Freeport-McMoran, Inc. (FCX)

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Freeport-McMoran Copper & Gold Inc. (FCX)

Q2 2009 Earnings Call

July 21, 2009 10:00 am ET

Executives

Kathleen L. Quirk – Executive Vice President, Chief Financial Officer & Treasurer

Richard C. Adkerson – President & Chief Executive Officer

James R. Moffett – Chairman

Analysts

Michael Gambardella – JPMorgan

Anthony B. Rizzuto – Dahlman Rose & Co.

Kuni Chen – Bank of America Securities

Jorge Beristain – Deutsche Bank Securities

John Tumazos – Very Independent Research, LLC

Charles Bradford – Affiliated Research Group, LLC

Terence S. Ortslan – TSO & Associates

Mark Liinamaa – Morgan Stanley

Wayne Atwell – Casimir Capital L.P.

Lawrence Smith – Scotia Capital

Jeff Cramer – UBS

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoran Copper & Gold second quarter earnings conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Ms. Kathleen Quirk, Executive Vice President and Chief Financial Officer. Please go ahead, ma’am.

Kathleen L. Quirk

Thank you and good morning everyone. Welcome to the Freeport-McMoRan Copper & Gold second quarter 2009 earnings conference call. Our earnings announcement was released earlier this morning and a copy of the press release is available on our website at fcx.com. Our conference call today is being broadcast live on the Internet and we will have several slides to supplement our comments this morning. The slides are accessible using the webcast link on our fcx.com website homepage.

In addition to analysts and investors, the financial press has also been invited to listen to today’s call and a replay of the call will be available by accessing the webcast link on our Internet homepage later today.

Before we begin today’s comments, we’d like to remind everyone that today’s press release and certain of our comments on this call include forward-looking statements. Please refer to the cautionary language included in our press release and slide presentation and to the risk factors described in our SEC filings.

On the call today are, Jim-Bob Moffett, Chairman of the Board; Richard Adkerson, our President and Chief Executive Officer. We’ve also got Dave Thornton and Red Conger with us today.

I will start by briefly summarizing our financial results and then turn the call over to Richard, who will be referring to the slide presentation material that’s on our website. We’ll then open the call for questions.

Today FCX reported second quarter 2009 net income attributable to common stock of $588 million, or $1.38 per share, compared with $947 million, or $2.25 per share for the second quarter of 2008.

For the six months period ended June 30, 2009, FCX reported net income attributable to common stock of $631 million, or $1.54 per share, compared with $2.1 billion, or $4.89 per share in the six-month 2008 period.

Our sales in the second quarter for copper were 1.1 billion pounds that was higher than last year’s second quarter sales of 942 million pounds, and our April 2009 estimate of 955 million pounds. The increase from the prior-year reflects the mining of a high-grade section in the Grasberg open pit partially offset by our reduced operating rates in North America. The favorable variance to our prior estimates reflects the accelerated mining of a high-grade section in the Grasberg open pit during the second quarter, which was previously planned for future periods.

For gold, we sold 837 (sic) [837,000] ounces during the quarter that was significantly higher than the 265,000 ounces sold in 2008 second quarter, again we were mining in a very high-grade section of the Grasberg pit, which enabled us to exceed our April 2009 estimates to 650,000 ounces.

The molybdenum sales of 16 million pounds in the second quarter were lower than last year’s level of 20 million pounds, but higher than our 2009 estimate of 11 million pounds. Our sales during the second quarter reflect increased sales to Europe and Asia compared with the first quarter levels and with our previous estimates.

Our recorded copper prices averaged $2.22 per pound in the second quarter that was a significant reduction from last year’s second quarter. Gold prices of $932 per ounce were slightly above $912 per ounce in the year ago period. We realized $10.11 per pound of molybdenum during the second quarter of 2009, significantly lower than last year’s level of just under $32 per pound.

The results reflect our strong performance really across all of our operations and particularly in the Grasberg mine where we operated at where all of our gold revenues offset all of the costs of production there.

Our unit costs on a consolidated basis averaged $0.43 per pound during the second quarter that was significantly lower than last year’s $1.25 per pound net of by-product credits.

The operating cash flows in the second quarter were significant at $1.2 billion. On a year-to-date basis that brings our operating cash flows to $896 million in the first six months of 2009 that was net of nearly $1 billion in working capital uses that we had earlier this year, primarily associated with the settlements on our provisionally priced prior year copper sales.

Capital expenditures during the quarter totaled $375 million, and year-to-date $894 million. Our spending is expected to decline in the second half, reflecting a substantial completion of our construction activities at the Tenke Fungurume project, which Richard is going to talk more about.

We ended the quarter in a strong financial position. Our total debt approximated $7.2 billion and our cash balance grew to $1.3 billion during the quarter. We had no amounts borrowed under our revolving credit facility at June 30.

We also announced separately today that we’re calling for redemption, our 6⅞% senior notes due 2014 those have a principal amount of $340 million and what that will allow us to do is to reduce our interest expense by roughly $23 million and reduce our debt levels and improve our financial flexibility.

I’d now like to turn the call over to Richard, who will be referring to the materials on our website.

Richard C. Adkerson

Thanks, Kathleen. Before I turn to the quarter, I’m going to take just a few minutes to review the recent events in Indonesia that you’ve been reading about in the paper.

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