SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO CURRENT REPORT ON FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 2, 1994
FREEPORT-McMoRan COPPER & GOLD INC.
Delaware 1-9916 74-2480931
(State or other
jurisdiction of (IRS Employer
incorporation or Commission Identification
organization) File Number) Number)
---------------- ----------- --------------
First Interstate Bank Building
One East First Street, Suite 1600
Reno, Nevada, 89509
Registrant's telephone number, including area code:
(702) 688-3000
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Current Report on
Form 8-K dated March 2, 1994, as set forth in the pages attached hereto.
After discussions with the staff of the Securities and Exchange Commission
(SEC), FCX is reclassifying certain expenses and accruals previously
recorded in 1993 as restructuring and valuation of assets. In response to
inquiries, the Company advised the SEC staff that $15.5 million originally
reported as restructuring and valuation of assets represented the
cumulative effect of changes in accounting principle resulting from the
adoption of the new accounting policies that the Company considered
preferable. The Company also informed the SEC staff of the components of
other charges included in the amount originally reported as restructuring
and valuation of assets. The Company concluded that the reclassification
and the related supplemental disclosures more accurately reflect the nature
of these charges to 1993 net income in accordance with generally accepted
accounting principles. These reclassifications had no impact on net income
or net income per share.
Item 7. Financial Statements and Exhibits.
Balance Sheets as of December 31, 1993 and 1992.
Statements of Income for the years ended December 31, 1993, 1992
and 1991.
Statements of Cash Flow for the years ended December 31, 1993,
1992 and 1991
Statements of Stockholders' Equity for the years ended December 31,
1993, 1992 and 1991
Notes to Financial Statements
Report of Management
Report of Independent Public Accountants
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Selected Financial and Operating Highlights
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, thereunto duly authorized.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ John T. Eads
-----------------------
Vice President
Date: April 6, 1994
FREEPORT-McMoRan COPPER & GOLD INC.
BALANCE SHEETS
December 31,
____________________
1993 1992
_____ _____
ASSETS (In Thousands)
Current assets:
Cash and short-term investments................... $ 13,798 $ 371,842
Accounts receivable:
Customers....................................... 122,527 130,587
Other........................................... 66,202 20,249
Inventories:
Products........................................ 58,247 13,911
Materials and supplies.......................... 153,681 118,347
Prepaid expenses and other........................ 13,787 6,178
__________ _________
Total current assets............................ 428,242 661,114
__________ _________
Property, plant and equipment..................... 2,172,222 1,443,939
Less accumulated depreciation and amortization.... 525,619 450,527
__________ _________
Net property, plant and equipment............... 1,646,603 993,412
__________ _________
Other assets...................................... 41,808 39,479
__________ _________
Total assets...................................... $2,116,653 $1,694,005
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.......... $ 218,083 $ 88,876
Current portion of long-term debt and
short-term borrowings........................... 48,791 78,571
Accrued income and other taxes.................... 20,865 1,129
__________ _________
Total current liabilities....................... 287,739 168,576
Long-term debt, less current portion.............. 211,868 645,012
Accrued postretirement benefits and
other liabilities............................... 188,165 15,558
Deferred income taxes............................. 201,553 196,953
Minority interest................................. 46,781 21,449
Mandatory redeemable gold-denominated
preferred stock................................. 232,620 -
Stockholders' equity:
Special preference stock.......................... 224,400 224,400
Step-Up preferred stock........................... 350,000 -
Class A common stock, par value $.10.............. 5,802 5,318
Class B common stock, par value $.10.............. 14,213 14,213
Capital in excess of par value of common stock.... 334,166 353,697
Cumulative foreign translation adjustment......... (10,012) -
Retained earnings................................. 29,358 48,829
__________ _________
947,927 646,457
__________ _________
Total liabilities and stockholders' equity........ $2,116,653 $1,694,005
========== =========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME
Years Ended December 31,
__________________________
1993 1992 1991
____ ____ ____
(In Thousands,
Except Per Share Amounts)
Revenues....................................... $925,932 $714,315 $467,522
Cost of sales:
Site production and delivery................... 567,148 308,948 204,353
Depreciation and amortization.................. 67,906 48,272 38,397
________ ________ ________
Total cost of sales.......................... 635,054 357,220 242,750
Exploration expenses........................... 33,748 12,185 6,502
Provision for restructuring charges............ 20,795 - -
General and administrative expenses............ 81,399 68,481 40,550
________ ________ ________
Total costs and expenses..................... 770,996 437,886 289,802
________ ________ ________
Operating income............................... 154,936 276,429 177,720
Interest expense, net.......................... (15,327) (18,897) (21,451)
Other income (expense), net.................... (2,216) 7,162 3,477
________ ________ ________
Income before income taxes and minority interest 137,393 264,694 159,746
Provision for income taxes..................... (67,589) (103,726) (45,585)
Minority interest.............................. (9,134) (31,075) (12,199)
________ ________ ________
Income before changes in accounting principle.. 60,670 129,893 101,962
Cumulative effect of changes in accounting
principle, net of taxes and minority interest (9,854) - (5,803)
________ ________ ________
Net income..................................... 50,816 129,893 96,159
Preferred dividends............................ (28,954) (7,025) -
________ ________ ________
Net income applicable to common stock.......... $ 21,862 $122,868 $ 96,159
======== ======== ========
Net income per share of common stock:
Before changes in accounting principle....... $.16 $.66 $.56
Cumulative effect of changes in accounting
principle.................................... (.05) - (.03)
________ ________ ________
$.11 $.66 $.53
======== ======== ========
Average common shares outstanding.............. 197,929 187,343 182,130
======== ======== ========
Dividends per common share..................... $.60 $.60 $.55
======== ======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW
Years End December 31,
__________________________
1993 1992 1991
---- ---- ----
Cash flow from operating activities: (In Thousands)
Net income.................................... $ 50,816 $129,893 $ 96,159
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of changes
in accounting principle................... 9,854 - 5,803
Depreciation and amortization............... 67,906 48,272 38,397
Provision for restructuring charges,
net of payments........................... 4,623 - -
Deferred income taxes....................... 8,512 52,154 17,052
Amortization of discount on zero coupon
exchangeable notes........................ 10,844 17,297 9,162
Minority interest's share of net income..... 9,134 31,075 12,199
(Increase) decrease in working capital,
net of effect of acquisition:
Amount due from FTX....................... - 20,000 (20,000)
Accounts receivable....................... (16,904) (77,448) (24,647)
Inventories............................... (36,669) (10,644) (50,086)
Prepaid expenses and other................ (10,503) (4,157) (939)
Accounts payable and accrued liabilities.. 32,792 44,035 (794)
Accrued income and other taxes............ 19,736 1,129 (9,988)
Other....................................... 8,404 963 1,554
________ ________ ________
Net cash provided by operating activities..... 158,545 252,569 73,872
________ ________ ________
Cash flow from investing activities:
Capital expenditures.......................... (453,122) (367,842) (239,954)
Purchase of indirect interest in PT-FI........ - (211,892) -
Acquisition of RTM, net of cash acquired...... (10,390) - -
________ ________ ________
Net cash used in investing activities......... (463,512) (579,734) (239,954)
________ ________ ________
Cash flow from financing activities:
Cash dividends paid:
Common stock................................ (118,575) (111,365) (100,171)
Preferred stock............................. (22,981) (4,407) -
Minority interest........................... (19,143) (15,643) (8,945)
Conversion of zero coupon exchangeable notes.. - (7,848) -
Proceeds from debt............................ 397,971 153,000 103,000
Repayment of debt............................. (931,439) - (10,000)
Net proceeds from infrastructure financing.... 80,000 - -
Net proceeds from sale of:
Step-Up preferred stock..................... 340,700 - -
Gold-denominated preferred stock............ 220,390 - -
Class A common stock........................ - 174,142 -
Special preference stock.................... - 217,867 -
Subsidiary interest......................... - 212,485 -
Zero coupon exchangeable notes.............. - - 218,560
________ ________ ________
Net cash provided by (used in)
financing activities........................ (53,077) 618,231 202,444
________ ________ ________
Net increase (decrease) in cash and
short-term investments...................... (358,044) 291,066 36,362
Cash and short-term investments
at beginning of year........................ 371,842 80,776 44,414
________ ________ ________
Cash and short-term investments
at end of year.............................. $ 13,798 $371,842 $ 80,776
======== ======== ========
Interest paid................................. $ 29,122 $ 22,581 $ 32,482
======== ======== ========
Income taxes paid............................. $ 39,314 $ 50,029 $ 38,521
======== ======== ========
The accompanying notes, which include information in Notes 1, 2, 3,
and 7 regarding noncash transactions, are an integral part of these
financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years End December 31,
__________________________
1993 1992 1991
---- ---- ----
(In Thousands)
Special Preference Stock:
Balance at beginning of year................... $224,400 $ - $ -
Sale of shares to the public.................. - 224,400 -
________ ________ ________
Balance at end of year...................... 224,400 224,400 -
________ ________ ________
Step-Up Preferred Stock:
Sale of shares to the public.................. 350,000 - -
________ ________ ________
Class A common stock:
Balance at beginning of year.................. 5,318 2,000 2,000
Two-for-one stock split....................... - 2,000 -
Sale of shares to the public.................. - 863 -
Conversion of zero coupon exchangeable notes.. 484 455 -
________ ________ ________
Balance at end of year...................... 5,802 5,318 2,000
________ ________ ________
Class B common stock:
Balance at beginning of year.................. 14,213 7,106 7,106
Two-for-one stock split....................... - 7,107 -
________ ________ ________
Balance at end of year...................... 14,213 14,213 7,106
________ ________ ________
Capital in excess of par value of common stock:
Balance at beginning of year.................. 353,697 163,439 167,451
Issuance cost of Mandatory Redeemable Gold-
Denominated and Step-Up Preferred Stock..... (21,530) - -
Sale of Class A and Special Preference Stock.. - 166,746 -
Conversion of zero coupon exchangeable notes.. 79,241 69,945 -
Two-for-one stock split....................... - (9,107) -
Cash dividends on common stock................ (65,587) (37,326) (4,012)
Dividends on preferred stocks................. (11,655) - -
________ ________ ________
Balance at end of year...................... 334,166 353,697 163,439
________ ________ ________
Cumulative foreign translation adjustment:
Current year adjustment....................... (10,012) - -
________ ________ ________
Retained earnings:
Balance at beginning of year.................. 48,829 - -
Net income.................................... 50,816 129,893 96,159
Cash dividends on common stock................ (52,988) (74,039) (96,159)
Dividends on preferred stocks................. (17,299) (7,025) -
________ ________ ________
Balance at end of year...................... 29,358 48,829 -
________ ________ ________
Total stockholders' equity.................... $947,927 $646,457 $172,545
======== ======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements of
Freeport-McMoRan Copper & Gold Inc. (FCX or the Company) include its
majority-owned subsidiaries, including P.T. Freeport Indonesia
Company (PT-FI) and Rio Tinto Minera, S.A. (RTM). Reclassifications
were made to prior year financial statements to conform to the 1993
presentation. All significant intercompany transactions have been eliminated.
