PHOENIX--(BUSINESS WIRE)-- Freeport-McMoRan Inc. (NYSE: FCX)
To download a PDF of the release, please visit the following link: Freeport-McMoRan Reports Fourth-Quarter and Year Ended 2018 Results
- Net income attributable to common stock totaled $140 million, $0.09 per share, in fourth-quarter 2018. After adjusting for net charges of $21 million, $0.02 per share, fourth-quarter 2018 adjusted net income attributable to common stock totaled $161 million, $0.11 per share.
- Consolidated sales totaled 785 million pounds of copper, 266 thousand ounces of gold and 24 million pounds of molybdenum in fourth-quarter 2018, and 3.8 billion pounds of copper, 2.4 million ounces of gold and 94 million pounds of molybdenum for the year 2018. Fourth-quarter 2018 consolidated copper and gold sales were lower than consolidated production of 841 million pounds of copper and 334 thousand ounces of gold because of timing of shipments.
- Consolidated sales for the year 2019, which reflects a transition year, are expected to approximate 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 0.8 billion pounds of copper, 255 thousand ounces of gold and 24 million pounds of molybdenum in first-quarter 2019.
- Average realized prices in fourth-quarter 2018 were $2.75 per pound for copper, $1,255 per ounce for gold and $12.75 per pound for molybdenum.
- Average unit net cash costs in fourth-quarter 2018 were $1.54 per pound of copper and $1.07 per pound of copper for the year 2018. Unit net cash costs are expected to average $1.73 per pound of copper for the year 2019.
- Operating cash flows totaled $(62) million (net of $400 million in working capital uses and timing of other tax payments) in fourth-quarter 2018 and $3.9 billion (net of $0.6 billion in working capital uses and timing of other tax payments) for the year 2018. Based on current sales volume and cost estimates, and assuming average prices of $2.75 per pound for copper, $1,300 per ounce for gold and $12.00 per pound for molybdenum, operating cash flows are expected to approximate $1.8 billion (net of $0.2 billion in working capital uses and timing of other tax payments) for the year 2019.
- Capital expenditures totaled $0.6 billion in fourth-quarter 2018 (including approximately $0.3 billion for major mining projects) and $2.0 billion for the year 2018 (including approximately $1.2 billion for major mining projects). Capital expenditures for the year 2019 are expected to approximate $2.4 billion, including $1.5 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district in Indonesia and development of the Lone Star oxide project in Arizona.
- On December 21, 2018, FCX successfullycompleted the transaction with the Indonesian government regarding PT Freeport Indonesia's (PT-FI) long-term mining rights and share ownership. FCX expects its share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to its share of anticipated future cash flows under PT-FI's previous Contract of Work (COW) and joint venture arrangements with Rio Tinto (Joint Venture).
- At December 31, 2018, consolidated debt totaled $11.1 billionand consolidated cash totaled $4.2 billion. FCX had no borrowings and $3.5 billion available under its revolving credit facility at December 31, 2018.
- On December 19, 2018, FCX declared a quarterly cash dividend of $0.05 per share on its common stock, which will be paid on February 1, 2019.
- Preliminary estimated consolidated recoverable proven and probable reserves at December 31, 2018, totaled 119.6 billion pounds of copper, 30.8 million ounces of gold and 3.78 billion pounds of molybdenum, which includes net additions of 23.7 billion pounds of copper primarily in North America and South America, and 13.0 billion pounds of copper and 10.1 million ounces of gold related to PT-FI's acquisition of the Joint Venture interest.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income attributable to common stock of $140 million ($0.09 per share) in fourth-quarter 2018 and $2.3 billion ($1.55 per share) for the year 2018. After adjusting for net charges of $21 million ($0.02 per share), primarily reflecting accruals for disputed royalty matters in Peru and net charges at PT-FI, partly offset by gains on sales of assets and tax credits, adjusted net income attributable to common stock totaled $161 million ($0.11 per share) in fourth-quarter 2018. 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 2018, our global team achieved strong operating results with an ongoing focus on safety, productivity, cost management and capital discipline. We were successful in establishing a new partnership with the Indonesian government, which protects our long-term value at Grasberg. We continued to strengthen our balance sheet, commenced development of an exciting new copper project at Lone Star in Eastern Arizona, completed important construction projects to support long-term underground mining at Grasberg and added new reserves to our portfolio to extend mine lives and enhance future growth options. As we enter 2019, our priorities are focused on achieving important milestones to ramp-up production from our large-scale underground assets in the Grasberg minerals district, continuing our focus on productivity and cost management, advancing the Lone Star project and defining future growth options from our large portfolio of reserves and resources. Despite recent market uncertainty, we remain confident in the fundamentals and long-term outlook for copper and the opportunities to deliver substantial value to shareholders from our premier portfolio of geographically diverse long-lived copper assets."
