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 March 31, 2001
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 March 31, 2001, there were issued and outstanding 55,457,860
shares of the registrant's Class A Common Stock, par value $0.10
per share, and 88,474,099 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 Income 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Remarks 9
Report of Independent Public Accountants 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information 19
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)
March 31, December 31,
2001 2000
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 11,387 $ 7,968
Accounts receivable 184,861 149,085
Inventories 403,948 400,607
Prepaid expenses and other 11,809 11,462
---------- ----------
Total current assets 612,005 569,122
Property, plant and equipment, net 3,221,552 3,248,710
Investment in PT Smelting 53,686 56,154
Other assets 78,011 76,755
---------- ----------
Total assets $3,965,254 $3,950,741
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 281,561 $ 313,208
Current portion of long-term debt
and short-term borrowings 243,925 202,294
Unearned customer receipts 84,533 28,688
Rio Tinto share of joint venture cash flows 49,055 78,706
Accrued income taxes 21,101 11,016
---------- ----------
Total current liabilities 680,175 633,912
Long-term debt, less current portion:
FCX and PT Freeport Indonesia credit facilities 730,000 760,000
Senior notes 450,000 450,000
Infrastructure asset financings 414,168 457,673
Atlantic Copper debt 225,582 246,727
Equipment and other loans 72,414 73,331
Accrued postretirement benefits
and other liabilities 114,035 112,831
Deferred income taxes 622,092 599,536
Minority interests 120,598 103,795
Redeemable preferred stock 475,005 475,005
Stockholders' equity 61,185 37,931
---------- ----------
Total liabilities and stockholders' equity $3,965,254 $3,950,741
========== ==========
The accompanying notes are an integral part of these financial
statements.
3
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME (Unaudited)
Three Months
Ended March 31,
----------------------
2001 2000
-------- --------
(In Thousands, Except
Per Share Amounts)
Revenues $447,087 $467,592
Cost of sales:
Production and delivery 194,450 266,064
Depreciation and amortization 68,129 63,359
-------- --------
Total cost of sales 262,579 329,423
Exploration expenses 2,051 1,968
Equity in PT Smelting net (income) loss 2,468 (2,241)
General and administrative expenses 14,409 20,749
-------- --------
Total costs and expenses 281,507 349,899
-------- --------
Operating income 165,580 117,693
Interest expense, net (48,437) (49,935)
Other income, net 3,177 1,218
-------- --------
Income before income taxes and
minority interests 120,320 68,976
Provision for income taxes (60,615) (40,473)
Minority interests in net income of
consolidated subsidiaries (12,601) (9,772)
-------- --------
Net income 47,104 18,731
Preferred dividends (9,065) (9,490)
-------- --------
Net income applicable to common stock $ 38,039 $ 9,241
======== ========
Net income per share of common stock:
Basic $.26 $.06
==== ====
Diluted $.26 $.06
==== ====
Average common shares outstanding:
Basic 143,906 161,323
======= =======
Diluted 144,728 162,544
======= =======
The accompanying notes are an integral part of these financial
statements.
4
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Three Months
Ended March 31,
----------------------
2001 2000
-------- --------
(In Thousands)
Cash flow from operating activities:
Net income $ 47,104 $ 18,731
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 68,129 63,359
Deferred income taxes 22,784 20,374
Equity in PT Smelting net (income) loss 2,468 (2,241)
Minority interests' share of net income 12,601 9,772
Other, including deferred mining costs (8,900) 5,739
(Increases) decreases in working capital:
Accounts receivable (38,033) 21,010
Inventories 2,015 (3,296)
Prepaid expenses and other (402) 1,869
Accounts payable and accrued liabilities 15,865 59,185
Rio Tinto share of joint venture cash flows (29,767) (8,082)
Accrued income taxes 11,642 (40,839)
-------- --------
(Increase) decrease in working capital (38,680) 29,847
-------- --------
Net cash provided by operating activities 105,506 145,581
-------- --------
Cash flow from investing activities:
PT Freeport Indonesia capital expenditures (35,872) (56,404)
Atlantic Copper capital expenditures (3,465) (1,464)
Investment in PT Smelting - (5,717)
Other 4,592 -
-------- --------
Net cash used in investing activities (34,745) (63,585)
-------- --------
Cash flow from financing activities:
Proceeds from debt 68,506 151,934
Repayments of debt (121,511) (156,458)
Purchases of FCX common shares (3,436) (60,649)
Cash dividends paid:
Preferred stock (9,204) (9,508)
Minority interests - (3,946)
Other (1,697) (4,827)
-------- --------
Net cash used in financing activities (67,342) (83,454)
-------- --------
Net increase (decrease) in cash
and cash equivalents 3,419 (1,458)
Cash and cash equivalents at beginning of year 7,968 6,698
-------- --------
Cash and cash equivalents at end of period $ 11,387 $ 5,240
======== ========
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
Basic net income per share of common stock was calculated by
dividing net income applicable to common stock by the weighted-
average number of common shares outstanding during the period.
Diluted net income per share of common stock was calculated by
dividing net income applicable to common stock by the weighted-
average number of common shares outstanding during the period plus
the net effect of dilutive stock options and restricted stock.
Dilutive stock options represented 0.5 million shares in the first
quarter of 2001 and 1.2 million shares in the first quarter of
2000. Dilutive restricted stock totaled 0.3 million shares in the
first quarter of 2001.
Options excluded from the computation of diluted net income
per share of common stock (because their exercise prices were
greater than the average market price of the common stock during
the period) totaled options for 11.4 million shares (average
exercise price of $21.59 per share) in the first quarter of 2001
and options for 11.1 million shares (average exercise price of
$21.98 per share) in the first quarter of 2000. Convertible
preferred stock outstanding was not included in the computation of
diluted net income per share of common stock because including the
conversion of these shares would have increased diluted net income
per share of common stock. The preferred stock was convertible
into 11.7 million shares of common stock and accrued dividends
totaled $6.1 million in the first quarter of 2001 and $6.1 million
in the first quarter of 2000.
2. DERIVATIVE CONTRACTS
At times Freeport-McMoRan Copper & Gold Inc. (FCX) and its
subsidiaries have entered into derivative 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 market exposures. Effective
January 1, 2001, FCX adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133). SFAS 133, as subsequently amended,
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 instrument
depends on the intended use of the derivative and the resulting
designation.
