Freeport-McMoRan Copper & Gold Inc. Reports Third-Quarter and Nine-Month 2003 Results.Business Editors NEW ORLEANS--(BUSINESS WIRE)--Oct. 16, 2003 Freeport-McMoRan Freeport-McMoRan Copper & Gold Inc., (NYSE: FCX) often called simply Freeport, is the world's lowest-cost copper producer and one of the world's largest producers of gold. Copper & Gold Inc. (NYSE NYSE See: New York Stock Exchange :FCX FCX French Connexion (gaming site) FCX Freeport-McMoran Copper & Gold Inc (stock symbol) FCX Fuel Cell Experiment (Honda) FCX Fire Coordination Exercise FCX Fire Control Exercise ): HIGHLIGHTS -- Third-quarter 2003 net income of $55.9 million, $0.33 per share, after $37.6 million, $0.19 per share, of net charges for the cumulative effect of a change in accounting principle, the early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt and redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of preferred stock, compared with third-quarter 2002 net income of $61.5 million, $0.39 per share. -- Third quarter sales volumes of 345 million pounds of copper and 763,500 ounces of gold exceeded previous estimates by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 25 million pounds and 120,000 ounces, respectively. -- Third quarter unit cash production costs, net of gold and silver credits, were a net credit of $0.16 per pound and a net credit of $0.08 per pound for the nine months ended September September: see month. 30, 2003. -- Annual sales volumes for 2003, after estimated effect of reduced fourth quarter production from recent slippage Slippage The difference between estimated transaction costs and the amount actually paid. Notes: Slippage is usually attributed to a change in the spread. See also: Spread, Transaction Costs Slippage event in section of Grasberg pit, expected to approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 1.33 billion pounds of copper and 2.45 million ounces of gold, approximately 70 million pounds and 150,000 ounces lower than prior 2003 estimates. -- Third-quarter 2003 operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. totaled $220.7 million and for the nine months ended September 30 ,2003, totaled $504.8 million. Assuming copper prices of $0.80 per pound and gold prices of $375 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. in the fourth quarter, full year 2003 operating cash flows estimated to approximate $575 million. -- Total debt of $2.3 billion at September 30, 2003, and approximately $1.7 billion net of cash and restricted investments, reflects year to date reductions of approximately $643 million, including change in cash and restricted investments. -- Cash and cash equivalents of $528.6 million at September 30, 2003. -- Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: an increase in common stock dividend from an annual rate of $0.36 per share to $0.80 per share. Board also authorized a new 20 million share open market purchase program. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) reported third-quarter 2003 net income applicable to common stock (inclusive of inclusive of prep. Taking into consideration or account; including. items discussed below aggregating in a net reduction of $37.6 million, $0.19 per share), of $55.9 million, $0.33 per share, compared with third-quarter 2002 net income of $61.5 million, $0.39 per share. Net income for the third quarter of 2003 was reduced by $24.7 million ($0.13 per share) for the cumulative effect of a required change in the accounting for issuance costs of redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. now classified as debt and $25.1 million ($0.13 per share) in charges related to the early extinguishments of debt. Third quarter net income benefited from a $12.2 million gain ($0.06 per share) on the redemption of Gold- and Silver-Denominated Preferred Stock. For the nine months ended September 30, 2003, FCX reported net income applicable to common stock of $162.5 million, $1.03 per share, including net charges for the cumulative effect of changes in accounting principles of $15.6 million, $0.08 per share, compared with net income of $63.0 million, $0.43 per share, including a charge for the cumulative effect of a change in accounting principle of $3.0 million, $0.02 per share, for the nine months ended September 30, 2002.
Summary Financial Table Third Quarter Nine Months
2003 2002 2003 2002
------------------------- --------- --------- ----------- -----------
(In thousands, except per share amounts)
Revenues $668,826 $538,739 $1,802,877 $1,339,418
Operating income 301,795 206,076 734,347 416,029
Net income applicable to
common stock before
cumulative effect
adjustments (a) 80,548 61,537 178,083 66,008
Net income applicable to
common stock (b) 55,873 61,537 162,490 62,959
Diluted net income per
share:(c)
-------------------------
Before cumulative
effect adjustments 0.46 0.39 1.11 0.45
Applicable to common
stock 0.33 0.39 1.03 0.43
Diluted average shares
outstanding (c) 194,335 188,877 191,146 146,446
a) Includes losses on the early extinguishment and conversion of debt related to the conversion of FCX's 8 1/4% Convertible Senior Notes and other debt extinguishments totaling $25.1 million ($0.13 per share) in the third quarter of 2003 and $29.9 million ($0.16 per share) in the first nine months of 2003. Third-quarter 2003 and nine-month 2003 also include gains totaling $12.2 million ($0.06 per share) on the redemption of Gold- and Silver-Denominated Preferred Stock. b) Third-quarter 2003 cumulative effect adjustment reflects a $24.7 million charge for adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Debt," effective July July: see month. 1, 2003, and nine-month 2003 also reflects a $9.1 million gain for adoption of SFAS No. 143, "Accounting for Asset Retirement Obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. ," effective January January: see month. 1, 2003. Nine-month 2002 cumulative effect adjustment reflects a $3.0 million charge for an accounting change for depreciation of mining and milling assets, effective January 1, 2002. c) Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per share reflects assumed conversion of FCX's 8 1/4% Convertible Senior Notes, resulting in the exclusion exclusion /ex·clu·sion/ (eks-kloo´zhun) 1. a shutting out or elimination. 2. surgical isolation of a part, as of a segment of intestine, without removal from the body. of interest expense, net of tax, totaling $8.4 million in the third quarter of 2003, $12.6 million in the third quarter of 2002 and $33.8 million in the first nine months of 2003, and the inclusion of 31.1 million common shares in the third quarter of 2003, 42.2 million common shares in the third quarter of 2002 and 38.5 million common shares in the first nine months of 2003. Mr. James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. R. Moffett Moffett may refer to:
Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a C. Adkerson, President and Chief Financial Officer said, "Our third quarter and nine month results demonstrate the cash flow generating capacity of our high volume, low cost operations. Our recent Board action to increase our common dividend and authorize To empower another with the legal right to perform an action. The Constitution authorizes Congress to regulate interstate commerce. authorize v. to officially empower someone to act. (See: authority) an expanded share purchase program will allow us to return a portion of our available cash flow to shareholders while we continue to reduce our debt. These measures are consistent with our ability to generate significant cash flows in excess of our capital expenditures and debt service requirements. We will continue to take actions to maintain a strong financial position which will benefit both our shareholders and investors in our debt securities." PT Freeport Freeport, city, Bahamas Freeport, city (1990 pop. 25,115), Grand Bahama Island, Bahamas. A popular resort area, it developed out of a 1955 agreement between the Bahamian colonial government and a private development company to create a free port and Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. (PT-FI) PRODUCTION AND SALES
Third Quarter Nine Months
2003 2002 2003 2002
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Copper (000s of
recoverable pounds):
Production 341,200 425,900 1,131,200 1,097,100
Sales 344,900 446,000 1,132,100 1,092,500
Average realized
price per pound $0.81 $0.67 $0.77 $0.70
Gold (recoverable
ounces):
Production 761,000 851,500 2,199,000 1,631,500
Sales 763,500 884,600 2,196,600 1,614,900
Average realized price
per ounce(a) $387.75(a) $314.19 $364.04(a) $307.34
a) Amounts were $367.72 in the third quarter of 2003 and $353.92 in the first nine months of 2003 before hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. gains resulting from redemption of FCX's Gold-Denominated Preferred Stock. PT-FI, FCX's Indonesian mining unit, reported lower mill throughput rates Throughput rate is an obsolete term[1] in the terminology of automated chemical analysis. It may mean either:
