News Release Details

FCX Reports Second-Quarter and Six-Month 2009 Results

07/21/09

PHOENIX--(BUSINESS WIRE)--Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):

  • Net income attributable to common stock for second-quarter 2009 was $588 million, $1.38 per share, compared with $947 million, $2.25 per share, for second-quarter 2008. Net income attributable to common stock for the first six months of 2009 was $631 million, $1.54 per share, compared with $2.1 billion, $4.89 per share, for the first six months of 2008.
  • Consolidated sales from mines for second-quarter 2009 totaled 1.1 billion pounds of copper, 837 thousand ounces of gold and 16 million pounds of molybdenum, compared with 942 million pounds of copper, 265 thousand ounces of gold and 20 million pounds of molybdenum for second-quarter 2008.
  • Consolidated sales from mines are expected to approximate 3.9 billion pounds of copper, 2.4 million ounces of gold and 56 million pounds of molybdenum for the year 2009, including 910 million pounds of copper, 550 thousand ounces of gold and 15 million pounds of molybdenum for third-quarter 2009.
  • Consolidated unit net cash costs (net of by-product credits) averaged $0.43 per pound for second-quarter 2009 compared with $1.25 per pound in the second quarter of 2008. Assuming average prices of $900 per ounce for gold and $8 per pound for molybdenum for the second half of 2009, consolidated unit net cash costs are estimated to average approximately $0.70 per pound for the year 2009.
  • Operating cash flows totaled $1.2 billion for second-quarter 2009 and $896 million for the first six months of 2009, net of $973 million in working capital uses (principally related to customer settlements on provisionally priced prior year copper sales). Using estimated sales volumes and assuming average prices of $2.25 per pound for copper, $900 per ounce for gold and $8 per pound for molybdenum for the second half of 2009, operating cash flows for the year 2009 are expected to approximate $3.0 billion, net of $0.5 billion in working capital requirements.
  • Capital expenditures totaled $375 million for second-quarter 2009 and $894 million for the first six months of 2009. Capital spending is expected to decline in the second half of 2009, reflecting the substantial completion of the Tenke Fungurume project. FCX currently expects capital expenditures to approximate $1.4 billion for the year 2009, including sustaining capital of $0.6 billion and $0.8 billion for major projects.
  • Construction activities for the Tenke Fungurume project are substantially complete. Copper production commenced in March 2009 and 26 million pounds of copper cathode were sold during the second quarter. Commissioning of the cobalt circuit began during the second quarter. FCX expects to ramp up to full annual capacity approximating 250 million pounds of copper and 18 million pounds of cobalt in the second half of 2009.
  • Total debt approximated $7.2 billion and consolidated cash was $1.3 billion at June 30, 2009.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported second-quarter 2009 net income attributable to common stock of $588 million, $1.38 per share, compared with $947 million, $2.25 per share, for the second quarter of 2008. For the six months ended June 30, 2009, FCX reported net income attributable to common stock of $631 million, $1.54 per share, compared with $2.1 billion, $4.89 per share, in the 2008 six-month period.

James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer, said, “Our results reflect strong operating performance at all of our operations and successful execution of our plans. Over the past six months, we have achieved meaningful reductions in our costs, enabling us to generate strong margins and cash flows. Results from the Grasberg operation are particularly impressive, reflecting the mining of a high-grade section in the massive Grasberg open pit. We are also successfully transitioning our Tenke Fungurume project from a construction project to operating status, which will enhance our future cash flows. We commend our entire team for their significant achievements in the first half of the year and are pleased with how our company is positioned to build on these achievements to generate value for shareholders.”


SUMMARY FINANCIAL AND OPERATING DATA




Second Quarter
Six Months


2009
2008
2009
2008
Financial Data (in millions, except per share amounts)











Revenuesa
$ 3,684b

$ 5,441b

$ 6,286b

$ 11,113b
Operating income
$ 1,508b

$ 2,053b

$ 2,180b

$ 4,449b
Net income
$ 812

$ 1,284

$ 1,019

$ 2,789
Net income attributable to common stockc
$ 588b

$ 947b

$ 631b

$ 2,069b
Diluted net income per share of common stock
$ 1.38b

$ 2.25b

$ 1.54b

$ 4.89b
Diluted weighted-average common shares outstandingd

471


450


426


449
Operating cash flows
$ 1,154e

$ 1,009e

$ 896e

$ 1,624e
Capital expenditures
$ 375

$ 655

$ 894

$ 1,163













FCX Operating Data











Copper (millions of recoverable pounds)











Production

1,069


941


2,110


1,821
Sales, excluding purchased metal

1,102


942


2,122


1,853
Average realized price per pound
$ 2.22

$ 3.85

$ 2.03

$ 3.77
Site production and delivery unit costsf
$ 1.04

$ 1.59

$ 1.05

$ 1.53
Unit net cash costsf
$ 0.43

$ 1.25

$ 0.54

$ 1.16
Gold (thousands of recoverable ounces)











Production

802


250


1,397


525
Sales, excluding purchased metal

837


265


1,382


545
Average realized price per ounce
$ 932

$ 912

$ 919

$ 917
Molybdenum (millions of recoverable pounds)











Production

13


18


27


36
Sales, excluding purchased metal

16


20


26


40
Average realized price per pound
$ 10.11

$ 31.59

$ 10.65

$ 31.63

a. Includes impacts of adjustments to provisionally priced concentrate and cathode sales recognized in prior periods (see discussion beginning on page 8).

b. Includes unrealized gains totaling $14 million ($14 million to net income attributable to common stock or $0.03 per share) in second-quarter 2009, $2 million ($1 million to net income attributable to common stock or less than $0.01 per share) in second-quarter 2008, $20 million ($20 million to net income attributable to common stock or $0.05 per share) for the first six months of 2009 and $11 million ($7 million to net income attributable to common stock or $0.01 per share) for the first six months of 2008 on copper derivative contracts entered into in connection with certain of FCX’s sales contracts with its U.S. copper rod customers. These contracts allow FCX to receive market prices in the month of shipment while the customer pays the fixed price they requested.

