Freeport-mcmoran, Inc. · NYSE:FCX
Freeport-mcmoran — Freeport-McMoRan Copper & Gold — Q4 2005 Earnings Presentation
28 slides from Freeport-mcmoran's earnings presentation, Jan 17, 2006
Slide 1: 4th Qtr/Year-end 2005 Earnings Conference Call
th Qtr/Year-end 2005 4th Earnings Conference Call J. R. Moffett R. C. Adkerson Chairman of the Board President and Chief Executive Officer K. L. Quirk M. J. Johnson Senior Vice President, Senior Vice President and Chief Financial Officer Chief Operating Officer January 17, 2006
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains forward-looking statements in which we discuss factors we believe may affect our performance in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding projected ore grades and milling rates,
Slide 3: 2005 Highlights
2005 Highlights ¾ Multiple Operating and Financial Records ¾ Sales Stats – PT-FI Share 4Q05 2005 Volumes Realization Volumes Realization Copper 468 mm lbs $2.02/lb 1.46 bl lbs $1.85/lb Gold 1.1 mm ozs $494/oz 2.8 mm ozs $456/oz ¾ Operating Cash Flows of $670 million in 4Q05, $1.55 Billion for Year ¾
Slide 4: Record Metal Production
Record Metal Production 4Q05 Quarterly Record In 4Q, largerFlotation mining Aggregate Metal areas in Pushback 6S allowed for better 555 million lbs of copper productivities and 1.36 million ozs of gold record metal production Production Records were 6% Pushback 6S and 24% higher than the previous re
Slide 5: Long Lived Reserves
Long Lived Reserves Copper Gold (Billion Lbs) (Million Ozs) 80 90 70 80 70 60 60 50 50 40 40.3 43.9 40 30 Grasberg Grasberg 30 Discovery Discovery 20 (1988) 20 (1988) 10 10 0 0 1973 1983 1993 2005 1973 1983 1993 2005 Reserves Plus Production* Reserves Plus Production* Total Copper Reserves Total Gol
Slide 6: Reserves
Reserves Aggregate & Net to PT-FI 2005 Reserve Roll Forward Aggregate PT-FI’s Share Cu Au Cu Au (billion lbs) (million ozs) (billion lbs) (million ozs) Reserves @ 12/31/04 56.2 61.0 40.5 46.5 Additions/changes* 2.1 0.4 1.3 0.2 Production (1.7) (3.4) (1.5) (2.8) Net Change 0.4 (3.0) (0.2) (2.6) Reser
Slide 7: FCX Operating Cash Flows and Capital Expenditures
FCX Operating Cash Flows and Capital Expenditures ($ in millions) $1,600 Operating Cash Flows Capital Expenditures $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 $1.02/ 94¢/ 73¢/ 75¢/ 82¢/ 69¢/ 71¢/ 82¢/ $1.37/ $1.85/ $391 $346 $291 $277 $276 $269 $312
Slide 8: Positive Markets
LME Copper Price $ per oz. $200 $250 $300 $350 $400 $450 $500 $550 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 Dec-98 Jan-99 Mar-99 May-99 Jul-99 Oct-99 ECB Nov-99 Feb-00 Mar-00 Jul-00 Jul-00 Nov-00 Nov-00 Mar-01 Apr-01 Jul-01 Aug-01 Announcement Announcements Producer Hedging Nov-01 Jan-02 Mar-
Slide 9: Grasberg Open Pit
Grasberg Open Pit 4Q05 8N • In 2005, Pushback 6S was our 6N primary source of high-grade ore. 6S • Pushbacks 6N & 6E 6E will provide the 8S 7S majority of the ore from the Grasberg in 2006. N 9 9 9
Slide 10: Updated Mine Plans, 2006-2010