Cash and Short-Term Investments. The Company considers highly
liquid investments purchased with a maturity of three months
or less to be cash equivalents. PT-FI and RTM
cash is not available to FCX until cash dividends are paid to FCX.
At December 31, 1993, PT-FI's net assets totaled $184.3 million,
including $24.6 million of retained earnings.
On January 5, 1994, PT-FI declared a $42.1 million dividend
of which $36.1 million was due to FCX. At December 31, 1993,
RTM's net assets totaled $40.2 million. RTM is not
expected to pay a dividend to FCX in the near future.
Inventories. Inventories are generally stated at the lower
of cost or market. PT-FI uses the average cost method and
RTM uses the first-in, first-out (FIFO) cost method.
Property, Plant and Equipment. Property, plant and
equipment is carried at cost. Mineral exploration costs
are expensed as incurred, except in the year the property is deemed to
contain a viable mineral deposit, in which case they are capitalized.
Development costs, which include interest incurred during the
construction and development period, are capitalized.
Expenditures for replacements and improvements are capitalized.
Depreciation expense for mining and milling operations is
determined using the unit-of-production method based on
estimates of recoverable reserves. Other assets, including
RTM's smelter, are depreciated on a straight-line basis
over estimated useful lives of 15 to 20 years for buildings
and 3 to 25 years for machinery and equipment.
Hedging. PT-FI has a price protection program for virtually
all of its estimated copper sales to be priced in 1994 at an
average floor price of $.90 per pound, while allowing
full benefit from prices above that amount. The cost
of this program ($6.0 million at December 31, 1993) is
included in product inventories and will be amortized during 1994.
Based on an average 1994 forward market price of approximately
$.82 per pound of copper (December 31, 1993 forward prices per
London Metal Exchange, LME), the market value of
these contracts is approximately $56 million.
The contracts are with a diversified group
of financially strong counterparties.
RTM has forward contracts for approximately 61 percent
of its estimated 1994 gold production at $383.80 per ounce
and 38 percent of its estimated 1995 gold production at
$394.80 per ounce. RTM has also hedged approximately 53
percent and 38 percent of its estimated 1994 and 1995
silver production at $4.70 and $4.80 per ounce, respectively.
Based on a market price of $390.65 per ounce of gold and
$5.12 per ounce of silver (December 31, 1993 price per LME),
these contracts are in a loss position of approximately
$2 million. Additionally, RTM has a policy of eliminating
significant exposure to copper price fluctuations by hedging
purchases of concentrate at its smelter through the use of
forward contracts. At December 31, 1993, RTM sold forward
approximately 4.2 million pounds of its concentrate inventory
at approximately $.78 per pound of copper.
Concentrate Sales. Revenues associated with PT-FI's sales
of metal concentrates are recorded net of royalties,
treatment costs, and amortization of the cost of its price
protection program. PT-FI's concentrate sales agreements
provide for provisional billings based on world metals prices,
primarily the LME, with actual settlement generally based on
appropriate future metals prices. Revenues, recorded initially
using provisional prices, are adjusted using current prices.
At December 31, 1993, copper sales totaling 213.4
million pounds remained to be contractually priced at various
times in 1994. As a result of PT-FI's price protection program,
these pounds are recorded at an average price of $.90
per pound. Gold sales are priced according to individual
contract terms.
Foreign Translation Adjustment. The functional currency for
RTM is the Spanish peseta. RTM's assets and liabilities are
translated to U.S. dollars using the exchange rate in
effect at the balance sheet date. The cumulative results
of the translation adjustment are recorded as a separate
component of stockholders' equity. Results of operations are
translated using the average exchange rates during the period.
Gains and losses resulting from foreign currency transactions,
which were not material, are included in net income.
Changes in Accounting Principle. During 1993, the Company
adopted the following changes to accounting policies:
Periodic Scheduled Maintenance Costs - Costs related to
periodic scheduled maintenance (turnarounds) were previously
capitalized when incurred and amortized generally over six
months to two years. Effective January 1, 1993, the method
of accounting was changed to expense these costs when incurred.
Deferred Charges - The accounting for deferred charges was
changed to provide for deferral of only those costs that
directly relate to the acquisition, construction, and development
of assets and to the issuance of debt and related instruments.
Previously, certain other costs that benefitted future periods
were amortized over the periods benefitted.
Management Information Systems - Costs of management information
systems (MIS) equipment and software that have a material impact
on periodic measurement of net income are capitalized and
amortized over their estimated productive lives. Other MIS costs,
including equipment and purchased software that involve
relatively immaterial amounts (currently individual expenditures
of less than $.5 million) and short estimated productive lives
(currently less than three years) are charged to expense when incurred.
During 1993, approximately $3.5 million of equipment and purchased
software was charged to expense. Previously, most expenditures
for MIS equipment and purchased software were capitalized.
The accounting for MIS costs was changed to recognize the
rapid rate of technology change in MIS which results in short
productive lives of equipment and software and a need for
continuing investments.
The changes in accounting policy were adopted to improve
the measurement of operating results by reporting cash expenditures
as expenses when incurred unless they are directly related to
long-lived asset additions. In addition, the administrative costs of
accounting for assets will be reduced by not capitalizing and
amortizing relatively insignificant expenditures that do not
have a material effect on measuring periodic net income.
If these changes in accounting principle had not been adopted,
1993 income before changes in accounting principle would not have
been materially different from the amount reported. If the changes
in accounting principle had been applied in prior years, 1992
and 1991 net income would not have been materially different
from amounts reported.
Restructuring Charges. FCX recognized
expense of $20.8 million during 1993 for restructuring the
administrative organization (including primarily personnel
related costs and a write-off of excess office facilities)
of Freeport-McMoRan Inc. (FTX), the parent company of FCX,
the cost to downsize PT-FI's computing and MIS structure,
and a write-off of costs associated with PT-FI's previous
credit agreement. See Management's Discussion
and Analysis of Financial Condition and Results of
Operations for information about a reclassification of
restructuring charges from those previously reported resulting from
views expressed by the Securities and Exchange Commission staff.
2. OWNERSHIP IN PT-FI
In January 1991, the Government of Indonesia (the Government)
increased its ownership in PT-FI from 8.9 percent to 10 percent
by purchasing 2,242 PT-FI shares owned by FCX for
$18.1 million. FCX withholds 40 percent of PT-FI dividends
on all Government-owned shares until the non-interest bearing
receivable ($2.2 million at December 31, 1993) is satisfied.
In December 1991, FCX exchanged 21,300 shares of PT-FI
common stock for a $212.5 million subordinated promissory note
from PT-FI, reducing FCX's ownership in PT-FI to
approximately 89 percent with the remaining 11 percent being
owned by the Government. Interest on the note is due quarterly
at a rate equal to the effective rate under PT-FI's
amended credit agreement, and principal is payable in twenty
equal, quarterly installments beginning January 2000.
If interest or principal is in arrears, PT-FI cannot pay
dividends on its common stock.
In December 1991, PT-FI and the Government signed a
new contract of work (New COW) which has a 30-year term
with two 10-year extensions permitted. Under the New COW, FCX
pays the Government a royalty of 1.5 percent to 3.5 percent
on the value of copper sold, net of delivery costs and
treatment and refining charges, and a 1 percent royalty on the
sales value of gold and silver ($9.5 million in 1993,
$15.7 million in 1992, and $10.5 million in 1991).
The New COW required FCX to increase the ownership by Indonesian
entities in PT-FI to 20 percent, which was achieved
through the sale of 10 percent (21,300 shares) of PT-FI
common stock to an entity owned by Indonesian investors
on December 31, 1991.
In December 1992, FCX purchased 49 percent (10.5 million shares)
of the capital stock of the publicly traded Indonesian entity which
owned the 10 percent of PT-FI sold in 1991.