c. After noncontrolling interests and preferred dividends.

d. As applicable, diluted shares reflect the assumed conversion of FCX’s 5½% Convertible Perpetual Preferred Stock and 6¾% Mandatory Convertible Preferred Stock. See footnote e on page IV. In addition, the 2009 periods include 26.8 million shares of common stock sold in February 2009.

e. Includes working capital uses of $54 million in second-quarter 2009, $753 million in second-quarter 2008, $973 million in the first six months of 2009 and $2.1 billion in the first six months of 2008.

f. Reflects per pound weighted average site production and delivery unit costs and unit net cash costs, net of by-product credits, excluding Tenke Fungurume which is currently in start up. For reconciliations of unit costs per pound by operating division to production and delivery costs reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VII, which is available on FCX’s web site, “www.fcx.com.”


OPERATIONS

Consolidated. Second-quarter 2009 consolidated copper sales of 1.1 billion pounds were higher than second-quarter 2008 sales of 942 million pounds and the April 2009 estimate of 955 million pounds. The increase from the prior-year quarter primarily reflects the mining of a higher grade section in the Grasberg open pit partially offset by production curtailments in North America. The favorable variance to the April 2009 estimate reflects the accelerated mining of a high-grade section in the Grasberg open pit.

Second-quarter 2009 consolidated gold sales of 837 thousand ounces were significantly higher than second-quarter 2008 gold sales of 265 thousand ounces because of higher ore grades at Grasberg. Second-quarter 2009 consolidated sales of gold exceeded the April 2009 estimate of 650 thousand ounces primarily because of accelerated mining of a high-grade section in the Grasberg open pit.

Consolidated molybdenum sales of 16 million pounds in the second quarter of 2009 were lower than second-quarter 2008 sales of 20 million pounds but were higher than the April 2009 estimate of 11 million pounds. Sales were higher than first-quarter 2009 and the April 2009 estimate because of increased sales to Europe and Asia.

Consolidated unit site production and delivery costs averaged $1.04 per pound of copper in second-quarter 2009, 35 percent lower than second-quarter 2008 unit costs of $1.59 per pound. Second-quarter 2009 unit net cash costs, after by-product credits, of $0.43 per pound were significantly lower than the year-ago period primarily as a result of higher ore grades at Grasberg, reduced operating rates following production curtailments at North America mining operations, achievement of operating efficiencies, and lower energy and other commodity-based input costs. Assuming average prices of $2.25 per pound for copper, $900 per ounce for gold and $8 per pound for molybdenum for the second half of 2009, and using recent prices for commodity-based input costs, unit net cash costs are expected to average approximately $0.70 per pound for the year 2009. Because of the impact of projected lower second-half 2009 copper and gold sales volumes from Grasberg, unit net cash costs for the second half of 2009 are expected to be higher than the first-half 2009 unit net cash costs. FCX will incorporate Tenke Fungurume in its consolidated unit net cash cost disclosures upon completion of ramp-up activities.

North America Copper Mines. FCX operates five open-pit copper mines in North America (Morenci, Sierrita, Bagdad and Safford in Arizona and Tyrone in New Mexico). By-product molybdenum is produced primarily at Sierrita and Bagdad. All of the North America mining operations are wholly owned, except for Morenci. FCX records its 85 percent joint venture interest in Morenci using the proportionate consolidation method.










Second Quarter
Six Months
North America Copper Mining Operations
2009
2008
2009
2008

















Copper (millions of recoverable pounds)















Production

272


350


561


677
Sales, excluding purchased metal

281


347


582


686
Average realized price per pound
$ 2.18

$ 3.82

$ 1.88

$ 3.66

















Molybdenum (millions of recoverable pounds)a















Production

7


7


13


15

















Unit net cash costs per pound of copper:















Site production and delivery, after adjustments
$ 1.24

$ 1.84

$ 1.28

$ 1.74
By-product credits, primarily molybdenum

(0.21)


(0.70)


(0.19)


(0.74)
Treatment charges

0.09


0.10


0.08


0.10
Unit net cash costsb
$ 1.12

$ 1.24

$ 1.17

$ 1.10

a. Represents by-product production. Sales of by-product molybdenum are reflected in the molybdenum division discussion that begins on page 7.

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VII, which is available on FCX’s web site, “www.fcx.com.”


Consolidated copper sales in North America totaled 281 million pounds in the second quarter of 2009, 19 percent lower than second-quarter 2008 sales primarily reflecting curtailed production rates. FCX continues to operate at reduced rates at certain of its North America copper mines in response to weak global economic conditions.

For the year 2009, FCX expects sales from North America copper mines to approximate 1.1 billion pounds of copper, compared with 1.4 billion pounds of copper for 2008. By-product molybdenum production is expected to approximate 25 million pounds in 2009, compared with 30 million pounds in 2008. Copper production in 2010 is currently expected to approximate 1.0 billion pounds, reflecting impacts of reduced 2009 mining activities on 2010 leaching operations. Operating plans continue to be reviewed and additional adjustments will be made in response to changes in market conditions.

North America unit site production and delivery costs were lower in the 2009 periods as compared with the 2008 periods primarily because of cost reduction and efficiency efforts, lower operating rates and reduced input costs, primarily for energy. These decreases were partly offset by changes in inventory, including draw downs of sulphuric acid and other components of inventory with higher costs. Molybdenum by-product credits were significantly lower in the 2009 periods compared with the 2008 periods primarily because of lower molybdenum prices.

Based on current operating plans and assuming achievement of current sales estimates, an average molybdenum price of $8 per pound for the second half of 2009 and estimates for commodity-based input costs, FCX estimates that its average unit net cash costs, including molybdenum credits, for its North America copper mines would approximate $1.19 per pound of copper for the year 2009. Unit net cash costs for the year 2009 would change by approximately $0.008 per pound for each $1 per pound change in the average price of molybdenum for the second half of 2009.