Updated Mine Plans, 2006-2010 Status Overview • Updated plans incorporate 2005 Grasberg Pit results & revised Grasberg mining Year-end 2005 rate estimates Plan View • As a result of lower-than-targeted 8N mining rates, high-grade ore from “6 North” previously expected to be mined in late 2006 deferr
Slide 11: Mining Sequence in 2006
Mining Sequence in 2006 Current v. Previous Plan Copper Copper Equivalent Equivalent Cross Cross Section Section A B 6N provides 75% of the copper & 50% of the gold from the Grasberg Pit in 2006 8N 7S End 2005 Grasberg Plan View 6N B 6E Current Previous A Deferred from late 2006 to early 2007 Legend
Slide 12: Mining Sequence in 2007
Mining Sequence in 2007 Copper Equivalent Cross Section A B 6N & 7S are the Primary Ore Pushbacks in 2007 8N 7S Grasberg Plan View B End 2006 6N A 2007 Legend: 0.50 – 0.99 % Eq Cu 1.00 – 1.99 % Eq Cu 2.00 – 2.99 % Eq Cu > 3.00 % Eq Cu 12 12 12
Slide 13: Mining Sequence in 2008
Mining Sequence in 2008 Copper Equivalent Cross Section A B 7S is the Primary Ore Pushback in 2008 8N 8S Grasberg Plan View B 7S End 2007 A 2008 Legend: 0.50 – 0.99 % Eq Cu 1.00 – 1.99 % Eq Cu 2.00 – 2.99 % Eq Cu > 3.00 % Eq Cu 13 13 13
Slide 14: Mining Sequence in 2009
Mining Sequence in 2009 Copper Equivalent Cross Section A B 8S is the Primary Ore Pushback in 2009 8N Grasberg Plan View B 8S End 2008 7S A 2009 Legend: 0.50 – 0.99 % Eq Cu 1.00 – 1.99 % Eq Cu 2.00 – 2.99 % Eq Cu > 3.00 % Eq Cu 14 14 14
Slide 15: Mining Sequence in 2010
Mining Sequence in 2010 Copper Equivalent Cross Section A B 8N is the Primary Ore Pushback in 2010 8N Grasberg Plan View B End 2009 8S 2010 A Legend: 0.50 – 0.99 % Eq Cu 1.00 – 1.99 % Eq Cu 2.00 – 2.99 % Eq Cu > 3.00 % Eq Cu 15 15 15
Slide 16: PT-FI Mine Plan
PT-FI Mine Plan PT-FI’s Share of Metal Sales, 2004-2010e Copper, billion lbs Gold, million ozs 2006e – 2010e PT-FI Share 2006e – 2010e PT-FI Share Total: 6.5 billion lbs Total: 9.6 million ozs Annual Average: 1.3 billion lbs Annual Average: 1.9 million ozs 2.8 2.4 2.0 1.9 1.7 1.6 1.4 1.46 1.5 1.3 1.
Slide 17: 2006 Outlook
2006 Outlook Quarterly Payable Metal Sales PT-FI’s share of Copper PT-FI’s share of Gold 1.3 billion pounds 1.7 million ounces 600 500 600 450 400 450 Ounces in thousands 375 375 Pounds in millions 300 300 300 340 240 300 200 150 100 42% 58% 42% 58% 0 0 1Q06 2Q06 3Q06 4Q06 1Q06 2Q06 3Q06 4Q06 Estima
Slide 18: Unit Production Costs
Unit Production Costs (per pound of copper) 9 mos. 4th Qtr. (1) 2005 2005 2005 2006e Cash Unit Costs Site Production & Delivery 67¢ 62¢ 65¢ 86¢ (2) Royalties 6 10 7 6 Treatment Charges 23 27 24 32 Gold/Silver Credits (76) (119) (89) (73) Net Cash Unit Costs 20¢ (20¢) 7¢ 51¢ (1) Estimate based on 1.3
Slide 19: FCX Capital Expenditures
FCX Capital Expenditures ($ in millions) AC & Other 2006 – 2010 Annual Average ~ $200 Million PT-FI Long-term $250 Projects* $215 $230 $230 $185 $190 $190 $170 $170 $175 $175 $143 $160 $160 $165 $165 $129 $129 $115 $100 $100 $75 $80 2005 2006e 2007e 2008e 2009e 2010e e = estimate. Amounts are projec
