Exhibit 99.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission file number 1-9916
FREEPORT-McMoRan COPPER & GOLD INC.
Organized in Delaware I.R.S. Employer Identification No. 74-2480931
First Interstate Bank Building, One East First Street,
Suite 1600, Reno, Nevada 89501
Registrant's telephone number, including area code: (702) 688-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ------------------
Class A Common Stock Par Value $0.10 per Share New York Stock Exchange
and Australian Stock
Exchange
Depositary Shares Representing 2-16/17 shares of New York Stock Exchange
Special Preference Stock Par Value $0.10 per Share
Depositary Shares Representing 0.05 shares of Step-Up New York Stock Exchange
Convertible Preferred Stock Par Value $0.10 per Share
Depositary Shares Representing 0.05 shares of Gold- New York Stock Exchange
Denominated Preferred Stock Par Value $0.10 per Share
Depositary Shares, Series II, Representing 0.05 shares New York Stock Exchange
of Gold-Denominated Preferred Stock, Series II,
Par Value $0.10 per Share
Depositary Shares Initially Representing 0.025 shares New York Stock Exchange
of Silver-Denominated Preferred Stock Par Value
$0.10 per Share
9-3/4% Senior Notes Due 2001 of P.T. ALatieF Freeport New York Stock Exchange
Finance Company B.V. guaranteed by the registrant
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $1,352,817,000 on March 10, 1995.
On March 10, 1995, there were issued and outstanding 65,972,568 shares of
Class A Common Stock, par value $0.10 per share, of which 1,859,660 shares
were held by the registrant's parent, Freeport-McMoRan Inc., and 139,980,763
shares of Class B Common Stock, par value $0.10 per share, all of which were
held by Freeport-McMoRan Inc.
Documents Incorporated by Reference
Portions of the registrant's Annual Report to stockholders for the year ended
December 31, 1994 (Parts I, II and IV) and portions of the Proxy Statement
dated March 23, 1995, submitted to the registrant's stockholders in connec-
tion with its 1995 Annual Meeting to be held on May 4, 1995 (Part III).
TABLE OF CONTENTS
Page
Part I................................................................ 1
Items 1 and 2. Business and Properties.............................. 1
Introduction...................................................... 1
P.T. Freeport Indonesia Company................................... 2
Contract of Work.................................................. 3
Ore Reserves...................................................... 4
Mining Operations................................................. 5
Exploration....................................................... 5
Milling and Production............................................ 7
Transportation and Other Infrastructure........................... 8
Marketing......................................................... 10
Republic of Indonesia............................................. 10
Rio Tinto Minera, S.A............................................. 11
P.T. Irja Eastern Minerals Corporation............................ 11
Research and Development.......................................... 12
Environmental Matters............................................. 12
Employees......................................................... 13
Competition....................................................... 13
Item 3. Legal Proceedings.......................................... 14
Item 4. Submission of Matters to a Vote of Security Holders........ 14
Executive Officers of the Registrant................................ 14
Part II............................................................... 15
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..................................... 15
Item 6. Selected Financial Data.................................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 16
Item 8. Financial Statements and Supplementary Data................ 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 16
Part III.............................................................. 16
Items 10, 11, 12, and 13. Directors and Executive Officers of
the Registrant, Executive Compensation, Security
Ownership of Certain Beneficial Owners and
Management, and Certain Relationships and Related
Transactions............................................ 16
Part IV............................................................... 16
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K..................................... 16
Signatures............................................................ 17
Index to Financial Statements......................................... F-1
Report of Independent Public Accountants.............................. F-1
Exhibit Index......................................................... E-1
PART I
Items 1 and 2. Business and Properties.
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INTRODUCTION
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation formed in
1987 ("FCX"), is a subsidiary of Freeport-McMoRan Inc. ("FTX"*). FCX's
principal operating subsidiary is P.T. Freeport Indonesia Company ("PT-FI"), a
limited liability company organized under the laws of the Republic of
Indonesia and domesticated in Delaware. PT-FI engages in the exploration for
and development, mining, and processing of copper, gold and silver in
Indonesia and in the marketing of concentrates containing such metals
worldwide. FCX believes that PT-FI has one of the lowest cost copper
producing operations in the world, taking into account customary credits for
related gold and silver production. At March 10, 1995, FTX owned
approximately 68.9% of FCX's common stock, and FCX owned 81.28% of the
outstanding common stock of PT-FI. Of the remaining 18.72% of the outstanding
PT-FI common stock, 9.36% is owned by the Government of the Republic of
Indonesia (the "Government") and 9.36% is owned by an Indonesian limited
liability company, P.T. Indocopper Investama Corporation ("PT-II"), in which
FCX owns a 49% interest. In 1993 FCX acquired the Spanish company Rio Tinto
Minera, S.A. ("RTM") which is principally engaged in the smelting and refining
of copper concentrates in Spain through wholly owned subsidiaries. RTM
provides an additional market for a portion of PT-FI's copper concentrates.
FCX's wholly owned subsidiary, Eastern Mining Company, Inc. ("EMI"), owns 80%
of the outstanding common stock of P.T. Irja Eastern Minerals Corporation
("Eastern Mining"), an Indonesian limited liability company, which signed a
Contract of Work (the "Eastern Mining COW") with the Government in August 1994
covering approximately 2.5 million acres in Indonesia. PT-II owns 10% of the
outstanding common stock of Eastern Mining, and P.T. Setdco Ganesha, an
Indonesian limited liability company, owns the remaining 10% of the
outstanding common stock.
In May 1994, FTX announced a plan to separate its two principal
businesses, metals and agricultural minerals, into two independent financial
and operating entities. To accomplish this plan, FTX will effect a pro rata
distribution (the "Distribution") to its common stockholders of all of the
Class B common stock of FCX which it owns at the time of the Distribution on a
tax-free basis. As a result of the Distribution, FTX will no longer own any
interest in FCX. The Distribution is contingent on a number of factors,
including the recapitalization of FCX and FTX. In order for FTX to make the
Distribution on a tax-free basis, the FCX stockholders recently approved
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*The term "FTX", as used in this report, means Freeport-McMoRan Inc.,
its divisions, and its direct and indirect subsidiaries and affiliates other
than FCX, or any one or more of them, unless the context requires Freeport-
McMoRan Inc. only.
certain changes to FCX's capital structure and the voting rights of its common
stock and preferred stock. Prior to the Distribution, the voting rights of
FCX stockholders will be amended so that holders of Class B common stock elect
80% of the FCX directors and holders of Class A common stock and holders of
preferred stock elect the balance. The Distribution is expected to occur by
June 30, 1995.
In March 1995, FCX, FTX, The RTZ Corporation PLC ("RTZ") and RTZ America
Inc. ("RTZ America") signed letters of intent to establish a strategic
alliance. Pursuant to the proposed transactions, RTZ America will acquire
from FTX approximately 21.5 million shares of FCX Class A common stock
(approximately 10.4% of the outstanding common stock of FCX). RTZ America
also will receive an option to acquire from FTX approximately 3.5 million
shares of FCX Class A common stock. In connection with FTX's
recapitalization, if requested by FTX, RTZ America will make a cash tender
offer for certain of FTX's convertible debt, and convert any such debt to FTX
common stock. If RTZ America acquires such convertible debt and exercises its
option, after completion of the Distribution, RTZ America will own over 18% of
the outstanding common stock of FCX. However, as the total number of shares
of FCX will not change as a result of these transactions, RTZ America's
acquisition of FCX common stock from FTX will not result in any dilution to
the current holders of FCX Class A common stock. The transactions with RTZ
America will enable FTX to complete its recapitalization and the Distribution.