In December 1993, PT-FI issued 8,321 shares of its stock to
FCX in exchange for the conversion of certain notes (Note 7).
FCX's direct ownership in PT-FI totaled 80.8 percent and 80.0
percent at December 31, 1993 and 1992, respectively. In 1994, PT-FI
issued an additional 6,169 shares of its stock to FCX for
conversion of the remaining notes, increasing FCX's direct
ownership in PT-FI to 81.3 percent.
Each transaction discussed above used the fair market
value of FCX Class A common stock at the time of the agreements
as the basis to calculate the purchase and sale prices.
3. ACQUISITION OF RTM
In March 1993, FCX acquired a 65 percent interest in RTM,
which operates a copper smelter and a gold mine with an
estimated remaining life of fewer than four years, by investing
approximately $50 million, excluding transaction costs,
to be used by RTM for working capital requirements and
capital expenditures, including funding a portion of the costs of
the expansion of its smelter production capacity from
its current 150,000 metric tons of metal per year to 180,000
metric tons of metal per year by mid-1995. In December 1993,
RTM redeemed the remaining 35 percent interest for approximately
$19 million. Selected balance sheet information reflecting the
allocation of the purchase price to the assets
and liabilities acquired is as follows (in thousands):
Current assets...........................................$101,454
Current liabilities......................................(158,445)
Property, plant and equipment, net........................277,170
Other assets................................................5,358
Long-term debt............................................(38,941)
Accrued postretirement benefits and other liabilities....(176,206)
________
Net cash investment......................................$ 10,390
========
Unaudited pro forma data giving effect to the purchase of
RTM as if it had been acquired on January 1 of each year is as follows:
Years Ended December 31,
_________________________
1993 1992
____ ____
Revenues (000s)....................................$1,024,097 $1,176,612
Operating income (000s)...............................152,484 267,951
Net income before changes
in accounting principle (000s).......................22,578 96,760
Net income per share................................... .11 .52
The pro forma results are not necessarily indicative of the
actual results that would have been achieved nor are they indicative
of future results.
4. REDEEMABLE PREFERRED STOCK
In August 1993, FCX sold publicly 6.0 million depositary shares
representing 300,000 shares of its Gold-Denominated Preferred Stock.
Each depositary share has a cumulative quarterly cash dividend equal
to the value of 0.000875 ounces of gold and is subject to
mandatory cash redemption in August 2003 for the value of
0.1 ounces of gold. The depositary shares are recorded at
their offering price and are being reflected as a hedge
of future gold sales for accounting purposes. The net
proceeds from this offering ($220.4 million) were loaned
to PT-FI in the form of a Gold Production Payment Loan, requiring
quarterly production payments of 6,176 ounces of refined
gold bullion or the dollar equivalent thereof. Based on the
December 31, 1993 closing market price, these depositary
shares had a market value of $258.0 million.
In January 1994, FCX sold publicly 4.3 million depositary
shares representing 215,279 shares of its Gold-Denominated
Preferred Stock, Series II. Each depositary share has a
cumulative quarterly cash dividend equal to the value of
0.0008125 ounces of gold and is subject to mandatory cash
redemption in February 2006 for the value of 0.1 ounces of gold.
The net proceeds from this offering ($158.5 million) were
loaned to PT-FI under terms similar to the Gold Production
Payment Loan discussed above.
5. STOCKHOLDERS' EQUITY
FCX has 312.0 million authorized shares of capital stock
consisting of 110.0 million of Special stock, 200.0 million
of Class B common stock, and 2.0 million of Preferred stock.
Special and Preferred Stock. At December 31, 1993, there
were 84.4 million shares of Special stock issued and outstanding,
58.0 million as Class A common stock and 26.4
million as Special Preference Stock.
In July 1992, FCX sold publicly 8.6 million shares of
its Class A common stock and 9.0 million depositary shares.
Each depositary share represents 2-16/17 shares of its 7%
Convertible Exchangeable Special Preference Stock (Special
Preference Stock), has a cumulative annual cash dividend of $1.75
(payable quarterly) and a $25 liquidation preference, and is
convertible at the option of the holder into approximately
1.009 shares of FCX Class A common stock (equivalent to a
conversion price of $24.77 per share of FCX Class A common stock).
Beginning August 1, 1995, FCX may redeem these depositary shares
for cash at $26.225 per share (declining ratably to $25 per share
in March 2002) plus accrued and unpaid dividends. A portion
of the proceeds were used to purchase the 49 percent interest
in the publicly traded Indonesian entity which owned a 10 percent
interest in PT-FI and $145.7 million, net of $4.3 million of
expenses, was loaned to PT-FI in January 1993, in exchange
for an 8.235% Convertible Subordinated Debenture due August
1, 2007.
In July 1993, FCX sold publicly 14.0 million depositary
shares representing 700,000 shares of its Step-Up Convertible
Preferred Stock (Step-Up Preferred Stock). Each
depositary share has a cumulative annual cash dividend
of $1.25 through August 1, 1996 and thereafter $1.75
(payable quarterly) and a $25 liquidation preference, and is convertible
at the option of the holder into approximately 0.826 shares
of FCX Class A common stock (equivalent to a conversion price
of $30.28 per share of FCX Class A common stock). From
August 1, 1996 and prior to August 1, 1999, FCX may redeem
these depositary shares for approximately 0.826 shares of FCX Class A
common stock per depositary share if the market price of FCX Class A
common stock exceeds certain specified levels. Thereafter, FCX may
redeem these depositary shares at $25 per share (payable in FCX Class
A common stock, cash or a combination of both, at FCX's option)
plus accrued and unpaid dividends. The net proceeds from this
offering ($341.3 million) were loaned to PT-FI in the form of a Step-Up
Perpetual Convertible Subordinated Debenture bearing interest
at the rate of 5.88 percent per annum through August 1, 1996
and 8.235 percent thereafter on the unpaid principal amount.
6. INCOME TAXES
FCX records income taxes pursuant to Statement of Financial
Accounting Standards No. 109. Substantially all temporary
differences relate to property, plant and equipment. FCX has
provided a valuation allowance for all tax credit carryforwards
($29.5 million) as these would only be utilized should FCX be
required to pay regular U.S. tax, which FCX views as
unlikely because Indonesian taxes exceed U.S. taxes.
In addition, RTM, which is subject to a separate tax jurisdiction
(Spain), has net operating loss carryforwards totaling
approximately $108 million ($91 million pre-acquisition)
which expire from 1994 to 1998. FCX has provided a valuation
allowance for the full amount of these carryforwards as RTM
has not generated taxable income in recent years.
The provision for income taxes consists of the following:
Years Ended December 31,
____________________________
1993 1992 1991
____ ____ ____
(In Thousands)
Current income taxes:
Indonesian...................................$54,994 $ 45,996 $20,198
United States..................................3,933 5,376 3,178
State............................................150 200 150
______ ______ ______
59,077 51,572 23,526
______ ______ ______
Deferred income taxes:
Indonesian.....................................4,600 52,771 43,240
Adjustment for change in rates under New COW... - - (26,465)
United States.................................. - (617) 277
______ ______ ______
4,600 52,154 17,052
______ ______ ______
Provision for income taxes......................$63,677 $103,726 $40,578
====== ======== ======
Reconciliations of the differences between income taxes computed at the
contractual Indonesian tax rate and income taxes recorded are as follows:
Years Ended December 31,
______________________________________________________________________
1993 1992 1991
___________________ ____________________ _____________________
Percent Percent Percent
of Income of Income of Income
Before Before Before
Income Income Income
Amount Taxes Amount Taxes Amount Taxes
______ ______ ______ ______ ______ ______
(Dollar Amounts In Thousands)
Income taxes computed at
contractual Indonesian rate...$42,656 35% $ 92,643 35% $62,342 42%
Indonesian tax withheld on:
Dividend payments..............19,765 16 11,732 4 - -
Interest payments...............4,170 3 - - - -
Increase (decrease) attributable to:
Adjustment for change in rates
under New COW................. - - - - (26,465) (18)
Intercompany interest expense.(18,645) (15) - - - -
RTM net loss....................5,500 5 - - - -
United States tax...............4,083 3 5,302 2 3,370 2
Other, net......................6,148 5 (5,951) (2) 1,331 1
_______ __ ________ __ _______ __
Provision for income taxes......$63,677 52% $103,726 39% $40,578 27%
====== == ======== == ======= ==
7. LONG-TERM DEBT
December 31,
_______________
1993 1992
____ ____
(In Thousands)
PT-FI revolver, average rate 4.4% in 1993 and 5.1% in 1992..$ 13,000 $550,000
Zero coupon exchangeable notes...............................102,039 173,583
ALatieF joint venture bank loan (Note 10).....................60,000 -
Note payable to FTX, average rate 4.2%........................12,270 -
RTM gold and silver denominated loans, average rate 1.3%......39,284 -
RTM bank loan..................................................2,374 -
RTM short-term borrowings, average rate 11%...................31,692 -
________ _______
260,659 723,583
Less current portion and short-term borrowings................48,791 78,571
________ _______
$211,868 $645,012
======== ========
PT-FI amended its $550.0 million credit agreement in June 1993.
