Includes costs charged directly to production and delivery costs totaling $9 million ($0.03 per pound of copper) for third-quarter 2017 and $112 million ($0.18 per pound of copper) for the first nine months of 2017 as a result of workforce reductions. |
| |
b. | Includes asset retirement charges of $17 million ($0.05$0.18 per pound of copper in third-quarter 2016second-quarter 2019 and $0.02$0.09 per pound of copper for the first ninesix months of 2016).2019 associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. |
A significant
Because of the fixed nature of a large portion of PT-FI’s costs, are fixed and unit costs vary depending on production volumes and other factors. Indonesia’s unit net cash costs (credits) can vary significantly from quarter to quarter depending on copper and gold volumes. PT-FI’s unit net cash costs (credits) (including gold
and silver credits) of $0.13$2.15 per pound of copper in third-quarter 2017second-quarter 2019 and $0.26$1.99 per pound of copper for the first ninesix months of 2017 were lower than2019, compared with unit net cash costscredits of $0.57$0.77 per pound of copper in third-quarter2016second-quarter2018 and $0.92$0.70 per pound of copper for the first ninesix months of 2016,2018, primarily reflecting higher gold and silver credits, partly offset byreflect lower copper salesand gold volumes.
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 million in third-quarter 2017, $40 million in third-quarter 2016, $106 million for the first nine months of 2017 and $84 million for the first nine months of 2016. Export duties totaled $21 million in third-quarter 2017, $34 million in third-quarter 2016, $62 million for the first nine months of 2017 and $63 million for the first nine months of 2016. As further discussed above in “Regulatory Matters,” PT-FI agreed to continue to pay a five percent export duty.
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, because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate varies with 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.
Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate may vary with asset additions and the level of copper production and sales.
PT Smelting intercompany lossprofit (loss) represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting. Refer to “Operations – Smelting &“Smelting and Refining” below for further discussion.
Assuming an average gold price of $1,300$1,400 per ounce for fourth-quarter 2017the second half of 2019 and achievement of current sales volume and cost estimates, unit net cash costs (net of(including gold and silver credits) for Indonesia miningPT-FI are expected to approximate $0.07$1.55 per pound of copper for the year 2017. Indonesia mining’s2019 (including $1.14 per pound of copper for the second half of 2019). PT-FI’s unit net cash costs for the second half of 2019 are expected to benefit from access to higher grade ore from the Grasberg open pit. PT-FI’s unit net cash costs for the year 20172019 would change by approximately $0.04 per pound for each $50 per ounce change in the average price of gold.gold for the second half of 2019.
factors, including operational performance, mine sequencing changes, timing of shipments and export quotas.
Because of the fixed nature of a large portion of Indonesia’s costs, unit costs vary from quarter to quarter depending on copper and gold volumes.
Molybdenum Mines
We have two wholly owned molybdenum mines in North AmericaColorado – the Henderson underground mine and the Climax open-pit mine, both in Colorado.mine. 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-quarter2017, 5 million pounds in third-quarter 2016, 24both second-quarter2019 and 2018, 17 million pounds for the first ninesix months of 20172019 and 1918 million pounds for the first ninesix months of 2016.2018. 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 unitUnit net cash costs for our Molybdenum mines of $7.90averaged $9.15 per pound of molybdenum in third-quarter2017 and $7.60second-quarter2019, $8.36 per pound of molybdenumin second-quarter 2018, $9.45 per pound for the first ninesix months of 2017 were lower than average unit net cash costs of $10.282019 and $8.46 per pound of molybdenum in third-quarter 2016 and $8.39 per pound of molybdenum for the first ninesix months of 2016, primarily reflecting higher volumes. Assuming achievement of2018. Based on current sales volume and cost estimates, we estimateaverage unit net cash costs for the Molybdenum mines are expected to average $7.85approximate $9.60 per pound of molybdenum for the year 2017.2019. 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 2017,2019, Atlantic Copper’s concentrate purchases include 28 percent from our copper mining operations included 16and 72 percent from our North America copper mines and 10 percent from South America mining, 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 treatment charge 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 2017,2019, PT-FI supplied substantially all of PT Smelting’s concentrate requirements. Minimum and maximum treatment charge rates have been approvedIn March 2019, PT Smelting received a one-year extension of its anode slimes export license through AprilMarch 11, 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 (reductions) additions to net income attributable to common stock of $24$(1) million in third-quarter2017second-quarter2019, $17$27 million for third-quarter 2016, less than $1in second-quarter 2018, $(15) million for the first ninesix months of 20172019 and $6$20 million for the first ninesix months of 2016.2018. 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$23 million at SeptemberJune 30, 2017.2019. 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. In third-quarter 2019, we expect increased intercompany sales volumes to Atlantic Copper and PT Smelting, resulting in the deferral of approximately $30 million of net income until final sales occur.
CAPITAL RESOURCES AND LIQUIDITY
Our consolidated operating cash flows vary with sales volumes,volumes; prices realized from copper, gold and molybdenum sales,sales; 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 continue to advance a project to develop the Lone Star leachable ores near our 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.
As presented in “Outlook,” our projected capital expenditures for 2019 are approximately $0.7 billion higher than projected operating cash flows. A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital. Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows in 2019, plus available cash and availability under our credit facility, to be sufficient to fund our budgeted capital expenditures, cash dividends, noncontrolling interest distributions and other cash requirements for the year.
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, 20172019 (in billions):
| | Cash at domestic companies | $ | 3.7 |
| $ | 1.6 |
| |
Cash at international operations | 1.3 |
| 1.0 |
| |
Total consolidated cash and cash equivalents | 5.0 |
| 2.6 |
| |
Noncontrolling interests’ share | (0.4 | ) | (0.4 | ) | |
Cash, net of noncontrolling interests’ share | 4.6 |
| 2.2 |
| |
Withholding taxes and other | (0.1 | ) | — |
| a |
Net cash available | $ | 4.5 |
| $ | 2.2 |
| |
a. Rounds to less than $0.1 billion.
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 totalAt June 30, 2019, FCX's consolidated debt and the related weighted-average interest rates at Septembertotaled $9.9 billion, with no material scheduled maturities until 2021. At June 30, 2017 (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.
At September 30, 2017,2019, we had no borrowings, $36$13 million in letters of credit issued and availability$3.5 billion of $3.5 billionavailability under our revolving credit facility, which matures on May 31, 2019.facility.
Refer to Note 65 for further discussion of debt.debt (including an amendment that extended the maturity date for our credit facility) and to Note 12 for discussion of the August 2019 debt transactions.
Operating Activities
We generated consolidated operating cash flows of $3.0$1.1 billion (including $0.4$0.3 billion inof working capital sources and changes intiming of other tax payments) for the first ninesix months of 20172019 and $2.6$2.7 billion (including $0.5(net of $0.2 billion in working capital sourcesuses and changes intiming of other tax payments) for the first ninesix months of 2016.
Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated2018. Lower operating cash flows for the years 2017first six months of 2019, compared with the first six months of 2018, primarily reflect lower copper and 2018, plus available cashgold sales volumes and availability under our credit facility and uncommitted lines of credit, to be sufficient to fund our budgeted capital expenditures, scheduled debt maturities, 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, and 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.lower copper prices.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized interest, totaled $1.0$1.25 billion for the first ninesix months of 2017,2019, including $0.6approximately $0.7 billion for major mining projects. Capital expenditures, including capitalized interest, totaled $2.3$0.9 billion for the first ninesix months of 2016, consisting of $1.2 billion for mining operations (including2018, including approximately $0.9$0.5 billion for major projects) and $1.1 billion for oil and gas operations.
Lowermining projects. Higher capital expenditures for the first ninesix months of 2017,2019, compared with the first ninesix months of 2016,2018, primarily reflect a decreaseunderground development activities in oilthe Grasberg minerals district and gas activities as a resultdevelopment of the sales of significant oil and gas properties in 2016 and a decrease in major mining projects associated with the completion of the Cerro Verde expansion.Lone Star copper leach project. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2017.2019.
Dispositions. NetProceeds from sales of oil and gas properties. We received $91 million of proceeds from asset sales totaled $1.4 billionof oil and gas properties for the first ninesix months of 2016 primarily2019, including $50 million in contingent consideration received associated with the $1.0 billion2016 sale of an additional 13 percent undivided interest in Morenci, the sale of an interest in the Timok exploration project in Serbia and fromonshore California oil and gas asset sales, including the Haynesville shale assetsproperties.
Intangible water rights and certain oil and gas royalty interests. Refer to Note 2 for further discussionother, net. During first-quarter 2018, our North America copper mines purchased intangible water rights totaling $88 million.
Financing Activities
Debt Transactions. Net repayments of debt for the first ninesix months of 20172019 totaled $1.2 billion, primarily forconsisting of the redemption and repayment of senior notes$1.0 billion aggregate principal amount of our 3.100% Senior Notes due 2020 and the repayment of $200 million under Cerro Verde’s shareholder loans, partly offset by the additional borrowings on Cerro Verde’sVerde's credit facility.
Net repayments of debt for the first ninesix months of 20162018 totaled $1.1$1.9 billion, primarily reflecting paymentsconsisting of $0.6$1.4 billion of 2.375% Senior Notes that matured in March 2018 and $454 million for senior notes due in 2022 and 2023.
Cash Dividends and Distributions Paid. We paid cash dividends on our term loan, $0.2 billion on the Cerro Verde credit facility and $0.2 billion on lines of credit.
Dividends. The Board suspended our annual common stock totaling $146 million for the first six months of 2019 and $73 million for the first six months of 2018. On June 26, 2019, we declared a quarterly cash dividend in December 2015.of $0.05 per share on our common stock, which was paid on August 1, 2019, to shareholders of record as of July 15, 2019. The declaration of dividends is at the discretion of our Board of Directors (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 nine 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 and distributions paid to noncontrolling interests totaled $67$79 million for the first ninesix months of 20172019 and $87$241 million for the first ninesix months of 2016.2018. These payments will vary based on the operating results and cash requirements of our consolidated subsidiaries.
Contributions from Noncontrolling Interests. During second-quarter 2019, we received equity contributions totaling $100 million from PT Inalum for their share of smelter costs and capital spending on PT-FI underground mine development projects.