In addition to RTZ America's acquisition of FCX stock, FCX, PT-FI and
Eastern Mining will enter into joint venture arrangements with subsidiaries of
RTZ pursuant to which RTZ's subsidiaries intend to invest up to $850 million
on exploration and development projects on lands controlled by PT-FI and
Eastern Mining. These transactions are further described below under
"Contract of Work." RTZ also will acquire 25% of RTM's Spanish smelter
operations, and a 25% interest in RTM's Spanish mineral exploration program.
All of the transactions with RTZ and RTZ America are subject to, among other
things, certain regulatory approvals. The transactions are expected to be
completed by June 30, 1995.
In January 1994, FCX redeemed its Zero Coupon Exchangeable Notes due
2011 (the "Zero Coupon Notes"). Of the $118.6 million principal amount of
Zero Coupon Notes outstanding at the initiation of the call for redemption,
$118.3 million principal amount was converted into an aggregate of 6.7 million
shares of FCX's Class A common stock prior to the redemption of the Zero
Coupon Notes. The balance was redeemed for cash. Also in January 1994, FCX
sold 4.3 million depositary shares, each representing 0.05 shares of its Gold-
Denominated Preferred Stock, Series II to the public for net proceeds of
$158.5 million. In April 1994, P. T. ALatieF Freeport Finance Company B.V.,
a wholly owned subsidiary of FCX, completed a public offering of $120 million
of 9-3/4% Senior Notes Due 2001, for net proceeds of $116.3 million. In July
1994, FCX sold 4.8 million depositary shares, each initially representing
0.025 shares of its Silver-Denominated Preferred Stock, to the public for net
proceeds of $94.5 million.
P.T. FREEPORT INDONESIA COMPANY
PT-FI's operations are located in the rugged highlands of the Sudirman
Mountain Range in the province of Irian Jaya, Indonesia, located on the
western half of the island of New Guinea. Over the last 26 years, PT-FI has
met an extraordinary combination of engineering and construction challenges to
develop its mining and milling complex and supporting infrastructure in one of
the least explored areas in the world. PT-FI's largest mine, Grasberg,
discovered in 1988, contains the largest single gold reserve and one of the
three largest open-pit copper reserves of any mine in the world. In order to
develop the Grasberg deposit, PT-FI undertook an expansion program in stages,
initially from 20,000 metric tons of ore per day ("MTPD") to 57,000 MTPD.
Expansion from 57,000 MTPD to 66,000 MTPD was completed in 1993 ahead of
schedule and within budget. PT-FI is currently expanding its production
capacity from 66,000 MTPD to 115,000 MTPD, which is expected to be completed
during the second half of 1995 and to almost double annual production to
approximately 1.1 billion pounds of copper and approximately 1.5 million
ounces of gold from the 1993 levels of 658 million pounds of copper and 787
thousand ounces of gold, respectively.
CONTRACT OF WORK
In 1967, PT-FI's predecessor, Freeport Indonesia, Incorporated, a
Delaware corporation ("FII"), and the Government entered into a Contract of
Work (the "1967 COW"), pursuant to which FII operated as the Government's sole
contractor for the production and marketing of certain minerals from a 24,700
acre area (the "1967 Mining Area") from 1967 until the end of 1991. On
December 30, 1991, FII was merged into PT-FI in Delaware, and PT-FI and the
Government signed a new Contract of Work (the "New COW"), which superseded the
1967 COW and has a 30-year term, with provisions for two 10-year extensions
under certain conditions.
The New COW covers both the 1967 Mining Area and a contiguous 6.5
million acre exploration area (the "New COW Area"). Pursuant to a provision
in the New COW, PT-FI must progressively relinquish its rights to the
nonprospective parts of the New COW Area in amounts equal to 25% of the 6.5
million acres at the end of each of three specified periods. PT-FI
relinquished approximately 1.7 million acres in December 1994. In light of
these relinquishment provisions, PT-FI has implemented an active exploration
program with a focus on both what it believes to be the most promising
exploration opportunities in the New COW Area as well as identification of
areas which appear to hold the least promise. The next relinquishment will
occur at the end of 1995, unless extended by the Government.
The New COW also contains provisions for PT-FI to conduct or cause to be
conducted a feasibility study relating to the construction of a copper
smelting facility in Indonesia and for the eventual construction of such a
facility by PT-FI, if such facility is deemed to be economically viable by PT-
FI and the Government. In January 1995, FCX announced that it would form a
joint venture with Mitsubishi Materials Corporation and Fluor Daniel Wright
Ltd. to build, own and operate a copper smelter/refinery in Gresik, East Java,
Indonesia. This project remains subject to the execution of definitive
agreements among the joint venture participants, the confirmation of the
feasibility of the project, financing and certain Government approvals. For
further information with respect to the proposed smelter/refinery project,
reference is made to Note 10 to the financial statements of FCX referred to on
page F-1 hereof (the "FCX Financial Statements").
Pursuant to the proposed transactions with RTZ, subsidiaries of RTZ will
acquire a 40% beneficial interest in the Eastern Mining COW and a portion of
the New COW covering the New COW Area. In addition, a subsidiary of RTZ will
acquire a 40% beneficial interest in future expansion projects in the 1967
Mining Area.
Under joint venture arrangements, RTZ and FCX will establish an
Exploration Committee to approve exploration expenditures, and subsidiaries of
RTZ will pay for all further exploration approved by the committee until RTZ
has paid an aggregate of $100 million. The parties will pay, ratably in
proportion to their ownership, additional exploration costs and the costs to
develop projects mutually agreed upon in the New COW Area and the Eastern
Mining COW Area.
For further expansion projects in the 1967 mining Area, subsidiaries of
RTZ will provide up to a maximum of $750 million for 100% of defined costs to
develop such projects. RTZ will receive 100% of incremental cash flow
attributed to the expansion projects until it has received an amount equal to
the funds it had provided plus interest based on RTZ's costs of borrowing.
Subsequently, the parties will share incremental cash flow ratably in
proportion to their ownership. Future expansion projects in the 1967 Mining
Area will exclude any interest in future production equivalent to FCX's
expanded 115,000 MTPD milling operations.
ORE RESERVES
Based upon published reports, FCX believes that PT-FI's Grasberg deposit
contains the largest single gold reserve and one of the three largest open-pit
copper reserves of any mine in the world. Proved and probable ore reserves at
December 31, 1994 were 1,125.6 million tons** of ore at an average grade of
1.30% copper, 1.42 grams of gold per ton and 4.06 grams of silver per ton
compared with 1,074.1 million tons of ore with an average grade of 1.31%
copper, 1.47 grams of gold per ton and 4.04 grams of silver per ton at
December 31, 1993. Primarily as a result of the drilling operations at the
Grasberg mine (see "Mines in Production" below), PT-FI's proved and probable
copper and gold reserves as of December 31, 1994 have increased, net of
production, since December 31, 1989 by approximately 237% and 389%,
respectively, and from year-end 1993 by 4.5% and 1.3%, respectively.
