As filed with the Securities and Exchange Commission on February 14, 1994
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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P.T. ALatieF Freeport Finance Company B.V.
(Exact name of Issuer as specified in its charter)
Freeport-McMoRan Copper & Gold Inc.
(Exact name of Guarantor as specified in its charter)
Issuer: The Netherlands Not applicable
Guarantor: Delaware 74-2480931
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
---------------------
Building "Coolse Poort"
Coolsingel 139 (9th Floor)
3012 AG Rotterdam
The Netherlands
011 31 10 402 4323
(Address, including zip code, and
telephone number, including area
code, of the Issuer's
principal executive offices)
First Interstate Bank Building
One East First Street
Suite 1600
Reno, Nevada 89501
(702) 688-3000
(Address, including zip code, and telephone
number, including area code,
of Guarantor's principal executive offices)
Michael C. Kilanowski, Jr.
1615 Poydras Street
New Orleans, Louisiana 70112
(504) 582-4000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Copies to:
David W. Ferguson John P. Mead
Davis Polk & Wardwell Sullivan & Cromwell
450 Lexington Avenue 125 Broad Street
New York, New York 10017 New York, New York 10004
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. ( )
___________________
CALCULATION OF REGISTRATION FEE
=============================================================================
: Proposed : Proposed : :Amount
Title of Each : Maximum : Maximum :Aggregate :of Regis-
Class of Securities : Amount to be : Offering Price :Offering : tration
to be Registered : Registered : Per Unit(1) : Price : Fee
______________________________________________________________________________
%Senior Notes Due 2001 : $120,000,000 : 100% :$120,000,000: $41,380
______________________________________________________________________________
Guaranty of Senior Notes: -- : (2) : (2) : None
==============================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) No proceeds will be received by Freeport-McMoRan Copper & Gold Inc. for
its Guaranty.
---------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
=============================================================================
SUBJECT TO COMPLETION, DATED FEBRUARY 14, 1994
P R O S P E C T U S
$120,000,000
P.T. ALatieF Freeport Finance Company B.V.
% Senior Notes Due 2001
Unconditionally Guaranteed by
(LOGO) Freeport-McMoRan Copper & Gold Inc.
Interest payable and Due , 2001
________________________
The % Senior Notes due 2001 (the "Guaranteed Notes") will be issued by
P.T. ALatieF Freeport Finance Company B.V., a corporation organized under the
laws of The Netherlands (the "Issuer"). The Issuer is a wholly owned
subsidiary of Freeport-McMoRan Copper & Gold Inc. ("FCX"). The Guaranteed
Notes will be unconditionally guaranteed on a senior basis as to principal,
premium, if any, Additional Amounts (as defined), if any, and interest by FCX.
The Issuer will lend the net proceeds of the Guaranteed Notes to P.T. ALatieF
Freeport Infrastructure Corporation ("AFIC") and one or more affiliated
entities which will use the proceeds of such loan to purchase infrastructure
assets from P.T. Freeport Indonesia Company, an Indonesian limited liability
company also domesticated in Delaware ("PT-FI"). See "Use of Proceeds" and
"Business of the Issuer." FCX directly owns 81.3% of PT-FI's outstanding
capital stock.
The Guaranteed Notes are not redeemable prior to , 1999. On or after
, 1999, the Guaranteed Notes are redeemable at the option of the
Issuer, in whole or in part, at the redemption prices set forth herein. If any
withholding tax is imposed in the future, the Issuer will, subject to certain
exceptions, pay Additional Amounts so that the net amount received by the
holder of a Guaranteed Note after such withholding will be equal to the amount
that would have been received if no tax had been applicable. Upon the
occurrence of certain changes with respect to United States, Netherlands or
Indonesian tax law requiring Additional Amounts to be paid by the Issuer with
respect to the Guaranteed Notes or an increase in Underlying Additional
Amounts (as defined) required to be paid by PT-FI, AFIC or any Infrastructure
Affiliate (as defined) with respect to the PT-FI Note (as defined) or the
Underlying Notes (as defined), the Issuer may redeem the Guaranteed Notes, in
whole but not in part, at 100% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption. Upon a Repurchase Event (as
defined), each holder of Guaranteed Notes may require FCX to repurchase such
Guaranteed Notes at 101% of the principal amount thereof plus accrued interest
to the date of repurchase. See "Description of the Guaranteed Notes."
________________________
See "Special Considerations" for a discussion of certain factors that should
be considered in connection with an investment in the Guaranteed Notes.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
==============================================================================
Price to Underwriting Proceeds to
Public(1) Discount(2) Issuer(1)(3)
______________________________________________________________________________
Per Guaranteed Note % % %
______________________________________________________________________________
Total $ $ $
==============================================================================
(1) Plus accrued interest, if any, from 1994.
(2) PT-FI has agreed to reimburse the Issuer for the underwriting discount.
(3 Before deduction of expenses payable by the Issuer estimated at $ .
Taking into account PT-FI's reimbursement to the Issuer of the
underwriting discount and offering expenses, Proceeds to Issuer will be
$120,000,000.
________________________
The Guaranteed Notes are offered by the several Underwriters when, as
and if issued by the Issuer and delivered to and accepted by the several
Underwriters and subject to their right to reject orders in whole or in part.
It is expected that the Guaranteed Notes will be ready for delivery on or
about , 1994.
CS First Boston Chase Securities, Inc.
______________________________________________________________________________
The date of this Prospectus is , 1994.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
GUARANTEED NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE OFFERING OF THE GUARANTEED NOTES IS NOT AND SHALL NOT BE DIRECTED TO
PERSONS ESTABLISHED OR DOMICILED OR HAVING THEIR NORMAL PLACE OF RESIDENCE IN
THE NETHERLANDS, OTHER THAN TO NATURAL PERSONS OR LEGAL PERSONS WHO OR WHICH
DEAL OR INVEST IN SECURITIES IN THE CONDUCT OF THEIR PROFESSION OR TRADE.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K of FCX for the fiscal year ended December
31, 1992 (as amended on June 25, 1993), the Quarterly Reports on Form 10-Q of
FCX for the fiscal quarters ended March 31, 1993, June 30, 1993 and September
30, 1993 and the Current Reports on Form 8-K of FCX dated April 13, 1993 (as
amended on May 21, 1993 and August 5, 1993), June 15, 1993, June 30, 1993,
January 7, 1994 and January 12, 1994 are incorporated by reference in this
Prospectus.
All documents filed by FCX pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities and Exchange Act of 1934, as amended (the "Exchange Act")
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Guaranteed Notes shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Copies of the above documents (excluding exhibits to the information that
is incorporated by reference unless such exhibits are specifically
incorporated by reference into the information this Prospectus incorporates)
may be obtained upon request without charge from FCX, c/o Freeport-McMoRan
Inc. at 1615 Poydras Street, New Orleans, Louisiana 70112 (telephone (504)
582-4000), attention: Michael C. Kilanowski, Jr., Secretary.
ENFORCEMENT OF CIVIL LIABILITIES
The Issuer is a Netherlands corporation. All or a substantial portion of
its assets are located outside the United States. The Issuer has been advised
by legal counsel in The Netherlands, Stibbe Simont Monahan Duhot, that the
United States and The Netherlands do not currently have a treaty providing for
reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Therefore, a final judgment for the
payment of money rendered by any federal or state court in the United States
based on civil liability, whether or not predicated solely upon the federal
securities laws, would not be enforceable in The Netherlands. However, if the
party in whose favor such final judgment is rendered brings a new suit in a
competent court in The Netherlands, such party may submit to the Netherlands
court the final judgment which has been rendered in the United States. If the
Netherlands court finds that the jurisdiction of the federal or state court in
the United States has been based on grounds which are internationally
acceptable and that proper legal procedures have been observed, the
Netherlands court would, in principle, give binding effect to the final
judgment which has been rendered in the United States unless such judgment
contravenes Netherlands' principles of public policy.
FCX, the Guarantor of the Guaranteed Notes, is a Delaware corporation
with its principal executive offices in the United States. Accordingly,
process may be served and judgements enforced against FCX in the United
States, including judgments predicated upon the civil liabilities provisions
of the federal securities laws of the United States.
PROSPECTUS SUMMARY
The following summary is qualified by the detailed information and
financial statements in this Prospectus (the "Prospectus").
FCX and the Issuer
P.T. ALatieF Freeport Finance Company B.V. (the "Issuer") is a wholly
owned subsidiary of Freeport-McMoRan Copper & Gold Inc. ("FCX") that has been
organized for the purpose of issuing the Guaranteed Notes and lending the net
proceeds thereof to P.T. ALatieF Freeport Infrastructure Corporation ("AFIC")
and one or more Infrastructure Affiliates (as defined below). Such proceeds
will be used by AFIC and such Infrastructure Affiliates to purchase from P.T.
Freeport Indonesia Company ("PT-FI") certain infrastructure assets supporting
PT-FI's mining activities in Irian Jaya, Indonesia. See "The Enhanced
Infrastructure Project and AFIC" below and "Use of Proceeds."
FCX, a Delaware corporation, conducts its operations in Indonesia through
its 81.3% directly owned subsidiary PT-FI. PT-FI is a limited liability
company organized under the laws of the Republic of Indonesia and domesticated
in Delaware. PT-FI engages in the exploration for and development, mining,
production and processing of copper, gold and silver in Indonesia and in the
marketing of concentrates containing such metals worldwide. In 1993, FCX
acquired the Spanish company Rio Tinto Minera, S.A. ("RTM"), which provides
an additional market for a portion of PT-FI's copper concentrates. See "Recent
Developments--Purchase of Interest in RTM." FCX also owns Eastern Mining
Company, Inc. ("Eastern Mining"), a separate subsidiary which has been granted
certain mineral exploration rights in Irian Jaya, Indonesia.
PT-FI is among the world's largest copper companies in terms of reserves
and believes that it has one of the lowest cost copper-producing operations in
the world, taking into account customary by-product credits for related gold
and silver production. PT-FI's operations are set in remote, rugged,
mountainous terrain and are characterized by relatively high ore-grade mineral
deposits. FCX, through PT-FI or its predecessor, has operated in Indonesia
since 1967, substantially increasing reserves and production during this time.
Since the signing of its original Contract of Work in 1967, PT-FI has enjoyed
and continues to enjoy favorable and stable relations with the Government of
the Republic of Indonesia (the "Indonesian Government").
In 1993, PT-FI achieved record copper production of 658.4 million payable
pounds, approximately 6% more than in 1992. Gold production was a record
786,700 payable ounces, an increase of 23% over 1992. See "Summary FCX
Operating Data" below.
PT-FI currently has two principal mines in operation in Irian Jaya,
Indonesia: Grasberg and Ertsberg East, located within approximately three
kilometers of each other. The Grasberg deposit commenced operations in 1990
and now contains the largest single gold reserve of any mine in the world and
one of the five largest open pit copper reserves. Ertsberg East is an
underground mine which commenced operations in 1980 and is expected to be
depleted by the second half of 1994.
PT-FI also has several mines in various stages of development. The
Intermediate Ore Zone (the "IOZ"), which lies below the Ertsberg East ore
body, is currently under development and is entering the initial stages of
production. The Deep Ore Zone (the "DOZ"), also an underground mine, lies
below the IOZ. Production at the DOZ, which was temporarily suspended in 1991,
is expected to resume once the IOZ ore body is depleted sometime after 1998.
Also under development is the "DOM" (from the Dutch word meaning "cathedral")
ore body, an underground mine situated on a mountain adjacent to Ertsberg
East.
In addition to continued delineation of the Grasberg deposit and other
existing deposits, PT-FI is continuing its ongoing exploration program for
copper and gold mineralization within the 24,700 acre mining area covered by
its original Contract of Work (the "1967 Mining Area"). PT-FI recently
discovered mineralization at two sites, Big Gossan and Wanagon, which are
located west of the Ertsberg open pit and southwest of Grasberg. Mine planning
for development of Big Gossan has commenced, and development is expected to
begin in late 1994 or early 1995. In addition, PT-FI has begun driving a
horizontal access adit from the mill site at the 2,900 meter level, which is
below the Grasberg ore body as currently delineated. The new adit, expected to
be completed in 1996, will facilitate further deep exploration and delineation
of the extent of the Grasberg deposit. Preliminary drilling from the existing
3,700 meter level adit indicates significant additional mineralization below
the existing proved and probable reserves.
A new Contract of Work signed by PT-FI and the Indonesian Government on
December 30, 1991 (the "New COW") covers both the 1967 Mining Area and a new
contiguous 6.5 million acre exploration area (the "New COW Area"). On April
29, 1993 Eastern Mining was granted exclusive exploration rights on 2.5
million acres adjacent to the New COW Area (the "Eastern Mining Area").
Preliminary investigation of the New COW Area has indicated many promising
targets. Within the New COW Area extensive stream sediment sampling has
generated analytical results which are being evaluated. No assurance can be
given that any of the exploration areas in the 1967 Mining Area (other than
Big Gossan), the New COW Area or the Eastern Mining Area contains commercially
exploitable mineral deposits. FCX's exploration expenses were $33.7 million
for 1993, compared to $12.2 million for 1992.
At December 31, 1993, PT-FI's total estimated proved and probable
reserves were 26.8 billion payable pounds of copper and 39.1 million payable
ounces of gold. Net of 1993 production, PT-FI's total estimated proved and
probable reserves increased since December 31, 1992 by 5.9 billion payable
pounds of copper (a 28% increase) and 7.0 million payable ounces of gold (a
22% increase). These new reserves were added primarily at the Grasberg
deposit, but also include additions at the DOZ deposit and the recently
discovered Big Gossan deposit.
The following table summarizes PT-FI's estimated proved and probable
reserves at the end of each of the years shown, as verified by Independent
Mining Consultants, Inc. (see "Special Considerations--FCX--Reserves").
December 31,
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
(in millions)
Reserves:
Ore reserves--dry metric tons.... 256.4 445.7 768.0 733.2 1,074.1
Copper--payable pounds........... 8,300 13,900 21,800 20,900 26,800
Gold--payable ounces............. 8.1 19.5 32.4 32.1 39.1
During 1993, PT-FI completed, within budget and ahead of schedule, the
production facilities designed to enable it to mine and mill at least 66,000
metric tons* of ore per day ("MTPD"). Average mill throughput during 1993 was
62,300 MTPD, an increase of 63% from the average level of ore milled in 1991.
Additionally, PT-FI has begun work on a further expansion to 115,000 MTPD
which is expected to be completed by year-end 1995 and to result in annual
production rates approaching 1.1 billion pounds of copper and 1.5 million
ounces of gold. Expansion from the current 66,000 MTPD to 115,000 MTPD is
projected to require an investment of approximately $685 million (of which
approximately $120 million had been spent through December 31, 1993),
excluding the capital required for the Enhanced Infrastructure Project (as
defined below) and other infrastructure improvements.
- --------------------
* As used herein, "ton" refers to a metric ton, which is equivalent to
2,204.62 pounds on a dry weight basis.
Freeport-McMoRan Inc. ("FTX") currently owns approximately 70% of FCX's
outstanding common stock. FCX directly owns 81.3% of PT-FI's outstanding
common stock. Of the remaining 18.7% of the outstanding PT-FI common stock,
9.35% is owned by the Indonesian Government and 9.35% is owned by an
Indonesian corporation, P.T. Indocopper Investama Corporation ("PT-II"), in
which FCX owns a 49% interest.
The Enhanced Infrastructure Project and AFIC
The location of PT-FI's operations in a remote and undeveloped area
requires that such operations be virtually self-sufficient. PT-FI's
infrastructure in Irian Jaya currently includes an airport, a heliport, a 119
kilometer road with bridges and tunnels, an aerial service tramway to
transport personnel, equipment and supplies to the mines, a hospital and two
town sites with schools, housing and other required facilities sufficient to
support approximately 10,000 persons.
PT-FI has commenced a long-term program (the "Enhanced Infrastructure
Project" or "EIP"), the goal of which is to develop and promote the growth of
local activities and enterprises in Irian Jaya through the creation of certain
necessary physical support facilities. The full Enhanced Infrastructure
Project includes plans for various commercial, residential, educational,
retail, medical, recreational, environmental and other infrastructure
facilities to be constructed during the next 10 to 20 years, which facilities
would be available for PT-FI's workforce and others. In connection with the
expansion of PT-FI's mining and processing facilities to 115,000 MTPD, the
first phase of the Enhanced Infrastructure Project is being implemented. This
first phase envisages the construction of dwelling units and related power,
water and waste disposal systems, a light industrial park and new small
business development facilities, improvements to the port and airport
facilities, an 84-room guest house with dining, recreational and meeting
facilities near the airport and other general infrastructure facilities.
AFIC was formed in 1993 principally to purchase and operate certain
existing infrastructure assets and new EIP assets. P.T. ALatieF Nusakarya
Corporation ("ALatieF"), which is one of an affiliated group of corporations
(the "ALatieF Group"), owns 66.7% and PT-FI owns 33.3% of AFIC's capital
stock. ALatieF Group is one of the largest Indonesian retail and property
management groups. Pursuant to the Joint Venture Agreement between ALatieF and
PT-FI (the "Joint Venture Agreement"), PT-FI has agreed to sell to AFIC new
EIP assets and existing infrastructure assets at an aggregate price of $270
million through 1995. The first acquisition, principally consisting of
dormitory-style residential properties and associated food service facilities,
was completed in December 1993 for a purchase price of $90 million. This
acquisition was financed, and future acquisitions will be financed, with the
proceeds of indebtedness in a principal amount equal to two-thirds of the
acquisition cost and equity contributions equal to one-third of the
acquisition cost. See "Business of the Issuer--AFIC". The acquisitions
which are anticipated for 1994 and later are subject to the execution of
definitive agreements and certain Indonesian Government approvals. Depending
on the long-term growth of PT-FI's operations, the total cost of the EIP,
including subsequent phases, could range between $500 million and $600
million. Indonesian laws or regulations may require that certain EIP assets
that would otherwise be sold to AFIC be held by a separate entity.
Accordingly, one or more affiliated entities having similar equity ownership
and capital structure to AFIC (each, an "Infrastructure Affiliate") may be
organized to acquire and operate such assets.
The net proceeds of the Guaranteed Notes will be loaned by the Issuer to
AFIC and one or more Infrastructure Affiliates to provide the balance of the
debt funding required for the purchases of the first $270 million of
infrastructure assets from PT-FI. PT-FI has agreed to reimburse the Issuer for
the underwriting discount and expenses associated with the issuance of these
Guaranteed Notes so that the net proceeds to the Issuer from the issuance of
the Guaranteed Notes are expected to equal the offering price thereof. AFIC
and each Infrastructure Affiliate will issue one or more promissory notes (the
"Underlying Notes") to the Issuer in an aggregate principal amount equal to
the principal amount of loans by the Issuer to such entity. PT-FI will enter
into one or more agreements with AFIC and any Infrastructure Affiliate (each,
a "Master Services Agreement") pursuant to which PT-FI will compensate AFIC or
such Infrastructure Affiliate for the use and occupancy of the infrastructure
assets purchased by such entity with the proceeds of the Guaranteed Notes.
The Master Services Agreements will provide for minimum payments by PT-FI
thereunder in an aggregate amount sufficient to satisfy all costs and expenses
of AFIC or such Infrastructure Affiliate, including, without limitation,
principal of, interest on and any Underlying Additional Amounts (as defined
below) payable with respect to, the Underlying Notes. Each Master Services
Agreement will have a term of 120 days beyond the final payment of the
Guaranteed Notes. See "Business of the Issuer--Master Services Agreements."
The rights of AFIC and any Infrastructure Affiliate under the Master Services
Agreements will be pledged to secure the obligations of AFIC and such
Infrastructure Affiliate to the Issuer under the Underlying Notes. The
Guaranteed Notes, however, will not be secured by any infrastructure assets or
the Underlying Notes. See "Description of the Guaranteed Notes--Application of
Proceeds Under Indenture."
Ownership Structure
(GRAPHIC)
(SEE APPENDIX A FOR DESCRIPTION OF GRAPHIC MATERIAL)
The Issuer's principal executive office is located at Building "Coolse
Poort", Coolsingel 139, 9th Floor, 3012 AG Rotterdam, The Netherlands and its
telephone number is 011-31-10 402-4323. FCX's principal executive office is
located at First Interstate Bank Building, One East First Street, Suite 1600,
Reno, Nevada 89501 and its telephone number is (702) 688-3000.
Recent Developments
Issuance of Gold-Denominated Preferred Stock
On January 21, 1994, FCX issued 4,305,580 Depositary Shares, Series II,
each representing 0.05 shares of Gold-Denominated Preferred Stock, Series II,
in an underwritten public offering. The net proceeds of $158.5 million are
being used by PT-FI to fund capital expenditures associated with the expansion
of mining and milling activities and to reduce borrowings under the PT-FI
Credit Agreement (as defined below), thereby increasing the facility's
availability for general corporate purposes. For a brief description of the
terms of the Gold-Denominated Preferred Stock, see "Description of FCX
Preferred Stock and Special Preference Stock -- Gold-Denominated Preferred
Stock."
Redemption of Zero Coupon Notes
Effective January 18, 1994, FCX redeemed its outstanding Zero Coupon
Exchangeable Notes due 2011 (the "Zero Coupon Notes"). Of the $118.6 million
principal amount of Zero Coupon Notes outstanding at the initiation of the
call for redemption, $118.3 million principal amount was converted into an
aggregate of approximately 6.7 million shares of FCX's Class A Common Stock.
