SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000
Commission File Number: 1-9916
Freeport-McMoRan Copper & Gold Inc.
Incorporated in Delaware 74-2480931
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
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 __
On September 30, 2000, there were issued and outstanding
57,292,123 shares of the registrant's Class A Common Stock, par
value $0.10 per share, and 91,194,374 shares of its Class B
Common Stock, par value $0.10 per share.
FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 8
Report of Independent Public Accountants 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information 20
Signature 21
Exhibit Index E-1
2
FREEPORT-McMoRan COPPER & GOLD INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED BALANCE SHEETS (Unaudited)
September 30, December 31,
2000 1999
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 5,978 $ 6,698
Accounts receivable 159,577 172,762
Inventories 395,493 368,125
Prepaid expenses and other 9,632 16,869
---------- ----------
Total current assets 570,680 564,454
Property, plant and equipment, net 3,261,301 3,363,291
Investment in PT Smelting 62,767 66,070
Other assets 86,425 89,101
---------- ----------
Total assets $3,981,173 $4,082,916
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
and accrued liabilities $ 400,005 $ 317,339
Current portion of long-term debt
and short-term borrowings 205,102 114,789
Unearned customer receipts 40,410 40,235
Accrued income taxes 4,718 42,704
---------- ----------
Total current liabilities 650,235 515,067
Long-term debt, less current portion:
FCX and PT Freeport Indonesia
credit facilities 859,000 648,000
Senior notes 450,000 570,000
Infrastructure asset financings 410,592 443,150
Atlantic Copper debt 212,419 230,212
Equipment loans 57,268 65,656
Rio Tinto loan - 30,123
Other notes payable 77,578 46,329
Accrued postretirement benefits
and other liabilities 92,128 114,677
Deferred income taxes 569,089 553,394
Minority interests 113,715 181,921
Redeemable preferred stock 475,005 487,507
Stockholders' equity 14,144 196,880
---------- ----------
Total liabilities and
stockholders' equity $3,981,173 $4,082,916
========== ==========
The accompanying notes are an integral part of these financial
statements.
3
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Revenues $473,837 $473,658 $1,338,777 $1,359,829
Cost of sales:
Production and delivery 278,886 223,715 798,234 666,055
Depreciation and amortization 77,825 74,063 195,512 217,188
-------- -------- ---------- ----------
Total cost of sales 356,711 297,778 993,746 883,243
Exploration expenses 2,915 2,484 6,724 7,590
Equity in PT Smelting losses 5,383 3,926 9,020 16,391
General and
administrative expenses 18,729 15,151 55,996 48,059
-------- -------- ---------- ----------
Total costs and expenses 383,738 319,339 1,065,486 955,283
-------- -------- ---------- ----------
Operating income 90,099 154,319 273,291 404,546
Interest expense, net (53,539) (47,904) (153,287) (146,127)
Other income (expense), net 5,598 (4,316) 5,014 1,381
-------- -------- ---------- ----------
Income before income taxes
and minority interests 42,158 102,099 125,018 259,800
Provision for income taxes (34,752) (53,331) (93,477) (135,623)
Minority interests in
net income of consolidated
subsidiaries (7,252) (13,130) (21,832) (34,552)
-------- -------- ---------- ----------
Net income 154 35,638 9,709 89,625
Preferred dividends (9,346) (8,829) (28,273) (26,145)
-------- -------- ---------- ----------
Net income (loss) applicable to
common stock $ (9,192) $ 26,809 $ (18,564) $ 63,480
======== ======== ========== ==========
Net income (loss) per share of common stock:
Basic $(.06) $.16 $(.12) $.39
===== ==== ===== ====
Diluted $(.06) $.16 $(.12) $.39
===== ==== ===== ====
Average common shares outstanding:
Basic 150,088 163,481 156,597 163,654
======= ======= ======= =======
Diluted 150,088 164,844 156,597 164,471
======= ======= ======= =======
The accompanying notes are an integral part of these financial
statements.
4
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW (Unaudited)
Nine Months
Ended
September 30,
---------------------
2000 1999
--------- ---------
(In Thousands)
Cash flow from operating activities:
Net income $ 9,709 $ 89,625
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 195,512 217,188
Deferred income taxes 18,707 49,231
Equity in PT Smelting losses 9,020 16,391
Minority interests' share of net income 21,832 34,552
Other 27,511 9,280
(Increases) decreases in working capital:
Accounts receivable 5,090 5,968
Inventories (30,571) (39,246)
Prepaid expenses and other 8,077 (610)
Accounts payable and accrued liabilities 81,872 (3,884)
Accrued income taxes (41,838) 9,200
--------- ---------
(Increase) decrease in working capital 22,630 (28,572)
--------- ---------
Net cash provided by operating activities 304,921 387,695
--------- ---------
Cash flow from investing activities:
PT Freeport Indonesia capital expenditures (117,950) (97,656)
Atlantic Copper capital expenditures (8,377) (4,886)
Investment in PT Smelting (5,717) (3,384)
Other 13 (852)
--------- ---------
Net cash used in investing activities (132,031) (106,778)
--------- ---------
Cash flow from financing activities:
Repayments to Rio Tinto (60,564) (161,050)
Proceeds from other debt 399,601 264,611
Repayment of other debt (271,110) (314,031)
Partial redemption of preferred stock (11,893) (11,946)
Purchase of FCX common shares (158,731) (7,921)
Cash dividends paid:
Preferred stock (28,464) (28,587)
Minority interests (31,757) (11,189)
Other (10,692) (13,320)
--------- ---------
Net cash used in financing activities (173,610) (283,433)
--------- ---------
Net decrease in cash and cash equivalents (720) (2,516)
Cash and cash equivalents
at beginning of year 6,698 5,877
--------- ---------
Cash and cash equivalents at end of period $ 5,978 $ 3,361
========= =========
The accompanying notes are an integral part of these financial
statements.
5
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. EARNINGS PER SHARE
Freeport-McMoRan Copper & Gold Inc.'s (FCX) basic net income
(loss) per share of common stock was calculated by dividing net
income (loss) applicable to common stock by the weighted-average
number of common shares outstanding during the period. Diluted
net income (loss) per share of common stock was calculated by
dividing net income (loss) applicable to common stock by the
weighted-average number of common shares outstanding during the
period plus the net effect of dilutive stock options. Stock
options representing less than 0.1 million shares in the third
quarter of 2000 and 0.5 million shares in the 2000 nine-month
period that otherwise would have been considered dilutive were
excluded from the diluted net loss per share calculation because
of the net losses for the periods. Dilutive stock options
represented 1.4 million shares in the third quarter of 1999 and
0.8 million shares in the 1999 nine-month period.
Options totaling 14.7 million shares (average price of
$19.17 per share) in the third quarter of 2000 and 11.7 million
shares (average price of $21.51 per share) in the 2000 nine-month
period were excluded from the computation of diluted net income
(loss) per share of common stock because their exercise prices
were greater than the average market price of the common stock
during the period. For 1999, options for 9.9 million shares
(average exercise price of $22.65 per share) in the third quarter
and 11.2 million shares (average exercise price of $21.75 per
share) in the nine-month period were excluded. Convertible
preferred stock outstanding was not included in the computation
of diluted net income (loss) per share of common stock because
doing so would have increased diluted net income per share of
common stock or decreased diluted net loss per share of common
stock. The preferred stock was convertible into 11.7 million
shares of common stock, and the related accrued dividends totaled
$6.1 million in the third quarter of 2000, $5.6 million in the
third quarter of 1999, $18.4 million in the 2000 nine-month
period and $16.1 million in the 1999 nine-month period.
2. FINANCIAL CONTRACTS
At times, FCX has entered into financial contracts to manage
certain risks resulting from fluctuations in commodity prices
(primarily copper and gold), foreign currency exchange rates and
interest rates by creating offsetting exposures. Costs or
premiums and gains or losses on the contracts, including closed
contracts, are recognized with the hedged transaction if deferral
criteria are met. Gains or losses on the contracts are
recognized currently if the hedged transaction is no longer
expected to occur or if deferral criteria are not met. FCX
monitors its credit risk on an ongoing basis and considers this
risk to be minimal because its contracts are with a diversified
group of financially strong counterparties. FCX currently has no
copper and gold price protection contracts relating to its future
mine production other than its gold-denominated preferred stock.
At September 30, 2000, FCX had redeemable preferred stock
indexed to commodities, open foreign currency forward contracts,
open forward copper sales and purchase contracts related to its
smelter operations and interest rate swap contracts. Redeemable
preferred stock indexed to commodities is treated as a hedge of
future production and is carried at its original issue value. As
principal payments occur, differences between the carrying value
and the payment are recorded as an adjustment to revenues. In
August 2000, FCX made the second of eight annual mandatory
partial redemption payments of its Silver-Denominated Preferred
Stock. FCX recorded $0.6 million to revenues in each of the
third quarters of 1999 and 2000 for the excess of the carrying
values over the payments.
Atlantic Copper, S.A., a wholly owned subsidiary of FCX
(Atlantic Copper), hedges a portion of its anticipated Spanish
peseta/euro cash outflows with foreign currency forward
contracts. PT Freeport Indonesia, FCX's majority-owned
subsidiary, also has foreign currency forward contracts hedging a
portion of its anticipated Australian dollar and Indonesian
rupiah cash outflows. Changes in market value of foreign currency
forward contracts which are intended to cover anticipated
transactions are recognized in the period incurred. A stronger
U.S. dollar and the weaker Spanish peseta/euro and Australian
dollar have resulted in unrealized losses on these foreign
currency contracts which are recorded in earnings. FCX's net
gains (losses) on foreign currency contracts are included in
production costs and totaled $(26.8) million in the third quarter
of 2000, $1.2 million in the third quarter of 1999, $(32.7)
million in the first nine months of 2000 and $(4.4) million in
the first nine months of 1999. Atlantic Copper also enters into
futures contracts for copper to hedge its price risk whenever its
physical purchases and sales pricing periods do not match. Gains
and losses on these contracts are recognized when the contracts
mature. Atlantic Copper has interest rate swap contracts to limit
the effect of increases in the interest rates on variable-rate
debt. The costs associated with these contracts are amortized to
interest expense over the terms of the agreements.