The amended credit agreement (the Credit Agreement), guaranteed by
FCX and FTX, is structured as a three year revolving line of credit
followed by a 3 1/2 year reducing revolver. The Credit Agreement
is part of an $800.0 million committed credit facility available
to FTX and its subsidiaries including PT-FI, and is subject to a
borrowing base, redetermined annually by the banks,
which establishes maximum consolidated debt for FTX and its
subsidiaries, including PT-FI. PT-FI's limit under the facility
is $550.0 million subject to the borrowing base discussed
above. Interest is variable and commitment fees are payable
at 0.38 percent per annum on the average daily unused commitment.
The Credit Agreement provides for working capital requirements,
specified coverage of fixed charges, and restrictions on other borrowings.
PT-FI assigned its existing and future sales contracts and pledged
its rights under the New COW and its accounts receivables and other
assets as security for its borrowings under the Credit Agreement.
As of December 31, 1993, $547.5 million was available under the current
borrowing base and $412.0 million of borrowings were unused under
the credit facility. To the extent FTX and its other subsidiaries
incur additional debt, the amount available to PT-FI under the
Credit Agreement may be reduced.
In July 1991, FCX sold $1.035 billion face amount of subordinated
Zero Coupon Exchangeable Notes (the Notes). The net proceeds were
loaned to PT-FI under similar terms. The remaining Notes outstanding
were redeemed in January 1994. Notes with a face amount of
$386.0 million, $322.6 million, and $326.4 million were presented
for exchange in 1994, 1993, and 1992, respectively, for which FCX
issued 5.8 million, 4.8 million, and 4.5 million shares of Class A
common stock, and the Company paid $.3 million in 1994 and $7.9
million in 1992. As a result of the issuance by FCX of its Class A
common stock, PT-FI issued 14,490 shares of its stock to FCX.
Had the Company called the Notes for redemption on January 1,
1993, net income would have been $.10 per common share for 1993.
In 1993, FCX borrowed funds from FTX for the acquisition
of RTM and $12.3 million was outstanding at December 31, 1993.
Interest accrues at a rate equal to the effective rate
under the Credit Agreement and was $.2 million in 1993.
RTM's gold and silver loans are payable with 107,800 ounces
of gold (9,200 ounces payable quarterly) and 953,100 ounces of silver
(105,900 ounces payable quarterly), and are carried at the market
price of gold ($331.70 per ounce) and silver ($3.70 per ounce) at the
date of FCX's acquisition. The loans are accounted for as a hedge.
Interest is calculated on the outstanding ounces at the current
prices on the date of payment. Based on the December 31, 1993
LME quotes for gold and silver, the market value of this debt was
approximately $47 million.
RTM also has several short-term credit facilities with banks.
The stated rates of interest on these loans range from 3.7 percent
to 13 percent. RTM has pledged certain of its assets as security
for these loans.
The minimum principal payments for debt scheduled for each of
the five succeeding years based on the amounts outstanding at
December 31, 1993, assuming the terms of the Credit
Agreement are not extended and the note to FTX is repaid by
borrowing from the Credit Agreement, are $48.8 million in 1994,
$18.8 million in 1995, $15.0 million in 1996, $13.5 million in 1997,
and $55.2 million in 1998.
The Company has an interest rate exchange agreement resulting
in a fixed rate of 8.3 percent on $85.7 million of financing at
December 31, 1993, reducing $14.3 million annually through December
1999. Based on market conditions at December 31, 1993, unwinding this
interest swap would cost an estimated $8.3 million.
Capitalized interest totaled $24.5 million in 1993, $24 million
in 1992, and $18.3 million in 1991.
8. MAJOR CUSTOMERS
Historically, most of PT-FI's sales have been made under long-term contracts.
The following table details the percentage of total product sold by
PT-FI to its customers:
Years Ended December 31,
_________________________
1993 1992 1991
____ ____ ____
Long-term contracts
Japanese companies.................................44% 34% 36%
Swiss firm.........................................13 13 17
German firm.........................................7 7 11
Other..............................................35 12 12
Spot sales............................................1 34 24
The contract with a group of Japanese companies extends through
December 31, 2000, whereas the contracts with the Swiss and German
firms extend through December 31, 1995 and 1994, respectively.
Certain terms of these long-term contracts are negotiated annually.
There are several other long-term agreements in place, each accounting
for less than 10 percent of 1993 sales. During 1993, PT-FI supplied
RTM with approximately 90,000 metric tons of copper concentrate and
is expected to supply approximately 150,000 metric tons in 1994,
providing for approximately 20 percent and 33 percent, respectively,
of RTM's requirements in those years. Beginning in 1996, PT-FI is
expected to provide RTM with approximately one-half of its copper
concentrate requirements.
RTM's customers are located primarily in Spain and European
Union countries, none of which accounted for over 10 percent of the
Company's total revenues.
9. TRANSACTIONS WITH FTX AND EMPLOYEE BENEFITS
Management Services Agreement. FTX furnishes general executive,
administrative, financial, accounting, legal, and certain other
services to the Company under a management services agreement
terminable by either party on December 31 in any year, upon six months
written notice. These costs, which include related overhead,
are non-interest bearing, reimbursed monthly and totaled $49.0
million in 1993 (excluding $10.7 million of restructuring costs),
$44.9 million in 1992, and $33.4 million in 1991.
Pension Plans. Substantially all the employees seconded to the
Company from FTX are covered by FTX's defined benefit plan for
salaried employees. The accumulated benefits and plan assets
are not determined separately from FTX and amounts allocated to FCX under
this plan have not been material. As of December 31, 1993,
FTX's accumulated benefit obligation under the plan was fully funded.
PT-FI has a defined benefit plan covering substantially all
of its Indonesian national employees which is funded through cash
payments to retirees at the date of retirement. Benefits are based
on years of service and level of compensation. It is anticipated that
in order to comply with new Indonesian pension laws, certain amendments
to the plan will be made in 1994 which will affect future benefits
provided and funding requirements. These amendments are not expected
to have a material effect on the financial statements. The actuarial
present value of the accumulated benefit obligation, determined by the
projected credit method, was fully accrued at December 31, 1993, and
amounted to $6.0 million. The projected benefit obligation at
December 31, 1993, was $11.9 million assuming a discount rate
of 11 percent and an annual increase in future compensation
levels of 9 percent. The pension expense for each of the three
years in the period ended December 31, 1993, was not material.
RTM has a contractual obligation to supplement the amounts paid
to retired employees. Based on an assumed discount rate of 8 percent,
the liability accrued for such payments totaled $79.4 million at
December 31, 1993 ($76.6 million for retirees and $2.8 million
for current employees). Since the initial acquisition, RTM has
recorded expense of $5.2 million compared with cash payments of
$8.0 million. This obligation is unfunded.
Other Postretirement Benefits. FTX provides certain health care
and life insurance benefits for retired employees, including
employees seconded to FCX. Effective January 1,
1991, FCX adopted Statement of Financial Accounting Standards
No. 106 (FAS 106) requiring current accrual for postretirement
benefits other than pensions, recording an $11.4 million charge
as the cumulative effect of the accounting change. The FAS 106 expense
totaled $1.1 million in 1993 ($.2 million for service cost and
$.9 million in interest for prior period services), $1.3 million in 1992
($.3 million for service cost and $1.0 million in interest for
prior period services), and $1.3 million in 1991 ($.4 million for
service cost and $.9 million in interest for prior period services).
Summary information of the plan is as follows:
December 31,
______________
1993 1992
____ ____
(In Thousands)
Actuarial present value of accumulated
postretirement obligation:
Retirees................................................. $ 9,953 $ 8,604
Fully eligible active plan participants.................. 1,312 2,077
Other active plan participants........................... 1,747 1,981
_______ _______
Total accumulated postretirement obligation................ 13,012 12,662
Unrecognized net loss...................................... (668) (575)
_______ _______
Accrued postretirement benefit cost........................ $12,344 $12,087
======= =======
In determining the FAS 106 amounts, FTX used an initial health
care cost trend rate of 11.5 percent for 1993 (12 percent for 1992),
decreasing 1/2 percent per year until reaching 6 percent. A 1 percent
increase in the trend rate would increase the FAS 106 amounts by
approximately 10 percent. The discount rate used was 7 percent in
1993 and 8.5 percent in 1992. FCX anticipates funding these costs,
in addition to the annual cash costs, over the expected life of its
mineral reserves. FTX has the right to modify or terminate these benefits.
10. COMMITMENTS AND CONTINGENCIES
Environmental. PT-FI believes it is in compliance with all
applicable Indonesian environmental laws, rules, and regulations.
Based on current Indonesian environmental regulations, eventual
mine closure and reclamation costs, at the mine in Irian Jaya, is
not expected to be material.
RTM's capital expenditures for 1994 are expected to include
approximately $18 million to modify its sulphuric acid plants,
including expanding their capacity, to comply with certain
environmental standards in Spain. Additionally, at December 31,
1993 the Company had an accrual of $10.3 million related to RTM's
impending mine closure and the eventual closure of its smelter.
Long-Term Contracts and Operating Leases. At December 31, 1993, RTM
had purchase commitments totaling $25.6 million related to the
expansion of its smelter. In addition, it had commitments to
purchase concentrate from third parties (excluding PT-FI) of 305,000
metric tons in 1994, 295,000 metric tons in 1995, 260,000 metric
tons in 1996, 140,000 metric tons in 1997, and a total of 580,000
metric tons from 1998-2002, at then market prices.