1. ^ International Union of Pure and Applied Chemistry. "throughput rate". reflecting the mining of harder ore ore, metal-bearing mineral mass that can be profitably mined. Nearly all rock deposits contain some metallic minerals, but in many cases the concentration of metal is too low to justify mining the ore. at the Grasberg open pit. Mill throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. averaged 211,400 metric tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. of ore per day in the third quarter of 2003 compared with 219,800 metric tons of ore in the third quarter of 2002. Mill throughput rates vary based on the characteristics of the ore being processed as PT-FI manages its operations to optimize optimize - optimisation metal production. PT-FI's third-quarter copper production and sales were higher than previous estimates but were lower than the 2002 period, reflecting the mining of lower-grade ore than was mined during the third quarter of 2002. Third-quarter 2003 copper ore grades Ore grade is a measure that describes the concentration of a valuable natural material (such as metals or minerals) in its surrounding ore. Ore grade is used to assess the economic feasibility of a mining operation: the cost of extracting a natural material from its ore is directly averaged 1.08 percent, compared with 1.31 percent in the third quarter of 2002. Copper recovery rates were 90.0 percent for the third quarter of 2003, compared with 90.8 percent for the third quarter of 2002. Copper realized prices improved by 21 percent to $0.81 per pound in the third quarter of 2003 from $0.67 in the third quarter of 2002. Current LME See London Metal Exchange. LME See London Metal Exchange (LME). copper prices approximate $0.88 per pound. Gold production and sales for the third quarter of 2003 were also higher than previously estimated but were lower than the year-ago period primarily because of lower grades and recoveries. In the third quarter of 2003, ore milled averaged 1.79 grams of gold per metric ton (g/t), compared with 1.85 g/t in the third quarter of 2002. Gold recovery rates declined to 88.5 percent for the third quarter of 2003, compared with 90.1 percent for the third quarter of 2002. Gold realized prices, before hedging, improved by 17 percent to $367.72 per ounce in the third quarter of 2003 from $314.19 per ounce in the third quarter of 2002. Third-quarter 2003 sales exceeded previous quarterly estimates primarily because of the timing of mining ore previously forecast to be mined in the fourth quarter of 2003. As a result of the slippage in the Grasberg open pit, PT-FI has revised its fourth-quarter 2003 estimates and expects its sales for 2003 to approximate 1.33 billion pounds of copper and 2.45 million ounces of gold, with sales for the fourth quarter of 2003 estimated to approximate 200 million pounds of copper and 250,000 ounces of gold. These estimates are subject to change depending on the timing of restoring access to higher grade sections of the Grasberg pit. As previously reported, a slippage of material in a section of the Grasberg open pit occurred on October October: see month. 9, 2003. Regrettably, two fatalities were confirmed, six workers are missing and are presumed to have perished and five were injured in·jure tr.v. in·jured, in·jur·ing, in·jures 1. To cause physical harm to; hurt. 2. To cause damage to; impair. 3. . The search effort continues as our highest priority, in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with activities to ensure stability in the area of the slippage. Clean-up activities to restore access to the affected areas of the pit have commenced and are currently anticipated to be completed during the fourth quarter. The causes of the accident continue to be studied. PT-FI is currently conducting operations in the sections of the Grasberg pit unaffected by the slippage and in its underground operations Underground Operations is a Toronto-based independent punk rock record label. Operated by Mark Spicoluk, former Closet Monster member, this label is one of the most cutting edge independent labels in Canada. , milling facilities, and concentrate shipping operations. The area affected by the slippage, comprising approximately five percent of the surface area of the massive Grasberg pit, includes two active mining areas which were scheduled to be mined in the fourth quarter of 2003, resulting in a deferral deferral - Waiting for quiet on the Ethernet. to future periods. The event is not expected to affect long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. mine plans and production rates. Production from PT-FI's Deep Ore Zone (DOZ DOZ Dozen Doz Dozent (German) DOZ Description Out of Zip ) underground mine averaged 42,600 metric tons of ore per day during the third quarter of 2003, representing 20 percent of third-quarter 2003 mill throughput. DOZ operations continue to perform above design capacity of 35,000 metric tons of ore per day and studies are ongoing to evaluate additional low-cost options to increase production from the DOZ underground operation. The Intermediate Ore Zone (IOZ IOZ Inorganic Zinc ) underground mine was depleted de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d during the third quarter of 2003. During its approximate 10-year life, the IOZ operation produced almost 30 percent more copper and gold than the initial reserve estimate. At September 30, 2003, FCX's concentrate sales included 155.6 million pounds of copper, priced at an average of $0.81 per pound, that remain subject to final pricing over the next several months. Each $0.01 change in the price realized from the September 30 price would result in an approximate $0.8 million, $0.004 per share, effect on FCX's 2003 net income. Third-quarter 2003 adjustments to concentrate sales recognized in prior quarters increased revenues by $8.3 million ($4.3 million to net income, $0.02 per share) compared with a decrease of $10.3 million ($5.3 million to net income, $0.03 per share) in the third quarter of 2002. NET CASH PRODUCTION COSTS (1)
Third Quarter Nine Months
2003 2002 2003 2002
--------------------------------------- ------- ------- ------- ------
Per pound of copper:
Site production and delivery $0.48 $0.33 $0.42 $0.37
Gold and silver credits (0.84) (0.63) (0.70) (0.47)
Treatment charges and royalties 0.20 0.20 0.20 0.20
------- ------- ------- ------
Net cash production costs (credits) $(0.16) $(0.10) $(0.08) $0.10
(1) For a reconciliation of net cash production costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge refer to the attached presentation, "Product Revenues and Production Costs." PT-FI maintained its cost-leading position with average unit net cash production costs, including gold and silver credits, of a net credit of $(0.16) per pound of copper during the third quarter of 2003, compared with a net credit of $(0.10) per pound for the 2002 quarter. Unit production and delivery costs increased from the prior year period primarily because of lower sales volumes. Higher mine maintenance costs, stronger Indonesian and Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. currencies and higher energy costs also resulted in higher costs compared with last year's third quarter. Gold credits improved primarily because of higher gold prices. Assuming gold prices of $375 per ounce for the fourth quarter of 2003 and gold sales of 2.45 million ounces for 2003, we expect our gold credits would essentially offset our cash production cost per pound of copper for the year. SMELTER OPERATIONS Atlantic Copper, FCX's wholly owned Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. smelting smelting, in metallurgy, any process of melting or fusion, especially to extract a metal from its ore. Smelting processes vary in detail depending on the nature of the ore and the metal involved, but they are typified in the use of the blast furnace. unit, treated 253,000 metric tons of concentrates and scrap in the third quarter of 2003, compared with 258,200 metric tons in the year-ago period. Unit cathode cash production costs totaled $0.15 per pound in the third quarter of 2003 and $0.12 per pound for the year-ago period. Unit costs were adversely affected by a stronger euro/US$ exchange rate, which added $0.02 per pound to Atlantic Copper's third-quarter 2003 unit costs compared with third-quarter 2002 unit costs. Atlantic Copper reported an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $5.0 million for the third quarter of 2003, compared with operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $1.5 million in the 2002 period. Treatment charges received by Atlantic Copper remained at historically low levels, averaging $0.16 per pound during the third quarter of 2003 and $0.18 per pound during the third quarter of 2002. FCX recognized a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. totaling $1.5 million, $0.01 per share, in the third quarter of 2003 as a result of the effect on Atlantic Copper's net euro-denominated liabilities from the euro strengthening from $1.14 per euro to $1.17 per euro, compared with a gain of $1.7 million, $0.01 per share, in the third quarter of 2002. Atlantic Copper's current euro hedges, the effects of which are recognized in income when realized, cover approximately 60 percent of its projected fourth quarter euro disbursements at an average rate of $1.03 per euro. PT Smelting, PT-FI's 25 percent-owned Indonesian smelting unit, treated 209,900 metric tons of concentrates in the third quarter of 2003, compared with 192,200 metric tons in the year-ago period. PT Smelting reported a quarterly production record of 125.2 million pounds of cathodes and sold 123.6 million pounds of cathodes. Cathode production totaled 91.5 million pounds and sales totaled 95.5 million pounds