Freeport-McMoRan Reports First-Quarter 2016 Results

PHOENIX PHOENIX--(BUSINESS WIRE)--Freeport-McMoRan Inc. (NYSE: FCX):

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  Net loss attributable to common stock totaled $4.2 billion,
  $3.35 per share, for first-quarter 2016. After adjusting for net
  charges totaling $4.0 billion, $3.19 per share, first-quarter 2016
  adjusted net loss attributable to common stock totaled $197 million,
  $0.16 per share.
  
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  Consolidated sales totaled 1.1 billion pounds of copper, 201
  thousand ounces of gold, 17 million pounds of molybdenum and 12.1
  million barrels of oil equivalents (MMBOE) for first-quarter 2016,
  compared with 960 million pounds of copper, 263 thousand ounces of
  gold, 23 million pounds of molybdenum and 12.5 MMBOE for first-quarter
  2015.
  
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  The Cerro Verde expansion project reached full production
  capacity in first-quarter 2016, and Cerro Verde is on track to produce
  over 1 billion pounds of copper for the year 2016.
  
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  Consolidated sales for the year 2016 (adjusted for the
  anticipated closing of the Morenci transaction in second-quarter 2016)
  are expected to approximate 5.0 billion pounds of copper, 1.85 million
  ounces of gold, 71 million pounds of molybdenum and 54.4 MMBOE,
  including 1.15 billion pounds of copper, 195 thousand ounces of gold,
  19 million pounds of molybdenum and 13.5 MMBOE for second-quarter 2016.
  
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  Average realized prices were $2.17 per pound for copper, $1,227
  per ounce for gold and $29.06 per barrel for oil for first-quarter
  2016.
  
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  Consolidated unit net cash costs averaged $1.38 per pound of
  copper for mining operations and $15.85 per barrel of oil equivalents
  (BOE) for oil and gas operations for first-quarter 2016. Consolidated
  unit net cash costs for the year 2016 are expected to average $1.05
  per pound of copper for mining operations and $15 per BOE for oil and
  gas operations.
  
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  Operating cash flows totaled $740 million (including
  $188 million in working capital sources and changes in other tax
  payments) for first-quarter 2016. Based on current sales volume and
  cost estimates and assuming average prices of $2.25 per pound for
  copper, $1,250 per ounce for gold, $5 per pound for molybdenum and $45
  per barrel for Brent crude oil for the remainder of 2016, operating
  cash flows for the year 2016 are expected to approximate $4.8 billion
  (including $0.8 billion in working capital sources and changes in
  other tax payments).
  
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  Capital expenditures totaled $982 million for first-quarter
  2016, consisting of $459 million for mining operations (including $350
  million for major projects) and $523 million for oil and gas
  operations. Capital expenditures are expected to approximate $3.3
  billion for the year 2016, consisting of $1.8 billion for mining
  operations (including $1.4 billion for major projects) and $1.5
  billion for oil and gas operations.
  
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  At March 31, 2016, consolidated debt totaled $20.8 billion
  and consolidated cash totaled $331 million. At March 31,
  2016, FCX had $3.0 billion available under its $3.5 billion credit
  facility.
  
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  During first-quarter 2016, FCX entered into agreements to sell an
  additional 13 percent ownership in Morenci and to sell an
  interest in the Timok exploration project in Serbia for aggregate
  consideration of $1.3 billion. In addition, in April 2016, FCX entered
  into an agreement to sell certain oil and gas royalty interests
  for $0.1 billion. These transactions are expected to close in
  second-quarter 2016.
  
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  FCX continues to advance discussions for the sale of certain
  interests in its mining and oil and gas assets to accelerate its
  debt reduction initiatives. FCX expects to achieve additional progress
  during second-quarter 2016.
  
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Freeport-McMoRan Inc. (NYSE: FCX) reported net losses attributable to

common stock of $4.2 billion, $3.35 per share, for first-quarter 2016,

compared with $2.5 billion, $2.38 per share, for first-quarter 2015.

FCX’s net losses attributable to common stock include net charges

totaling $4.0 billion, $3.19 per share, for first-quarter 2016 and $2.4

billion, $2.32 per share, for first-quarter 2015, primarily for the

reduction of the carrying value of oil and gas properties, idle rig

costs and other items described below.

Richard C. Adkerson, President and Chief Executive Officer, said,

"During the first quarter, we remained focused on executing our plans to

strengthen FCX’s balance sheet and to position the Company to enhance

shareholder value in a challenging market environment. Our global team

is successfully executing our plans, managing production efficiently and

reducing costs and capital spending. We also achieved progress on our

asset divestment program with $1.4 billion in announced transactions

since the beginning of the year and expect to report additional progress

in the second quarter. We believe the quality and scale of our assets

provide opportunities for significant debt reduction while retaining a

substantial business with attractive low-cost, long-lived reserves and

resources that will enable our shareholders to benefit from improved

conditions in the future."