6
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
(SFAS 133). In June 1999, the FASB issued SFAS 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133," which deferred
SFAS 133's effective date to fiscal years beginning after June
15, 2000. In June 2000, the FASB issued SFAS 138, "Accounting
for Certain Derivative Instruments and Certain Hedging
Activities," which amended SFAS 133. SFAS 133 establishes
accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The
accounting for changes in the fair value of a derivative depends
on the intended use of the derivative and the resulting
designation.
FCX will adopt SFAS 133 effective January 1, 2001. FCX
expects to continue its current accounting for its redeemable
preferred stock indexed to commodities under the provisions of
SFAS 133 which allow such instruments issued before January 1,
1998 to be excluded from those instruments required to be
adjusted for changes in their fair values.
Under current accounting standards, Atlantic Copper's and PT
Freeport Indonesia's foreign currency forward contracts do not
qualify for hedge accounting because they are intended to cover
anticipated transactions. The market value of these contracts is
recorded in the balance sheet (a $32.3 million current liability
at September 30, 2000). Changes in the market value of these
contracts are recognized in earnings as they occur. Under SFAS
133, these contracts are expected to qualify for special hedge
accounting treatment, whereby changes in fair value will be
recognized in other comprehensive income (a component of
stockholders' equity) until settled, when resulting gains and
losses will be recorded in earnings.
FCX believes that for all its other significant contracts
that are not excluded from SFAS 133's provisions, the impact of
the adoption of SFAS 133 will not be material to its financial
position or results of operations.
3. INTEREST COST
Interest expense excludes capitalized interest of $2.0 million in
the third quarter of 2000, $1.3 million in the third quarter of
1999, $4.8 million in the first nine months of 2000 and $2.6
million in the first nine months of 1999.
4. BUSINESS SEGMENTS
FCX has two operating segments: "mining and exploration" and
"smelting and refining." The mining and exploration segment
includes the copper and gold mining operations of PT Freeport
Indonesia in Indonesia and FCX's Indonesian exploration
activities. The smelting and refining segment includes Atlantic
Copper's operations in Spain and PT Freeport Indonesia's equity
investment in PT Smelting in Gresik, Indonesia. The segment data
presented below were prepared on the same basis as the
consolidated FCX financial statements.
Mining Smelting
and and Eliminations FCX
Exploration Refining and Other Total
---------- -------- --------- ----------
(In Thousands)
Three months ended September 30, 2000
Revenues $ 385,933a $181,312 $ (93,408)b $ 473,837
Production and delivery 176,002 186,851 (83,967)b 278,886
Depreciation and amortization 69,881 6,795 1,149 77,825
Exploration expenses 2,388 - 527 2,915
Equity in PT Smelting losses - 5,383c - 5,383
General and
administrative expenses 14,751 2,346 1,632 18,729
---------- -------- --------- ----------
Operating income (loss) $ 122,911 $(20,063) $ (12,749) $ 90,099
========== ======== ========= ==========
Interest expense, net $ 35,061 $ 6,263 $ 12,215 $ 53,539
========== ======== ========= ==========
Provision (benefit)
for income taxes $ 34,107 $ (649) $ 1,294 $ 34,752
========== ======== ========= ==========
7
<CAPTION
Mining Smelting
and and Eliminations FCX
Exploration Refining and Other Total
---------- -------- --------- ----------
(In Thousands)
Three months ended September 30, 1999
Revenues $ 376,298a $174,306 $ (76,946)b $ 473,658
Production and delivery 124,081 164,313 (64,679)b 223,715
Depreciation and amortization 65,621 7,325 1,117 74,063
Exploration expenses 2,099 - 385 2,484
Equity in PT Smelting losses - 3,926c - 3,926
General and
administrative expenses 11,537 2,206 1,408 15,151
---------- -------- --------- ----------
Operating income (loss) $ 172,960 $ (3,464) $ (15,177) $ 154,319
========== ======== ========= ==========
Interest expense, net $ 33,568 $ 6,565 $ 7,771 $ 47,904
========== ======== ========= ==========
Provision (benefit)
for income taxes $ 52,004 $ (1,593) $ 2,920 $ 53,331
========== ======== ========= ==========
Nine months ended September 30, 2000
Revenues $ 953,313a $607,994 $(222,530)b $1,338,777
Production and delivery 454,490 597,091 (253,347)b 798,234
Depreciation and amortization 171,066 21,063 3,383 195,512
Exploration expenses 5,445 - 1,279 6,724
Equity in PT Smelting losses - 9,020c - 9,020
General and
administrative expenses 44,768 6,520 4,708 55,996
---------- -------- --------- ----------
Operating income (loss) $ 277,544 $(25,700) $ 21,447 $ 273,291
========== ======== ========= ==========
Interest expense, net $ 100,620 $ 19,111 $ 33,556 $ 153,287
========== ======== ========= ==========
Provision for income taxes $ 68,863 $ 1,079 $ 23,535 $ 93,477
========== ======== ========= ==========
Nine months ended September 30, 1999
Revenues $1,040,653a $552,532 $(233,356)b $1,359,829
Production and delivery 386,605 522,374 (242,924)b 666,055
Depreciation and amortization 191,901 21,936 3,351 217,188
Exploration expenses 6,848 - 742 7,590
Equity in PT Smelting losses - 16,391c - 16,391
General and
administrative expenses 36,250 6,697 5,112 48,059
---------- -------- --------- ----------
Operating income (loss) $ 419,049 $(14,866) $ 363 $ 404,546
========== ======== ========= ==========
Interest expense, net $ 104,947 $ 19,981 $ 21,199 $ 146,127
========== ======== ========= ==========
Provision (benefit)
for income taxes $ 116,559 $ (3,164) $ 22,228 $ 135,623
========== ======== ========= ==========
a. Includes PT Freeport Indonesia sales to PT Smelting totaling
$101.2 million in the third quarter of 2000, $87.1 million in the
third quarter of 1999, $230.6 million in the nine-month period
ended September 30, 2000 and $175.6 million in the nine-month
period ended September 30, 1999.
b. Represents elimination of intersegment sales from PT
Freeport Indonesia to Atlantic Copper and the change in deferred
profits on intersegment sales remaining in Atlantic Copper's
inventories.
c. Includes effect of changes in deferred intercompany profits
on 25 percent of PT Freeport Indonesia's sales to PT Smelting
that remain in PT Smelting's inventory at period end. The gains
(losses) totaled $(1.8) million in the third quarter of 2000,
$(4.3) million in the third quarter of 1999, $2.9 million in the
nine-month period ended September 30, 2000 and $(8.6) million in
the nine-month period ended September 30, 1999.
5. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first nine months
of 2000 and 1999 was 1.8 to 1 and 2.7 to 1, respectively. For
this calculation, earnings consist of income from continuing
operations before income taxes, minority interests and fixed
charges. Fixed charges include interest and that portion of rent
deemed representative of interest.
----------------------
Remarks
The information furnished herein should be read in conjunction
with FCX's financial statements contained in its 1999 Annual
Report on Form 10-K. The information furnished herein reflects
all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the periods.
All such adjustments are, in the opinion of management, of a
normal recurring nature.
8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Freeport-McMoRan Copper & Gold Inc.:
We have reviewed the accompanying condensed balance sheet of
Freeport-McMoRan Copper & Gold Inc. (a Delaware corporation) as
of September 30, 2000, the related statements of operations for
the three- and nine-month periods ended September 30, 2000 and
1999, and the statements of cash flow for the nine-month periods
ended September 30, 2000 and 1999. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with auditing standards generally
accepted in the United States, the objective of which is the
expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with accounting
principles generally accepted in the United States.
We have previously audited, in accordance with auditing
standards generally accepted in the United States, the balance
sheet of Freeport-McMoRan Copper & Gold Inc. as of December 31,
1999, and the related statements of income, stockholders' equity
and cash flow for the year then ended (not presented herein),
and, in our report dated January 18, 2000, we expressed an
unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed
balance sheet as of December 31, 1999, is fairly stated, in all
material respects, in relation to the balance sheet from which it
has been derived.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
October 17, 2000
9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
Management's discussion and analysis presented below should be
read in conjunction with our discussion and analysis and our
financial statements contained in our 1999 Annual Report. The
results of operations reported and summarized below are not
necessarily indicative of future operating results.
Summary comparative results for the third-quarter and nine-
month periods follow (in millions, except per share amounts):
Third Quarter Nine Months
--------------- -------------------
2000 1999 2000 1999
------ ------ -------- --------
Revenues $473.8 $473.7 $1,338.8 $1,359.8
Operating income 90.1 154.3 273.3 404.5
Net income (loss)
applicable to common stock (9.2) 26.8 (18.6) 63.5
Diluted net income (loss)
per share of common stock (.06) 0.16 (.12) 0.39
Third-quarter 2000 revenues benefited from higher copper
prices and sales volumes, offset in part by lower gold sales
volumes compared to the third quarter of 1999. Revenues for the
first nine months of 2000 benefited from the higher copper and
gold prices, but sales volumes were lower when compared with the
first nine months of 1999. Third-quarter 2000 revenues benefited
by $5.1 million ($2.5 million to net loss or $0.02 per share)
and third-quarter 1999 revenues benefited by $10.6 million ($5.2
million to net income or $0.03 per share) from adjustments to
prior period "open" concentrate sales. Nine-month 2000 revenues
benefited by $10.5 million ($5.1 million to net loss or $0.03 per
share) and nine-month 1999 revenues benefited by $6.3 million
($3.1 million to net income or $0.02 per share) from adjustments
to prior year concentrate sales.
