Freeport-McMoran, Inc. (FCX)

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Freeport-McMoRan Copper & Gold (FCX)

Q3 2010 Earnings Call

October 21, 2010 10:00 am ET

Executives

Conger Harry - President of Americas Division

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

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

James Moffett - Chairman of the Board

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

Analysts

Jorge Beristain - Deutsche Bank AG

Aleem Ladak - Desjardins

Peter Faulkner

Sanil Daptardar - Centennial Asset Management

David Gagliano - Crédit Suisse AG

Paul Forward - Stifel, Nicolaus & Co., Inc.

Brian Yu - Citigroup Inc

Sal Tharani - Goldman Sachs Group Inc.

Michael Gambardella - JP Morgan Chase & Co

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Copper & Gold Third Quarter 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 Quirk

Thank you, and good morning, everyone. Welcome to the Freeport-McMoRan Copper & Gold Inc. Third Quarter 2010 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 conference call. As usual, we have several slides to supplement our comments this morning, and they are also available on our website 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 is available later today on our website.

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 will include forward-looking statements. Please refer 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 are Chairman of the Board, Jim Bob Moffett; Richard Adkerson, our President and Chief Executive Officer. We also have Mark Johnson here, as well as Red Conger. I'll start by briefly summarizing our financial results and then turn the call over to Richard who'll be reviewing our presentation materials including our recent performance and outlook. After our formal remarks, we'll open up the call for questions.

Today, FCX reported excellent third quarter results, reflecting strong production and cost performance. Net income attributable to common stock totaled $1.2 billion or $2.49 per share for the third quarter of 2010, compared with net income of $925 million or $2.07 per share for the year-ago third quarter. Our third quarter consolidated copper sales of 1.1 billion pounds were higher than our previous estimate of 970 million pounds and the third quarter 2009 copper sales of 1 billion pounds.

The variance to our previous estimates primarily reflects favorable production performance at our Grasberg mine in Indonesia and the timing of shipments as we advanced some scheduled sales from the fourth quarter into the third quarter. The variance to the 2009 period primarily reflects higher copper ore grades and mill throughput in South America, a higher share of Grasberg volumes and a higher contribution from our Tenke Fungurume mine in Africa. This was partly offset by lower ore grades in North America.

Our third quarter 2010 consolidated gold sales of 497,000 ounces were higher than the July 2010 estimates of 410,000 ounces, but as anticipated were significantly lower than third quarter 2009 sales of 706,000 ounces. The variance to our previous estimate primarily reflects favorable production performance at Grasberg.

Third quarter 2010 consolidated molybdenum sales of 17 million pounds were higher than our estimate of 15 million pounds and the third quarter 2009 sales level of 16 million pounds because of improved demand in the chemicals sector for molybdenum.

Our third quarter results included positive pricing of our key commodities: Copper, gold and molybdenum. Our recorded average price for copper was $3.50 per pound in the third quarter, which was $0.75 higher than last year's third quarter. For gold, our realized price was $1,266 per ounce compared with $987 per ounce in the third quarter 2009, and our realized price of molybdenum of just over $16 per pound was 15% higher than last year's third quarter.

As anticipated, our consolidated unit site production costs of $1.38 per pound were higher than the third quarter of 2009, which was $1.15 per pound. Our third quarter 2010 unit net cash costs, net of by-product credits averaged $0.82 per pound in the third quarter of 2010 compared with $0.50 per pound in the year-ago period. The higher unit net cash cost in the 2010 period primarily reflects increased input costs and lower by-product gold credits.

Our operating cash flows in the third quarter totaled $1.3 billion. That was net of $636 million in working capital requirements primarily related to an increase in receivables during the quarter. Our operating cash flows were significantly above our capital expenditures of $350 million. Our operating cash flows for the first nine months totaled $4.2 billion, and capital expenditures were just under $900 million. We ended the quarter in a very strong financial position. At September 30, our total debt approximated $4.8 billion and consolidated cash approximated $3.7 billion.

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