This increase in proved and probable reserves, net of production, is
largely the result of a drilling program that includes data obtained from the
surface down to approximately the 3,060 meter elevation at the Grasberg ore
body. PT-FI's proved and probable reserves at Grasberg do not include
reserves below the 3,060 meter level. PT-FI has begun driving an adit (the
"Amole adit") from the mill site to a point below the currently delineated
Grasberg ore body at the 2,900 meter level. The Amole adit, expected to be
completed in 1996, will facilitate further deep exploration to delineate the
extent of the Grasberg deposit below the 3,060 meter level. Preliminary
drilling from the existing 3,700 meter adit indicates significant additional
mineralization below the existing proved and probable reserves. There can be
no assurance, however, that PT-FI's exploration programs will result in the
delineation of additional reserves in commercial quantities. For further
information with respect to the copper, gold and silver content of proved and
probable ore reserves of PT-FI, reference is made to Note 12 to the FCX
Financial Statements.
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**As used herein, "ton" refers to a metric ton, which is equivalent to
2,204.62 pounds on a dry weight basis.
MINING OPERATIONS
Mines in Production
PT-FI currently has two mines in operation: the Grasberg and the
Intermediate Ore Zone (the "IOZ"), both within the 1967 Mining Area. Open pit
mining of the Grasberg ore body commenced in January 1990. In 1994 Grasberg
mine output totaled approximately 27.2 million tons of ore, providing
approximately 95% of total PT-FI ore production. The IOZ is an underground
block cave operation which came into production in the first half of 1994.
The production level is at the 3550 meter elevation, which is 150 meters below
the Ertsberg East deposit, which was depleted in the second half of 1994. In
1994 mine output from the IOZ totaled approximately 0.7 million tons of ore.
Mines in Development
Three other significant ore bodies are currently at various stages of
mine development. All are carried as proved and probable reserves, and are
intended to augment or replace other underground production areas as they
become depleted. These deposits include the Deep Ore Zone ("DOZ"), the DOM
(from the Dutch word meaning "cathedral") and the Big Gossan.
The DOZ ore body lies within the 1967 Mining Area, vertically below the
IOZ. This underground mine was originally developed for mining using a
variety of stoping methods and is currently capable of production. Initial
production from the DOZ ore body commenced in 1989 but was suspended in favor
of production from the Grasberg. Production by the block cave mining method
is anticipated to begin after depletion of the overlying IOZ reserve, sometime
after 1998.
The DOM ore body's production level is 380 meters above and
approximately 1,200 meters southeast of the now depleted Ertsberg East mining
operation. The DOM ore body was developed as an underground mine, employing
the block cave mining method. Pre-production development was completed just
as the Grasberg began production from the open pit in 1990. All maintenance,
warehouse and service facilities are in place. Like the DOZ ore body,
production at the DOM ore body was deferred as a result of the increasing
reserves and production capabilities of the Grasberg.
The Big Gossan ore body lies approximately 1,000 meters southwest of the
original Ertsberg deposit/pit and within the 1967 Mining Area. Initial
underground development of the ore body began in 1993 when tunnels were driven
from the mill area, into the ore zone at approximately the 2900 meter
elevation. A variety of stoping methods will be used to mine the deposit,
with production expected by 1998.
EXPLORATION
In addition to continued delineation of the Grasberg deposit and other
deposits discussed under "Mining Operations" above, PT-FI is continuing its
ongoing exploration program for copper and gold mineralization within the 1967
Mining Area. Three anomalous zones in the vicinity of PT-FI's current mining
activities are under investigation. The Big Gossan and Wanagon mineralizations
are located west of the Erstberg open pit, southwest of the Grasberg ore body
and anchor the ends of a clearly defined mineralized structure trending
roughly east-west for 4.5 kilometers. The Big Gossan mineralization, as
drilled to date, extends approximately 1,100 meters westward from just east of
the intersection of the Amole adit. The Amole adit is being driven at the
2,900 meter level for approximately 4 kilometers from the mill to the deep
levels of the Grasberg deposit, providing a platform from which to explore
deeper mineral potential in a significant portion of the 1967 Mining Area.
The Lembah Tembaga prospect described below is located approximately one
kilometer southwest of the Grasberg deposit.
At the Big Gossan mineralization, nearly 200 holes have been drilled
from the Amole adit and from an exploration drift being driven in a westwardly
direction parallel to the Big Gossan structure. This drilling resulted in the
inclusion of 31.8 million tons of ore at an average grade of 2.5% copper and
0.7 grams of gold per ton to PT-FI's total proved and probable reserves at
December 31, 1994.
During the first quarter of 1993, PT-FI initiated helicopter-supported
surface drilling of the Wanagon gold/silver/copper prospect. Seven holes were
drilled during 1993 at Wanagon, located approximately 2 kilometers northwest
of Big Gossan and approximately 3 kilometers southwest of Grasberg.
Significant copper values have been encountered below the 2,900 meter
elevation. Additional holes were drilled during 1994 to explore the area near
the surface for gold potential. Evaluation of this prospect and similar
potential mineral sites along the Big Gossan-Wanagon structure will be
undertaken as the Big Gossan exploration drift is extended west toward the
Wanagan prospect.
PT-FI has intercepted porphyry copper mineralization in several holes at
its Lembah Tembaga prospect. The holes were drilled from the surface and
intersected copper mineralization at considerable depth below the surface.
Three rigs are currently drilling at Lembah Tembaga to further evaluate the
prospect. Target evaluation in other parts of the 1967 Mining Area is also
continuing.
Preliminary exploration of the New COW Area has indicated many promising
targets. Extensive stream sediment sampling within the new acreage has
generated analytical results which are being evaluated. This sampling
program, when coupled with regional mapping completed on the ground and from
aerial photographs and air-magnetometer surveys, has led to the outlining of
over 70 exploration targets. Detailed follow-up exploration of these anomalies
by additional mapping and sampling and through the use of both aerial and
ground magnetic surveys is now in progress. Systematic drilling of these
targets has already commenced with mineralization being discovered at several
prospects. Additional drilling is required to determine if any of these are
commercially viable.
PT-FI has focused its initial drilling in the New COW Area in an area 35
kilometers north of Grasberg, an area called the Hitalipa District, that
displays anomalous geochemical and magnetic characteristics. Although this
area requires additional exploratory drilling, initial results indicate a
large mineralized district that covers three times the aerial extent or
approximately 75,000 acres when compared to the original 24,700-acre Ertsberg
District that contained the Ertsberg, Grasberg, Ertsberg East, IOZ, DOZ, Big
Gossan and DOM ore bodies. The discovery of widespread igneous activity,
including volcanic rocks, in the Hitalipa District indicates the potential for
Grasberg-type stockwork and porphyry deposits as well as skarn-type
copper/gold/silver deposits similar to the ore bodies of the Ertsberg
District. Because of its size and number of geologic leads, the Hitalipa
District is likely to be explored for many years. PT-FI has also initiated
drilling programs on other prospects. Drilling results are being interpreted,
and no assurance can be given that any of these new areas contain commercially
exploitable mineral deposits.
Site specific work within the Hitalipa District continues where the
drilling of over 100 holes at the Wabu prospect has been completed. Within a
200 acre area at the Wabu prospect, drilling has indicated a potential
resource of between 700,000 and 1.7 million ounces of gold. The variation is
dependent upon a 25 to 50 meter radius area of influence around the drill
holes, respectively. This area is open to the east and west and also at
depth. Further drilling will be required to determine the extent and
commercial potential of this resource. PT-FI has initiated drilling programs
on other prospects within the Hitalipa District, and drilling results are
being interpreted.