SUMMARY FINANCIAL DATA | |||||||||||||||||||
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| (in millions, except per share amounts) | |||||||||||||||||||
| Revenuesa,b | $ | 3,684 | $ | 5,041 | $ | 18,628 | $ | 16,403 | |||||||||||
| Operating incomea | $ | 316 | $ | 1,479 | $ | 4,754 | $ | 3,690 | |||||||||||
Net (loss) income from continuing operations | $ | (9 | ) | $ | 1,193 | $ | 2,526 | $ | 2,029 | ||||||||||
| Net income attributable to common stockc,d | $ | 140 | $ | 1,041 | $ | 2,257 | $ | 1,817 | |||||||||||
| Diluted net income (loss) per share of common stock: | |||||||||||||||||||
| Continuing operations | $ | 0.09 | $ | 0.70 | $ | 1.56 | $ | 1.21 | |||||||||||
| Discontinued operations | — | 0.01 | (0.01 | ) | 0.04 | ||||||||||||||
| $ | 0.09 | $ | 0.71 | $ | 1.55 | $ | 1.25 | ||||||||||||
| Diluted weighted-average common shares outstanding | 1,457 | 1,455 | 1,458 | 1,454 | |||||||||||||||
| Operating cash flowse | $ | (62 | ) | $ | 1,654 | $ | 3,863 | $ | 4,666 | ||||||||||
| Capital expenditures | $ | 580 | $ | 390 | $ | 1,971 | $ | 1,410 | |||||||||||
| At December 31: | |||||||||||||||||||
| Cash and cash equivalents | $ | 4,217 | $ | 4,526 | $ | 4,217 | $ | 4,526 | |||||||||||
| Total debt, including current portion | $ | 11,141 | $ | 13,229 | $ | 11,141 | $ | 13,229 | |||||||||||
a. For segment financial results, refer to the supplemental schedules, "Business Segments," beginning on page X, which are available on FCX's website, "fcx.com." | |||||||||||||||||||
b. Includes adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(32) million ($(15) million to net income attributable to common stock or $(0.01) per share) in fourth-quarter 2018, $104 million ($42 million to net income attributable to common stock or $0.03 per share) in fourth-quarter 2017, $(70) million ($(31) million to net income attributable to common stock or $(0.02) per share) for the year 2018 and $81 million ($34 million to net income attributable to common stock or $0.02 per share) for the year 2017. For further discussion, refer to the supplemental schedule, "Derivative Instruments," on page IX, which is available on FCX's website, "fcx.com." | |||||||||||||||||||
c. Includes net (charges) gains of $(21) million ($(0.02) per share) in fourth-quarter 2018, $291 million ($0.20 per share) in fourth-quarter 2017, $48 million ($0.03 per share) for the year 2018 and $113 million ($0.08 per share) for the year 2017 that are described in the supplemental schedule, "Adjusted Net Income," on page VII, which is available on FCX's website, "fcx.com." | |||||||||||||||||||
d. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. For a summary of net impacts from changes in these deferrals, refer to the supplemental schedule, "Deferred Profits," on page IX, which is available on FCX's website, "fcx.com." | |||||||||||||||||||
e. Includes net working capital (uses) sources and timing of other tax payments of $(400) million in fourth-quarter 2018, $184 million in fourth-quarter 2017, $(554) million for the year 2018 and $573 million for the year 2017. | |||||||||||||||||||
SUMMARY OPERATING DATA | |||||||||||||||||
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Copper (millions of recoverable pounds) | |||||||||||||||||
| Production | 841 | 1,007 | 3,813 | 3,737 | |||||||||||||
| Sales, excluding purchases | 785 | 1,017 | 3,811 | 3,700 | |||||||||||||
| Average realized price per pound | $ | 2.75 | $ | 3.21 | $ | 2.91 | $ | 2.93 | |||||||||
| Site production and delivery costs per pounda | $ | 1.98 | $ | 1.61 | $ | 1.76 | $ | 1.60 | |||||||||
| Unit net cash costs per pounda | $ | 1.54 | $ | 1.03 | $ | 1.07 | $ | 1.19 | |||||||||
| Gold (thousands of recoverable ounces) | |||||||||||||||||
| Production | 334 | 567 | 2,439 | 1,577 | |||||||||||||
