Freeport-McMoRan Reports Fourth-Quarter and Year Ended December 31, 2017 Results
PHOENIX–(BUSINESS WIRE)–Freeport-McMoRan Inc. (NYSE: FCX):
-
Net income attributable to common stock totaled $1.0 billion,
$0.71 per share, for fourth-quarter 2017. After adjusting for net
gains of $291 million, $0.20 per share, fourth-quarter 2017 adjusted
net income attributable to common stock totaled $750 million, $0.51
per share. -
Consolidated sales totaled 1.0 billion pounds of copper, 593
thousand ounces of gold and 24 million pounds of molybdenum for
fourth-quarter 2017 and 3.7 billion pounds of copper, 1.6 million
ounces of gold and 95 million pounds of molybdenum for the year 2017. -
Consolidated sales for the year 2018 are expected to
approximate 3.9 billion pounds of copper, 2.4 million ounces of gold
and 91 million pounds of molybdenum, including 1.0 billion pounds of
copper, 675 thousand ounces of gold and 24 million pounds of
molybdenum for first-quarter 2018. -
Average realized prices for fourth-quarter 2017 were $3.21 per
pound for copper, $1,285 per ounce for gold and $9.79 per pound for
molybdenum. -
Average unit net cash costs for fourth-quarter 2017 were $1.04
per pound of copper and $1.20 per pound for the year 2017. Unit net
cash costs are expected to average $0.97 per pound of copper for the
year 2018. -
Operating cash flows totaled $1.7 billion (including $0.2
billion in working capital sources and timing of other tax payments)
for fourth-quarter 2017 and $4.7 billion (including $0.6 billion in
working capital sources and timing of other tax payments) for the year
2017. Based on current sales volume and cost estimates, and assuming
average prices of $3.15 per pound for copper, $1,300 per ounce for
gold and $10.00 per pound for molybdenum, operating cash flows for the
year 2018 are expected to exceed $5.8 billion (including $0.3 billion
in working capital sources and timing of other tax payments). -
Capital expenditures for fourth-quarter 2017 totaled $390
million (including approximately $250 million for major mining
projects) and $1.4 billion for the year 2017 (including $0.9 billion
for major mining projects). Capital expenditures for the year 2018 are
expected to approximate $2.1 billion, including $1.2 billion for major
mining projects primarily associated with underground development
activities in the Grasberg minerals district and development of the
Lone Star oxide project. -
During fourth-quarter 2017, FCX repaid $1.7 billion in debt,
including the redemption of $617 million of senior notes due 2020 and
the repurchase of $74 million of senior notes due 2018 in open-market
transactions. -
At December 31, 2017, consolidated cash totaled $4.4
billion and consolidated debt totaled $13.1 billion. FCX
had no borrowings and $3.5 billion available under its revolving
credit facility at December 31, 2017.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income attributable to
common stock of $1.0 billion ($0.71 per share) for fourth-quarter 2017
and $1.8 billion ($1.25 per share) for the year 2017, compared with net
income attributable to common stock of $292 million ($0.21 per share)
for fourth-quarter 2016 and a net loss attributable to common stock of
$4.2 billion ($3.16 per share) for the year 2016. After adjusting for
net gains of $291 million ($0.20 per share) primarily related to tax
benefits associated with U.S. tax reform, partly offset by charges for
adjustments to environmental obligations, adjusted net income
attributable to common stock totaled $750 million ($0.51 per share) for
fourth-quarter 2017. Refer to the supplemental schedule, "Adjusted Net
Income," on page VII, which is available on FCX's website, "fcx.com,"
for additional information.
Richard C. Adkerson, President and Chief Executive Officer, said,
"During 2017, our global team’s focus on productivity and cost and
capital discipline, together with improved market conditions for copper,
produced solid results. We generated strong cash flows, continued to
strengthen our balance sheet and advanced several long-term initiatives
to build value for shareholders. Our actions during 2016 and 2017
achieved our debt reduction objectives efficiently while retaining a
strong asset base for the future. As we enter 2018, our shareholders are
well positioned to benefit from our global leadership position in
copper, supported by a large, high-quality portfolio of long-lived
geographically diverse assets and favorable copper market conditions. We
are continuing to make significant progress in our ongoing negotiations
with the Indonesian government to restore long-term stability for our
Grasberg operations as we remain focused on executing our business
strategy for the benefit of our shareholders and other stakeholders."