SUMMARY FINANCIAL DATA

DEBT REDUCTION INITIATIVES

During first-quarter 2016, FCX announced plans to strengthen its balance

sheet and accelerate its debt reduction initiatives. In addition to

reducing costs and capital expenditures to maximize cash flows from its

global business, FCX announced plans to sell assets to repay debt. FCX’s

large portfolio of mining and oil and gas assets provide opportunities

to generate significant proceeds while retaining a strong competitive

position within the global copper industry and a high-quality portfolio

of long-lived assets positioned to generate value as market conditions

improve. FCX is advancing discussions on additional transactions and

expects to achieve additional progress during second-quarter 2016.

During first-quarter 2016, FCX conducted a formal process involving

multiple third-party oil and gas industry and financial participants to

evaluate alternatives for the oil and gas business. Further weakening in

oil and gas prices and negative credit and financing market conditions

during first-quarter 2016 had a significant unfavorable impact on the

process. While the process did not identify a buyer for the entire oil

and gas business, a number of parties have interest in select assets,

and FCX continues to engage in discussions with parties interested in

potential asset or joint venture transactions.

In the interim, FCX is taking immediate steps to reduce oil and gas

costs further. In April 2016, FCX announced a new management structure

and is instituting an approximate 25 percent oil and gas workforce

reduction. The newly structured oil and gas management team is actively

engaged in managing costs and developing plans to preserve and enhance

asset values. FCX expects to record a charge of approximately $40

million in second-quarter 2016 associated with workforce reductions and

other restructuring costs.

SUMMARY OPERATING DATA

Consolidated Sales Volumes

First-quarter 2016 consolidated copper sales of 1.1 billion

pounds approximated the January 2016 estimate and were higher than

first-quarter 2015 sales of 960 million pounds, primarily reflecting

higher volumes from Cerro Verde.

First-quarter 2016 consolidated gold sales of 201 thousand ounces

approximated the January 2016 estimate, but were lower than

first-quarter 2015 sales of 263 thousand ounces, primarily reflecting

lower ore grades and recoveries.

First-quarter 2016 consolidated molybdenum sales of 17 million

pounds were lower than the January 2016 estimate of 19 million pounds

and first-quarter 2015 sales of 23 million pounds, primarily reflecting

lower demand and reduced volumes from the Henderson molybdenum mine.

First-quarter 2016 sales from oil and gas operations of 12.1 MMBOE,

including 8.3 million barrels (MMBbls) of crude oil, 19.6 billion

cubic feet (Bcf) of natural gas and 0.6 MMBbls of natural gas

liquids (NGLs), were slightly lower than first-quarter 2015 sales of

12.5 MMBOE and the January 2016 estimate of 12.4 MMBOE.

Consolidated sales for the year 2016 are expected to approximate 5.0

billion pounds of copper, 1.85 million ounces of gold, 71 million pounds

of molybdenum and 54.4 MMBOE, including 1.15 billion pounds of copper,

195 thousand ounces of gold, 19 million pounds of molybdenum and 13.5

MMBOE for second-quarter 2016. Projected consolidated copper sales have

been adjusted for the anticipated closing of the Morenci transaction in

second-quarter 2016. Anticipated higher grades from Grasberg in the

second half of 2016 are expected to result in approximately 55 percent

of consolidated copper sales and 80 percent of consolidated gold sales

to occur in the second half of the year.

Consolidated Unit Costs

Mining Unit Net Cash Costs. Consolidated average unit net cash

costs (net of by-product credits) for FCX's copper mines of $1.38 per

pound of copper in first-quarter 2016 were lower than unit net cash

costs of $1.64 per pound in first-quarter 2015, primarily reflecting

higher copper sales volumes in South America and the impact of ongoing

cost reduction initiatives.

Assuming average prices of $1,250 per ounce of gold and $5 per pound of

molybdenum for the remainder of 2016 and achievement of current sales

volume and cost estimates, consolidated unit net cash costs (net of

by-product credits) for copper mines are expected to average $1.05 per

pound of copper for the year 2016. The impact of price changes for the

remainder of 2016 on consolidated unit net cash costs would approximate

$0.015 per pound for each $50 per ounce change in the average price of

gold and $0.01 per pound for each $2 per pound change in the average

price of molybdenum. Quarterly unit net cash costs vary with

fluctuations in sales volumes and realized prices primarily for gold and

molybdenum.

Oil and Gas Cash Production Costs per BOE. Cash production costs

for oil and gas operations of $15.85 per BOE in first-quarter 2016 were

lower than cash production costs of $20.26 per BOE in first-quarter

2015, primarily reflecting increased production from the Deepwater Gulf

of Mexico (GOM) and ongoing cost reduction efforts.

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Based on current sales volume and cost estimates, cash production costs

are expected to approximate $15 per BOE for the year 2016.