The balance of the Zero Coupon Notes was redeemed for cash.
Purchase of Interest in RTM
In March 1993, FCX acquired a 65% interest in RTM, which is principally
engaged in the smelting and refining of copper in Spain, for approximately $50
million, excluding transaction costs. In December 1993, RTM redeemed the
remaining 35% interest for approximately $19 million. RTM has announced plans
to expand its smelter production capacity from its current 150,000 metric tons
of metal per year to approximately 180,000 metric tons of metal per year by
1995 at a cost of approximately $50 million. RTM is studying further
expansion to as much as 270,000 metric tons of metal production per year.
During 1993, PT-FI supplied RTM with approximately 90,000 metric tons of
copper concentrate and is expected to supply approximately 150,000 metric tons
in 1994, providing for approximately 20% and 33%, respectively, of RTM's
requirements in those years. Beginning in 1996, PT-FI is expected to provide
the RTM smelter with approximately one-half of its copper concentrate
requirements. For further information concerning RTM, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
herein, FCX's Current Report on Form 8-K dated April 13, 1993, as amended May
21, 1993, and as amended August 5, 1993, incorporated by reference in this
Prospectus (which Current Report includes financial information with respect
to RTM and the RTM acquisition) and FCX's Current Report on Form 8-K dated
January 7, 1994 (which includes financial information for the nine months
ended September 30, 1993 as if RTM had been consolidated since March 30,
1993).
Recent Infrastructure Developments
In December 1993, PT-FI announced the execution of a Letter of Intent
with Duke Energy Corp. ("Duke Energy"), a wholly owned affiliate of Duke Power
Company, and PowerLink Corporation ("PowerLink"), a subsidiary of Northstar
Energy Corporation, pursuant to which PT-FI would sell its existing and to be
constructed power generation and transmission assets and certain other
power-related assets to a joint venture (the "Power Joint Venture") whose
ownership consists of Duke Energy (30%), PowerLink (30%), PT-FI (30%) and an
Indonesian investor (10%). The total value of the transaction is estimated at
$200 million and is expected to be concluded in two phases. The first sale,
representing the existing assets, is expected to exceed $100 million and to
occur in mid-1994. The final sale, representing the to-be-constructed
expansion-related assets, is expected to occur during the first half of 1995.
Under the agreement, the Power Joint Venture will own these assets and be
responsible for providing the electrical power services required by PT-FI at
its mining, milling and support operations in Irian Jaya, including the power
services required for the expansion of ore throughput to 115,000 MTPD. PT-FI
has also entered into two separate letters of intent with respect to sales to
joint ventures of certain aircraft, airport and related operations and certain
port facilities and related marine logistics, construction equipment and other
assets. These transactions are subject to the execution of definitive
agreements, financing and certain Indonesian Government approvals. See
"Business of FCX--Transportation, Other Infrastructure and Recent
Infrastructure Developments."
The Offering
Securities Offered $120,000,000 aggregate principal amount of
% Senior Notes Due 2001.
Interest Payment Dates and , commencing ,
1994.
Guaranty Payment of principal, premium, if any,
Additional Amounts, if any, and interest on
the Guaranteed Notes and any obligation to
repurchase Guaranteed Notes following a
Repurchase Event or pursuant to an Asset
Disposition Offer will be unconditionally
guaranteed on a senior basis by FCX.
Optional Redemption The Guaranteed Notes are redeemable at the
option of the Issuer, in whole or in part,
on or after , 1999 at a redemption price
equal to % of the principal amount
thereof through , 2000 and thereafter
at 100% of the principal amount thereof,
plus in each case accrued and unpaid
interest to the date of redemption.
Sinking Fund None.
Withholding Tax There is currently no United States,
Netherlands or Indonesian withholding tax
applicable to payments on the Guaranteed
Notes. If any such withholding tax is
imposed in the future, subject to certain
exceptions, the Issuer will pay Additional
Amounts so that the net amount received by
the holder of a Guaranteed Note after such
withholding will be equal to the amount that
would have been received if no tax had been
applicable. See "Description of the
Guaranteed Notes--Maturity, Interest and
Principal." Any reference in this Prospectus
to principal, premium or interest with
respect to any Guaranteed Note shall be
deemed to include any such Additional
Amounts payable in connection therewith.
Tax Redemption Upon the occurrence of certain changes with
respect to United States, Netherlands or
Indonesian tax law requiring Additional
Amounts to be paid by the Issuer or an
increase in the Underlying Additional
Amounts (as defined below) to be paid by
PT-FI, AFIC or any Infrastructure Affiliate
with respect to the PT-FI Note or the
Underlying Notes, the Issuer may redeem the
Guaranteed Notes, in whole but not in part,
at 100% of the principal amount thereof plus
accrued and unpaid interest to the date of
redemption. See "Description of the
Guaranteed Notes--Tax Redemption."
Assumption by FCX FCX may at any time assume all obligations
of the Issuer in respect of the Guaranteed
Notes and may be substituted for the Issuer
in all respects, in which event the Issuer
will be released from all obligations under
the Guaranteed Notes and the indenture
pursuant to which the Guaranteed Notes will
be issued (the "Indenture").
Certain Covenants The Indenture will restrict, among other
things, the ability of FCX to incur liens on
the capital stock of PT-FI without equally
and ratably securing the Guaranteed Notes,
to engage in certain transactions with
affiliates and to merge with or consolidate
with or into, or sell or otherwise transfer
its properties and assets as an entirety.
The Indenture will also require that the
proceeds of certain Asset Dispositions be
used to repay certain debt or be reinvested
in natural resource businesses. All of these
limitations are subject to a number of
important qualifications, however. See
"Description of the Guaranteed
Notes--Certain Covenants."
Change of Control Upon a Repurchase Event, each holder of the
Guaranteed Notes may require FCX to
repurchase such holder's Guaranteed Notes at
101% of the principal amount thereof plus
accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase.
A "Repurchase Event" is defined to mean the
occurrence of a Change of Control followed
by a Rating Decline within 60 days of the
first public announcement of such Change of
Control. See "Description of the Guaranteed
Notes--Repurchase in Event of Change of
Control and Rating Decline."
Use of Proceeds The net proceeds will be loaned to AFIC and
one or more Infrastructure Affiliates for
the purchase of infrastructure assets from
PT-FI as part of the first phase of the EIP.
Pending such use, the net proceeds will be
loaned by the Issuer to PT-FI on a senior
unsecured basis. See "Use of Proceeds."
Special Considerations See "Special Considerations" for a
discussion of certain factors that should be
considered in connection with an investment
in the Guaranteed Notes.
Summary FCX Financial Data
The following Summary Financial Data are derived from the consolidated
financial statements of FCX and should be read in conjunction with those
statements. The income statement data for the three years ended December 31,
1992 and the balance sheet data as of December 31, 1992 and 1991 are derived
from audited consolidated financial statements included and incorporated by
reference herein. The income statement data for the year ended December 31,
1989 and the balance sheet data as of December 31, 1990 and 1989 are derived
from audited consolidated financial statements not included or incorporated by
reference in this Prospectus. Income statement data for the year ended
December 31, 1993 and balance sheet data as of such date are derived from
unaudited condensed consolidated financial statements included in this
Prospectus, which financial statements, in the opinion of FCX's management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations for such period
and the financial position as of such date.
Years Ended December 31,
______________________________________________________
1989 1990 1991 1992 1993
______ ______ ______ ______ ______
(in thousands, except ratios)
Income Statement Data:
Revenues(1)...........$367,886 $434,148 $467,522 $714,315 $925,932
Cost of sales:
Site production
and delivery........ 118,489 160,045 204,353 308,948 558,253
Depreciation and
amortization......... 24,594 35,479 38,397 48,272 67,906
-------- -------- -------- -------- --------
Total cost of sales.. 143,083 195,524 242,750 357,220 626,159
-------- -------- -------- -------- --------
Exploration expenses.. 363 4,086 6,502 12,185 33,748
Provision for
restructuring and
valuation of assets.. -- -- -- -- 50,880
General and
administrative
expenses............. 21,206 29,989 40,550 68,481 75,727
-------- -------- -------- -------- --------
Total costs and
expenses........... 164,652 229,599 289,802 437,886 786,514(2)
-------- -------- -------- -------- --------
Operating income...... 203,234 204,549 177,720 276,429 139,418(2)
Minority interest..... (17,415) (13,726) (12,199) (31,075) (7,382)
Net income applicable
to common stock...... 98,927 90,179 96,159(3) 122,868 21,862(2)
Ratio of Earnings
to Fixed
Charges(4):.......... 27.6x 9.2x 4.5x 6.5x 3.3x
Balance Sheet Data
(at end of period):
Net property, plant
and equipment...... 264,688 502,171 601,675 993,412 1,646,603
Total assets......... 415,072 676,727 1,157,615 1,694,005 2,116,653
Long-term debt
(including
current portion
thereof)........... 130,000 294,000 631,961 723,583 228,967
Minority interest.... 19,632 8,899 14,237 21,449 46,781
Gold-Denominated
Preferred Stock.... -- -- -- -- 232,620
Stockholders' equity. 113,759 176,557 172,545 646,457 947,927
Other Financial Data:
EBITDA(5)............ 227,828 240,028 216,117 324,701 207,324(2)
Depreciation and
amortization....... 24,594 35,479 38,297 48,272 67,906
Capital expenditures. 138,448 187,544 239,954 367,842 453,122
Interest incurred(6). 7,261 21,761 39,727 42,871 39,846
Ratio of EBITDA to
interest incurred.. 31.4x 11.0x 5.4x 7.6x 5.2x
(1) Net of treatment charges, royalties to the Indonesian Government and
amortization of the cost of the price protection program.
(2) Includes pretax charges totaling $50.9 million ($28.6 million to net
income) related to the restructuring of the administrative organization
at FTX, the parent company of FCX, as well as reductions in the book
carrying value of certain assets to estimated recoverable amounts.
(3) Reflects a $5.8 million reduction for the cumulative effect of the
change in accounting for postretirement benefits and a $26.5 million
reduction in PT-FI's income tax provision due to the signing of the
New COW.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes,
minority interest and fixed charges. Fixed charges consist of interest
and that portion of rent deemed representative of interest.
(5) Earnings before interest, taxes and depreciation and amortization
(EBITDA) consists of operating income after non-recurring expenses ($50.9
million in 1993 as discussed in Note 2) plus depreciation and
amortization. EBITDA should not be considered by an investor as an
alternative to net income as an indicator of FCX's operating performance
or to the information included in FCX's statement of cash flow and
accompanying Management's Discussion and Analysis as a measure of
liquidity.
(6) Includes interest expense plus capitalized interest.
Summary FCX Operating Data
Years Ended December 31,
______________________________________________________
1989 1990 1991 1992 1993
______ ______ ______ ______ ______
PT-FI Results(1)
Mill Operations:
Ore milled--metric
tons ("MT")
per day 24,700 31,700 38,200 57,600 62,300
Average copper grade 1.84% 1.61% 1.77% 1.59% 1.57%
Grams of gold--per MT .60 .98 1.23 1.35 1.46
Payable Metal
Production(2)
Copper--thousand
pounds 317,400 361,800 466,700 619,100 658,400
Gold--ounces 139,000 284,000 420,800 641,000 786,700
Payable Metal Sales:
Copper--thousand
pounds 317,800 348,000 439,700 651,800 645,700
Gold--ounces 140,000 273,000 397,900 679,300 762,900
Average Realizations:
Copper--per pound(3) $ 1.24 $ 1.20 $ 1.01 $ 1.03 $ .90
Gold--per ounce 383.28 378.30 358.76 340.11 361.74
Gross Profit Per
Pound of Copper:
Average realized
price 123.6 Cents 120.4 Cents 101.1 Cents 103.3 Cents 90.4 Cents
------- ------- ------- ------- -------
Production Costs:
Site production
and delivery 37.2 46.0 46.5 47.4 49.3
Gold and silver
credits (20.3) (32.0) (34.0) (36.2) (43.4)
Treatment charges 25.1 25.2 23.5 27.1 23.7
Royalty on payable
metals 3.4 3.1 2.4 2.4 1.5
------- ------- ------- ------- -------
Cash production
costs 45.4 42.3 38.4 40.7 31.1
Depreciation and
amortization 7.8 10.2 8.7 7.4 8.7
------- ------- ------- ------- -------
Total production
costs 53.2 52.5 47.1 48.1 39.8
------- ------- ------- ------- -------
Revenue
adjustments(4) 0.4 0.7 (2.9) (0.4) (2.4)
------- ------- ------- ------- -------
Gross profit
per pound 70.8 Cents 68.6 Cents 51.1 Cents 54.8 Cents 48.2 Cents
======= ======= ======= ======= =======
RTM Results (since March 1993 acquisition)
Smelter operations:
Concentrate treated--MT 330,200
Anode production--MT 135,800
Cathode production--MT 103,100
Gold operations:
Ore milled--MTPD 17,900
Grade--grams per MT 1.05
Production--payable ounces 132,500
Average realized price $ 369.06
_________________
(1) Mill operations, payable metal production, payable metal sales and
average realizations reflect 100% of PT-FI's results and have not been
adjusted for the minority ownership in PT-FI.
(2) Derived by multiplying total annual mill throughput in tons times grade
times recovery percentage times a payable factor of .965 for copper and
.963 for gold and multiplying the product by 2,204.62 (in the case of
copper) or dividing the product by 31.1035 (in the case of gold).
(3) Includes amounts recognized on current period sales under the price
protection program. Excludes the adjustments discussed in Note 4.
(4) Reflects adjustments primarily for prior period concentrate sales
contractually priced (net of related amounts recognized under the price
protection program) or adjusted during the respective periods. In
addition, for periods subsequent to the year ended December 31, 1990,
reflects amortization of the cost of PT-FI's price protection program for
such periods. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
SPECIAL CONSIDERATIONS
An investment in the Guaranteed Notes involves certain risks.
Accordingly, prospective investors should consider carefully the following
special considerations, in addition to the other information concerning FCX
and the Issuer and their business contained in this Prospectus, before
purchasing the Guaranteed Notes offered hereby.
FCX
Prices of Minerals
Because FCX's revenues are derived almost entirely from the sale of
concentrates containing copper, gold and silver by PT-FI, FCX's earnings are
directly related to market prices for copper, gold and, to a lesser extent,
silver. Prices for such minerals have historically fluctuated widely and are
affected by numerous factors beyond FCX's control. A price protection program
has been implemented for estimated copper sales priced during 1994 at a price
of $.90 per pound. During the fourth quarter of 1993, copper prices averaged
significantly below $.90 per pound.
Location and Industry Risks
The current mining area, most of the new 6.5 million acre exploration
area and the prospective mining area of Eastern Mining, are located in steeply
mountainous terrain, which makes access to certain parts of these areas
difficult. These areas are subject to considerable rainfall, which has in the
past led to periodic floods and mud slides. The mining area is located in an
area of known seismic activity, and some earth tremors have been experienced
from time to time. None of these factors has caused personal injury to FCX
employees or significant property damage not covered by insurance or any
significant interruptions to production, although no assurance can be given
that delays, injury or damage will not occur in the future. The climate and
remoteness of the area have required PT-FI to overcome special engineering
difficulties. PT-FI is also subject to the usual risks encountered in the
mining industry, including unexpected geological conditions resulting in
cave-ins, flooding and rock-bursts and unexpected changes in rock stability
conditions. FTX purchases, for the benefit of PT-FI, substantial insurance
involving such amounts and types of coverage as it believes are appropriate
for PT-FI's exploration, development, mining and processing activities in
Indonesia.
Political Factors
Maintaining its good relationship with the Indonesian Government is of
particular importance to PT-FI because its operations are located solely in
Indonesia. The Indonesian Government currently owns 9.35% of PT-FI's
outstanding common stock. PT-FI operates in Indonesia by virtue of the New
COW, which has a 30-year term and provides for two 10-year extensions under
certain conditions. The 1967 Foreign Capital Investment Law, which expresses
Indonesia's foreign investment policy, provides basic guarantees of remittance
rights and protection against nationalization, a framework for incentives and
some basic rules as to other rights and obligations of foreign investors.
PT-FI's rights and obligations relating to taxes, exchange controls,
repatriation and other matters are governed by the New COW, which was
concluded pursuant to the 1967 Foreign Capital Investment Law.
Indonesia has a presidential republic system of government. Elections
for the Indonesian Parliament and the office of President are held every five
years. President Suharto, who assumed power following an attempted communist
coup, was reelected in March 1993 to serve a sixth consecutive five-year term.
Reserves
With respect to PT-FI's reserves, it should be noted that such quantities
are estimates only. The mines from which PT-FI's reserves are presently being
or are expected to be produced may not conform to geological or other
expectations with the result that the volume and grade of reserves recovered
and the rates of production may be more or less than anticipated. Further,
market price fluctuations in copper, gold and, to a lesser extent, silver, and
changes in operating and capital costs may render certain ore reserves
uneconomic to develop. No assurance can be given that PT-FI's exploration
programs will result in the replacement of current reserves with new reserves.
Relationship of FCX and FTX
FTX currently owns approximately 70% of the combined total outstanding
shares of FCX's Class A Common Stock and Class B Common Stock. Through this
ownership, FTX has control over FCX, and through FCX, over PT-FI. FTX thus
controls the composition of the Board of Directors of FCX and the Board of
Commissioners of PT-FI and the dividend policies of both and also has
sufficient voting control under Delaware law to effect major corporate actions
at FCX such as "going private" transactions and mergers without the
concurrence of other stockholders. Among the various companies owned or
controlled by FTX, it is intended that FCX and its subsidiaries will have
priority with respect to the exploration, development and mining of copper and
associated minerals in Indonesia. However, if any conflict of interest arises
between FCX or one of its subsidiaries and another company owned or controlled
by FTX relating to business opportunities in Indonesia, FTX will resolve such
dispute. In addition, FCX and PT-FI are parties, with FTX, to a Management
Services Agreement, pursuant to which FTX provides a variety of management
services to FCX and PT-FI. Under the terms of this Agreement, FCX and PT-FI
reimburse FTX on a monthly basis at FTX's cost for such services, including
allocated overhead. In addition, FTX is a party to a credit agreement,
pursuant to which, under certain circumstances, FTX might be required to
pledge the stock of FCX owned by FTX and its affiliates to secure its
outstanding borrowings under such credit agreement. See "Relationship of the
FCX Group with the FTX Group" and Note 7 of Notes to Financial Statements
herein.
FCX made payments to FTX pursuant to the Management Services Agreement of
$44.9 million and $57.9 million and paid dividends to FTX of $85.4 million and
$85.9 million in 1992 and 1993, respectively.
Environmental Matters
Although the management of FCX believes that it is in compliance with
Indonesian environmental laws, rules and regulations, and that there will be
no significant adverse impact on the environment as a result of the planned
expansion of its operations, the Indonesian Government may revise its
environmental laws and regulations periodically. The impact, if any, of such
possible revisions on FCX's current or future operations cannot be accurately
predicted. In accordance with Indonesian law, PT-FI has submitted an
environmental impact study to the Indonesian Government with respect to the
proposed expansion of copper production to 115,000 MTPD.
Holding Company Structure
FCX is a holding company which conducts its business through its
subsidiaries PT-FI, RTM and Eastern Mining. As a result, FCX's cash flow and
consequent ability to meet its debt obligations are primarily dependent upon
the earnings of its subsidiaries, and on dividends and other payments
therefrom. Any right of FCX to participate in any distribution of the assets
of its subsidiaries upon the liquidation, reorganization or insolvency thereof
would, with certain exceptions, be subject to the claims of creditors
(including trade creditors) and preferred stockholders, if any, of such
subsidiaries.
Fraudulent Conveyance Considerations
FCX has guaranteed the payment of principal of, premium, if any,
Additional Amounts, if any, and interest on the Guaranteed Notes. It is
possible, however, that under certain circumstances a court could hold that
the direct obligations of FCX to any other direct creditor of FCX could be
superior to the obligations under the Guaranty. In addition, it is possible
that the amount for which FCX is liable under such Guaranty would be limited
or subject to avoidance by application of fraudulent conveyance laws and other
similar legal principles. If any of the obligations of FCX with respect to
the Guaranty are held unenforceable, as a fraudulent conveyance or otherwise,
claims of creditors of FCX effectively will have priority with respect to the
assets and earnings of such companies over the claims of the holders of the
Guaranteed Notes. Although the standards will vary depending upon the law of
the jurisdiction applied, in general, if a court were to find that at the time
of the issuance of the Guaranty, FCX issued the Guaranty with the intent of
defrauding creditors or received less than fair consideration or reasonably
equivalent value for issuing the Guaranty and among other things, was
insolvent or rendered insolvent by reason of issuing the Guaranty, was engaged
in a business for which its remaining assets constituted unreasonably small
capital, or was acting with the intent or belief that it would incur debts
beyond its ability to repay such debts as they matured (as the foregoing terms
are defined or interpreted under applicable federal and state bankruptcy and
fraudulent conveyance statutes), then such court could avoid the payment of
amounts by FCX pursuant to the Guaranty and require the return of such
payments to FCX. The Guaranty could also become equitably subordinated to
general creditors of FCX or could, under certain circumstances, be
invalidated. Management of FCX believes that, after giving effect to the
application of the proceeds from the Offering, FCX would not be considered
insolvent at the time of the issuance of the Guaranty or rendered insolvent by
reason of such issuance, would not be considered to be engaged in a business
or transaction for which its assets constituted unreasonably small capital to
carry on its business and would not be considered to intend to incur, or
believe that it would incur, debts beyond its ability to pay such debts as
they mature.