FCX's minimum annual contractual charges under noncancellable
long-term contracts and operating leases which expire during the
period 1994 to 2000, totals $35.4 million, with $11.8 million in 1994,
$8.3 million in 1995, $6.1 million in 1996, $4.2 million in 1997,
and $3.8 million in 1998. Total rental expense under long-term contracts
and operating leases amounted to $15.4 million, $3.9 million, and
$3.3 million in 1993, 1992, and 1991, respectively.
Infrastructure Assets Sales. During 1993, the Company entered
into a joint venture agreement with P.T. ALatieF Nusakarya
Corporation (ALatieF), an Indonesian investor, which
provides for the sale of certain portions of the to-be-constructed
infrastructure assets and certain existing assets by PT-FI to a
joint venture or ventures (the ALatieF Joint Venture) owned
one-third by PT-FI and two-thirds by ALatieF for total consideration of
$270.0 million. The acquired assets will be made available
to PT-FI and its employees and designees under arrangements
which will provide the ALatieF Joint Venture with a
guaranteed minimum rate of return on its investment.
Funding of the ALatieF Joint Venture is expected to be
provided by $90.0 million in equity contributions from the ALatieF Joint
Venture partners and $180.0 million in debt financing,
which is expected to be guaranteed by PT-FI, FCX or both.
The sale of the first group of assets to the ALatieF Joint Venture
was completed in December 1993 for a price of $90.0 million.
The sale was partially financed with a $60.0 million medium
term loan facility which is guaranteed by PT-FI (Note
7). The variable rate loan has a 5 percent per year amortization
with a balloon payment after five years. The ALatieF Joint
Venture is consolidated and no gain or loss was
recorded on the sale. The sales which are anticipated for
1994 and later are subject to the execution of definitive
agreements and certain Government approvals.
In December 1993, PT-FI announced the execution of a
Letter of Intent with Duke Energy Corp. (Duke Energy), a wholly
owned affiliate of Duke Power Company, and PowerLink
Corporation (PowerLink), a subsidiary of Northstar Energy
Corporation, pursuant to which PT-FI would sell its existing
and to-be-constructed power generation and transmission
assets and certain other power-related assets to a joint
venture (the Power Joint Venture) whose ownership consists
of Duke Energy (30 percent), PowerLink (30 percent), PT-FI (30
percent), and an Indonesian investor (10 percent). The total
value of the transaction is estimated at $200 million and
is expected to be concluded in two phases. The first sale,
representing the existing assets, is expected to exceed
$100 million and to occur in mid-1994. The final sale,
representing the to-be-constructed expansion-related assets, is
expected to occur during the first half of 1995. Under
the agreement, the Power Joint Venture will own these assets
and be responsible for providing the electrical power
services required by PT-FI at its mining, milling, and
support operations in Irian Jaya, Indonesia, including
the power services required for the expansion of ore throughput to
115,000 metric tons of ore milled per day. The transaction
is subject to the execution of definitive agreements between
PT-FI and the Power Joint Venture, financing, and certain
Government approvals.
PT-FI is proceeding with plans to sell other non-operating
assets under terms whereby the purchaser will operate the assets
and provide services to PT-FI and its employees and designees.
11. MINERAL RESERVES (Unaudited)
The Company's estimated proved and probable mineral reserves were as follows:
Average Ore Grade Per Ton Recoverable Content*
_________________________________________________________ ______________________________
Year-End Ore Copper Gold Silver Copper Gold Silver
________ ___ ______ ____ ______ ______ ____ ______
(Metric Tons) (%) (Grams) (Ounce) (Grams) (Ounce) (Billions (Millions (Millions
of Lbs.) of Ozs.) of Ozs.)
PT-FI
1989 256,400,000 1.64 1.24 .040 5.23 .168 8.3 8.1 27.2
1990 445,741,000 1.59 1.71 .055 4.60 .148 13.9 19.5 34.7
1991 768,045,000 1.45 1.66 .053 3.86 .124 21.8 32.4 50.0
1992 733,173,000 1.47 1.72 .055 3.87 .124 20.9 32.1 44.7
1993 1,074,100,000 1.31 1.47 .047 4.04 .130 26.8 39.1 76.7
RTM
1993 12,700,000 - 1.03 .033 50.45 1.622 - 0.4 8.5
<FN>
* Recoverable production and reserves are used synonymously with payable
production and reserves.
12. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)
Net Income (Loss)
Operating Applicable to Net Income (Loss)
Revenues Income (Loss) Common Stock Per Share
________ _____________ _____________ ________________
(In Thousands, Except Per Share Amounts)
1993
____
1st Quarter a,b,c... $133,515 $ 25,454 $(5,160) $(.03)
2nd Quarter a,c..... 215,033 (18,463) (21,524) (.11)
3rd Quarter a....... 261,504 59,462 19,188 .10
4th Quarter......... 315,880 88,483 29,358 .15
________ ________ ________
$925,932 $154,936 $21,862 .11
======== ======== ========
1992
____
1st Quarter......... $106,749 $ 35,212 $ 17,312 $.10
2nd Quarter......... 241,684 109,261 49,716 .27
3rd Quarter......... 157,114 58,658 23,379 .12
4th Quarter......... 208,768 73,298 32,461 .17
________ ________ ________
$714,315 $276,429 $122,868 .66
======== ======== ========
a. The quarterly results have been restated to reflect the cumulative
effect of the changes in accounting principle (Note 1) and the RTM
investment on a fully consolidated basis. FCX previously reported this
investment using the equity method of accounting because FCX anticipated
reducing its interest below 50 percent within one year of the initial
investment in RTM. FCX is now considering alternative forms of financing.
b. Includes a $9.9 million charge ($.05 per share), net of taxes and
minority interest, for the cumulative effect of the changes in accounting
principle (Note 1).
c. Includes restructuring charges of $3.4 million ($1.9 million to net
income or $.01 per share) and $17.4 million ($9.6 million to net income or
$.05 per share) during the first and second quarters, respectively. The
second quarter includes nonrecurring charges totaling $16.3 million ($9.0
million to net income or $.05 per share).
FREEPORT-McMoRan COPPER & GOLD INC.
REPORT OF MANAGEMENT
Freeport-McMoRan Copper & Gold Inc. (the Company) is responsible for the
preparation of the financial statements and all other information contained
in this Annual Report. The financial statements have been prepared in
conformity with generally accepted accounting principles and include
amounts that are based on management's informed judgments and estimates.
The Company maintains a system of internal accounting controls
designed to provide reasonable assurance at reasonable costs that assets
are safeguarded against loss or unauthorized use, and that transactions are
executed in accordance with management's authorization and recorded and
summarized properly. The system is tested and evaluated on a regular basis
by the Company's internal auditors. In accordance with generally accepted
auditing standards, the Company's independent public accountants have
developed an overall understanding of our accounting and financial controls
and have conducted other tests as they consider necessary to support their
opinion on the financial statements.
The Board of Directors, through its Audit Committee composed solely of
non-employee directors, is responsible for overseeing the integrity and
reliability of the Company's accounting and financial reporting practices
and the effectiveness of its system of internal controls. The independent
public accountants and internal auditors meet regularly with, and have
access to, this committee, with and without management present, to discuss
the results of their audit work.
George A. Mealey Stephen M. Jones
President and Vice President and
Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF FREEPORT-McMoRan COPPER &
GOLD INC.: We have audited the accompanying balance sheets of Freeport-
McMoRan Copper & Gold Inc. (the Company), a Delaware Corporation, as of
December 31, 1993 and 1992, and the related statements of income, cash flow
and stockholders' equity for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1993 and 1992 and the results of its operations and its
cash flow for each of the three years in the period ended December 31, 1993
in conformity with generally accepted accounting principles.
As discussed in Notes 9 and 1 to the financial statements, effective
January 1, 1991, the Company changed its method of accounting for
postretirement benefits other than pensions and effective January 1, 1993,
changed its method of accounting for periodic scheduled maintenance costs,
deferred charges, and costs of management information systems.
New Orleans, Louisiana, /s/ Arthur Andersen & Co.
January 25, 1994
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ORE RESERVE ADDITIONS AND ONGOING EXPLORATION PROGRAM
Total estimated proved and probable recoverable reserves at P.T. Freeport
Indonesia Company (PT-FI), Freeport-McMoRan Copper & Gold Inc.'s (FCX or the
Company) principal operating unit, have increased since December 31, 1992,
by 5.9 billion pounds of copper (a 28 percent increase), 7.0 million ounces
of gold (a 22 percent increase), and 32.0 million ounces of silver (a 72
percent increase), bringing PT-FI's total year-end 1993 estimated proved
and probable recoverable reserves to 26.8 billion pounds of copper, 39.1
million ounces of gold and 76.7 million ounces of silver. The increases,
net of production during the year, were added primarily at the Grasberg
deposit, but also include additions at the Company's underground mine at
the DOZ (Deep Ore Zone) deposit and the recently discovered Big Gossan
deposit.
In addition to continued delineation of the Grasberg deposit and other
deposits including Big Gossan, PT-FI is proceeding with its ongoing
exploration program for mineralization within the original mining area.
During 1993, PT-FI initiated helicopter-supported surface drilling of the
Wanagon gold/silver/copper prospect, located 1.5 miles northwest of Big
Gossan and 2 miles southwest of Grasberg, where seven holes were drilled.
Significant copper mineralization has been encountered below the 2,900
meter elevation.