PT-FI's exploration expenditures were $27.7 million in 1994, compared to
$31.7 million in 1993.
MILLING AND PRODUCTION
Milling
Most of the ore from PT-FI's mines moves by a conveyor system to an ore
pass through which it drops to the mill site. At the mill site, which is
located approximately 2,900 meters above sea level, the ore is crushed and
ground. The powdered ore is then mixed in tanks with chemical reagents and
continuously agitated with air. At this stage the copper-bearing concentrate
rises to the top of the tanks from which it is removed and thickened. The
product leaves the mill site as a thickened concentrate slurry, consisting of
approximately 65% solids by weight. During 1994, the recovery rates for the
milling facilities averaged 83.7% of the copper content, 72.8% of the gold
content and 64.7% of the silver content of the ore processed, compared to
87.0%, 76.2% and 67.2%, respectively, during 1993.
Production
In 1994 PT-FI achieved record copper production of 710.3 million
recoverable pounds, approximately 8% more than in 1993. Gold production was
784,000 recoverable ounces, approximately the same as 1993. For a summary of
PT-FI's production, sales and average product realizations for 1994 and the
previous four years, reference is made to "Selected Financial and Operating
Data" appearing on page 16 of FCX's 1994 Annual Report to stockholders, which
is incorporated herein by reference.
In 1993 PT-FI completed, within budget and ahead of schedule, the
expansion of its production facilities, increasing its mining and milling
capacity from 57,000 MTPD to 66,000 MTPD. Average mill throughput was 72,500
MTPD in 1994, compared to 62,300 MTPD in 1993. PT-FI is currently expanding
its overall mining and milling rate to 115,000 MTPD, which is expected to be
completed during the second half of 1995. Once the expansion is complete,
PT-FI expects annual production of 1.1 billion pounds of copper, 1.5 million
ounces of gold and 2.4 million ounces of silver.
TRANSPORTATION AND OTHER INFRASTRUCTURE
Transportation
From the mill site, the thickened concentrate is pumped through two 115
kilometer pipelines to the port-site facility at Amamapare. At the port-site
the slurry is filtered, dried and stored for shipping. When ships arrive,
they are loaded at the dock facilities at the port-site until they draw their
maximum water. The ships then normally move to deeper water, where loading is
completed from shuttling barges.
Other Infrastructure
The location of PT-FI's operations in a remote and undeveloped area
requires that such operations be virtually self-sufficient. The facilities,
in addition to those described above, include an airport, a heliport, a 119
kilometer road with bridges and tunnels, an aerial service tramway to
transport personnel, equipment and supplies to the mines, a hospital and two
town sites with schools, housing and other required facilities sufficient to
support approximately 14,000 persons, including approximately 360 who are
located at the port-site.
In conjunction with the expansion of ore throughput to 115,000 MTPD, the
first phase of the Enhanced Infrastructure Project ("EIP") is being
implemented. The EIP is a long term program created (1) to provide certain
infrastructure facilities needed for PT-FI's operations, (2) to enhance the
quality of conditions for PT-FI's employees and (3) to develop and promote the
growth of local and other third party activities and enterprises in Irian Jaya
through the construction of certain required physical support facilities. The
full EIP includes plans for various commercial, residential, educational,
retail, medical, recreational, environmental and other infrastructure
facilities to be constructed during the next ten to twenty years. Depending on
the long-term growth of PT-FI's operations, the total cost of the EIP could
range between $500 million and $600 million. The first phase of the EIP is
needed to support the 115,000 MTPD expansion. FCX anticipates that the first
phase, which includes various residential, community and commercial
facilities, increases in electric generating capacity and an extension of the
principal road which will enable vehicle traffic to travel all the way to the
port-site, will be completed by mid-1996.
Pursuant to a joint venture agreement which PT-FI entered into with P.T.
ALatieF Nusakarya Corporation ("ALatieF"), an Indonesian investor, in 1993,
PT-FI has sold approximately $195 million of existing infrastructure assets,
of which approximately $105 million of assets were sold in 1994, to P.T.
ALatieF Freeport Infrastructure Corporation ("AFIC") and to P.T. ALatieF
Freeport Hotel Corporation ("AFHC"). AFIC and AFHC are each owned one-third
by PT-FI and two-thirds by ALatieF. AFIC is expected to purchase an
additional $75 million of infrastructure assets during 1995 subject to certain
Government approvals. The funding for the AFIC and AFHC purchases is provided
by equity contributions from the shareholders ($90 million) and debt financing
($180 million). Debt financing has been secured by a $60 million bank loan,
guaranteed by PT-FI, and a $120 million bond issue, guaranteed by FCX,
completed during the second quarter of 1994. See "Introduction" above. The
acquired assets will be made available to PT-FI and its employees and
designees under arrangements which will provide ALatieF with a guaranteed
minimum rate of return on its investment.
In December 1993, PT-FI announced the execution of a Letter of Intent
with Duke Energy Corp. ("DE") and PowerLink Corporation ("PL"), pursuant to
which PT-FI would sell its existing and to be constructed power generation and
transmission assets and certain other power-related assets to a joint venture
company. In December 1994, P.T. Puncakjaya Power ("PJP"), an Indonesian
limited liability company, was formed, whose ownership consists of DE (30%),
PL (30%), PT-FI (30%) and P.T. Austindo Nusantara Jaya ("ANJ"), an Indonesian
limited liability company, (10%). The first sale, representing the majority
of the existing assets, was completed in December 1994, for a price of $100
million. The final two sales are expected to occur during 1995. The total
value of these transactions is estimated at $215 million. Pursuant to these
transactions, PJP will own these assets and be responsible for providing the
electrical power services required by PT-FI at its mining, milling and support
operations in Irian Jaya, Indonesia, including the power services required for
the expansion of ore throughput to 115,000 MTPD. These transactions will
provide DE, PL and ANJ with a guaranteed minimum rate of return on their
investments.
PT-FI has also entered into two separate letters of intent with respect
to the sale to joint ventures of certain construction equipment, certain port
facilities and related marine, logistics and related assets (the "Port Joint
Venture") and certain aircraft, airport and related operations (the "Airport
Joint Venture"). The Port Joint Venture is expected to be owned by P & O
Australia Ltd. and ALatieF. PT-FI would not have an equity interest in the
Port Joint Venture. PT-FI would enter into one or more agreements with the
Port Joint Venture for use of the transferred assets. It is expected that the
purchase price of the assets transferred to the Port Joint Venture will not
exceed $100 million. PT-FI would have a 25% equity interest in the Airport
Joint Venture, with certain Indonesian investors owning the remainder. PT-FI
would enter into one or more agreements with the Airport Joint Venture for air
transport services for both passengers and cargo. It is expected that the
purchase price of the assets transferred to the Airport Joint Venture will be
approximately $45 million.
The foregoing letters of intent are not binding and are subject to the
execution of definitive agreements, financing, and certain Government
approvals. No assurance can be given that any of these transactions will be
consummated.