The Issuer
Dependence Upon PT-FI for Revenues from Infrastructure Assets
The Issuer will obtain funds to service the Guaranteed Notes from
payments from PT-FI, AFIC and any Infrastructure Affiliate in respect of
advances made to such entities by the Issuer with the net proceeds of the
Guaranteed Notes. The Underlying Notes will be secured by a pledge of the
rights of AFIC and any Infrastructure Affiliate under their respective Master
Services Agreements. The Guaranteed Notes, however, will not be secured. AFIC
and any Infrastructure Affiliate will be dependent upon revenues from PT-FI
for use and occupancy of the infrastructure assets of AFIC and such
Infrastructure Affiliate under the Master Services Agreements in order to
service the Underlying Notes. These infrastructure assets are located in a
remote and undeveloped area, are designed to support PT-FI's mining activities
and are generally not suitable for alternative uses. Accordingly, the
performance of AFIC and any Infrastructure Affiliate is largely dependent upon
the performance of PT-FI.
Certain Infrastructure Properties Not Yet Identified
Certain of the infrastructure assets that are planned to be sold to AFIC
have not yet been built. No assurance can be given that such assets will be
built in a timely manner. In addition, if the aggregate audited cost of
construction of the infrastructure assets to be sold to AFIC by PT-FI pursuant
to the Joint Venture Agreement is less than $270 million, PT-FI has agreed to
make available additional assets for purchase, with the approval of ALatieF,
so that the aggregate audited construction cost of the assets sold is not less
than $270 million. Accordingly, certain of the assets that may be acquired by
the Issuer have not yet been identified. Nevertheless, the Joint Venture
Agreement provides that fees payable by PT-FI and third parties to AFIC for
use of such assets must be sufficient to provide specified minimum returns on
the shareholders' investments. See "Business of the Issuer." The proceeds of
this Offering will initially be loaned by the Issuer to PT-FI by means of a
promissory note issued to the Issuer (the "PT-FI Note") pending the use of
such proceeds to fund the acquisition of infrastructure assets by AFIC or one
or more Infrastructure Affiliates. See "Use of Proceeds." There can be no
assurance that any such infrastructure assets will be acquired or that such
proceeds will be loaned to AFIC or one or more Infrastructure Affiliates.
Sources of Capital
ALatieF and PT-FI have committed to subscribe for additional shares of
capital stock of AFIC in the aggregate amounts of $40 million and $20 million,
respectively. These obligations are not secured. Any delay or default by
ALatieF in funding its equity commitments could delay or prevent the transfer
of some or all of the infrastructure assets proposed to be acquired by AFIC
from PT-FI. See "Business of the Issuer -- AFIC." Pending any such transfer,
PT-FI would continue to be obligated on the PT-FI Note, with respect to net
proceeds of this Offering previously loaned by the Issuer to PT-FI and not
theretofore repaid. See "Description of the Guaranteed Notes--Application of
Proceeds under Indenture."
Lack of Public Market for the Guaranteed Notes
There is no existing market for the Guaranteed Notes. Accordingly, there
can be no assurance as to the liquidity of any market that may develop for the
Guaranteed Notes, the ability of holders of the Guaranteed Notes to sell their
Guaranteed Notes or the price at which such holders would be able to sell
their Guaranteed Notes. If such market were to develop, the Guaranteed Notes
could trade at prices that may be lower than the initial offering price
thereof, depending on many factors, including prevailing interest rates, FCX's
operating results and markets for similar debt securities. The Underwriters
have advised FCX that they currently intend to make a market in the Guaranteed
Notes. However, they are not obligated to do so, and any market making with
respect to the Guaranteed Notes may be discontinued at any time without
notice. FCX does not intend to apply for listing of the Guaranteed Notes on
any securities exchange.
Historically, the market for non-investment grade debt has been subject
to disruptions that have caused substantial volatility in the prices of
securities similar to the Guaranteed Notes. There can be no assurance that the
market for the Guaranteed Notes will not be subject to similar disruptions.
USE OF PROCEEDS
The proceeds from the sale of the Guaranteed Notes, $120 million will be
loaned by the Issuer to AFIC and one or more Infrastructure Affiliates. PT-FI
has agreed to reimburse the Issuer for the underwriting discount and expenses
associated with the issuance of the Guaranteed Notes. The proceeds of such
loan will used by AFIC and any such Infrastructure Affiliate, together with
the proceeds of equity subscriptions by the stockholders of AFIC and any such
Infrastructure Affiliate, to purchase infrastructure assets from PT-FI having
an aggregate purchase price of $180 million. Pending such application, the
proceeds from the sale of the Guaranteed Notes will be loaned on a senior
unsecured basis to PT-FI and used for general corporate purposes, including
funding of capital expenditures associated with the expansion of its mining
and milling activities and the development of infrastructure assets.
FCX CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization
of FCX at December 31, 1993 and as adjusted to reflect (i) the sale of the
Guaranteed Notes offered hereby and the application of the net proceeds
thereof, (ii) the sale in January 1994 of 4,305,580 Depositary Shares, Series
II, each representing 0.05 shares of Gold-Denominated Preferred Stock, Series
II, and the application of the net proceeds thereof and (iii) the call for
redemption of the Zero Coupon Notes and the issuance of approximately 5.8
million shares of Class A Common Stock upon conversion thereof.
December 31, 1993
__________________________
Actual As Adjusted(1)
---------- -----------
(in thousands)
Cash and short-term
investments $ 13,798 $ 275,507
========== ==========
RTM short-term borrowings $ 31,692 $ 31,692
Current portion of RTM gold and
silver denominated loans(2) 13,773 13,773
Current portion of long-term debt 3,326 3,326
---------- ----------
Total current debt 48,791 48,791
---------- ----------
RTM notes payable to banks 949 949
Note payable to FTX 12,270 12,270
PT-FI bank loan 13,000 --
RTM gold and silver denominated loans(2) 25,510 25,510
AFIC medium-term bank loan 58,100 58,100
Guaranteed Notes offered hereby -- 120,000
Zero Coupon Exchangeable Notes due 2011 102,039 --
---------- ----------
Total long-term debt 211,868 216,829
---------- ----------
Minority interest 46,781 62,328
---------- ----------
Gold-Denominated Preferred Stock represented
by depositary shares, issued and outstanding
300,000 shares 232,620 232,620
Gold-Denominated Preferred Stock, Series II,
represented by depositary shares, Series II,
issued and outstanding 215,279 shares, as adjusted -- 167,380
---------- ----------
232,620 400,000
---------- ----------
Stockholders' equity:
Preferred Stock, par value $0.10, 2,000,000
shares authorized: Step-Up Convertible
Preferred Stock represented by depositary
shares, issued and outstanding 700,000 shares(3) 350,000 350,000
Special Stock, par value $0.10, 110,000,000 shares
authorized:
Special Preference Stock represented
by depositary shares, issued and outstanding
26,400,000 shares 224,400 224,400
Class A Common Stock, issued and outstanding
58,022,582 shares actual; 63,803,313
shares as adjusted(4) 5,802 6,380
Class B Common Stock, par value $0.10,
authorized 200,000,000 shares, issued and
outstanding 142,129,602 shares 14,213 14,213
Capital in excess of par value 334,166 426,456
Cumulative foreign translation adjustment (10,012) (10,012)
Retained earnings 29,358 29,358
---------- ----------
Total stockholders' equity 947,927 1,040,795
---------- ----------
Total capitalization $1,487,987 $1,768,743
=========== ==========
_________________
(1) Does not include adjustments for dividends paid on February 1, 1994
totaling $30.8 million for Common Stock and $10.4 million for Preferred
Stock. Assumes estimated underwriting discount and expenses in
connection with the Offering of approximately $3.5 million.
(2) Payable with 107,800 ounces of gold, 36,800 ounces within one year, and
953,100 ounces of silver, 423,600 ounces within one year, which are
carried at the market prices of gold ($331.70 per ounce) and silver
($3.70 per ounce), respectively, at the date of acquisition.
(3) In addition to the 515,279 currently outstanding shares of
Gold-Denominated Preferred Stock.
(4) Does not include (a) approximately 8.9 million shares of Class A Common
Stock authorized for issuance upon conversion of the Company's Special
Preference Stock, or (b) approximately 11.4 million shares of Class A
Common Stock authorized for issuance upon conversion of the Step-Up
Convertible Preferred Stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Ore Reserve Addition and Ongoing Exploration Program
Total estimated proved and probable reserves at PT-FI have increased
since December 31, 1992 by an estimated 5.9 billion pounds of copper (a 28%
increase), 7.0 million ounces of gold (a 22% increase), and 32.0 million
ounces of silver (a 72% increase), bringing PT-FI's total year-end 1993
estimated proved and probable reserves to 26.8 billion pounds of copper, 39.1
million ounces of gold and 76.7 million ounces of silver. The increases, net
of production during the year, were added primarily at the Grasberg deposit,
but also include additions at PT-FI's underground mine at the DOZ deposit and
the recently discovered Big Gossan deposit.
In addition to continued delineation of the Grasberg deposit and other
deposits including Big Gossan, PT-FI is proceeding with its ongoing
exploration program for mineralization within the original mining area. During
1993, PT-FI initiated helicopter-supported surface drilling of the Wanagon
gold/silver/copper prospect, located approximately 2 kilometers northwest of
Big Gossan and approximately 3 kilometers southwest of Grasberg, where seven
holes were drilled. Significant copper mineralization has been encountered
below the 2,900 meter elevation.
Preliminary exploration of the New COW Area has indicated promising
targets. Extensive stream sediment sampling within the new acreage has
generated analytical results which are being evaluated. This sampling program,
when coupled with the regional mapping completed on the ground and from aerial
photographs, has led to the outlining of over 50 exploration targets. Detailed
follow-up exploration of these anomalies by additional mapping and sampling
and through the use of both aerial and ground magnetic surveys is now in
progress. PT-FI has completed a fixed-wing air-magnetometer survey of the
entire New COW Area and, together with extensive geologic data gathered from
surface sampling, this air-magnetometer survey will enable PT-FI to
efficiently direct future exploratory efforts. Drilling of several of these
targets has already commenced. There can be no assurance, however, that
PT-FI's exploration programs will result in discovery of ore reserves in
commercial quantities.
1993 Results of Operations Compared with 1992
FCX reported 1993 net income applicable to common stock of $21.9 million
($.11 per share) compared with net income of $122.9 million ($.66 per share)
for 1992. Information for 1993 reflects a $15.7 million loss for RTM since its
acquisition. Operating income was lower in 1993 due to a lower gross margin
resulting primarily from lower copper realizations; higher exploration
expenses; administrative restructuring costs and asset recoverability charges;
and higher general and administrative costs. Also impacting net income were
lower interest expense resulting from reduced debt levels, a higher effective
tax rate and an increase in preferred dividends.
A reconciliation of revenues from 1992 to 1993 is presented below (in
millions):
Revenues--1992 $714.3
RTM revenues 288.4
Elimination of intercompany sales (47.7)
Concentrate:
Price realizations:
Copper (84.7)
Gold 14.7
Sales volumes:
Copper (5.5)
Gold 30.2
Treatment charges 23.6
Adjustments to prior year concentrate sales (13.0)
Other 5.6
------
Revenues -- 1993 $925.9
======
Revenues in 1993 increased as a result of the acquisition of RTM, adding
sales of copper cathodes and anodes ($204.9 million), gold bullion ($57.4
million), and other byproducts ($26.1 million). Excluding RTM, revenues
declined 4% when compared to 1992. Copper price realizations, taking into
account PT-FI's $.90 per pound price protection program, were 12% lower than
in 1992, but gold price realizations were up 6%. Although ore production
averaged 62,300 MTPD in 1993 (8% higher than in 1992), copper sales volumes
decreased slightly from 1992 primarily because of sales from inventory in
1993. Gold sales volumes in 1993 benefited from significantly higher
fourth-quarter 1993 gold grades (a 46% increase over fourth-quarter 1992 and a
38% increase over third-quarter 1993), which are not anticipated to continue
in 1994, and an increase in gold recovery rates for the year, which improve
with higher gold grades. See "Summary Operating Data".
Revenues in 1993 also benefited from a decline in treatment charges of
3.4 cents per pound from the 1992 period. This reduction in treatment charges
resulted from a tightening in the concentrate market as the industry's
inventories were reduced for much of 1993. Additionally, lower copper prices
led to lower treatment charges since these charges vary with the price of
copper.
Adjustments to prior period concentrate sales include changes in prices
on all metals for prior year open sales as well as the related impact on
treatment charges. Open copper sales at the beginning of 1993 were recorded
at an average price of $1.04 per pound, but subsequently were adjusted
downward as copper prices fell during the year, negatively impacting 1993
revenues. As of December 31, 1993, 213.4 million pounds of copper remained to
be contractually priced during future quotational periods. As a result of
PT-FI's price protection program, discussed below, these pounds are recorded
at $.90 per pound. The copper price on the London Metal Exchange ("LME") was
$.84 per pound on February 1, 1994.
In June 1993, two of PT-FI's four mill level ore passes caved, resulting
in a blockage of a portion of the ore pass delivery system. The blockage's
primary effect was to limit mill throughput to approximately 40,700 MTPD for
approximately eight weeks. The impact of the blockage was minimized by using
an ore stockpile adjacent to the mill and installing conveyors to alternative
ore pass systems. The ore pass blockage has been rectified through the
temporary use of alternative delivery systems and by-passes. A permanent
delivery system is expected to be in service by mid-1994. The copper recovery
rate for 1993 was adversely affected because the ore milled from the stockpile
contained higher than normal oxidized copper, which yields lower copper
recoveries.
PT-FI's unit site production and delivery costs increased slightly from
1992 primarily as a result of costs incurred in connection with the ore pass
blockage and an increase in production overhead costs related to expansion
activities. Unit cash production costs declined significantly to 31.1 cents
per pound in 1993 from 40.7 cents per pound in 1992, benefiting from higher
gold and silver credits, lower treatment charges, and reduced royalties
primarily due to lower copper prices on which such royalties are based.
PT-FI's depreciation rate increased from 7.4 cents per payable pound during
1992 to 8.3 cents in 1993, reflecting the increased cost relating to the
66,000 MTPD expansion. As a result of the reserve additions discussed
earlier, PT-FI's depreciation rate is expected to decrease to 7.5 cents per
payable pound for 1994, absent any other significant changes in ore reserves.
In addition, FCX is amortizing costs in excess of book value ($2.4 million in
1993) relating to certain capital stock transactions with PT-FI. Amortization
of these excess costs is expected to be $3.6 million per year starting in
1994.
Exploration expenditures in Irian Jaya totaled $12.2 million in 1992,
compared to $31.7 million in 1993, and they are projected to be approximately
$35 million in 1994. Exploration expenditures in Spain are expected to be
approximately $6 million in 1994.
FCX's general and administrative expenses increased from $68.5 million in
1992 to $75.7 million in 1993, including $5.0 million for RTM, primarily
because of the additional personnel and facilities needed relative to the
expansion at PT-FI and the acquisition of RTM. During 1993, FCX recorded
certain charges related to restructuring the administrative organization of
FTX and reductions in the book carrying value of certain assets to estimated
recoverable amounts. Substantial cost savings were achieved by the
restructuring activities undertaken in 1993. However, further increases in
general and administrative expenses are anticipated in conjunction with
continuing expansion at PT-FI. General and administrative expenses are
currently expected to increase by approximately 25% in 1994.
Interest expense was $18.9 million in 1992 and $15.3 million in 1993,
excluding $24.0 million and $24.5 million of capitalized interest,
respectively.
The New COW provides a 35% corporate income tax rate for PT-FI and a 15%
withholding tax on interest for debt incurred after the signing of the New COW
and on dividends paid to FCX by PT-FI. The additional withholding required on
interest and on dividends paid to FCX by PT-FI, and a $15.7 million loss by
RTM for which no tax benefit is recorded, results in a 1993 effective tax rate
of 52%.
Trends and Outlook--Marketing
PT-FI's copper concentrates, which contain significant amounts of payable
gold and silver, are sold primarily under long-term sales agreements which
accounted for virtually all of PT-FI's 1993 sales. PT-FI has commitments from
various parties to purchase virtually all of its estimated 1994 production.
Concentrate sales agreements provide for provisional billings based on world
metals prices, primarily the LME, generally at the time of loading. As is
customary within the industry, sales under these long-term contracts usually
"final-price" within a few months of shipment. Certain terms of the long-term
contracts, including treatment charges, are negotiated annually on a portion
of the tonnage to reflect current market conditions. Treatment charges have
declined during 1993 as a result of the tightening in the concentrate market
and are expected to remain at or below 1993 levels. RTM has commitments from
most of its suppliers for 1994 treatment charge rates in excess of current
spot market rates.
The increased production at PT-FI has required it to market its
concentrate globally. Its principal markets include Japan, Asia, Europe and
North America. PT-FI's mill throughput is currently forecast to be
approximately 67,000 MTPD for 1994 as PT-FI continues to integrate new mill
equipment for the expansion to 115,000 MTPD. Current estimates for 1994
production are approximately 700 million pounds of copper and 780,000 ounces
of gold for PT-FI and 165,000 ounces of gold at RTM. RTM, whose smelter can
be expanded, was acquired to provide low-cost smelter capacity for a portion
of PT-FI's concentrate and to improve PF-FI's competitive position in
marketing concentrate to other parties.
During 1993, copper prices dropped to their lowest levels since 1987,
reflecting lower demand caused by the continuing global recession, but
recovered to a level in excess of $.80 per pound. Prices for copper, gold and
silver are influenced by many factors beyond FCX's control and can fluctuate
sharply. PT-FI has a price protection program for virtually all of its
estimated copper sales to be priced in 1994 at an average floor price of $.90
per payable pound of copper, while allowing full benefit from prices above
this amount. Based on projected 1994 PT-FI copper sales of approximately 720
million pounds, a 1 cent per pound change in the average annual copper price
received over $.90 per pound would have an approximately $6 million effect on
pretax operating income and cash flow. Based on projected 1994 gold sales of
approximately 800,000 ounces by PT-FI, a $10 per ounce change in the average
annual gold price received would have an approximately $8 million effect on
1994 pretax operating income and cash flow.
Capital Resources and Liquidity
Cash flow from operations decreased from $252.6 million for 1992 to
$158.5 million during 1993, due primarily to lower net income and an increase
in inventories. Materials and supplies increased over year-end 1992 as
additional explosives, reagents and chemicals, fuel, and spare parts were
required for the expanding PT-FI operations. For the year ended December 31,
1993, consolidated working capital decreased by $352.0 million from December
31, 1992, primarily as a result of a $358.0 million decrease in cash and
short-term investments which was used to reduce long-term debt and fund
capital expenditures and the negative working capital position of RTM.
Cash flow used in investing activities totaled $579.7 million in 1992
compared with $463.5 million in 1993. Capital expenditures increased 23% in
1993 due to increased expansion activities. During 1992, FCX acquired an
indirect interest in PT-FI for $211.9 million.
Cash flow provided by financing activities totaled $618.2 million in 1992
compared with $53.1 million used in financing activities in 1993. FCX issued
shares of its Step-Up Preferred Stock and its Gold-Denominated Preferred Stock
during 1993 for net proceeds totaling $561.1 million. Net proceeds from the
two offerings were used in part to reduce borrowings under the PT-FI amended
credit agreement by a net $537.0 million, thereby increasing the facility's
availability for general corporate purposes and the continued expansion of
mining and milling operations. Also in 1993, PT-FI received net proceeds of
$80.0 million from the sale of a portion of PT-FI's infrastructure assets. In
1992, $212.5 million was received from the sale of a 10% interest in PT-FI to
Indonesian investors in December 1991 and $392.0 million was received from the
sale of Class A Common Stock and Special Preference Stock. Dividend payments
rose in 1993 due to increased Class A shares outstanding and dividends paid on
the Special Preference and Preferred Stock issued in 1992 and 1993. FCX called
its Zero Coupon Notes for redemption in January 1994 (substantially all of
which were exchanged for Class A Common Stock) and completed a public
offering of its Gold-Denominated Preferred Stock, Series II which yielded net
proceeds of $158.5 million to be used primarily for expansion related
activities.
Cash flow from operations increased from $73.9 million for 1991 to $252.6
million during 1992, due primarily to higher net income. Customer accounts
receivable rose by $76.1 million to $130.6 million because of increased sales.
Partially offsetting the increase in receivables was an increase in accounts
payable and accrued liabilities associated with expansion activities. Cash
flow used in investing activities increased from $240.0 million during 1991 to
$579.7 million for 1992, due to increased capital expenditures for the 57,000
MTPD expansion and the purchase of an indirect interest in PT-FI. Cash flow
from financing activities increased $415.8 million in 1992 compared with 1991,
primarily due to the sale of Class A Common Stock, Special Preference Stock,
and a 10% interest in PT-FI to Indonesian investors. The proceeds from these
financing activities were used to purchase an indirect interest in PT-FI and
to fund ongoing expansion related expenditures.