South America Copper Mines. FCX operates four copper mines in South America – Cerro Verde in Peru and Candelaria, Ojos del Salado and El Abra in Chile. FCX owns a 53.56 percent interest in Cerro Verde, an open-pit mine currently producing both electrowon copper cathodes and copper concentrates. FCX owns 80 percent of the Candelaria and Ojos del Salado mining complexes, which include the Candelaria open-pit and underground mines and the Ojos del Salado underground mines. These mines use common processing facilities to produce copper concentrates. FCX owns a 51 percent interest in El Abra, an open-pit mine producing electrowon copper cathodes. All operations in South America are consolidated in FCX’s financial statements.










Second Quarter
Six Months
South America Copper Mining Operations
2009
2008
2009
2008

















Copper (millions of recoverable pounds)















Production

358


369


706


722
Sales

363


366


713


731
Average realized price per pound
$ 2.22

$ 3.86

$ 2.10

$ 3.84

















Gold (thousands of recoverable ounces)















Production

24


25


47


51
Sales

25


26


48


53
Average realized price per ounce
$ 928

$ 910

$ 915

$ 914

















Unit net cash costs per pound of copper:















Site production and delivery, after adjustments
$ 1.00

$ 1.15

$ 1.00

$ 1.12
By-product credits, primarily gold

(0.10)


(0.12)


(0.11)


(0.13)
Treatment charges

0.15


0.19


0.15


0.19
Unit net cash costsa
$ 1.05

$ 1.22

$ 1.04

$ 1.18

a. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VII, which is available on FCX’s web site, “www.fcx.com.”


For the year 2009, FCX expects South America sales of 1.4 billion pounds of copper and 100 thousand ounces of gold, compared with 1.5 billion pounds of copper and 116 thousand ounces of gold for 2008. Projected sales volumes for the year 2009 are lower than the year 2008 because of the impact of previously anticipated mining of lower ore grades at Candelaria.

South America unit site production and delivery costs were lower in the 2009 periods as compared with the 2008 periods primarily because of cost reduction and efficiency efforts and lower input costs, primarily for energy, partly offset by draw downs of inventory with higher costs. Treatment charges were lower in the 2009 periods compared with the 2008 periods because of lower price participation resulting from lower copper prices.

Assuming achievement of current sales estimates and estimates for commodity-based input costs, FCX estimates that its average unit net cash costs, including gold credits, for its South America copper mines would approximate $1.11 per pound of copper for the year 2009.

Indonesia Mining. Through its 90.64 percent owned and wholly consolidated subsidiary PT Freeport Indonesia (PT-FI), FCX operates the world’s largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia.










Second Quarter
Six Months
Indonesia Mining Operations
2009
2008
2009
2008

















Copper (millions of recoverable pounds)















Production

403


222


807


422
Sales

432


229


801


436
Average realized price per pound
$ 2.24

$ 3.88

$ 2.06

$ 3.84

















Gold (thousands of recoverable ounces)















Production

778


221


1,348


467
Sales

811


235


1,332


486
Average realized price per ounce
$ 932

$ 912

$ 919

$ 917

















Unit net cash (credits) costs per pound of copper:

















Site production and delivery, after adjustments
$ 0.93

$ 1.90

$ 0.92

$ 1.88
Gold and silver credits

(1.80)


(0.99)


(1.58)


(1.11)
Treatment charges

0.22


0.28


0.21


0.31
Royalties

0.12


0.13


0.09


0.13
Unit net cash (credits) costsa
$ (0.53)

$ 1.32

$ (0.36)

$ 1.21

a. For a reconciliation of unit net cash (credits) costs per pound to production and delivery costs applicable to sales reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VII, which is available on FCX’s web site, “www.fcx.com.”


Indonesia copper and gold sales in the second quarter of 2009 were significantly higher than in the second quarter of 2008 as a result of mining in a higher ore grade section of the Grasberg open pit, including accelerated mining of a higher grade section previously scheduled for future periods. At the Grasberg mine, the sequencing in mining areas with varying ore grades causes fluctuations in the timing of ore production, resulting in varying quarterly and annual sales of copper and gold.

FCX expects Indonesia sales of 1.3 billion pounds of copper and 2.3 million ounces of gold for the year 2009, compared with 1.1 billion pounds of copper and 1.2 million ounces of gold for 2008. FCX has increased its estimated 2009 gold sales by 100 thousand ounces from previous estimates because of the accelerated mining of a high-grade section previously projected in future periods. Copper and gold sales volumes in the second half of 2009 are expected to be lower than first-half 2009 volumes because of mine sequencing.

PT-FI’s unit net cash (credits) costs, including gold and silver credits, averaged a net credit of $0.53 per pound for the second quarter of 2009, compared with a net cost of $1.32 per pound for the second quarter of 2008. The lower unit net cash costs in the 2009 periods primarily reflected higher copper and gold volumes. Unit site production and delivery costs will vary with fluctuations in production volumes because of the primarily fixed nature of PT-FI’s cost structure.

Assuming achievement of current 2009 sales estimates, average gold prices of $900 per ounce for the second half of 2009 and revised estimates for energy, currency exchange rates and other cost factors, FCX expects PT-FI’s average unit net cash costs per pound to approximate a net credit of $0.15 per pound for the year 2009. Second-half 2009 unit net cash costs are expected to be higher than first-half 2009 unit net cash costs because of lower projected sales volumes. Unit net cash costs for 2009 would change by approximately $0.035 per pound for each $50 per ounce change in the average price of gold for the second half of 2009.