SUMMARY FINANCIAL DATA
|
Three Months Ended |
Years Ended |
|||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| (in millions, except per share amounts) | ||||||||||||
| Revenuesa,b | $ | 5,041 | $ | 4,377 | $ | 16,403 | $ | 14,830 | ||||
| Operating income (loss)a | $ | 1,467 | $ | 703 | $ | 3,633 | $ | (2,792 | ) | |||
| Net income (loss) from continuing operations | $ | 1,193 | $ | 202 | $ | 2,029 | $ | (3,832 | ) | |||
| Net income (loss) from discontinued operations | $ | 16 | c | $ | (2 | ) | $ | 66 | c | $ | (193 | ) |
| Net income (loss) attributable to common stockd,e | $ | 1,041 | $ | 292 | $ | 1,817 | $ | (4,154 | ) | |||
| Diluted net income (loss) per share of common stock: | ||||||||||||
| Continuing operations | $ | 0.70 | $ | 0.22 | $ | 1.21 | $ | (2.96 | ) | |||
| Discontinued operations | 0.01 | (0.01 | ) | 0.04 | (0.20 | ) | ||||||
| $ | 0.71 | $ | 0.21 | $ | 1.25 | $ | (3.16 | ) | ||||
| Diluted weighted-average common shares outstanding | 1,455 | 1,410 | 1,454 | 1,318 | ||||||||
| Operating cash flowsf | $ | 1,664 | $ | 1,135 | $ | 4,682 | $ | 3,729 | ||||
| Capital expenditures | $ | 390 | $ | 504 | $ | 1,410 | $ | 2,813 | ||||
| At December 31: | ||||||||||||
| Cash and cash equivalents | $ | 4,447 | $ | 4,245 | $ | 4,447 | $ | 4,245 | ||||
| Total debt, including current portion | $ | 13,117 | $ | 16,027 | $ | 13,117 | $ | 16,027 | ||||
|
a. |
For segment financial results, refer to the supplemental |
|
b. |
Includes favorable adjustments to provisionally priced |
|
c. |
Primarily reflects adjustments to the fair value of the |
|
d. |
Includes net gains (charges) of $291 million ($0.20 per share) |
|
e. |
FCX defers recognizing profits on intercompany sales until |
|
f. |
Includes net working capital sources (uses) and timing of other |
SUMMARY OPERATING DATA
|
Three Months Ended |
Years Ended |
|||||||
| 2017 | 2016a | 2017 | 2016a | |||||
| Copper (millions of recoverable pounds) | ||||||||
| Production | 1,007 | 1,131 | 3,737 | 4,222 | ||||
| Sales, excluding purchases | 1,017 | 1,127 | 3,700 | 4,227 | ||||
| Average realized price per pound | $ | 3.21 | $ | 2.48 | $ | 2.93 | $ | 2.28 |
| Site production and delivery costs per poundb | $ | 1.62 | $ | 1.44 | $ | 1.61 | $ | 1.42 |
| Unit net cash costs per poundb | $ | 1.04 | $ | 1.21 | $ | 1.20 | $ | 1.26 |
| Gold (thousands of recoverable ounces) | ||||||||
| Production | 567 | 430 | 1,577 | 1,088 | ||||
| Sales, excluding purchases | 593 | 405 | 1,562 | 1,079 | ||||
| Average realized price per ounce | $ | 1,285 | $ | 1,174 | $ | 1,268 | $ | 1,238 |
| Molybdenum (millions of recoverable pounds) | ||||||||
| Production | 22 | 22 | 92 | 80 | ||||
| Sales, excluding purchases | 24 | 22 | 95 | 74 | ||||
| Average realized price per pound | $ | 9.79 | $ | 8.27 | $ | 9.33 | $ | 8.33 |
|
a. |
Excludes the results of the Tenke Fungurume (Tenke) mine, which |
|
b. |
Reflects per pound weighted-average production and delivery |
Consolidated Sales Volumes
Fourth-quarter 2017 copper sales of 1.0 billion pounds
approximated the October 2017 estimate and were lower than
fourth-quarter 2016 sales of 1.1 billion pounds, primarily reflecting
lower sales volumes in North America and at Cerro Verde.
Fourth-quarter 2017 gold sales of 593 thousand ounces were lower
than the October 2017 estimate of 625 thousand ounces, primarily
reflecting lower mill rates at PT Freeport Indonesia (PT-FI).
Fourth-quarter 2017 gold sales were higher than fourth-quarter 2016
sales of 405 thousand ounces, primarily reflecting anticipated higher
ore grades from Indonesia.