RTM's principal operations currently consist of a copper smelter. The FCX
purchase proceeds will be used by RTM for working capital requirements and
capital expenditures, including funding a portion of the expansion of its
smelter production capacity expected to cost approximately $50 million from
its current 150,000 metric tons of metal per year to 180,000 metric tons of
metal per year by mid-1995. RTM is also studying further expansion of the
smelter facilities to as much as 270,000 metric tons of metal production per
year and is assessing the opportunity to expand its tankhouse operations from
135,000 metric tons per year to 215,000 metric tons per year. RTM's 1993 cash
flow from operations was negative ($5.9 million) primarily due to cash
requirements related to shut-down costs for RTM's gold mine. RTM has relied
on short-term credit facilities and the FCX purchase proceeds to fund this
shortfall. RTM is currently evaluating financing alternatives to fund its
short-term needs and to provide long-term funding for expansion. RTM's future
cash flow is dependent on a number of variables including fluctuations in the
exchange rate between the United States dollar and the Spanish peseta, future
prices and sales volumes of gold, the size and timing of the smelter and
tankhouse expansions, and the supply/demand for smelter capacity and its
impact on related treatment and refining charges.
During 1992, the Company established the EIP. The full EIP (currently
expected to involve aggregate costs of as much as $500 million to $600
million) includes plans for commercial, residential, educational, retail,
medical, recreational, environmental and other infrastructure facilities to be
constructed during the next 20 years for PT-FI operations. The EIP will
develop and promote the growth of local and other third party activities and
enterprises in Irian Jaya through the creation of certain necessary support
facilities. The initial phase of the EIP is under construction and is
scheduled for completion in 1995 at a cost of approximately $200 million.
Certain portions of the EIP and other existing infrastructure assets are
expected to be sold in the near future to provide additional funds for the
expansion to 115,000 MTPD.
Through 1995, capital expenditures are expected to be greater than cash
flow from operations. Upon completion of the previously announced 115,000
MTPD expansion by year-end 1995, annual production is expected to approach 1.1
billion pounds of copper and 1.5 million ounces of gold. Subsequently,
capital expenditures will be determined by the results of FCX's exploration
activities and ongoing capital maintenance programs. Estimated capital
expenditures for 1994 and 1995 for the expansion to 115,000 MTPD, the initial
phase of the EIP, ongoing capital maintenance expenditures, and the expansion
of RTM's smelter to 180,000 metric tons of metal per year are expected to
range from $850 million to $950 million and will be funded by operating cash
flow, sales of existing and to-be-constructed infrastructure assets and a wide
range of financing sources the Company believes are available as a result of
the future cash flow from PT-FI's mineral reserve asset base. These sources
include, but are not limited to, PT-FI's credit facility and the public and
private issuances of securities. Depending on the long-term growth of PT-FI's
operations, the total cost of the EIP could range between $500 million and
$600 million. Additional EIP expenditures, if any, would be expected to be
funded by third-party financing sources, which may include debt, equity or
asset sales.
The New COW contains provisions for PT-FI to conduct or cause to be
conducted a feasibility study relating to the construction of a copper
smelting facility in Indonesia and for the eventual construction of such a
facility, if it is deemed to be economically viable by PT-FI and the
Government of Indonesia. PT-FI has participated in a group assessing the
feasibility of constructing a copper smelting facility in Indonesia.
PT-FI amended its $550 million credit agreement in June 1993. The amended
credit agreement, which, among other things eliminated a required debt service
reserve and provided a lower interest rate, is guaranteed by FCX and FTX, and
is structured as a three year revolving line of credit followed by a 3 1/2
year reducing revolving line of credit. As of February 1, 1994, $425 million
was available to PT-FI under the credit facility. To the extent FTX and its
other subsidiaries incur additional debt, the amount available to PT-FI under
the credit facility may be reduced. See "Description of Certain
Indebtedness--PT-FI Credit Agreement."
Payment of future dividends by FCX will depend on the payment of
dividends by PT-FI, which, in turn, depends on PT-FI's economic resources,
profitability, cash flow and capital expenditures. It is the policy of PT-FI
to maximize its dividend payments to stockholders, taking into account its
operational cash needs including debt service requirements. FCX currently pays
an annual cash dividend of 60 cents per share to its common shareholders.
Management anticipates that this dividend will continue at this level through
completion of the expansion in 1995, absent significant changes in the prices
of copper and gold. However, FCX's Board of Directors determines its dividend
payment on a quarterly basis and in its discretion may change or maintain the
dividend payment. In determining dividend policy, the Board of Directors
considers many factors, including current and expected future prices and sales
volumes, future capital expenditure requirements and the availability and cost
of financing from third parties.
PT-FI has had good relations with the Indonesian Government since it
commenced operations in Indonesia in 1967. The New COW also provides that the
Indonesian Government will not nationalize the mining operations of PT-FI or
expropriate assets of PT-FI. Disputes under the New COW are to be resolved by
international arbitration. The 1967 Foreign Capital Investment Law, which
expresses Indonesia's foreign investment policy, provides basic guaranties of
remittance rights and protection against nationalization, a framework for
incentives and some basic rules as to other rights and obligations of foreign
investors.
Environmental
FTX and affiliates, including FCX, have a history of commitment to
environmental responsibility. Since the 1940s, long before public attention
focused on the importance of maintaining environmental quality, FTX has
conducted preoperational, bioassay, marine ecological, and other environmental
surveys to ensure the environmental compatibility of its operations. FTX's
Environmental Policy commits FTX's operations to full compliance with local,
state, and federal laws and regulations.
PT-FI believes it is in compliance with Indonesian environmental laws,
rules, and regulations. PT-FI had a team of environmental scientists from a
leading Indonesian scientific institution conduct a study to update its 1984
Environmental Impact Assessment that covered expansion to 66,000 MTPD.
Subsequently, that document was expanded by other independent scientists to
cover all environmental aspects of the current expansion to 115,000 MTPD. The
latest study document was submitted to the Government in December 1993. Based
on preliminary hearings, PT-FI believes the study document will be accepted
substantially as submitted.
FCX has made, and will continue to make, expenditures at its operations
for protection of the environment. Increasing emphasis on environmental
matters can be expected to require FCX to incur additional costs, which will
be charged against income from future operations. On the basis of its
analysis of its operations in relation to current and presently anticipated
environmental requirements, management does not anticipate that these
investments will have a significant adverse impact on its future operations,
liquidity, capital resources, or financial position.
1992 Results of Operations Compared with 1991
FCX reported 1992 net income of $122.9 million ($.66 per share), compared
with 1991 net income of $96.2 million ($.53 per share). A reconciliation of
revenues from 1991 to 1992 is presented below (in millions):
Revenues - 1991...................................... $467.5
Price realizations:
Copper............................................. 8.8
Gold............................................... (7.4)
Sales volumes:
Copper............................................. 218.5
Gold............................................... 95.7
Treatment charges.................................... (73.0)
Adjustments to prior year concentrate sales.......... 12.5
Other................................................ (8.3)
-------
Revenues--1992 $714.3
=======
Revenues increased 53% in 1992, reflecting higher production rates due
to the mine/mill expansion, higher gold grades, and the sale of all year-end
1991 inventory. Price realizations were relatively unchanged between years
(2% increase in copper realizations and 5% decrease in gold realizations), but
sales volumes benefited significantly from the expansion, gold grades, and
inventory sales discussed above. Copper sales volumes increased 48% and gold
sales volumes increased 71%. Partially offsetting the benefit from sales
volumes increases was a 3.6 cents per pound increase in treatment charges
because of tight market conditions in the smelting industry early in 1992 and
increased spot market sales attributable to higher than anticipated production
due to the early completion of the 57,000 MTPD expansion program. A $5.7
million upward revenue adjustment was made in 1992 compared with a $6.8
million downward revenue adjustment in 1991 for prior year concentrate sales
contractually priced during the period.
Cost of sales for 1992 were $357.2 million, an increase of 47% from 1991,
due primarily to a 48 percent increase in copper sales volumes. Unit site
production and delivery costs in 1992 approximated 1991 costs. FCX's
depreciation rate declined from an average 8.7 cents per payable pound in 1991
to 7.4 cents in 1992 because of the significant increase in ore reserves
during 1991.
Interest expense was $21.5 million during 1991 compared with $18.9
million in 1992, excluding $18.3 million and $24.0 million of capitalized
interest, respectively.
General and administrative expenses rose from $40.6 million in 1991 to
$68.5 million in 1992, because of several financing transactions and
operational and environmental studies in 1992 which required additional
corporate personnel whose salaries and related overhead, were charged to the
Company. General and administrative expenses also increased because of the
additional personnel and facilities needed in Indonesia for the expanding
operations.
Minority interest share of net income reflects FCX's 90% ownership
interest in PT-FI for 1991, compared with its 80% interest during 1992.
(GRAPHIC)
(SEE APPENDIX B FOR DESCRIPTION OF GRAPHIC MATERIAL)
BUSINESS OF FCX
General
FCX, a Delaware corporation, conducts its operations in Indonesia through
its 81.3% directly owned subsidiary, PT-FI, a limited liability company
organized under the laws of Indonesia and domesticated in Delaware. Of the
remaining 18.7% of the outstanding PT-FI common stock, 9.35% is owned by the
Indonesian Government and 9.35% is owned by PT-II, in which FCX owns a 49%
interest. PT-FI engages in the exploration for and development, mining and
processing of concentrates containing copper, gold and silver in Indonesia and
the marketing of concentrates containing such metals worldwide. In 1993, FCX
acquired RTM, as described under "Prospectus Summary-- Recent Developments."
FCX also owns Eastern Mining, a separate subsidiary which has been granted
certain mineral exploration rights in Irian Jaya, Indonesia.
PT-FI's operations are located in the rugged highlands of the Sudirman
Mountain Range in the province of Irian Jaya, Indonesia, located on the
western half of the island of New Guinea. Over the last 25 years, PT-FI has
met an extraordinary combination of engineering and construction challenges to
develop its mining and milling complex and supporting infrastructure in one of
the least explored areas in the world. PT-FI's largest mine, Grasberg,
discovered in 1988, contains the largest single gold reserve and one of the
five largest open-pit copper reserves of any mine in the world. In order to
develop the Grasberg deposit, PT-FI undertook an expansion program in stages,
initially from 20,000 MTPD to 57,000 MTPD. Expansion from 57,000 MTPD to
66,000 MTPD was completed in 1993 ahead of schedule and within budget. PT-FI
has begun work on a further expansion of its overall mining and milling rate
to 115,000 MTPD which is expected to be completed by year-end 1995 and to
result in annual production rates approaching 1.1 billion pounds of copper and
1.5 million ounces of gold.
Copper and Gold
Copper. Copper's primary property, that of high thermal and electrical
conductivity, makes it one of the most important metals in the industrial
world. It is used worldwide in electrical wiring, phone lines, plumbing,
industrial machinery, transportation equipment, consumer, and general
products. Building construction accounts for over 40% of all copper consumed
and the average car contains more than 40 pounds of copper. Copper remains
the product of choice in the plumbing market due to its durability and
bactericide properties. Another important area of copper consumption involves
its use as the basis for many industrial alloys including brass, bronze, and
as an important addition with other alloys based on lead, zinc, nickel and
aluminum.
Gold. Gold is used as a source of decoration in jewelry, a raw material
for industrial uses, and as a store of value especially during times of
economic or political uncertainty.
Jewelry accounts for one-half of the world's consumption of gold. Gold's
natural softness prevents fabrication in its pure form but when alloyed with
such metals as copper, zinc, silver and nickel, a wide range of colors in gold
jewelry can be achieved. Changes in real income have the most impact on the
direction of gold jewelry demand. From 1980 to 1992, gold fabrication in Asia
increased at a trend line growth rate of over 20% as the rise in economic
prosperity created a large, wealthy population with a strong affinity towards
the metal.
Industrial uses of gold account for less than 10% of total demand. These
uses are mostly confined to dentistry and the electronics industry where it is
used for plating fine wires and contacts to assure minimum resistance. Gold
is also used in the manufacture of certain semi-conductors and printed
circuits.
Gold as an investment vehicle can take the form of physical purchases of
gold bars, coins and jewelry or through paper purchases of gold futures and
option contracts or gold mining equities. The latter medium is more prevalent
in the modern world and can have a significant impact on gold prices.
The demand for and supply of gold affects gold prices but not in the same
manner as those of the vast majority of other commodities. Because the supply
of gold is made up largely of gold produced in past years, the amount produced
in a single year constitutes a very small portion of the total supply. Thus,
variations in current production levels do not have a significant impact on
the price of gold.
Contract of Work
In 1967, PT-FI's predecessor, Freeport Indonesia, Incorporated, a
Delaware corporation ("FII"), and the Indonesian Government entered into a
contract of work (the "1967 COW") governing FII's mining activities in
Indonesia. From 1967 until the end of 1991, FII operated as the sole
contractor for the production and marketing of certain minerals from a 24,700
acre area (the "1967 Mining Area"). On December 30, 1991, FII was merged into
PT-FI in Delaware and PT-FI and the Indonesian Government signed a new
contract of work (the "New COW") which superseded the 1967 COW. The New COW
covers both the 1967 Mining Area and an additional contiguous 6.5 million acre
exploration area (the "New COW Area"). The New COW has a 30-year term with
provisions for two 10-year extensions under certain conditions. Since the
signing of the 1967 COW, PT-FI has enjoyed and continues to enjoy favorable
and stable relations with the Indonesian Government.
The New COW contains a provision under which PT-FI must progressively
relinquish its rights to the parts of the New COW Area in amounts equal to 25%
of the 6.5 million acres at the end of each of three specified periods, the
first of which is scheduled to expire on December 30, 1994, and the last of
which is set to expire five to seven years after the signing of the New COW.
The New COW also contains provisions for PT-FI to conduct or cause to be
conducted a feasibility study relating to the construction of a copper
smelting facility in Indonesia and for the eventual construction of such a
facility by PT-FI, if such facility is deemed to be economically viable by
PT-FI and the Indonesian Government and is not constructed by others. PT-FI is
pursuing with another company the feasibility of constructing a copper
smelting facility in Indonesia, in which PT-FI would hold a minority interest
and supply approximately one-half of the smelter's currently anticipated
copper concentrate requirements.
The New COW provides that PT-FI may be required after 2001, if requested
by the Indonesian Government to meet the then existing requirements of
Indonesian law, and subject to certain other specified conditions, to sell up
to an additional 25% of its common stock through offerings on the Jakarta
Stock Exchange or up to an additional 31% if sold otherwise to Indonesian
nationals, with all such sales to be at market prices to be determined at the
times of sale. However, the New COW further stipulates that PT-FI is entitled
to the benefit of any changes in Indonesian law, regulations, or policy
subsequent to the signing of the New COW that impose less burdensome
divestiture requirements. Indonesian regulations promulgated in 1992 require
that 20% of the capital stock of a corporation such as PT-FI ultimately be
held by Indonesian investors. The Investment Coordinating Board of Indonesia
has indicated that such regulations apply to PT-FI.
On April 29, 1993, FCX's subsidiary, Eastern Mining, was granted
exclusive exploration rights on 2.5 million acres adjacent to the New COW Area
(see "Eastern Mining" below.)
Ore Reserves of PT-FI
The following table summarizes PT-FI's estimated proved and probable
reserves at the end of each of the years shown, as verified by Independent
Mining Consultants, Inc. (see "Special Considerations--FCX --Reserves"):
December 31,
_____________________________________________
1989 1990 1991 1992 1993
----- ------ ------ ------ ------
(in millions)
Reserves:
Ore reserves--dry metric
tons 256.4 445.7 768.0 733.2 1,074.1
Copper--payable pounds 8,300 13,900 21,800 20,900 26,800
Gold--payable ounces 8.1 19.5 32.4 32.1 39.1
Primarily as a result of the drilling operations at the Grasberg mine
(see "Mines in Production" below), PT-FI's proved and probable copper and gold
ore reserves have increased since December 31, 1989 by approximately 223% and
383%, respectively, and from year-end 1992 by approximately 28% and 22%,
respectively. PT-FI's Grasberg deposit now contains the largest single gold
reserve and one of the five largest open-pit copper reserves of any mine in
the world.
This increase in proved and probable reserves, net of production,
reflects the addition of approximately 340.9 million tons of ore since
December 31, 1992 (a 46% increase) as the result of a drilling program that
includes data obtained from the surface down to the 3,100 meter elevation at
the Grasberg copper/gold ore body, bringing total proved and probable ore
reserves to approximately 1,074.1 million tons. PT-FI's proved and probable
reserves at Grasberg do not include reserves below the 3,100 meter level.
PT-FI has begun driving an adit (the "Amole adit") from the mill site to a
point below the currently delineated Grasberg ore body at the 2,900 meter
level. The Amole adit, expected to be completed in 1996, will facilitate
further deep exploration to delineate the extent of the Grasberg deposit below
the 3,100 meter level. Preliminary drilling from the existing 3,700 meter adit
indicates significant additional mineralization below the existing proved and
probable reserves. There can be no assurance, however, that PT-FI's
exploration programs will result in the delineation of additional reserves in
commercial quantities.
PT-FI's proved and probable ore reserves at December 31, 1993 of
approximately 1,074.1 million tons had an average grade of 1.31% copper and
1.47 grams of gold per ton compared with approximately 733.2 million tons of
ore with an average grade of 1.47% copper and 1.72 grams of gold per ton at
December 31, 1992.
The Grasberg mine reserves alone approximate 976.6 million tons of ore at
an average grade of 1.25% copper and 1.55 grams of gold per ton.
Mines in Production
PT-FI currently has two mines in operation: Grasberg and Ertsberg East,
both within the 1967 Mining Area. PT-FI milled ore at an average rate of
approximately 57,600 MTPD in 1992 and 62,300 MTPD in 1993.
Open-pit mining of the Grasberg ore body commenced in January 1990. In
1993, Grasberg mine output totaled approximately 19.8 million tons of ore,
providing approximately 81% of total PT-FI ore production. Production from
the Grasberg ore body during January 1994 averaged 77,700 MTPD.
Ertsberg East is an underground mine which commenced production in 1980.
Block caving operations are conducted in two separate zones of the ore body
with a common haulage level at the 3,530 meter elevation. In 1993, mine output
from Ertsberg East totaled approximately 4.4 million tons of ore and provided
approximately 18% of total PT-FI ore production. Ertsberg East is expected to
be depleted by the second half of 1994, and production primarily from
Grasberg, supplemented by production from the IOZ ore body (see "Mines in
Development" below), is expected to offset the Ertsberg East production.
Production from Ertsberg East during January 1994 averaged 2,700 MTPD.
Mines in Development
Three major additions to PT-FI's underground mining operations, which are
intended to replace existing underground production areas when they become
depleted, have previously been developed: the DOM, the DOZ and the IOZ. The
IOZ is located vertically between the Ertsberg East and the DOZ ore bodies.
The DOM ore body's initial working level is some 380 meters above the
Ertsberg East mining operation. The DOM ore body will initially be mined
using the block caving method. Pre-production development is complete and the
first block cave area has been prepared. All maintenance, warehouse and
service facilities are in place. Production at the DOM has been deferred as a
result of the continued increase in the Grasberg ore reserves.
The mine being developed at the IOZ ore body is situated approximately
350 meters above the 2,900 meter level adit. Delineation drilling and
pre-production development began in 1991. The IOZ is being developed to
gradually replace production from the Ertsberg East mine beginning in 1993
using the same block caving method. Mining will proceed downward from the IOZ
to the DOZ.
The DOZ, also an underground mine within the 1967 Mining Area, lies
vertically below the IOZ ore body and is currently capable of production.
Initial production from the DOZ commenced in 1989. However, at the end of
1991, mine output from the DOZ was temporarily suspended, and it is
anticipated that it will resume once the IOZ ore body has been depleted
sometime after 1998.
Exploration
In addition to continued delineation of the Grasberg deposit and other
deposits discussed above, PT-FI is continuing its ongoing exploration program
for copper and gold mineralization within the 1967 Mining Area. Two anomalous
zones in the vicinity of PT-FI's current mining operations are under active
exploratory drilling. The Big Gossan and Wanagon mineralizations are located
west of the Ertsberg open pit, southwest of the Grasberg copper/gold ore body
and anchor the ends of a clearly defined mineralized structure trending
roughly east-west for 4.5 kilometers. The Big Gossan mineralization, as
drilled to date, extends approximately 1,100 meters from just east of the
intersection of the Amole adit.
Over 50 holes have been drilled from the Amole adit and from an
exploration drift being driven in a westerly direction parallel to the Big
Gossan structure, which drilling resulted in the addition of 8.5 million
metric tons of ore at an average grade of 2.4% copper and 0.77 grams of gold
per metric ton to PT-FI's total proved and probable reserves at December 31,
1993. Earlier surface drilling of the western portion of the Big Gossan
anomaly, approximately 300-500 meters west of the underground drilling,
established a mineral resource in excess of 6 million metric tons with an
average grade of 5% copper and 2.9 grams of gold per metric ton which is not
included in PT-FI's total proved and probable reserves at December 31, 1993.
Further underground exploration of the resources established by the surface
drilling as well as the area between it and the reserves discovered near the
Amole adit will be carried out in 1994 from the exploration drift as it is
extended.
Mine planning for development of Big Gossan has commenced with
development estimated to cost approximately $100 million and to begin in late
1994 or early 1995.
During the first quarter of 1993, PT-FI initiated helicopter-supported
surface drilling of the Wanagon gold/silver/copper prospect. Seven holes were
drilled during 1993 at Wanagon, located approximately 2 kilometers northwest
of Big Gossan and approximately 3 kilometers southwest of Grasberg.
Significant copper values have been encountered below the 2,900 meter
elevation. Target evaluation in other parts of the 1967 Mining Area is also
continuing.