Africa Mining. FCX holds an effective 57.75 percent interest in the Tenke Fungurume copper and cobalt mining concessions in the Katanga province of the Democratic Republic of Congo (DRC) and is the operator of the project. Construction activities on the $1.8 billion project are substantially complete and the first copper cathode was produced in March 2009. The cobalt plant is currently being commissioned. Start-up issues are being addressed in the copper and cobalt circuits and FCX expects to ramp up to full annual capacity of 250 million pounds of copper and 18 million pounds of cobalt in the second half of 2009. In the second quarter of 2009, Tenke Fungurume produced 36 million pounds of copper and sold 26 million pounds of copper. FCX expects Tenke Fungurume copper sales to approximate 100 million pounds for the year 2009.

The high grades of copper and cobalt produced at the Tenke Fungurume mine are expected to result in an attractive cost structure once the operation reaches full capacity. Upon reaching design capacity in the copper and cobalt circuits and assuming average cobalt prices of $10 per pound, unit net cash costs are anticipated to be less than $0.50 per pound of copper. Each $2 per pound change in average prices of cobalt would impact unit net cash costs by $0.12 per pound of copper. FCX will incorporate Tenke Fungurume in its unit net cash cost disclosures upon completion of ramp-up activities.

FCX continues to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective district at Tenke Fungurume and expects its ore reserves to increase significantly over time. These analyses are being incorporated in future plans to evaluate opportunities for expansion.

The project has been designed and constructed in a world-class fashion, using modern technology and following international standards for environmental management, occupational safety and social responsibility. The facilities include impermeable lined tailing storage and waste-water treatment ponds, the first of their kind in the region. FCX is also making significant investments in infrastructure in the region that will have lasting benefits to the country, including upgrading a national road and the regional power generation and transmission systems. FCX’s social and community development programs continue to expand, including development of local micro-enterprise businesses, agricultural capacity-building initiatives, malaria abatement programs, additional potable water wells, new medical facilities and several new schools. The project will continue to provide important benefits to the Congolese through employment and the provision of local services and to the DRC government through substantial tax, royalty and dividend payments.

FCX is continuing to work cooperatively with the DRC government to resolve the ongoing contract review. FCX believes its contract is fair and equitable, complies with Congolese law and is enforceable without modifications. The review process has not affected the development schedule or current operations.

Molybdenum. FCX is the world’s largest producer of molybdenum. FCX conducts molybdenum mining operations at the wholly owned Henderson underground mine in Colorado in addition to sales of by-product molybdenum primarily from FCX’s North America copper mines.






Consolidated
Second Quarter
Six Months
Molybdenum Mining Operations
2009
2008
2009
2008









Molybdenum (millions of recoverable pounds)







Productiona

6

11

13

20
Sales, excluding purchased metalb

16

20

26

40
Average realized price per pound
$ 10.11
$ 31.59
$ 10.65
$ 31.63

a. Amounts reflect production at Henderson.

b. Includes sales of molybdenum produced as a by-product at the North and South America copper mines.


In the second quarter of 2009, consolidated molybdenum sales from the Henderson mine and by-product mines totaled 16 million pounds, 20 percent lower than the second quarter of 2008. Molybdenum markets have been significantly affected by the downturn in global economic conditions. Second-quarter 2009 molybdenum sales were 60 percent higher than the first quarter of 2009 and 45 percent higher than the April 2009 estimate, reflecting improved demand from Europe and Asia.

FCX continues to operate its Henderson primary molybdenum mine at 60 percent of capacity and has curtailed molybdenum production at Cerro Verde. FCX will continue to review its operating plans and adjust its operating rates to reflect market conditions.

For the year 2009, FCX expects molybdenum sales from its mines to approximate 56 million pounds, compared with 71 million pounds in 2008. The increase from the previous estimate of 50 million pounds reflects improved sales to Europe and Asia. For 2009, approximately 90 percent of FCX’s molybdenum sales are expected to be priced at prevailing market prices. The Metals Week Dealer Oxide closing price for molybdenum as of July 20, 2009, was $12.30 per pound.

Unit net cash costs at the Henderson molybdenum mine averaged $6.00 per pound of molybdenum for the second quarter of 2009, $4.98 per pound for the second quarter of 2008, $5.79 per pound for the 2009 six-month period and $5.06 per pound for the 2008 six-month period. Unit net cash costs were higher in the 2009 periods as compared with the 2008 periods, primarily because of lower volumes. Assuming achievement of current 2009 sales estimates, FCX estimates 2009 average unit net cash costs for its Henderson mine will approximate $6.00 per pound of molybdenum. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VII, which is available on FCX’s web site, “www.fcx.com.”

EXPLORATION ACTIVITIES

FCX is conducting exploration activities near its existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where it currently operates. Drilling activities were significantly expanded in 2007 and 2008 and were successful in providing significant reserve additions and in identifying potential additional ore adjacent to existing ore bodies. Results indicate opportunities for significant future potential reserve additions at Morenci, Sierrita and Bagdad in North America; Cerro Verde in South America and in the high potential Tenke Fungurume district.

Exploration spending in 2009 is estimated to approximate $75 million, compared with $248 million in 2008. FCX continues to analyze exploratory data gained through the core drilling previously undertaken in addition to conducting new activities.

PROVISIONAL PRICING AND OTHER

For the first six months of 2009, approximately 58 percent of FCX’s mined copper was sold in concentrate, 21 percent as cathodes and 21 percent as rod (principally from North America operations). Under the long-established structure of sales agreements prevalent in the industry, substantially all of FCX’s concentrate and cathode sales are provisionally priced at the time of shipment. The provisional prices are finalized in a contractually specified future period (generally one to four months from the shipment date) primarily based on quoted London Metal Exchange (LME) prices. Because a significant portion of FCX’s concentrate and cathode sales in any quarterly period usually remain subject to final pricing, the quarter-end forward price is a major determinant of recorded revenues and the average recorded copper price for the period.