CONTRACTUAL OBLIGATIONS
As further discussed in Note 6,5, during the first ninesix months of 2017,2019, we have reduced our December 31, 2016,2018, total debt balance by $1.25$1.2 billion. There have been no other material changes in our contractual obligations since December 31, 2016.2018. Refer to Part II, Items 7. and 7A. in our annual report on2018 Form 10-K, for the year ended December 31, 2016, 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 disclosed in Note 9, there
There have been no material changes to our environmental and asset retirement obligations since December 31, 2016.2018. 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 on2018 Form 10-K, for the year ended December 31, 2016, 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, 2016.2018. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our annual report on2018 Form 10-K, for the year ended December 31, 2016, as updated inby Note 9 in our quarterly reports on Form 10-Q for the quarters ended March 31, 2017, and June 30, 2017,8, 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 (loss) 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 (loss) 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, 2019 | | | | | | |
(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 |
| | | $ | 1,026 |
| | $ | 1,026 |
| | $ | 103 |
| | $ | 20 |
| | $ | 1,149 |
| |
Site production and delivery, before net noncash and other costs shown below | | 576 |
| | 541 |
| | 45 |
| | 11 |
| | 597 |
| | | 758 |
| | 692 |
| | 79 |
| | 13 |
| | 784 |
| |
By-product credits | | (60 | ) | | — |
| | — |
| | — |
| | — |
| | | (97 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 39 |
| | 38 |
| | — |
| | 1 |
| | 39 |
| | | 40 |
| | 39 |
| | — |
| | 1 |
| | 40 |
| |
Net cash costs | | 555 |
| | 579 |
| | 45 |
| | 12 |
| | 636 |
| | | 701 |
| | 731 |
| | 79 |
| | 14 |
| | 824 |
| |
DD&A | | 96 |
| | 90 |
| | 4 |
| | 2 |
| | 96 |
| | | 88 |
| | 79 |
| | 7 |
| | 2 |
| | 88 |
| |
Noncash and other costs, net | | 15 |
| | 14 |
| | 1 |
| | — |
| | 15 |
| | | 10 |
| | 8 |
| | 2 |
| | — |
| | 10 |
| |
Total costs | | 666 |
| | 683 |
| | 50 |
| | 14 |
| | 747 |
| | | 799 |
| | 818 |
| | 88 |
| | 16 |
| | 922 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | | 7 |
| | 7 |
| | — |
| | — |
| | 7 |
| | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (16 | ) | | (16 | ) | | — |
| | — |
| | (16 | ) | |
Gross profit | | $ | 352 |
| | $ | 335 |
| | $ | 12 |
| | $ | 5 |
| | $ | 352 |
| | | $ | 211 |
| | $ | 192 |
| | $ | 15 |
| | $ | 4 |
| | $ | 211 |
| |
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 345 |
| | 345 |
| | | | | | | | | 369 |
| | 369 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 8 |
| | | | | | | | | | | 9 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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 |
| | | | | | | $ | 2.78 |
| | $ | 2.78 |
| | $ | 12.39 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.67 |
| | 1.56 |
| | 5.58 |
| | | | | | | 2.05 |
| | 1.88 |
| | 9.53 |
| | | | | |
By-product credits | | (0.17 | ) | | — |
| | — |
| | | | | | | (0.26 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.11 |
| | — |
| | | | | | | 0.11 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.61 |
| | 1.67 |
| | 5.58 |
| | | | | | | 1.90 |
| | 1.98 |
| | 9.53 |
| | | | | |
DD&A
| | 0.28 |
| | 0.27 |
| | 0.49 |
| | | | | | | 0.24 |
| | 0.22 |
| | 0.77 |
| | | | | |
Noncash and other costs, net | | 0.04 |
| | 0.04 |
| | 0.05 |
| | | | | | | 0.03 |
| | 0.02 |
| | 0.23 |
| | | | | |
Total unit costs | | 1.93 |
| | 1.98 |
| | 6.12 |
| | | | | | | 2.17 |
| | 2.22 |
| | 10.53 |
| | | | | |
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 | | | (0.04 | ) | | (0.04 | ) | | — |
| | | | | |
Gross profit per pound | | $ | 1.02 |
| | $ | 0.97 |
| | $ | 1.47 |
| | | | | | | $ | 0.57 |
| | $ | 0.52 |
| | $ | 1.86 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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 |
| | | | | | | $ | 1,149 |
| | $ | 784 |
| | $ | 88 |
| | | | | |
Treatment charges | | (8 | ) | | 31 |
| | — |
| | | | | | | (19 | ) | | 21 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 15 |
| | — |
| | | | | | | — |
| | 10 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on prior period open sales | | 7 |
| | — |
| | — |
| | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (16 | ) | | — |
| | — |
| | | | | |
Eliminations and other | | 14 |
| | 15 |
| | — |
| | | | | | | 6 |
| | 10 |
| | (1 | ) | | | | | |
North America copper mines | | 1,105 |
| | 658 |
| | 96 |
| | | | | | | 1,120 |
| | 825 |
| | 87 |
| | | | | |
Other miningc | | 3,909 |
| | 2,897 |
| | 299 |
| | | | | | | 3,173 |
| | 2,899 |
| | 246 |
| | | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | | | | (747 | ) | | (722 | ) | | 19 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | | | |
As reported in our consolidated financial statements | | | $ | 3,546 |
| | $ | 3,002 |
| | $ | 352 |
| | | | | |
| |
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,segments, 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, 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 | $ | 1,002 |
| | $ | 1,002 |
| | $ | 65 |
| | $ | 35 |
| | $ | 1,102 |
| | $ | 1,126 |
| | $ | 1,126 |
| | $ | 91 |
| | $ | 22 |
| | $ | 1,239 |
| |
Site production and delivery, before net noncash and other costs shown below | 659 |
| | 610 |
| | 48 |
| | 25 |
| | 683 |
| | 701 |
| | 644 |
| | 68 |
| | 12 |
| | 724 |
| |
By-product credits | (76 | ) | | — |
| | — |
| | — |
| | — |
| | (90 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | 45 |
| | 42 |
| | — |
| | 3 |
| | 45 |
| | 37 |
| | 36 |
| | — |
| | 1 |
| | 37 |
| |
Net cash costs | 628 |
| | 652 |
| | 48 |
| | 28 |
| | 728 |
| | 648 |
| | 680 |
| | 68 |
| | 13 |
| | 761 |
| |
DD&A
| 127 |
| | 117 |
| | 6 |
| | 4 |
| | 127 |
| | 91 |
| | 83 |
| | 6 |
| | 2 |
| | 91 |
| |
Noncash and other costs, net | 26 |
|
| 25 |
| | 1 |
| | — |
| | 26 |
| | 23 |
| | 21 |
| | 1 |
| | 1 |
| | 23 |
| |
Total costs | 781 |
| | 794 |
| | 55 |
| | 32 |
| | 881 |
| | 762 |
| | 784 |
| | 75 |
| | 16 |
| | 875 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | (3 | ) | | (3 | ) | | — |
| | — |
| | (3 | ) | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| |
Gross profit | $ | 218 |
| | $ | 205 |
| | $ | 10 |
| | $ | 3 |
| | $ | 218 |
| | $ | 365 |
| | $ | 343 |
| | $ | 16 |
| | $ | 6 |
| | $ | 365 |
| |
| | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 457 |
| | 457 |
| | | | | | | | 361 |
| | 361 |
| | | | | | | |
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 |
| | | | | | $ | 3.12 |
| | $ | 3.12 |
| | $ | 12.13 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.44 |
| | 1.34 |
| | 5.51 |
| | | | | | 1.94 |
| | 1.78 |
| | 9.09 |
| | | | | |
By-product credits | (0.17 | ) | | — |
| | — |
| | | | | | (0.25 | ) | | — |
| | — |
| | | | | |
Treatment charges | 0.10 |
| | 0.09 |
| | — |
| | | | | | 0.10 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | 1.37 |
| | 1.43 |
| | 5.51 |
| | | | | | 1.79 |
| | 1.88 |
| | 9.09 |
| | | | | |
DD&A
| 0.28 |
| | 0.26 |
| | 0.70 |
| | | | | | 0.25 |
| | 0.23 |
| | 0.80 |
| | | | | |
Noncash and other costs, net | 0.06 |
|
| 0.05 |
| | 0.13 |
| | | | | | 0.07 |
| | 0.06 |
| | 0.15 |
| | | | | |
Total unit costs | 1.71 |
| | 1.74 |
| | 6.34 |
| | | | | | 2.11 |
| | 2.17 |
| | 10.04 |
| | | | | |
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 |
| | | | | | $ | 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 | $ | 1,102 |
| | $ | 683 |
| | $ | 127 |
| | | | | | $ | 1,239 |
| | $ | 724 |
| | $ | 91 |
| | | | | |
Treatment charges | (26 | ) | | 19 |
| | — |
| | | | | | (5 | ) | | 32 |
| | — |
| | | | | |
Noncash and other costs, net | — |
| | 26 |
| | — |
| | | | | | — |
| | 23 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on prior period open sales | (3 | ) | | — |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 1 |
| | — |
| | — |
| | | | | |
Eliminations and other | 11 |
| | 11 |
| | 2 |
| | | | | | 12 |
| | 10 |
| | 1 |
| | | | | |
North America copper mines | 1,084 |
| | 739 |
| | 129 |
| | | | | | 1,247 |
| | 789 |
| | 92 |
| | | | | |
Other miningc | 3,085 |
| | 2,306 |
| | 268 |
| | | | | | 4,738 |
| | 3,042 |
| | 336 |
| | | | | |
Corporate, other & eliminations | (292 | ) | | (516 | ) | | 246 |
| | | | | | (817 | ) | | (916 | ) | | 14 |
| | | | | |
As reported in FCX’s consolidated financial statements | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | | |
As reported in our consolidated financial statements | | | $ | 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,segments, 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, 2019 | | | | | | |
(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 |
| | | $ | 1,931 |
| | $ | 1,931 |
| | $ | 190 |
| | $ | 43 |
| | $ | 2,164 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | | |
and other costs shown below | | 2,008 |
| | 1,904 |
| | 121 |
| | 46 |
| | 2,071 |
| | |
Site production and delivery, before net noncash and other costs shown below | | | 1,416 |
| | 1,288 |
| | 153 |
| | 28 |
| | 1,469 |
| |
By-product credits | | (168 | ) | | — |
| | — |
| | — |
| | — |
| | | (180 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 148 |
| | 142 |
| | — |
| | 6 |
| | 148 |
| | | 76 |
| | 73 |
| | — |
| | 3 |
| | 76 |