Slide 20: Common Infrastructure
Common Infrastructure Access to Underground Reserves 2Q 2007 Grasberg Complete tunnel to Grasberg BC Grasberg UG Begin mine development & other facilities Pit Grasberg Grasberg Block Block Kucing Liar Cave Cave “Spur” “Spur” Kucing Kucing Liar Liar Amole Amole MLZ “Spur” “Spur” Deep MLZ ESZ DOZ N Bi
Slide 21: 2006 Exploration Program
2006 Exploration Program Tw Kke ¾ Block A Focus: Tk Tk Tf Kkel Ti 50 Kke North Grasberg Kkeh Tk Ts 45 Kkel 25 Tw 45 West Grasberg Int. Tgv Qal Extensions of the Deep Tf Qal Tk Idenberg Ti GRASBERG Ts Deep Grasberg &W. Grasberg Ts Tk Tf Grasberg and Kucing Liar Tw Ti Tgd Tgm Qal Kucing Liar Lembah
Slide 22: Significant Debt Reduction
Significant Debt Reduction ($ in billions) FCX Ending Net Debt (1) $3.0 $2.9 3.75x EBITDA $2.5 $2.0 Over 80% Decrease $1.5 $1.0 $0.5 $0.5 0.2x EBITDA 7% Conv. Notes Convert Price: $30.87 per share $0.0 2000 2005 (1) Debt and commodity preferreds net of cash and restricted investments. Includes $253
Slide 23: FCX Debt Maturities
FCX Debt Maturities ($ in millions) $1,000 December December 31, 31, 2005 2005 Total Total Debt Debt $1, $1, 256 256 Less Less Cash Cash ($764) ($764) $800 Total Total After After Cash Cash $$ 492 492 $600 $400 $327 $340 $294 $253 7% Conv. Notes $200 10⅛% 6⅞% FCX Senior Convert Senior PRC(1) (1) Not
Slide 24: FCX Operating Cash Flows at Varying Copper & Gold Prices
FCX Operating Cash Flows (Annual Avg. 2006-2008e) at Varying Copper & Gold Prices ($ in millions, except copper and gold prices) Payable Payable Sales* Sales* $1,400 Copper Gold 2006 1.3 1.7 $1,200 2007 1.2 2.0 2008 1.5 2.4 2006-2008e Avg. $1,000 Operating Cash Flows $800 ’06-’07e $600 Avg. ’06-’07e
Slide 25: Commodity Price Sensitivities
Commodity Price Sensitivities FCX Earnings & Cash Flow Annual Impacts +$25/oz 11¢ 11¢ Gold $21 +10¢/lb 35¢ 35¢ Copper $65 Impact Per Share* (¢/share) Impact ($ millions) * EPS based on 187 million basic shares outstanding. Note: Assumes projected 2006 annual sales of 1.3 billion lbs. copper and 1.7
Slide 26: Financial Policy
Financial Policy ¾ Maintain Strong Balance Sheet and Financial Flexibility ¾ Maintain Regular Quarterly Dividend That Can Be Sustained Within Broad Range of Commodity Prices ¾ In Periods of High Commodity Prices, Supplement Regular Dividend With Special Dividends/Share Purchases 26
Slide 27: Historical Shareholder Returns
Historical Shareholder Returns ¾ $1.5 Billion in FCX Open Market Purchases Since 1995 Spin-off 80 Million Shares in Open Market Purchases at an Average Price of $18.66 per Share ¾ $2.0 Billion in Common Stock Dividends Since 1988 $693 Million Since 2003 $3.5 Billion in Total Long Track Record fo
Slide 28: Summary
Summary ¾ Strong Cash Flow Generator ¾ Long-lived Reserves ¾ Unhedged Exposure to Copper & Gold Markets ¾ Improved Balance Sheet/Enhanced Shareholder Returns ¾ Attractive Valuation 28
Freeport-McMoRan Copper & Gold — Q4 2005 Earnings Presentation on 6ix