during the third quarter of 2002. PT Smelting's copper cathode cash production costs per pound totaled $0.10 per pound in the third quarter of 2003 and $0.12 per pound in the year-ago period. PT-FI's equity interest in PT Smelting's earnings totaled $1.3 million, $0.01 per share, for the third quarter of 2003 compared to a net loss of $1.9 million, $0.01 per share, in the 2002 quarter. FCX defers recognition of profits on PT-FI's sales to Atlantic Copper and on 25 percent of PT-FI's sales to PT Smelting until the final sale to third parties occurs. Changes to these net deferrals resulted in additions to FCX's net income totaling $10.0 million, $0.05 per share, in the third quarter of 2003, compared with a reduction of $20.9 million, $0.11 per share, in the third quarter of 2002. While currently low smelter treatment and refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar charges adversely affect the operating results of FCX's smelter operations, they benefit operating results of FCX's mining operations. Approximately one-half of PT-FI's concentrate production is sold to its affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: smelters, Atlantic Copper and PT Smelting, and the remainder is sold to other customers. Considering taxes and minority ownership interest, an equivalent change in smelting and refining rates substantially offset in FCX's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: operating results. CASH FLOW and DEBT REDUCTIONS Operating cash flows for the first nine months of 2003 totaled $504.8 million. Assuming fourth quarter copper and gold prices of $0.80 per pound and $375 per ounce, respectively, FCX estimates that its operating cash flows for 2003 would approximate $575 million. Capital expenditures totaled $96.3 million in the first nine months of 2003 and are estimated to total approximately $160 million for the year 2003. As of September 30, 2003 FCX had $528.6 million in cash and cash equivalents. Total debt, which includes mandatorily Adv. 1. mandatorily - in a manner that cannot be evaded; "the ministry considers that contributions to such a fund should be met from voluntary donations rather than from rates compulsorily levied." compulsorily, obligatorily redeemable preferred stock, totaled $2.29 billion at September 30, 2003, and approximately $1.73 billion net of cash and restricted investments. The net reduction of debt, including the change in cash and restricted investments, was $468 million in the third quarter and $643 million since the beginning of the year. Assuming fourth quarter copper and gold prices of $0.80 per pound and $375 per ounce, respectively, FCX estimates total debt, net of cash and restricted investments, will approximate $1.75 billion at year end 2003. Upon the adoption of SFAS No. 150 on July 1, 2003, FCX's mandatorily redeemable preferred stock was reclassified as debt and FCX recorded a cumulative effect adjustment for the amortization of $24.7 million ($0.13 per share) of original issuance costs related to the mandatorily redeemable preferred stock. During the third quarter, FCX completed a number of transactions to improve its balance sheet: In August 2003, FCX negotiated the early conversion of approximately 51% of its 8 1/4% convertible senior notes, which resulted in a $311.1 million reduction in debt. The holders converted their notes into 21.76 million shares of FCX common stock and received $23.0 million in cash from restricted cash held in escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. for payment of future interest on these notes. FCX recorded charges totaling $24.7 million ($24.2 million to net income or $0.12 per share) related to the conversion of its 8 1/4% convertible senior notes. At September 30, 2003, FCX had $292.6 million in 8 1/4% convertible senior notes remained outstanding. The notes are callable Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. beginning in August 2004. On August 1, 2003, FCX redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. its 6.0 million shares of Gold-Denominated Preferred Stock for $210.5 million and partially redeemed its Silver-Denominated Preferred Stock for $10.8 million. The mandatory Peremptory; obligatory; required; that which must be subscribed to or obeyed. Mandatory statutes are those that require, as opposed to permit, a particular course of action. redemptions resulted in a $245.1 million decrease in debt and a hedging gain to revenues of $23.8 million ($12.2 million to net income or $0.06 per share) for the third quarter of 2003. In July 2003, FCX purchased $76.0 million of its 7.2% Senior Notes for $77.2 million and recorded a $1.3 million, $0.9 million to net income ($0.005 per share) charge for early extinguishment of debt. Through September 30, 2003, FCX has purchased 7.20% Senior Notes and 7.50% Senior Notes with a total face amount of $310.0 million. In July 2003, FCX also purchased an 85.7 percent interest in PT-FI's power project owned by a third party for $78 million, reducing consolidated debt by $54.0 million. In October 2003, FCX and PT-FI entered into an amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. The amended credit facility provides a commitment of $165.0 million, which may be increased to $350 million with additional lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. commitments, and a maturity date of September 2006. FCX recorded charges totaling $5.6 million ($3.7 million to net income or $0.02 per share) in the third quarter of 2003 for deferred financing costs related to the prior credit facility. NEW DIVIDEND POLICY AND SHARE PURCHASE AUTHORIZATION The right or permission to use a system resource; the process of granting access. See access control. FCX's Board of Directors authorized an increase in the common stock dividends from an annual rate of $0.36 per share to $0.80 per share. The Board also approved a new open market share purchase program authorizing open market purchases totaling 20 million shares. The timing of future purchases is dependent upon many factors including the company's operating results, cash flow and financial position, the market price of the common shares and general economic and market conditions. FCX explores for, develops, mines and processes ore containing copper, gold and silver in Indonesia, and smelts
Smelts are a family, Osmeridae, of small anadromous fish. and refines copper concentrates in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. and Indonesia. Additional information on FCX is available on our Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the website www.fcx.com. Cautionary Statement and Regulation G Disclosure. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. in which we discuss factors we believe may affect our performance in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding anticipated sales volumes, projected unit production costs, projected capital expenditures, projected operating cash flows, projected debt and cash levels, the impact of copper and gold price changes, the impact of the recent slippage in the Grasberg open pit on operations, statements regarding timing of dividend payments and statements regarding open market purchases of FCX common stock. The declaration and payment of dividends is at the discretion of the Company's Board of Directors and will depend on the Company's financial results, cash requirements, future prospects, and other factors deemed relevant by the Board. Accuracy of the projections depends on assumptions about events that change over time and is thus susceptible susceptible /sus·cep·ti·ble/ (su-sep´ti-b'l) 1. readily affected or acted upon. 2. lacking immunity or resistance and thus at risk of infection. sus·cep·ti·ble adj. to periodic change based on actual experience and new developments. FCX cautions readers that it assumes no obligation to update or publicly release any revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to the projections in this press release and, except to the extent required by applicable law, does not intend to update or otherwise revise the projections more frequently than quarterly. Additionally, important factors that might cause future results to differ from these projections include industry risks, commodity prices, Indonesian political risks, weather-related risks, currency translation risks and other factors described in FCX's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2002, filed with the Securities and Exchange Commission. This press release also contains certain financial measures such as net cash production costs per pound of copper and cathode cash production costs per pound of copper. As required by Securities and Exchange Commission Regulation G, reconciliations of these measures to amounts reported in FCX's consolidated financial statements are provided in the attachments to this press release. A copy of this press release is available on our website at "www.fcx.com." A conference call with securities analysts about third-quarter 2003 results is scheduled for today at 10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The conference call will be broadcast on the Internet along with slides. Interested parties may listen to the webcast live and view the slides by accessing "www.fcx.com." A replay of the webcast will be available through Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , November November: see month. 14, 2003.