| |
Net cash costs | | 1,988 |
| | 2,046 |
| | 121 |
| | 52 |
| | 2,219 |
| | | 1,312 |
| | 1,361 |
| | 153 |
| | 31 |
| | 1,545 |
| |
DD&A | | 405 |
| | 381 |
| | 15 |
| | 9 |
| | 405 |
| | | 170 |
| | 155 |
| | 12 |
| | 3 |
| | 170 |
| |
Noncash and other costs, net | | 74 |
| | 72 |
| | 1 |
| | 1 |
| | 74 |
| | | 33 |
| | 29 |
| | 3 |
| | 1 |
| | 33 |
| |
Total costs | | 2,467 |
| | 2,499 |
| | 137 |
| | 62 |
| | 2,698 |
| | | 1,515 |
| | 1,545 |
| | 168 |
| | 35 |
| | 1,748 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | | | |
on prior period open sales | | (1 | ) | | (1 | ) | | — |
| | — |
| | (1 | ) | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 4 |
| | 4 |
| | — |
| | — |
| | 4 |
| |
Gross profit | | $ | 624 |
| | $ | 592 |
| | $ | 18 |
| | $ | 14 |
| | $ | 624 |
| | | $ | 420 |
| | $ | 390 |
| | $ | 22 |
| | $ | 8 |
| | $ | 420 |
| |
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 1,421 |
| | 1,421 |
| | | | | | | | | 689 |
| | 689 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 25 |
| | | | | | | | | | | 16 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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 |
| | | | | | | $ | 2.80 |
| | $ | 2.80 |
| | $ | 12.06 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | | |
and other costs shown below | | 1.41 |
| | 1.34 |
| | 4.86 |
| | | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 2.05 |
| | 1.87 |
| | 9.69 |
| | | | | |
By-product credits | | (0.12 | ) | | — |
| | — |
| | | | | | | (0.26 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.10 |
| | — |
| | | | | | | 0.11 |
| | 0.11 |
| | — |
| | | | | |
Unit net cash costs | | 1.40 |
| | 1.44 |
| | 4.86 |
| | | | | | | 1.90 |
| | 1.98 |
| | 9.69 |
| | | | | |
DD&A | | 0.29 |
| | 0.27 |
| | 0.61 |
| | | | | | | 0.25 |
| | 0.22 |
| | 0.75 |
| | | | | |
Noncash and other costs, net | | 0.05 |
| | 0.05 |
| | 0.06 |
| | | | | | | 0.05 |
| | 0.04 |
| | 0.22 |
| | | | | |
Total unit costs | | 1.74 |
| | 1.76 |
| | 5.53 |
| | | | | | | 2.20 |
| | 2.24 |
| | 10.66 |
| | | | | |
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 |
| | — |
| | | | | |
Gross profit per pound | | $ | 0.44 |
| | $ | 0.42 |
| | $ | 0.71 |
| | | | | | | $ | 0.61 |
| | $ | 0.57 |
| | $ | 1.40 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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 |
| | | | | | | $ | 2,164 |
| | $ | 1,469 |
| | $ | 170 |
| | | | | |
Treatment charges | | (74 | ) | | 74 |
| | — |
| | | | | | | (32 | ) | | 44 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 74 |
| | — |
| | | | | | | — |
| | 33 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | | |
on prior period open sales | | (1 | ) | | — |
| | — |
| | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 4 |
| | — |
| | — |
| | | | | |
Eliminations and other | | 32 |
| | 34 |
| | 2 |
| | | | | | | 18 |
| | 22 |
| | — |
| | | | | |
North America copper mines | | 3,280 |
| | 2,253 |
| | 407 |
| | | | | | | 2,154 |
| | 1,568 |
| | 170 |
| | | | | |
Other miningc | | 8,433 |
| | 6,722 |
| | 766 |
| | | | | | | 6,688 |
| | 5,750 |
| | 490 |
| | | | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | | | | | (1,504 | ) | | (1,340 | ) | | 39 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | | | | |
As reported in our consolidated financial statements | | | $ | 7,338 |
| | $ | 5,978 |
| | $ | 699 |
| | | | | |
|
| |
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,segments, as presented in Note 10.9. |
SouthNorth America MiningCopper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | |
Three Months Ended September 30, 2017 | | | | | |
Six Months Ended June 30, 2018 | | | | | | |
(In millions) | | By-Product | | Co-Product Method | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 965 |
| | $ | 965 |
| | $ | 75 |
| | $ | 1,040 |
| | $ | 2,337 |
| | $ | 2,337 |
| | $ | 167 |
| | $ | 45 |
| | $ | 2,549 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 524 |
| | 490 |
| | 46 |
| | 536 |
| |
Site production and delivery, before net noncash and other costs shown below | | | 1,405 |
| | 1,304 |
| | 123 |
| | 25 |
| | 1,452 |
| |
By-product credits | | (63 | ) | | — |
| | — |
| | — |
| | (165 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 73 |
| | 73 |
| | — |
| | 73 |
| | 74 |
| | 71 |
| | — |
| | 3 |
| | 74 |
| |
Royalty on metals | | 2 |
| | 2 |
| | — |
| | 2 |
| |
Net cash costs | | 536 |
| | 565 |
| | 46 |
| | 611 |
| | 1,314 |
| | 1,375 |
| | 123 |
| | 28 |
| | 1,526 |
| |
DD&A | | 134 |
| | 125 |
| | 9 |
| | 134 |
| | 185 |
| | 171 |
| | 10 |
| | 4 |
| | 185 |
| |
Noncash and other costs, net | | 225 |
| b | 207 |
| | 18 |
| | 225 |
| | 42 |
| | 40 |
| | 2 |
| | — |
| | 42 |
| |
Total costs | | 895 |
| | 897 |
| | 73 |
| | 970 |
| | 1,541 |
| | 1,586 |
| | 135 |
| | 32 |
| | 1,753 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 59 |
| | 59 |
| | — |
| | 59 |
| |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (5 | ) | | (5 | ) | | — |
| | — |
| | (5 | ) | |
Gross profit | | $ | 129 |
| | $ | 127 |
| | $ | 2 |
| | $ | 129 |
| | $ | 791 |
| | $ | 746 |
| | $ | 32 |
| | $ | 13 |
| | $ | 791 |
| |
| | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 327 |
| | 327 |
| | | | | | 744 |
| | 744 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | | 15 |
| | | | | |
| | | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper: | | | | | |
Gross profit per pound of copper/molybdenum: | | Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.95 |
| | $ | 2.95 |
| | | | | | $ | 3.14 |
| | $ | 3.14 |
| | $ | 11.52 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.60 |
| | 1.50 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 1.89 |
| | 1.75 |
| | 8.47 |
| | | | | |
By-product credits | | (0.19 | ) | | — |
| | | | | | (0.22 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.22 |
| | 0.22 |
| | | | | | 0.10 |
| | 0.10 |
| | — |
| | | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | | |
Unit net cash costs | | 1.64 |
| | 1.73 |
| | | | | | 1.77 |
| | 1.85 |
| | 8.47 |
| | | | | |
DD&A | | 0.41 |
| | 0.38 |
| | | | | | 0.25 |
| | 0.23 |
| | 0.74 |
| | | | | |
Noncash and other costs, net | | 0.69 |
| b | 0.63 |
| | | | | | 0.05 |
| | 0.05 |
| | 0.12 |
| | | | | |
Total unit costs | | 2.74 |
| | 2.74 |
| | | | | | 2.07 |
| | 2.13 |
| | 9.33 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 0.18 |
| | 0.18 |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (0.01 | ) | | (0.01 | ) | | — |
| | | | | |
Gross profit per pound | | $ | 0.39 |
| | $ | 0.39 |
| | | | | | $ | 1.06 |
| | $ | 1.00 |
| | $ | 2.19 |
| | | | | |
| | | | | | | | | | | | | | | | | | | |
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 |
| | | | $ | 2,549 |
| | $ | 1,452 |
| | $ | 185 |
| | | | | |
Treatment charges | | (73 | ) | | — |
| | — |
| | | | (13 | ) | | 61 |
| | — |
| | | | | |
Royalty on metals | | (2 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 225 |
| | — |
| | | | — |
| | 42 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 59 |
| | — |
| | — |
| | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (5 | ) | | — |
| | — |
| | | | | |
Eliminations and other | | (1 | ) | | (2 | ) | | — |
| | | | 24 |
| | 25 |
| | 1 |
| | | | | |
South America mining | | 1,023 |
| | 759 |
| | 134 |
| | | |
North America copper mines | | | 2,555 |
| | 1,580 |
| | 186 |
| | | | | |
Other miningc | | 3,991 |
| | 2,796 |
| | 261 |
| | | | 9,255 |
| | 6,053 |
| | 672 |
| | | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | (1,774 | ) | | (1,910 | ) | | 35 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | |
As reported in our consolidated financial statements | | | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| | | | | |
| | | | | | | | | |
| |
a. | Includes silver sales of 1.0 million ounces ($16.15 per ounce average realized price). Also reflectsReflects sales of molybdenum produced by Cerro Verdecertain of the North America copper mines 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.gold and silver product revenues and production costs. |
| |
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,segments, as presented in Note 10.9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | |
Three Months Ended June 30, 2019 | | | | | | |
(In millions) | | By-Product | | Co-Product Method | | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | | | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 709 |
| | $ | 709 |
| | $ | 50 |
| | $ | 759 |
| | | $ | 781 |
| | $ | 781 |
| | $ | 92 |
| | $ | 873 |
| |
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 409 |
| | 386 |
| | 35 |
| | 421 |
| | |
Site production and delivery, before net noncash and other costs shown below | | | 550 |
| | 498 |
| | 64 |
| | 562 |
| |
By-product credits | | (38 | ) | | — |
| | — |
| | — |
| | | (80 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 79 |
| | 79 |
| | — |
| | 79 |
| | | 52 |
| | 52 |
| | — |
| | 52 |
| |
Royalty on metals | | 2 |
| | 2 |
| | — |
| | 2 |
| | | 2 |
| | 2 |
| | — |
| | 2 |
| |
Net cash costs | | 452 |
| | 467 |
| | 35 |
| | 502 |
| | | 524 |
| | 552 |
| | 64 |
| | 616 |
| |
DD&A | | 134 |
| | 126 |
| | 8 |
| | 134 |
| | | 119 |
| | 107 |
| | 12 |
| | 119 |
| |
Noncash and other costs, net | | 4 |
| | 3 |
| | 1 |
| | 4 |
| | | 21 |
| | 20 |
| | 1 |
| | 21 |
| |
Total costs | | 590 |
| | 596 |
| | 44 |