MARKETING
PT-FI's copper concentrates, which contain significant gold and silver
components, are sold primarily under long-term, U.S. dollar-denominated
contracts, pursuant to which the selling price is based on world metals
prices, generally the London Metal Exchange ("LME") settlement prices for
Grade A copper metal, less certain allowances. PT-FI supplies copper
concentrates to Asian, European and North American smelters and international
trading companies under long-term sales agreements and pursuant to "spot"
sales contracts. Substantially all of PT-FI's 1994 production of copper
concentrates was sold under prior commitments with the balance sold in the
spot market. PT-FI has commitments from various parties to purchase virtually
all of its estimated 1995 production of copper concentrates. For further
information with respect to sales of concentrates, reference is made to Note 8
to the FCX Financial Statements.
For average realizations per recoverable pound of copper, reference is
made to "Selected Financial and Operating Data" on page 16 of FCX's 1994
Annual Report to stockholders, which is incorporated herein by reference. For
information with respect to PT-FI's price protection program, reference is
made to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 11 through 14 and 17 through 20, of FCX's 1994
Annual Report to stockholders, which is incorporated herein by reference.
REPUBLIC OF INDONESIA
The economy of Indonesia is based on export commodity agriculture, the
extraction of petroleum, natural gas and other mineral resources, wholesale
and retail trade and, to an increasing extent, manufacturing. Indonesia has a
presidential republic system of government. President Suharto assumed power
in 1966 following an attempted communist coup and has been in power since
then. The Government has maintained a high degree of stability for the past
27 years. President Suharto was re-elected in March 1993 to serve a sixth
consecutive five-year term.
The Government has promoted policies designed to help develop Indonesia
economically and has encouraged foreign investment in numerous areas where
such investment would benefit the Indonesian economy. Indonesia's foreign
investment policy is expressed in the 1967 Foreign Capital Investment Law. It
provides basic guarantees of remittance rights and protection against
nationalization, a framework for incentives and some basic rules as to the
other rights and obligations of foreign investors. PT-FI's rights and
obligations relating to taxes, exchange controls, repatriation and other
matters are governed by the New COW, which was concluded pursuant to the 1967
Foreign Capital Investment Law.
PT-FI has had and continues to enjoy a good working relationship with
the Government. PT-FI's mining complex was Indonesia's first copper mining
project and was the first major foreign investment made in Indonesia following
the new economic development program instituted by the Suharto administration
in 1967. PT-FI works closely with the various levels of the Government in
development efforts in the vicinity of its operations. PT-FI incurs
significant costs associated with providing health and educational assistance,
job training, employment opportunities, agricultural assistance and other
community development services and facilities for the Indonesian people living
in the areas of its operations. In 1990 PT-FI established a foundation to
provide educational and work opportunities for the benefit of the people of
Irian Jaya. Over the next several years, PT-FI will contribute at least $10
million to the foundation for community projects. PT-FI also has in place a
long-term business development program to provide financing and support for
new and emerging businesses, many of which are expected to be suppliers of
goods and services for PT-FI's operations. Over time, PT-FI anticipates
investing $25 million in this program.
FCX has the benefit of political risk insurance from the Overseas
Private Investment Corporation, the Multilateral Investment Guaranty Agency
and other insurers, where available, which covers a portion of its interest in
PT-FI. The insurance is primarily designed to cover certain breach of
contract risks.
RIO TINTO MINERA, S.A.
In 1993 FCX acquired RTM, which is principally engaged in the smelting
and refining of copper concentrates in Spain through wholly owned
subsidiaries. RTM is expanding its smelter production capacity to
approximately 270,000 tons of metal per year by early 1996, which will enable
RTM's operations to achieve significant unit cost efficiencies and is expected
to bring RTM's cash costs into the smelter industry's lowest quartile
worldwide. During 1994, PT-FI supplied RTM with approximately 173,000 tons of
copper concentrate and is expected to supply approximately 150,000 tons in
1995, providing for approximately 38% and 30%, respectively, of RTM's
requirements in those years. Beginning in 1996, PT-FI is expected to provide
the RTM smelter with approximately one-half of its copper concentrate
requirements. For further information concerning RTM, reference is made to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11 through 14 and 17 through 20 of FCX's 1994 Annual
Report to stockholders, which is incorporated herein by reference.
P.T. IRJA EASTERN MINERALS CORPORATION
FCX owns 84.9% of Eastern Mining, which entered into the Eastern Mining
COW with the Government in August 1994 covering 2.5 million acres adjacent to
the New COW Area in Irian Jaya, Indonesia. The Eastern Mining COW provides
for a 30-year term and for two 10-year extensions under certain circumstances.
Reconnaissance activity, including air-magnetometer analysis has indicated a
number of interesting magnetic anomalies, one of which is located near sea
level in an area known as Etna Bay. It is believed that this expansive
magnetic anomaly indicates igneous material intruding sedimentary rocks and
appears to be on trend with and contains geologic characteristics similar to
those exhibited in the 1967 Mining Area. FCX is currently drilling with three
rigs at its Etna Bay prospect areas. Eastern Mining's exploration
expenditures totaled $8.3 million in 1994.
RESEARCH AND DEVELOPMENT
In 1993 FTX contracted with Crescent Technology, Inc. ("Crescent") to
furnish engineering consulting, research and development, environmental and
safety services to FTX. Crescent maintains engineering consulting, analytical
laboratory and mine development groups in New Orleans, Louisiana, which
provide engineering consulting, environmental services and design and
construction supervision activities required to implement new ventures and
apply improvements to existing operations of PT-FI and RTM.
ENVIRONMENTAL MATTERS
FTX and its affiliates, including FCX, have a history of commitment to
environmental responsibility. Since the 1940s, long before the general public
recognized the importance of maintaining environmental quality, FTX has
conducted, and continues to conduct, preoperational, bioassay, marine
ecological and other environmental surveys to determine the environmental
compatibility of its operations. FTX's Environmental Policy commits its
operations to full compliance with applicable laws and regulations. FTX has
contracted with Crescent whose environmental specialists develop and implement
environmental programs that include the activities of PT-FI and RTM.
FCX believes that it is in compliance with Indonesian environmental
laws, rules and regulations. PT-FI had a team of environmental scientists
from a leading Indonesian scientific institution conduct a study to update its
1984 Environmental Evaluation Study, with particular focus on its 66,000 MTPD
expansion program, and which addressed the anticipated effect of PT-FI's
expansion to 66,000 MTPD on the environment within the study area including
water quality, aquatic and terrestrial biology, hydrology, geomorphology,
oceanography, sociology and economics. The study was submitted to the
Government, and a formal hearing was held on the document. The Government
then requested PT-FI to update the document to include future expansion plans.
An additional environmental evaluation study was submitted in late 1993 with
respect to the proposed expansion of production to 115,000 MTPD, and it was
approved in February 1994. In February 1995 the Government approved PT-FI's
Environmental Management Plan (RKL) and Environmental Monitoring Plan (RPL).
These plans addressed all PT-FI environmental programs, including sustainable
development, reaffirming its long-term commitment to manage its operations in
an environmentally responsible manner.
RTM's smelter production capacity expansion costs include approximately
$18 million for environmental optimization. Subsequent to expansion, FCX
believes RTM's facilities will be in compliance with all standards in Spain.
PT-FI and RTM, through FTX, maintain insurance coverage in amounts
deemed prudent for certain types of damages associated with environmental
liabilities which arise from sudden, unexpected and unforeseen events.