Upon adoption of SFAS 133 on January 1, 2001, FCX recorded
immaterial cumulative adjustments totaling $0.8 million of gains
to other income ($0.8 million to net income) to adjust the recorded
values of PT Freeport Indonesia's and Atlantic Copper's foreign
currency forward contracts to fair value and $0.8 million of
additional revenues ($0.4 million to net income) to adjust the
embedded derivatives in PT Freeport Indonesia's provisionally
priced copper sales to fair value, as calculated under SFAS 133.
In addition, FCX recorded a cumulative effect net loss adjustment
to other comprehensive income totaling $1.0 million for the fair
value of Atlantic Copper's interest rate swaps on January 1, 2001.
During the first quarter of 2001, FCX reclassified $0.2 million
of gains to earnings associated with the January 1, 2001 transition
adjustment for interest rate swaps.
FCX has entered into derivative contracts in limited instances
to achieve specific objectives. Currently, the objectives
principally relate to managing risks associated with foreign
currency, commodity prices and interest rate risks with Atlantic
Copper's smelting operations, where certain derivative contracts
are required under financing agreements. In addition, in response
to volatility in the Indonesian rupiah and Australian dollar
currencies, FCX has sought to manage certain foreign currency risks
with PT Freeport Indonesia's mining operations. In the past, FCX
entered into derivative contracts related to its exposure to copper
and gold prices, but activities in this regard since 1997 have been
limited to establishing fixed prices for open copper sales under PT
Freeport Indonesia's concentrate sales contracts. FCX does not
enter into derivative contracts for speculative purposes. A summary
of FCX's outstanding derivative instruments at March 31, 2001 and a
discussion of FCX's risk management strategies for those designated
as hedges follows.
Commodity Price Protection Contracts
From time to time, PT Freeport Indonesia enters into forward and
option contracts to hedge the market risk associated with
fluctuations in the prices of commodities it sells. The primary
objective of these contracts is to set a minimum price and the
secondary objective is to retain market upside if possible at a
reasonable cost without sacrificing the primary objective. As of
March 31, 2001, FCX had no price protection contracts relating to
its mine production other than its gold- and silver-denominated
redeemable preferred stock. FCX elected to continue its historical
accounting for its redeemable preferred stock indexed to
commodities under
6
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. Therefore, FCX's redeemable preferred stock is carried on
its books at its original issue value less redemptions, and totaled
$475.0 million at March 31, 2001.
Certain of PT Freeport Indonesia's concentrate sales contracts
allow for final pricing in future periods. Under SFAS 133, these
pricing terms cause a portion of the contracts to be considered
embedded derivatives which must be recorded at fair value. Prior
to January 1, 2001, PT Freeport Indonesia adjusted the revenues
from these provisionally priced sales based on then-current spot
prices on or near each reporting date. Effective January 1, 2001,
PT Freeport Indonesia began adjusting the revenues from these
provisionally priced sales to reflect fair value, the primary
result of which is using forward prices for the final pricing
periods on or near each reporting date. The impact of this change
was to increase revenues by $0.8 million ($0.4 million to net
income) on January 1, 2001. Changes in the fair value of these
embedded derivatives are recorded in current period revenues.
At March 31, 2001, Atlantic Copper had forward copper contracts
that are intended to hedge its copper price risk whenever its
physical purchases and sales pricing periods do not match. Although
these contracts provide a hedge against changes in copper prices,
they do not qualify for hedge accounting under SFAS 133 because
Atlantic Copper bases its hedging contracts on its net
sales/purchases position and contracts that hedge a net position do
not qualify for hedge accounting under SFAS 133. Atlantic Copper
recorded gains (losses) to production costs totaling $3.2 million
in the first quarter of 2001 and $(0.5) million in the first
quarter of 2000 related to its forward copper sales contracts.
Atlantic Copper held forward copper sales contracts for 33.9
million pounds and the fair value of these contracts was a $2.7
million gain, which is recorded in accounts payable at March 31,
2001.
Foreign Currency Exchange Contracts
PT Freeport Indonesia and Atlantic Copper enter into foreign
currency forward contracts to hedge the market risks of their
forecasted costs that are denominated in a currency other than
their functional currency - the U.S. dollar. The primary objective
of these contracts is to either lock-in a favorable exchange rate
or to minimize the impact of adverse exchange rate changes. As of
March 31, 2001, PT Freeport Indonesia had foreign currency forward
contracts to hedge 72.0 million of its aggregate projected
Australian dollar payments through December 2001, or approximately
50 percent of its aggregate projected 2001 Australian dollar
payments at an average exchange rate of $0.58 to one Australian
dollar. PT Freeport Indonesia also had foreign currency forward
contracts to hedge 60 billion of its aggregate projected Indonesian
rupiah payments for the period from April through July 2001 at an
exchange rate of 10,000 rupiahs to one U.S. dollar. Atlantic
Copper had foreign currency forward contracts to hedge 165.1
million of its projected euro payments through December 2003, or
approximately 50 percent of its projected 2001 peseta/euro payments
and approximately 67 percent of its projected 2002 and 2003 euro
payments at an average exchange rate of $1.02 per euro. The fair
value of PT Freeport Indonesia's and Atlantic Copper's foreign
currency contracts at March 31, 2001 totaled a loss of $26.2
million, of which $14.5 million was recorded in accrued liabilities
and $11.7 million was recorded in other liabilities.
PT Freeport Indonesia and Atlantic Copper have designated their
foreign currency forward contracts as cash flow hedges. During the
first quarter of 2001, PT Freeport Indonesia recorded $0.5 million
($0.2 million to net income) and Atlantic Copper recorded $0.3
million ($0.3 million to net income) of losses to production costs
for their matured foreign currency forward contracts. No hedge
ineffectiveness was recorded for the remaining open contracts.
FCX's other comprehensive income for the first quarter of 2001
included $13.2 million, net of taxes and minority interests, of
unrealized losses on open foreign currency forward contracts, of
which $5.6 million is scheduled to be realized within the next
twelve months, all based on fair values of these contracts measured
on March 31, 2001. Prior to 2001, PT Freeport Indonesia and
Atlantic Copper recorded changes in the market value of their
foreign currency forward contracts to production costs as incurred.
Net charges to production cost for changes in market value of
foreign currency forward contracts totaled $6.0 million for the
first quarter of 2000.