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
(Page 1 of 2)
Third Quarter Nine Months
--------------------- ---------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
PT Freeport Indonesia, Net of Rio Tinto's Interest
Copper
Production (000s of
recoverable pounds) 341,200 425,900 1,131,200 1,097,100
Production (metric
tons) 154,800 193,200 513,100 497,600
Sales (000s of
recoverable pounds) 344,900 446,000 1,132,100 1,092,500
Sales (metric tons) 156,400 202,300 513,500 495,600
Average realized price
per pound $.81 $.67 $.77 $.70
Gold
Production
(recoverable ounces) 761,000 851,500 2,199,000 1,631,500
Sales (recoverable
ounces) 763,500 884,600 2,196,600 1,614,900
Average realized price
per ounce $387.75(a) $314.19 $364.04(a) $307.34
Silver
Production
(recoverable ounces) 1,181,900 1,198,000 3,716,700 3,000,400
Sales (recoverable
ounces) 1,182,300 1,264,200 3,726,900 2,992,000
Average realized price
per ounce $5.25(b) $5.17(b) $5.10(b) $4.78(b)
PT Freeport Indonesia Gross Profit per Pound of Copper (cents):
Average realized price 80.6 67.0 77.4 69.7
---------- ---------- ---------- ----------
Production costs:
Site production and
delivery 47.5(c) 33.1(c) 42.3(c) 36.4(c)
Gold and silver
credits (83.7) (63.4) (70.3) (46.7)
Treatment charges 17.9 18.1 17.7 18.3
Royalty on metals 2.6 2.0 2.3 1.5
---------- ---------- ---------- ----------
Cash production
costs (credits)(d) (15.7) (10.2) (8.0) 9.5
Depreciation and
amortization 15.6 14.8 14.9 14.8
---------- ---------- ---------- ----------
Total production
costs (credits) (0.1) 4.6 6.9 24.3
---------- ---------- ---------- ----------
Adjustments, primarily for
copper pricing on
prior period open sales 9.9 (2.7) 3.5 1.2
---------- ---------- ---------- ----------
Gross profit per pound of
copper 90.6 59.7 74.0 46.6
========== ========== ========== ==========
a. Amounts were $367.72 in the third quarter of 2003 and $353.92 in
the first nine months of 2003 before hedging gains resulting from
redemption of FCX's Gold-Denominated Preferred Stock.
b. Amounts were $4.89 in the third quarter of 2003, $4.54 in the
third quarter of 2002, $4.65 in the first nine months of 2003 and
$4.50 in the first nine months of 2002 before hedging gains
resulting from redemption of FCX's Silver-Denominated Preferred
Stock.
c. Net of deferred mining costs totaling $15.7 million or 4.6 cents
per pound in the third quarter of 2003, $11.3 million or 2.5 cents
per pound in the third quarter of 2002, $37.4 million or 3.3 cents
per pound in the first nine months of 2003 and $23.7 million or
2.2 cents per pound in the first nine months of 2002.
d. For a reconciliation of net cash production costs (credits) per
pound to production and delivery costs applicable to sales
reported in FCX's consolidated financial statements refer to the
attached presentation, "Product Revenues and Production Costs."
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
(Page 2 of 2)
Third Quarter Nine Months
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
PT Freeport Indonesia, 100% Operating Statistics
Ore milled (metric tons
per day) 211,400 219,800 223,600 234,500
Average ore grade
Copper (percent) 1.08 1.31 1.16 1.11
Gold (grams per
metric ton) 1.79 1.85 1.65 1.17
Gold (ounce per
metric ton) .058 .059 .053 .038
Silver (grams per
metric ton) 3.90 4.01 3.98 3.45
Silver (ounce per
metric ton) .125 .129 .128 .111
Recovery rates
(percent)
Copper 90.0 90.8 89.4 88.0
Gold 88.5 90.1 87.7 88.1
Silver 66.3 65.9 64.3 60.3
Copper
Production (000s of
recoverable pounds) 402,800 510,300 1,338,000 1,325,000
Production (metric
tons) 182,700 231,500 606,900 601,000
Sales (000s of
recoverable
pounds) 407,100 534,800 1,339,200 1,319,500
Sales (metric tons) 184,700 242,600 607,500 598,500
Gold (recoverable
ounces)
Production 977,100 1,053,100 2,806,400 2,053,100
Sales 980,200 1,096,000 2,802,800 2,032,100
Silver (recoverable
ounces)
Production 1,428,000 1,401,200 4,224,100 3,440,500
Sales 1,430,500 1,476,300 4,230,600 3,428,900
Atlantic Copper
Concentrates and scrap
treated (metric tons) 253,000 258,200 739,700 759,000
Anodes
Production (000s of
pounds) 173,400 164,500 496,800 486,700
Production (metric
tons) 78,600 74,600 225,300 220,800
Sales (000s of
pounds) 36,200 26,100 87,700 73,100
Sales (metric tons) 16,400 11,800 39,800 33,200
Cathodes
Production (000s of
pounds) 135,300 135,600 408,100 412,100
Production (metric
tons) 61,400 61,500 185,100 186,900
Sales, including
wire rod and wire
(000s of pounds) 127,100 137,100 406,000 413,300
Sales, including
wire rod and wire
(metric tons) 57,700 62,200 184,200 187,500
Gold sales in anodes
and slimes (ounces) 260,000 154,000 707,600 565,400
Cathode cash production
cost per pound
before hedging(a) $.15 $.12 $.16 $.12
PT Smelting, 25%-owned by PT Freeport Indonesia
Concentrate treated
(metric tons) 209,900 192,200 630,600 500,500
Anodes
Production (000s of
pounds) 142,700 121,900 425,000 317,600
Production (metric
tons) 64,700 55,300 192,800 144,100
Sales (000s of
pounds) 8,600 10,200 53,800 15,100
Sales (metric tons) 3,900 4,600 24,400 6,800
Cathodes
Production (000s of
pounds) 125,200 91,500 370,300 301,700
Production (metric
tons) 56,800 41,500 168,000 136,800
Sales (000s of
pounds) 123,600 95,500 368,600 299,200
Sales (metric tons) 56,100 43,300 167,200 135,700
Cathode cash production
cost per pound(a) $.10 $.12 $.10 $.16
a. For a reconciliation of cathode cash production costs per pound to
production costs applicable to sales reported in FCX's
consolidated financial statements refer to the attached
presentation, "Cathode Cash Production Costs."