| | 640 |
| | | 664 |
| | 679 |
| | 77 |
| | 756 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | (7 | ) | | (7 | ) | | — |
| | (7 | ) | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (57 | ) | | (57 | ) | | — |
| | (57 | ) | |
Gross profit | | $ | 112 |
| | $ | 106 |
| | $ | 6 |
| | $ | 112 |
| | | $ | 60 |
| | $ | 45 |
| | $ | 15 |
| | $ | 60 |
| |
| | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 323 |
| | 323 |
| | | | | | | 287 |
| | 287 |
| | | | | |
| | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper: | Gross profit per pound of copper: | | | | | | Gross profit per pound of copper: | | | | | |
| | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.19 |
| | $ | 2.19 |
| | | | | | | $ | 2.72 |
| | $ | 2.72 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1.27 |
| | 1.20 |
| | | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 1.92 |
| | 1.74 |
| | | | | |
By-product credits | | (0.12 | ) | | — |
| | | | | | | (0.28 | ) | | — |
| | | | | |
Treatment charges | | 0.24 |
| | 0.24 |
| | | | | | | 0.18 |
| | 0.18 |
| | | | | |
Royalty on metals | | 0.01 |
| | — |
| | | | | | | 0.01 |
| | 0.01 |
| | | | | |
Unit net cash costs | | 1.40 |
| | 1.44 |
| | | | | | | 1.83 |
| | 1.93 |
| | | | | |
DD&A | | 0.41 |
| | 0.39 |
| | | | | | | 0.41 |
| | 0.37 |
| | | | | |
Noncash and other costs, net | | 0.01 |
| | 0.01 |
| | | | | | | 0.07 |
| | 0.07 |
| | | | | |
Total unit costs | | 1.82 |
| | 1.84 |
| | | | | | | 2.31 |
| | 2.37 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | (0.02 | ) | | (0.02 | ) | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (0.20 | ) | | (0.20 | ) | | | | | |
Gross profit per pound | | $ | 0.35 |
| | $ | 0.33 |
| | | | | | | $ | 0.21 |
| | $ | 0.15 |
| | | | | |
| | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | | | Production | | | | | |
| | | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 759 |
| | $ | 421 |
| | $ | 134 |
| | | | | $ | 873 |
| | $ | 562 |
| | $ | 119 |
| | | |
Treatment charges | | (79 | ) | | — |
| | — |
| | | | | (52 | ) | | — |
| | — |
| | | |
Royalty on metals | | (2 | ) | | — |
| | — |
| | | | | (2 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 4 |
| | — |
| | | | | — |
| | 21 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | |
on prior period open sales | | (7 | ) | | — |
| | — |
| | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (57 | ) | | — |
| | — |
| | | |
Eliminations and other | | — |
| | (1 | ) | | — |
| | | | | (1 | ) | | (2 | ) | | — |
| | | |
South America mining | | 671 |
| | 424 |
| | 134 |
| | | | | 761 |
| | 581 |
| | 119 |
| | | |
Other miningb | | 3,498 |
| | 2,621 |
| | 263 |
| | | | | 3,532 |
| | 3,143 |
| | 214 |
| | | |
Corporate, other & eliminations | | (292 | ) | | (516 | ) | | 246 |
| | | | | (747 | ) | | (722 | ) | | 19 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | |
As reported in our consolidated financial statements | | | $ | 3,546 |
| | $ | 3,002 |
| | $ | 352 |
| | | |
| | | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 952 thousand1.2 million ounces ($21.7215.39 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,segments, as presented in Note 10.9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | |
Nine 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 | | $ | 2,605 |
| | $ | 2,605 |
| | $ | 190 |
| | $ | 2,795 |
| | $ | 958 |
| | $ | 958 |
| | $ | 81 |
| | $ | 1,039 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1,429 |
| | 1,340 |
| | 123 |
| | 1,463 |
| |
Site production and delivery, before net noncash and other costs shown below | | | 552 |
| | 513 |
| | 50 |
| | 563 |
| |
By-product credits | | (156 | ) | | — |
| | — |
| | — |
| | (70 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 204 |
| | 204 |
| | — |
| | 204 |
| | 59 |
| | 59 |
| | — |
| | 59 |
| |
Royalty on metals | | 6 |
| | 5 |
| | 1 |
| | 6 |
| | 2 |
| | 2 |
| | — |
| | 2 |
| |
Net cash costs | | 1,483 |
| | 1,549 |
| | 124 |
| | 1,673 |
| | 543 |
| | 574 |
| | 50 |
| | 624 |
| |
DD&A | | 392 |
| | 365 |
| | 27 |
| | 392 |
| | 133 |
| | 123 |
| | 10 |
| | 133 |
| |
Noncash and other costs, net | | 234 |
| b | 217 |
| | 17 |
| | 234 |
| | 17 |
| | 17 |
| | — |
| | 17 |
| |
Total costs | | 2,109 |
| | 2,131 |
| | 168 |
| | 2,299 |
| | 693 |
| | 714 |
| | 60 |
| | 774 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 40 |
| | 40 |
| | — |
| | 40 |
| |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 13 |
| | 13 |
| | — |
| | 13 |
| |
Gross profit | | $ | 536 |
| | $ | 514 |
| | $ | 22 |
| | $ | 536 |
| | $ | 278 |
| | $ | 257 |
| | $ | 21 |
| | $ | 278 |
| |
| | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 923 |
| | 923 |
| | | | | | 312 |
| | 312 |
| | | | | |
| | | | | | | | | | | | | | | | | |
Gross profit per pound of copper: | Gross profit per pound of copper: | | | | | Gross profit per pound of copper: | | | | | |
| | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.82 |
| | $ | 2.82 |
| | | | | | $ | 3.07 |
| | $ | 3.07 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.55 |
| | 1.45 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 1.77 |
| | 1.65 |
| | | | | |
By-product credits | | (0.17 | ) | | — |
| | | | | | (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 | | 1.61 |
| | 1.68 |
| | | | | | 1.74 |
| | 1.84 |
| | | | | |
DD&A | | 0.42 |
| | 0.40 |
| | | | | | 0.43 |
| | 0.40 |
| | | | | |
Noncash and other costs, net | | 0.25 |
| b | 0.23 |
| | | | | | 0.05 |
| | 0.05 |
| | | | | |
Total unit costs | | 2.28 |
| | 2.31 |
| | | | | | 2.22 |
| | 2.29 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 0.04 |
| | 0.04 |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 0.04 |
| | 0.04 |
| | | | | |
Gross profit per pound | | $ | 0.58 |
| | $ | 0.55 |
| | | | | | $ | 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 | | $ | 2,795 |
| | $ | 1,463 |
| | $ | 392 |
| | | | $ | 1,039 |
| | $ | 563 |
| | $ | 133 |
| | | |
Treatment charges | | (204 | ) | | — |
| | — |
| | | | (59 | ) | | — |
| | — |
| | | |
Royalty on metals | | (6 | ) | | — |
| | — |
| | | | (2 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 234 |
| | — |
| | | | — |
| | 17 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 40 |
| | — |
| | — |
| | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 13 |
| | — |
| | — |
| | | |
Eliminations and other | | 1 |
| | (2 | ) | | — |
| | | | (1 | ) | | (2 | ) | | — |
| | | |
South America mining | | 2,626 |
| | 1,695 |
| | 392 |
| | | | 990 |
| | 578 |
| | 133 |
| | | |
Other miningc | — |
| 10,992 |
| | 8,126 |
| | 788 |
| | | |
Other miningb | | | 4,995 |
| | 3,253 |
| | 295 |
| | | |
Corporate, other & eliminations | — |
| (2,256 | ) | | (2,324 | ) | | 77 |
| | | | (817 | ) | | (916 | ) | | 14 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | | |
As reported in our consolidated financial statements | | | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| | | |
| | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 2.81.1 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. |
South America 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 | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 2,115 |
| | $ | 2,115 |
| | $ | 129 |
| | $ | 2,244 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1,199 |
| | 1,140 |
| | 88 |
| | 1,228 |
| |
By-product credits | | (100 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 230 |
| | 230 |
| | — |
| | 230 |
| |
Royalty on metals | | 5 |
| | 5 |
| | — |
| | 5 |
| |
Net cash costs | | 1,334 |
| | 1,375 |
| | 88 |
| | 1,463 |
| |
DD&A | | 401 |
| | 379 |
| | 22 |
| | 401 |
| |
Noncash and other costs, net | | 15 |
| | 14 |
| | 1 |
| | 15 |
| |
Total costs | | 1,750 |
| | 1,768 |
| | 111 |
| | 1,879 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 9 |
| | 9 |
| | — |
| | 9 |
| |
Gross profit | | $ | 374 |
| | $ | 356 |
| | $ | 18 |
| | $ | 374 |
| |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 973 |
| | 973 |
| | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.17 |
| | $ | 2.17 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.23 |
| | 1.17 |
| | | | | |
By-product credits | | (0.10 | ) | | — |
| | | | | |
Treatment charges | | 0.24 |
| | 0.24 |
| | | | | |
Royalty on metals | | — |
| | — |
| | | | | |
Unit net cash costs | | 1.37 |
| | 1.41 |
| | | | | |
DD&A | | 0.41 |
| | 0.39 |
| | | | | |
Noncash and other costs, net | | 0.02 |
| | 0.02 |
| | | | | |
Total unit costs | | 1.80 |
| | 1.82 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 0.01 |
| | 0.01 |
| | | | | |
Gross profit per pound | | $ | 0.38 |
| | $ | 0.36 |
| | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 2,244 |
| | $ | 1,228 |
| | $ | 401 |
| | | |
Treatment charges | | (230 | ) | | — |
| | — |
| | | |
Royalty on metals | | (5 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 15 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 9 |
| | — |
| | — |
| | | |
Eliminations and other | | 1 |
| | (3 | ) | | 1 |
| | | |
South America mining | | 2,019 |
| | 1,240 |
| | 402 |
| | | |
Other miningb | | 9,694 |
| | 7,735 |
|
| 771 |
| | | |
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 2.8 million ounces ($17.9916.38 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,segments, as presented in Note 10.9. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
|
| | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2019 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 1,584 |
| | $ | 1,584 |
| | $ | 204 |
| | $ | 1,788 |
| |
Site production and delivery, before net noncash and other costs shown below | | 1,053 |
| | 949 |
| | 129 |
| | 1,078 |
| |
By-product credits | | (179 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 108 |
| | 108 |
| | — |
| | 108 |
| |
Royalty on metals | | 3 |
| | 3 |
| | — |
| | 3 |
| |
Net cash costs | | 985 |
| | 1,060 |
| | 129 |
| | 1,189 |
| |
DD&A | | 233 |
| | 207 |
| | 26 |
| | 233 |
| |
Noncash and other costs, net | | 46 |
| | 45 |
| | 1 |
| | 46 |
| |
Total costs | | 1,264 |
| | 1,312 |
| | 156 |
| | 1,468 |
| |
Other revenue adjustments, primarily for pricing on prior period open sales | | 37 |
| | 37 |
| | — |
| | 37 |
| |
Gross profit | | $ | 357 |
| | $ | 309 |
| | $ | 48 |
| | $ | 357 |
| |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 577 |
| | 577 |
| | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.75 |
| | $ | 2.75 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.82 |
| | 1.64 |
| | | | | |
By-product credits | | (0.31 | ) | | — |
| | | | | |
Treatment charges | | 0.19 |
| | 0.19 |
| | | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | | |
Unit net cash costs | | 1.71 |
| | 1.84 |
| | | | | |
DD&A | | 0.40 |
| | 0.35 |
| | | | | |
Noncash and other costs, net | | 0.08 |
| | 0.08 |
| | | | | |
Total unit costs | | 2.19 |
| | 2.27 |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.06 |
| | 0.06 |
| | | | | |
Gross profit per pound | | $ | 0.62 |
| | $ | 0.54 |
| | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 1,788 |
| | $ | 1,078 |
| | $ | 233 |
| | | |
Treatment charges | | (108 | ) | | — |
| | — |
| | | |
Royalty on metals | | (3 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 46 |
| | — |
| | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 37 |
| | — |
| | — |
| | | |
Eliminations and other | | (2 | ) | | (4 | ) | | — |
| | | |
South America mining | | 1,712 |
| | 1,120 |
| | 233 |
| | | |
Other miningb | | 7,130 |
| | 6,198 |
| | 427 |
| | | |
Corporate, other & eliminations | | (1,504 | ) | | (1,340 | ) | | 39 |
| | | |
As reported in our consolidated financial statements | | $ | 7,338 |
| | $ | 5,978 |
| | $ | 699 |
| | | |
| | | | | | | | | |
| |
a. | Includes silver sales of 2.5 million ounces ($15.58 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 segments, as presented in Note 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 our 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 segments, 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, 2019 | | | | | | |
(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 |
| | $ | 412 |
| | $ | 412 |
| | $ | 250 |
| | $ | 8 |
| | $ | 670 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 364 |
| | 226 |
| | 134 |
| | 4 |
| | 364 |
| |
Site production and delivery, before net noncash and other costs shown below | | | 516 |
| | 317 |
| | 193 |
| | 6 |
| | 516 |
| |
Gold and silver credits | | (466 | ) | | — |
| | — |
| | — |
| | — |
| | (256 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 71 |
| | 44 |
| | 26 |
| | 1 |
| | 71 |
| | 40 |
| | 25 |
| | 14 |
| | 1 |
| | 40 |
| |
Export duties | | 21 |
| | 13 |
| | 8 |
| | — |
| | 21 |
| | 10 |
| | 6 |
| | 4 |
| | — |
| | 10 |
| |
Royalty on metals | | 43 |
| | 26 |
| | 17 |
| | — |
| | 43 |
| | 17 |
| | 12 |
| | 5 |
| | — |
| | 17 |
| |
Net cash costs | | 33 |
| | 309 |
| | 185 |
| | 5 |
| | 499 |
| | 327 |
| | 360 |
| | 216 |
| | 7 |
| | 583 |
| |
DD&A | | 136 |
| | 85 |
| | 50 |
| | 1 |
| | 136 |
| | 99 |
| | 61 |
| | 37 |
| | 1 |
| | 99 |
| |
Noncash and other costs, net | | 24 |
| b | 15 |
| | 9 |
| | — |
| | 24 |
| | 45 |
| b | 28 |
| | 17 |
| | — |
| | 45 |
| |
Total costs | | 193 |
| | 409 |
| | 244 |
| | 6 |
| | 659 |
| | 471 |
| | 449 |
| | 270 |
| | 8 |
| | 727 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 28 |
| | 28 |
| | 2 |
| | — |
| | 30 |
| |
PT Smelting intercompany loss | | (18 | ) | | (11 | ) | | (7 | ) | | — |
| | (18 | ) | |
Gross profit | | $ | 579 |
| | $ | 370 |
| | $ | 204 |
| | $ | 5 |
| | $ | 579 |
| |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (19 | ) | | (19 | ) | | (2 | ) | | — |
| | (21 | ) | |
PT Smelting intercompany profit | | | 7 |
| | 4 |
| | 3 |
| | — |
| | 7 |
| |
Gross loss | | | $ | (71 | ) | | $ | (52 | ) | | $ | (19 | ) | | $ | — |
| | $ | (71 | ) | |
| | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 258 |
| | 258 |
| | | | | | | | 151 |
| | 151 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 352 |
| | | | | | | | | | 185 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
Gross loss per pound of copper/per ounce of gold: | | Gross loss per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.95 |
| | $ | 2.95 |
| | $ | 1,290 |
| | | | | | $ | 2.71 |
| | $ | 2.71 |
| | $ | 1,350 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.41 |
| | 0.87 |
| | 383 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 3.40 |
| | 2.09 |
| | 1,041 |
| | | | | |
Gold and silver credits | | (1.80 | ) | | — |
| | — |
| | | | | | (1.69 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.27 |
| | 0.17 |
| | 74 |
| | | | | | 0.26 |
| | 0.16 |
| | 80 |
| | | | | |
Export duties | | 0.08 |
| | 0.05 |
| | 22 |
| | | | | | 0.07 |
| | 0.04 |
| | 20 |
| | | | | |
Royalty on metals | | 0.17 |
| | 0.10 |
| | 48 |
| | | | | | 0.11 |
| | 0.08 |
| | 28 |
| | | | | |
Unit net cash costs | | 0.13 |
| | 1.19 |
| | 527 |
| | | | | | 2.15 |
| | 2.37 |
| | 1,169 |
| | | | | |
DD&A | | 0.53 |
| | 0.33 |
| | 143 |
| | | | | | 0.65 |
| | 0.40 |
| | 199 |
| | | | | |
Noncash and other costs, net | | 0.09 |
| b | 0.06 |
| | 25 |
| | | | | | 0.30 |
| b | 0.18 |
| | 91 |
| | | | | |
Total unit costs | | 0.75 |
| | 1.58 |
| | 695 |
| | | | | | 3.10 |
| | 2.95 |
| | 1,459 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 0.11 |
| | 0.11 |
| | 4 |
| | | | | |
PT Smelting intercompany loss | | (0.07 | ) | | (0.04 | ) | | (19 | ) | | | | | |
Gross profit per pound/ounce | | $ | 2.24 |
| | $ | 1.44 |
| | $ | 580 |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (0.13 | ) | | (0.13 | ) | | (7 | ) | | | | | |
PT Smelting intercompany profit | | | 0.06 |
| | 0.03 |
| | 16 |
| | | | | |
Gross loss per pound/ounce | | | $ | (0.46 | ) | | $ | (0.34 | ) | | $ | (100 | ) | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
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 |
| | | | | | $ | 670 |
| | $ | 516 |
| | $ | 99 |
| | | | | |
Treatment charges | | (71 | ) | | — |
| | — |
| | | | | | (40 | ) | | — |
| | — |
| | | | | |
Export duties | | (21 | ) | | — |
| | — |
| | | | | | (10 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (43 | ) | | — |
| | — |
| | | | | | (17 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 24 |
| | — |
| | | | | | — |
| | 45 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 30 |
| | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 18 |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (21 | ) | | — |
| | — |
| | | | | |
PT Smelting intercompany profit | | | — |
| | (7 | ) | | — |
| | | | | |
Indonesia mining | | 1,121 |
| | 406 |
| | 136 |
| | | | | | 582 |
| | 554 |
| | 99 |
| | | | | |
Other miningc | | 3,893 |
| | 3,149 |
| | 259 |
| | | | | | 3,711 |
| | 3,170 |
| | 234 |
| | | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | | | (747 | ) | | (722 | ) | | 19 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | | |
As reported in our consolidated financial statements | | | $ | 3,546 |
| | $ | 3,002 |
| | $ | 352 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 666 thousand0.5 million ounces ($16.6414.57 per ounce average realized price). |
| |
b. | Includes $9charges totaling $28 million ($0.030.18 per pound of copper) associated with adjustments to the settlement of costs charged directlythe historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. Refer to production and delivery costs as a result of workforce reductions.Note 8. |
| |
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,segments, as presented in Note 10.9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Three Months Ended June 30, 2018 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 965 |
| | $ | 965 |
| | $ | 855 |
| | $ | 17 |
| | $ | 1,837 |
| |
Site production and delivery, before net noncash and other credits shown below | | 420 |
| | 221 |
| | 195 |
| | 4 |
| | 420 |
| |
Gold and silver credits | | (871 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 82 |
| | 43 |
| | 38 |
| | 1 |
| | 82 |
| |
Export duties | | 55 |
| | 29 |
| | 26 |
| | — |
| | 55 |
| |
Royalty on metals | | 71 |
| | 36 |
| | 34 |
| | 1 |
| | 71 |
| |
Net cash (credits) costs | | (243 | ) | | 329 |
| | 293 |
| | 6 |
| | 628 |
| |
DD&A | | 172 |
| | 90 |
| | 80 |
| | 2 |
| | 172 |
| |
Noncash and other credits, net | | (3 | ) | | (1 | ) | | (2 | ) | | — |
| | (3 | ) | |
Total (credits) costs | | (74 | ) | | 418 |
| | 371 |
| | 8 |
| | 797 |
| |
Other revenue adjustments, primarily for pricing on prior period open sales | | 12 |
| | 12 |
| | (2 | ) | | 1 |
| | 11 |
| |
PT Smelting intercompany loss | | (8 | ) | | (4 | ) | | (4 | ) | | — |
| | (8 | ) | |
Gross profit | | $ | 1,043 |
| | $ | 555 |
| | $ | 478 |
| | $ | 10 |
| | $ | 1,043 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 316 |