Interest Rate Contracts
Atlantic Copper entered into interest rate swap contracts to manage
exposure to interest rate changes on a portion of its variable-rate
debt. The primary objective of these contracts is to lock-in a
favorable interest rate. As of March 31, 2001, Atlantic Copper had
interest rate swap contracts at an average interest rate of 6.6
percent on $70.5 million of financing, reducing quarterly through
June 2003. Atlantic Copper has designated its interest rate swap
contracts as cash flow hedges and no ineffectiveness is expected
from these hedges. Atlantic Copper recognized reductions in
interest expense totaling $0.2 million in the first quarter of 2001
and additional interest costs of less than $0.1 million in the
first quarter of 2000 related to its
7
interest rate swap contracts.
FCX's other comprehensive income for the first quarter of 2001
included a $1.0 million cumulative effect loss to record the fair
value of Atlantic Copper's interest rate swap contracts on January
1, 2001 and changes in unrealized losses on the swaps totaling $1.3
million. Atlantic Copper receives no tax benefit for these losses.
The fair value of these interest rate swap contracts totaled a loss
of $2.3 million, which is recorded in accrued liabilities at March
31, 2001.
3. COMPREHENSIVE INCOME
First-quarter 2000 results did not include any items of other
comprehensive income. A recap of FCX's first quarter 2001
comprehensive income is shown below (in thousands).
Net income $38,039
Other comprehensive income (loss):
Cumulative effect of change in accounting,
no tax effect (982)
Change in unrealized derivatives' fair value
(net of taxes of $1.8 million) (14,824)
Reclass to earnings
(net of taxes of $0.2 million) 331
-------
Total Comprehensive Income $22,564
=======
4. INTEREST COST
Interest expense excludes capitalized interest of $2.0 million in
the first quarter of 2001 and $1.3 million in the first quarter of
2000.
5. 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)
First Quarter of 2001
Revenues $ 360,046a $159,126 $(72,085) $ 447,087
Production and delivery 115,102 150,985 (71,637) 194,450
Depreciation and amortization 60,019 6,789 1,321 68,129
Exploration expenses 1,975 - 76 2,051
Equity in PT Smelting losses - 2,468b - 2,468
General and
administrative expenses 10,775 2,019 1,615 14,409
---------- -------- -------- ----------
Operating income (loss) $ 172,175 $ (3,135) $ (3,460) $ 165,580
========== ======== ======== ==========
Interest expense, net $ 30,514 $ 7,146 $ 10,777 $ 48,437
========== ======== ======== ==========
Provision (benefit)
for income taxes $ 52,305 $ (431) $ 8,741 $ 60,615
========== ======== ======== ==========
Capital expenditures $ 35,566 $ 3,465 $ 306 $ 39,337
========== ======== ======== ==========
Total assets $3,284,193c $685,428d $ (4,367) $3,965,254
========== ======== ======== ==========
First Quarter of 2000
Revenues $ 307,495a $224,887 $(64,790) $ 467,592
Production and delivery 143,740 217,342 (95,018) 266,064
Depreciation and amortization 55,062 7,180 1,117 63,359
Exploration expenses 1,570 - 398 1,968
Equity in PT Smelting income - (2,241)b - (2,241)
General and
administrative expenses 16,936 2,317 1,496 20,749
---------- -------- -------- ----------
Operating income $ 90,187 $ 289 $ 27,217 $ 117,693
========== ======== ======== ==========
Interest expense, net $ 33,690 $ 6,754 $ 9,491 $ 49,935
========== ======== ======== ==========
Provision for income taxes $ 23,122 $ 1,464 $ 15,887 $ 40,473
========== ======== ======== ==========
Capital expenditures $ 56,272 $ 7,181 $ 132 $ 63,585
========== ======== ======== ==========
Total assets $3,332,880c $680,661d $ 10,927 $4,024,468
========== ======== ======== ==========
a. Includes PT Freeport Indonesia sales to PT Smelting totaling
$90.6 million in 2001 and $70.5 million in 2000.
8
b. Includes effect of deferral of intercompany profits on 25
percent of PT Freeport Indonesia's sales to PT Smelting that are
still in PT Smelting's inventory at quarter end, totaling $1.2
million in 2001 and $(4.0) million in 2000.
c. Includes PT Freeport Indonesia's trade receivables with PT
Smelting totaling $15.8 million at March 31, 2001 and $11.2 million
at March 31, 2000.
d. Includes PT Freeport Indonesia's equity investment in PT
Smelting totaling $53.7 million at March 31, 2001 and $74.0 million
at March 31, 2000.
6. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first three months
of 2001 and 2000 was 3.3 to 1 and 2.3 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 2000 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.
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
March 31, 2001, and the related statements of income and cash flows
for the three-month periods ended March 31, 2001 and 2000. 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,
2000, and the related statements of income, cash flows and
stockholders' equity for the year then ended (not presented
herein), and, in our report dated January 18, 2001, 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, 2000, 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
April 18, 2001
9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
We operate through our majority-owned subsidiaries, PT Freeport
Indonesia and PT Irja Eastern Minerals (Eastern Minerals), and
through Atlantic Copper, S.A. (Atlantic Copper), our wholly owned
subsidiary. PT Freeport Indonesia also has a 25 percent interest
in PT Smelting, an Indonesian company that operates a copper
smelter and refinery in Gresik, Indonesia. In addition to the PT
Freeport Indonesia and Eastern Minerals exploration activities,
we conduct other mineral exploration activities in Irian Jaya
(Papua), Indonesia pursuant to joint venture and other
arrangements. The results of operations reported and summarized
below are not necessarily indicative of future operating results.
Summary comparative results for the first-quarter periods
follow (in millions, except per share amounts):
First
Quarter
---------------
2001 2000
------ ------
Revenues $447.1 $467.6
Operating income 165.6 117.7
Net income applicable to common stock 38.0 9.2
Diluted net income per share of common stock 0.26 0.06
Our consolidated revenues include PT Freeport Indonesia's
sale of copper concentrates, which also contain significant
amounts of gold, and the sale by Atlantic Copper of copper
anodes, cathodes, wire and wire rod. Our revenues and net income
vary significantly with fluctuations in the market prices of
copper and gold and other factors. At various times, in response
to market conditions, we have entered into copper and gold price
protection contracts for some portion of our expected future mine
production to mitigate the risk of adverse price fluctuations.
We currently have no copper or gold price protection contracts
relating to our mine production other than our gold-denominated
preferred stock. Based on PT Freeport Indonesia's projected
share of 2001 copper sales (1.4 billion pounds), a $0.01 per
pound change in the average price realized would have an
approximate $14 million impact on our revenues and an approximate
$7 million impact on our net income. A $5 per ounce change in
the average price realized on PT Freeport Indonesia's share of
projected 2001 gold sales (2.4 million ounces) would have an
approximate $12 million impact on our revenues and an approximate
$6 million impact on our net income.