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF NET INCOME (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ------------- -------------
(In Thousands, Except Per Share Amounts)
Revenues $668,826(a) $538,739(a) $1,802,877(a) $1,339,418(a)
Cost of sales:
Production and
delivery 284,946 238,231 809,824 679,272
Depreciation and
amortization 63,979 77,077 200,050 192,436
----------- ----------- ------------- -------------
Total cost of
sales 348,925 315,308 1,009,874 871,708
Exploration
expenses 1,685 908 5,016 2,462
General and
administrative
expenses 16,421(b) 16,447(b) 53,640(b) 49,219(b)
----------- ----------- ------------- -------------
Total costs
and expenses 367,031 332,663 1,068,530 923,389
----------- ----------- ------------- -------------
Operating income 301,795 206,076 734,347 416,029
Equity in PT
Smelting earnings
(losses) 1,294 (1,864) 4,241 (5,223)
Interest expense,
net (48,000) (41,388) (155,987) (129,162)
Losses on
extinguishment and
conversion of debt (25,988) - (32,566) -
Other income
(expenses), net (375)(c) 807(c) (4,323)(c) (8,488)(c)
----------- ----------- ------------- -------------
Income before
income taxes and
minority interests 228,726 163,631 545,712 273,156
Provision for
income taxes (123,921) (81,134) (299,043) (155,988)
Minority interests
in net income of
consolidated
subsidiaries (18,132) (11,534) (43,302) (23,063)
----------- ----------- ------------- -------------
Net income before
cumulative effect
of changes in
accounting
principle 86,673 70,963 203,367 94,105
Cumulative effect
of changes in
accounting
principle, net (24,675) - (15,593) (3,049)
----------- ----------- ------------- -------------
Net income 61,998 70,963 187,774 91,056
Preferred dividends (6,125) (9,426) (25,284) (28,097)
----------- ----------- ------------- -------------
Net income
applicable to
common stock $ 55,873 $ 61,537 $ 162,490 $ 62,959
=========== =========== ============= =============
Net income per
share of common
stock:
Basic:
Before
cumulative
effect $.51 $.42 $1.19 $.46
Cumulative
effect (.16) - (.11) (.02)
---------- ---------- ------------ ------------
Net income per
share of
common stock $.35 $.42 $1.08 $.44
========== ========== ============ ============
Diluted:
Before
cumulative
effect $.46(d) $.39(d) $1.11(d) $.45
Cumulative
effect (.13) - (.08) (.02)
---------- ---------- ------------ ------------
Net income per
share of
common stock $.33(d) $.39(d) $1.03(d) $.43
========== ========== ============ ============
Average common
shares
outstanding:
Basic 159,407 144,894 150,185 144,567
========== ========== ============ ============
Diluted 194,335(d) 188,877(d) 191,146(d) 146,446
========== ========== ============ ============
Dividends paid per
common share $0.09 $- $0.18 $-
========== ========== ============ ============
a. Includes adjustments to prior period concentrate sales totaling
$8.3 million in the 2003 quarter, $(10.3) million in the 2002
quarter, $11.0 million in the 2003 nine-month period and $5.4
million in the 2002 nine-month period. Also includes hedging
gains from redemption of gold and silver preferred stock totaling
$23.8 million for the 2003 quarter and nine-month period, and
$0.8 million for the 2002 quarter and nine-month period.
b. Includes charges (credits) for costs associated with stock
appreciation rights caused by an increase (decrease) in FCX's
stock price totaling $2.2 million in the 2003 quarter, $(0.5)
million in the 2002 quarter, $4.0 million in the 2003 nine-month
period and $0.1 million in the 2002 nine-month period. Also
includes reductions from Rio Tinto's reimbursements for certain
administrative costs totaling $7.4 million in the 2003 quarter,
$9.7 million in the 2003 nine-month period and $1.2 million in
the 2002 nine-month period.
c. Includes net benefits (charges) totaling $(1.5) million in the
2003 quarter, $1.7 million in the 2002 quarter, $(7.8) million in
the 2003 nine-month period and $(7.1) million in the 2002
nine-month period associated with the impact of movements in the
US$/euro exchange rate on Atlantic Copper's non-operating
euro-denominated liabilities. Third-quarter and nine-month 2003
periods include a $5.6 million charge related to restructuring
FCX/PT-FI's credit facility.
d. Diluted net income per share reflects assumed conversion of FCX's
8 1/4% Convertible Senior Notes, resulting in the exclusion of
interest expense (net of tax) totaling $8.4 million in the 2003
quarter, $12.6 million in the 2002 quarter, $33.8 million in the
2003 nine-month period, and the inclusion of 31.1 million common
shares for the 2003 quarter, 42.2 million common shares for the
2002 quarter, and 38.5 million common shares for the 2003
nine-month period.
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED BALANCE SHEETS (Unaudited)
September 30, December 31,
2003 2002
------------- -------------
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 528,593 $ 7,836
Restricted investments and cash 34,585 49,809
Accounts receivable 282,740 190,509
Inventories 358,479 387,247
Prepaid expenses and other 10,365 2,579
------------- -------------
Total current assets 1,214,762 637,980
Property, plant, equipment and
development costs, net 3,242,730 3,320,561
Lease receivable and other assets 156,656 (a) 52,661
Deferred mining costs 115,588 78,235
Investment in PT Smelting 43,959 44,619
Restricted investments and cash - 58,137
------------- -------------
Total assets $ 4,773,695 $ 4,192,193
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 280,142 $ 262,310
Current portion of long-term debt
and short-term borrowings 140,552 77,112
Accrued income taxes 106,577 81,319
Unearned customer receipts 47,488 36,754
Rio Tinto share of joint venture
cash flows 44,443 51,297
Accrued interest payable 23,557 29,081
------------- -------------
Total current liabilities 642,759 537,873
Long-term debt, less current
portion:
Convertible senior notes 867,604 603,750
Senior notes 639,967 450,000
Infrastructure asset financings 200,906 310,674
Redeemable preferred stock 192,381 (b) - (b)
Atlantic Copper debt 161,293 233,642
Equipment and other loans 90,456 84,212
FCX and PT Freeport Indonesia
credit facilities - 279,000
------------- -------------
Total long-term debt, less
current portion 2,152,607 1,961,278
Accrued postretirement benefits and
other liabilities 151,714 140,016
Deferred income taxes 859,769 706,510
Minority interests 180,366 129,687
Redeemable preferred stock - (b) 450,003 (b)
Stockholders' equity 786,480 266,826
------------- -------------
Total liabilities and stockholders'
equity $ 4,773,695 $ 4,192,193
============= =============
a. Includes $76.2 million lease receivable due from Rio Tinto
resulting from FCX's acquisition of PT Puncakjaya Power in July
2003.