Preliminary exploration of the New COW Area has indicated many promising
targets. Extensive stream sediment sampling within the new acreage has
generated analytical results which are being evaluated. This sampling
program, when coupled with the regional mapping completed on the ground and
from aerial photographs, has led to the outlining of over 50 exploration
targets. Detailed follow-up exploration of these anomalies by additional
mapping and sampling and through the use of both ground and aerial magnetic
surveys is now in progress. PT-FI has completed a fixed-wing air-magnetometer
survey of the entire New COW Area and, together with extensive geologic data
gathered from surface sampling, this air-magnetometer survey will enable PT-FI
to efficiently direct future exploratory efforts. Drilling of several of
these targets has already commenced.
PT-FI has focused its initial drilling in the New COW Area on two
prospects 30 kilometers and 40 kilometers north of Grasberg that display
anomalous geochemical and magnetic characteristics. Although these prospects
require additional exploratory drilling, initial results indicate a large
mineralized district that covers three times the aerial extent or
approximately 75,000 acres when compared to the original 24,700-acre district
that contained the Ertsberg, Grasberg, Ertsberg East, IOZ, DOZ, Big Gossan and
DOM ore bodies. The discovery of widespread igneous activity, including
volcanic rocks, in these new areas indicates the potential for Grasberg-type
stockwork and porphyry deposits as well as skarn-type copper/gold deposits
similar to the Ertsberg, Ertsberg East, IOZ, DOZ and DOM ore bodies. PT-FI
has also initiated drilling programs for four other prospects. Drilling
results are being interpreted. No assurance can be given that any of these
new areas contain commercially exploitable mineral deposits.
PT-FI's exploration expenses were $31.7 million for 1993, compared to
$12.2 million for 1992.
Milling, Expansion and Production
Milling. Most of the ore from PT-FI's mines moves by a conveyor system
to an ore pass through which it drops to the mill site. At the mill site,
which is located approximately 2,900 meters above sea level, the ore is
crushed and ground. The powdered ore is then mixed in tanks with chemical
reagents and continuously agitated with air. At this stage the copper-bearing
concentrate rises to the top of the tanks from which it is removed and
thickened. The product leaves the mill site as a thickened concentrate slurry,
consisting of approximately 65% solids by weight. During 1993, the recovery
rates for the milling facilities averaged approximately 87.0% of the copper
content and 76.2% of the gold content of the ore processed, compared to 88.2%
and 73.7%, respectively, during 1992.
During 1992, PT-FI began construction of a second conveyor system to
carry more ore from the mine to the mill. A new access road over which
equipment heavier than 17 tons can be transported directly to the Grasberg
mine was also completed during 1992. Until completion, all equipment heavier
than 17 tons had to be disassembled for shipment up to the mine on an aerial
tramway and reassembled at the higher level.
Expansion. In 1993 PT-FI completed, within budget and ahead of schedule,
the expansion of its production facilities increasing its mining and milling
capacity from 57,000 MTPD to 66,000 MTPD at its Indonesian complex. During
1992, production averaged 57,600 MTPD. The average mill throughput during
1993 was 62,300 MTPD. PT-FI has begun work on a further expansion of its
overall mining and milling rate to 115,000 MTPD at an estimated cost of
approximately $685 million, excluding the capital required for the EIP and
other infrastructure improvements, of which approximately $120 million had
been spent through December 31, 1993. This expansion is expected to be
completed by or about year end 1995. Funding for this expansion will be
obtained from existing cash balances, cash flow from operations and additional
financing, if required. Such expansion beyond 66,000 MTPD will also require
certain Indonesian Government approvals and the approval of an environmental
evaluation study. This expansion will further PT-FI's goal of approaching
annual copper production of 1.1 billion pounds and annual gold production of
approximately 1.5 million ounces.
Production. In 1993, PT-FI achieved record copper production of 658.4
million payable pounds, approximately 6% more than in 1992. Gold production
was a record 786,700 payable ounces, an increase of 23% over 1992.
Transportation, Other Infrastructure and Recent Infrastructure Developments
Transportation. From the mill site, the thickened concentrate is pumped
down two 115 kilometer pipelines to the port site facility at Amamapare. At
the port site the slurry is filtered, dried and stored for shipping. The
concentrate is transported by front-end loaders from the storage shed to a
conveyor belt shiploader system. When ships arrive, they are loaded at the
dock facilities at the port site until they draw their maximum water. The
ships normally move to deeper water, where loading is completed from shuttling
barges.
Other Infrastructure. The location of PT-FI's operations in a remote and
undeveloped area requires that such operations be virtually self-sufficient.
The existing facilities, in addition to those described above, include an
airport, a heliport, a 119 kilometer road with bridges and tunnels, an aerial
service tramway to transport personnel, equipment and supplies to the mines, a
hospital and two town sites with schools, housing and other required
facilities sufficient to support approximately 10,000 persons, including
approximately 360 who are located at the port site.
AFIC was formed in 1993 principally to purchase and operate certain
existing and new infrastructure facilities designed to serve the residential
and community needs associated with the current and expected long-term
expansion of FCX's operations and to facilitate the long-term economic
development of the area of Irian Jaya in which its mining and milling
operations are located. See "Business of the Issuer."
In conjunction with the expansion of the mining and processing facilities
to 115,000 MTPD, the first phase of the EIP is being implemented. PT-FI has
commenced the EIP, the goal of which is to develop and promote the growth of
local and other third party activities and enterprises in Irian Jaya through
the creation of certain necessary physical support facilities. The assets
acquired and to be acquired by AFIC and one or more Infrastructure Affiliates
are part of the EIP. The full EIP includes plans for various commercial,
residential, educational, retail, medical, recreational, environmental and
other infrastructure facilities to be constructed during the next 10 to 20
years, which facilities would be available for PT-FI's workforce and others.
These facilities will support PT-FI's expansion of its production by providing
housing and related support facilities for the benefit of PT-FI's employees
and their families and by expanding logistical facilities and transportation
systems in Irian Jaya. The first phase of the EIP envisages the construction
of dwelling units and related power, water and waste disposal systems, a light
industrial park and new small business development facilities, improvements to
the port and airport facilities, an 84-room guest house with dining,
recreational and meeting facilities near the airport and other general
infrastructure facilities. Depending on the long-term success of PT-FI's
exploration program, the total cost of the EIP, including subsequent phases,
could range between $500 million and $600 million.
Recent Infrastructure Developments. In December 1993, PT-FI announced
the execution of a Letter of Intent with Duke Energy and PowerLink, pursuant
to which PT-FI would sell its existing and to be constructed power generation
and transmission assets and certain other power-related assets to a joint
venture (the "Power Joint Venture") whose ownership consists of Duke Energy
(30%), PowerLink (30%), PT-FI (30%) and an Indonesian investor (10%). The
total value of the transaction is estimated at $200 million and is expected to
be concluded in two phases. The first sale, representing the existing assets,
is expected to exceed $100 million and to occur in mid-1994. The final sale,
representing the to-be-constructed expansion-related assets, is expected to
occur during the first half of 1995. Under the agreement, the Power Joint
Venture will own these assets and be responsible for providing the electrical
power services required by PT-FI at its mining, milling and support operations
in Irian Jaya including the power services required for the expansion or ore
throughput to 115,000 MTPD.
PT-FI has also entered into two separate letters of intent with respect
to the sale to joint ventures of certain aircraft, airport, construction
equipment and related operations (the "Airport Joint Venture") and certain
port facilities and related marine, logistics and related assets (the "Port
Joint Venture").
PT-FI would have a 25% equity interest in the Airport Joint Venture, with
certain Indonesian investors controlling the remainder. PT-FI would enter into
one or more agreements with the Airport Joint Venture for air transport
services for both passengers and cargo. It is expected that the purchase price
of the assets transferred to the Airport Joint Venture will be approximately
$30 million.
The Port Joint Venture is expected to be owned by a multinational
shipping concern and three to five Indonesian investors (one of which is
expected to be ALatieF). PT-FI is not expected to have an equity interest in
the Port Joint Venture. PT-FI would enter into one or more agreements with
the Port Joint Venture for use of the transferred assets. It is expected that
the purchase price of the assets transferred to the Port Joint Venture will
not exceed $100 million.
The foregoing letters of intent are not binding and are subject to the
execution of definitive agreements, financing, and certain Indonesian
Government approvals. No assurance can be given that any of these transactions
will be consummated.
Marketing
PT-FI's copper concentrates, which contain significant gold and silver
components, are sold primarily under long-term U.S. dollar-denominated
contracts, pursuant to which the selling price is based on world metals
prices, generally the London Metal Exchange settlement prices for Grade A
copper metal, less certain allowances. Under a major long-term contract signed
in late 1990, approximately 34% and 44% of the concentrates produced by PT-FI
in 1992 and 1993, respectively, were sold to a pool of Japanese copper
smelting companies. PT-FI also supplies copper concentrates to other Asian,
European and North American smelters and international trading companies under
long-term sales agreements. Approximately 66% of 1992 copper production was
sold under long-term contracts, with the balance sold on the spot market.
Spot sales were especially high in 1992 because the 57,000 MTPD expansion
program was completed earlier than planned. Virtually all of PT-FI's 1993
production of copper concentrates was sold under prior commitments, and PT-FI
has commitments from various parties to purchase virtually all of its
estimated 1994 production of copper concentrates.
PT-FI has in place a price protection program that eliminates exposure to
copper price declines below an average of 90 cents per payable pound for
estimated copper sales pricing in 1994, while allowing full benefit to PT-FI
from prices above that level. The cost of the 1994 price protection program,
$6 million, is included in product inventories and is being amortized as an
adjustment to revenues as sales are priced during 1994.
Eastern Mining
FCX's subsidiary Eastern Mining was granted an exploration permit (the
"SIPP") on April 29, 1993 which gives exclusive rights for a limited period to
explore for minerals on 2.5 million acres (the "SIPP Area") adjacent to the
6.5 million acre exploration area covered by PT- FI's New COW. Preliminary
exploration of the SIPP Area is under way.
A draft of a contract of work ("Eastern Mining Draft") was initialled on
January 30, 1993 by the Ministry of Mines and Energy of Indonesia and Eastern
Mining which covers the SIPP Area. The Eastern Mining Draft will be submitted
to the President of Indonesia, with execution of a definitive contract of work
expected in 1994. The Eastern Mining Draft, as initialled, provides for a
30-year term and for two 10-year extensions under certain circumstances. Upon
execution, an Indonesian limited liability company will be formed to hold the
definitive contract of work which initially is to be owned 80% by Eastern
Mining and 10% by each of PT-II and an unrelated Indonesian corporation.
Purchase of Interest in RTM
In March 1993, FCX acquired a 65% interest in RTM, which is principally
engaged in the smelting and refining of copper in Spain, for approximately $50
million, excluding transaction costs. In December 1993, RTM redeemed the
remaining 35% interest for approximately $19 million. RTM has announced plans
to expand its smelter production capacity from its current 150,000 metric tons
of metal per year to approximately 180,000 metric tons of metal per year by
1995 at a cost of approximately $50 million. RTM is studying further
expansion to as much as 270,000 metric tons of metal production per year.
During 1993, PT-FI supplied RTM with approximately 90,000 metric tons of
copper concentrate and is expected to supply approximately 150,000 metric tons
in 1994, providing for approximately 20% and 33%, respectively, of RTM's
requirements in those years. Beginning in 1996, PT-FI is expected to provide
the RTM smelter with approximately one-half of its copper concentrate
requirements. For further information concerning RTM, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
herein, FCX's Current Report on Form 8-K dated April 13, 1993, as amended May
21, 1993, and as amended August 5, 1993, incorporated by reference in this
Prospectus (which Current Report includes financial information with respect
to RTM and the RTM acquisition) and FCX's Current Report on Form 8-K dated
January 7, 1994 (which includes financial information for the nine months
ended September 30, 1993 as if RTM had been consolidated since March 30,
1993).
Republic of Indonesia
The economy of Indonesia is based on export commodity agriculture, the
extraction of petroleum, natural gas and other mineral resources, wholesale
and retail trade, and to an increasing extent, manufacturing. Indonesia has a
presidential republic system of government. President Suharto assumed power
in 1966 following an attempted communist coup and has been in office since
then. The Indonesian Government has maintained a high degree of stability for
the past 26 years. President Suharto was re-elected in March 1993 to serve a
sixth consecutive five-year term.
The Indonesian Government has promoted policies designed to help develop
Indonesia economically and has encouraged foreign investment in numerous areas
where such investment would benefit the Indonesian economy. Indonesia's
foreign investment policy is expressed in the 1967 Foreign Capital Investment
Law. It provides basic guarantees of remittance rights and protection against
nationalization, a framework for incentives and some basic rules as to the
other rights and obligations of foreign investors. PT-FI's rights and
obligations relating to taxes, exchange controls, repatriation and other
matters are governed by the New COW, which was concluded pursuant to the 1967
Foreign Capital Investment Law.
PT-FI has had and continues to enjoy a good working relationship with the
Indonesian Government. PT-FI's mining complex was Indonesia's first copper
mining project and was the first major foreign investment made in Indonesia
following the new economic development program instituted by the Suharto
administration in 1967. PT-FI works closely with the various levels of the
Indonesian Government in development efforts in the vicinity of its
operations. PT-FI incurs significant costs associated with providing health
and educational assistance, job training, employment opportunities,
agricultural assistance and other community development services and
facilities for the Indonesian people living in the areas of its operations.
In 1990, PT-FI established a foundation to provide educational and work
opportunities for the benefit of the people of Irian Jaya. PT-FI has
contributed or will contribute at least $10 million to the foundation for
community projects over the next several years. PT-FI also has in place a
long-term business development program to provide financing for new and
emerging businesses, many of which are expected to be suppliers of goods and
services for PT-FI's operations. Over time, PT-FI anticipates investing $25
million in this program.
FCX has the benefit of political risk insurance from the Overseas Private
Investment Corporation, the Multilateral Investment Guaranty Agency and
commercial insurers, where available, which covers a portion of its investment
in PT-FI. The insurance is primarily designed to cover certain breach of
contract risks.
Research and Development
FTX has maintained engineering and mine development groups in New
Orleans, Louisiana, which provide the engineering, design and construction
supervision activities required to implement new ventures and apply
improvements to existing operations of PT-FI. In February 1993, FTX
outsourced its corporate engineering, research and development, corporate
environmental and corporate safety functions and, to that end, contracted with
a new company initially owned and staffed by former employees of FTX, Crescent
Technology, Inc., that will furnish similar services to PT-FI.
Environmental Matters
The management of FCX believes that it is in compliance with the
environmental laws, rules and regulations in Indonesia and Spain,
respectively. PT-FI had a team of environmental scientists from a leading
Indonesian scientific institution conduct a study to update its 1984
Environmental Evaluation Study, with particular focus on its 66,000 MTPD
expansion program. The study has been submitted to the Indonesian Government.
In accordance with Indonesian law, PT-FI has submitted an environmental impact
study to the Indonesian Government with respect to the proposed expansion of
its mill throughput production to 115,000 MTPD.
It is possible that both the Indonesian Government and the government of
Spain could revise their environmental laws and/or regulations periodically.
The impact, if any, of such possible revisions on PT-FI's and RTM's
operations, respectively, cannot be accurately predicted.
Both PT-FI and RTM, through FTX, maintain insurance coverage in amounts
deemed prudent for certain types of damages associated with environmental
liabilities which arise from sudden, unexpected and unforseen events.
PT-FI has made, and continues to make, expenditures at its operations for
protection of the environment. Public emphasis on environmental matters can
be expected to require both PT-FI and RTM to incur additional costs, which
will be charged against income from future operations. On analyzing its
operations in relation to current and presently anticipated environmental
requirements, neither PT-FI nor RTM anticipates that these investments will
have a significant adverse impact on its future operations, liquidity, capital
resources or financial position.
Employees
In order to allow access to the FTX employee benefit plans for United
States citizens employed full time in PT- FI's business, such persons are
formally employed by a United States subsidiary of FTX. For all operational
purposes, however, such individuals are regarded as employees of PT-FI and
references herein to PT-FI employees include such individuals.
FCX, PT-FI and FTX are parties to a Management Services Agreement
pursuant to which FTX furnishes various management services to FCX and PT-FI.
See "Relationship of the FCX Group with the FTX Group--Management Services
Agreement."
As of December 31, 1993, PT-FI had a total of 6,054 employees
(approximately 94% Indonesian), compared with 5,300 employees (approximately
92% Indonesian) at year-end 1992. In addition, as of December 31, 1993, PT-FI
had approximately 6,600 contract workers, most of whom were Indonesian.
Approximately 76% of PT-FI's Indonesian employees are members of the All
Indonesia Workers' Union, which operates under Indonesian Government
supervision, and with which PT-FI has a labor agreement running until
September 30, 1995 covering PT-FI's hourly paid Indonesian employees. PT-FI
has experienced no work stoppages in recent years, and relations with the
union have generally been good. The management of PT-FI believes that it has
good relations with all other personnel employed in its operations.
Competition
PT-FI competes with other mining companies in connection with the sale of
its mineral concentrates and the recruitment and retention of qualified
personnel. Some competing companies possess financial resources equal to or
greater than those of PT-FI. The management of FCX believes that PT-FI is one
of the lowest cost copper producers in the world, taking into account
customary by-product credits for related gold and silver production.
Legal Proceedings
Although each of FCX and PT-FI from time to time is involved in various
legal proceedings of a character normally incident to the ordinary course of
its business, the management of each of FCX and PT-FI believes that the
potential liability in any known pending or threatened proceeding will not
have a material adverse effect on the financial condition or results of
operations of FCX or PT-FI, respectively. Each of FCX and PT-FI, through FTX,
maintains liability insurance to cover some, but not all, potential
liabilities normally incident to the ordinary course of its business, as well
as other insurance coverages of the types customary in its business, with such
coverage limits as management deems prudent.
BUSINESS OF THE ISSUER
The Issuer is a wholly owned subsidiary of FCX that has been organized
for the purpose of issuing the Guaranteed Notes and to lend the net proceeds
thereof to AFIC and one or more Infrastructure Affiliates. The Indenture
prohibits the Issuer from engaging in any business activities other than
issuing the Guaranteed Notes and applying the proceeds therefrom as provided
in the Indenture, enforcing its rights under the PT-FI Note and taking such
actions as are called for by the Indenture. The Indenture also prohibits the
Issuer from issuing any additional securities. The Issuer was incorporated in
The Netherlands in 1994.
AFIC and any Infrastructure Affiliate will use the net proceeds loaned by
the Issuer to purchase certain existing and new infrastructure assets that are
part of the EIP. The majority shareholder of AFIC is, and the majority
shareholder of any Infrastructure Affiliate will be, ALatieF, which is part of
ALatieF Group, a major Indonesian retail and property management company. The
acquired assets will be managed by AFIC or an Infrastructure Affiliate and
will be made available to PT-FI and its employees and designees under
arrangements that will provide the shareholders of AFIC or such Infrastructure
Affiliate with a guaranteed minimum return on investment. See "Master
Services Agreements."
AFIC and one or more Infrastructure Affiliates are expected to purchase
an aggregate of approximately $180 million in additional assets. Funding will
be provided by equity contributions from AFIC's shareholders ($60 million) and
debt ($120 million, which will be funded with the net proceeds of the
Guaranteed Notes offered hereby).
The location of PT-FI's operations in a remote and undeveloped area
requires that such operations be virtually self-sufficient. The facilities
currently include an airport, a heliport, a 119 kilometer road with bridges
and tunnels, an aerial service tramway to transport personnel, equipment and
supplies to the mines, a hospital and two town sites with schools, housing and
other required facilities sufficient to support approximately 10,000 persons.
In conjunction with the expansion of the mining and processing facilities to
115,000 MTPD, the first phase of the EIP is currently being implemented.
The first purchase of assets by AFIC was completed in December 1993. Most
of the assets purchased are located at Tembagapura, on the access road to
PT-FI's mining area. The buildings purchased include dormitory-style
residential properties and associated food service facilities, office,
security, shop and warehouse facilities, recreation centers and a shopping
center.
Future purchases are expected to cover similar existing facilities
serving PT-FI's Indonesia operations. In addition, as part of the EIP, PT-FI
is planning and developing a new residential community, New Town, to relieve
development constraints at Tembagapura. New Town will offer a variety of
commercial, administrative civic and cultural facilities. The commercial
cluster will include a department store, supermarket, bank, restaurants and a
variety of retail service facilities. The first phase of the New Town
development is planned to include housing for 3,500 persons and is scheduled
to be completed by December 1995. A light industrial park, to be located
south of New Town, is planned to serve as the "hub" distribution, logistics
and support staging area for PT-FI's current and future operations.
Finally, to accommodate the increasing number of visitors and guests of
PT-FI, an 84-room guest house is being developed at Timika. This facility
will include a main lodge building, guest cottage and recreational facilities.
Completion is scheduled for June 1994. See "Business of FCX--Transportation
and Other Infrastructure."
Certain assets to be purchased by AFIC and any Infrastructure Affiliate
have not been identified and the Issuer will have no control over the
selection of such assets. Under the Joint Venture Agreement, PT-FI has certain
rights to substitute the assets sold to AFIC. See "Special Considerations --
Certain Infrastructure Properties Not Yet Identified" and "AFIC."