Our first-quarter 2001 consolidated revenues reflect higher
copper and gold revenues at PT Freeport Indonesia offset by lower
Atlantic Copper revenues. Atlantic Copper's gold sales in the
first quarter of 2001 declined by nearly 50 percent compared to
the 2000 quarter and it had no copper anodes sales in the first
quarter of 2001 as it prepared for a scheduled 27-day maintenance
turnaround that began in late March 2001. Atlantic Copper's
maintenance turnaround is expected to have a negative impact on
our second-quarter 2001 sales volumes, revenues and production
costs. First-quarter 2001 revenues include reductions of $2.4
million ($1.2 million to net income or $0.01 per share) for
adjustments to December 31, 2000 "open" concentrate sales, while
first-quarter 2000 revenues were increased by $9.4 million ($4.6
million to net income or $0.03 per share) for adjustments to
December 31, 1999 open concentrate sales.
Consolidated cost of sales for 2001 were $66.8 million lower
compared with the 2000 quarter largely because of lower unit
costs at PT Freeport Indonesia and lower overall costs at
Atlantic Copper resulting from lower sales volumes. Contributing
to the lower PT Freeport Indonesia costs were weaker foreign
currencies, the fourth-quarter 2000 change in PT Freeport
Indonesia's estimated ratio of waste rock to ore over the life of
the mine and implementation of operating initiatives in 2000
designed to improve processes and reduce costs.
From time to time we enter into foreign currency contracts
to hedge our projected operating costs denominated in foreign
currencies. On January 1, 2001, the accounting for these types
of hedging contracts changed (see Note 2). Prior to January 1,
2001, our foreign currency forward contracts did not qualify for
hedge accounting and all changes in the market values of these
contracts were recorded to earnings in the respective periods.
As a result, our reported earnings prior to January 1, 2001
included the effects of changes in market value of all our
foreign currency forward contracts, including open contracts,
which were significant. The first quarter of 2000 included
charges to production costs totaling $6.0 million for changes in
market value of foreign currency forward contracts, most of which
would have been charged to other comprehensive income under the
new accounting rules we adopted on January 1, 2001.
10
The change in the amount we recorded for our equity interest
in PT Smelting ($2.5 million net loss in 2001 and $2.2 million
net income in 2000) was primarily caused by adjustments to
deferred profits on 25 percent of PT Freeport Indonesia's copper
concentrate sales to PT Smelting. General and administrative
expenses during the first quarter of 2001 were $6.3 million lower
than during the 2000 period when we recorded a $6.0 million
charge for a contribution commitment to support small business
development programs within Irian Jaya (Papua) and a $0.8 million
charge for personnel severance costs, partly offset by a $1.5
million reversal of costs for stock appreciation rights. Our
effective tax rate for the first quarter of 2001 was 50 percent
compared with an effective rate of 59 percent in the first
quarter of 2000. The lower effective rate for the first quarter
of 2001 primarily reflects the impact of higher 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 by segment for the first-quarter periods
follows (in millions):
First
Quarter
---------------
2001 2000
------ ------
Mining and exploration $172.2 $ 90.2
Smelting and refining (3.1) 0.3
Intercompany eliminations and other (3.5) 27.2
------ ------
FCX operating income a $165.6 $117.7
====== ======
a. Profits on 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 $(0.1) million in 2001
and $35.3 million in 2000. 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):
First
Quarter
-------
PT Freeport Indonesia revenues - prior year period $307.5
Increases (decreases):
Sales volumes:
Copper 20.9
Gold 57.8
Price realizations:
Copper 2.3
Gold (17.1)
Adjustments, primarily for copper pricing (3.9)
on prior year open sales
Treatment charges, royalties and other (7.5)
------
PT Freeport Indonesia revenues - current year period $360.0
======
PT Freeport Indonesia's first-quarter 2001 revenues benefited
from a 9 percent increase in copper sales volumes and a 45
percent increase in gold sales volumes. Gold realizations in the
first quarter of 2001 were nearly $27 an ounce lower than first-
quarter 2000 realizations. Treatment charges in total were higher
in the first quarter of 2001 primarily because of the higher
sales volumes while unit cost for treatment remained about the
same as in the prior year. Royalties were $2.4 million higher in
the first quarter of 2001 compared with the 2000 period,
primarily because of higher gold sales.
PT Freeport Indonesia has commitments from various parties,
including Atlantic Copper and PT Smelting, to purchase virtually
all of its estimated 2001 production at market prices. Net of
Rio Tinto's interest, PT Freeport Indonesia's share of sales for
the second quarter of 2001 is projected to approximate 385
million pounds of copper and 700,000 ounces of gold. PT Freeport
Indonesia's share of sales for 2001 is projected to approximate
1.4 billion pounds of copper and 2.4 million ounces of gold.
Projected 2001 gold sales reflect the expectation of higher
average gold ore grades compared to 2000.
11
PT Freeport Indonesia's concentrate sales agreements, with
regard to copper, provide for provisional billings at the time of
shipment with final pricing settlement generally based on the
average London Metal Exchange (LME) price for a specified future
month. Copper revenues on provisionally priced open pounds are
adjusted monthly based on then-current forward prices. At March
31, 2001, we had consolidated copper sales totaling 198.5 million
pounds recorded at an average price of $0.75 per pound remaining
to be finally priced. Approximately 90 percent of these open
pounds are expected to be finally priced during the second
quarter of 2001 with the remaining pounds to be priced during the
third 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 2001 net income.
At times PT Freeport Indonesia has entered into derivative
contracts to manage certain risks resulting from fluctuations in
commodity prices. During the first-quarter of 2001 and as of
March 31, 2001, PT Freeport Indonesia did not have any price
protection programs in place for its copper and gold sales other
than its gold-denominated preferred stock. As conditions
warrant, PT Freeport Indonesia may enter into new contracts for
its future sales. During the first quarter of 2000 PT Freeport
Indonesia entered into forward copper sales contracts to fix the
price at $0.85 per pound on approximately 50 percent of its
December 31, 1999 open concentrate sales. We recorded $6.9
million of additional revenues in the first quarter of 2000 from
these forward sales.