| | 316 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 671 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 3.05 |
| | $ | 3.05 |
| | $ | 1,274 |
| | | | | |
Site production and delivery, before net noncash and other credits shown below | | 1.33 |
| | 0.70 |
| | 291 |
| | | | | |
Gold and silver credits | | (2.76 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.26 |
| | 0.14 |
| | 57 |
| | | | | |
Export duties | | 0.18 |
| | 0.09 |
| | 38 |
| | | | | |
Royalty on metals | | 0.22 |
| | 0.11 |
| | 51 |
| | | | | |
Unit net cash (credits) costs | | (0.77 | ) | | 1.04 |
| | 437 |
| | | | | |
DD&A | | 0.54 |
| | 0.28 |
| | 119 |
| | | | | |
Noncash and other credits, net | | (0.01 | ) | | — |
| | (2 | ) | | | | | |
Total unit (credits) costs | | (0.24 | ) | | 1.32 |
| | 554 |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.04 |
| | 0.04 |
| | (2 | ) | | | | | |
PT Smelting intercompany loss | | (0.03 | ) | | (0.01 | ) | | (6 | ) | | | | | |
Gross profit per pound/ounce | | $ | 3.30 |
| | $ | 1.76 |
| | $ | 712 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,837 |
| | $ | 420 |
| | $ | 172 |
| | | | | |
Treatment charges | | (82 | ) | | — |
| | — |
| | | | | |
Export duties | | (55 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (71 | ) | | — |
| | — |
| | | | | |
Noncash and other credits, net | | — |
| | (3 | ) | | — |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 11 |
| | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 8 |
| | — |
| | | | | |
Indonesia mining | | 1,640 |
| | 425 |
| | 172 |
| | | | | |
Other miningb | | 4,345 |
| | 3,406 |
|
| 256 |
| | | | | |
Corporate, other & eliminations | | (817 | ) | | (916 | ) | | 14 |
| | | | | |
As reported in our consolidated financial statements | | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 1.1 million ounces ($15.89 per ounce average realized price). |
| |
b. | Represents the combined total for our other segments, as presented in Note 9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | |
Six Months Ended June 30, 2019 | | | | | | |
(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 | | $ | 729 |
| | $ | 729 |
| | $ | 408 |
| | $ | 18 |
| | $ | 1,155 |
| | | $ | 900 |
| | $ | 900 |
| | $ | 552 |
| | $ | 17 |
| | $ | 1,469 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | | |
and other costs shown below | | 453 |
| | 286 |
| | 160 |
| | 7 |
| | 453 |
| | |
Site production and delivery, before net noncash and other costs shown below | | | 1,054 |
| | 646 |
| | 396 |
| | 12 |
| | 1,054 |
| |
Gold and silver credits | | (427 | ) | | — |
| | — |
| | — |
| | — |
| | | (571 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 90 |
| | 57 |
| | 32 |
| | 1 |
| | 90 |
| | | 91 |
| | 56 |
| | 34 |
| | 1 |
| | 91 |
| |
Export duties | | 34 |
| | 21 |
| | 12 |
| | 1 |
| | 34 |
| | | 27 |
| | 17 |
| | 10 |
| | — |
| | 27 |
| |
Royalty on metals | | 40 |
| | 24 |
| | 15 |
| | 1 |
| | 40 |
| | | 45 |
| | 28 |
| | 16 |
| | 1 |
| | 45 |
| |
Net cash costs | | 190 |
| | 388 |
| | 219 |
| | 10 |
| | 617 |
| | | 646 |
| | 747 |
| | 456 |
| | 14 |
| | 1,217 |
| |
DD&A | | 110 |
| | 69 |
| | 39 |
| | 2 |
| | 110 |
| | | 204 |
| | 125 |
| | 77 |
| | 2 |
| | 204 |
| |
Noncash and other costs, net | | 16 |
| b | 11 |
| | 5 |
| | — |
| | 16 |
| | | 48 |
| b | 29 |
| | 18 |
| | 1 |
| | 48 |
| |
Total costs | | 316 |
| | 468 |
| | 263 |
| | 12 |
| | 743 |
| | | 898 |
| | 901 |
| | 551 |
| | 17 |
| | 1,469 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | | |
prior period open sales | | (6 | ) | | (6 | ) | | — |
| | 1 |
| | (5 | ) | | |
PT Smelting intercompany loss | | (9 | ) | | (6 | ) | | (3 | ) | | — |
| | (9 | ) | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 18 |
| | 18 |
| | 2 |
| | — |
| | 20 |
| |
PT Smelting intercompany profit | | | 11 |
| | 7 |
| | 4 |
| | — |
| | 11 |
| |
Gross profit | | $ | 398 |
| | $ | 249 |
| | $ | 142 |
| | $ | 7 |
| | $ | 398 |
| | | $ | 31 |
| | $ | 24 |
| | $ | 7 |
| | $ | — |
| | $ | 31 |
| |
| | | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 332 |
| | 332 |
| | | | | | | | | 325 |
| | 325 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 307 |
| | | | | | | | | | | 420 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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 | | $ | 2.20 |
| | $ | 2.20 |
| | $ | 1,327 |
| | | | | | | $ | 2.77 |
| | $ | 2.77 |
| | $ | 1,314 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | | |
and other costs shown below | | 1.37 |
| | 0.86 |
| | 520 |
| | | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 3.24 |
| | 1.99 |
| | 944 |
| | | | | |
Gold and silver credits | | (1.29 | ) | | — |
| | — |
| | | | | | | (1.75 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.27 |
| | 0.17 |
| | 104 |
| | | | | | | 0.28 |
| | 0.17 |
| | 81 |
| | | | | |
Export duties | | 0.10 |
| | 0.07 |
| | 39 |
| | | | | | | 0.08 |
| | 0.05 |
| | 24 |
| | | | | |
Royalty on metals | | 0.12 |
| | 0.07 |
| | 50 |
| | | | | | | 0.14 |
| | 0.09 |
| | 38 |
| | | | | |
Unit net cash costs | | 0.57 |
| | 1.17 |
| | 713 |
| | | | | | | 1.99 |
| | 2.30 |
| | 1,087 |
| | | | | |
DD&A | | 0.33 |
| | 0.21 |
| | 125 |
| | | | | | | 0.63 |
| | 0.38 |
| | 183 |
| | | | | |
Noncash and other costs, net | | 0.05 |
| b | 0.03 |
| | 19 |
| | | | | | | 0.14 |
| b | 0.09 |
| | 43 |
| | | | | |
Total unit costs | | 0.95 |
| | 1.41 |
| | 857 |
| | | | | | | 2.76 |
| | 2.77 |
| | 1,313 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | | |
prior period open sales | | (0.02 | ) | | (0.02 | ) | | 1 |
| | | | | | |
PT Smelting intercompany loss | | (0.03 | ) | | (0.02 | ) | | (10 | ) | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 0.05 |
| | 0.05 |
| | 5 |
| | | | | |
PT Smelting intercompany profit | | | 0.04 |
| | 0.02 |
| | 10 |
| | | | | |
Gross profit per pound/ounce | | $ | 1.20 |
| | $ | 0.75 |
| | $ | 461 |
| | | | | | | $ | 0.10 |
| | $ | 0.07 |
| | $ | 16 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | | | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,155 |
| | $ | 453 |
| | $ | 110 |
| | | | | | | $ | 1,469 |
| | $ | 1,054 |
| | $ | 204 |
| | | | | |
Treatment charges | | (90 | ) | | — |
| | — |
| | | | | | | (72 | ) | | 19 |
| | — |
| | | | | |
Export duties | | (34 | ) | | — |
| | — |
| | | | | | | (27 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (40 | ) | | — |
| | — |
| | | | | | | (45 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 16 |
| | — |
| | | | | | | — |
| | 48 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | | |
prior period open sales | | (5 | ) | | — |
| | — |
| | | | | | |
PT Smelting intercompany loss | | — |
| | 9 |
| | — |
| | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | 20 |
| | — |
| | — |
| | | | | |
PT Smelting intercompany profit | | | — |
| | (11 | ) | | — |
| | | | | |
Indonesia mining | | 986 |
| | 478 |
| | 110 |
| | | | | | | 1,345 |
| | 1,110 |
| | 204 |
| | | | | |
Other miningc | | 3,183 |
| | 2,567 |
|
| 287 |
| | | | | | | 7,497 |
| | 6,208 |
| | 456 |
| | | | | |
Corporate, other & eliminations | | (292 | ) | | (516 | ) | | 246 |
| | | | | | | (1,504 | ) | | (1,340 | ) | | 39 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | | | |
As reported in our consolidated financial statements | | | $ | 7,338 |
| | $ | 5,978 |
| | $ | 699 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 928 thousand1.1 million ounces ($18.9714.66 per ounce average realized price). |
| |
b. | Includes asset retirement charges of $17totaling $28 million ($0.050.09 per pound of copper). associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. Refer to Note 8. |
| |
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,segments, as presented in Note 10.9. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs
| | | | | | | | | | | |
Nine Months Ended September 30, 2017 | | | | | |
Six 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 | | $ | 1,772 |
| | $ | 1,772 |
| | $ | 1,206 |
| | $ | 32 |
| | $ | 3,010 |
| | $ | 1,949 |
| | $ | 1,949 |
| | $ | 1,644 |
| | $ | 36 |
| | $ | 3,629 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1,076 |
| | 634 |
| | 431 |
| | 11 |
| | 1,076 |
| |
Site production and delivery, before net noncash and other costs shown below | | | 853 |
| | 458 |
| | 387 |
| | 8 |
| | 853 |
| |
Gold and silver credits | | (1,247 | ) | | — |
| | — |
| | — |
| | — |
| | (1,697 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 170 |
| | 100 |
| | 68 |
| | 2 |
| | 170 |
| | 160 |
| | 86 |
| | 72 |
| | 2 |
| | 160 |
| |
Export duties | | 62 |
| | 36 |
| | 25 |
| | 1 |
| | 62 |
| | 101 |
| | 54 |
| | 46 |
| | 1 |
| | 101 |
| |
Royalty on metals | | 106 |
| | 60 |
| | 45 |
| | 1 |
| | 106 |
| | 138 |
| | 73 |
| | 64 |
| | 1 |
| | 138 |
| |
Net cash costs | | 167 |
| | 830 |
| | 569 |
| | 15 |
| | 1,414 |
| |
Net cash (credits) costs | | | (445 | ) | | 671 |
| | 569 |
| | 12 |
| | 1,252 |
| |
DD&A | | 372 |
| | 219 |
| | 149 |
| | 4 |
| | 372 |
| | 353 |
| | 189 |
| | 160 |
| | 4 |
| | 353 |
| |
Noncash and other costs, net | | 140 |
| b | 82 |
| | 56 |
| | 2 |
| | 140 |
| | 12 |
| | 7 |
| | 5 |
| | — |
| | 12 |
| |
Total costs | | 679 |
| | 1,131 |
| | 774 |
| | 21 |
| | 1,926 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 39 |
| | 39 |
| | 9 |
| | — |
| | 48 |
| |