FCX has made, and continues to make, expenditures at its operations for
protection of the environment. On the basis of an analysis of its operations
in relation to current and anticipated environmental requirements, FCX does
not anticipate that these investments will have a significant adverse impact
on its future operations, liquidity, capital resources or financial position.
EMPLOYEES
In order to allow access to the FTX employee benefit plans for United
States citizens employed full time in PT-FI's and RTM's businesses, such
persons are formally employed by certain United States subsidiaries of FTX.
For all operational purposes, however, such individuals are regarded as
employees of PT-FI or RTM, respectively, and references herein to PT-FI or RTM
employees include such individuals.
FCX, PT-FI and FTX are parties to a Management Services Agreement (the
"Management Agreement") pursuant to which FTX furnishes general executive,
administrative, financial, accounting, legal, environmental, tax, research and
development, sales and certain other services to FCX and PT-FI. The term of
the Management Agreement is unlimited, subject to termination by any of the
parties on December 31 of any year and subject to at least six months prior
written notice. FCX and PT-FI reimburse FTX monthly at FTX's cost, including
allocated overhead, for such services. For further information with respect
to the Management Agreement, including costs reimbursed to FTX, and the effect
of the Distribution, reference is made to Note 9 to the FCX Financial
Statements.
As of December 31, 1994, PT-FI had a total of 6,074 employees
(approximately 94% Indonesian), compared with 6,054 employees (approximately
94% Indonesian) at year-end 1993. In addition, as of December 31, 1994, PT-FI
had approximately 9,600 contract workers, most of whom were Indonesian.
Approximately 40% of PT-FI's Indonesian employees are members of the All
Indonesia Workers' Union, which operates under Government supervision, with
which a labor agreement covering PT-FI's hourly paid Indonesian employees runs
until September 30, 1995. PT-FI experienced no work stoppages in 1994, and
relations with the union have generally been good. As of December 31, 1994,
RTM had a total of 1,250 employees, of which approximately 95% are covered by
union contracts. RTM experienced limited work stoppages in 1994, but
relations with these unions have also generally been good.
COMPETITION
PT-FI competes with other mining companies in connection with the sale
of its mineral concentrates and the recruitment and retention of qualified
personnel. Some competing companies possess financial resources equal to or
greater than those of PT-FI. The management of FCX believes that PT-FI is one
of the lowest cost copper producers in the world, taking into account credits
for related gold and silver production.
Item 3. Legal Proceedings.
--------------------------
Although FCX may be from time to time involved in various legal
proceedings of a character normally incident to the ordinary course of its
business, the management of FCX believes that potential liability in any such
pending or threatened proceedings would not have a material adverse effect on
the financial condition or results of operations of FCX. FCX, through FTX,
maintains liability insurance to cover some, but not all, potential
liabilities normally incident to the ordinary course of its business as well
as other insurance coverages customary in its business, with such coverage
limits as management deems prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
Not applicable.
Executive Officers of the Registrant.
------------------------------------
In addition to the elected executive officers of FCX (the "Elected FCX
Executive Officers"), one officer of PT-FI is deemed by FCX to be an executive
officer of FCX (the "Designated FCX Executive Officer") for purposes of the
federal securities laws. Listed below are the names and ages, as of March 15,
1995, of each of the Elected FCX Executive Officers and the Designated FCX
Executive Officer, together with the principal positions and offices with FCX,
FTX, and PT-FI held by each. All officers of FCX, FTX, and PT-FI are elected
or appointed for one year terms, subject to death, resignation or removal.
Name Age Position or Office
---- --- -------------------
Richard C. Adkerson 48 Senior Vice President of FCX. Senior Vice
President of FTX. Commissioner of PT-FI.
John G. Amato 51 General Counsel of FCX. General Counsel of FTX.
Commissioner of PT-FI.
Richard H. Block 44 Senior Vice President of FCX. Senior Vice
President of FTX.
Thomas J. Egan 50 Senior Vice President of FCX. Senior Vice
President of FTX.
Charles W. Goodyear 37 Senior Vice President of FCX. Senior Vice
President of FTX. Commissioner of PT-FI.
Hoediatmo Hoed*** 55 President Director of PT-FI.
W. Russell King 45 Senior Vice President of FCX. Senior Vice
President of FTX.
Rene L. Latiolais 52 Director and Vice Chairman of the Board of FCX.
Director, President, and Chief Operating
Officer of FTX. Commissioner of PT-FI.
George A. Mealey 61 Director, President, and Chief Executive Officer
of FCX. Executive Vice President of FTX.
Director and Executive Vice President of
PT-FI.
James R. Moffett 56 Director and Chairman of the Board of FCX.
Director, Chairman of the Board, and
Chief Executive Officer of FTX. President
Commissioner of PT-FI.
The individuals listed above have served FCX, FTX, or PT-FI in various
executive capacities for at least the last five years.
PART II
Item 5. Market for Registrant's Common Equity and Related
-----------------------------------------------------------------
Stockholder Matters.
-------------------
The information set forth under the caption "FCX Class A Common Shares"
and "Class A Common Share Dividends", on the inside back cover of FCX's 1994
Annual Report to stockholders, is incorporated herein by reference. As of
March 10, 1995, there were 19,844 record holders of FCX's Class A common
stock.
-----------------
***This individual is a Designated FCX Executive Officer and not an
Elected FCX Executive Officer. He is deemed by FCX to be a Designated FCX
Executive Officer solely for purposes of the federal securities laws in view
of his position and responsibilities as an officer of PT-FI; he holds no
actual position as an officer of FCX.
Item 6. Selected Financial Data.
--------------------------------
The information set forth under the caption "Selected Financial and
Operating Data", on page 16 of FCX's 1994 Annual Report to stockholders, is
incorporated herein by reference.
FCX's ratio of earnings to fixed charges for each of the years 1990
through 1994, inclusive, was 9.2x, 4.5x, 6.5x, 3.6x and 7.5x respectively. For
this calculation, earnings consist of income from continuing operations before
income taxes, minority interest and fixed charges. Fixed charges include
interest and that portion of rent deemed representative of interest.
Item 7. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------------------
Results of Operations.
---------------------
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations", on pages 11
through 14 and 17 through 20, of FCX's 1994 Annual Report to stockholders, is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
----------------------------------------------------
The financial statements of FCX, the notes thereto and the report
thereon of Arthur Andersen LLP, appearing on pages 21 through 34, inclusive,
and the report of management on page 15 of FCX's 1994 Annual Report to
stockholders, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
----------------------------------------------------------------------------
and Financial Disclosure.
------------------------
Not applicable.
PART III
Items 10, 11, 12, and 13. Directors and Executive Officers of the
---------------------------------------------------------------------
Registrant, Executive Compensation, Security Ownership of
------------------------------------------------------------
Certain Beneficial Owners and Management, and Certain
---------------------------------------------------------
Relationships and Related Transactions.
--------------------------------------
The information set forth under the captions "Voting Procedure" and
"Election of Directors", beginning on pages 1 and 4, respectively, of the
Proxy Statement dated March 23, 1995, submitted to the stockholders of FCX in
connection with its 1995 Annual Meeting to be held on May 4, 1995, is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
--------------------------------------------------------------------------
(a)(1), (a)(2), and (d). Financial Statements. See Index to Financial
Statements appearing on page F-1 hereof.