Cost of sales for the 2000 periods reflects higher equipment
maintenance and fuel costs at PT Freeport Indonesia and the net
mark-to-market losses on our foreign currency contracts which are
intended to cover future anticipated operating costs. These mark-
to-market losses totaled $26.8 million for the third quarter of
2000 and $32.7 million for the first nine months of 2000 (see
"Note 2. Financial Contracts" and "New Accounting Standards").
The foreign currency contracts do not contain cash margin
requirements. Nine-month 2000 cost of sales benefited from lower
depreciation and amortization because of lower sales volumes at
PT Freeport Indonesia.
Lower PT Smelting losses for the first nine months of 2000
compared with the 1999 period primarily reflects changes in
deferred profits on 25 percent of PT Freeport Indonesia's copper
concentrate sales to PT Smelting. Third-quarter 2000 general and
administrative expenses include charges totaling $2.3 million
related to personnel severance costs. General and administrative
expenses in the nine-month 2000 period were higher compared to
the 1999 period primarily because of contribution commitments to
support small business development programs within Irian Jaya
(Papua) over a two-year period and personnel severance costs,
partly offset by a reversal of costs for stock appreciation
rights. The higher effective rate for income taxes in the 2000
periods as compared with the 1999 periods primarily reflects (1)
an increase in net interest costs at the parent company level,
for which there is very little tax benefit, (2) foreign currency
contract losses at Atlantic Copper, for which there is no tax
benefit, and (3) lower reported PT Freeport Indonesia taxable
income. Lower minority interest charges in the 2000 periods
primarily reflect lower net income at PT Freeport Indonesia.
RESULTS OF OPERATIONS
We have two operating segments: "mining and exploration" and
"smelting and refining." The mining and exploration segment
includes PT Freeport Indonesia's copper and gold mining
operations in Indonesia and FCX's Indonesian exploration
activities. The smelting and refining segment includes Atlantic
Copper's operations in Spain and PT Freeport Indonesia's 25
percent equity investment in PT Smelting. Summary comparative
operating income (loss) by segment for the third-quarter and
nine-month periods follows (in millions):
Third Quarter Nine Months
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
Mining and exploration $122.9 $173.0 $277.5 $419.0
Smelting and refining (20.1) (3.5) (25.7) (14.9)
Intercompany eliminations and other (12.7) (15.2) 21.5 0.4
FCX operating income a $ 90.1 $154.3 $273.3 $404.5
10
a.Profits on 100 percent of PT Freeport Indonesia's sales to
Atlantic Copper and 25 percent of PT Freeport Indonesia's sales
to PT Smelting are deferred until the final sale to third parties
has occurred. Changes in the amount of these deferred profits
impacted operating income by $(10.7) million in the third quarter
of 2000, $(12.1) million in the third quarter of 1999, $35.9
million in the nine-month 2000 period and $10.2 million in the
nine-month 1999 period. Our consolidated quarterly earnings
fluctuate depending on the timing and prices of these sales.
MINING AND EXPLORATION
A summary of increases (decreases) in PT Freeport Indonesia
revenues between the periods follows (in millions):
Third Nine
Quarter Months
------- --------
PT Freeport Indonesia revenues - 1999 periods $376.3 $1,040.7
Increases (decreases):
Price realizations:
Copper 52.0 115.0
Gold 8.1 12.0
Sales volumes:
Copper 17.4 (82.0)
Gold (54.1) (170.5)
Adjustments, primarily for copper pricing on
prior period open sales (11.5) 6.7
Treatment charges, royalties and other (2.3) 31.4
------ --------
PT Freeport Indonesia revenues - 2000 periods $385.9 $ 953.3
====== ========
PT Freeport Indonesia's 2000 revenues for both the third-
quarter and nine-month periods benefited from increases in copper
price realizations, which were 18 percent and 17 percent higher,
respectively, compared to the 1999 periods. However, higher
copper realizations for the 2000 periods were more than offset by
decreases in gold sales volumes. Third-quarter and nine-month
2000 gold sales volumes were 33 percent and 34 percent lower than
the respective 1999 periods primarily because of lower ore grades
attributable to the irregular distribution of higher grade ore in
the Grasberg pit, which will result in significantly higher
projected fourth-quarter 2000 gold sales. Lower ore grades also
caused nine-month 2000 copper sales volumes to decline 11 percent
as compared to the 1999 period.
In late 1999, PT Freeport Indonesia began a program using
forward copper contracts to fix the prices of a portion of its
open concentrate sales when market conditions are favorable. In
July 2000, PT Freeport Indonesia entered into forward copper
sales contracts to fix the price at $0.82 per pound on
approximately 60 percent of its June 30, 2000 open concentrate
sales. In April 2000, PT Freeport Indonesia entered into
contracts to fix the price at $0.81 per pound on approximately 60
percent of its March 31, 2000 open concentrate sales. In January
2000, PT Freeport Indonesia entered into contracts to fix the
price at $0.85 per pound on approximately 50 percent of its
December 31, 1999 open concentrate sales. We recorded reductions
in revenues totaling $6.0 million in the third quarter of 2000
for the July 2000 contracts and a net increase in revenues
totaling $1.7 million in the first nine months of 2000 for all of
the 2000 contracts. These amounts are included as part of the
adjustments shown above. We remain unhedged with respect to our
future copper mine production. Treatment charges and royalties
in total were lower in the first nine months of 2000 primarily
because of lower sales volumes and because treatment rates were
lower than in the prior year period.
PT Freeport Indonesia Sales Outlook
Net of Rio Tinto plc's interest, PT Freeport Indonesia's share of
fourth-quarter sales is expected to approximate 410 million
pounds of copper and 675,000 ounces of gold as ore grades are
expected to significantly improve. Sales for 2000 are projected
to approximate 1.36 billion pounds of copper and 1.87 million
ounces of gold. Projected 2000 copper and gold sales reflect the
expectation of slightly higher average mill throughput rates than
in 1999, offset by lower average ore grades and the impact of the
specified sharing arrangement with Rio Tinto, which will result
in a smaller proportion of production attributed to PT Freeport
Indonesia compared to 1999. Preliminary estimates for PT-
Freeport Indonesia's 2001 sales are 1.4 billion pounds of copper
and 2.3 million ounces of gold.
11
At September 30, 2000, we had consolidated copper sales
totaling 202.8 million pounds recorded at an average price of
$0.88 per pound remaining to be finally priced. Approximately 90
percent of these open pounds are expected to be finally priced
during the fourth quarter of 2000 with the remaining pounds to be
priced during the first quarter of 2001. A one-cent movement in
the average price used for these open pounds would have an
approximate $1 million impact on our 2000 net income.
PT Freeport Indonesia Operating Results
Third Quarter Nine Months
---------------- --------------------
2000 1999 2000 1999
------- ------- --------- ---------
PT Freeport Indonesia, Net of Rio Tinto's Interest
Copper
Production (000s of recoverable pounds)362,500 368,600 958,300 1,081,800
Sales (000s of recoverable pounds) 388,300 364,500 950,400 1,066,100
Average realized price $.86 $.73 $.83 $.71
Gold
Production (recoverable ounces) 385,400 625,500 1,191,500 1,826,100
Sales (recoverable ounces) 422,700 633,200 1,197,400 1,826,500
Average realized price $276.23 $257.13 $281.02 $270.98
Gross profit per pound of copper (cents):
Average realized price 86.3 72.9 83.0 70.9
----- ----- ----- -----
Production costs:
Site production and delivery 43.7a 33.8 46.9a 36.1
Gold and silver credits (31.3) (46.5) (36.7) (47.6)
Treatment charges 18.8 19.1 18.3 19.1
Royalty on metals 1.3 1.6 1.3 1.5
----- ----- ----- -----
Cash production costs 32.5 8.0 29.8 9.1
Depreciation and amortization 18.0 18.0 18.0 18.0
----- ----- ----- -----
Total production costs 50.5 26.0 47.8 27.1
----- ----- ----- -----
Adjustments, primarily for copper
pricing on prior period sales 1.9 4.5 0.2 (0.5)
----- ----- ----- -----
Gross profit per pound of copper 37.7 51.4 35.4 43.3
===== ===== ===== =====
PT Freeport Indonesia, 100% Operating Statistics
Ore milled (metric tons per day, MTPD) 221,500 221,800 223,900 220,100
Copper grade (percent) 1.09 1.11 0.99 1.14
Gold grade (grams per metric ton) 0.89 1.40 0.92 1.37
Recovery rate (percent)
Copper 88.8 86.1 87.1 84.4
Gold 82.1 83.7 83.7 83.7
Copper
Production (000s of recoverable pounds)415,400 417,100 1,112,600 1,226,200
Sales (000s of recoverable pounds) 445,700 412,500 1,103,900 1,211,100
Gold
Production (recoverable ounces) 470,900 779,600 1,470,800 2,250,300
Sales (recoverable ounces) 517,500 788,000 1,476,100 2,251,700
a. Includes charges totaling $2.3 million, 0.6 cents per pound
for the third quarter and 0.2 cents per pound for the nine-month
period, for personnel severance costs.