At March 31, 2009, 407 million pounds of copper (net of intercompany sales and noncontrolling interests) were provisionally priced at $1.83 per pound. In early April 2009, FCX entered into forward copper sales contracts to lock in prices of $1.86 per pound for the period from April through July 2009 on PT-FI’s provisionally priced copper sales totaling 355 million pounds (including intercompany sales) as of March 31, 2009. Forward copper sales contracts on 63 million pounds of copper remain open at June 30, 2009, and are scheduled to final price in July 2009. Adjustments to the March 31, 2009, provisionally priced copper sales (net of forward copper sales contracts) resulted in a net increase to consolidated revenues of $43 million ($13 million to net income attributable to common stock or $0.03 per share) in the second quarter of 2009, compared with $5 million ($1 million to net income attributable to common stock or less than $0.01 per share) in the second quarter of 2008. Adjustments to prior year provisionally priced copper sales in the first six months of 2009 resulted in a net increase to consolidated revenues of $132 million ($62 million to net income attributable to common stock or $0.15 per share) in the 2009 six-month period, compared with $267 million ($164 million to net income attributable to common stock or $0.37 per share) in the 2008 six-month period.

LME copper prices averaged $2.12 per pound during the second quarter of 2009, compared with FCX’s recorded average price of $2.22 per pound. Approximately 57 percent of FCX’s consolidated copper sales during the second quarter were provisionally priced at the time of shipment and are subject to final pricing over the second half of 2009. At June 30, 2009, FCX had copper sales of 434 million pounds of copper (net of intercompany sales, forward sales contracts and noncontrolling interests) priced at an average of $2.25 per pound, subject to final pricing over the next several months. FCX has not entered into additional forward sales contracts since April 2009 for its provisionally priced sales. Each $0.05 change in the price from the June 30, 2009, price for provisionally priced sales would have an approximate $14 million effect on FCX’s 2009 net income attributable to common stock. The LME closing settlement price for copper on July 20, 2009, was $2.45 per pound.

FCX defers recognizing profits on PT-FI’s and its South America sales to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting, PT-FI’s 25 percent-owned Indonesian smelting unit, until final sales to third parties occur. Changes in these net deferrals resulted in reductions in FCX’s net income attributable to common stock totaling $32 million, $0.07 per share, in the second quarter of 2009 and $95 million, $0.22 per share, in the first six months of 2009. For the 2008 periods, changes in these net deferrals resulted in a reduction in FCX’s net income attributable to common stock of $6 million, $0.01 per share, in the second quarter and an addition to FCX’s net income attributable to common stock totaling less than $1 million, less than $0.01 per share, in the first six months of 2008. At June 30, 2009, FCX’s net deferred profits on PT-FI and South America concentrate inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $123 million.

CASH and DEBT

At June 30, 2009, FCX had consolidated cash of $1.3 billion. Net of noncontrolling interests’ share, taxes and other costs, cash available to parent company is $1.0 billion as shown below (in millions):







June 30,


2009
Cash at domestic companies
$ 477a
Cash from international operations

842
Total consolidated cash

1,319
Less: Noncontrolling interests’ share

(186)

Cash, net of noncontrolling interests’ share

1,133
Taxes and other costs if distributed

(118)
Net cash available to parent company
$ 1,015

a. Includes cash at FCX’s parent and North America mining operations.


At June 30, 2009, FCX had $7.2 billion in debt. FCX had no borrowings and $73 million of letters of credit issued under its revolving credit facilities, resulting in total availability of approximately $1.4 billion at June 30, 2009.

FCX also announced today that it has called for redemption $340 million in 6?% Senior Notes due 2014. The notes will be redeemed on August 20, 2009, at a redemption price of 103.438% of the principal amount, equivalent to $352 million, together with accrued and unpaid interest. Annual interest cost savings approximate $23 million. FCX expects to record an approximate $14 million charge to net income in the third quarter in connection with the redemption. FCX may consider additional opportunities to prepay debt in advance of scheduled maturities.

FCX’s debt maturities in the near-term, excluding $340 million of 6?% Senior Notes due 2014 being called for redemption in August 2009, are indicated in the table below (in millions).





2009
$ 39
2010

15
2011

120
Total 2009 - 2011
$ 174




OUTLOOK

Projected sales volumes for 2009 approximate 3.9 billion pounds of copper, 2.4 million ounces of gold and 56 million pounds of molybdenum, including 910 million pounds of copper, 550 thousand ounces of gold and 15 million pounds of molybdenum in the third quarter of 2009. The achievement of FCX’s sales estimates will be dependent on the achievement of targeted mining rates, the successful operation of production facilities, the impact of weather conditions and other factors.

Using estimated sales volumes for 2009 and assuming average prices of $2.25 per pound of copper, $900 per ounce of gold and $8 per pound of molybdenum for the second half of 2009, FCX’s consolidated operating cash flows, net of an estimated $0.5 billion of working capital requirements, would approximate $3.0 billion in 2009. Working capital requirements principally reflect final settlements with customers in early 2009 of prior year provisionally priced sales. The impact of price changes on FCX’s operating cash flows over the second half of 2009 would approximate $200 million for each $0.10 per pound change for copper, $40 million for each $50 per ounce change for gold and $20 million for each $1 per pound change for molybdenum.

FCX’s capital expenditures are currently estimated to approximate $1.4 billion for 2009 and $1.0 billion for 2010. Major projects in 2009 are expected to approximate $0.8 billion, which primarily includes Tenke and underground development activities at Grasberg. Major projects in 2010 are expected to approximate $0.5 billion, which primarily includes underground development activities at Grasberg and the sulfide project at El Abra. Capital spending plans will continue to be reviewed and adjusted in response to changes in market conditions and other factors.

FINANCIAL POLICY

FCX has a long-standing tradition of seeking to build shareholder values through pursuing development projects with high rates of return and returning cash to shareholders through common stock dividends and share purchases. FCX is committed to maintaining a strong balance sheet.