b. In accordance with Statement of Financial Accounting Standards
No. 150, FCX's mandatorily redeemable preferred stock was
classified as debt effective July 1, 2003. Restatement of prior
periods is not allowed. On August 1, 2003, FCX redeemed preferred
stock with a balance of $245.1 million for $221.3 million resulting
in a hedging gain of $23.8 million recorded in revenues.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
----------------------
2003 2002
----------- ----------
(In Thousands)
Cash flow from operating activities:
Net income $ 187,774 $ 91,056
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 200,050 192,436
Cumulative effect of changes in accounting
principle 15,593 3,049
Losses on extinguishment and conversion of
debt 32,566 -
Deferred income taxes 87,251 34,617
Equity in PT Smelting (earnings) losses (4,241) 5,223
Minority interests' share of net income 43,302 23,063
Change in deferred mining costs (37,353) (23,698)
Currency translation loss 7,800 7,071
Amortization of deferred financing costs 13,361 9,002
Elimination of profit on PT Freeport
Indonesia sales to PT Smelting 5,595 6,277
Provision for inventory obsolescence 4,500 4,500
Other (4,897) (2,032)
(Increases) decreases in working capital:
Accounts receivable (76,448) (43,229)
Inventories 7,228 (26,990)
Prepaid expenses and other (5,555) (1,658)
Accounts payable and accrued liabilities 11,905 (35,696)
Rio Tinto share of joint venture cash flows (6,008) 31,680
Accrued income taxes 22,366 29,589
----------- ----------
Increase in working capital (46,512) (46,304)
----------- ----------
Net cash provided by operating activities 504,789 304,260
----------- ----------
Cash flow from investing activities:
PT Freeport Indonesia capital expenditures (90,145) (143,698)
Atlantic Copper capital expenditures (6,108) (1,962)
Investment in PT Puncakjaya Power, net of cash
acquired (68,068) -
Sale of restricted investments 71,848 47,938
Sale of assets and other 1,165 (167)
----------- ----------
Net cash used in investing activities (91,308) (97,889)
----------- ----------
Cash flow from financing activities:
Net proceeds from sales of senior notes 1,046,437 -
Proceeds from other debt 36,592 342,607
Repayments of debt (739,499) (485,286)
Redemptions of preferred stock (221,289) (11,671)
Cash dividends paid:
Common stock (26,289) -
Preferred stock (27,555) (27,896)
Minority interest (1,623) -
Proceeds from exercised stock options 43,839 7,549
Financing costs and other (3,337) (1,234)
----------- ----------
Net cash provided by (used in) financing
activities 107,276 (175,931)
----------- ----------
Net increase in cash and cash equivalents 520,757 30,440
Cash and cash equivalents at beginning of year 7,836 7,587
----------- ----------
Cash and cash equivalents at end of period $ 528,593 $ 38,027
=========== ==========
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
NET CASH PRODUCTION COSTS Net cash production costs per pound of copper is a measure intended to provide investors with information about the cash generating capacity of our mining operations in Indonesia. This measure is presented by other copper and gold mining companies, although our measures may not be comparable to similarly titled measures reported by other companies. We calculate gross profit per pound of copper under a "by-product by·prod·uct or by-prod·uct n. 1. Something produced in the making of something else. 2. A secondary result; a side effect. by-product Noun 1. " method, while the copper, gold and silver contained within our concentrates are treated as co-products in our financial statements. We use the by-product method in our presentation of gross profit per pound of copper because (1) the majority of our revenues are copper revenues, (2) we produce and sell one product, concentrates, which contains all three metals and (3) it is not possible to specifically assign our costs to revenues from the copper, gold and silver we produce in concentrates. In the co-product method presentation below, costs are allocated to the different products based on their relative revenue values. Presentations under both methods are presented below along with a reconciliation to amounts reported in FCX's consolidated financial statements.
Three Months Ended September 30, 2003
-------------------------------------
Co-Product Method
By-Product -----------------------------------------
(In Thousands) Method Copper Gold Silver Total
---------- --------- --------- ----------- ---------
Revenues $ 277,744 $277,744 $282,723 $ 5,891 $566,358
Site production
and delivery 164,087 80,469 81,911 1,707 164,087
Gold and silver
credits (288,614) - - - -
Treatment charges 61,656 30,236 30,779 641 61,656
Royalty on metals 8,844 4,337 4,415 92 8,844
---------- --------- --------- ----------- ---------
Net cash
production costs (54,027) 115,042 117,105 2,440 234,587
Depreciation and
amortization 53,747 26,358 26,830 559 53,747
---------- --------- --------- ----------- ---------
Total production
costs (280) 141,400 143,935 2,999 288,334
Adjustments,
primarily for
copper pricing on
prior period
sales and
gold/silver
hedging 34,498 10,666 22,110 1,722 34,498
---------- --------- --------- ----------- ---------
Gross profit $ 312,522 $147,010 $160,898 $ 4,614 $312,522
========== ========= ========= =========== =========
Pounds of copper
sold (000) 344,900 344,900
Ounces of gold
sold 763,500
Ounces of silver
sold 1,182,300
Gross profit per pound of copper (cents)/
per ounce of gold and silver ($):
Revenues 80.6 80.6 387.75 5.25
---------- --------- --------- -----------
Site production
and delivery 47.5 23.3 107.28 1.44
Gold and silver
credits (83.7) - - -
Treatment charges 17.9 8.8 40.31 0.54
Royalty on metals 2.6 1.3 5.78 0.08
---------- --------- --------- -----------
Net cash
production costs (15.7) 33.4 153.37 2.06
Depreciation and
amortization 15.6 7.6 35.14 0.47
---------- --------- --------- -----------
Total production
costs (0.1) 41.0 188.51 2.53
Adjustments,
primarily for
copper pricing on
prior period
sales and
gold/silver
hedging 9.9 3.0 11.50 1.18
---------- --------- --------- -----------
Gross profit per
pound/ounce 90.6 42.6 210.74 3.90
========== ========= ========= ===========
Reconciliation to Amounts Reported
(In Thousands) Production Depreciation
and and
Revenues Delivery Amortization
---------- ---------- -------------
Totals presented above $ 566,358 $ 164,087 $ 53,747
Less: Treatment charges per above (61,656) N/A N/A
Royalty per above (8,844) N/A N/A
Other N/A 487 N/A
Adjustments, primarily for copper
pricing on prior period sales and
hedging per above 34,498 N/A N/A
---------- ---------- -------------
Mining and exploration segment 530,356 164,574 53,747
Smelting and refining segment 239,727 234,795 7,067
Eliminations and other (101,257) (114,423) 3,165
---------- ---------- -------------
As reported in FCX consolidated
financial statements $ 668,826 $ 284,946 $ 63,979
========== ========== =============
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
Three Months Ended September 30, 2002
-------------------------------------
Co-Product Method
By-Product -----------------------------------------
(In Thousands) Method Copper Gold Silver Total
---------- --------- --------- ----------- ---------
Revenues $ 296,878 $296,878 $277,121 $ 5,718 $579,717
Site production
and delivery 147,594 75,584 70,554 1,456 147,594
Gold and silver
credits (282,839) - - - -
Treatment charges 80,698 41,326 38,576 796 80,698
Royalty on metals 9,019 4,619 4,311 89 9,019
---------- --------- --------- ----------- ---------
Net cash
production costs (45,528) 121,529 113,441 2,341 237,311
Depreciation and
amortization 66,010 33,804 31,555 651 66,010
---------- --------- --------- ----------- ---------