PT Freeport Indonesia Operating Results
First Quarter
------------------
2001 2000
------- -------
PT Freeport Indonesia, Net of Rio Tinto's Interest
Copper
Production (000s of recoverable pounds) 377,100 308,500
Sales (000s of recoverable pounds) 333,400 305,900
Average realized price $.77 $.76
Gold
Production (recoverable ounces) 730,900 447,300
Sales (recoverable ounces) 644,700 444,200
Average realized price $261.54 $288.10
Gross profit per pound of copper (cents):
Average realized price 76.8 76.1
----- -----
Production costs:
Site production and delivery 34.8 a 47.4 a
Gold and silver credits (51.7) (43.2)
Treatment charges 18.0 18.1
Royalty on metals 1.9 1.3
----- -----
Cash production costs 3.0 23.6
Depreciation and amortization 18.0 18.0
----- -----
Total production costs 21.0 41.6
----- -----
Adjustments, primarily for copper pricing on
prior year open sales (0.6) 0.7
----- -----
Gross profit per pound of copper 55.2 35.2
===== =====
PT Freeport Indonesia, 100% Operating
Statistics
Ore milled (metric tons per day) 229,600 231,600
Copper grade (percent) 1.13 .94
Gold grade (grams per metric ton) 1.68 .99
Recovery rate (percent)
Copper 89.1 85.6
Gold 87.8 84.8
Copper (000s of recoverable pounds)
Production 434,900 360,700
Sales 384,900 358,100
Gold (recoverable ounces)
Production 946,000 557,000
Sales 833,000 551,000
a. Net of deferred mining costs totaling $8.4 million (2.5
cents per pound) in the first quarter of 2001. The first
quarter of 2000 included $7.3 million (2.4 cents per pound) for
recaptured deferred mining costs.
12
PT Freeport Indonesia's first-quarter 2001 production
benefited from higher grades and recovery rates when compared
with the prior-year period. First-quarter 2001 copper grades
were 20 percent higher than the prior-year and gold grades were
70 percent higher. Gold recovery rates reached a record
quarterly average of 87.8 percent reflecting recovery initiatives
achieved at the mill and high-recovery ore processed during the
quarter. As previously reported, gold grades during the first
three quarters of 2000 were uncharacteristically low in the
Grasberg pit and the gold grades in the first quarter of 2001
reflect a continuation of the improved grades mined during the
fourth quarter of 2000. First-quarter 2001 production exceeded
sales primarily because of weather-related shipping delays, but
second-quarter scheduled shipments are expected to exceed first-
quarter sales and second-quarter production.
Unit site production and delivery costs in the first quarter
of 2001 averaged $0.35 per pound of copper, $0.12 per pound lower
than the $0.47 reported in the first quarter of 2000, primarily
because of higher sales volumes, weaker foreign currencies, the
previously reported change in the estimated ratio of waste rock
to ore over the life of the mine and implementation of operating
initiatives introduced in 2000 designed to improve processes and
reduce costs. Gold credits of $0.52 per pound in the 2001
quarter were higher when compared with the 2000 quarter level of
$0.43 per pound because of higher gold ore grades and sales.
Royalties totaled $6.3 million in the first quarter of 2001 and
$3.9 million in the first quarter of 2000.
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 rupiahs, 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 volatile. One U.S. dollar was equivalent to 10,415
rupiahs at March 31, 2001 and 9,215 rupiahs at December 31, 2000.
PT Freeport Indonesia recorded losses totaling $0.5 million
during the first quarter of 2001 and $0.3 million during the
first quarter of 2000 related to its rupiah-denominated net
assets. Operationally PT Freeport Indonesia has benefited from a
weakened rupiah currency, primarily through lower labor costs.
At estimated annual aggregate rupiah payments of 800 billion and
a March 31, 2001 exchange rate of 10,415 rupiahs to one U.S.
dollar, a one-thousand-rupiah increase in the exchange rate would
result in an approximate $7 million decrease in annual operating
costs and a one-thousand-rupiah decrease in the exchange rate
would result in an approximate $8 million increase in annual
operating costs.
In April 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 March 31, 2001, these contracts hedge 72.0
million of Australian dollar payments through December 2001, or
approximately 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 $0.49 to one Australian
dollar at March 31, 2001. Each $0.01 change in the U.S.
dollar/Australian dollar exchange rate impacts the market value
of these contracts by approximately $0.7 million. 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 rupiahs to one U.S. dollar. Each
1,000-rupiah change in the Indonesian rupiah/U.S. dollar exchange
rate impacts the market value of these contracts by approximately
$0.5 million. PT Freeport Indonesia recorded net realized losses
to production costs related to matured Australian dollar
contracts totaling $0.5 million in the first quarter of 2001.
Our accounting treatment for these foreign currency forward
contracts changed effective January 1, 2001 (see Note 2).
Exploration Activities
First-quarter exploration efforts focused on the Guru surface
project, the underground Ertsberg Stockwork Zone and Grasberg
Underground. Exploration drilling and a preliminary study of the
Guru resource during the quarter concluded that open-pit mining
appears promising and PT Freeport Indonesia continues to study
the feasibility of this surface mineralization target for
possible near-term development. As of March 31, 2001, five
drilling rigs were operating from the surface and two from
underground locations to explore and delineate the grades and
geometry of the resource. Delineation drilling also continues at
the Ertsberg Stockwork Zone adjacent to our DOZ ore deposit where
underground production has recently begun, and the Grasberg
Underground to define the extent of mineralization.
13
Field exploration activities outside of our current mining
operations area have been temporarily suspended pending the
resolution of a number of regulatory and local community issues.
SMELTING AND REFINING
Impact of Smelter Treatment and Refining Charges
Our investment in smelters serves an important role in our
concentrate marketing strategy. Approximately one-half of PT
Freeport Indonesia's concentrate production is sold to its
affiliated smelters, Atlantic Copper and PT Smelting, and the
remainder is sold to other customers. Through downstream
integration, we are able to achieve operating hedges for changes
in treatment charges for smelting and refining PT Freeport
Indonesia's copper concentrates. While low smelter treatment and
refining charges adversely affect the operating results of our
smelter operations, they benefit the operating results of our
mining operations of PT Freeport Indonesia. Taking into account
taxes and minority ownership interests, an equivalent change in
rates would essentially offset in our consolidated operating
results.
Atlantic Copper Operating Results
First
Quarter
------------------
2001 2000
------- -------
Cash margin before hedging (in millions) $8.6 $14.0
Operating loss (in millions) $(0.7) $(2.0)
Concentrate treated (metric tons) 205,500 244,700
Anode production (000s of pounds) 144,000 178,300
Cathode, wire rod and wire sales
(000s of pounds) 135,600 137,100
Gold sales in anodes and slimes (ounces) 108,200 211,200
Atlantic Copper's cash margin before hedging, which is
revenues less production costs, was $5.4 million lower in the
2001 quarter compared with the 2000 quarter primarily because of
higher unit costs. Atlantic Copper's cathode cash production
costs per pound of copper, before currency hedging, averaged
$0.15 in the first quarter of 2001 compared with $0.12 in the
first quarter of 2000. The increase in unit costs reflects the
effects of lower production volumes and the start of a scheduled
27-day major maintenance turnaround in late March 2001.