In late 2008, FCX suspended its share purchase program and common stock dividend in response to market conditions. The Board will continue to review FCX’s financial policy on an ongoing basis.

FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the world’s largest producer of molybdenum.

The company’s portfolio of assets includes the Grasberg mining complex, the world’s largest copper and gold mine in terms of recoverable reserves, significant mining operations in the Americas, including the large scale Morenci and Safford minerals districts in North America and the Cerro Verde and El Abra operations in South America, and the Tenke Fungurume minerals district in the DRC. Additional information about FCX is available on FCX’s web site at “www.fcx.com.”

Cautionary Statement and Regulation G Disclosure: This press release contains forward-looking statements 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 projected ore grades and milling rates, projected sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, the impact of copper, gold, molybdenum and cobalt price changes, and potential prepayments of debt, future dividend payments and open market purchases of FCX common stock. Accuracy of the forward-looking statements depends on assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments. FCX cautions readers that it assumes no obligation to update the forward-looking statements in this press release and does not intend to update the forward-looking statements more frequently than quarterly. Additionally, important factors that might cause future results to differ from these projections include mine sequencing, production rates, industry risks, commodity prices, political risks, the potential effects of the recent violence in Indonesia, weather-related risks, labor relations, currency translation risks and other factors described in FCX's Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission (SEC).

This press release also contains certain financial measures such as unit net cash costs per pound of copper and per pound of molybdenum. As required by SEC Regulation G, reconciliations of these measures to amounts reported in FCX’s consolidated financial statements are in the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VII, which is available on FCX’s web site, “www.fcx.com.”

A copy of this release is available on FCX’s web site at www.fcx.com. A conference call with securities analysts about second-quarter 2009 results is scheduled for today at 10:00 a.m. Eastern Time. The conference call will be broadcast on the Internet along with slides. Interested parties may listen to the conference call live and view the slides by accessing “www.fcx.com.” A replay of the webcast will be available through Friday, August 21, 2009.


FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA




Three Months Ended June 30,

COPPER



Production

Sales
(millions of recoverable pounds)

2009

2008

2009

2008
MINED COPPER (FCX’s net interest in %)















North America

















Morenci (85%)

103a


155a



111a



158a
Bagdad (100%)

55


54



54



54
Sierrita (100%)

43


49



41



46
Safford (100%)

36


24



38



20
Tyrone (100%)

21


16



20



15
Chino (100%)

10


47



13



48
Miami (100%)

4


4



4



5
Other (100%)

-


1



-



1
Total North America

272


350



281



347

















South America

















Cerro Verde (53.56%)

169


179



174



181
Candelaria/Ojos del Salado (80%)

98


97



99



101
El Abra (51%)

91


93



90



84
Total South America

358


369



363



366

















Indonesia

















Grasberg (90.64%)

403b


222b



432b



229b

Africa

















Tenke Fungurume (57.75%)

36


-



26



-

















Consolidated

1,069


941



1,102



942

















Less noncontrolling participants’ share

196


169



196



167
Net

873


772



906



775

















Consolidated sales from mines










1,102



942
Purchased copper










51



130
Total consolidated sales










1,153



1,072

















Average realized price per pound









$ 2.22


$ 3.85

















GOLD

















(thousands of recoverable ounces)















MINED GOLD (FCX’s net interest in %)















North America (100%)

-


4



1



4
South America (80%)

24


25



25



26
Indonesia (90.64%)

778b


221b



811b



235b
Consolidated

802


250



837



265

















Less noncontrolling participants’ share

77


26



81



27
Net

725


224



756



238

















Consolidated sales from mines










837



265
Purchased gold










-c



1
Total consolidated sales










837



266

















Average realized price per ounce









$ 932


$ 912


















MOLYBDENUM

















(millions of recoverable pounds)















MINED MOLYBDENUM (FCX’s net interest in %)















Henderson (100%)

6


11



N/A



N/A
By-product – North America (100%)

7a


7a



N/A



N/A
By-product – Cerro Verde (53.56%)

-


- c



N/A



N/A
Consolidated

13


18



16



20

















Less noncontrolling participants’ share

-


- c



-



- c
Net

13


18



16



20

















Consolidated sales from mines










16



20
Purchased molybdenum










2



2
Total consolidated sales










18



22

















Average realized price per pound









$ 10.11


$ 31.59

















a. Amounts are net of Morenci’s joint venture partner’s 15 percent interest.

b. Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with the terms of the joint venture agreement.

c. Amount rounds to less than 1 million.


FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA




Six Months Ended June 30,

COPPER



Production

Sales
(millions of recoverable pounds)

2009

2008

2009

2008
MINED COPPER (FCX’s net interest in %)















North America

















Morenci (85%)

216a


301a



235a



318a
Bagdad (100%)

110


106



107



107
Sierrita (100%)

84


90



83



87
Safford (100%)

83


46



79



33
Tyrone (100%)

42


31



40



30
Chino (100%)

18


91



30



97
Miami (100%)

8


9



8



10
Other (100%)

-


3



-



4
Total North America

561


677



582



686


















South America

















Cerro Verde (53.56%)

336


345



341



349
Candelaria/Ojos del Salado (80%)

194


197



195



204
El Abra (51%)

176


180



177



178
Total South America

706


722



713



731

















Indonesia

















Grasberg (90.64%)

807b


422b



801b



436b

Africa

















Tenke Fungurume (57.75%)

36


-



26



-

















Consolidated

2,110


1,821



2,122



1,853

















Less noncontrolling participants’ share

372


327



370



331
Net

1,738


1,494



1,752



1,522

















Consolidated sales from mines










2,122



1,853
Purchased copper










91



301
Total consolidated sales










2,213



2,154

















Average realized price per pound









$ 2.03


$ 3.77

















GOLD

















(thousands of recoverable ounces)















MINED GOLD (FCX’s net interest in %)















North America (100%)