PT Freeport Indonesia's mill throughput averaged 221,500 MTPD
for the third quarter of 2000. Copper and gold production volumes
were lower in the 2000 periods as compared to the 1999 periods
primarily because of lower ore grades. Improvements in copper
recovery rates partly offset the lower copper ore grades. Lower
gold ore grades were attributable to the irregular distribution
of higher grade ore in the Grasberg pit, which will result in
significantly higher projected fourth-quarter 2000 gold
production. In May 2000, PT Freeport Indonesia, in consultation
with the Government of Indonesia, voluntarily agreed to
temporarily limit Grasberg open-pit ore production (see
"Environmental Matters"). Mill throughput rates will vary in the
future based on the characteristics of the ore being processed as
PT Freeport Indonesia manages its operations to optimize metal
production and the impact of the temporary limitations on
Grasberg open-pit ore production.
12
At the Deep Ore Zone mine, production of ore officially
began in September 2000. Production is projected to ramp up to
just over 3,500 MTPD by year-end and to full production of 25,000
MTPD by 2004.
Unit site production and delivery costs in the third quarter
of 2000 averaged $0.44 per pound of copper, $0.10 per pound
higher than the $0.34 reported in the third quarter of 1999.
Higher maintenance and energy costs, as well as the mark-to-
market impact of PT Freeport Indonesia's Australian dollar hedge
contracts discussed below, contributed to the higher unit costs.
Higher equipment availability, increased utilization of the
stacker for overburden placement and improved haul road
conditions benefited unit rates when compared with the second
quarter of 2000 and are expected to benefit fourth-quarter 2000
unit costs. Lower copper grades and the higher costs mentioned
earlier also affected unit site production and delivery costs for
the first nine months of 2000, resulting in an $0.11 per pound
increase as compared to the 1999 period. Gold credits in the
2000 periods, $0.31 per pound in the third quarter and $0.37 per
pound in the nine-month period, were lower as compared with the
1999 period amounts, $0.47 per pound in the third quarter and
$0.48 per pound in the nine-month period, because of lower gold
sales. Unit treatment charges were lower in the 2000 periods
because of related market conditions, which benefited producers.
At current gold prices and currency exchange rates, PT Freeport
Indonesia expects net cash production costs for 2000 to average
approximately $0.25 per pound and approximately $0.11 per pound
in the fourth quarter.
We conduct the majority of our operations in Indonesia and
Spain where our functional currency is the U.S. dollar. All of
our revenues are denominated in U.S. dollars; however, some costs
and certain asset and liability accounts are denominated in
Indonesian rupiah, Australian dollars or Spanish pesetas/euros.
Generally, our results are positively affected when the U.S.
dollar strengthens against these foreign currencies and adversely
affected when the U.S. dollar weakens against these foreign
currencies.
Since 1997, the Indonesian rupiah - U.S. dollar exchange
rate has been extremely volatile. The rupiah - U.S. dollar
exchange rates were 6,970 rupiah to one U.S. dollar at December
31, 1999 and 8,765 rupiah to one U.S. dollar at September 30,
2000. Assuming estimated aggregate 2000 rupiah payments of 800
billion and a September 30, 2000 exchange rate of 8,765 rupiah to
one U.S. dollar, a one-thousand-rupiah increase in the exchange
rate would result in an approximate $9 million decrease in annual
operating costs. A one-thousand-rupiah decrease in the exchange
rate would result in an approximate $12 million increase in
annual operating costs. PT Freeport Indonesia recorded gains
(losses) to production costs totaling $0.2 million during the
third quarter of 2000, $(0.9) million in the third quarter of
1999, $(0.5) million in the first nine months of 2000 and $(1.6)
million during the first nine months of 1999 related to its
rupiah-denominated net assets. Operationally PT Freeport
Indonesia has benefited from a weakened rupiah currency,
primarily through lower labor costs.
During 1998, PT Freeport Indonesia began a currency hedging
program to reduce its exposure to changes in the Indonesian
rupiah and Australian dollar by entering into foreign currency
forward contracts to hedge a portion of its anticipated payments
in these currencies. The last of these contracts expired in
September 1999. PT Freeport Indonesia recorded gains (losses) to
production costs totaling $(0.4) million in the third quarter of
1999 and $3.1 million in the first nine months of 1999 related to
these contracts.
During the second quarter of 2000, PT Freeport Indonesia
entered into foreign currency forward contracts to hedge a
portion of its aggregate anticipated Australian dollar payments
for the remainder of 2000 and for 2001. As of September 30, 2000,
these contracts hedge 135.0 million of Australian dollar payments
through December 2001, or approximately 80 percent of aggregate
projected Australian dollar payments for the remainder of 2000 at
an average exchange rate of $0.60 to one Australian dollar and 50
percent of aggregate projected 2001 Australian dollar payments at
an average exchange rate of $0.58 to one Australian dollar. The
exchange rate was $0.54 to one Australian dollar at September 30,
2000. In July 2000, PT Freeport Indonesia entered into foreign
currency forward contracts to hedge a portion of its aggregate
projected April through July 2001 Indonesian rupiah payments.
The contracts hedge 60 billion of rupiah payments during the
period covered at an exchange rate of 10,000 rupiah to one U.S.
dollar. PT Freeport Indonesia recorded net losses to production
costs related to the Australian dollar and rupiah contracts
totaling $7.6 million during the third quarter of 2000 and $5.8
million during the first nine months of 2000. Each $0.01 change
in the US$/Australian dollar exchange rate impacts the market
value of these contracts by approximately $1 million.
13
Current accounting rules require us to record changes in
market value on all of our open foreign currency contracts
designated as hedges of anticipated payments to net income each
reporting period. Effective January 1, 2001, gains or losses on
foreign currency contracts covering future periods will be
recorded in other comprehensive income (i.e. a component of
equity) instead of net income to the extent they qualify for
special hedge accounting treatment and are effective hedges (See
"New Accounting Standards").
Exploration Activities
Our exploration activities are primarily focused on prospects in
Irian Jaya (Papua), Indonesia. Rio Tinto shares in 40 percent of
our exploration costs and results in Irian Jaya (Papua). Exploration
drilling within PT Freeport Indonesia's Block A area continues to
focus on converting resources to reserves at Kucing Liar, Deep
Grasberg, the Deep Ore Zone and a newly defined surface target called
Ertsberg East. Drilling between Deep Grasberg and Kucing Liar
is proceeding with significant mineralized intervals intersected
on the south side of the present Grasberg block cave reserve.
Extensions of the Deep Ore Zone continue to be confirmed by recent
drilling, and the continuity of mineralization adjacent to the
existing block cave ore reserve is being confirmed. Drilling was
conducted from underground and the surface to focus on defining
the extent of the East Ertsberg mineralization.
Field exploration activities outside of our current mining
operations area have been suspended pending the resolution of a
number of regulatory and local community issues.
SMELTING AND REFINING
Atlantic Copper Operating Results
Third Quarter Nine Months
---------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
Revenues (in millions) $181.3 $174.3 $608.0 $552.5
Operating income (loss) (in millions) $(14.7) $0.5 $(16.7) $1.5
Concentrate treated (metric tons) 245,200 230,900 728,400 694,600
Anode production (000s of pounds) 164,300 154,300 510,400 472,000
Cathode and wire rod sales (000s of pounds) 143,200 137,000 427,400 413,500
Gold sales in anodes and slimes (ounces) 119,000 162,600 503,400 613,600
Atlantic Copper reported higher revenues in the 2000 periods
as compared with the 1999 periods primarily because of higher
copper prices and higher cathode and wire rod sales volumes.
Atlantic Copper's operating income (loss) includes mark-to-market
adjustments for changes in the market value of its Spanish
peseta/euro currency hedging contracts, which are discussed
below. The gains (losses) related to these contracts totaled
$(19.1) million in the third quarter of 2000, $1.5 million in the
third quarter of 1999, $(26.9) million in the first nine months
of 2000 and $(7.5) million in the first nine months of 1999.
Excluding the mark-to-market effect of Atlantic Copper's open
peseta/euro currency contracts, its cathode cash production costs
of $0.12 per pound in the third-quarter of 2000 compared
favorably with $0.14 per pound reported in the 1999 quarter
primarily because of higher production volumes and byproduct
credits. The benefits from lower unit cathode cash production
costs were offset by lower treatment and refining rates ($0.17
per pound in the third quarter of 2000 compared with $0.19 per
pound in the third quarter of 1999). Nine-month 2000 cathode
cash production costs were lower ($0.13 per pound in 2000 and
$0.14 per pound in 1999), but the currency contract losses more
than offset the gains from lower unit costs. Lower treatment
charges, which negatively affect Atlantic Copper, benefit PT
Freeport Indonesia as discussed above.
A portion of Atlantic Copper's operating costs and certain
Atlantic Copper asset and liability accounts are denominated in
Spanish pesetas/euros. Based on estimated 2000 peseta/euro
payments of 15 billion pesetas/90 million euros and September 30,
2000 exchange rates of 189.8 pesetas to one U.S. dollar or $0.88
per euro, a 10-peseta/$0.06 increase or decrease in the exchange
rate could result in a corresponding approximate $4 million
change in annual operating costs, before any hedging effects.
Atlantic Copper had peseta-denominated net monetary liabilities
at September 30, 2000 totaling $63.5 million recorded at an
exchange rate of 189.8 pesetas to one U.S. dollar or $0.88 per
euro. Adjustments to these net liabilities to reflect changes in
the exchange rate are recorded as currency transaction gains
(losses) in "Other income (expense), net" and totaled $5.9
million in the third quarter of 2000, $(2.7) million in the third
quarter of 1999, $8.0 million in the first nine months of 2000
and $6.9 million in the first nine months of 1999.