Projected turnaround costs of approximately $8 million are also
expected to have a negative impact on Atlantic Copper's second-
quarter 2001 operating results. The next scheduled major
maintenance turnaround is not anticipated for another three
years. Atlantic Copper's average treatment rates remained about
the same for both quarters ($0.18 per pound), which is at
historically low levels.
Atlantic Copper recorded operating losses of $0.7 million
for the first quarter of 2001 compared with losses of $2.0
million in the 2000 period. Atlantic Copper's first-quarter 2001
operating results reflect a $0.3 million loss on currency hedging
contracts maturing during the quarter compared to a $6.0 million
charge for currency hedging contracts in the first quarter of
2000. Under new accounting standards that became effective
January 1, 2001 gains or losses on qualifying hedging contracts
are recognized in earnings as the contracts are settled, with
changes in fair value of open contracts reflected in Other
Comprehensive Income, a component of stockholders' equity, until
realized. In the first quarter of 2000, changes in the market
value of all open currency contracts were recorded as losses
during that quarter. Atlantic Copper recorded an $11.1 million
charge to Other Comprehensive Income during the first quarter of
2001 for its currency hedging contracts that remained open as of
March 31, 2001, reflecting a 5 percent decline in the Spanish
peseta/euro exchange rate during the period (see below).
Atlantic Copper had peseta/euro-denominated net monetary
liabilities at March 31, 2001 totaling $58.7 million recorded at
an exchange rate of 188.4 pesetas to one U.S. dollar or $0.88 per
euro. The December 31, 2000 exchange rate was 178.8 pesetas to
one U.S. dollar or $0.93 per euro. Adjustments to Atlantic
Copper's peseta/euro-denominated net liabilities to reflect
changes in the exchange rate are recorded in other income and
totaled gains of $3.1 million in the first quarter of 2001 and
$2.4 million in the first quarter of 2000.
At estimated annual peseta/euro payments of 15 billion
pesetas/90 million euros and a March 31, 2001 exchange rate of
188.4 pesetas to one U.S. dollar or $0.88 per euro, a 10-
peseta/$0.06 increase or decrease in the exchange rate would
result in an approximate $4 million change in annual costs,
before any hedging effects.
14
As part of refinancing its debt in June 2000, Atlantic
Copper was required to significantly expand its program to hedge
anticipated peseta/euro-denominated operating costs. At March
31, 2001, Atlantic Copper had contracts to purchase 27.5 billion
pesetas/165.1 million euros at an average exchange rate of 163.1
pesetas per one U.S. dollar or $1.02 per euro through December
2003. These contracts currently hedge approximately 50 percent
of Atlantic Copper's projected 2001 peseta/euro disbursements and
approximately 67 percent of Atlantic Copper's projected 2002 and
2003 euro disbursements. Each $0.01 change in the US$/euro
exchange rate impacts the market value of these contracts by
approximately $1.7 million. Our accounting treatment for these
foreign currency forward contracts changed effective January 1,
2001 (see Note 2).
PT Smelting Operating Results
First Quarter
-------------
2001 2000
----- -----
(in millions)
PT Freeport Indonesia sales to PT Smelting $90.6 $70.5
===== =====
PT Freeport Indonesia share of net losses $ 1.3 $ 1.8
PT Freeport Indonesia profits deferred (recognized) 1.2 (4.0)
----- -----
Equity in PT Smelting (income) losses $ 2.5 $(2.2)
===== =====
PT Freeport Indonesia accounts for its 25 percent interest
in PT Smelting under the equity method and provides PT Smelting
with nearly all of its concentrate requirements. PT Smelting
operated slightly above its full design capacity of 200,000
metric tons of copper per year during the first quarter of 2001.
Concentrate treated during the first quarter of 2001 totaled
161,700 metric tons, a 37 percent increase compared to the
amounts treated in the year-ago quarter when operations were
still ramping up. PT Smelting shut down the 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 2000. First-quarter 2001 anodes
production increased by nearly 50 percent and cathodes production
increased by over 60 percent when compared to the year-ago
period, resulting in a 65 percent increase in PT Smelting's
cathodes sales in the 2001 quarter over the 2000 quarter. The
higher production levels in 2001 benefited PT Smelting's cathode
cash production costs per pound of copper which decreased to
$0.11 in the 2001 quarter compared with $0.12 in the 2000
quarter.
Our revenues include PT Freeport Indonesia's sales to PT
Smelting, but we defer recognizing profits on 25 percent of PT
Freeport Indonesia sales to PT Smelting that are still in PT
Smelting's inventory at the end of the period. The effect of
changes in these deferred profits was a charge of $1.2 million in
the first quarter of 2001 compared with the recognition of $4.0
million of those profits in the first quarter of 2000.
OTHER FINANCIAL RESULTS
The FCX/Rio Tinto joint ventures incurred $3.5 million of
exploration costs in the 2001 quarter, compared with $2.8 million
in the 2000 first quarter. We reported $2.1 million of
exploration expense in the first quarter of 2001 for our share of
these exploration costs. All costs in the joint venture areas are
now being shared 60 percent by us and 40 percent by Rio Tinto.
First-quarter 2001 general and administrative expenses of
$14.4 million were $6.3 million lower than the $20.7 million
reported in the 2000 quarter. The 2000 period included a $6.0
million charge for contribution commitments to support small
business development programs within Irian Jaya (Papua) and a
$0.8 million charge for personnel severance costs, partly offset
by a $1.5 million reversal of costs for stock appreciation rights
because of a decrease in our stock price during the first quarter
of 2000.
Our total interest cost (before capitalization) was $50.4
million in the 2001 quarter, slightly lower than the $51.3
million incurred in the 2000 quarter. We capitalized $2.0 million
of interest costs in the first quarter of 2001 and $1.3 million
of interest costs in the first quarter of 2000.