Master Services Agreements
AFIC and any Infrastructure Affiliate will enter into one or more Master
Services Agreements with PT-FI pursuant to which AFIC or such Infrastructure
Affiliate will make available to PT-FI, its affiliates and employees or
designated third parties, certain infrastructure assets acquired from PT-FI
and certain services in connection therewith. The Master Services Agreements
will provide that the fees paid by PT-FI for use of such assets for any period
will not be less than the expenses of AFIC or such Infrastructure Affiliate
for such period, including, without limitation, principal of, interest on and
Underlying Additional Amounts with respect to the Underlying Notes. All
payments by PT-FI under the Master Services Agreements will be made in U.S.
dollars. AFIC and any Infrastructure Affiliate will pledge their rights under
their respective Master Services Agreements as security for the Underlying
Notes.
The Master Services Agreements may not be amended without the consent of
the holders of a majority in outstanding principal amount of the Guaranteed
Notes unless (i) such amendment does not reduce the amounts payable by PT-FI
and third parties to AFIC or an Infrastructure Affiliate for any period prior
to the stated maturity of the Guaranteed Notes to an amount less than an
amount sufficient to cover all of the expenses of AFIC or such Infrastructure
Affiliate with respect to the Underlying Notes for such period and (ii) such
amendment does not otherwise adversely affect the interests of the holders of
the Guaranteed Notes. See "Description of the Guaranteed Notes."
AFIC
Pursuant to the Joint Venture Agreement between ALatieF and PT-FI dated
March 11, 1993 (the "Joint Venture Agreement"), ALatieF and PT-FI agreed to
organize AFIC for the purpose of purchasing from PT-FI and operating certain
existing and new infrastructure properties that are part of the EIP. It is
expected that a similar agreement will be entered into with respect to each
Infrastructure Affiliate. AFIC's purpose is to serve the residential and
community needs associated with the expected long-term expansion of FCX's
operations and to facilitate the long-term economic development of the area of
Irian Jaya in which its mining and milling operations are located.
PT-FI and ALatieF initially purchased shares of AFIC's equity for an
aggregate price of $30 million. ALatieF currently owns two-thirds of the
outstanding shares and PT-FI currently owns one-third. ALatieF and PT-FI have
agreed to contribute an additional $60 million to AFIC's authorized capital in
the same proportion as their current share ownership in installments through
December 31, 1995. If either PT-FI or ALatieF defaults on the payment of the
subscription price, the non-defaulting party will have the right to subscribe
for the shares to be subscribed for by the defaulting party and to acquire all
(but not part) of the defaulting party's shares. See "Special Considerations
- -- Sources of Capital."
PT-FI has agreed to be responsible for arranging financing for AFIC in a
principal amount of up to $180 million for a seven-year period ending in 2000.
Pursuant to this commitment, PT-FI arranged the loan under the AFIC Credit
Agreement in the principal amount of $60 million and is required to arrange
additional financing in the principal amount of $120 million. AFIC will be
solely responsible for refinancing at the end of the initial seven-year term.
Pursuant to the Joint Venture Agreement, ALatieF and PT-FI have generally
agreed not to transfer any shares of AFIC to any other person, subject to
certain exceptions and except, in the case of ALatieF, with the consent of
AFIC's shareholders. Any transfer of shares pursuant to the Joint Venture
Agreement is subject to the receipt of all necessary approvals of the
Indonesian Government. Each party may transfer its shares to an affiliate
that has a net worth acceptable to the other party (or if the transferring
party undertakes to guarantee such affiliate's fulfillment of its obligations
under the Joint Venture Agreement).
ALatieF has the non-transferable option to acquire all of AFIC's shares
owned by PT-FI or any of its affiliates on or after October 26, 2000. The
purchase price for such shares would be equal to the par value of such shares
if the option is exercised on October 26, 2000 or the fair market value of
such shares (determined in accordance with the Joint Venture Agreement) if
exercised thereafter.
ALatieF has agreed that if it wishes to accept a bona fide offer from a
third party to purchase any or all of its shares of AFIC, PT-FI will have a
right of first refusal to acquire all of the shares proposed to be sold on the
terms and conditions specified in the offer. If the party owning a majority
of AFIC's shares of capital stock (currently ALatieF) receives an offer from
an Indonesian person (or a group including a certain portion of Indonesian
persons) to purchase all of such party's shares, such party will, if requested
by the other party, seek to include the other party's shares in that sale.
If ALatieF elects to pursue a public offering of the shares of AFIC, the
parties have agreed to cooperate to obtain all approvals necessary or
desirable for AFIC to be authorized to offer its shares to the public. If
ALatieF elects to have any of AFIC's shares then owned by it included in such
offering, PT-FI has agreed to allow the same percentage of its shares of AFIC
to be included in such offering.
The Joint Venture Agreement provides that AFIC's Board of Directors will
consist of a maximum of three members, all of whom will be nominated by
ALatieF, and the Board of Commissioners will consist of at least three members
who will be nominated by ALatieF and PT-FI in proportion to their respective
holdings of shares of AFIC. The Board of Directors of AFIC is responsible for
the management and day-to-day operations of AFIC. The approval of a majority
of the members of the Board of Commissioners, including at least one
Commissioner elected from persons nominated by PT-FI, is required before the
Board of Directors can cause AFIC to take certain actions, including (i)
adoption of an annual operating and capital budget, (ii) borrowing money,
binding AFIC as guarantor or granting certain security interests, (iii)
acquiring or selling property having a value in excess of limits set by the
Board of Commissioners from time to time, (iv) proposing any amendment to
AFIC's Articles of Association, (v) participating in any other business
enterprise, including establishing any subsidiary or (vi) distributing to
shareholders the proceeds arising from the sale of any infrastructure assets.
PT-FI and ALatieF have agreed to cause AFIC to use its equity capital
contributed by the parties and the proceeds of the financing to acquire
infrastructure properties from PT-FI for an aggregate purchase price of $180
million in addition to the $90 million of infrastructure assets previously
acquired by AFIC. The purchase price of such assets will be equal to the
audited construction cost thereof. If AFIC acquires infrastructure assets that
are under construction, AFIC is required to pay to PT-FI a construction
management fee equal to 2.5% of the purchase price thereof, unless waived by
PT-FI.
The purchase price for each asset will be equal to the total cost of
construction of the asset, and the total price for all assets listed in the
Joint Venture Agreement (including those previously acquired) will be $270
million. If the actual cost of the assets to be sold to AFIC is less than
$270 million, PT-FI will make available for acquisition by AFIC additional
properties approved by ALatieF so that the cost of all acquired infrastructure
properties is not less than $270 million.
PT-FI and AFIC have agreed to cooperate with each other to cause the
geographical area encompassing the site of AFIC's assets to be established as
an economic development zone so that they will enjoy certain benefits,
including relief from certain taxes and duties. Although an economic
development zone has not been established, PT-FI has received letters from the
Director General of Taxes and the Director General of Customs and Excise which
provide PT-FI relief from postponed import duties, value-added taxes and other
taxes that would have become due at the time of any transfer of assets to
AFIC.
The Joint Venture Agreement provides that PT-FI may at any time reacquire
any asset previously transferred to AFIC if PT-FI determines that a
commercially exploitable deposit of minerals exists under, near or as part of
such asset, if PT-FI requires all or part of such asset as the location of
equipment or other facilities in connection with its mining and milling
activities, if PT-FI determines that the asset has become or is likely to
become a physical hazard to any person or property or if PT-FI reasonably
determines that such reacquisition is necessary or advisable to enable it to
comply with the New COW. In the event of such a reacquisition, AFIC has the
option to require PT-FI to construct a property substantially similar to the
reacquired asset, substitute another asset if available or pay a repurchase
price equal to the greater of the fair market value of the asset or the debt
encumbering such asset.
With respect to each infrastructure asset acquired from PT-FI, AFIC has
agreed to comply fully with the standards set forth in the purchase and sale
agreement (or a services agreement entered into for such property), for the
management, operation and maintenance of such property. Each service contract
(including the Master Services Agreements) will be structured so that the
revenues received by AFIC under such contract and from third parties will
result in an annual after-tax cash flow to AFIC of not less than 15% on equity
and 10% on debt on the original purchase price of the acquired infrastructure
assets in each of the first seven years ending December 2000. Thereafter, for
so long as PT-FI conducts mining operations in that area of Irian Jaya where
the acquired infrastructure assets are located, the rate of return will be
fixed at 11.67% per annum after tax applied to the original purchase price of
the acquired infrastructure assets, calculated in accordance with the Joint
Venture Agreement. PT-FI has agreed that until December 2000, subject to
certain exceptions, it will subordinate or assign its share of any profits
distributed by AFIC to ALatieF so that ALatieF will receive 100% of all
distributable cash flow of AFIC in the most tax effective manner for both
parties.
MANAGEMENT OF FCX
Set forth below is information regarding the names, ages, principal
occupations, other directorships and positions over the past five years of the
directors and executive officers of FCX. Certain information regarding
compensation and securities ownership of these directors and officers is
incorporated by reference. See "Incorporation of Documents By Reference."
Directors
The following table shows, as of December 31, 1993, the ages, principal
occupations and employment during the past five years, other directorships and
positions with FCX of each of its current directors, and the years in which
they first became directors of FCX. None of the organizations referred to in
such table is an affiliate of FCX except for FTX and PT-FI.
Principal Occupations Year First
Other Directorships and Positions Elected a
Name of Director Age Over the Past Five Years Director
_________________ ___ _________________________________ __________
Leland O. Erdahl 65 Consultant. President and Chief 1988
Executive Officer of Albuquerque
Uranium Corp., producer and
seller of uranium concentrates,
until 1992. President and Chief
Executive Officer of Stolar
Inc., mining industry services,
products, and equipment, until
1991. Director of Canyon
Resources Corporation, Hecla
Mining Company and Original
Sixteen to One Mine, Inc.
Trustee of Freedom Investment
Trusts I, II and III.
Ronald Grossman 57 Consultant, Commissioner of 1988
PT-FI. Senior Vice President of
FCX until 1993. Executive Vice
President and Chief Financial
Officer of FTX until 1993.
Senior Vice President of FTX
until 1992.
Rene L. Latiolais 51 Director, President and Chief 1993
Operating Officer of FTX.
Commissioner of PT-FI.
Executive Vice President of FTX
until 1993. Senior Vice
President of FTX until 1992.
George A. Mealey 60 President and Chief Executive 1988
Officer of FCX. Executive Vice
President of FTX. Director and
Executive Vice President of
PT-FI.
James R. Moffett 55 Chairman of the Board of FCX. 1992
Director, Chairman of the Board
and Chief Executive Officer of
FTX. President Commissioner of
PT-FI.
Wolfgang F. Siegel 61 Senior Vice President of 1988
Kreditanstalt fur Wiederaufbau,
a bank owned by the Federal
Republic of Germany (the "FRG")
and the states comprising the
FRG.
Elwin E. Smith 71 Sole proprietor of Elwin Smith 1988
International, consultants to
global industrial corporations.
Eiji Umene 68 Executive Advisor of Nippon 1992
Steel Corporation. Managing
Director of Nippon Steel
Corporation and President of its
subsidiary, Nippon Steel U.S.A.,
Inc., until 1989. Director of
Schlumberger Limited.
Executive Officers
In addition to the elected executive officers of FCX (the "Elected FCX
Executive Officers"), certain officers and employees of affiliates of FCX are
deemed by FCX to be executive officers of FCX (the "Designated FCX Executive
Officers") for purposes of the federal securities laws. Listed below are the
names and ages, as of December 31, 1993, of each of the Elected FCX Executive
Officers and the Designated FCX Executive Officers, together with the
principal positions and offices with FCX, FTX and PT-FI held by each. All
officers of FCX, FTX and PT-FI are elected or appointed for one-year terms,
subject to earlier death, resignation or removal.
Name Age Position or Office
________ ___ __________________
Richard C. Adkerson* 47 Senior Vice President of FTX.
Commissioner of PT-FI.
John G. Amato 49 General Counsel of FCX.
General Counsel of FTX.
Commissioner of PT-FI.
Richard H. Block* 43 Senior Vice President of FTX.
Thomas J. Egan* 49 Senior Vice President of FTX.
Charles W. Goodyear* 35 Senior Vice President of FTX.
Commissioner of PT-FI.
Hoediatmo Hoed* 54 President Director of PT-FI.
W. Russell King* 44 Senior Vice President of FTX.
Rene L. Latiolais* 51 Director of FCX. Director,
President and Chief Operating
Officer of FTX. Commissioner of
PT-FI.
George A. Mealey 60 Director, President and Chief
Executive Officer of FCX. Executive
Vice President of FTX. Director and
Executive Vice President of PT-FI.
James R. Moffett 55 Director and Chairman of the Board
of FCX. Director, Chairman of the
Board and Chief Executive Officer of
FTX. President Commissioner of
PT-FI.
- --------------------
* This individual is a Designated FCX Executive Officer and not an Elected FCX
Executive Officer. He is deemed by FCX to be a Designated FCX Executive
Officer solely for purposes of the federal securities laws in view of his
position and responsibilities as an executive officer of FTX or PT-FI, as
applicable; he holds no actual position as an officer of FCX.
The individuals listed above, with the exceptions of Messrs. Adkerson,
Amato and Goodyear, have served FCX, FTX or PT-FI in various executive
capacities for at least the last five years. Until 1989, Mr. Adkerson was a
partner in Arthur Andersen & Co. and Mr. Goodyear was a Vice President of
Kidder, Peabody & Co. Incorporated, an investment banking firm. During the
past five years and prior to that period, Mr. Amato was engaged in the private
practice of law and served as outside counsel to FCX, FTX and PT-FI.
RELATIONSHIP OF THE FCX GROUP
WITH THE FTX GROUP
Ownership of Stock
FTX currently owns approximately 70% of the combined total outstanding
shares of FCX's Class A Common Stock and Class B Common Stock. Through this
ownership, FTX has, and will continue to have, the ultimate ability to control
FCX and, through the direct ownership by FCX of 81.3% of PT-FI's capital
stock, to control PT-FI. FTX and its consolidated subsidiaries other than FCX
and PT-FI (the "FTX Group") have and will continue to have a variety of other
corporate relationships with FCX and PT-FI. In addition to such other
obligations as it may assume, FTX, as a controlling stockholder of FCX, has a
fiduciary obligation under Delaware law to act in good faith and to exercise
its rights of control in a manner that is fair and reasonable to the other
stockholders of FCX.
FTX, as FCX's ultimate controlling stockholder, controls and will
continue to have the power to control the election of directors and decisions
with respect to the use of cash generated by FCX and its subsidiaries (the
"FCX Group"), including those with respect to the FCX Group's dividend policy.
The determination of FTX as to the use of cash generated by the FCX Group may
be affected by factors related to the cash requirements of the FTX Group. FTX
also has sufficient voting control under Delaware corporate law to effect
major corporate actions such as "going private" transactions and mergers
without the concurrence of other stockholders.
Although PT-FI has in the past relied on FTX to provide many management,
administrative and technical services and will continue, under the Management
Agreement discussed below, to make use of these services, it has always
operated as a separate unit within FTX and will continue to do so.
Under the terms of a credit agreement dated as of June 1, 1993, as
amended (the "PT-FI Credit Agreement"), failure by FTX to maintain control of
PT-FI or direct or indirect ownership of at least 50.1% of the PT-FI common
stock would allow acceleration of the indebtedness thereunder. Similarly, for
FCX to retain the benefits of insurance provided by the Overseas Private
Investment Corporation, it is necessary for at least a majority of FCX's
capital stock and of each class thereof to be held beneficially by U.S.
persons.
Conflicts of Interests
FTX is involved in the exploration for and extraction of natural
resources. To avoid conflicts between the interests of the various FTX
entities with respect to any future opportunities which may arise, it is
anticipated that the FCX Group will have a priority with respect to copper
exploration, development and mining in Indonesia. If the FCX Group determines
for any reason not to pursue any opportunity within its area of priority, then
FTX will be free to offer it to another FTX entity as it sees fit. It may be
determined that it would be impractical for the FCX Group to act with respect
to a particular exploration or development opportunity outside the mining area
covered by the contract of work which preceded the New COW. For example, due
to the size of the exploration area covered by the New COW, development of
certain mineral prospects may be beyond the financial or other resources of
FCX and might be undertaken by FTX alone or in conjunction with one or more
third parties, which could include one of FTX's other subsidiaries. In
addition, acquisition of certain mineral prospects or mining companies may be
beyond the financial or other resources of FCX and might be undertaken by FTX
alone or in conjunction with one of its other subsidiaries. Such development
or acquisitions could lead to competition between the FCX Group and members of
the FTX Group.
Management Services Agreement
Pursuant to the terms of a Management Services Agreement (the "Management
Agreement"), FTX furnishes general executive, administrative, financial,
accounting, legal, environmental, insurance, personnel, engineering, tax,
research and development, sales and certain other services to FCX and PT-FI.
The nature and extent of the services provided under the Management Agreement
are similar to those historically provided by FTX. The services of each of
the executive officers of FCX and certain officers and employees of PT-FI are
provided to FCX and PT-FI under the Management Agreement.
The Management Agreement is subject to termination by any party on any
December 31 if six months' prior written notice is given. FCX and PT-FI have
agreed to reimburse FTX at FTX's cost, including allocated overhead, for such
services on a monthly basis. The Management Agreement also provides for the
use of the services of certain of FCX's and PT-FI's employees by FTX and its
subsidiaries on a similar cost reimbursement basis. The cost of such services
is reimbursed monthly. The total amount charged by FTX to FCX and PT-FI,
excluding any amounts paid with respect to employees seconded to PT-FI from
FTX, was $33.4 million, $44.9 million and $57.9 million for the years ended
December 31, 1991, 1992 and 1993, respectively.
In February 1993, FTX outsourced its corporate engineering, research and
development, environmental and safety functions and, to that end, contracted
with a new company initially owned and staffed by former employees of FTX.
The new company will furnish services similar to services provided by FTX in
the past, and is anticipated to save PT-FI significant costs.
Debt Instruments
The FTX Group maintains a revolving credit agreement with a syndicate of
banks, dated as of June 1, 1993, as amended and restated (the "FTX Credit
Agreement"), to provide funds for FTX's general corporate purposes. The FTX
Credit Agreement provides that, under certain circumstances relating to excess
borrowings thereunder or events of default thereunder, FTX and such affiliates
must pledge stock owned by them, including the Class A Common Stock and Class
B Common Stock of FCX owned directly by FTX, to secure outstanding borrowings
under the FTX Credit Agreement. As of the date of this Prospectus, no FCX
stock was pledged under the FTX Credit Agreement. To the extent FTX and its
other subsidiaries incur additional debt, the amount available to PT-FI under
the PT-FI Credit Agreement may be reduced.
DESCRIPTION OF THE GUARANTEED NOTES
General
The Guaranteed Notes will be issued under an indenture to be dated as of
, 1994 (the "Indenture"), by and among the Issuer, FCX and Chemical Bank, as
Trustee (the "Trustee"). FCX will provide, without charge, to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
such person's written or oral request, a copy of the Indenture relating to the
Guaranteed Notes and the Guaranty. Any such request should be delivered to
FCX, c/o FTX at 1615 Poydras Street, New Orleans, Louisiana 70112 (telephone
(504) 582-4000), attention: Michael C. Kilanowski, Jr., Secretary. The
following summaries of certain provisions of the Indenture do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Indenture, including the definitions
therein of certain terms included herein. Wherever particular sections or
defined terms of the Indenture are referred to herein, such sections or
defined terms shall be incorporated herein by reference. Unless the context
otherwise requires, references to sections and defined terms refer to sections
and defined terms of the Indenture.
The Guaranteed Notes will be senior obligations of the Issuer
unconditionally guaranteed on a senior basis by FCX, limited to $120 million
in aggregate principal amount. The Guaranteed Notes will be issued in
registered form, without coupons, in denominations of $1,000 and any integral
multiple thereof. The principal of, premium, if any, Additional Amounts, if
any, and interest on the Guaranteed Notes will be payable, and the Guaranteed
Notes will be exchangeable and transferable, at the office or agency of the
Issuer maintained for such purpose in The City of New York; provided, that
payment of interest may be made at the option of the Issuer by check mailed to
the holders of the Guaranteed Notes. Unless otherwise designated by the
Issuer, the office of the Trustee maintained for such purpose shall be the
Trustee's office or agency in The City of New York. No service charge will be
made for any registration of transfer or exchange of Guaranteed Notes, but the
Issuer may require payment of a sum sufficient to cover any tax, assessment or
other governmental charge payable in connection therewith.
The Indenture contains no restrictions on the ability of FCX to incur
additional debt or to pay dividends or other distributions to its
stockholders.
Maturity, Interest and Principal
The Guaranteed Notes will mature on , 2001. Interest on the
Guaranteed Notes will accrue at a rate of % per annum, and will be payable
semi-annually on each and commencing , 1994, to the
holders of record of the Guaranteed Notes on the immediately preceding
and .
There is currently no United States, Netherlands or Indonesian
withholding tax applicable to payments on the Guaranteed Notes. If any such
withholding tax is imposed in the future, the Issuer will, subject to certain
exceptions, pay Additional Amounts so that the net amount received by the
holder of a Guaranteed Note after such withholding will be equal to the amount
that would have been received if no tax had been applicable.