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 | ) | | (10 | ) | | (7 | ) | | — |
| | (17 | ) | | (17 | ) | | (9 | ) | | (8 | ) | | — |
| | (17 | ) | |
Gross profit | | $ | 1,115 |
| | $ | 670 |
| | $ | 434 |
| | $ | 11 |
| | $ | 1,115 |
| | $ | 1,978 |
| | $ | 1,039 |
| | $ | 919 |
| | $ | 20 |
| | $ | 1,978 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 630 |
| | 630 |
| | | | | | | | 635 |
| | 635 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 956 |
| | | | | | | | | | 1,274 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | |
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 | | $ | 2.81 |
| | $ | 2.81 |
| | $ | 1,261 |
| | | | | | $ | 3.07 |
| | $ | 3.07 |
| | $ | 1,291 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.71 |
| | 1.01 |
| | 451 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | | 1.34 |
| | 0.72 |
| | 304 |
| | | | | |
Gold and silver credits | | (1.98 | ) | | — |
| | — |
| | | | | | (2.67 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.27 |
| | 0.16 |
| | 71 |
| | | | | | 0.25 |
| | 0.14 |
| | 57 |
| | | | | |
Export duties | | 0.10 |
| | 0.06 |
| | 26 |
| | | | | | 0.16 |
| | 0.09 |
| | 36 |
| | | | | |
Royalty on metals | | 0.16 |
| | 0.09 |
| | 47 |
| | | | | | 0.22 |
| | 0.11 |
| | 50 |
| | | | | |
Unit net cash costs | | 0.26 |
| | 1.32 |
| | 595 |
| | | | | |
Unit net cash (credits) costs | | | (0.70 | ) | | 1.06 |
| | 447 |
| | | | | |
DD&A | | 0.59 |
| | 0.35 |
| | 156 |
| | | | | | 0.55 |
| | 0.30 |
| | 125 |
| | | | | |
Noncash and other costs, net | | 0.22 |
| b | 0.13 |
| | 58 |
| | | | | | 0.02 |
| | 0.01 |
| | 4 |
| | | | | |
Total unit costs | | 1.07 |
| | 1.80 |
| | 809 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 0.06 |
| | 0.06 |
| | 9 |
| | | | | |
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 | | (0.03 | ) | | (0.01 | ) | | (7 | ) | | | | | | (0.04 | ) | | (0.01 | ) | | (7 | ) | | | | | |
Gross profit per pound/ounce | | $ | 1.77 |
| | $ | 1.06 |
| | $ | 454 |
| | | | | | $ | 3.11 |
| | $ | 1.64 |
| | $ | 721 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,010 |
| | $ | 1,076 |
| | $ | 372 |
| | | | | | $ | 3,629 |
| | $ | 853 |
| | $ | 353 |
| | | | | |
Treatment charges | | (170 | ) | | — |
| | — |
| | | | | | (160 | ) | | — |
| | — |
| | | | | |
Export duties | | (62 | ) | | — |
| | — |
| | | | | | (101 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (106 | ) | | — |
| | — |
| | | | | | (138 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 140 |
| | — |
| | | | | | — |
| | 12 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 48 |
| | — |
| | — |
| | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | | (17 | ) | | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 17 |
| | — |
| | | | | | — |
| | 17 |
| | — |
| | | | | |
Indonesia mining | | 2,720 |
| | 1,233 |
| | 372 |
| | | | | | 3,213 |
| | 882 |
| | 353 |
| | | | | |
Other miningc | | 10,898 |
| | 8,588 |
| | 808 |
| | | | | |
Other miningb | | | 8,597 |
| | 6,751 |
| | 505 |
| | | | | |
Corporate, other & eliminations | | (2,256 | ) | | (2,324 | ) | | 77 |
| | | | | | (1,774 | ) | | (1,910 | ) | | 35 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | | | | |
As reported in our consolidated financial statements | | | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| |
a. | Includes silver sales of 1.92.3 million ounces ($16.7015.93 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,segments, as presented in Note 10.9. |
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. |
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 | | | | 2019 | | 2018 | | | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 72 |
| | $ | 51 |
| | | | $ | 117 |
| | $ | 119 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 56 |
| | 53 |
| | | | 76 |
| | 71 |
| | | |
Treatment charges and other | 7 |
| | 5 |
| | | | 8 |
| | 8 |
| | | |
Net cash costs | 63 |
| | 58 |
| | | | 84 |
| | 79 |
| | | |
DD&A | 20 |
| | 15 |
| | | | 18 |
| | 21 |
| | | |
Noncash and other costs, net | 2 |
| | 4 |
| | | | 2 |
| | — |
| | | |
Total costs | 85 |
| | 77 |
| | | | 104 |
| | 100 |
| | | |
Gross loss | $ | (13 | ) | | $ | (26 | ) | | | | |
Gross profit | | $ | 13 |
| | $ | 19 |
| | | |
| | | | | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 8 |
| | 5 |
| | | | 9 |
| | 9 |
| | | |
| | | | | | | | | | | | |
Gross loss per pound of molybdenum: | | |
Gross profit per pound of molybdenum: | | Gross profit per pound of molybdenum: | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 9.02 |
| | $ | 9.08 |
| | | | $ | 12.74 |
| | $ | 12.72 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 7.05 |
| | 9.42 |
| | | | 8.31 |
| | 7.51 |
| | | |
Treatment charges and other | 0.85 |
| | 0.86 |
| | | | 0.84 |
| | 0.85 |
| | | |
Unit net cash costs | 7.90 |
| | 10.28 |
| | | | 9.15 |
| | 8.36 |
| | | |
DD&A | 2.44 |
| | 2.63 |
| | | | 2.07 |
| | 2.24 |
| | | |
Noncash and other costs, net | 0.28 |
| | 0.77 |
| | | | 0.15 |
| | 0.05 |
| | | |
Total unit costs | 10.62 |
| | 13.68 |
| | | | 11.37 |
| | 10.65 |
| | | |
Gross loss per pound | $ | (1.60 | ) | | $ | (4.60 | ) | | | | |
Gross profit per pound | | $ | 1.37 |
| | $ | 2.07 |
| | | |
| | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Production | | | | | | Production | | | |
Three Months Ended September 30, 2017 | Revenues | | and Delivery | | DD&A | | |
Three Months Ended June 30, 2019 | | Revenues | | and Delivery | | DD&A | |
Totals presented above | $ | 72 |
| | $ | 56 |
| | $ | 20 |
| | $ | 117 |
| | $ | 76 |
| | $ | 18 |
| |
Treatment charges and other | (7 | ) | | — |
| | — |
| | (8 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 2 |
| | — |
| | — |
| | 2 |
| | — |
| |
Molybdenum mines | 65 |
| | 58 |
| | 20 |
| | 109 |
| | 78 |
| | 18 |
| |
Other miningb | 4,949 |
| | 3,497 |
| | 375 |
| | 4,184 |
| | 3,646 |
| | 315 |
| |
Corporate, other & eliminations | (704 | ) | | (753 | ) | | 23 |
| | (747 | ) | | (722 | ) | | 19 |
| |
As reported in FCX’s consolidated financial statements | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | |
As reported in our consolidated financial statements | | $ | 3,546 |
| | $ | 3,002 |
| | $ | 352 |
| |
| | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | |
Three Months Ended June 30, 2018 | | | | | | | |
Totals presented above | $ | 51 |
| | $ | 53 |
| | $ | 15 |
| | $ | 119 |
| | $ | 71 |
| | $ | 21 |
| |
Treatment charges and other | (5 | ) | | — |
| | — |
| | (8 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| |
Molybdenum mines | 46 |
| | 57 |
| | 15 |
| | 111 |
| | 71 |
| | 21 |
| |
Other miningb | 4,123 |
| | 2,988 |
| | 382 |
| | 5,874 |
| | 3,760 |
| | 407 |
| |
Corporate, other & eliminations | (292 | ) | | (516 | ) | | 246 |
| | (817 | ) | | (916 | ) | | 14 |
| |
As reported in FCX’s consolidated financial statements | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | |
As reported in our consolidated financial statements | | $ | 5,168 |
| | $ | 2,915 |
| | $ | 442 |
| |
| | | | | | | | | | | | |
| |
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,segments, 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 | | | | 2019 | | 2018 | | | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 220 |
| | $ | 153 |
| | | | $ | 215 |
| | $ | 221 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 164 |
| | 146 |
| | | | 146 |
| | 136 |
| | | |
Treatment charges and other | 21 |
| | 17 |
| | | | 15 |
| | 15 |
| | | |
Net cash costs | 185 |
| | 163 |
| | | | 161 |
| | 151 |
| | | |
DD&A | 58 |
| | 51 |
| | | | 34 |
| | 40 |
| | | |
Noncash and other costs, net | 5 |
| | 13 |
| | | | 3 |
| | 2 |
| | | |
Total costs | 248 |
| | 227 |
| | | | 198 |
| | 193 |
| | | |
Gross loss | $ | (28 | ) | | $ | (74 | ) | | | | |
Gross profit | | $ | 17 |
| | $ | 28 |
| | | |
| | | | | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 24 |
| | 19 |
| | | | 17 |
| | 18 |
| | | |
| | | | | | | | | | | | |
Gross loss per pound of molybdenum: | | |
Gross profit per pound of molybdenum: | | Gross profit per pound of molybdenum: | |
| | | | | | | | | | | | |
Revenues, excluding adjustmentsa | $ | 9.05 |
| | $ | 7.94 |
| | | | $ | 12.63 |
| | $ | 12.38 |
| | | |
Site production and delivery, before net noncash and other costs shown below | 6.75 |
| | 7.53 |
| | | | 8.60 |
| | 7.61 |
| | | |
Treatment charges and other | 0.85 |
| | 0.86 |
| | | | 0.85 |
| | 0.85 |
| | | |
Unit net cash costs | 7.60 |
| | 8.39 |
| | | | 9.45 |
| | 8.46 |
| | | |
DD&A | 2.38 |
| | 2.65 |
| | | | 2.04 |
| | 2.24 |
| | | |
Noncash and other costs, net | 0.23 |
| | 0.72 |
| | | | 0.15 |
| | 0.10 |
| | | |
Total unit costs | 10.21 |
| | 11.76 |
| | | | 11.64 |
| | 10.80 |
| | | |
Gross loss per pound | $ | (1.16 | ) | | $ | (3.82 | ) | | | | |
Gross profit per pound | | $ | 0.99 |
| | $ | 1.58 |
| | | |
| | | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Production | | | | | | Production | | | |
Nine Months Ended September 30, 2017 | Revenues | | and Delivery | | DD&A | | |
Six Months Ended June 30, 2019 | | Revenues | | and Delivery | | DD&A | |
Totals presented above | $ | 220 |
| | $ | 164 |
| | $ | 58 |
| | $ | 215 |
| | $ | 146 |
| | $ | 34 |
| |
Treatment charges and other | (21 | ) | | — |
| | — |
| | (15 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 5 |
| | — |
| | — |
| | 3 |
| | — |
| |
Molybdenum mines | 199 |
| | 169 |