Our effective tax rate was 50 percent for the first quarter
of 2001 and 59 percent for the first quarter of 2000. PT
Freeport Indonesia's Contract of Work provides a 35 percent
corporate income tax rate and a withholding tax rate of 10
percent (based on the tax treaty between Indonesia and the United
States) on dividends and interest paid to us by PT Freeport
Indonesia. 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
substantial tax loss carryforwards for which no financial
statement
15
benefit has been provided. Additionally, we only
receive a small U.S. tax benefit on costs incurred by our parent
company because it has no U.S.-sourced income. As a result, our
effective tax rate varies with the level of earnings at PT
Freeport Indonesia, Atlantic Copper and the parent company. The
lower effective tax rate for the first quarter of 2001 primarily
reflects the impact of higher income at PT Freeport Indonesia.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities was $105.5 million for
the first quarter of 2001, compared with $145.6 million for the
2000 period. Net cash used in investing activities totaled $34.7
million in the 2001 period, compared with $63.6 million in the
2000 period, primarily for PT Freeport Indonesia capital
expenditures. Net cash used in financing activities totaled $67.3
million (including $53.0 million in net debt repayments) in 2001
compared with $83.5 million in 2000.
Operating Activities
Higher net income in 2001 was offset by an increase in deferred
mining costs and working capital changes in the first quarter of
2001, resulting in a decrease in operating cash flow of $40.1
million, to $105.5 million, from the year-ago period. The $38.7
million net increase in working capital for the first quarter of
2001 primarily reflects an increase in accounts receivable
because of the timing of shipments and the timing of payments to
Rio Tinto for their share of joint venture cash flows. The net
decrease in working capital for the first quarter of 2000
primarily reflects the collection of accounts receivable and an
increase in accounts payable and accrued liabilities partly
offset by income tax payments.
Investing Activities
Our first-quarter 2001 capital expenditures were lower compared
to the 2000 period primarily because we paid for previously
purchased mine equipment in the first quarter of 2000. Our
capital expenditures for 2001 are expected to total approximately
$215 million, including $40 million for continued development of
the Deep Ore Zone underground ore body, which started production
in 2000 and is ramping up to full production of 25,000 metric
tons of ore per day by 2004. Capital expenditure funding is
expected to be provided by operating cash flow.
Financing Activities
In response to volatile copper and gold markets, in early 1998 we
initiated a concentrated effort to reduce our costs and enhance
our production. Our overall strategy remains focused on
optimizing the performance of our mining and milling facilities
so that we can achieve higher sales levels at low costs. PT
Freeport Indonesia implemented a number of initiatives in 2000
designed to further improve operating processes, reduce costs and,
thereby, enhance cash flow. We believe our large-scale, low-cost
operations will generate significant operating cash flows
even if the current low commodity price environment were to
prevail for an extended period.
We used available operating cash flows to repay $53.0 million
of debt in the first quarter of 2001 and we expect to generate
sufficient operating cash flows to meet our remaining scheduled
debt and commodity preferred maturities in 2001 (approximately
$70 million after the $120.0 million repayment of the 9 3/4% Senior
Notes on April 16, 2001). We have additional scheduled maturities
of debt and commodity preferreds totaling approximately $200
million in 2002, excluding outstanding amounts under our $1.0
billion credit facility, which is scheduled to mature in
December 2002. As of April 17, 2001, $795.0 million was
outstanding under our $1.0 billion credit facility.
We guarantee a $254.0 million loan to PT Nusamba Mineral
Industri (Nusamba), as discussed in our Form 10-K for the year
ended December 31, 2000, which matures in March 2002. Based on
current market conditions, we may be required to perform under
the guarantee. Should we be required to honor our guarantee,
we would anticipate satisfying the amounts due either through our
available resources, including availability under our $1.0 billion
credit facility; through a negotiation with the Nusamba bank
group or through external financing. We also agreed to lend
Nusamba any amounts necessary to cover shortfalls between the
interest payments on the loan and dividends received by Nusamba
on the PT Indocopper Investama stock. At March 31, 2001, we had
loaned $57.9 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) of Nusamba's acquisition of its interest
in PT Indocopper Investama, we will charge any additional
amounts we loan to Nusamba to expense, which we expect to occur
beginning in the second quarter of 2001.
16
Our $1.0 billion credit facility matures in December 2002,
and we have approximately $500.0 million in long-term debt and
commodity preferred maturities in 2003, based on March 31, 2001
gold and silver prices. We are currently discussing with our
commercial bank group refinancing options for our significant
maturities scheduled for 2002 and 2003, including a possible
extension of the $1.0 billion credit facility under revised terms.
The market for syndicated bank loans has tightened considerably
in recent months. Given the political and economic uncertainties
affecting Indonesia, an extension of the maturity of our credit
facility, or any refinancing of that facility and other components
of our long-term debt could result in higher financing costs,
scheduled maturity requirements and restrictions on our
financial management and flexibility, including purchases of our
common stock and distributions to equity holders. We continue to
consider alternatives for financing our maturing obligations;
however, the specific course of action we may take in this
regard is currently uncertain.
In June 2000, our Board of Directors authorized a 20-million-
share increase in our open market share purchase program,
bringing the total shares approved for purchase under this
program to 80 million. During the first quarter of 2001, we
purchased 0.2 million of our shares for $1.6 million, $8.35 per
share. During the first quarter of 2000, we acquired 3.5 million
of our shares for $60.6 million (an average of $17.17 per share).
From inception of these programs in July 1995 through April 17,
2001, we have purchased a total of 70.7 million shares for $1.24
billion (an average of $17.53 per share) and approximately 9.3
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.
DEVELOPMENTS IN INDONESIA
In Indonesia, political conflict, security issues and economic
pressures mounted during early 2001 as President Wahid struggled
to maintain control. President Wahid appeared before the DPR
(House of Representatives) in February in connection with
allegations of involvement in two financial scandals, prompting
numerous calls for his resignation. There have been recent
reports that discussions are under way involving a political
compromise to address the shortcomings of the Wahid government.
ExxonMobil's decision to close its liquefied natural gas (LNG)
operations in Aceh, Indonesia for safety purposes during the
quarter also negatively impacted public perception of the Wahid
government and the country's economic picture. The ExxonMobil
Arun gas field is a critical asset for Indonesia, representing
about 40 percent of Indonesia's LNG export earnings. It is also
an important asset for ExxonMobil, representing approximately 7
percent of its global natural gas output.
The new U.S. administration made strong statements in
support of its commitment to continue to assist Indonesia in its
democratic transition, recognizing the importance of Indonesia to
the global community and the interests of the U.S. The U.S. and
other developed nations continue to make clear public statements
supporting Indonesia's territorial integrity.
