Freeport-McMoRan, Inc. · NYSE:FCX
Freeport-McMoRan — Freeport-McMoRan Copper & Gold — Investor Presentation (2002)
34 slides from Freeport-McMoRan's investor presentation, 2002
Slide 1: 2001 World Copper Smelter and Refinery Cash Costs
Cents Per Pound of Copper 0 5 10 15 20 25 30 0 Dias/D’Avila PT Smelting Norddeutsche East Guixi 1,000 Onsan Atlantic Copper Ilo 2,000 La Caridad Chuquicamata 3,000 Ronnskar Refinery Cash Costs Saganoseki 4,000 Glogow I Miami Cumulative Smelter Capacity (000 Metric Tons) Tamano Toyo 5,000 2001 World
Slide 2: PT-FI Concentrate Sales
PT-FI Concentrate Sales Atlantic Atlantic Copper Copper Others Others 25% 25% 50% 50% PT PT Smelting Smelting 25% 25% 2002e 2002e Sales: Sales: 2.9 2.9 million million metric metric tons tons 87
Slide 3: PT-FI Sales Distribution
PT-FI Sales Distribution Sales (mts conc) 2000 2001 Asia 1,731 68% 1,529 63% Spain 564 22% 573 24% Other 236 10% 327 13% Total 2,531 100% 2,429 100% Finland Sweden Germany Canada Romania U.S.A. Spain Korea Bulgaria Japan Mexico China India Philippines Gresik Indonesia Indonesia Brazil Australia Braz
Slide 4: Top Suppliers of Custom Concentrate
Top 10 Suppliers of Custom Concentrate 2002 Estimate 3,500 DMT DMT Conc. Conc. MT MT Cu* Cu* 000’s 000’s 000’s 000’s 3,000 2,870 Top 10 Custom Mines 10,978 3,571 Other 57 Custom Mines 4,339 1,234 Total Custom Supply 15,317 4,805 2,500 2,000 MT (000) 1,618 1,500 1,150 1,014 1,000 870 870 MT MT 844 75
Slide 5: TC/RC Markets
TC/RC Markets Industry Treatment and Refining Charges - 31% Cu (L-T Contract includes PP) 30 25 Cents per Pound 20 15 10 5 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 Long-Term Contracts Spot Market 90
Slide 6: Impact of 1¢ Increase in TC/RC's
Impact of 1¢ Increase in TC/RC’s ($ in millions) $6 $1 -$14 -$10 -$5 PT-FI Excl. Sales to After Tax Atlantic FCX Pre-Tax PT Smelting Net to FCX Copper Consolidated Under Floor Price (based on annual PT-FI sales of approximately 1.4 billion pounds of copper) 91
Slide 7: PT-FI Mine Plan Projections
PT-FI Mine Plan Projections Aggregate 100% Metal Sales, 2002 - 2007e Exploration will drive the mine plan. 3.3 2.9 2.9 2.9 2.8 2.6 2.4 2.3 2.4 2.3 2.2 1.8 2.0 1.7 1.6 1.6 1.5 1.5 1.5 1.4 1.4 1.4 1.3 1.3 2002e 2003e 2004e 2005e 2006e 2007e Copper, billion lbs Gold, million ozs Net to PT-FI e = estima
Slide 8: Net Cash Production Costs at Varying Gold Prices
Net Cash Production Costs at Varying Gold Prices (¢ per payable pound) 15¢ 12¢ 9¢ 6¢ 2¢ -5¢ $260 $280 $300 $325 $350 $400 Estimates based on sales of 1.5 billion pounds copper and 2.25 million ounces gold. See Cautionary Statement. 93
Slide 9: FCX Estimated Average Annual EBITDA at Various Commodity Prices
FCX FCX Estimated Estimated Average Average Annual Annual EBITDA EBITDA ** FCX EBITDA* At Various Commodity Prices ($ in millions) $1,600 $1,400 $1,200 $1,000 $800 $600 $400 2001 2002e $275 $325 $375 $275 $325 $375 $275 $325 $375 69¢/ 68¢/ 75¢ 85¢ $1.05 $269 $309 * Average annual EBITDA for years 20
Slide 10: FCX Estimated Operating Cash Flows at Various Commodity Prices
FCX FCX Estimated Estimated Average Average Annual Annual Cash Cash Flows Flows ** Estimated Operating Cash Flows At Various Commodity Prices ($ in millions) $1,000 $800 $600 $400 $200 $0 2001 2002e $275 $325 $375 $275 $325 $375 $275 $325 $375 69¢/ 68¢/ 75¢ 85¢ $1.05 $269 $309 * Average annual opera
Slide 11: FCX Capital Expenditures
FCX Capital Expenditures ($ in millions) PT-FI AC & Other $201 $181 $167 $191 $191 $164 $160 $160 $154 $154 $153 $153 $129 $117 $117 $117 $105 $105 2000 2001 2002e 2003e 2004e 2005e Projected e = Financial models based on estimates of future operating results. See Cautionary Statement. 96
Slide 12: PT-FI Capital Expenditures