Fourth-quarter 2017 molybdenum sales of 24 million pounds were
slightly higher than the October 2017 estimate of 23 million pounds and
fourth-quarter 2016 sales of 22 million pounds.
Sales volumes for the year 2018 are expected to approximate 3.9 billion
pounds of copper, 2.4 million ounces of gold and 91 million pounds of
molybdenum, including 1.0 billion pounds of copper, 675 thousand ounces
of gold and 24 million pounds of molybdenum in first-quarter 2018.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product credits) for
FCX's copper mines of $1.04 per pound of copper in fourth-quarter 2017
were lower than unit net cash costs of $1.21 per pound in fourth-quarter
2016, primarily reflecting higher by-product credits, partly offset by
lower copper sales volumes and higher mining and milling costs in South
America.
Assuming average prices of $1,300 per ounce of gold and $10.00 per pound
of molybdenum for 2018 and achievement of current sales volume and cost
estimates, consolidated unit net cash costs (net of by-product credits)
for copper mines are expected to average $0.97 per pound of copper for
the year 2018. The impact of price changes on 2018 consolidated unit net
cash costs would approximate $0.03 per pound for each $50 per ounce
change in the average price of gold and $0.025 per pound for each $2 per
pound change in the average price of molybdenum. Quarterly unit net cash
costs vary with fluctuations in sales volumes and realized prices,
primarily for gold and molybdenum.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit copper
mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in
Arizona, and Chino and Tyrone in New Mexico. In addition to copper,
certain of FCX's North America copper mines produce molybdenum
concentrate, gold and silver.
All of the North America mining operations are wholly owned, except for
Morenci. FCX records its 72 percent undivided joint venture interest in
Morenci using the proportionate consolidation method.
Operating and Development Activities. FCX has significant
undeveloped reserves and resources in North America and a portfolio of
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. FCX continues to study
opportunities to reduce the capital intensity of its potential long-term
development projects.
Through exploration drilling, FCX has identified a significant resource
at its wholly owned Lone Star project located near the Safford operation
in eastern Arizona. FCX has commenced a project to develop the Lone Star
oxide ores with first production expected by the end of 2020. Total
estimated capital costs for the project, including mine equipment and
pre-production stripping, approximates $850 million and will benefit
from the utilization of existing infrastructure at the adjacent Safford
operation. Production from the Lone Star oxide ores is expected to
average approximately 200 million pounds of copper per year with an
approximate 20-year mine life. The project also advances the potential
for development of a larger-scale district opportunity. FCX is
conducting additional drilling as it continues to evaluate longer term
opportunities available from the significant sulfide potential in
the Lone Star/Safford minerals district.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the fourth quarters and years
2017 and 2016:
|
Three Months Ended |
Years Ended |
|||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Copper (millions of recoverable pounds) | ||||||||
| Production | 367 | 420 | 1,518 | 1,831 | ||||
| Sales, excluding purchases | 354 | 416 | 1,484 | 1,841 | ||||
| Average realized price per pound | $ | 3.15 | $ | 2.45 | $ | 2.85 | $ | 2.24 |
| Molybdenum (millions of recoverable pounds) | ||||||||
| Productiona | 8 | 8 | 33 | 33 | ||||
| Unit net cash costs per pound of copperb | ||||||||
| Site production and delivery, excluding adjustments | $ | 1.79 | $ | 1.46 | $ | 1.64 | $ | 1.42 |
| By-product credits | (0.21 | ) | (0.13 | ) | (0.17 | ) | (0.12 | ) |
| Treatment charges | 0.10 | 0.11 | 0.10 | 0.11 | ||||
| Unit net cash costs | $ | 1.68 | $ | 1.44 | $ | 1.57 | $ | 1.41 |
|
a. |
Refer to summary operating data on page 3 for FCX's |
|
b. |
For a reconciliation of unit net cash costs per pound to |
North America's consolidated copper sales volumes of 354 million pounds
in fourth-quarter 2017 were lower than fourth-quarter 2016 sales of 416
million pounds, primarily reflecting anticipated lower ore grades. North
America copper sales are estimated to approximate 1.5 billion pounds for
the year 2018, compared with 1.5 billion pounds in 2017.
Average unit net cash costs (net of by-product credits) for the North
America copper mines of $1.68 per pound of copper in fourth-quarter 2017
were higher than unit net cash costs of $1.44 per pound in
fourth-quarter 2016, primarily reflecting lower sales volumes.