"Additional Amounts" means, subject to certain limitations and exceptions
(as set forth below), payment by the Issuer to a holder of a Guaranteed Note
of such amounts as may be necessary so that every net payment of principal of,
or interest on, the Guaranteed Notes, after deduction or withholding for or on
account of any present or future tax, assessment or other governmental charge
imposed upon such holder by reason of the making of such payment or deemed
payment by the United States, The Netherlands and Indonesia or any political
subdivision or taxing authority of or in any of them, will not be less than
the amount provided for in the Guaranteed Notes. However, the payments for or
on account of the following shall be excluded from the above definition of
"Additional Amounts":
(a) any tax, assessment or other governmental charge imposed by the
United States or any political or taxing authority thereof or therein
which would not have been imposed but for (i) the existence of any present
or former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, trust, partnership or corporation)
and the United States, including, without limitation, such holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being
or having been a citizen or resident thereof or being or having been
present or engaged in a trade or business therein or having had a
permanent establishment therein, (ii) such holder's past or present status
as a personal holding company, foreign personal holding company or
controlled foreign corporation with respect to the United States or as a
corporation which accumulates earnings to avoid United States federal
income tax or (iii) such holder's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power of
all classes of stock entitled to vote of FCX or certain affiliates of FCX;
(b) any tax, assessment or other governmental charge imposed by The
Netherlands or any political subdivision or taxing authority thereof or
therein which would not have been imposed but for the existence of any
present or former connection between such holder (or between a fiduciary,
settlor, beneficiary, member or shareholder of, or possessor of a power
over, such holder, if such holder is an estate, trust, partnership or
corporation) and The Netherlands, including, without limitation, such
holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen, resident or deemed resident
thereof or being or having been present or engaged in a trade or business
therein or having had a permanent establishment therein;
(c) any tax, assessment or other governmental charge imposed by
Indonesia or any political subdivision or taxing authority thereof or
therein which would not have been imposed but for the existence of any
present or former connection between such holder (or between a fiduciary,
settlor, beneficiary, member or shareholder of, or possessor of a power
over, such holder, if such holder is an estate, trust, partnership or
corporation) and Indonesia including, without limitation, such holder (or
such fiduciary, settlor, beneficiary, member, shareholder or possessor)
being or having been a citizen or resident thereof or being or having been
present or engaged in a trade or business therein or having had a
permanent establishment therein;
(d) the presentation of a Guaranteed Note for payment on a date more
than 15 days after the date on which such payment became due and payable
or the date on which payment thereof is duly provided for, whichever
occurs later;
(e) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(f) any tax, assessment or other governmental charge which is
payable otherwise than by withholding from payments of the principal of or
interest on a Guaranteed Note;
(g) any tax, assessment or other governmental charge which would not
have been imposed but for the failure of the holder to comply with
certification, information or other reporting requirements concerning the
nationality, residence, identity or connections of the holder or
beneficial owner of such Guaranteed Note (i) with the United States, if
the tax, assessment or governmental charge is imposed by the United States
or any political subdivision or taxing authority thereof or therein, (ii)
with The Netherlands, if the tax, assessment or governmental charge is
imposed by The Netherlands or any political subdivision or taxing
authority thereof or therein, and (iii) with Indonesia, if the tax,
assessment or governmental charge is imposed by Indonesia or any political
subdivision or taxing authority thereof or therein, if in each case such
compliance is required by statute or by regulation of the respective
taxing authority to establish entitlement to an exemption from such tax,
assessment or other governmental charge; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g);
nor shall Additional Amounts be paid to any holder who is a fiduciary or
partnership or other than the sole beneficial owner of the Guaranteed Notes to
the extent the beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner of the Guaranteed Notes would
not have been entitled to payment of Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the holder of the Guaranteed Note.
Guaranty
Payment of the principal of, premium, if any, Additional Amounts, if any,
and interest on the Guaranteed Notes as well as any obligations of FCX to
repurchase the Guaranteed Notes following any Repurchase Event (as defined
below) or an Asset Disposition Offer (as defined below) will be
unconditionally guaranteed on a senior basis by FCX.
Application of Proceeds under Indenture
The proceeds of the Offering of the Guaranteed Notes will be loaned by
the Issuer to AFIC or one or more Infrastructure Affiliates and used to
purchase infrastructure assets from PT-FI. See "Use of Proceeds." The
Guaranteed Notes will not be secured by any infrastructure assets or the
Underlying Notes. However, the obligations of AFIC and each Infrastructure
Affiliate to the Issuer pursuant to the Underlying Notes will be secured by a
pledge of the Master Services Agreements, as described below. Prior to the
time that AFIC or an Infrastructure Affiliate purchases infrastructure assets
from PT-FI, the proceeds from the Guaranteed Notes will be loaned to PT-FI on
a senior, unsecured basis, as described below. The Indenture permits the
Issuer to subsequently advance to PT-FI, AFIC or an Infrastructure Affiliate
the proceeds of any repayments of the PT-FI Note or the Underlying Notes. The
terms of the Underlying Notes are designed, together with the PT-FI Note, to
provide the Issuer with funds in amounts and at times sufficient to allow the
Issuer to meet all of its obligations on the Guaranteed Notes.
PT-FI Note
The proceeds from the sale of the Guaranteed Notes will initially be
loaned by the Issuer to PT-FI on a senior, unsecured basis, and PT-FI will
issue the PT-FI Note to the Issuer. The PT-FI Note will initially be in an
aggregate principal amount equal to the aggregate principal amount of the
Guaranteed Notes. The PT-FI Note will bear interest at a rate equal to the
interest rate on the Guaranteed Notes plus up to .25% per annum, payable
semi-annually on the interest payment dates on the Guaranteed Notes. The PT-FI
Note will require PT-FI to pay to the Issuer such Underlying Additional
Amounts as will allow the Issuer to pay any Additional Amounts that may be
required to be paid by the Issuer on the Guaranteed Notes. The PT-FI Note will
mature on , 2001. The PT-FI Note will be subject to prepayment, in
whole or in part, upon demand of the Issuer at any time. PT-FI will not have
the right to prepay voluntarily the PT-FI Note. PT-FI may, with the Issuer's
consent, reborrow funds it has previously repaid to the Issuer, and the
principal amount of the PT-FI Note will be increased accordingly.
Underlying Notes
The proceeds from the sale of the Guaranteed Notes are intended to be
loaned by the Issuer to AFIC and one or more Infrastructure Affiliates to fund
the purchase of infrastructure assets from PT-FI. Certain of the
infrastructure assets to be acquired from PT-FI have not been identified. The
first acquisition of infrastructure assets with the proceeds from the
Guaranteed Notes is anticipated to take place in mid-1994.
Prior to the time that AFIC or an Infrastructure Affiliate purchases
infrastructure assets from PT-FI, it will notify the Issuer of such planned
purchase, the aggregate purchase price for such assets, and the U.S. dollar
amount to be borrowed by AFIC or such Infrastructure Affiliate to fund that
purchase. The Issuer will require PT-FI to repay all or a portion of the PT-FI
Note in an amount equal to the U.S. dollar amount to be loaned by the Issuer
to AFIC or such Infrastructure Affiliate. AFIC or such Infrastructure
Affiliate will issue an Underlying Note in an amount equal to the amount
loaned to it by the Issuer. The repayment of the PT-FI Note and the issuance
of the Underlying Note will occur simultaneously.
The Underlying Notes will be denominated in U.S. dollars, will bear
interest at a rate equal to the interest rate on the Guaranteed Notes plus up
to .25% and will be subject to redemption at any time in whole or in part (i)
in connection with the repayment of the Guaranteed Notes, (ii) to fund a loan
by the Issuer to PT-FI on the same terms as the PT-FI Note or (iii) to fund a
loan by the Issuer to AFIC or an Infrastructure Affiliate on the same terms as
the Underlying Notes.
There is currently a 10% withholding tax applicable to payments on the
Underlying Notes and the PT-FI Note. AFIC, any Infrastructure Affiliate and
PT-FI will pay the Underlying Additional Amounts so that the amount received
by the Issuer after such withholding will be equal to the amount that would
have been received if no such tax had been payable.
"Underlying Additional Amounts"means payment to the Issuer by PT-FI, AFIC
or an Infrastructure Affiliate of such amounts as may be necessary so that
every net payment of principal of, or interest on, the PT-FI Note or any
Underlying Note, as the case may be, after deduction or withholding for or on
account of any present or future tax, assessment or other governmental charge
imposed upon such holder by reason of the making of such payment or deemed
payment by the United States, The Netherlands and Indonesia or any political
subdivision or taxing authority of or in any of them, will not be less than
the amount provided for in the PT-FI Note or such Underlying Note, as the case
may be.
The Underlying Notes will be secured by a pledge by AFIC or the
applicable Infrastructure Affiliate of all rights under the Master Services
Agreement entered into by AFIC or such Infrastructure Affiliate in connection
with the purchase of infrastructure assets with the proceeds from the
Underlying Notes. See "Business of the Issuer--Master Services Agreements."
The Underlying Notes will provide that AFIC or such Infrastructure Affiliate
will not amend, waive or terminate that Master Services Agreement if such
amendment (i) would reduce the amounts payable by PT-FI to AFIC and all
Infrastructure Affiliates for any period prior to the Stated Maturity of the
Guaranteed Notes to an amount less than an amount sufficient to assure the
payment of the principal of, interest on and Underlying Additional Amounts
with respect to, the Underlying Notes or (ii) would in any other respect have
a material adverse effect on the holders of the Guaranteed Notes, unless in
either such case the holders of a majority in principal amount of the
Guaranteed Notes consent to such amendment, waiver or termination. In
addition, payment of amounts under the Master Services Agreements in respect
of principal of, interest on and Underlying Additional Amounts with respect
to, the Underlying Notes shall be made directly to a U.S. dollar account
maintained by the Issuer with Chemical Bank outside Indonesia.
The Indenture will require the Issuer to take or cause to be taken, all
action required or desirable to maintain good and valid title to the PT-FI
Note and the Underlying Notes. The Indenture will prohibit the Issuer from
amending, waiving or terminating any provisions in the PT-FI Note or the
Underlying Notes other than in connection with a permitted repayment of any
such note. The Issuer will agree in the Indenture to enforce diligently and
expeditiously all of its rights under the PT-FI Note and the Underlying Notes.
Optional Redemption
The Guaranteed Notes are not redeemable prior to , 1999, except as
provided below under "Tax Redemption." The Guaranteed Notes are redeemable at
the option of the Issuer, in whole or in part, on or after , 1999, upon
not less than 30 nor more than 60 days' notice, at the redemption price of %
through , 2000 and thereafter at 100% of the principal amount thereof,
in each case plus accrued interest to the date of redemption. In the case of a
partial redemption, selection of the Guaranteed Notes to be redeemed shall be
made by the Trustee in such manner as in its sole discretion it shall deem
appropriate and fair. Guaranteed Notes may be redeemed in part in multiples of
$1,000 only.
Tax Redemption
The Guaranteed Notes may be redeemed, in whole but not in part, at the
option of the Issuer, upon not less than 30 nor more than 60 days' notice, at
the redemption price of 100% of the principal amount plus accrued interest to
the redemption date, if the Issuer, PT-FI, AFIC or any Infrastructure
Affiliate becomes legally obligated, as a result of statutory or regulatory
changes adopted on or after the date hereof generally affecting United States,
Netherlands or Indonesian withholding taxes, to pay amounts on the Guaranteed
Notes, the PT-FI Note or the Underlying Notes, as the case may be, in excess
of amounts required to be paid by the Issuer, PT-FI, AFIC or such
Infrastructure Affiliate on the date of the issuance of the Guaranteed Notes,
PT-FI Note or the Underlying Notes, as the case may be; provided, however,
that (1) no such notice of redemption may be given earlier than 90 days prior
to the earliest date on which the Issuer would be obligated to pay such
Additional Amounts, or PT-FI, AFIC or any Infrastructure Affiliate would be
obligated to pay such Underlying Additional Amounts, were a payment in respect
of the Guaranteed Notes, PT-FI Note or the Underlying Notes then due, as the
case may be, and (2) at the time such notice of redemption is given, such
obligation to pay such Underlying Additional Amounts remains in effect.
Immediately prior to the publication of any notice of redemption pursuant to
this paragraph, the Issuer shall deliver to the Trustee (i) a certificate
stating that the Issuer is entitled to effect such redemption and setting
forth a statement of facts showing that the conditions precedent to the right
of the Issuer so to redeem have occurred, and (ii) an opinion of independent
legal counsel of recognized standing to the effect that the Issuer has or will
become obligated to pay such Additional Amounts or that PT-FI, AFIC or any
Infrastructure Affiliate, as the case may be, has or will become obligated to
pay such Underlying Additional Amounts, in each case as a result of such
change.
Certain Covenants
Merger and Consolidation
Neither the Issuer nor FCX will merge or consolidate with or into, or
permit any person to consolidate with or merge into the Issuer or FCX, or
convey, transfer, lease or otherwise dispose of all or substantially all of
its assets to any person, unless (i) the resulting, surviving or transferee
person (if not FCX or the Issuer, as the case may be), shall be a person
organized and existing under the laws of the United States or any State
thereof or the District of Columbia except that, if only the Issuer enters
into one of the aforementioned transactions, such person may be a person
organized under the laws of The Netherlands, and such person shall expressly
assume all obligations of the Issuer or FCX, as the case may be, for the
payment of all amounts due in respect of the Guaranteed Notes and the
performance of the Issuer's or FCX's, as the case may be, obligations under
the Indenture by supplemental indenture satisfactory to the Trustee pursuant
to the Indenture, (ii) immediately after giving effect to such merger,
consolidation, sale or conveyance (and treating any Debt which becomes an
obligation of, or any Lien which applies to any assets of, such successor
entity or any Subsidiary of FCX or the Issuer as a result of such transaction
as having been incurred by such entity or such Subsidiary at the time of such
transaction), the Issuer or FCX, as the case may be, or such successor person
shall not be in default in the performance of any covenant or condition of the
Indenture to be performed or observed by the Issuer or FCX, as the case may
be, and no Event of Default and no event which, after notice or lapse of time
or both, would become an Event of Default shall have occurred and be
continuing and (iii) the Issuer and FCX shall each have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such merger, consolidation, sale or conveyance and such supplemental indenture
(if any) comply with the Indenture.
Limitation on Liens
FCX will not create, incur, assume or suffer to exist any Lien upon any
Capital Stock of the Issuer or PT-FI owned by FCX or any of its Subsidiaries
securing any Indebtedness unless contemporaneously therewith effective
provision is made to secure the Guaranteed Notes equally and ratably with such
Indebtedness (or if such Indebtedness is subordinate in right of payment to
the Guaranteed Notes, then the Guaranteed Notes are to be so secured prior to
such Indebtedness) for so long as such Indebtedness is so secured.
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on a balance
sheet of such person prepared in accordance with Generally Accepted Accounting
Principles.
"Capital Stock" means any and all shares, interests, rights to purchase,
options, participations or other equivalents of or interests in (however
designated) corporate stock, including any Preferred Stock.
"Commodity Price Protection Agreement" of any person means any forward
contract, commodity swap, commodity option or other financial agreement or
arrangement designed to protect against fluctuations in commodity prices.
"Currency Exchange Protection Agreement" of any person means any forward
foreign exchange agreement, currency swap, currency option or other financial
agreement or arrangement designed to protect against fluctuations in currency
exchange rates.
"Debt" of any person means, without duplication,
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
person is responsible or liable;
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the deferred
(for 180 days or more) purchase price of property, all conditional sale
obligations of such person and all obligations of such person under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business);
(iv) all obligations of such person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing obligations
(other than obligations described in (i) through (iii) above) entered into in
the ordinary course of business of such person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by such
person of a demand for reimbursement following payment on the letter of
credit);
(v) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock (but
excluding any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through (v)
of other persons and all dividends of other persons for the payment of which,
in either case, such person is responsible or liable, directly or indirectly,
as obligor, guarantor or otherwise, including by means of any Guarantee; and
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other persons secured by any Lien on any property or asset of such person
(whether or not such obligation is assumed by such person).
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States which are in effect on the
date of determination.
"Indebtedness" of any person means, without duplication, all obligations
of such person under any Debt, Interest Rate Protection Agreement, Currency
Exchange Protection Agreement or Commodity Price Protection Agreement.
"Interest Rate Protection Agreement" of any person means any interest
rate swap agreement, interest rate cap agreement or other financial agreement
or arrangement designed to protect against fluctuations in interest rates,
including any agreement which exchanges a fixed rate interest obligation for a
floating rate interest obligation.
"Lien" means any mortgage, deed of trust, pledge, charge, security
interest, assignment, conditional sale, encumbrance or other title retention
agreement.
"Preferred Stock", as applied to Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed on or prior to the first anniversary of the Stated
Maturity of the Guaranteed Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated
Maturity of the Guaranteed Notes.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency unless such
contingency has occurred).
"Subsidiary" of a person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such person or any of its Subsidiaries,
and any partnership of which more than 50% of the partnership interests are
owned, directly or indirectly, by such person or any of its Subsidiaries.
Transactions with Affiliates
FCX will not, and will not permit the Issuer, PT-FI or any Transferee
Subsidiary to enter into any transaction or series of related transactions
with any Affiliate of FCX (other than FCX, PT-FI, the Issuer or any
Majority-Owned Subsidiary of any of FCX, the Issuer or PT-FI) that involves
aggregate consideration in excess of $1 million and that is not in the
ordinary course of its business and consistent with past practice between FCX,
the Issuer, PT-FI or such Transferee Subsidiary, on the one hand, and its
respective Affiliates, on the other hand, unless the transaction or series of
related transactions is in writing and either (i) the Board of Directors of
FCX or, as to any transaction involving PT-FI and its Subsidiaries, the Board
of Commissioners of PT-FI, has adopted a resolution approving such transaction
as having terms which are no less favorable to such person than those that
would have been obtained in a comparable transaction by such person with an
unrelated third person or (ii) FCX, the Issuer, PT-FI or such Transferee
Subsidiary, as the case may be, delivers to the Trustee on behalf of the
holders of the Guaranteed Notes a written opinion of a nationally recognized
investment banking firm stating that such transaction is fair to FCX, the
Issuer, PT-FI or such Transferee Subsidiary, as the case may be, from a
financial point of view. The following transactions shall not be subject to
this covenant: (1) the pro rata rights of Affiliates of FCX, the Issuer, PT-FI
or any Transferee Subsidiary as stockholders of FCX, the Issuer, PT-FI or such
Transferee Subsidiary, including the right to receive pro rata dividends or
other distributions, (2) obligations under any management or administrative
services arrangement or tax sharing or other similar agreement or arrangement
that is either consistent with past practices of FCX, the Issuer, PT-FI or any
Transferee Subsidiary or is approved by the Board of Directors of FCX as being
in the best interests of FCX, the Issuer, PT-FI or such Transferee Subsidiary,
as the case may be, (3) the sale, lease or other disposition of EIP Assets now
existing or to be constructed, or Undeveloped Mining Assets, and all
arrangements related to the development, operation, use and financing of such
assets (other than any sale, lease or other disposition to, or arrangement
with, an entity which is an Affiliate other than by virtue of FCX's interest
therein); provided that the Board of Directors of FCX, or, as to any
transaction involving PT-FI and its Subsidiaries, the Board of Commissioners
of PT-FI, shall have approved such transaction as being in the best interests
of FCX or PT-FI, as the case may be, (4) transactions between FCX, the Issuer,
PT-FI or such Transferee Subsidiary, or any of their respective Subsidiaries,
on the one hand, and any employee of FCX, the Issuer, PT-FI or such Transferee
Subsidiary, or any of their respective Subsidiaries, on the other hand, (5)
the payment of reasonable and customary fees to directors and commissioners of
FCX, the Issuer, PT-FI or such Transferee Subsidiary and (6) any amendment to
the Bank Master Services Agreement or any related agreement or arrangement
involving any assets subject to such agreement that is made at the request of
the Banks party to the AFIC Credit Agreement.
"Affiliate" of any specified person means (i) any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director
or officer (A) of such specified person, (B) of any Subsidiary of such
specified person or (C) of any person described in clause (i) above. For
purposes of this definition, control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such person whether by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, no bank (or trustee or security agent therefor) party to the AFIC
Credit Agreement, the PT-FI Credit Agreement or the FTX Credit Agreement, or
any amendment to or replacement of any of the foregoing, shall be deemed to be
an "Affiliate" by virtue of compliance with the requirements of any of the
foregoing agreements, amendments or replacements, including the granting of
the Liens provided for therein.
"EIP Assets" means the commercial, residential, educational, retail,
medical, recreational, environmental and other infrastructure facilities
(including without limitation power, water and waste disposal systems, an
industrial park, small business development facilities, port, marine,
logistics and related assets under construction, airport, flood control or
road facilities, hotel or other guest facilities and other general
infrastructure facilities), constructed or to be constructed in connection
with or to support the mining and milling operations of PT-FI in Irian Jaya,
Indonesia; provided that the mining and milling production facilities of PT-FI
in Irian Jaya, Indonesia shall not constitute EIP Assets.
"Majority-Owned Subsidiary" means a Subsidiary of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person, and any partnership of which more than 50% of the partnership
interests are owned, directly or indirectly, by such person.
"Transferee Subsidiary" means any Subsidiary of FCX to which PT-FI has
transferred property, plant and equipment with an aggregate net book value on
the date of transfer in excess of $10 million.
"Undeveloped Mining Assets" means the rights to explore for, mine,
process, store and transport minerals and any assets or facilities used in
connection with such rights or the exercise thereof; provided that the term
"Undeveloped Mining Assets" shall not include (i) any such rights with respect
to COW Area Block A, (ii) any assets or facilities used in connection with
mining or processing on COW Area Block A or (iii) any such rights, assets or
facilities to the extent acquired or developed with the proceeds of an Asset
Disposition. The term "COW Area Block A" is defined in the New COW and
includes all currently existing producing mines and proved and probable
reserves of PT-FI in Irian Jaya, Indonesia.