14
As part of Atlantic Copper's recent refinancing, it was
required to significantly expand its program to hedge anticipated
peseta/euro-denominated operating costs. At September 30, 2000,
Atlantic Copper had contracts to purchase 33.4 billion
pesetas/200.5 million euros at an average exchange rate of 161.4
pesetas per one US dollar or $1.03 per one euro through December
2003. These contracts currently hedge approximately 75 percent
of Atlantic Copper's projected 2000 peseta/euro disbursements and
approximately 60 percent of Atlantic Copper's projected 2001
through 2003 peseta/euro disbursements. Mark-to-market gains
(losses) related to Atlantic Copper's forward currency contracts
are included in production costs and totaled $(19.1) million in
the third quarter of 2000, $1.5 million in the third quarter of
1999, $(26.9) million in the first nine months of 2000 and $(7.5)
million in the first nine months of 1999. Each $0.01 change in
the US$/euro exchange rate impacts the market value of these
contracts by approximately $2 million.
Current accounting rules require us to record changes in
market value on all of our open foreign currency contracts
designated as hedges of anticipated payments to net income each
reporting period. Effective January 1, 2001, gains or losses on
foreign currency contracts covering future periods will be
recorded in other comprehensive income (i.e. a component of
equity) instead of net income to the extent they qualify for
special hedge accounting treatment and are effective hedges (See
"New Accounting Standards").
PT Smelting Operating Results
PT Freeport Indonesia accounts for its 25 percent interest in PT
Smelting under the equity method. PT Smelting temporarily shut
down its smelter, as planned, at the end of March 2000 for the
tie-in of a new third anode furnace as well as for planned
maintenance. The smelter restarted at the end of April and
during the third quarter of 2000 achieved its goal of reaching
full design capacity of 200,000 metric tons of copper per year
and exceeded slightly that rate during the quarter. PT Smelting
expects to maintain its operating levels at full design capacity.
Our revenues include $101.2 million in the third quarter of 2000,
$87.1 million in the third quarter of 1999, $230.6 million in the
first nine months of 2000 and $175.6 million in the first nine
months of 1999 from PT Freeport Indonesia sales to PT Smelting.
PT Freeport Indonesia's share of PT Smelting's net income
(loss) is recorded as "Equity in PT Smelting Losses" in the
Statements of Operations and totaled $(3.6) million in the third
quarter of 2000, $0.4 million in the third quarter of 1999,
$(11.9) million in the first nine months of 2000 and $(7.8)
million in the first nine months of 1999. We also defer
recognizing profits on 25 percent of PT Freeport Indonesia sales
to PT Smelting, for which the final sale has not occurred.
Changes in these deferred amounts are also recorded as Equity in
PT Smelting Losses and resulted in additional income (losses) of
$(1.8) million in the third quarter of 2000, $(4.3) million in
the third quarter of 1999, $2.9 million in the first nine months
of 2000 and a $(8.6) million in the first nine months of 1999.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
(SFAS 133) which establishes accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded
in the balance sheet as either an asset or liability measured at
its fair value. We will adopt SFAS 133 effective January 1,
2001. SFAS 133 requires us to report changes in the fair value
of financial instruments that qualify as hedges, including
foreign currency contracts and interest rate swaps, in other
comprehensive income. We will continue our current accounting
for our redeemable preferred stock indexed to commodities under
the provisions of SFAS 133 that allow such instruments issued
before January 1, 1998 to be excluded from those instruments
required to be adjusted for changes in their fair values.
We expect to record cumulative effect adjustments upon
adoption of SFAS 133 for the difference between the recorded
values of our outstanding foreign currency contracts and their
fair values as calculated under SFAS 133. Based on our September
30, 2000 outstanding contracts and their estimated fair values,
the cumulative effect gain would total approximately $2 million.
Otherwise, the most significant change to our financial
statements will be that changes in the fair values of our open
foreign currency contracts that hedge anticipated transactions
will be reflected in other comprehensive income and will not
affect earnings until the contracts mature. Currently, the
changes in the market values of our foreign currency contracts
that are intended to cover anticipated transactions are recorded
in earnings.
15
OTHER FINANCIAL RESULTS
The FCX/Rio Tinto joint ventures incurred exploration costs of
$4.2 million in the 2000 third quarter, $3.8 million in the 1999
third quarter, $9.7 million in the 2000 nine-month period and
$13.1 million in the 1999 nine-month period. The 2000 periods
included personnel severance costs totaling $1.0 million.
Substantially all costs in the joint venture areas are now being
shared 60 percent by us and 40 percent by Rio Tinto.
Third-quarter 2000 general and administrative expenses of
$18.7 million were higher than the $15.2 million reported in the
1999 quarter mostly because the 2000 quarter included charges
totaling $2.3 million for personnel severance costs. Nine-month
2000 general and administrative expenses were $56.0 million, $7.9
million higher compared to the 1999 period, primarily because of
a $6.0 million charge for contribution commitments to support
small business development programs within Irian Jaya (Papua)
that will be paid over a two-year period. The nine-month 2000
period also included total personnel severance costs of $3.1
million, partially offset by a $1.5 million reversal of costs for
stock appreciation rights because of a decrease in our common
stock price.
Our total interest costs (before capitalization) were $55.5
million for the 2000 quarter, $49.2 million in the 1999 quarter,
$158.1 million in the first nine months of 2000 and $148.7
million in the first nine months of 1999. Although average debt
levels were lower in 2000, average interest rates were higher
resulting in higher interest costs. We capitalized $2.0 million
of interest costs in the third quarter of 2000, $1.3 million in
the third quarter of 1999, $4.8 million in the first nine months
of 2000 and $2.6 million in the first nine months of 1999.
Our provision for income taxes was 75 percent of income
before income taxes and minority interests for the first nine
months of 2000 and 52 percent for the first nine months of 1999.
The combination of higher parent company interest costs, Atlantic
Copper foreign currency contract losses and lower reported PT
Freeport Indonesia taxable income in the first nine months of
2000 caused the majority of the increase in the effective tax
rate compared with the 1999 period. PT Freeport Indonesia's
Contract of Work provides for a 35 percent income tax rate and a
10 percent withholding on dividends paid to FCX by PT Freeport
Indonesia and on interest for debt incurred after the signing of
the Contract of Work. No income taxes are recorded at Atlantic
Copper, which is subject to taxation in Spain, because it has not
generated significant taxable income in recent years and has a
substantial tax loss carryforward for which no financial
statement benefit has been provided. Additionally, our parent
company costs generate only a small U.S. tax benefit because our
parent company has no U.S.-sourced income.
CAPITAL RESOURCES AND LIQUIDITY
Our primary sources of cash are operating cash flows and
borrowings, while our primary uses of cash include capital
expenditures, repayments of debt, dividends and purchases of our
common stock. Net cash provided by operating activities was
$304.9 million for the first nine months of 2000, compared with
$387.7 million for the 1999 period. Net cash used in investing
activities totaled $132.0 million in the 2000 period, compared
with $106.8 million in the 1999 period, primarily for PT Freeport
Indonesia capital expenditures. Net cash used in financing
activities totaled $173.6 million in 2000 compared with $283.4
million in 1999.
Operating Activities
Lower net income was only partly offset by lower non-cash charges
and working capital changes in the first nine months of 2000,
resulting in a decrease in operating cash flow of $82.8 million,
to $304.9 million, from the year-ago period. The net decrease in
working capital for the first nine months of 2000 primarily
reflects an increase in accounts payable and accrued liability
balances, partly offset by inventory purchases and income tax
payments. The net increase in working capital for the first nine
months of 1999 primarily reflects an increase in inventories.
Investing Activities
Our nine-month 2000 capital expenditures were higher compared to
the 1999 period primarily because of deferred payments made in
2000 for purchases of mine equipment in 1999. Our capital
expenditures for 2000 are expected to total approximately $175
million, including $35 million for underground mine development,
primarily the Deep Ore Zone. Funding is expected to be provided
by operating cash flow.
16
Atlantic Copper has an unfunded contractual obligation
($58.1 million at September 30, 2000) to supplement amounts paid
to retired employees. Spanish legislation requires that Atlantic
Copper fund this non-operating obligation over a multi-year
period commencing in 2001. Atlantic Copper is reviewing its
options to meet the requirements of the new Spanish laws.
Financing Activities
Repayments to Rio Tinto totaled $60.6 million in the first nine
months of 2000 and $161.1 million in the first nine months of
1999 from PT Freeport Indonesia's share of incremental cash flow
attributable to the fourth concentrator mill expansion. In less
than two and one-half years, PT Freeport Indonesia has fully
repaid the $450 million loan from Rio Tinto which funded PT
Freeport Indonesia's share of the fourth concentrator mill
expansion. PT Freeport Indonesia's 60 percent share of
incremental cash flows from the expansion is now available for
its general use. Net borrowings of other debt totaled $128.5
million in the first nine months of 2000, compared with net
repayments of $49.4 million in the first nine months of 1999.
Our first two annual mandatory partial redemption payments of our
Silver-Denominated Preferred Stock totaled $11.9 million in
August 1999 and August 2000. Six annual redemption payments
remain and will vary with the price of silver.