On the economic front, rising local interest rates,
inflationary pressures, a weakened currency and delays in the
release of funds from the International Monetary Fund negatively
impacted the country's economic position. After growing by
nearly 5 percent in 2000, the outlook for 2001 is uncertain. Some
analysts expect a reduction in exports to reduce growth to 3-4
percent. Indonesia's performance is the best in the region
(primarily because of high oil prices) and the country's target
is 4.5-5.5 percent growth in 2001.
PT Freeport Indonesia's area of operation remains peaceful
as PT Freeport Indonesia continues to work with the local people
in a positive way. There were isolated incidents of violence in
parts of Irian Jaya (Papua), but these occurred long distances
from PT Freeport Indonesia's operating area. In late March, the
Indonesian and Australian governments announced a cooperative
program to boost the Irian Jaya (Papua) economy, including
construction of a cement plant potentially using tailings from PT
Freeport Indonesia. The World Bank recently announced $2.2
million in financial aid to the province and the Ministry of
National Education inaugurated the new Papua State University in
Manokwari. The central and local governments continue to work
together on a regional autonomy plan although little progress has
been accomplished in large part because of the political issues
facing the Wahid government.
The rupiah weakened significantly during the first quarter,
reaching a two-year low of 11,000 rupiahs to one U.S. dollar in
March and approximating 10,800 rupiahs to one U.S. dollar on
April 17, 2001. Since the beginning of the year, the rupiah has
declined by approximately 20 percent as a result of the uncertain
political and social situation.
17
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, 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,
Atlantic Copper turnaround costs 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, and
other factors described in more detail under the heading
"Cautionary Statements" in our Form 10-K for the year ended
December 31, 2000.
18
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 March
2000, the Civil District Court for the Parish of Orleans, State
of Louisiana, granted our exception of no cause of action and
dismissed the entire case with prejudice. The plaintiff has
appealed to the Louisiana Fourth Circuit Court of Appeal, which
is expected to hear oral arguments in the third quarter of 2001.
We will continue to defend this action vigorously.
In addition to the foregoing proceedings, we are involved
from time to time in various legal proceedings of a character
normally incident to the ordinary course of our business. We
believe that potential liability in such proceedings would not
have a material adverse effect on our financial condition or
results of operations. We maintain liability insurance to cover
some, but not all, potential liabilities normally incident to the
ordinary course of our business as well as other insurance
coverage customary in our business, with coverage limits that we
deem prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Our Annual Meeting of Stockholders was held May 3,
2001 (the Annual Meeting). Proxies were solicited pursuant
to Regulation 14A under the Securities Exchange Act of 1934,
as amended.
(b) At the Annual Meeting Robert J. Allison, Jr., R.
Leigh Clifford, James R. Moffett, B. M. Rankin, Jr., J.
Stapleton Roy and J. Taylor Wharton were elected to serve
until the 2004 Annual Meeting of Stockholders. In addition
to the directors elected at the Annual Meeting, the terms of
the following directors continued after the Annual Meeting:
Robert W. Bruce III, R. Leigh Clifford, Robert A. Day,
Gerald J. Ford, H. Devon Graham, Jr., Oscar Y. L.
Groeneveld, J. Bennett Johnston, Bobby Lee Lackey and
Gabrielle K. McDonald.
(c) At the Annual Meeting, holders of FCX's Class A
Common Stock and the FCX's Preferred Stock, voting as a
class, elected one director with the number of votes cast
for or withheld from the nominee as follows:
Name For Withheld
- ---- --- --------
R. Leigh Clifford 51,055,284 2,575,851
At the Annual Meeting, holders of shares of FCX's Class B
Common Stock elected five directors with the number of votes
cast for or withheld from each nominee as follows:
Name For Withheld
- ---- --- --------
Robert J. Allison,Jr. 65,560,468 14,558,850
James R. Moffett 60,329,302 19,790,016
B. M. Rankin, Jr. 65,523,455 14,595,863
J. Stapleton Roy 65,517,109 14,602,209
J. Taylor Wharton 65,537,660 14,581,658
With respect to the election of directors, there were no abstentions
or broker non-votes.
At the Annual Meeting, holders of Class A and Class B
Common Stock also voted on and approved a proposal to ratify
the appointment of Arthur Andersen LLP to act as the
independent auditors to audit our and our subsidiaries'
financial statements for the year 2001. Holders of
127,946,925 shares voted for, holders of 4,170,950 shares
voted against and holders of 530,386 shares abstained from
voting on, such proposal. There were no broker non-votes
with respect to such proposal.
At the Annual Meeting, holders of Class A and Class B
Common Stock voted on and approved a stockholder proposal
requesting that the board of directors take steps to
eliminate the classification of our board. Holders of
62,292,641 shares (53.93% of the votes cast) voted for,
holders of 51,916,419 shares (44.94% of the votes cast)
voted against and holders of 1,305,916 shares (1.13% of the
votes cast) abstained from voting on, the proposal. There
were broker non-votes consisting of 17,133,285 shares with
respect to this proposal.
19
At the Annual Meeting, holders of the Class A and Class B
Common Stock voted on and failed to pass a stockholder
proposal requesting that the board of directors take steps
to permit stockholders to elect advisors to the Company's
compensation committee. The proposal failed to pass because
it received less than a majority of the votes cast for the
proposal. Holders of 7,440,318 shares (6.44% of the votes
cast) voted for, holders of 106,041,578 shares (91.80% of
the votes cast) voted against and holders of 2,033,080
shares (1.76% of the votes cast) abstained from voting on,
the proposal. There were broker non-votes consisting of
17,133,285 shares with respect to this proposal.
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 one Current Report on Form 8-K
dated January 2, 2001, reporting information under
Item 5.
20
FREEPORT-McMoRan COPPER & GOLD INC.
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: May 7, 2001
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).
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.
E-1
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
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 PTFreeport 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 PT
Smelting. Incorporated by reference to Exhibit 10.34 to the
Annual Report of FCX on Form 10-K for the year ended
December 31, 1999 (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 10.34)
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.
10.16 FCX 1995 Stock Option Plan. Incorporated by reference
to Exhibit 10.13 to the FCX 1996 Form 10-K.
E-4
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
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 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 Supplemental Agreement between FMS and B. M. Rankin,
Jr. dated February 5, 2001. Incorporated by reference to
Exhibit 10.29 to the Annual Report on Form 10-K of FCX for
the fiscal year ended December 31, 2000.
10.30 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.
10.31 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.
10.33 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.
10.34 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 April 18, 2001 from Arthur Andersen LLP
regarding unaudited interim financial statements.
E-5