2


7



2



6
South America (80%)

47


51



48



53
Indonesia (90.64%)

1,348b


467b



1,332b



486b
Consolidated

1,397


525



1,382



545

















Less noncontrolling participants’ share

135


54



134



56
Net

1,262


471



1,248



489

















Consolidated sales from mines










1,382



545
Purchased gold










- c



1
Total consolidated sales










1,382



546

















Average realized price per ounce









$ 919


$ 917


















MOLYBDENUM

















(millions of recoverable pounds)















MINED MOLYBDENUM (FCX’s net interest in %)















Henderson (100%)

13


20



N/A



N/A
By-product – North America (100%)

13a


15a



N/A



N/A
By-product – Cerro Verde (53.56%)

1


1



N/A



N/A
Consolidated

27


36



26



40

















Less noncontrolling participants’ share

1


- c



1



- c
Net

26


36



25



40

















Consolidated sales from mines










26



40
Purchased molybdenum










3



4
Total consolidated sales










29



44

















Average realized price per pound









$ 10.65


$ 31.63

















a. Amounts are net of Morenci’s joint venture partner’s 15 percent interest.

b. Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with the terms of the joint venture agreement.

c. Amount rounds to less than 1 million.


FREEPORT-McMoRan COPPER & GOLD INC.

SELECTED OPERATING DATA (continued)




Three Months Ended

Six Months Ended



June 30,

June 30,



2009

2008

2009

2008
100% North America Copper Mines Operating Data












Solution Extraction/Electrowinning (SX/EW) Operations














Leach ore placed in stockpiles (metric tons per day)

553,700

1,099,500


611,200

1,117,200
Average copper ore grade (percent)

0.31

0.23


0.30

0.21
Copper production (millions of recoverable pounds)

201

215


423

432














Mill Operations














Ore milled (metric tons per day)

170,600

257,600


175,700

250,800
Average ore grades (percent):












Copper

0.31

0.40


0.33

0.39
Molybdenum

0.03

0.02


0.03

0.02
Copper recovery rate (percent)

84.8

84.6


85.3

82.9
Production (millions of recoverable pounds):












Copper

89

163


177

299
Molybdenum (by-product)

7

7


13

15














100% South America Copper Mines Operating Data












SX/EW Operations














Leach ore placed in stockpiles (metric tons per day)

260,200

291,500


255,400

282,800
Average copper ore grade (percent)

0.44

0.42


0.45

0.41
Copper production (millions of recoverable pounds)

141

144


278

279














Mill Operations














Ore milled (metric tons per day)

186,300

177,200


184,400

173,900
Average ore grades (percent):












Copper

0.67

0.72


0.68

0.73
Molybdenum

0.02

0.02


0.02

0.02
Copper recovery rate (percent)

90.2

89.7


89.6

90.2
Production (millions of recoverable pounds):












Copper

217

225


428

443
Molybdenum

-

-a




1

1














100% Indonesia Mining Operating Data












Ore milled (metric tons per day)

237,700

183,300


237,600

181,600














Average ore grades:












Copper (percent)

1.10

0.75


1.11

0.72
Gold (grams per metric ton)

1.51

0.54


1.32

0.57














Recovery rates (percent):












Copper

90.6

89.8


90.6

89.7
Gold

83.6

78.9


82.9

79.0














Production (recoverable):












Copper (millions of pounds)

457

237


913

451
Gold (thousands of ounces)

849

221


1,468

467














100% Primary Molybdenum Operating Data












Henderson Molybdenum Mine Operations














Ore milled (metric tons per day)

11,700

26,800


13,400

25,900
Average molybdenum ore grade (percent)

0.27

0.23


0.25

0.22
Molybdenum production (millions of recoverable pounds)

6

11


13

20

a. Amount rounds to less than 1 million.


FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)




Three Months Ended

Six Months Ended



June 30,

June 30,



2009

2008

2009

2008



(In Millions, Except Per Share Amounts)
Revenues

$ 3,684a


$ 5,441a


$ 6,286a


$ 11,113a
Cost of sales:















Production and delivery


1,809



2,716



3,371



5,437
Depreciation, depletion and amortization


256



462



488



880
Lower of cost or market inventory adjustments


-



4



19b



5
Total cost of sales


2,065



3,182



3,878



6,322
Selling, general and administrative expenses


89c



126



151c



210
Exploration and research expenses


24



80



54



132
Restructuring and other charges


(2)



-



23d



-
Total costs and expenses


2,176



3,388



4,106



6,664
Operating income


1,508



2,053



2,180



4,449
Interest expense, net


(158)



(140)



(289)



(305)
Losses on early extinguishment of debt


-



-



-



(6)
Gains on sales of assets


-



13



-



13
Other income and expense, net


(3)



9



(17)



11

Income before income taxes and equity in affiliated companies’ net earnings




1,347



1,935



1,874



4,162
Provision for income taxes


(542)



(658)



(873)



(1,387)
Equity in affiliated companies’ net earnings


7



7



18



14
Net income


812



1,284



1,019



2,789
Net income attributable to noncontrolling interests


(164)



(274)



(268)



(593)
Preferred dividends


(60)



(63)



(120)



(127)
Net income attributable to FCX common stockholders

$ 588


$ 947


$ 631


$ 2,069

















Net income per share attributable to FCX common stockholders:















Basic

$ 1.43


$ 2.47


$ 1.56


$ 5.40
Diluted

$ 1.38e


$ 2.25e


$ 1.54e


$ 4.89e

















Weighted-average common shares outstanding:















Basic


412



384



406



383
Diluted


471e



450e



426e



449e

















Dividends declared per share of common stock

$ -


$ 0.4375


$ -


$ 0.875

a.


Includes positive adjustments to provisionally priced copper sales recognized in prior periods, net of adjustments on forward copper sales contracts entered into in April 2009 to lock in prices on PT-FI’s provisionally priced sales at March 31, 2009, totaling $43 million in second-quarter 2009, $5 million in second-quarter 2008, $132 million in the 2009 six-month period and $267 million in the 2008 six-month period.

b.