Average unit net cash costs (net of by-product credits) for the North
America copper mines are expected to approximate $1.67 per pound of
copper for the year 2018, based on achievement of current sales volume
and cost estimates and assuming an average molybdenum price of $10.00
per pound. North America's average unit net cash costs for the year 2018
would change by approximately $0.04 per pound for each $2 per pound
change in the average price of molybdenum.
South America Mining. FCX operates two copper mines in South
America – Cerro Verde in Peru (in which FCX owns a 53.56 percent
interest) and El Abra in Chile (in which FCX owns a 51 percent
interest). These operations are consolidated in FCX's financial
statements. In addition to copper, the Cerro Verde mine produces
molybdenum concentrate and silver.
Operating and Development Activities. The Cerro Verde expansion
project commenced operations in September 2015. The project expanded the
concentrator facilities from 120,000 metric tons of ore per day to
360,000 metric tons of ore per day, and averaged 374,200 metric tons of
ore per day in fourth-quarter 2017. Cerro Verde's expanded operations
benefit from its large-scale, long-lived reserves and cost efficiencies.
FCX continues to evaluate a major expansion at El Abra to process
additional sulfide material and to achieve higher recoveries.
Exploration results at El Abra indicate a significant sulfide resource,
which could potentially support a major mill project similar to
facilities recently constructed at Cerro Verde. Future investments will
depend on technical studies, which are being advanced, economic factors
and market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the fourth quarters and
years 2017 and 2016:
|
Three Months Ended |
Years Ended |
|||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Copper (millions of recoverable pounds) | ||||||||
| Production | 303 | 342 | 1,235 | 1,328 | ||||
| Sales | 312 | 359 | 1,235 | 1,332 | ||||
| Average realized price per pound | $ | 3.22 | $ | 2.50 | $ | 2.97 | $ | 2.31 |
| Molybdenum (millions of recoverable pounds) | ||||||||
| Productiona | 6 | 7 | 27 | 21 | ||||
| Unit net cash costs per pound of copperb | ||||||||
| Site production and delivery, excluding adjustments | $ | 1.71 | $ | 1.35 | $ | 1.59 | $ | 1.26 |
| By-product credits | (0.20 | ) | (0.10 | ) | (0.18 | ) | (0.10 | ) |
| Treatment charges | 0.21 | 0.25 | 0.22 | 0.24 | ||||
| Royalty on metals | 0.01 | 0.01 | 0.01 | 0.01 | ||||
| Unit net cash costs | $ | 1.73 | $ | 1.51 | $ | 1.64 | $ | 1.41 |
|
a. |
Refer to summary operating data on page 3 for FCX's |
|
b. |
For a reconciliation of unit net cash costs per pound to |
South America's consolidated copper sales volumes of 312 million pounds
in fourth-quarter 2017 were lower than fourth-quarter 2016 sales of 359
million pounds, primarily reflecting lower recovery rates at Cerro
Verde. Sales from South America mining are expected to approximate 1.2
billion pounds of copper for the year 2018, compared with 1.2 billion
pounds of copper in 2017.
Average unit net cash costs (net of by-product credits) for South
America mining of $1.73 per pound of copper in fourth-quarter 2017 were
higher than unit net cash costs of $1.51 per pound in fourth-quarter
2016, primarily reflecting lower sales volumes and higher mining and
milling costs at Cerro Verde, partly offset by higher by-product
credits. Average unit net cash costs (net of by-product credits) for
South America mining are expected to approximate $1.63 per pound of
copper for the year 2018, based on current sales volume and cost
estimates and assuming an average price of $10.00 per pound of
molybdenum.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT-FI, FCX's assets include one of the world's
largest copper and gold deposits at the Grasberg minerals district in
Papua, Indonesia. PT-FI operates a proportionately consolidated joint
venture, which produces copper concentrate that contains significant
quantities of gold and silver.
Regulatory Matters. PT-FI continues to actively engage with
Indonesian government officials to address regulatory changes that
conflict with its contractual rights in a manner that provides long-term
stability for PT-FI’s operations and investment plans, and protects
value for FCX’s shareholders.
Following a framework understanding reached in August 2017, the parties
have been engaged in negotiation and documentation of a special license
(IUPK) and accompanying documentation for assurances on legal and fiscal
terms to provide PT-FI with long-term rights through 2041. In addition,
the IUPK would provide that PT-FI construct a smelter within five years
of reaching a definitive agreement and include agreement for the
divestment of 51 percent of the project area interests to Indonesian
participants at fair market value.
