Freeport-McMoran, Inc. (FCX)

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Freeport-McMoRan Copper & Gold (FCX)

Q1 2011 Earnings Call

April 20, 2011 10:00 am ET

Executives

Conger Harry - President of Americas Division

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

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

David Thornton - President of Climax Molybdenum

Analysts

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

John Tumazos - Independent Research

Anthony Rizzuto - Dahlman Rose & Company, LLC

Charles Bradford - Bradford Research

John Redstone - Desjardins Securities Inc.

Paretosh Misra

Gary Lampard - Canaccord Genuity

Unknown Analyst -

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 First 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 First 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. Our conference call today is being broadcast live on the Internet and anyone may listen to the call by accessing our website home page and clicking on the webcast link for the conference call. As usual, we have several slides to supplement our comments this morning. And we'll be referring to the slides during the call. They are also accessible using the webcast link 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 will be available on our website later today.

Before we begin our comments, I'd like to remind everyone that today's 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 are Jim Bob Moffett, our Chairman of the Board; Richard Adkerson, President and Chief Executive Officer. And we also have several of our senior operating team here today: Red Conger, who runs the Americas operations; Mark Johnson [ph], who runs Indonesia; and Dave Thornton, who runs our Molybdenum business. I'll start by briefly summarizing our financial results and then turn the call over to Richard, who'll be going through those presentation materials. As usual, after our remarks, we'll open up the call for questions.

Today, we reported first quarter 2011 net income attributable to common stock of $1.5 billion or $1.57 per share compared to net income of $897 million, $1 per share for the first quarter of 2010. The 2010 historical earnings per share amount has been adjusted to reflect the 2-for-1 stock split that took effect on February 1 of 2011.

Our sales of copper in the first quarter were 926 million pounds. Those were higher than our previous estimate in January of 840 million pounds, but slightly lower than last year's first quarter of 960 million pounds. In the first quarter, we had a favorable variance to our production performance primarily in Indonesia, where we had access to higher grade ore than we previously expected that we advanced volumes into the first quarter that we previously expected to be mined in future periods.

We also had improved production performance in North and South America. In the first quarter, our gold sales of 480,000 ounces were higher than our January estimate of 325,000 ounces, again because of mining higher grade ore in Indonesia. And those sales in the first quarter approximated the level of the prior-year period.

Our first quarter 2011 molybdenum sales of 20 million pounds were higher than our prior estimate of 17 million pounds in the year-ago period, primarily reflecting improved demand in the chemical and metallurgical sectors. First quarter results included positive pricing of all of our commodities: copper, gold and molybdenum. Our realized price for copper in the first quarter was $4.31 per pound. That was higher than last year's $3.42 per pound. Our gold realization of about $1,400 per ounce compared favorably with last year's first quarter, $1,110 per ounce. First quarter molybdenum price of $18 per pound was about 20% higher than the year-ago period.

As anticipated, our consolidated unit site production and delivery costs of $1.61 per pound in the first quarter of 2011 were higher than the year-ago period of $1.35 per pound of copper, reflecting higher input costs including energy, materials and labor. We also -- Our net unit costs, net of credit, were lower though than the first quarter of the prior year. We averaged $0.79 per pound compared with $0.82 per pound in the prior-year period. That was because of higher gold and molybdenum by-product credits in the current year period.

We had strong operating cash flows during the quarter which totaled $2.4 billion, those were significantly above our capital expenditures, which totaled $505 million during the quarter. We ended the quarter at March 31 with total debt of $4.8 billion. But after taking into account the redemption, $1.1 billion redemption of our 8.25% senior notes that we've made on April 1, our total debt approximated $3.7 billion. And our consolidated cash exceeded that amount and approximated $4.1 billion.

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