Freeport-McMoran Copper & Gold, Inc. (FCX)

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Freeport-McMoRan Copper & Gold (FCX)

Q4 2011 Earnings Call

January 19, 2012 10:00 am ET

Executives

James R. Moffett - Chairman of the Board

David H. Thornton - President of Climax Molybdenum

Kathleen L. Quirk - Chief Financial Officer, Executive Vice President, Treasurer and Commissioner of PT Freeport Indonesia

Mark J. Johnson - Senior Vice President and Chief Operating Officer of Indonesian Operations

Richard C. Adkerson - Chief Executive Officer, President, Director and Chairman of FM Services Company

Analysts

Garrett S. Nelson - BB&T Capital Markets, Research Division

John Charles Tumazos - John Tumazos Very Independent Research, LLC

Raymond Kramer - BofA Merrill Lynch, Research Division

Brett Levy - Jefferies & Company, Inc., Research Division

R. Wayne Atwell - Rodman & Renshaw, LLC, Research Division

Charles A. Bradford - Bradford Research, Inc.

Unknown Analyst

Brian MacArthur - UBS Investment Bank, Research Division

Oscar Cabrera - BofA Merrill Lynch, Research Division

Paretosh Misra - Morgan Stanley, Research Division

Justine Fisher - Goldman Sachs Group Inc., Research Division

Kuni M. Chen - CRT Capital Group LLC, Research Division

Richard Garchitorena - Crédit Suisse AG, Research Division

Michael F. Gambardella - JP Morgan Chase & Co, Research Division

Sal Tharani - Goldman Sachs Group Inc., Research Division

David Gagliano - Barclays Capital, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Copper & Gold Fourth Quarter and Year-End Earnings Conference Call. [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. Good morning. Welcome to the Freeport-McMoRan Copper & Gold Fourth Quarter 2011 Earnings Conference Call. Our results were released earlier this morning and a copy of the press release is available on our website at fcx.com. Today's conference call is being broadcast live on the Internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. As usual, we'll have several slides to supplement our comments this morning and they're also available on our webcast link at fcx.com. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today.

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

On the call today, Jim Bob Moffatt, our Chairman of the Board; Richard Adkerson, our Chief Executive Officer. We also have Dave Thornton and Mark Johnson here with us today. I'll start by briefly summarizing our financial results, and then turn the call over to Richard, who will be referring to the presentation materials on our website.

Today, FCX reported fourth quarter 2011 net income attributable to common stock of $640 million or $0.67 per share, compared with $1.5 billion or $1.63 per share for the fourth quarter of 2010. For the year 2011, FCX reported net income attributable to common stock of $4.6 billion or $4.78 per share, compared with $4.3 billion or $4.57 per share for the year 2010.

Our fourth quarter 2011 consolidated copper sales of 823 million pounds and gold sales of 133,000 ounces were lower than our original October 2011 estimates of 915 million pounds of copper and 305,000 ounces of gold and the fourth quarter 2010 sales of 941 million pounds of copper and 590,000 ounces of gold, primarily because of labor disruptions and the temporary suspension of milling operations at PT Freeport Indonesia as a result of damage to the concentrate and fuel pipelines. Our copper and gold sales were higher than the revised 2011 estimates of 800 million pounds of copper and 105,000 ounces of gold, primarily because of higher Grasberg production late in the year and timing of shipments, principally from North America. The estimated impact of the labor and pipeline disruptions net to PT-FI totaled 165 million pounds of copper and 170,000 ounces of gold for the fourth quarter of 2011, and for the year, totaled 235 million pounds of copper and 275,000 ounces of gold.

Our fourth quarter 2011 consolidated molybdenum sales were 19 million pounds. That was higher than our estimate in October of 18 million pounds and the year-ago fourth quarter sales of 17 million pounds.

As we've been reporting, PT-FI's milling operations were temporarily suspended, resulting from the damage to the concentrate and fuel pipelines resulting from civil unrest that occurred during the course of the strike. We reached financial terms of a new 2-year labor agreement in mid-December 2011, and the repairs to the pipelines are substantially complete. We've begun to ramp up production and are also working cooperatively with the government of Indonesia to address the security issues. Maintaining security is a requirement of returning to normal operations. We're currently mobilizing the workforce, and full operations are expected to be restored during the first quarter of 2012.

Our realized copper price during the fourth quarter was $3.42 per pound. That was below the fourth quarter of 2010 realized price of $4.18 per pound. And for gold, we realized approximately $1,656 per ounce in the fourth quarter of 2011, and that was 18% higher than the $1,398 per ounce realized in the fourth quarter of 2010. Our molybdenum price realization for the fourth quarter of 2011 averaged $15 per pound. That was lower than the year-ago average of $16.60 per pound.

As anticipated, our consolidated average unit net cash cost, net of by-product credits, averaged $1.57 per pound of copper in the fourth quarter of 2011. That was higher than the unit net cash cost of $0.53 in the fourth quarter of 2010, principally because of lower copper and gold volumes in Indonesia. Our net -- consolidated net unit cash cost for the fourth quarter included $116 million on a consolidated basis associated with signing bonuses and other costs related to new labor agreements in Indonesia and South America. We also had higher unit net cash costs from higher mining and higher input costs in North and South America.

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