| | 58 |
| | 200 |
| | 149 |
| | 34 |
| |
Other miningb | 13,419 |
| | 9,652 |
| | 1,122 |
| | 8,642 |
| | 7,169 |
| | 626 |
| |
Corporate, other & eliminations | (2,256 | ) | | (2,324 | ) | | 77 |
| | (1,504 | ) | | (1,340 | ) | | 39 |
| |
As reported in FCX’s consolidated financial statements | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | |
As reported in our consolidated financial statements | | $ | 7,338 |
| | $ | 5,978 |
| | $ | 699 |
| |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | |
Six Months Ended June 30, 2018 | | | | | | | |
Totals presented above | $ | 153 |
| | $ | 146 |
| | $ | 51 |
| | $ | 221 |
| | $ | 136 |
| | $ | 40 |
| |
Treatment charges and other | (17 | ) | | — |
| | — |
| | (15 | ) | | — |
| | — |
| |
Noncash and other costs, net | — |
| | 13 |
| | — |
| | — |
| | 2 |
| | — |
| |
Molybdenum mines | 136 |
| | 159 |
| | 51 |
| | 206 |
| | 138 |
| | 40 |
| |
Other miningb | 11,577 |
| | 8,816 |
| | 1,122 |
| | 11,604 |
| | 7,495 |
| | 818 |
| |
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 |
| | |
As reported in our consolidated financial statements | | $ | 10,036 |
| | $ | 5,723 |
| | $ | 893 |
| |
| | | | | | | | | | | | |
| |
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,segments, 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,rates; production and sales volumes,volumes; unit net cash costs,costs; operating cash flows; capital expenditures; our expectations regarding our share of PT-FI’s net (loss) income and future cash flows capital expenditures,through 2022; PT-FI’s development, financing, construction and completion of a new smelter in Indonesia; PT-FI’s compliance with environmental standards under the framework established by Indonesia’s Ministry of Environment and Forestry; exploration efforts and results,results; development and production activities, rates and costs, liquidity,costs; liquidity; tax rates,rates; export quotas and duties; the impact of copper, gold and molybdenum price changes,changes; the impact of deferred intercompany profits on earnings,earnings; reserve estimates,estimates; consummation of the pending Freeport Cobalt transaction; and 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, expected, 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, but are not limited to, supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; changes in mine plans; production rates; potential effectstiming of cost and capital expenditure reductions and production curtailments on financialshipments; results and cash flow;of feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; satisfaction of customary closing conditions, including receipt of regulatory approvals to consummate the outcome of negotiations with the Indonesian government regarding PT-FI’s long-term operating rights;pending Freeport Cobalt transaction; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesian government’s approval of an increase in PT-FI's export quota for the current export period ending March 8, 2020, and extension of PT-FI's export license after March 8, 2020; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI’s IUPK to extend mining rights from 2031 through 2041; 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 and social risks; labor relations; weather- and climate-related risks; environmental risks; litigation results (including the final disposition of the unfavorable Indonesia Tax Court ruling relating to surface water taxes and the outcome of Cerro Verde’s royalty dispute with the Peruvian national tax authority);results; cybersecurity incidents; and other factors described in more detail in Part I, Item 1A. “Risk Factors” of our annual report on2018 Form 10-K for the year ended December 31, 2016, 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, 2017.10-K.
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.
| |
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, 2017.2019. For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Items 7. and 7A. of our annual report on2018 Form 10-K for the year ended December 31, 2016.10-K. 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;2019; 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, 2017.2019.
| |
Item 4. | Controls and Procedures. |
| |
(a) | Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 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, 2017.2019. |
| |
(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, 2017,2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
| |
Part II. | OTHER INFORMATION |
| |
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.issues. We are also involved from time to timeperiodically in other reviews, inquiries, investigations and other proceedings initiated by or involving 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 legal proceeding reported in Note 9 of this quarterly report on Form 10-Q for the period ended September 30, 2017, and in Part I, Item 3. “Legal Proceedings” and Note 12 of our annual report on2018 Form 10-K, for the year ended December 31, 2016, as updated in Note 9 in8 of our quarterly reports on Form 10-Q for the quarters ended March 31, 2017,2019 and June 30, 2017,2019, will have a material adverse effect on our financial condition; although individual or cumulative 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.
There have been no material changes to our risk factors previously disclosed in Part I, Item 1A. “Risk Factors” of our annual report2018 Form 10-K. For additional information on Form 10-K for the year ended December 31, 2016, except as disclosed inrisk factors, refer to Part II,I, Item 1A. “Risk Factors” of our quarterly report on2018 Form 10-Q for the quarter ended March 31, 2017, which provided as follows:10-K.
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.
| |
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, 2017.2019.
There were no shares of common stock purchased by us during the three months ended SeptemberJune 30, 2017.2019. 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, 2017,2019, there were 23.7 million shares that could still be purchased under the program.
| |
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.
|
| | | | | |
| | Filed | |
Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| PTFI Divestment Agreement dated as of September 27, 2018 among FCX, International Support LLC, PT Freeport Indonesia, PT Indocopper Investama and PT Indonesia Asahan Aluminium (Persero). (*) | | 10-Q | 001-11307-01 | 11/9/2018 |
| Supplemental and Amendment Agreement to the PT-FI Divestment Agreement, dated December 21, 2018, among FCX, PT Freeport Indonesia, PT Indonesia Papua Metal Dan Mineral (f/k/a PT Indocopper Investama), PT Indonesia Asahan Aluminium (Persero) and International Support LLC. | | 10-K | 001-11307-01 | 2/15/2019 |
| 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 Trustee (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 |
| | | | | |
|
| | | | | |
| | 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 FCX, 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,guarantor, and Wells FargoU.S. Bank N.A.,National Association, as Trustee (relating to the 6.5%3.875% Senior Notes due 20202023 and the 6.875%5.450% Senior Notes due 2023)2043). | | 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 |
|
| | | | | |
| | Filed | |
Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| 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 |
| 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 |
|
| | | | | |
| | Filed | | | |
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 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 6.125% Senior Notes due 2019. | | 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 | 12/13/2016 |
| Form of Certificate representing shares of common stock, par value $0.10. | | 8-A/A | 001-11307-01 | 8/10/2015 |
| First Amendment dated as of May 2, 2019 to the Revolving Credit Agreement dated as of April 20, 2018, among FCX, PT Freeport Indonesia, Freeport-McMoRan Oil & Gas LLC, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and each of the lenders and issuing banks party thereto. | | 8-K | 001-11307-01 | 5/2/2019 |
| 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 | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| | | | | |
| | | |
| | Filed | |
Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Mine Safety and Health Administration Safety Data. | X | | | |
101.INS | XBRL Instance Document.Document- the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | | | |
101.SCH | Inline XBRL Taxonomy Extension Schema. | X | | | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | X | | | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. | X | | | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. | X | | | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase. | X | | | |
* Indicates management contract
(*) The registrant agrees to furnish supplementally to the Securities and Exchange Commission (SEC) a copy of any omitted schedule or compensatory plan or arrangement.exhibit upon the request of the SEC in accordance with Item 601(a)(5) of Regulation S-K.
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.
|
| | |
| FREEPORT-McMoRan INC.Freeport-McMoRan Inc. |
| | |
| 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 6, 2019