| Sales, excluding purchases | 266 | 593 | 2,389 | 1,562 | |||||||||||||
| Average realized price per ounce | $ | 1,255 | $ | 1,285 | $ | 1,254 | $ | 1,268 | |||||||||
| Molybdenum (millions of recoverable pounds) | |||||||||||||||||
| Production | 26 | 22 | 95 | 92 | |||||||||||||
| Sales, excluding purchases | 24 | 24 | 94 | 95 | |||||||||||||
| Average realized price per pound | $ | 12.75 | $ | 9.79 | $ | 12.50 | $ | 9.33 | |||||||||
a. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIII, which are available on FCX's website, "fcx.com." | |||||||||||||||||
Consolidated Sales Volumes
Fourth-quarter 2018 copper and gold production of 841 million pounds and 334 thousand ounces exceeded October 2018 sales estimates. Fourth-quarter 2018 copper and gold sales were lower than production, primarily reflecting adjustments to shipping schedules in Indonesia as a result of unscheduled maintenance at PT Smelting (PT-FI's 25-percent owned smelter and refinery in Gresik, Indonesia). Fourth-quarter 2018 copper and gold sales of 785 million pounds and 266 thousand ounces were lower than fourth-quarter 2017 sales of 1.0 billion pounds and 593 thousand ounces, primarily reflecting anticipated lower ore grades and mill rates in Indonesia.
Fourth-quarter 2018 molybdenum sales of 24 million pounds approximated both the October 2018 estimate and fourth-quarter 2017 sales.
Sales volumes for the year 2019 are expected to approximate 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 0.8 billion pounds of copper, 255 thousand ounces of gold and 24 million pounds of molybdenum in first-quarter 2019. As PT-FI transitions mining from the open pit to underground, its production is expected to be significantly lower in 2019 and 2020, compared to 2018. Metal production is expected to improve significantly by 2021 following a ramp-up period.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product credits) for FCX's copper mines of $1.54 per pound of copper in fourth-quarter 2018 were higher than unit net cash costs of $1.03 per pound in fourth-quarter 2017, primarily reflecting lower sales volumes in Indonesia and lower by-product credits.
Assuming average prices of $1,300 per ounce of gold and $12.00 per pound of molybdenum for 2019 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 $1.73 per pound of copper for the year 2019. FCX expects unit net cash costs to decline in 2020 and 2021 following a ramp-up period. The impact of price changes on 2019 consolidated unit net cash costs would approximate $0.01 per pound for each $50 per ounce change in the average price of gold and $0.03 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. An initial project to develop the Lone Star oxide ores commenced in first-quarter 2018, with first production expected by the end of 2020. Total capital costs, including mine equipment and pre-production stripping, are expected to approximate $850 million and will benefit from the utilization of existing infrastructure at the adjacent Safford operation. As of December 31, 2018, approximately $290 million has been incurred for this project. Initial production from the Lone Star oxide ores is expected to average approximately 200 million pounds of copper per year. The project also advances exposure to a significant sulfide resource. FCX expects to incorporate recent positive drilling and ongoing results in its future development plans.
Operating Data. Following is summary consolidated operating data for the North America copper mines for the fourth quarters and years 2018 and 2017:
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
| Copper (millions of recoverable pounds) | |||||||||||||||||||||
| Production | 353 | 367 | 1,404 | 1,518 | |||||||||||||||||
| Sales, excluding purchases | 333 | 354 | 1,428 | 1,484 | |||||||||||||||||
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