Preliminary exploration of the new contract of work area (New COW
Area) has indicated numerous promising targets. Extensive stream sediment
sampling within the new acreage has generated analytical results which are
being evaluated. This sampling program, when coupled with regional mapping
completed on the ground and from aerial photographs, has led to the
outlining of over 50 exploration targets. PT-FI has also completed a
fixed-wing air-magnetometer survey of the entire New COW Area. Detailed
follow-up exploration of these anomalies by additional mapping and sampling
and through the use of both aerial and ground magnetic surveys is now in
progress. Systematic drilling of these targets has already commenced with
significant mineralization being discovered at several prospects.
Additional drilling is required to determine if any of these are
commercially viable. Initial surface and stream sampling began on an
additional 2.5 million acres, just north and west of our existing COW area,
on which an affiliate has an exploration permit and a pending COW.
1993 RESULTS OF OPERATIONS COMPARED WITH 1992
After discussions with the staff of the Securities and Exchange Commission
(SEC), FCX is reclassifying certain expenses and accruals previously
recorded in 1993 as restructuring and valuation of assets. In response to
inquiries, the Company advised the SEC staff that $15.5 million originally
reported as restructuring and valuation of assets represented the
cumulative effect of changes in accounting principle resulting from the
adoption of the new accounting policies that the Company considered
preferable, as described in Note 1 to the financial statements. The
Company also informed the SEC staff of the components of other charges
included in the amount originally reported as restructuring and valuation
of assets. The Company concluded that the reclassification and the related
supplemental disclosures more accurately reflect the nature of these
charges to 1993 net income in accordance with generally accepted accounting
principles. These reclassifications had no impact on net income or net
income per share.
FCX reported 1993 net income applicable to common stock of $21.9
million ($.11 per share) compared with net income of $122.9 million ($.66
per share) for 1992. The results for 1993 reflect (a) a $15.7 million loss
for Rio Tinto Minera, S.A. (RTM) since its acquisition (Note 3) and (b)
charges totaling $52.6 million ($30.4 million to net income or $.15 per
share), of which $28.3 million was noncash, related to (1) restructuring
the administrative organization at Freeport-McMoRan Inc. (FTX), the parent
company of FCX, (2) adjustments to general and administrative expenses and
site production and delivery costs discussed below, and (3) changes in
accounting principle, discussed further in Note 1 to the financial
statements. Operating income was lower in 1993 due to a lower gross margin
resulting primarily from lower copper realizations; higher exploration
expenses; administrative restructuring costs (Note 1); and higher general
and administrative costs. Also impacting net income were lower interest
expense resulting from reduced debt levels, a higher effective tax rate,
and an increase in preferred dividends (Notes 4 and 5).
Revenues in 1993 increased as a result of the acquisition of RTM,
adding sales of copper cathodes and anodes ($204.9 million), gold bullion
($57.4 million), and other products ($26.1 million). Excluding RTM,
revenues declined 4 percent when compared to 1992. Copper price
realizations, taking into account PT-FI's $.90 per pound price protection
program, were 12 percent lower than in 1992, but gold price realizations
were up 6 percent. Although ore production averaged 62,300 metric tons of
ore milled per day (MTPD) in 1993 (8 percent higher than in 1992), copper
sales volumes decreased slightly from 1992 primarily because of sales from
inventory in 1992. Gold sales volumes in 1993 benefited from significantly
higher fourth-quarter 1993 gold grades (a 46 percent increase over fourth-
quarter 1992 and a 38 percent increase over third-quarter 1993), which are
not anticipated to continue in 1994, and an increase in gold recovery rates
for the year which improve with higher gold grades. See Selected Financial
and Operating Data.
A reconciliation of revenues from 1992 to 1993 is presented below (in
millions):
Revenues - 1992 ........................................... $714.3
RTM revenues ........................................... 288.4
Elimination of intercompany sales.......................... (47.7)
Concentrate:
Price realizations:
Copper ............................................... (84.7)
Gold ............................................... 14.7
Sales volumes:
Copper ............................................... (5.5)
Gold ............................................... 30.2
Treatment charges 23.6
Adjustments to prior year concentrate sales ............. (13.0)
Other ............................................... 5.6
------
Revenues - 1993 $925.9
======
Revenues also benefited from a decline in treatment charges of 3.4
cents per pound from 1992, resulting from a tightening in the concentrate
market, as the industry's inventories were reduced for much of 1993.
Additionally, lower copper prices led to lower treatment charges since
these charges vary with the price of copper.
Adjustments to prior year concentrate sales include changes in prices
on all metals for prior year open sales as well as the related impact on
treatment charges. Open copper sales at the beginning of 1993 were
recorded at an average price of $1.04 per pound, but subsequently were
adjusted downward as copper prices fell during the year, negatively
impacting 1993 revenues. As of December 31, 1993, 213.4 million pounds of
copper remained to be contractually priced during future quotational
periods. As a result of PT-FI's price protection program, discussed below,
these pounds are recorded at $.90 per pound. The copper price on the
London Metal Exchange (LME) was $.84 per pound on February 1, 1994.
In June 1993, two of PT-FI's four mill level ore passes caved,
resulting in a blockage of a portion of the ore pass delivery system. The
blockage's primary effect was to limit mill throughput to approximately
40,700 MTPD for approximately eight weeks. The impact of the blockage was
minimized by using an ore stockpile adjacent to the mill and installing
conveyors to alternative ore pass systems. The ore pass blockage has been
rectified through the temporary use of alternative delivery systems and by-
passes. A permanent delivery system is expected to be in service by mid-
1994. The copper recovery rate for 1993 was adversely affected because the
ore milled from the stockpile contained higher than normal oxidized copper,
which yields lower copper recoveries. The Company's insurance policies are
expected to cover the property damage and business interruption claims
relative to the blockage.
PT-FI's unit site production and delivery costs, excluding the $10.0
million charge discussed below, increased slightly from 1992 primarily as a
result of costs incurred in connection with the ore pass blockage and an
increase in production overhead costs related to expansion activities.
Unit cash production costs declined significantly to 31.1 cents per pound
in 1993 from 40.7 cents per pound in 1992, benefiting from higher gold and
silver credits, lower treatment charges, and reduced royalties primarily
due to lower copper prices on which such royalties are based. PT-FI's
depreciation rate increased from 7.4 cents per recoverable pound during
1992 to 8.3 cents in 1993, reflecting the increased cost relating to the
66,000 MTPD expansion. As a result of the reserve additions discussed
earlier, PT-FI's depreciation rate is expected to decrease to 7.5 cents per
recoverable pound for 1994, absent any other significant changes in ore
reserves. In addition, FCX is amortizing costs in excess of book value
($2.4 million of amortization in 1993) relating to certain capital stock
transactions with PT-FI. Amortization of these excess costs is expected to
be $3.6 million per year starting in 1994.
Exploration expenditures in Irian Jaya totaled $31.7 million in 1993,
compared to $12.2 million in 1992 and are projected to be approximately $35
million in 1994. Exploration expenditures in Spain are expected to be
approximately $6 million in 1994.
FCX's general and administrative expenses increased from $68.5 million
in 1992 to $81.4 million in 1993 primarily because of the additional
personnel and facilities needed due to the expansion at PT-FI and the
acquisition of RTM. Included in the 1993 expense is $5.0 million for RTM
(since its acquisition in March 1993) and charges of $6.3 million primarily
consisting of a write-off of deferred charges incurred in 1992 related to a
planned securities offering that was withdrawn ($2.0 million) and costs to
downsize FCX's computing and management information systems (MIS) structure
($4.0 million).
Further increases in general and administrative expenses by FCX are
anticipated in conjunction with continuing expansion at PT-FI. General and
administrative expenses, including those of RTM, are currently expected to
increase by approximately 25 percent in 1994.
During the second quarter of 1993, FTX undertook a restructuring of
its administrative organization. This restructuring represented a major
step by FTX to lower its costs of operating and administering its
businesses in response to weak market prices of the commodities produced by
its operating units. As part of this restructuring, FTX significantly
reduced the number of employees engaged in administrative functions,
changed its MIS environment to achieve efficiencies, reduced its needs for
office space, outsourced a number of administrative functions, and
implemented other actions to lower costs. As a result of this
restructuring process, the level of FCX's administrative cost has been
reduced substantially over what it would have been otherwise, which benefit
will continue in the future. However, the restructuring process entailed
incurring certain one-time costs by FTX, portions of which were allocated
to FCX pursuant to its management services agreement with FTX.
FCX's restructuring costs totaled $20.8 million, including $10.7
million allocated from FTX based on historical allocations, consisting of
the following: $8.3 million for personnel related costs; $3.2 million
relating to excess office space and furniture and fixtures resulting from
the staff reduction; $6.1 million relating to the cost to downsize its
computing and MIS structure; and $3.2 million of deferred charges relating
to PT-FI's 1989 credit facility which was substantially revised in June
1993. As of December 31, 1993, the remaining accrual for these
restructuring costs totaled $1.5 million relating to excess office space.
In connection with the restructuring project, FCX changed its
accounting systems and undertook a detailed review of its accounting
records. As a result of this process, FCX recorded a $10.0 million charge
to site production and delivery costs comprised of the following: $5.0
million for materials and supplies inventory obsolescence; $2.5 million for
revised estimates of value added taxes and import duties related to prior
years; and $2.5 million of adjustments for various items identified in
converting its accounting system.
Interest expense was $15.3 million during 1993 compared with $18.9
million in 1992, excluding $24.5 million and $24.0 million of capitalized
interest, respectively.