PT-FI Capital Expenditures ($ in millions) 2002e 100%: $252 million 2003e 100%: $186 million Sustaining* Sustaining* Sustaining Sustaining $146 $146 $117 $117 DOZ Other $7 $7 $68 $25 $25 DOZ $12 $12 $8 $8 $21 $21 OHS $19 $9 $9 $6 $6 Common Other Infrastructure OHS ARD & ARD & Hydrology Hydrology Pro
Slide 13: FCX Debt Summary - 9/30/02
FCX Debt Summary - 9/30/02 ($ in millions, maturities in parentheses) Total Debt: $2,655 Restricted Interest Escrow _ (96) Total Debt & Comm. Pref.: $2,559 Commodity Preferred* Senior Convertible Notes $450 $604 $604 (Various) (2006) (2006) Infrastructure, $484 Equipment & Other $424 (Various) (2005
Slide 14: FCX Estimated Ending Net Debt @ 12/31/05
FCX FCX Estimated Estimated Ending Ending Net Net Debt Debt @ @ 12/31/05 12/31/05 Net Debt & Commodity Preferred At Various Commodity Prices Revolver ($ in millions) $2,800 Balance* $2,325 12/31/05 $1,850 No Revolver Outstanding $1,375 $900 $475 $425 $317 $0 ($50) 2001 2002e $275 $325 $375 $275 $325
Slide 15: Estimated Ending Net Debt with Conversion of Convertible Bonds
FCX FCX Estimated Estimated Ending Ending Net Net Debt Debt @ @ 12/31/05 12/31/05 with with Conversion Conversion of of $604 $604 MM MM Conv. Conv. Bonds Bonds Net Debt & Commodity Preferred At Various Commodity Prices Revolver $2,800 Balance* ($ in millions) $2,325 12/31/05 $1,850 No Revolver Outst
Slide 16: FCX Bank Commitments and Outstandings
FCX FCX Bank Bank Commitments Commitments and and Outstandings* Outstandings* ($ in millions) $0.75/$300 $0.85/$300 2002 - $0.68/$309 2002 - $0.68/$309 $0.75/$300 Thereafter $0.85/$300 Thereafter $750 $600 Commitments Outstandings $450 $300 $150 $0 2002 2003 2004 2005 2002 2003 2004 2005 $0.68 $0.75
Slide 17: FCX Debt Maturities
FCX Debt Maturities Including Commodity Preferred Stocks ($ millions) $1,500 $1,362 $1,362 Total Total Debt Debt Excluding Excluding Preferred Preferred at at 9/30/02: 9/30/02: $2,205 $2,205 $1,200 Commodity Commodity Preferred Preferred ($315 ($315 gold): gold): $375 $375 Total*: Total*: $2,580 $2,
Slide 18: Annualized Commodity Price Sensitivities
Annualized Commodity Price Sensitivities FCX Earnings & Operating Cash Flow Impacts +$25/oz 19¢ Gold $28 +10¢/lb 48¢ Copper $70 Impact Per Share (¢/share) Impact ($ millions) Note: Assumes sales of 1.4 billion lbs. copper and 2.2 million ozs. gold Note: Financial models based on estimates of future
Slide 19: FCX – Focus on Free Cash Flow
FCX – Focus on Free Cash Flow 3-Year Totals (1999 – 2001) Operating Cash Flow Less Capital Expenditures ($ in billions) $1.2 $1.0 3-Year Average (LME) Copper Price 75¢ $0.8 Gold Price $275 $0.6 $0.4 $0.2 $0.0 PD Newmont Barrick FCX Operating Cash Flow $1.0 $1.4 $2.5 $1.6 (1999 - 2001) Capital Expend
Slide 20: FCX Ratings Improvements
FCX Ratings Improvements S&P Rating of “B” Exceeds Indonesian Sovereign “Standard & Poor’s said that its corporate credit rating on the New Orleans, La.- based company was raised to single-’B’ from triple-’C’-plus. The current outlook is stable. Although the risks in operating in Indonesia remain co
Slide 21: Sovereign Ratings
Sovereign Ratings Moody Raises Indonesia’s Sovereign Rating Outlook “Moody’s Investors Service changed the outlook for Indonesia’s B3 foreign currency country ceilings for bonds and Caa1 foreign currency country ceiling for bank deposits to positive from stable.” Reuters April 25, 2002 Hong Kong Fit
Slide 22: FCX Senior Note Yields
FCX Senior Note Yields 7.5% Senior Notes 7.2% Senior Notes 20% 20% 18% 18% 16% 16% 14% 14% 12% 12% 10% 10% 8% 8% Sep- Nov- Jan- Mar- May- Jun- Aug- Oct- Sep- Nov- Jan- Mar- May- Jun- Aug- Oct- 01 01 02 02 02 02 02 02 01 01 02 02 02 02 02 02 $200 Million $250 Million Due 2006 Due 2026 (2003 Put) 107
