10-QPeriod: Q3 FY2017

FREEPORT-MCMORAN INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 7, 2017For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported a profitable third quarter of 2017, with net income attributable to common stockholders of $280 million, or $0.19 per diluted share, a significant improvement from the same period in the prior year. This growth was driven by higher copper prices and increased gold sales volumes, partially offset by lower copper sales volumes and higher tax expenses. The company also reported a net charge of $188 million related to disputed royalties in Peru, which impacted operating income. Financially, FCX demonstrated improved liquidity with consolidated cash and cash equivalents standing at $4.96 billion, while total debt was reduced to $14.78 billion. The company generated strong operating cash flows, allowing for further debt reduction and continued investment in its core mining operations. A key development mentioned is the ongoing framework agreement with the Indonesian government regarding PT Freeport Indonesia's long-term operating rights, which, if finalized, could significantly impact future operations and investments.

Financial Statements
Beta

Key Highlights

  • 1Net income attributable to common stockholders was $280 million, or $0.19 per diluted share, for Q3 2017.
  • 2Consolidated cash and cash equivalents increased to $4.96 billion, while total debt decreased to $14.78 billion.
  • 3Revenues increased to $4.31 billion from $3.88 billion in the prior year's third quarter, driven by higher copper prices and gold sales volumes.
  • 4The company incurred a significant charge of $357 million ($188 million net of noncontrolling interests) related to disputed Cerro Verde royalties in Peru following an unfavorable Supreme Court ruling.
  • 5Progress was made towards a definitive agreement with the Indonesian government on PT-FI's long-term operating rights, a crucial development for future operations.
  • 6Consolidated operating cash flows for the nine months ended September 30, 2017, were $3.02 billion.
  • 7Unit net cash costs for copper operations remained relatively stable compared to the prior year, with slight increases due to lower sales volumes in some segments.

Frequently Asked Questions

Freeport-McMoRan reported a net income attributable to common stockholders of $280 million, or $0.19 per diluted share, for the third quarter of 2017. This represents a significant improvement compared to the $217 million, or $0.16 per diluted share, reported in the same period of 2016.

Higher average realized prices for copper, which increased by 34% year-over-year for the quarter, and increased gold sales volumes were key drivers of revenue growth. Conversely, copper sales volumes decreased slightly, and molybdenum prices saw a slight increase.

The company reached an understanding with the Indonesian government on a framework for resolving PT Freeport Indonesia's long-term operating rights, which includes conversion from the Contract of Work (COW) to a new operating license (IUPK) and a commitment to build a new smelter. Negotiations are ongoing to finalize a definitive agreement, with PT-FI's export rights extended through December 31, 2017, while these discussions continue.

Yes, the company recorded a pre-tax charge of $357 million related to disputed royalties in Peru following an unfavorable Supreme Court ruling. Additionally, PT-FI is involved in tax matters in Indonesia concerning surface water taxes, with assessments totaling $516 million, including penalties, for which the company is contesting.