(a)(3) and (c). Exhibits. See Exhibit Index beginning on page E-1
hereof.
(b). Reports on Form 8-K. No reports on Form 8-K were filed by the
registrant during the fourth quarter of 1994.
SIGNATURES
----------
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 23, 1995.
FREEPORT-McMoRan COPPER & GOLD INC.
BY: /s/ James R. Moffett
--------------------------------
James R. Moffett
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 23, 1995.
/s/ James R. Moffett Chairman of the Board
---------------------- Director
James R. Moffett
George A. Mealey* President, Chief Executive Officer
and Director
(Principal Executive Officer)
Richard C. Adkerson* Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
John T. Eads* Controller - Financial Reporting
(Principal Accounting Officer)
Leland O. Erdahl* Director
Ronald Grossman* Director
Rene L. Latiolais* Director
Wolfgang F. Siegel* Director
Elwin E. Smith* Director
Eiji Umene* Director
*By: /s/ James R. Moffett
--------------------------
James R. Moffett
Attorney-in-Fact
INDEX TO FINANCIAL STATEMENTS
------------------------------
The financial statements of FCX, the notes thereto, and the report
thereon of Arthur Andersen LLP appearing on pages 21 through 34, inclusive, of
FCX's 1994 Annual Report to stockholders are incorporated by reference.
The financial statement schedules listed below should be read in
conjunction with such financial statements contained in FCX's 1994 Annual
Report to stockholders.
Page
----
Report of Independent Public Accountants........................F-1
III-Condensed Financial Information of Registrant...............F-2
Schedules other than those schedules listed above have been omitted since
they are either not required or not applicable or the required information is
included in the financial statements or notes thereof.
* * *
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
We have audited, in accordance with generally accepted auditing
standards, the financial statements as of December 31, 1994 and 1993 and for
each of the three years in the period ended December 31, 1994 included in
Freeport-McMoRan Copper & Gold Inc.'s annual report to shareholders
incorporated by reference in this Form 10-K, and have issued our report
thereon dated January 24, 1995. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed
in the index above is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
New Orleans, Louisiana,
January 24, 1995
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Balance Sheets
December 31,
------------------------
1994 1993
---------- ----------
(In Thousands)
Assets
Cash and short-term investments $ 171 $ 427
Interest receivable 12,676 7,582
Receivable from Government of Indonesia - 2,247
Notes receivable from PT-FI 1,338,611 1,064,888
Investment in PT-FI 195,258 145,959
Investment in PTII 76,081 75,601
Investment in RTM 81,386 43,254
Other assets 14,988 2,011
---------- ----------
Total assets $1,719,171 $1,341,969
========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 27,270 $ 32,468
Long-term debt 190,000 102,039
Amount due to FTX 800 12,270
RTM stock subscription payable - 12,644
Other liabilities and deferred credits 6,119 2,001
Mandatory redeemable preferred stock 500,007 232,620
Stockholders' equity 994,975 947,927
---------- ----------
Total liabilities and stockholders' equity $1,719,171 $1,341,969
========== ==========
Statements of Income
Years Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
Income from investment in PT-FI and PTII,
net of PT-FI tax provision $111,822 $ 53,861 $128,220
Net loss from investment in RTM (6,309) (15,666) -
Elimination of intercompany profit 3,005 (6,610) -
General and administrative expenses (7,253) (5,207) (4,802)
Depreciation and amortization (3,711) (2,397) (200)
Interest expense (10,259) (8,017) (16,518)
Interest income on PT-FI notes receivable:
Zero coupon exchangeable notes 352 19,175 18,326
Promissory notes 21,094 9,292 11,097
8.235% convertible 14,033 14,036 -
Step-up perpetual convertible 26,256 12,785 -
Gold and silver production payment loans 20,222 4,055 -
Other income (expense), net (7,424) (406) 5,561
Provision for income taxes (31,587) (24,085) (11,791)
-------- -------- --------
Net income 130,241 50,816 129,893
Preferred dividends (51,838) (28,954) (7,025)
-------- -------- --------
$ 78,403 $ 21,862 $122,868
======== ======== ========
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Continued)
Statements of Cash Flow
Years Ended December 31,
-----------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
Cash flow from operating activities:
Net income $130,241 $ 50,816 $129,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from investment in PT-FI and PTII (111,822) (53,861) (128,220)
Net loss from investment in RTM 6,309 15,666 -
Elimination of intercompany profit (3,005) 6,610 -
Dividends received from PT-FI and PTII 147,465 132,048 78,214
Accretion of note receivable from PT-FI,
net - (9,104) (1,808)
Depreciation and amortization 3,711 2,397 200
(Increase) decrease in accounts receivable (24,240) - 20,000
Increase (decrease) in accounts payable (4,648) (646) 597
Other 1,654 (5,959) (1,854)
-------- -------- --------
Net cash provided by operating activities 145,665 137,967 97,022
-------- -------- --------
Cash flow from investing activities:
Received from Government of Indonesia 2,247 6,288 3,911
Investment in RTM (36,365) (43,642) -
Investment in PTII (8) - (211,892)
Investment in Freeport Hasa Inc. - - (1)
-------- -------- --------
Net cash used in investing activities (34,126) (37,354) (207,982)
-------- -------- --------
Cash flow from financing activities:
Cash dividends paid:
Class A common stock (38,316) (33,298) (26,088)
Class B common stock (85,187) (85,277) (85,277)
Special preference stock (15,708) (15,708) (4,407)
Step-Up preferred stock (17,500) (5,590) -
Mandatory redeemable preferred stock (13,614) (1,683) -
Proceeds from sale of:
Class A common stock - - 174,142
Preferred and preference stock 252,985 561,090 217,867
PT-FI common shares - - 212,484
9 3/4% senior notes 116,276 - -
Proceeds from equipment loan 70,000 - -
Proceeds from FTX 88,280 20,650 -
Repayment to FTX (99,750) (8,380) -
Loans to PT-FI (369,261) (706,750) (212,484)
-------- -------- --------
Net cash provided by (used) in financing
activities (111,795) (274,946) 276,237
-------- -------- --------
Net increase (decrease) in cash and short-
term investments (256) (174,333) 165,277
Cash and short-term investments at beginning
of year 427 174,760 9,483
-------- -------- --------
Cash and short-term investments at end of
year $ 171 $ 427 $174,760
======== ======== ========
Interest paid $ 7,788 $ 213 $ -
======== ======== ========
Taxes paid $ 29,871 $ 22,723 $ 11,762
======== ======== ========
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Continued)
a. The footnotes contained in FCX's 1994 Annual Report to stockholders are
an integral part of these statements.
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
---------------
Sequentially
Exhibit Numbered
Number Page
-------- ----
3.1 Composite copy of the Certificate of
Incorporation of FCX.
3.2 By-Laws of FCX, as amended.
Incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K
of FCX for the fiscal year ended
December 31, 1992 (the "FCX 1992 Form
10-K").
4.1 Certificate of Designations of the 7%
Convertible Exchangeable Special
Preference Stock (the "Special
Preference Stock") of FCX.
Incorporated by reference to Exhibit 5
to the Form 8 Amendment No. 1 dated
July 16, 1992 (the "Form 8 Amendment")
to the Application for Registration on
Form 8-A of FCX dated July 2, 1992.