Slide 23: FCX Reserves-Based Valuation
FCX Reserves-Based Valuation* $50 Implied FCX Share Value ($/share) Newmont Newmont Bid Bid for for $38 $40 Normandy ($104/oz) $38 Normandy ($104/oz) $32 $32 $30 $26 $26 $20 $20 Barrick Barrick Acq. Acq. $20 V a alluuee of of Homestake Homestake $14 $14 h a arree V ($112/oz) ($112/oz) $9 $9 P e e rr
Slide 24: Measuring the Valuation Gap
Measuring the Valuation Gap Implied FCX Share Price Gold Gold Producers Producers (1) (1) Copper Copper Producers Producers (2) (2) Price/Cash Flow Price/ Reserve EV/EBITDA (2003e) Net Asset Value Multiples (2003e) $37(3) $35 $34 $30 $29 $27(3) $25 FCX Price $13/share $122/ $122/ $79/ $79/ 9.5x 9.5x
Slide 25: PT-FI Structure
PT-FI Structure ¾ Exporter With Sales Into World Markets in US Dollars ¾ Sales Proceeds Received in US Bank Accounts ¾ Majority of Operating Costs in US $ 14% in Rupiah 14% in Australian $ 110
Slide 26: Indonesian Contracts of Work
Indonesian Contracts of Work ¾ Existed Since 1967. Have Universal Support in Mining Community and Have Been Copied by Other Countries ¾ Equivalent to Law in Indonesia and Enforced According to Their Terms ¾ Define Financial Regime: Taxes, Royalties, Currency Flows, etc. ¾ Critical in Attracting and
Slide 27: Indonesian Contracts of Work
Indonesian Contracts of Work “Our history of our economic development is always foreign investment. Investors need certainty from Indonesia’s government.” Coordinating Minister of Economic Affairs August 10, 2001 “We know that investors will come to Indonesia only if there is a legal certainty that
Slide 28: PT-FI COW
PT-FI COW 1991 Contract: 30-Year Contract With Two 10-year Extensions 1991 COW compared to 1967 COW ¾ $535 million incremental revenue for government ¾ Indonesia’s first copper smelter at Gresik ¾ $1.8 billion in direct benefits from 1992-2001 ¾ $9.1 billion in direct and indirect benefits from 1992
Slide 29: PT-FI Economic Impacts
PT-FI Economic Impacts PT-FI Benefits to Indonesia/Papua ¾ Over $5 billion invested ¾ One of the Largest Taxpayers ¾ Significant Exporter ¾ One of the Largest Private Employers with 14,000 Direct Employees and Contractors ¾ Infrastructure Developed: Roads, Schools, Housing, Hospitals, Power Systems,
Slide 30: U.S. Government Position
U.S. Government Position U.S. Law RE: Foreign Government Seizure: U.S. law requires that the President suspend foreign assistance to any country that seizes (“has taken steps to repudiate or nullify existing contracts or agreements with any U.S. citizen, corporation, partnership, or association”) th
Slide 31: Auditors/Financial Reporting
Auditors/Financial Reporting ¾ SEC Completed Exhaustive Review in Early 2002 in Connection with Registration of Convertible Notes ¾ Appointed Ernst & Young, LLP (E&Y) July 2002 as FCX’s Independent Accountants E&Y Issued its Review Report on FCX’s 2nd and 3rd Quarter 2002 Results No Accounting o
Slide 32: Jim Miller, Vice President Environmental Affairs
Jim Miller Vice President Environmental Affairs 117
Slide 33: Environmental Management
Environmental Management Major Environmental Management Programs A comprehensive Environmental Impact Assessment (AMDAL) for the Fourth Concentrator expansion was conducted by PT-FI and approved by the Government of Indonesia in 1998. Major components of environmental management programs include: ¾
Slide 34: Environmental Management
Environmental Management Environmental Auditing Commitments ¾ Annual Internal Environmental Audits Annual Environmental Audits Conducted Triennial External Environmental Audits ¾ 1996 External Audit Conducted by Dames & Moore ¾ 1999 External Audit Conducted by Montgomery-Watson ¾ 2002 External A
Freeport-McMoRan Copper & Gold — Investor Presentation (2002) on 6ix