In 1998, PT Freeport Indonesia reacquired for $30 million an
aggregate one-third interest in certain infrastructure asset
joint ventures owned by PT AlatieF Nusakarya Corporation, an
Indonesian investor. The joint ventures had purchased $270.0
million of infrastructure assets from PT Freeport Indonesia
during the period from December 1993 to March 1997, and PT
Freeport Indonesia had sold its one-third interest in the joint
ventures to PT AlatieF in March 1997. In April 2000, PT Freeport
Indonesia paid $12.5 million to increase its aggregate ownership
interest in the joint ventures to 47 percent. In August 2000, PT
Freeport Indonesia purchased the remaining 53 percent interest in
the joint ventures for $13.4 million cash and the assumption of
$34.1 million of bank debt. PT Freeport Indonesia now owns 100
percent of the joint ventures. PT Freeport Indonesia's increased
ownership in the joint ventures will benefit net income because
it will eliminate PT Freeport Indonesia's obligation to pay a
guaranteed 15 percent after-tax return to the previous owners in
the joint ventures.
In June 2000, our Board of Directors authorized a 20 million
share increase in our open market share repurchase program,
bringing the total shares approved for purchase under this
program to 80 million. During the first nine months of 2000, we
acquired 15.0 million of our shares for $167.5 million (an
average of $11.13 per share). Our cash flow statement reflects
only $158.7 million paid for stock purchases in the first nine
months of 2000 because we paid $8.8 million in October 2000.
During the first nine months of 1999, we acquired 0.8 million of
our shares for $7.8 million (an average of $9.20 per share).
From inception of this program in July 1995 through October 23,
2000, we have purchased a total of 67.1 million shares for $1.2
billion (an average of $18.06 per share) and approximately 12.9
million shares remain available under the program. The timing of
future purchases is dependent upon many factors, including the
price of common shares, our business and financial position, and
general economic and market conditions. Cash dividends paid to
minority interests in the first nine months of 2000 increased by
$23.8 million compared with the 1999 period primarily because of
an increase in PT Freeport Indonesia dividends.
In response to volatile copper and gold markets, in early
1998 we began an effort to reduce our costs and enhance our
production. Our overall strategy remains focused on optimizing
the performance of our expanded milling facilities so that we can
achieve higher sales levels at low costs. PT Freeport Indonesia
is implementing a number of initiatives in 2000 designed to
further improve operating processes and reduce costs. Third-
quarter 2000 PT Freeport Indonesia costs reflect some of the
benefits of these initiatives. We believe we have the overall
financial flexibility to continue to invest in operations and
maintain our exploration program while still retaining our
options to reduce our overall debt levels or repurchase FCX
shares. Our credit facility availability at October 23, 2000 was
$101.0 million. We believe we can continue to generate
sufficient cash flows from operations to meet our planned capital
requirements without obtaining new capital, barring any
unforeseen events. However, because of the economic and political
issues affecting Indonesia and the volatility of copper and gold
prices, our ability to obtain capital is limited at this time,
and the cost of new capital, if available, would be high.
In 1997, we guaranteed a $254.0 million loan from a
commercial bank to PT Nusamba Mineral Industri, an Indonesian
company. Nusamba used the funds to purchase from a third party
for $315 million approximately 51 percent of the capital stock of
PT Indocopper Investama Corporation, a company whose only
significant asset is 9.4 percent of PT Freeport Indonesia's
stock. We own the remaining 49 percent of
17
PT Indocopper Investama. The loan is secured by a pledge of the PT
Indocopper Investama stock owned by Nusamba and is due March 2002.
The purchase price was negotiated based primarily on FCX's market
value at the time of the transaction. We also agreed to lend to
Nusamba any amounts necessary to cover shortfalls between the
interest payments on the loan and the dividends received by
Nusamba on the PT Indocopper Investama stock. At September 30,
2000, we had loaned $52.3 million to Nusamba for this purpose.
The amount of any future shortfalls will depend primarily on the
level of PT Freeport Indonesia's dividends to PT Indocopper
Investama. Once the total of the guaranteed loan and the amounts
we have subsequently loaned to Nusamba reach the original
purchase price ($315 million), we expect to begin expensing any
additional amounts we loan to Nusamba.
The effect of the current economic and political situation
in Indonesia on Indonesian companies, including Nusamba, is
uncertain. Should these uncertainties result in our being
required to honor our guarantee of Nusamba's commercial bank
loan, we would anticipate negotiating satisfaction of the amounts
due either through our available financial resources and/or
through a direct assumption of the obligation on mutually
acceptable terms. However, any such terms likely would be
restrictive and costly, given the commercial lending markets'
current assessment of Indonesian creditors.
DEVELOPMENTS IN INDONESIA
The Indonesian government continues to try to address the
important economic and political issues it faces. Regarding
economic matters, political and social issues facing Indonesia
continue to strain the President's and government's efforts to
achieve economic recovery in Indonesia, including its widespread
provinces. After trading in a range of 7,000-8,000 rupiah to one
U.S. dollar during the first quarter of 2000, in early July 2000
the Indonesian currency weakened to a 16-month low, approximating
9,500 rupiah to one U.S. dollar, before rebounding to the 8,000-
9,000 rupiah range. The Indonesian government continues to face
the important tasks of restructuring the country's debt and the
banking system. The government recently announced a new budget
with a focus on repaying debt, rebuilding the financial sector
and boosting regional budgets. President Wahid and other
government representatives also have made significant efforts to
encourage renewal of foreign investment in Indonesia.
With respect to political matters, the government is
preparing to implement new laws in 2001 granting greater autonomy
to the provincial governments, while continuing to preserve the
central government's sovereignty. Although some in the Indonesian
media and others have called for re-negotiation of existing
contracts and agreements between the central government and
foreign-owned companies, including PT Freeport Indonesia's
Contract of Work, President Wahid and other senior government
officials have made numerous public statements that existing
contracts would be honored and will remain unaffected by any
changes in provincial autonomy. During the third quarter of 2000
following the annual review of President Wahid's performance by
the Indonesian parliament bodies, the DPR and MPR, significant
changes were made in his administration, including the transfer
of certain administrative responsibilities to the Vice President
and the naming of a new cabinet. The political climate in
Indonesia likely will continue to be volatile as the government
strives to address social and economic issues.
While the Indonesian government permitted the Papuans to
conduct a meeting of the Papuan congress in June 2000 to express
their aspirations regarding political autonomy, the President and
other Indonesian leaders have made it clear that Irian Jaya
(Papua) must remain part of Indonesia. Moreover, the U.S.
Government, Japan, Australia and the European Union, have stated
that they do not support independence for Irian Jaya (Papua) and
support the territorial integrity of Indonesia. Key Papuan
leaders supporting independence have said independence should be
regarded as a long-term goal and that they should pursue that
goal peacefully. However, in early October 2000, violence
erupted in a remote town about 125 miles east of PT Freeport
Indonesia's operations after police lowered an outlawed rebel
flag.
Certain non-governmental organizations have criticized PT
Freeport Indonesia's independent environmental audit by
Montgomery Watson, which was publicly released in December 1999.
In response to this criticism, the Indonesian environmental
minister requested clarification of several of the audit's
findings, which Montgomery Watson has provided. PT Freeport
Indonesia has pledged to continue working with the environmental
minister and others to improve the voluntary audit process.
Additionally, the Indonesian government formed a "fact-finding"
team to review these and other criticisms. This team consisted of
members of the Ministry of Energy and Mineral Resources, the
Department of Finance, the environmental ministry and
representatives of provincial and local governments in Irian Jaya
(Papua). A report on the "fact-finding" team's review has not
been issued. PT Freeport Indonesia welcomed this team's review and has
18
cooperated fully in this effort, as we believe it
represents an opportunity for responsible members of the
government to develop an objective, first-hand understanding of
our operations.
ENVIRONMENTAL MATTERS
On May 4, 2000, an incident at the Wanagon overburden stockpile
involving the slippage of overburden caused a wave of water and
material to overtop the Wanagon basin spillway and enter the
nearby Wanagon valley. Four employees of a contractor of PT
Freeport Indonesia working in the area perished in the incident.
All other workers in the area were located and were unharmed. No
injuries were reported at Banti, the nearest village inhabited by
local people, located approximately 12 kilometers downstream of
the Wanagon basin. PT Freeport Indonesia charged $2.9 million to
second-quarter 2000 production costs primarily for assets lost as
a result of the incident.
Daily rainfall amounts for the four days preceding the
incident were about 40 millimeters, nearly five times normal
levels, and are believed to have contributed to the slippage. PT
Freeport Indonesia environmental specialists have been taking
water samples in the Wanagon River and other locations downstream
to assess the environmental impact. Based on the analysis to-
date, no threat to human health and no long-term environmental
impacts have been identified as a result of the overflow event.
Nevertheless, PT Freeport Indonesia is conducting an extensive
ecological risk assessment of the overflow event. The material
in the Wanagon basin includes the byproduct of treating acid rock
drainage from the overburden in the basin with lime as approved
by the Ministry of Energy and Mineral Resources in PT Freeport
Indonesia's mine plan. The overflow from the basin consisted of
this material together with crushed overburden, which is natural
rock, and other natural sediments.
PT Freeport Indonesia notified the appropriate officials of
the Ministry of Energy and Mineral Resources and BAPEDAL,
Indonesia's Environmental Ministry, and cooperated with a joint
team of Ministry of Energy and Mineral Resources and BAPEDAL
representatives who have studied the incident. Shortly after the
incident, the Ministry of Energy and Mineral Resources informed
PT Freeport Indonesia that it must suspend stockpiling overburden
in the immediate area affected by the slippage. PT Freeport
Indonesia had not stockpiled overburden in the Wanagon area since
the end of March 2000. On May 24, 2000, PT Freeport Indonesia, in
consultation with the Government of Indonesia, voluntarily agreed
to temporarily limit production at its Grasberg open pit to an
average of no more than 200,000 MTPD pending the conclusion of
technical studies and recommendations for safe re-use of the
Wanagon basin.