In late 2017, the Indonesian government (including the regional
government of Papua Province and Mimika Regency) and PT Indonesia Asahan
Aluminium (Inalum), a state-owned enterprise, which will lead a
consortium of investors, agreed to form a special purpose company to
acquire Grasberg project area interests. Inalum is owned 100 percent by
the Indonesian government and currently holds 9.36 percent of PT-FI's
outstanding common stock.
FCX is engaged in discussions with Inalum and PT-FI’s joint venture
partner regarding potential arrangements that would result in the Inalum
consortium acquiring interests that would meet the Indonesian
government’s 51 percent ownership objective in a manner satisfactory to
all parties, and in a structure that would provide for continuity of
FCX’s management of PT-FI’s operations and governance of the business.
The parties continue to negotiate documentation on a comprehensive
agreement for PT-FI’s extended operations and to reach agreement on
timing, process and governance matters relating to the divestment. The
parties have a mutual objective of completing negotiations and the
required documentation during the first half of 2018.
In December 2017, the Indonesian government extended PT-FI’s temporary
IUPK to June 30, 2018, and PT-FI is seeking an extension of its export
license which currently expires on February 16, 2018, to enable normal
operations to continue during the negotiation period.
Until a definitive agreement is reached, PT-FI has reserved all rights
under its Contract of Work (COW).
Operating and Development Activities. PT-FI is currently mining
the final phase of the Grasberg open pit, which contains high copper and
gold ore grades. PT-FI expects to mine high-grade ore over the next
several quarters prior to transitioning to the Grasberg Block Cave
underground mine in the first half of 2019.
PT-FI has several projects in the Grasberg minerals district related to
the development of its large-scale, long-lived, high-grade underground
ore bodies. In aggregate, these underground ore bodies are expected to
produce large-scale quantities of copper and gold following the
transition from the Grasberg open pit. Substantial progress has been
made to prepare for the transition to mining of the Grasberg Block Cave
underground mine. Mine development activities are sufficiently advanced
to commence caving in early 2019. The ore flow system and underground
rail line are expected to be installed during 2018.
Subject to reaching a definitive agreement with the Indonesian
government to support PT-FI's long-term investment plans, estimated
annual capital spending on these projects would average $0.9 billion per
year ($0.7 billion per year net to PT-FI) over the next five years.
Considering the long-term nature and size of these projects, actual
costs could vary from these estimates. In response to market conditions
and Indonesian regulatory uncertainty, 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,
FCX intends to reduce or defer investments significantly in its
underground development projects and will pursue dispute resolution
procedures under its COW.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the fourth quarters and years
2017 and 2016:
|
Three Months Ended |
Years Ended |
|||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||
| Copper (millions of recoverable pounds) | ||||||||||
| Production | 337 | 369 | 984 | 1,063 | ||||||
| Sales | 351 | 352 | 981 | 1,054 | ||||||
| Average realized price per pound | $ | 3.25 | $ | 2.48 | $ | 3.00 | $ | 2.32 | ||
| Gold (thousands of recoverable ounces) | ||||||||||
| Production | 562 | 424 | 1,554 | 1,061 | ||||||
| Sales | 584 | 401 | 1,540 | 1,054 | ||||||
| Average realized price per ounce | $ | 1,285 | $ | 1,174 | $ | 1,268 | $ | 1,237 | ||
| Unit net cash (credits) costs per pound of coppera | ||||||||||
| Site production and delivery, excluding adjustments | $ | 1.36 | b | $ | 1.50 | $ | 1.58 | b | $ | 1.63 |
| Gold and silver credits | (2.18 | ) | (1.34 | ) | (2.05 | ) | (1.30 | ) | ||
| Treatment charges | 0.26 | 0.27 | 0.27 | 0.28 | ||||||
| Export duties | 0.15 | 0.09 | 0.12 | 0.09 | ||||||
| Royalty on metals | 0.19 | 0.13 | 0.17 | 0.13 | ||||||
| Unit net cash (credits) costs | $ | (0.22 | ) | $ | 0.65 | $ | 0.09 | $ | 0.83 | |
Contacts
Freeport-McMoRan Inc.
Financial Contacts:
Kathleen L. Quirk,
602-366-8016
or
David P. Joint, 504-582-4203
or
Media
Contact:
Eric E. Kinneberg, 602-366-7994
