Freeport-McMoran, Inc. (FCX)

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Freeport-McMoRan Copper & Gold Inc. (FCX)

Q3 2012 Earnings Conference Call

October 22, 2012 10:00 AM ET

Executives

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

Richard C. Adkerson – President and Chief Executive Officer

Red Conger – President, Freeport-McMoRan Americas

David H. Thornton – President, Climax Molybdenum Company

Mark J. Johnson – SVP, Chief Operating Officer - Indonesian Operations

James R. Moffett – Chairman

Analysts

Sal Tharani - Goldman Sachs

Brian Yu – Citigroup Inc.

Michael F. Gambardella - JP Morgan Chase & Co.

Anthony Rizzuto - Dahlman Rose & Co.

Paretosh Misra - Morgan Stanley

Oscar Cabrera - Bank of America Merrill Lynch

Jorge Beristain - Deutsche Bank

Richard Garchitorena - Credit Suisse

John Tumazos - John Tumazos Very Independent Research, LLC

Carly Mattson - Goldman Sachs

Wayne Atwell - Global Hunter Securities

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Copper & Gold Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later, we will conduct an interactive 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. Good morning. Welcome to the Freeport-McMoRan Copper & Gold third quarter 2012 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.

Our conference call today 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. We also have several slides to supplement our comments this morning, and we’ll be referring to the slides during the call. They are 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 is our Chairman Jim Bob Moffett; our President and Chief Executive Officer, Richard Adkerson; Red Conger is here as well as Mark Johnson. I'll briefly summarize the financial results and then turn the call over to Richard who will be going through the slide materials that we've prepared. As usual, after our prepared remarks, we'll open the call up for questions.

Today, FCX reported third quarter 2012 net income attributable to common stock of $824 million; that was $0.86 per share, compared with $1.1 billion or $1.10 per share for the third quarter of 2011. Our third quarter 2012 net income included credits for adjustments to Cerro Verde deferred income taxes and to FCX's environmental obligations and related litigation reserves. Those two items totaled $168 million to net income or $0.18 per share. We had net charges in the year ago period for non-recurring items totaling $73 million or $0.07 per share.

We also increased sales during the quarter to intercompany smelters. We deferred recognizing profits on these sales until the final sales occurred to third parties, changes in these deferrals attributable to the variability in intercompany volumes resulted in reductions to our net income during the third quarter of 2012 that amounted to $34 million or $0.04 per share in the third quarter of 2012.

Our volumes for copper, our consolidated copper sales of £922 million, those were higher than our July 2012 estimate of £885 million. We had higher production from North America and Africa and we also had advanced timing of sales in South America. The third quarter consolidated gold sales of 202,000 ounces were lower than our previous estimate of 225,000 ounces reflecting changes to the mine plans at the Grasberg mine in Indonesia which delayed access to higher grade materials and a slower than expected ramp-up at the underground DOZ mine during the quarter.

Third quarter as anticipated sales were lower than the year ago level of £947 million of copper and 409,000 ounces of gold primarily reflecting lower ore grades in Indonesia offset partly by increased sales in North America and Africa.

Our molybdenum sales during the third quarter of £21 million were slightly above our prior estimate of £20 million in the third quarter 2011 sales of £19 million.

As we look to the year, we expect our copper sales to total £3.6 billion for the year 2012, 1 million ounces of gold and roughly £82 million of molybdenum. We expect that number to be growing as we look forward to 2013 going to £4.3 billion of copper, 1.4 million ounces of gold and £90 million of molybdenum. And if you look beyond 2013, you'll see that we have a stronger outlook for growing volumes.

Our realized copper price in the third quarter was $3.64 per pound that compared to $3.60 per pound in the third quarter of 2011. Our gold price realizations averaged $1,728 per ounce in the third quarter of 2012 compared to $1,693 per ounce in the year ago quarter.

Molybdenum prices were below the year ago levels averaging $13.62 per pound in the third quarter of 2012 compared to $16.34 in the year ago period. Our consolidated average unit net cash cost net of by-product credits of $1.62 per pound in third quarter of 2012 were in line with our previous estimates, but higher than unit net cash costs of $0.80 per pound in the third quarter of 2011, primarily because of lower volumes in Indonesia. As you’ll see and as Richard will be talking about, we expect our unit net cash costs to improve as we access parked ore grades in the second half of 2013 in Indonesia and we get the benefit of additional growth outside of Indonesia.

Our operating cash flows during the quarter, which were net of $765 million in working capital uses, totaled $526 million and capital expenditures for the quarter, which included spending on our major projects that are underway, totaled $971 million for the third quarter of 2012. We ended in a strong financial position with consolidated cash of $3.7 billion, which exceeded our total debt of roughly $3.5 billion. The common stock currently outstanding totals 949 million shares.

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