MINING OPERATIONS

North America Copper Mines. FCX operates seven open-pit copper

mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in

Arizona, and Chino and Tyrone in New Mexico. In addition to copper,

molybdenum concentrate and silver are also produced by certain of FCX's

North America copper mines.

All of the North America mining operations are wholly owned, except for

Morenci. FCX records its 85 percent joint venture interest in Morenci

using the proportionate consolidation method. In February 2016, FCX

entered into a definitive agreement to sell an additional 13 percent

joint venture interest in Morenci, which is expected to close in

second-quarter 2016.

Operating and Development Activities. FCX has significant

undeveloped reserves and resources in North America and a portfolio of

long-term development projects. In the near term, FCX is deferring

development of new projects as a result of current market conditions.

Future investments will be undertaken based on the results of economic

and technical feasibility studies, and market conditions.

During 2015, FCX's revised plans for its North America copper mines to

incorporate reductions in mining rates to reduce operating and capital

costs, including the suspension of mining operations at the Miami mine,

a transitioned suspension of production at the Sierrita mine, a 50

percent reduction in mining rates at the Tyrone mine and adjustments to

mining rates at other North America mines. The revised plans at each of

the operations incorporate the impacts of lower energy, acid and other

consumables, reduced labor costs and a significant reduction in capital

spending plans. These plans continue to be reviewed and additional

adjustments will be made as market conditions warrant.

Operating Data. Following is a summary of consolidated operating

data for the North America copper mines for the first quarters of 2016

and 2015:

North America's consolidated copper sales volumes of 503 million pounds

in first-quarter 2016 were higher than first-quarter 2015 sales of 472

million pounds, primarily reflecting higher ore grades at Morenci and

Safford. North America copper sales (adjusted for the anticipated

closing of the Morenci transaction) are estimated to approximate 1.75

billion pounds for the year 2016, compared with 2.0 billion pounds in

2015.

Average unit net cash costs (net of by-product credits) for the North

America copper mines of $1.42 per pound of copper in first-quarter 2016

were lower than the unit net cash costs of $1.76 per pound in

first-quarter 2015, primarily reflecting the impact of cost reduction

initiatives and higher sales volumes, partly offset by lower by-product

credits.

Average unit net cash costs (net of by-product credits) for the North

America copper mines are expected to approximate $1.45 per pound of

copper for the year 2016, based on current sales volume and cost

estimates and assuming an average molybdenum price of $5 per pound for

the remainder of 2016. North America's average unit net cash costs would

change by approximately $0.013 per pound for each $2 per pound change in

the average price of molybdenum.

South America Mining. FCX operates two copper mines in South

America - Cerro Verde in Peru (in which FCX owns a 53.56 percent

interest) and El Abra in Chile (in which FCX owns a 51 percent

interest). These operations are consolidated in FCX's financial

statements. In addition to copper, the Cerro Verde mine produces

molybdenum concentrate and silver.

Operating and Development Activities. In September 2015, the

Cerro Verde expansion project commenced operations and achieved capacity

operating rates during first-quarter 2016. Cerro Verde's expanded

operations benefit from its large-scale, long-lived reserves and cost

efficiencies. The project expanded the concentrator facilities from

120,000 metric tons of ore per day to 360,000 metric tons of ore per day

and is on track to provide incremental annual production of

approximately 600 million pounds of copper and 15 million pounds of

molybdenum.

During 2015, FCX revised plans for its South America copper mines,

principally to reflect adjustments to the mine plan at El Abra to reduce

mining and stacking rates by approximately 50 percent to achieve lower

operating and labor costs, defer capital expenditures and extend the

life of the existing operations.

Operating Data. Following is a summary of consolidated operating

data for the South America mining operations for the first quarters of

2016 and 2015:

South America's consolidated copper sales volumes of 323 million pounds

in first-quarter 2016 were higher than first-quarter 2015 sales of 200

million pounds, primarily reflecting higher mining and milling rates at

Cerro Verde. Sales from South America mining are expected to approximate

1.37 billion pounds of copper for the year 2016, compared with 871

million pounds of copper in 2015.

Average unit net cash costs (net of by-product credits) for South

America mining of $1.40 per pound of copper in first-quarter 2016 were

lower than unit net cash costs of $1.84 per pound in first-quarter 2015,

primarily reflecting higher copper sales volumes associated with the

Cerro Verde expansion. Average unit net cash costs (net of by-product

credits) for South America mining are expected to approximate $1.43 per

pound of copper for the year 2016, based on current sales volume and

cost estimates and assuming average prices of $5 per pound of molybdenum

for the remainder of 2016.

Indonesia Mining. Through its 90.64 percent owned and

consolidated subsidiary PT-FI, FCX's assets include one of the world's

largest copper and gold deposits at the Grasberg minerals district in

Papua, Indonesia.

Contacts

Freeport-McMoRan Inc.

Financial Contacts:

Kathleen L. Quirk,

602-366-8016

or

David P. Joint, 504-582-4203

or

Media

Contact:

Eric E. Kinneberg, 602-366-7994