Relates to molybdenum inventories.

c.


Lower selling, general and administrative expense is primarily associated with a reduction in compensation expense.

d.


Relates to contract cancellation costs and staff reductions primarily at the Morenci mine, partially offset by gains related to pension and postretirement special benefits and curtailments.

e.


Reflects assumed conversion of FCX’s 5½% Convertible Perpetual Preferred Stock, resulting in the exclusion of dividends totaling $11 million in second-quarter 2009, $15 million in second-quarter 2008, $23 million in the 2009 six-month period and $30 million in the 2008 six-month period. Also includes assumed conversion of FCX’s 6¾% Mandatory Convertible Preferred Stock, reflecting exclusion of dividends totaling $49 million in second-quarter 2009, $48 million in second-quarter 2008 and $97 million in the 2008 six-month period. The assumed conversions result in the inclusion of 57 million common shares in second-quarter 2009, 18 million common shares in the 2009 six-month period and 62 million common shares in each of the 2008 periods. In addition, the 2009 periods include 26.8 million common shares sold in February 2009.





Potential income impact of $97 million in dividends and additional 39 million common shares for the 6¾% Mandatory Convertible Preferred Stock were excluded for the 2009 six-month period, because they were anti-dilutive. The quarterly dilution threshold for the 5½% Convertible Perpetual Preferred Stock is $0.64 per share and for the 6¾% Mandatory Convertible Preferred Stock is $1.24 per share.

FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)




June 30,

December 31,



2009

2008



(In Millions)
ASSETS





Current assets:





Cash and cash equivalents

$ 1,319


$ 872
Trade accounts receivable


1,329



374
Other accounts receivable


736



838
Product inventories and materials and supplies, net


2,098



2,192
Mill and leach stockpiles


585



571
Other current assets


269



386
Total current assets


6,336



5,233
Property, plant, equipment and development costs, net


16,092



16,002
Long-term mill and leach stockpiles


1,260



1,145
Intangible assets, net


355



364
Trust assets


145



142
Other assets


436



467
Total assets

$ 24,624


$ 23,353







LIABILITIES AND EQUITY





Current liabilities:





Accounts payable and accrued liabilities

$ 1,820


$ 2,766
Accrued income taxes


589



163
Current portion of long-term debt and short-term borrowings


389



67
Current portion of reclamation and environmental liabilities


191



162
Total current liabilities


2,989



3,158
Long-term debt, less current portion:





Senior notes


6,542



6,884
Project financing, equipment loans and other


292



250
Revolving credit facility


-



150
Total long-term debt, less current portion


6,834



7,284
Deferred income taxes


2,632



2,339
Reclamation and environmental liabilities, less current portion


1,978



1,951
Other liabilities


1,360



1,520
Total liabilities


15,793



16,252
Equity:





FCX stockholders’ equity:





5½% Convertible Perpetual Preferred Stock


832



832
6¾% Mandatory Convertible Preferred Stock


2,875



2,875
Common stock


53



51
Capital in excess of par value


14,785



13,989
Accumulated deficit


(7,636)



(8,267)
Accumulated other comprehensive loss


(231)



(305)
Common stock held in treasury


(3,409)



(3,402)
Total FCX stockholders’ equity


7,269



5,773
Noncontrolling interests


1,562



1,328
Total equity


8,831



7,101
Total liabilities and equity

$ 24,624


$ 23,353

FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)




Six Months Ended



June 30,



2009

2008



(In Millions)
Cash flow from operating activities:





Net income

$ 1,019


$ 2,789

Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation, depletion and amortization


488



880
Lower of cost or market inventory adjustments


19



5
Stock-based compensation


57



92
Charges for reclamation and environmental liabilities, including accretion


112



79
Losses on early extinguishment of debt


-



6
Deferred income taxes


61



(114)
Gains on sales of assets


-



(13)
Elimination of profit on PT Freeport Indonesia sales to PT Smelting


37



5
Increase in long-term mill and leach stockpiles


(31)



(111)
Changes in other assets and liabilities


71



59
Amortization of intangible assets/liabilities and other, net


36



56
(Increases) decreases in working capital:





Accounts receivable


(803)



(921)
Inventories


53



(374)
Other current assets


105



9
Accounts payable and accrued liabilities


(675)



(525)
Accrued income and other taxes


394



(212)
Settlement of reclamation and environmental liabilities


(47)



(86)
Net cash provided by operating activities


896



1,624







Cash flow from investing activities:





Capital expenditures:





North America copper mines


(100)



(303)
South America copper mines


(111)



(166)
Indonesia


(128)



(223)
Africa


(458)



(384)
Other


(97)



(87)
Proceeds from the sale of assets and other, net


(1)



55
Net cash used in investing activities


(895)



(1,108)







Cash flow from financing activities:





Net proceeds from sale of common stock


740



-
Proceeds from revolving credit facility and other debt


155



524
Repayments of revolving credit facility and other debt


(285)



(384)
Cash dividends paid:





Common stock


-



(337)
Preferred stock


(120)



(127)
Noncontrolling interests


(63)



(280)
Net (payments for) proceeds from stock-based awards


(7)



22
Excess tax benefit from stock-based awards


-



25
Contributions from noncontrolling interests


29



-
Bank fees and other


(3)



63
Net cash provided by (used in) financing activities


446



(494)







Net increase in cash and cash equivalents


447



22
Cash and cash equivalents at beginning of year


872



1,626
Cash and cash equivalents at end of period

$ 1,319


$ 1,648

Contacts

Freeport-McMoRan Copper & Gold Inc.
Financial Contacts:
Kathleen L. Quirk, 602-366-8016
David P. Joint, 504-582-4203
or
Media Contact:
William L. Collier, 504-582-1750

Categories: Press Releases