In early July 2000, the Ministry of Energy and Mineral
Resources approved an overburden stockpile stabilization plan at
the Wanagon overburden stockpile involving the placement of eight
million metric tons of overburden within a sixty-day period. In
September 2000, the Ministry of Energy and Mineral Resources
approved an extension of the plan to place an additional 25
million metric tons of overburden during a six-month period. In
conjunction with its approval of the extension of PT Freeport
Indonesia's overburden placement plan, the Ministry of Energy and
Mineral Resources requested that PT Freeport Indonesia submit
additional technical data outlining its long-term overburden
management plan for the Wanagon basin and its plan for managing
acid rock drainage. External consultants, both Indonesian and
international, are assisting PT Freeport Indonesia with this task
to ensure that the best possible technical, safety and
environmental solutions are incorporated. PT Freeport Indonesia
expects to receive a positive response from the Ministry of Energy
and Mineral Resources upon submission and review of this
information.
CAUTIONARY STATEMENT
Our discussion and analysis 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 those regarding anticipated
sales volumes, ore grades, commodity prices, production costs,
capital expenditures, debt repayments, political, economic and
social conditions in our areas of operations, treatment charge
rates, exploration efforts and results, the availability of
financing and PT Smelting operating levels. We caution you that
these statements are not guarantees of future performance, and
our actual results may differ materially from those projected,
anticipated or assumed in the forward-looking statements.
Important factors that can cause our actual results to differ
materially from those anticipated in the forward-looking
statements include unanticipated declines in the average grades
of ore mined, unanticipated milling and other processing
problems, labor relations, weather conditions, the speculative
nature of mineral exploration, fluctuations in interest rates and
other adverse financial market conditions, Indonesian political
risks and other factors described in more detail under the
heading "Cautionary Statements" in our Form 10-K for the year
ended December 31, 1999.
19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La.
Filed June 19, 1996). The plaintiff alleged environmental, human
rights and social/cultural violations in Indonesia and seeks
unspecified monetary damages and other equitable relief. In
addition, the plaintiff alleged that she was a third-party
beneficiary under the 1967 and the 1991 Contracts of Work, and
claimed that she had not received fair compensation for her land
rights.
On March 21, 2000 the trial court dismissed the entire case
with prejudice, granting FCX's exception of no cause of action.
On March 24, 2000, the plaintiff filed a petition of appeal to
the Louisiana Fourth Circuit. FCX will continue to defend this
action vigorously.
In addition to the foregoing proceedings, FCX may be from
time to time involved in various legal proceedings of a character
normally incident to the ordinary course of its business.
Management believes that potential liability in any proceedings
would not have a material adverse effect on the financial
condition or results of operations of FCX. FCX 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 coverage customary in its
business, with coverage limits as management deems prudent.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed
in the Exhibit Index beginning on Page E-1 hereof.
(b) During the quarter for which this report
is filed, the registrant filed three Current
Reports on Form 8-K dated September 12, 2000,
September 20, 2000 and September 29, 2000
reporting information under item 5.
20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
FREEPORT-McMoRan COPPER & GOLD INC.
By: \s\ C. Donald Whitmire, Jr.
------------------------------
C. Donald Whitmire, Jr.
Vice President and
Controller-Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: November 1, 2000
21
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Agreement, dated as of May 2, 1995 by and between Freeport-
McMoRan Inc. (FTX) and FCX and The RTZ Corporation PLC, RTZ
Indonesia Limited, and RTZ America, Inc. (the Rio Tinto
Agreement). Incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of FTX dated as of May 26, 1995.
2.2 Amendment dated May 31, 1995 to the Rio Tinto Agreement.
Incorporated by reference to Exhibit 2.1 to the Quarterly
Report on Form 10-Q of FTX for the quarter ended June 30,
1995.
2.3 Distribution Agreement dated as of July 5, 1995 between FTX
and FCX. Incorporated by reference to Exhibit 2.1 to the
Quarterly Report on Form 10-Q of FTX for the quarter ended
September 30, 1995 (the FTX 1995 Third Quarter Form 10-Q).
3.1 Composite copy of the Certificate of Incorporation of FCX.
Incorporated by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q of FCX for the quarter ended June 30,
1995 (the FCX 1995 Second Quarter Form 10-Q).
3.2 Amended By-Laws of FCX dated as of March 12, 1999.
Incorporated by reference to Exhibit 3.2 to the Annual
Report on Form 10-K of FCX for the fiscal year ended
December 31, 1998 (the 1998 FCX Form 10-K).
4.1 Certificate of Designations of the Step-Up Convertible
Preferred Stock of FCX. Incorporated by reference to
Exhibit 4.2 to the FCX 1995 Second Quarter Form 10-Q.
4.2 Deposit Agreement dated as of July 1, 1993 among FCX,
ChaseMellon Shareholder Services, L.L.C. (ChaseMellon), 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 Annual Report on Form 10-K of FCX for the
fiscal year ended December 31, 1993 (the FCX 1993 Form 10-
K).
4.3 Form of Step-Up Depositary Receipt. Incorporated by
reference to Exhibit 4.6 to the FCX 1993 Form 10-K.
4.4 Certificate of Designations of the Gold-Denominated
Preferred Stock of FCX. Incorporated by reference to
Exhibit 4.3 to the FCX 1995 Second Quarter Form 10-Q.
4.5 Deposit Agreement dated as of August 12, 1993 among FCX,
ChaseMellon, 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.
4.6 Form of Gold-Denominated Depositary Receipt. Incorporated
by reference to Exhibit 4.9 to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the Gold-Denominated
Preferred Stock, Series II (the Gold-Denominated Preferred
Stock II) of FCX. Incorporated by reference to Exhibit 4.4
to the FCX 1995 Second Quarter Form 10-Q.
4.8 Deposit Agreement dated as of January 15, 1994, among FCX,
ChaseMellon, 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
Quarterly Report on Form 10-Q of FCX for the quarter ended
March 31, 1994 (the FCX 1994 First Quarter Form 10-Q).
E-1
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.9 Form of Gold-Denominated II Depositary Receipt.
Incorporated by reference to Exhibit 4.3 to the FCX 1994
First Quarter Form 10-Q.
4.10 Certificate of Designations of the Silver-Denominated
Preferred Stock of FCX. Incorporated by reference to
Exhibit 4.5 to the FCX 1995 Second Quarter Form 10-Q.
4.11 Deposit Agreement dated as of July 25, 1994 among FCX,
ChaseMellon, 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.
4.12 Form of Silver-Denominated Depositary Receipt. Incorporated
by reference to Exhibit 4.1 to the July 15, 1994, Form 8-A.
4.13 $550 million Composite Restated Credit Agreement dated as of
July 17, 1995 (the PT Freeport Indonesia Credit Agreement)
among PT Freeport Indonesia, FCX, the several financial
institutions that are parties thereto, First Trust of New
York, National Association, as PT Freeport Indonesia
Trustee, Chemical Bank, as administrative agent and FCX
collateral agent, and The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by
reference to Exhibit 4.16 to the Annual Report of FCX on
Form 10-K for the year ended December 31, 1995 (the FCX 1995
Form 10-K).
4.14 Amendment dated as of July 15, 1996 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, Chemical Bank, as administrative
agent and FCX collateral agent, and The Chase Manhattan Bank
(National Association), as documentary agent. Incorporated
by reference to Exhibit 4.2 to the Quarterly Report of FCX
on Form 10-Q for the quarter ended September 30, 1996 (the
FCX 1996 Third Quarter Form 10-Q).
4.15 Amendment dated as of October 9, 1996 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, The Chase Manhattan Bank
(formerly Chemical Bank), as administrative agent, security
agent and JAA security agent, and The Chase Manhattan Bank
(as successor to The Chase Manhattan Bank (National
Association)), as documentary agent. Incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K
of FCX dated and filed November 13, 1996 (the FCX November
13, 1996 Form 8-K).
4.16 Amendment dated as of March 7, 1997 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, The Chase Manhattan Bank, as
administrative agent, security agent and JAA security agent,
and The Chase Manhattan Bank, as documentary agent.
Incorporated by reference to Exhibit 4.16 to the Annual
Report of FCX on Form 10-K for the year ended December 31,
1997 (the FCX 1997 Form 10-K).
4.17 Amendment dated as of July 24, 1997 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, The Chase Manhattan Bank, as
administrative agent, security agent and JAA security agent,
and The Chase Manhattan Bank, as documentary agent.
Incorporated by reference to Exhibit 4.17 to the FCX 1997
Form 10-K.
E-2
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.18 $200 million Credit Agreement dated as of June 30, 1995 (the
CDF) among PT Freeport Indonesia, FCX, the several financial
institutions that are parties thereto, First Trust of New
York, National Association, as PT Freeport Indonesia
Trustee, Chemical Bank, as administrative agent and FCX
collateral agent, The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by
reference to Exhibit 4.2 to the FCX 1995 Third Quarter Form
10-Q.
4.19 Amendment dated as of July 15, 1996 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, Chemical
Bank, as administrative agent and FCX collateral agent, and
The Chase Manhattan Bank (National Association), as
documentary agent. Incorporated by reference to Exhibit 4.1
to the FCX 1996 Third Quarter Form 10-Q.
4.20 Amendment dated as of October 9, 1996 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank (formerly Chemical Bank), as administrative
agent, security agent and JAA security agent, and The Chase
Manhattan Bank (as successor to The Chase Manhattan Bank
(National Association)), as documentary agent. Incorporated
by reference to Exhibit 10.1 to the FCX November 13, 1996
Form 8-K.