Total production
costs 20,482 155,333 144,996 2,992 303,321
Adjustments,
primarily for
copper pricing on
prior period
sales and silver
hedging (10,072) (10,902) - 830 (10,072)
---------- --------- --------- ----------- ---------
Gross profit $ 266,324 $130,643 $132,125 $ 3,556 $266,324
========== ========= ========= =========== =========
Pounds of copper
sold (000) 446,000 446,000
Ounces of gold
sold 884,600
Ounces of silver
sold 1,264,200
Gross profit per pound of copper (cents)/
per ounce of gold and silver ($):
Revenues 67.0 67.0 314.19 5.17
---------- --------- --------- -----------
Site production
and delivery 33.1 16.9 79.76 1.15
Gold and silver
credits (63.4) - - -
Treatment charges 18.1 9.3 43.61 0.63
Royalty on metals 2.0 1.0 4.87 0.07
---------- --------- --------- -----------
Net cash
production costs (10.2) 27.2 128.24 1.85
Depreciation and
amortization 14.8 7.6 35.67 0.52
---------- --------- --------- -----------
Total production
costs 4.6 34.8 163.91 2.37
Adjustments,
primarily for
copper pricing on
prior period
sales and silver
hedging (2.7) (2.9) (0.92) 0.01
---------- --------- --------- -----------
Gross profit per
pound/ounce 59.7 29.3 149.36 2.81
========== ========= ========= ===========
Reconciliation to Amounts Reported
(In Thousands) Production Depreciation
and and
Revenues Delivery Amortization
---------- ---------- -------------
Totals presented above $ 579,717 $ 147,594 $ 66,010
Less: Treatment charges per above (80,698) N/A N/A
Royalty per above (9,019) N/A N/A
Other N/A 1,072 N/A
Adjustments, primarily for copper
pricing on prior period sales and
hedging per above (10,072) N/A N/A
---------- ---------- -------------
Mining and exploration segment 479,928 148,666 66,010
Smelting and refining segment 181,400 170,780 6,978
Eliminations and other (122,589) (81,215) 4,089
---------- ---------- -------------
As reported in FCX consolidated
financial statements $ 538,739 $ 238,231 $ 77,077
========== ========== =============
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
Nine Months Ended September 30, 2003
------------------------------------
(In Thousands)
Co-Product Method
By-Product ----------------------------------------------
Method Copper Gold Silver Total
----------- ----------- ----------- ----------- ----------
Revenues $ 877,499 $ 877,499 $ 778,946 $ 17,375 $1,673,820
Site
production
and
delivery 478,753 250,986 222,797 4,970 478,753
Gold and
silver
credits (796,321) - - - -
Treatment
charges 199,828 104,760 92,994 2,074 199,828
Royalty on
metals 25,498 13,367 11,866 265 25,498
----------- ----------- ----------- ----------- ----------
Net cash
production
costs (92,242) 369,113 327,657 7,309 704,079
Depreciation
and
amortization 168,679 88,430 78,498 1,751 168,679
----------- ----------- ----------- ----------- ----------
Total
production
costs 76,437 457,543 406,155 9,060 872,758
Adjustments,
primarily
for copper
pricing on
prior
period
sales and
gold/silver
hedging 36,586 12,754 22,110 1,722 36,586
----------- ----------- ----------- ----------- ----------
Gross
profit $ 837,648 $ 432,710 $ 394,901 $ 10,037 $ 837,648
=========== =========== =========== =========== ==========
Pounds of
copper
sold (000) 1,132,100 1,132,100
Ounces of
gold sold 2,196,600
Ounces of
silver sold 3,726,900
Gross profit per pound of copper (cents)/
per ounce of gold and silver ($):
Revenues 77.4 77.4 364.04 5.10
----------- ----------- ----------- -----------
Site
production
and
delivery 42.3 22.2 101.43 1.33
Gold and
silver
credits (70.3) - - -
Treatment
charges 17.7 9.3 42.34 0.56
Royalty on
metals 2.3 1.2 5.40 0.07
----------- ----------- ----------- -----------
Net cash
production
costs (8.0) 32.7 149.17 1.96
Depreciation
and
amortization 14.9 7.8 35.74 0.47
----------- ----------- ----------- -----------
Total
production
costs 6.9 40.5 184.91 2.43
=========== =========== =========== ===========
Adjustments,
primarily
for copper
pricing on
prior
period
sales and
gold/silver
hedging 3.5 1.3 0.65 0.02
----------- ----------- ----------- -----------
Gross profit
per
pound/ounce 74.0 38.2 179.78 2.69
=========== =========== =========== ===========
Reconciliation to Amounts Reported
Production Depreciation
(In Thousands) and and
Revenues Delivery Amortization
----------- ---------- -------------
Totals presented above $1,673,820 $ 478,753 $ 168,679
Less: Treatment charges per above (199,828) N/A N/A
Royalty per above (25,498) N/A N/A
Other N/A 9,887 N/A
Adjustments, primarily for copper
pricing on prior period sales and
hedging per above 36,586 N/A N/A
---------- --------- ------------
Mining and exploration segment 1,485,080 488,640 168,679
Smelting and refining segment 668,803 648,222 21,158
Eliminations and other (351,006) (327,038) 10,213
---------- --------- ------------
As reported in FCX consolidated
financial statements $1,802,877 $ 809,824 $ 200,050
========== ========= ============
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
Nine Months Ended September 30, 2002
------------------------------------
(In Thousands)
Co-Product Method
By-Product ----------------------------------------------
Method Copper Gold Silver Total
----------- ----------- ----------- ----------- ----------
Revenues $ 764,371 $ 764,371 $ 496,847 $ 13,502 $1,274,720
Site
production
and
delivery 398,184 238,766 155,200 4,218 398,184
Gold and
silver
credits (510,349) - - - -
Treatment
charges 199,725 119,763 77,847 2,115 199,725
Royalty on
metals 16,351 9,805 6,373 173 16,351
---------- ---------- ---------- ---------- ---------
Net cash
production
costs 103,911 368,334 239,420 6,506 614,260
Depreciation
and
amortization 161,689 96,955 63,021 1,713 161,689
---------- ---------- ---------- ---------- ---------
Total
production
costs 265,600 465,289 302,441 8,219 775,949
Adjustments,
primarily
for copper
pricing on
prior
period
sales and
silver
hedging 10,421 9,591 - 830 10,421
---------- ---------- ---------- ---------- ---------
Gross
profit $ 509,192 $ 308,673 $ 194,406 $ 6,113 $ 509,192
========== ========== ========== ========== =========
Pounds of
copper
sold (000) 1,092,500 1,092,500
Ounces of
gold sold 1,614,900
Ounces of
silver sold 2,992,000
Gross profit per pound of copper (cents)/
per ounce of gold and silver ($):
Revenues 69.7 69.7 307.34 4.78
---------- ---------- ---------- ----------
Site
production
and
delivery 36.4 21.9 96.11 1.41
Gold and
silver
credits (46.7) - - -
Treatment
charges 18.3 11.0 48.21 0.71
Royalty on
metals 1.5 0.9 3.95 0.06
---------- ---------- ---------- ----------
Net cash
production
costs 9.5 33.8 148.27 2.18
Depreciation
and
amortization 14.8 8.9 39.02 0.57
---------- ---------- ---------- ----------
Total
production
costs 24.3 42.7 187.29 2.75
Adjustments,
primarily
for copper
pricing on
prior
period
sales and
silver
hedging 1.2 1.3 0.33 0.01
---------- ---------- ---------- ----------
Gross profit
per
pound/ounce 46.6 28.3 120.38 2.04
========== ========== ========== ==========
Reconciliation to Amounts Reported
Production Depreciation
(In Thousands) and and
Revenues Delivery Amortization
----------- ---------- -------------
Totals presented above $1,274,720 $ 398,184 $ 161,689
Less: Treatment charges per above (199,725) N/A N/A
Royalty per above (16,351) N/A N/A
Other N/A 3,750 N/A
Adjustments, primarily for copper
pricing on prior period sales and
hedging per above 10,421 N/A N/A
---------- --------- ------------
Mining and exploration segment 1,069,065 401,934 161,689
Smelting and refining segment 556,997 524,690 20,622
Eliminations and other (286,644) (247,352) 10,125
---------- --------- ------------
As reported in FCX consolidated
financial statements $1,339,418 $ 679,272 $ 192,436
========== ========= ============
FREEPORT-McMoRan COPPER & GOLD INC.