The New COW provides a 35 percent corporate income tax rate for PT-FI
and a 15 percent withholding tax on interest for debt incurred after the
signing of the New COW and on dividends paid to FCX by PT-FI. The
additional withholding required on interest and on dividends paid to FCX by
PT-FI, and a $15.7 million loss by RTM for which no tax benefit is
recorded, results in a 1993 effective tax rate of 52 percent (Note 6).
TRENDS AND OUTLOOK - MARKETING
PT-FI's copper concentrates, which contain significant amounts of
recoverable gold and silver, are sold primarily under long-term sales
agreements which accounted for virtually all of PT-FI's 1993 sales. PT-FI
has commitments from various parties to purchase virtually all of its
estimated 1994 production. Concentrate sales agreements provide for
provisional billings based on world metals prices, primarily the LME,
generally at the time of loading. As is customary within the industry,
sales under these long-term contracts usually "final-price" within a few
months of shipment. Certain terms of the long-term contracts, including
treatment charges, are negotiated annually on a portion of the tonnage to
reflect current market conditions. Treatment charges have declined during
1993 as a result of the tightening in the concentrate market and are
expected to remain at or below 1993 levels. RTM has commitments from most
of its suppliers for 1994 treatment charge rates in excess of current spot
market rates.
The increased production at PT-FI has required it to market its
concentrate globally. Its principal markets include Japan, Asia, Europe
and North America. PT-FI's mill throughput is currently forecast to be
approximately 67,000 MTPD for 1994 as it continues to integrate new mill
equipment for the expansion to 115,000 MTPD. Current estimates for 1994
production are approximately 700 million pounds of copper and 780,000
ounces of gold for PT-FI and 165,000 ounces of gold at RTM. RTM, whose
smelter can be expanded, was acquired to provide low-cost smelter capacity
for a portion of PT-FI's concentrate and to improve PT-FI's competitive
position in marketing concentrate to other parties.
During 1993, copper prices dropped to their lowest levels since 1987,
reflecting lower demand caused by the continuing global recession, but
recovered to a level in excess of $.80 per pound. Prices for copper, gold,
and silver are influenced by many factors beyond the Company's control and
can fluctuate sharply. PT-FI has a price protection program for virtually
all of its estimated copper sales to be priced in 1994 at an average floor
price of $.90 per pound of copper, while allowing full benefit from prices
above this amount. Based on projected 1994 PT-FI copper sales of
approximately 720 million pounds, a 1 cent per pound change in the average
annual copper price received over $.90 per pound would have an
approximately $6 million effect on pretax operating income and cash flow.
Based on projected 1994 gold sales of approximately 800,000 ounces by PT-
FI, a $10 per ounce change in the average annual gold price received would
have an approximately $8 million effect on 1994 pretax operating income and
cash flow.
CAPITAL RESOURCES AND LIQUIDITY
Cash flow from operations decreased to $158.5 million during 1993
compared with $252.6 million for 1992, due primarily to lower net income
and an increase in inventories. Materials and supplies increased over
year-end 1992 as additional explosives, reagents and chemicals, fuel, and
spare parts are required for the expanding PT-FI operations. For the year
ended December 31, 1993, consolidated working capital decreased by $352.0
million from December 31, 1992, primarily as a result of a $358.0 million
decrease in cash and short-term investments, which was used to reduce long-
term debt and fund capital expenditures, and the negative working capital
position of RTM.
Cash flow used in investing activities totaled $463.5 million compared
with $579.7 million in 1992. Capital expenditures increased 23 percent in
1993 due to increased expansion activities. During 1992, FCX acquired an
indirect interest in PT-FI for $211.9 million.
Cash flow used in financing activities totaled $53.1 million compared
with $618.2 million provided by financing activities in 1992. FCX issued
shares of its Step-Up Preferred Stock and its Gold-Denominated Preferred
Stock during 1993 for net proceeds totaling $561.1 million. Net proceeds
from the two offerings were used in part to reduce borrowings under the PT-
FI amended credit agreement by a net $537.0 million, thereby increasing the
facility's availability for general corporate purposes and the continued
expansion of mining and milling operations. Also in 1993, the Company
received net proceeds of $80.0 million from the sale of a portion of PT-
FI's infrastructure assets (Note 10). In 1992, $212.5 million was received
from the sale of a 10 percent interest in PT-FI to Indonesian investors in
December 1991 and $392.0 million was received from the sale of Class A
common stock and Special Preference Stock. Dividend payments rose in 1993
due to increased Class A shares outstanding and dividends paid on the
Special Preference and Preferred Stock issued in 1992 and 1993. FCX called
its Zero Coupon Exchangeable Notes (Note 7) for redemption in January 1994
(substantially all of which were exchanged for Class A common stock) and
completed a public offering of its Gold-Denominated Preferred Stock, Series
II (Note 4) which yielded net proceeds of $158.5 million to be used
primarily for expansion related activities.
Cash flow from operations increased to $252.6 million during 1992
compared with $73.9 million for 1991, due primarily to higher net income.
Customer accounts receivable rose by $76.1 million to $130.6 million
because of increased sales. Partially offsetting the increase in
receivables was an increase in accounts payable and accrued liabilities
associated with expansion activities. Cash flow used in investing
activities increased to $579.7 million during 1992 compared with $240.0
million for 1991, due to increased capital expenditures for the 57,000 MTPD
expansion and the purchase of an indirect interest in PT-FI. Cash flow
from financing activities increased $415.8 million in 1992 compared with
1991, primarily due to the sale of Class A common stock, Special Preference
Stock, and a 10 percent interest in PT-FI to Indonesian investors. The
proceeds from these financing activities were used to purchase an indirect
interest in PT-FI and to fund ongoing expansion related expenditures.
RTM's principal operations currently consist of a copper smelter. The
FCX purchase proceeds will be used by RTM for working capital requirements
and capital expenditures, including funding a portion of the expansion of
its smelter production capacity (expected to cost approximately $50
million) from its current 150,000 metric tons of metal per year to 180,000
metric tons of metal per year by mid-1995. RTM is also studying further
expansion of the smelter facilities to as much as 270,000 metric tons of
metal production per year and is assessing the opportunity to expand its
tankhouse operations from 135,000 metric tons per year to 215,000 metric
tons per year. RTM's 1993 cash flow from operations was negative ($5.9
million) primarily due to cash requirements related to shut-down costs for
RTM's gold mine. RTM has relied on short-term credit facilities and the
FCX purchase proceeds to fund this shortfall. RTM is currently evaluating
financing alternatives to fund its short-term needs and to provide long-
term funding for expansion. RTM's future cash flow is dependent on a
number of variables including fluctuations in the exchange rate between the
United States dollar and the Spanish peseta, future prices and sales
volumes of gold, the size and timing of the smelter and tankhouse
expansions, and the supply/demand for smelter capacity and its impact on
related treatment and refining charges.
During 1992, the Company established the Enhanced Infrastructure
Project (EIP). The full EIP (currently expected to involve aggregate cost
of as much as $500 million to $600 million) includes plans for commercial,
residential, educational, retail, medical, recreational, environmental and
other infrastructure facilities to be constructed during the next 20 years
for PT-FI operations. The EIP will develop and promote the growth of local
and other third-party activities and enterprises in Irian Jaya through the
creation of certain necessary support facilities. The initial phase of the
EIP is under construction and is scheduled for completion in 1995.
Additional expenditures for EIP assets beyond the initial phase depend on
the long-term growth of PT-FI's operations and would be expected to be
funded by third-party financing sources, which may include debt, equity or
asset sales. As discussed in Note 10, certain portions of the EIP and
other existing infrastructure assets are expected to be sold in the near
future to provide additional funds for the expansion to 115,000 MTPD.
Through 1995, capital expenditures are expected to be greater than
cash flow from operations. Upon completion of the previously announced
115,000 MTPD expansion by year-end 1995, annual production is expected to
approach 1.1 billion pounds of copper and 1.5 million ounces of gold.
Subsequently, capital expenditures will be determined by the results of
FCX's exploration activities and ongoing capital maintenance programs.
Estimated capital expenditures for 1994 and 1995 for the expansion to
115,000 MTPD, the initial phase of the EIP, ongoing capital maintenance
expenditures, and the expansion of RTM's smelter to 180,000 metric tons of
metal per year are expected to range from $850 million to $950 million and
will be funded by operating cash flow, sales of existing and to-be-
constructed infrastructure assets and a wide range of financing sources the
Company believes are available as a result of the future cash flow from PT-
FI's mineral reserve asset base. These sources include, but are not
limited to, PT-FI's credit facility and the public and private issuances of
securities (including the January 1994 public offering of Gold-Denominated
Preferred Stock, Series II).
The New COW contains provisions for PT-FI to conduct or cause to be
conducted a feasibility study relating to the construction of a copper
smelting facility in Indonesia and for the eventual construction of such a
facility, if it is deemed to be economically viable by PT-FI and the
Government of Indonesia (the Government). PT-FI has participated in a
group assessing the feasibility of constructing a copper smelting facility
in Indonesia.
PT-FI amended its $550.0 million credit agreement in June 1993. The
amended credit agreement, which, among other things eliminated a required
debt service reserve and provided a lower interest rate, is guaranteed by
FCX and FTX, and is structured as a three year revolving line of credit
followed by a 3 1/2 year reducing revolver. As of February 1, 1994, $425.0
million was available to PT-FI under the credit facility. To the extent
FTX and its other subsidiaries incur additional debt, the amount available
to PT-FI under the credit facility may be reduced (Note 7).