4.21 Amendment dated as of March 7, 1997 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank, as administrative agent, security agent and
JAA security agent, and The Chase Manhattan Bank, as
documentary agent. Incorporated by reference to Exhibit
4.21 to the FCX 1997 Form 10-K.
4.22 Amendment dated as of July 24, 1997 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank, as administrative agent, security agent and
JAA security agent, and The Chase Manhattan Bank, as
documentary agent. Incorporated by reference to Exhibit
4.22 to the FCX 1997 Form 10-K.
4.23 Senior Indenture dated as of November 15, 1996 from FCX to
The Chase Manhattan Bank, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K
of FCX dated November 13, 1996 and filed November 15, 1996.
4.24 First Supplemental Indenture dated as of November 18, 1996
from FCX to The Chase Manhattan Bank, as Trustee, providing for
the issuance of the Senior Notes and supplementing the Senior
Indenture dated November 15, 1996 from FCX to such Trustee,
providing for the issuance of Debt Securities. Incorporated by
reference to Exhibit 4.20 to the FCX 1996 Form 10-K.
4.25 Certificate of Designations of Series A Participating
Cumulative Preferred stock of FCX. Incorporated by reference to
Exhibit 4.25 to the Quarterly Report on Form 10-Q of FCX for the
quarter ended March 31, 2000 (the FCX 2000 First Quarter Form 10-
Q).
4.26 Rights Agreement dated as of May 3, 2000 between FCX and
Chasemellon Shareholder Services, L.L.C., as Rights Agent.
Incorporated by reference to Exhibit 4.26 to the FCX 2000 First
Quarter Form 10-Q.
10.1 Contract of Work dated December 30, 1991 between the
Government of the Republic of Indonesia and PT Freeport
Indonesia. Incorporated by reference to Exhibit 10.2 to the
FCX 1995 Form 10-K.
10.2 Contract of Work dated August 15, 1994 between the
Government of the Republic of Indonesia and PT Irja Eastern
Minerals Corporation. Incorporated by reference to Exhibit
10.2 to the FCX 1995 Form 10-K.
E-3
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.3 Agreement dated as of October 11, 1996 to Amend and Restate
Trust Agreement among PT Freeport Indonesia, FCX, the RTZ
Corporation PLC, P.T. RTZ-CRA Indonesia, RTZ Indonesian
Finance Limited and First Trust of New York, National
Association, and The Chase Manhattan Bank, as Administrative
Agent, JAA Security Agent and Security Agent. Incorporated
by reference to Exhibit 10.3 to the FCX November 13, 1996
Form 8-K.
10.4 Concentrate Purchase and Sales Agreement dated effective
December 11, 1996 between PT Freeport Indonesia and P T
Smelting. Incorporated by reference to Exhibit 10.34 of the
FCX 1999 Form 10-K.
10.5 Participation Agreement dated as of October 11, 1996 between
PT Freeport Indonesia and P.T. RTZ-CRA Indonesia with
respect to a certain contract of work. Incorporated by
reference to Exhibit 10.5 to the FCX November 13, 1996 Form
8-K.
10.6 Second Amended and Restated Joint Venture and Shareholders'
Agreement dated as of December 11, 1996 among Mitsubishi
Materials Corporation, Nippon Mining and Metals Company,
Limited and PT Freeport Indonesia. Incorporated by
reference to Exhibit 10.3 of the FCX 1996 Form 10-K.
10.7 Put and Guaranty Agreement dated as of March 21, 1997
between FCX and The Chase Manhattan Bank. Incorporated by
reference to Exhibit 10.7 to the FCX 1997 Form 10-K.
10.8 Subordinated Loan Agreement dated as of March 21, 1997
between FCX and PT Nusamba Mineral Industri. Incorporated
by reference to Exhibit 10.8 to the FCX 1997 Form 10-K.
10.9 Amended and Restated Power Sales Agreement dated as of
December 18, 1997 between PT Freeport Indonesia and P.T.
Puncakjaya Power. Incorporated by reference to Exhibit 10.9
to the FCX 1997 Form 10-K.
10.10 Option, Mandatory Purchase and Right of First Refusal
Agreement dated as of December 19, 1997 among PT Freeport
Indonesia, P.T. Puncakjaya Power, Duke Irian Jaya, Inc.,
Westcoast Power, Inc. and P.T. Prasarana Nusantara Jaya.
Incorporated by reference to Exhibit 10.10 to the FCX 1997
Form 10-K.
Executive Compensation Plans and Arrangements (Exhibits
10.11 through 10.33)
10.11 Annual Incentive Plan of FCX as amended effective
February 2, 1999. Incorporated by reference to Exhibit
10.11 to the 1998 FCX Form 10-K.
10.12 1995 Long-Term Performance Incentive Plan of FCX.
Incorporated by reference to Exhibit 10.9 to the FCX 1996
Form 10-K.
10.13 FCX Performance Incentive Awards Program as amended
effective February 2, 1999. Incorporated by reference to
Exhibit 10.13 to the 1998 FCX Form 10-K.
10.14 FCX President's Award Program. Incorporated by
reference to Exhibit 10.8 to the FCX 1995 Form 10-K.
10.15 FCX Adjusted Stock Award Plan, as amended.
Incorporated by reference to Exhibit 10.15 to the 1997 FCX
Form 10-K.
E-4
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.16 FCX 1995 Stock Option Plan. Incorporated by reference
to Exhibit 10.13 to the FCX 1996 Form 10-K.
10.17 FCX 1995 Stock Option Plan for Non-Employee Directors,
as amended. Incorporated by reference to Exhibit 10.17 to
the FCX 1997 Form 10-K.
10.18 FCX 1999 Stock Incentive Plan. Incorporated by
reference to Exhibit 10.18 to the Quarterly Report on Form 10-Q
of FCX for the quarter ended June 30, 1999.
10.19 FCX 1999 Long-Term Performance Incentive Plan.
Incorporated by reference to Exhibit 10.19 to the Annual Report
of FCX on Form 10-K for the year ended December 31, 1999 (the FCX
1999 Form 10-K).
10.20 Financial Counseling and Tax Return Preparation and
Certification Program of FCX. Incorporated by reference to
Exhibit 10.12 to the FCX 1995 Form 10-K.
10.21 FM Services Company Performance Incentive Awards
Program as amended effective February 2, 1999. Incorporated
by reference to Exhibit 10.19 to the 1998 FCX Form 10-K.
10.22 FM Services Company Financial Counseling and Tax Return
Preparation and Certification Program. Incorporated by
reference to Exhibit 10.14 to the FCX 1995 Form 10-K.
10.23 Consulting Agreement dated as of December 22, 1988
between FTX and Kissinger Associates, Inc. (Kissinger
Associates). Incorporated by reference to Exhibit 10.21 to
the FCX 1997 Form 10-K.
10.24 Letter Agreement dated May 1, 1989 between FTX and Kent
Associates, Inc. (Kent Associates, predecessor in interest
to Kissinger Associates). Incorporated by reference to
Exhibit 10.22 to the FCX 1997 Form 10-K.
10.25 Letter Agreement dated January 27, 1997 among Kissinger
Associates, Kent Associates, FTX, FCX and FMS. Incorporated
by reference to Exhibit 10.20 to the FCX 1996 Form 10-K.
10.26 Agreement for Consulting Services between FTX and B. M.
Rankin, Jr. effective as of January 1, 1991 (assigned to FMS
as of January 1, 1996). Incorporated by reference to Exhibit
10.24 to the FCX 1997 Form 10-K.
10.27 Supplemental Agreement between FMS and B. M. Rankin Jr.
dated December 15, 1997. Incorporated by reference to
Exhibit 10.25 to the FCX 1997 Form 10-K.
10.28 Supplemental Agreement between FMS and B.M. Rankin Jr.
dated December 7, 1998. Incorporated by reference to Exhibit
10.26 to the 1998 FCX Form 10-K.
10.29 Letter Agreement effective as of January 7, 1997
between Senator J. Bennett Johnston, Jr. and FMS.
Incorporated by reference to Exhibit 10.25 of the FCX 1996
Form 10-K.
10.30 Supplemental Letter Agreement dated April 13, 2000
between J. Bennett Johnston, Jr. and FMS. Incorporated by
reference to Exhibit 10.30 to the FCX 2000 First Quarter
Form 10-Q.
10.31 Letter Agreement dated January 25, 1999 between FMS and
Rene L. Latiolais. Incorporated by reference to Exhibit
10.30 to the 1998 FCX Form 10-K.
10.32 Supplemental Letter Agreement dated August 4, 1999
between FMS and Rene L. Latiolais. Incorporated by reference
to Exhibit 10.32 of the FCX 1999 Form 10-K.
E-5
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ----- -----------
10.33 Supplemental Letter Agreement dated July 10, 2000
between FMS and RenE L. Latiolais. Incorporated by reference to
Exhibit 10.33 of the FCX 2000 Second Quarter Form 10-Q.
10.34 Letter Agreement dated November 1, 1999 between FMS and
Gabrielle K. McDonald. Incorporated by reference to Exhibit 10.33
of the FCX 1999 Form 10-K.
10.35 Supplemental Letter Agreement dated May 17, 2000
between FMS and Gabrielle K. McDonald. Incorporated by reference
to Exhibit 10.35 of the FCX 2000 Second Quarter Form 10-Q.
15.1 Letter dated October 17, 2000 from Arthur Andersen LLP
regarding unaudited interim financial statements.
27.1 FCX Financial Data Schedule.
E-6