4.2 Deposit Agreement dated as of July 21,
1992 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts
("Depositary Receipts") evidencing
certain Depositary Shares, each of
which, in turn, represents 2-16/17
shares of Special Preference Stock.
Incorporated by reference to Exhibit 2
to the Form 8 Amendment.
4.3 Form of Depositary Receipt.
Incorporated by reference to Exhibit 1
to the Form 8 Amendment.
4.4 Certificate of Designations of the
Step-Up Convertible Preferred Stock
of FCX. Incorporated by reference to
Exhibit 4.4 to the Annual Report on
Form 10-K of FCX for the fiscal year
ended December 31, 1993 (the "FCX 1993
Form 10-K").
4.5 Deposit Agreement dated as of July 1,
1993 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts ("Step-
Up Depositary Receipts") evidencing
certain Depositary Shares, each of
which, in turn, represents 0.05 shares
of Step-Up Convertible Preferred
Stock. Incorporated by reference to
Exhibit 4.5 to the FCX 1993 Form 10-K.
4.6 Form of Step-Up Depositary Receipt.
Incorporated by reference to Exhibit
4.6 to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the
Gold-Denominated Preferred Stock of
FCX. Incorporated by reference to
Exhibit 4.7 to the FCX 1993 Form 10-K.
4.8 Deposit Agreement dated as of August
12, 1993 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts ("Gold-
Denominated Depositary Receipts")
evidencing certain Depositary shares,
each of which, in turn, represents
0.05 shares of Gold-Denominated
Preferred Stock. Incorporated by
reference to Exhibit 4.8 to the FCX
1993 Form 10-K.
4.9 Form of Gold-Denominated Depositary
Receipt. Incorporated by reference to
Exhibit 4.9 to the FCX 1993 Form 10-K.
4.10 Certificate of Designations of the
Gold-Denominated Preferred Stock,
Series II (the "Gold-Denominated
Preferred Stock II") of FCX.
Incorporated by reference to Exhibit
4.1 to the Quarterly Report on Form
10-Q of FCX for the quarter ended
March 31, 1994 (the "FCX 1994 First
Quarter Form 10-Q").
4.11 Deposit Agreement dated as of January
15, 1994, among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts ("Gold-
Denominated II Depositary Receipts")
evidencing certain Depositary shares,
each of which, in turn, represents
0.05 shares of Gold-Denominated
Preferred Stock II. Incorporated by
reference to Exhibit 4.2 to the FCX
1994 First Quarter Form 10-Q.
4.12 Form of Gold-Denominated II Depositary
Receipt. Incorporated by reference to
Exhibit 4.3 to the FCX 1994 First
Quarter Form 10-Q.
4.13 Certificate of Designations of the
Silver-Denominated Preferred Stock of
FCX.
4.14 Deposit Agreement dated as of July 25,
1994 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts
("Silver-Denominated Depositary
Receipts") evidencing certain
Depositary shares, each of which, in
turn, initially represents 0.025
shares of Silver-Denominated Preferred
Stock. Incorporated by reference to
Exhibit 4.2 to the July 15, 1994 Form
8-A.
4.15 Form of Silver-Denominated Depositary
Receipt. Incorporated by reference to
Exhibit 4.1 to the July 15, 1994, Form
8-A.
4.16 Credit Agreement dated as of June 1,
1993 (the "PT-FI Credit Agreement")
among PT-FI, the several banks which
are parties thereto (the "PT-FI
Banks"), Morgan Guaranty Trust Company
of New York, as PT-FI Trustee (the
"PT-FI Trustee"), and Chemical Bank,
as agent (the "PT-FI Bank Agent").
Incorporated by reference to Exhibit
4.10 to the FCX 1993 Form 10-K.
4.17 First Amendment dated as of February
2, 1994 to the PT-FI Credit Agreement
among PT-FI, the PT-FI Banks, the PT-
FI Trustee and the PT-FI Bank Agent.
Incorporated by reference to Exhibit
4.11 to the FCX 1993 Form 10-K.
4.18 Second Amendment dated as of March 1,
1994 to the PT-FI Credit Agreement
among PT-FI, the PT-FI Banks, the PT-
FI Trustee and the PT-FI Bank Agent.
Incorporated by reference to Exhibit
4.12 to the FCX 1993 Form 10-K.
4.19 Third Consent and Waiver dated as of
October 18, 1994 to the PT-FI Credit
Agreement among PT-FI, the PT-FI
Banks, the PT-FI Trustee and the PT-FI
Bank Agent.
4.20 Fourth Amendment, Consent and Limited
Waiver dated as of November 23, 1994
to the PT-FI Credit Agreement among
PT-FI, the PT-FI Banks, the PT-FI
Trustee and the PT-FI Bank Agent.
4.21 Term Loan and Working Capital
Agreement dated as of November 4, 1994
(the "RTML Term Loan") among Rio Tinto
Metal, S.A. ("RTML"), the Lenders and
Barclays Bank PLC as Agent (the
"Agent").
4.22 Amendment No. 1 dated as of March 7,
1995 to the RTML Term Loan among
RTML, the Lenders and the Agent.
4.23 Agreement dated as of May 1, 1988
between Freeport Minerals Company and
FCX assigning certain stockholder
rights and obligations. Incorporated
by reference to Exhibit 10.13 to
Registration No. 33-20807.
10.1 Design, Engineering and Related
Services Contract dated as of
September 15, 1992 between PT-FI and
Fluor Daniel Engineers & Constructors,
Ltd. Incorporated by reference to
Exhibit 10.1 to the FCX 1992 Form 10-
K.
10.2 Site Services Contract dated as of
September 15, 1992 between PT-FI and
Fluor Daniel Eastern, Inc.
Incorporated by reference to Exhibit
10.2 to the FCX 1992 Form 10-K.
10.3 Contract of Work dated December 30,
1991 between The Government of the
Republic of Indonesia and PT-FI.
Incorporated by reference to Exhibit
10.20 to the FCX 1991 Form 10-K.
10.4 Management Services Agreement dated as
of May 1, 1988 among FCX, FII and FTX.
Incorporated by reference to Exhibit
10.01 to Registration No. 33-20807.
10.5 Concentrate Sales Agreement dated as
of December 30, 1990 between FII and
Dowa Mining Co., Ltd., Furukawa Co.,
Ltd., Mitsubishi Materials
Corporation, Mitsui Mining & Smelting
Co., Ltd., Nittetsu Mining Co., Ltd.,
Nippon Mining Co., Ltd. and Sumitomo
Metal Mining Co., Ltd. (Confidential
information omitted and filed
separately with the Securities and
Exchange Commission.) Incorporated by
reference to Exhibit 10.3 to the
Annual Report on Form 10-K of FCX for
the fiscal year ended December 31,
1990.
12.1 FCX Computation of Ratio of Earnings
to Fixed Charges.
13.1 Those portions of the 1994 Annual
Report to stockholders of FCX which
are incorporated herein by reference.
21.1 Subsidiaries of FCX.
23.1 Consent of Arthur Andersen LLP dated
March 23, 1995.
24.1 Certified resolution of the Board of
Directors of FCX authorizing this
report to be signed on behalf of any
officer or director pursuant to a
Power of Attorney.
24.2 Powers of Attorney pursuant to which
this report has been signed on behalf
of certain officers and directors of
FCX.
27.1 FCX Financial Data Schedule.