CATHODE CASH PRODUCTION COSTS
ATLANTIC COPPER CATHODE CASH PRODUCTION COST PER POUND OF COPPER Atlantic Copper cathode cash production cost per pound of copper is a measure intended to provide investors with information about the costs associated with our smelting operations in Spain. Other smelting companies present this measure, although our measure may not be comparable to similarly titled measures reported by other companies. Below is a reconciliation of our smelting and refining segment production costs reported in FCX's consolidated financial statements to the production costs used to calculate our cathode cash production cost per pound of copper (in thousands, except per pound amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
2003 2002 2003 2002
---------- --------- ---------- ----------
Smelting and refining
segment production costs
reported in FCX's
consolidated financial
statements $ 234,795 $170,780 $ 648,222 $ 524,690
Less:
Raw material purchase
costs (102,588) (83,507) (273,186) (244,452)
Production costs of wire
rod and wire (12,241) (11,854) (48,072) (37,369)
Production costs of
anodes sold (3,929) (2,660) (9,478) (6,481)
Currency hedging 2,272 285 6,388 (1,678)
Other 309 (1,710) (341) (3,224)
Credits:
Gold and silver revenues (92,612) (50,121) (244,872) (171,648)
Acid and other by-product
revenues (5,224) (4,431) (14,570) (12,453)
--------- -------- --------- ---------
Production costs used in
calculating cathode cash
production cost per pound $ 20,782 $ 16,782 $ 64,091 $ 47,385
========= ======== ========= =========
Pounds of cathode produced 135,300 135,600 408,100 412,100
========= ======== ========= =========
Cathode cash production cost
per pound before hedging $0.15 $0.12 $0.16 $0.12
========= ======== ========= =========
PT SMELTING CATHODE CASH PRODUCTION COST PER POUND OF COPPER PT Smelting cathode cash production cost per pound of copper is a measure intended to provide investors with information about the costs associated with our 25 percent-owned smelting operations in Indonesia. Other smelting companies present this measure, although our measure may not be comparable to similarly titled measures reported by other companies. Below is a reconciliation of the production costs used to calculate PT Smelting's cathode cash production cost per pound of copper to our equity in PT Smelting earnings (losses) reported in FCX's consolidated financial statements (in thousands, except per pound amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Production costs - PT
Smelting (100%) $ 14,486 $ 14,724 $ 41,914 $ 49,652
Add: Gold and silver
refining charges 1,734 753 4,597 2,641
Less: Acid and other by-
product revenues (2,949) (1,434) (6,837) (3,525)
Production cost of
anodes sold (1,064) (2,727) (3,488) (41)
---------- ---------- ---------- ----------
Production cost used in
calculating cathode cash
production cost $ 12,207 $ 11,316 $ 36,186 $ 48,727
========== ========== ========== ==========
Pounds of cathode produced 125,200 91,500 370,300 301,700
========== ========== ========== ==========
Cathode cash production
cost per pound $ 0.10 $ 0.12 $ 0.10 $ 0.16
========== ========== ========== ==========
Reconciliation to Amounts
Reported
Production costs per
above $ (14,486) $ (14,724) $ (41,914) $ (49,652)
Other costs (198,487) (117,054) (565,766) (345,566)
Revenue and other income 218,389 124,564 625,366 375,052
---------- ---------- ---------- ----------
PT Smelting net income
(loss) 5,416 (7,214) 17,686 (20,166)
PT Freeport Indonesia's
25% equity interest 1,354 (1,804) 4,422 (5,042)
Amortization of excess
investment cost (60) (60) (181) (181)
---------- ---------- ---------- ----------
Equity in PT
Smelting earnings
(losses) per FCX
consolidated
financial statements $ 1,294 $ (1,864) $ 4,241 $ (5,223)
========== ========== ========== ==========
FREEPORT-McMoRan COPPER & GOLD INC.
PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES PT Freeport Indonesia's Contract of Work provides for a 35 percent corporate income tax rate, and the tax treaty between Indonesia and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. provides for a withholding tax The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. of 10 percent on dividends and interest that PT Freeport Indonesia pays to the FCX parent company. FCX also incurs a U.S. alternative minimum tax at a rate of 2 percent based primarily on consolidated income, net of smelting and refining results. FCX currently records no income taxes at Atlantic Copper, which is subject to taxation in Spain, because it has not generated significant taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. in recent years and has substantial tax loss carry forwards for which FCX has provided no financial statement benefit. FCX receives minimal tax benefit from costs incurred by the parent company, primarily because it generates no taxable income from U.S. sources. FCX also currently receives no tax benefit from losses in its smelting and refining segment because those losses cannot be used to offset PT Freeport Indonesia's profits in Indonesia. Thus, the percentage of provision for income taxes to consolidated income before income taxes and minority interest will decrease as PT Freeport Indonesia's income increases and vice versa VICE VERSA. On the contrary; on opposite sides. absent changes in Atlantic Copper and parent company costs. Parent company costs consist primarily of interest, depreciation and amortization, and general and administrative expenses. Summaries of the significant components of the calculation of the consolidated provision for income taxes are shown below (in thousands, except percentages).
Three months ended Nine months ended
September 30, September 30,
------------------- ---------------------
2003 2002 2003 2002
--------- --------- ---------- ----------
Mining and exploration
segment operating income $257,804 $252,710 $731,440 $461,572
Mining and exploration
segment interest expense,
net (9,127) (16,590) (38,999) (54,500)
Intercompany operating profit
recognized (deferred) 19,393 (40,745) (16,492) (37,852)
--------- --------- ---------- ----------
Taxable income 268,070 195,375 675,949 369,220
Indonesian corporate income
tax rate (35%) plus U.S.
alternative minimum tax rate
(2%) 37% 37% 37% 37%
--------- --------- ---------- ----------
Corporate income taxes 99,186 72,289 250,101 136,611
PT Freeport Indonesia net
income 168,884 123,086 425,848 232,609
Withholding tax on FCX's
equity share 9.064% 9.064% 9.064% 9.064%
--------- --------- ---------- ----------
Withholding taxes 15,308 11,157 38,599 21,084
Changes in allowances and
other 9,427 (2,312) 10,343 (1,707)(a)
--------- --------- ---------- ----------
FCX consolidated provision
for income taxes $123,921 $81,134 $299,043$ $155,988
========= ========= ========== ==========
FCX consolidated effective
tax rate 54% 50% 55% 57%
========= ========= ========== ==========
a. Includes a $2.4 million tax refund.
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