Payment of future dividends by FCX will depend on the payment of
dividends by PT-FI, which, in turn, depends on PT-FI's economic resources,
profitability, cash flow and capital expenditures. It is the policy of PT-
FI to maximize its dividend payments to stockholders, taking into account
its operational cash needs including debt service requirements. FCX
currently pays an annual cash dividend of 60 cents per share to its common
shareholders. Management anticipates that this dividend will continue at
this level through completion of the expansion in 1995, absent significant
changes in the prices of copper and gold. However, FCX's Board of
Directors determines its dividend payment on a quarterly basis and in its
discretion may change or maintain the dividend payment. In determining
dividend policy, the Board of Directors considers many factors, including
current and expected future prices and sales volumes, future capital
expenditure requirements, and the availability and cost of financing from
third parties.
PT-FI has had good relations with the Government since it commenced
operations in Indonesia in 1967. The New COW provides that the Government
will not nationalize the mining operations of PT-FI or expropriate assets
of PT-FI. Disputes under the New COW are to be resolved by international
arbitration. The 1967 Foreign Capital Investment Law, which expresses
Indonesia's foreign investment policy, provides basic guarantees of
remittance rights and protection against nationalization, a framework for
incentives and some basic rules as to other rights and obligations of
foreign investors.
ENVIRONMENTAL
FTX and affiliates, including FCX, have a history of commitment to
environmental responsibility. Since the 1940s, long before public
attention focused on the importance of maintaining environmental quality,
FTX has conducted preoperational, bioassay, marine ecological, and other
environmental surveys to ensure the environmental compatibility of its
operations. FTX's Environmental Policy commits FTX's operations to full
compliance with local, state, and federal laws and regulations.
The Company believes it is in compliance with Indonesian environmental
laws, rules, and regulations. The Company had a team of environmental
scientists from a leading Indonesian scientific institution conduct a study
to update its 1984 Environmental Impact Assessment that covered expansion
to 66,000 MTPD. Subsequently, that document was expanded by other
independent scientists to cover all environmental aspects of the current
expansion to 115,000 MTPD. The latest study document was submitted to the
Government in December 1993. Based on preliminary hearings, the Company
believes the study document will be accepted substantially as submitted.
The Company has made, and will continue to make, expenditures at its
operations for protection of the environment. Increasing emphasis on
environmental matters can be expected to require the Company to incur
additional costs, which will be charged against income from future
operations. On the basis of its analysis of its operations in relation to
current and presently anticipated environmental requirements, management
does not anticipate that these investments will have a significant adverse
impact on its future operations, liquidity, capital resources, or financial
position.
1992 RESULTS OF OPERATIONS COMPARED WITH 1991
FCX reported 1992 net income of $122.9 million ($.66 per share)
compared with 1991 net income of $96.2 million ($.53 per share).
A reconciliation of revenues from 1991 to 1992
is presented below (in millions):
Revenues - 1991 .............................................. $467.5
Price realizations:
Copper ..................................................... 8.8
Gold........................................................ (7.4)
Sales volumes:
Copper...................................................... 218.5
Gold ....................................................... 95.7
Treatment charges............................................. (73.0)
Adjustments to prior year concentrate sales................... 12.5
Other......................................................... (8.3)
------
Revenues - 1992 .............................................. $714.3
======
Revenues increased 53 percent in 1992, reflecting higher production
rates due to the mine/mill expansion, higher gold grades, and the sale of
all year-end 1991 inventory. Price realizations were relatively unchanged
between years (2 percent increase in copper realizations and 5 percent
decrease in gold realizations), but sales volumes benefited significantly
from the expansion, higher gold grades, and inventory sales discussed
above. Copper sales volumes increased 48 percent and gold sales volumes
increased 71 percent. Partially offsetting the benefit from sales volumes
increases was a 3.6 cents per pound increase in treatment charges because
of tight market conditions in the smelting industry early in 1992 and
increased spot market sales attributable to higher than anticipated
production due to the early completion of the 57,000 MTPD expansion
program. A $5.7 million upward revenue adjustment was made in 1992
compared with a $6.8 million downward revenue adjustment in 1991 for prior
year concentrate sales contractually priced during the year.
Cost of sales for 1992 were $357.2 million, an increase of 47 percent
from 1991 due primarily to the 48 percent increase in copper sales volumes.
Unit site production and delivery costs in 1992 approximated 1991 costs.
FCX's depreciation rate declined from an average 8.7 cents per recoverable
pound in 1991 to 7.4 cents in 1992 because of the significant increase in
ore reserves during 1991.
Interest expense was $18.9 million during 1992 compared with $21.5
million in 1991, excluding $24.0 million and $18.3 million of capitalized
interest, respectively.
The 1992 general and administrative expenses rose to $68.5 million
from $40.6 million in 1991, because of several financing transactions and
operational and environmental studies in 1992 which required additional
corporate personnel whose salaries and related overhead, were charged to
the Company. General and administrative expenses also increased because of
the additional personnel and facilities needed in Indonesia for the
expanding operations.
Minority interest share of net income reflects FCX's 80 percent
ownership interest in PT-FI for 1992, compared with its 90 percent interest
during 1991.
___________________________
The results of operations reported and summarized above are not necessarily
indicative of future operating results.
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED FINANCIAL AND OPERATING DATA
Years Ended December 31,
--------------------------------------------------------
1993a 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------
(Financial data In Thousands, Except Per Share Amounts)
FINANCIAL
Revenues ......... $ 925,932 $ 714,315 $ 467,522 $ 434,148 $ 367,886
Operating income.. 154,936b 276,429 177,720 204,549 203,234
Net income........ 21,862c 122,868 96,159d 90,179 98,927
Net income per
common share..... .11c .66 .53d .52 .58
Dividends paid per
common share..... .60 .60 .55 .69 .56
Average common
shares outstanding 197,929 187,343 182,130 173,432 170,760
At December 31:
Property, plant..
and equipment,
net............. 1,646,603 993,412 601,675 502,171 264,688
Total assets..... 2,116,653 1,694,005 1,157,615 676,727 415,072
Long-term debt,
including
current portion
and short-term
borrowings..... 260,659 723,583 631,961 294,000 130,000
Minority interest 46,781 21,449 14,237 8,899 19,632
Gold denominated
preferred stock. 232,620 - - - -
Stockholders'
equity.......... 947,927 646,457 172,545 176,557 113,759
Common share
price........... 25.00 21.88 16.44 8.00 5.38
---------- ---------- ---------- ---------- ---------
PT-FI OPERATING
Ore milled
Metric tons...... 22,743,000 21,070,000 13,956,000 11,569,000 9,009,000
Metric tons
per day......... 62,300 57,600 38,200 31,700 24,700
Copper grade (%)... 1.57 1.59 1.77 1.61 1.84
Gold grade
Grams per
metric ton...... 1.46 1.35 1.23 .98 .60
Ounce per metric
ton............. .047 .043 .040 .032 .019
Silver grade
Grams per metric
ton............ 4.02 4.79 5.90 6.96 10.30
Ounce per metric
ton............ .129 .154 .190 .224 .331
Recovery rate (%)
Copper........... 87.0 88.2 89.9 90.1 91.0
Gold ............ 76.2 73.7 79.6 79.8 84.0
Silver 67.2 65.5 75.4 73.4 73.0
Copper (thousands
of recoverable
pounds)e
Production....... 658,400 619,100 466,700 361,800 317,400
Sales............ 645,700 651,800 439,700 348,000 317,800
Average
realization
per pound........ $.90 $1.03 $1.01 $1.20 $1.24
Gold (recoverable
ounces)
Production........ 786,700 641,000 420,800 284,000 139,000
Sales............. 762,900 679,300 397,900 273,000 140,000
Average
realization
per ounce........ $361.74 $340.11 $358.76 $378.30 $383.28
Silver (recoverable
ounces)
Production........ 1,541,200 1,642,500 1,567,900 1,749,000 1,971,000
Sales............. 1,480,900 1,804,400 1,620,900 1,664,000 1,979,000
Average
realization
per ounce........ $4.15 $3.72 $3.87 $4.61 $5.39
RTM OPERATING
(since acquisition)
Smelter operations
(metric tons):
Concentrate
treated.......... 330,200
Anode production.. 135,800
Cathode production 103,100
Gold operations:
Ore milled (metric
tons per day).... 17,900
Grade
Grams per metric
ton............ 1.05
Ounce per metric
ton............ .034
Production
(recoverable
ounces)......... 132,500
Average
realization
per ounce....... $369.06
a. Includes the operating results of Rio Tinto Minera, S.A. since
acquisition in March 1993.
b. Includes charges totaling $37.1 million ($14.7 million noncash) related
to restructuring the administrative organization at Freeport-McMoRan Inc.,
the parent company of FCX, and adjustments to general and administrative
expenses and site production and delivery costs as discussed further in
Management's Discussion and Analysis.
c. Includes the items discussed in Note B ($20.5 million after taxes and
minority interest; $.10 per share) and a noncash charge of $9.9 million
($.05 per share) related to the changes in accounting principle as
discussed in Note 1 to the financial statements.
d. Reflects a noncash charge of $5.8 million ($.03 per share) for the
cumulative effect of the change in accounting for postretirement benefits
other than pensions and a $26.5 million ($.15 per share) reduction in the
tax provision due to the signing of a new contract of work in December
1991.
e. Recoverable production and reserves are used synonymously with payable
production and reserves.