Certain Sales of Assets
FCX will not, and will not permit PT-FI or any Transferee Subsidiary to,
consummate any Asset Disposition other than in the ordinary course of
business, unless: (i) FCX, PT-FI or such Transferee Subsidiary, as the case
may be, receives consideration at the time of such Asset Disposition at least
equal to the fair market value (as determined in good faith, including as to
the value of all non-cash consideration, by the Board of Directors of FCX or,
as to any transaction involving PT-FI or its Subsidiaries, the Board of
Commissioners of PT-FI, whose determination shall be conclusive, of the shares
or assets subject to such Asset Disposition, provided, that the requirements
of this clause (i) will not apply to an Asset Disposition constituting a
spin-off or other distribution to stockholders of FCX, PT-FI or such
Transferee Subsidiary and (ii) within the time period specified below, either
(a) FCX, PT-FI or such Transferee Subsidiary applies the Net Proceeds either:
(1) to acquire Guaranteed Notes or to repay any Senior Debt of FCX or any Debt
of PT-FI (other than Indebtedness owing to any Affiliate of FCX or PT-FI but
including any Indebtedness owing by PT-FI to AFIC under the Bank Master
Services Agreement) or such Transferee Subsidiary or any Indebtedness secured
by such shares or assets sold or otherwise disposed of, or (2) to commence to
reinvest, either directly or through a Majority-Owned Subsidiary of FCX, such
Net Proceeds in any natural resource business (including, without limitation,
the production, exploration, extraction, development or refining of natural
resources), whether or not conducted by FCX or PT-FI as of the date of the
Indenture; or (b) to the extent FCX, PT-FI or such Transferee Subsidiary does
not apply (or commence to apply) all or any part of such Net Proceeds in
accordance with the immediately preceding clause (a), FCX makes an offer (the
"Asset Disposition Offer") in accordance with applicable law to purchase a
principal amount of the Guaranteed Notes and any other Senior Debt of FCX or
any Debt of PT-FI or a Subsidiary thereof (other than Indebtedness owed to any
Affiliate of FCX or PT-FI, but including any Indebtedness owed by PT-FI to
AFIC under the Bank Master Services Agreement), which is senior to or pari
passu with the Guaranteed Notes and which contains a covenant substantially
similar to this one equal to the amount of such Net Proceeds which FCX, PT-FI
or such Transferee Subsidiary have not so applied (or commenced to apply in
the case of clause (ii)(a)(2) above) pursuant to clause (a) above (the "Asset
Disposition Offer Amount") at 100% of the principal amount thereof plus
accrued interest or 100% of accreted value in the case of Indebtedness issued
at a discount to its face amount. Other than in the case of an Asset
Disposition of the type described in clause (B) of the definition of Net
Proceeds, the acquisition or repayment must be completed, or such reinvestment
must commence, or such Asset Disposition Offer must be made, within 360 days
after the later of the consummation of the Asset Disposition or the receipt of
the Net Proceeds therefrom. In the case of an Asset Disposition of the type
described in clause (B) of the definition of Net Proceeds, FCX, PT-FI or such
Transferee Subsidiary must complete an application of the Net Proceeds under
either clause (ii)(a)(1) or (ii)(b) above at or prior to the distribution,
spin-off, dividend or repurchase covered by clause (B) of the definition of
Net Proceeds. Notwithstanding the foregoing, the acquisition, reinvestment or
Asset Disposition Offer required by this covenant need not be made except to
the extent that the aggregate cumulative amount of Net Proceeds received by
FCX, PT-FI and any Transferee Subsidiary from all Asset Dispositions and not
previously applied as provided in either clauses (a) or (b) above exceeds $150
million. To the extent the Asset Disposition Offer is not fully subscribed,
the remaining Net Proceeds may be used for general corporate purposes,
including without limitation the payment of dividends. Pending the required
application of Net Proceeds, such Net Proceeds may be invested only in
Permitted Investments. If an Asset Disposition Offer would otherwise be
required to be made and the amount of such Asset Disposition Offer would be
less than $20 million, FCX shall not be required to make such offer until such
time as the total amount of Asset Dispositions which have occurred and as to
which Asset Disposition Offers have not been made exceeds $20 million.
"Asset Disposition" means, with respect to any person, any sale,
transfer, conveyance, lease or other disposition (including, without
limitation, by way of merger or consolidation, spin-off, or sale of shares of
Capital Stock in any Subsidiary of such person but excluding any
Sale-Leaseback Transaction) that is entered into and completed after the date
of the Indenture to any person (other than a Majority-Owned Subsidiary of FCX,
PT-FI or the Issuer) of (i) any assets (other than EIP Assets or Undeveloped
Mining Assets) of such person or (ii) any shares of Capital Stock of such
person's Subsidiaries (other than a Subsidiary substantially all of whose
assets are EIP Assets, Undeveloped Mining Assets or both), which, in either
case, results in Net Proceeds of $10 million or more. For purposes of this
definition, the term "Asset Disposition" shall not include (i) any sale,
transfer, conveyance, lease or other disposition of assets and properties of
FCX governed by the "Merger and Consolidation" covenant or (ii) the granting
of any Lien unless and until the property subject to such Lien is sold by or
on behalf of the person secured thereby or such person takes possession of
such property.
"Net Proceeds" from an Asset Disposition means:
(A) cash payments received (including any cash payments received by
way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received and also including
any cash received upon sale or disposition of such note or receivable or
upon sale or other disposition of other non-cash proceeds, but excluding
any consideration received in the form of assumption by the acquiring
person of Debt or other obligations relating to such properties or assets
or received in any other non-cash form) therefrom; and
(B) (i) in the case of an Asset Disposition (other than an Asset
Disposition described in clauses (ii) or (iii) below) the aggregate fair
market value of any non-cash assets received as consideration for such
Asset Disposition, but only to the extent that such non-cash assets are
then distributed by FCX as a dividend or other distribution to its
stockholders, (ii) in the case of an Asset Disposition constituting a
spin-off or other distribution to stockholders of FCX, the aggregate fair
market value on the date of such Asset Disposition of any non-cash assets
that are distributed by FCX as a dividend or other distribution to its
stockholders as part of such Asset Disposition and (iii) in the case of an
Asset Disposition pursuant to which FCX sells or otherwise conveys any
non-cash assets to any of its stockholders (other than pursuant to a pro
rata distribution to all of its stockholders) as consideration for the
repurchase by FCX of any of its Capital Stock from such stockholders, the
aggregate fair market value of the Capital Stock repurchased, provided
that in each such case, fair market value shall be determined in good
faith by the Board of Directors of FCX and such determination shall be
conclusive; and, provided further, that, in the case of each of subclauses
(i), (ii) and (iii) of this clause (B), any such Net Proceeds shall be
deemed to have been received, in respect of any Asset Disposition, at the
time when FCX distributes or otherwise sells or conveys such non-cash
assets to its stockholders,
in each case, net of all expenses, commissions and other fees or obligations
incurred, all taxes required to be accrued and reasonable reserves for the
after-tax cost of any indemnification (including environmental
indemnification) payments and in each case net of all payments made on any
Debt which is secured by any assets subject to such Asset Disposition, in
accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition,
and net of all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition.
"Permitted Investment" means (i) interest bearing deposit accounts in
United States national or state banks having a combined capital and surplus of
not less than $100 million and a Moody's Bank Credit Report Service short-term
deposit rating of P-1; (ii) bankers' acceptances drawn on and accepted by
commercial banks having a combined capital and surplus of not less than $100
million and a Moody's Bank Credit Report Service short-term deposit rating of
P-1; (iii) obligations of the United States of America or any agency or
instrumentality of the United States of America; (iv) commercial or finance
company paper which is rated A-1 by Standard & Poor's or P-1 by Moody's
Investors Service; (v) corporate debt securities rated A-1 by Standard &
Poor's or P-1 by Moody's Investors Service; (vi) repurchase agreements with
banking or financial institutions having a combined capital and surplus of not
less than $100 million and a Moody's Bank Credit Report Service short-term
deposit rating of P-1 with respect to any of the foregoing obligations or
securities; and (vii) money market funds with assets of at least $1 billion
and portfolio guidelines consistent with the foregoing obligations and
securities. Such investments shall have maturity dates, or shall be subject
to redemption by the holder at the option of the holder, prior to the date
which is one year from the date of purchase of such investment.
"Sale-Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby a person transfers such property to
another person and the transferor leases it from such person.
"Senior Debt" of any person means any Debt of such person unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinated in right of
payment to the Guaranteed Notes; provided, however, that Senior Debt shall not
be deemed to include (1) any obligations of such person to any Subsidiary, (2)
any liability for Federal, state, local or other taxes owed or owing by such
person or (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities).
Repurchase in Event of Change of Control and Rating Decline
Upon the occurrence of any Repurchase Event (as defined below), each
holder of a Guaranteed Note shall have the right, at such holder's option, to
require FCX to repurchase, and upon the exercise of such right FCX shall
repurchase, all or any part of such holder's Guaranteed Notes, in integral
multiples of $1,000, on the Repurchase Date (as defined below) at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to any Repurchase Date (the "Repurchase Price"), on
the terms and conditions described below.
Unless the Issuer shall have already called for the redemption of all
outstanding Guaranteed Notes, within 30 days of the occurrence of any
Repurchase Event, FCX or, at the request of FCX, the Trustee, shall mail to
all holders of record of the Guaranteed Notes, and cause to be published as
provided in the Indenture, a notice of the occurrence of such Repurchase Event
and of the rights of each holder of Guaranteed Notes in connection therewith.
To exercise a repurchase right, a holder of Guaranteed Notes shall
deliver to the Trustee within 30 days after receiving the notice of the type
described above, (1) irrevocable written notice of such holder's exercise of
such right and (2) the Guaranteed Notes with respect to which the repurchase
right is being exercised, duly endorsed for transfer to FCX. Guaranteed Notes
held by a securities depository may be delivered in such other manner as may
be agreed to by such securities depository and FCX or the Trustee. If the
Repurchase Date falls during the period between the close of business on
or in any year and the opening of business on the following
or , and the Guaranteed Notes have not been called for redemption on a
redemption date within such period (or on such or ), any
Guaranteed Notes delivered to the Trustee to be repurchased must be
accompanied by payment of an amount equal to the interest thereon, if any,
which the registered holder thereof is to receive on such or ,
and, notwithstanding such repurchase, such interest payment will be made by
FCX to the registered holder thereof on the next preceding or .
In the event a repurchase right shall be exercised in accordance with the
terms hereof, FCX shall pay or cause to be paid the Repurchase Price in cash
to such holder on the Repurchase Date.
If any Guaranteed Note surrendered for repurchase shall not be so paid on
the Repurchase Date, such Guaranteed Note shall, until paid, continue to
accrue interest, to the extent permitted by applicable law, from the
Repurchase Date at the rate per annum specified on the face thereof. FCX
shall pay to the holder of such Guaranteed Note the accrued amounts arising
from this paragraph at the same time that it pays the Repurchase Price.
Any Guaranteed Note which is to be repurchased only in part shall be
surrendered at any office or agency of FCX designated for that purpose by FCX
(with, if FCX or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to, FCX and the Trustee duly
executed by, the holder thereof or his attorney duly authorized in writing),
and FCX shall execute, and the Trustee shall authenticate and deliver to the
holder of such Guaranteed Note without service charge, a new Guaranteed Note
or Notes, of any authorized denomination as requested by such holder, in
aggregate principal amount equal to and in exchange for the unrepurchased
portion of the Guaranteed Note so surrendered.
"Repurchase Event" means the occurrence of a Change of Control followed
by a Rating Decline within the period of 60 days following the first public
announcement of the circumstances giving rise to a Change of Control (the
"Announcement") (which period shall be extended if during such 60 days either
both Rating Agencies shall have placed FCX on credit watch or one of the
Rating Agencies shall have placed FCX on credit watch and the other Rating
Agency shall have made the determination described in the definition of Rating
Decline, until such time as it can be determined that there has been a Rating
Decline).
"Change of Control" means the occurrence of any of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) (other than FTX in respect of FCX and FCX in respect
of the Issuer) is or becomes the beneficial owner (as defined in Section
13(d) of the Exchange Act and the rules promulgated thereunder except that
a person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total voting power of the Voting Stock
of the Issuer or FCX;
(ii) FCX ceases to own, directly or indirectly, at least 50.1% of
the outstanding shares of the Capital Stock of PT-FI, or ceases to have
the right, by share ownership, contract or otherwise, to elect at least
one-half of the members of the Board of Commissioners of PT-FI; provided
that no Change of Control shall be deemed to have occurred upon a
consolidation or merger of PT-FI with or into FCX or into any Subsidiary
of FCX in which FCX's direct or indirect percentage ownership interest
equals or exceeds FCX's direct or indirect percentage ownership interest
in PT-FI immediately prior to such transaction; or
(iii) any direct or indirect sale, transfer, lease or conveyance, in
one transaction or in a series of related transactions, of assets of PT-FI
having a fair market value (as determined in good faith by the Board of
Directors of FCX, which determination shall be conclusive) in excess of
half of the aggregate fair market value (determined as set forth above) of
PT-FI's assets as of the time of such sale, lease, transfer or conveyance
to any person (other than a direct or indirect Subsidiary of FCX in which
FCX's direct or indirect percentage ownership interest equals or exceeds
FCX's direct or indirect percentage ownership interest in PT-FI
immediately prior to such transaction) occurs.
A "Rating Decline" shall be deemed to have occurred if the Guaranteed
Notes shall be rated by each of the Rating Agencies at a rating which is lower
than the rating of the Guaranteed Notes by such Rating Agency on the day
before the Announcement by more than one gradation (whether or not within the
same Rating Category).
"Rating Agency" means Standard & Poor's Corporation and its successors
("S&P") and Moody's Investors Service, Inc. and its successors ("Moody's"),
or, if S&P and Moody's both shall not make a rating of the Guaranteed Notes
publicly available, a nationally recognized statistical rating agency or
agencies, as the case may be, selected by FCX which shall be substituted for
S&P or Moody's or both, as the case may be.
"Rating Category" means each major rating category symbolized by (x) in
the case of S&P, AAA, AA, A, BBB, BB, B, CCC, CC and C and each such Rating
Category shall include pluses or minuses ("gradations") modifying such capital
letters; (y) in the case of Moody's, Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C and
each such Rating Category shall include added numerals such as 1, 2 or 3
("gradations") modifying such letters; and (2) with respect to any other
Rating Agency, comparable or equivalent symbols.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the
election of directors.
Events of Default; Notice of Default and Waiver
The Indenture provides that, if an Event of Default specified therein
shall have occurred and be continuing, either the Trustee or the holders of
not less than 25% in aggregate principal amount of the Guaranteed Notes then
outstanding may declare 100% of the principal amount thereof plus accrued and
unpaid interest, if any, and Additional Amounts, if any, through the date of
such declaration, on all Guaranteed Notes then outstanding to be immediately
due and payable. In the case of certain events of bankruptcy or insolvency,
the principal amount plus accrued and unpaid interest through the date of the
occurrence of such event shall automatically become and be immediately due and
payable. Under certain circumstances, the holders of a majority in aggregate
principal amount of the outstanding Guaranteed Notes may rescind any such
acceleration with respect to the Guaranteed Notes and its consequences.
Interest shall accrue and be payable on demand on overdue interest and
Additional Amounts, if any (to the extent that the payment of such interest
shall be legally enforceable).
Under the Indenture, an Event of Default is defined as any of the
following: (i) default in payment of interest or Additional Amounts, with
respect to any Guaranteed Note, when the same becomes due and payable, and
continuance of such default for 30 days, (ii) default in payment of the
principal with respect to any Guaranteed Note when the same becomes due and
payable at its Stated Maturity, upon redemption or otherwise, (iii) failure by
the Issuer to redeem or repurchase the Guaranteed Notes when required to do so
under the Indenture or the Guaranteed Notes, (iv) failure by the Issuer or FCX
to comply with the "Mergers and Consolidations" covenant, (v) failure by the
Issuer or FCX to comply with any of its other agreements or covenants in the
Guaranteed Notes or the Indenture, but only upon the receipt by the Issuer of
notice of such default from the Trustee or from holders of not less than 25%
in aggregate principal amount of the Guaranteed Notes then outstanding and the
Issuer's or FCX's failure, as the case may be, to cure such default within 60
days after receipt by the Issuer of such notice, (vi) the acceleration of the
maturity or non-payment within any applicable grace period after final
maturity of any other Indebtedness (other than Non-Recourse Debt and other
than Debt described in clause (v) of the definition of "Debt") of the Issuer,
FCX, PT-FI, AFIC, any Infrastructure Affiliate or any Significant Subsidiary
in a principal amount exceeding $20 million (or an equivalent amount in
another currency) if such acceleration has not been rescinded or annulled
within 30 days, (vii) the rendering of one or more judgments or decrees for
the payment of money against the Issuer, FCX, PT-FI, AFIC, any Infrastructure
Affiliate or any Significant Subsidiary in an aggregate amount equal to or in
excess of $20 million (net of insurance) and either (a) any such judgments or
decrees are not vacated, discharged, stayed or bonded pending appeal within 60
days after the judgment becomes final and nonappealable or (b) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree,
(viii) certain events of bankruptcy or insolvency of the Issuer, FCX, PT-FI,
AFIC, any Infrastructure Affiliate or any Significant Subsidiary or (ix) the
FCX Guaranty shall cease for any reason to be in full force and effect or FCX
shall assert that the FCX Guaranty is not in full force and effect.
The Trustee shall give notice to holders of the Guaranteed Notes of any
continuing default known to it within 90 days after the occurrence thereof;
provided, that the Trustee may withhold such notice as to any default other
than a payment default, if it determines in good faith that withholding the
notice is in the interests of the holders.
The holders of a majority in aggregate principal amount of the
outstanding Guaranteed Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; provided, that the
Trustee may refuse to follow any direction which is in conflict with any law
or the Indenture and subject to certain other limitations. Before proceeding
to exercise any right or power under the Indenture at the direction of such
holders, the Trustee shall be entitled to receive from such holders reasonable
security or indemnity satisfactory to it against the cost, expenses and
liabilities which might be incurred by it in complying with any such
direction. No holder of any Guaranteed Note will have any right to pursue any
remedy with respect to the Guaranteed Notes, unless (i) such holder shall have
previously given the Trustee written notice of a continuing event of default;
(ii) the holders of at least 25% in aggregate principal amount of the
outstanding Guaranteed Notes shall have made a written request to the Trustee
to pursue such remedy; (iii) such holder or holders shall have offered to the
Trustee reasonable indemnity satisfactory to it; (iv) the holders of a
majority in aggregate principal amount of the outstanding Guaranteed Notes
shall not have given the Trustee a direction inconsistent with such request
within 60 days after receipt of such request; and (v) the Trustee shall have
failed to comply with the request within such 60-day period.
Notwithstanding the foregoing, the right of any holder (x) to receive
payments of principal, premium, if any, Additional Amounts, if any, or
interest payable with respect to any Guaranteed Note and any interest in
respect of a default in the payment of any such amounts on such Guaranteed
Note, on or after the due date expressed in such Guaranteed Note or (y) to
institute suit for the enforcement of any such payment rights shall not be
impaired or adversely affected without such holder's consent. The holders of
at least a majority in aggregate principal amount at maturity of Guaranteed
Notes at the time outstanding may waive any existing default and its
consequences, other than (i) any default in any payment on the Guaranteed
Notes, or (ii) any default in respect of certain covenants or provisions in
the Indenture which may not be modified without the consent of the holder of
each Guaranteed Note as described in "Modification" below.
The Issuer and FCX will be required to furnish to the Trustee annually a
statement as to any default by the Issuer or FCX in the performance and
observance of their respective obligations under the Indenture.
"Non-Recourse Debt" means any Debt issued pursuant to any agreement or
instrument which limits the liability of the borrower to the collateral
securing such debt so long as such collateral does not include any assets
within or constituting a part of COW Area Block A.
"Significant Subsidiary" means any Subsidiary of FCX which at the time of
determination either (A) had assets which, as of the date of FCX's most recent
quarterly consolidated balance sheet, constituted at least 5% of FCX's total
assets on a consolidated basis as of such date, or (B) had revenues for the
12-month period ending on the date of FCX's most recent quarterly consolidated
statement of income which constituted at least 5% of FCX's total revenues on a
consolidated basis for such period.
Modification
Modification and amendment of the Indenture or the Guaranteed Notes may
be effected by the Issuer, FCX and the Trustee with the consent of the holders
of not less than a majority in aggregate principal amount of the Guaranteed
Notes then outstanding. However, without the consent of each holder affected
thereby, no amendment may, among other things, (i) change the stated maturity
of the principal of, or any installment of interest on, any Guaranteed Note,
alter the principal amount of a Guaranteed Note or the rate of interest
thereon or any premium or Additional Amount payable thereon, change the place
of payment where or the coin or currency in which amounts due on the
Guaranteed Notes are payable, reduce or alter the method of computation of any
amount payable on redemption or repayment thereof (or the time at which any
such redemption may be made); (ii) make any reduction in the principal amount
of Guaranteed Notes whose holders must consent to an amendment or any waiver
under the Indenture or modify the Indenture provisions relating to such
amendments or waivers; (iii) impair or affect the right to institute suit for
the enforcement of any payment with respect to the Guaranteed Notes; (iv)
following the mailing of an Asset Disposition Offer or an occurrence of a
Repurchase Event, modify the Indenture provisions with respect to such offer
or Repurchase Event in a manner adverse to such holder or (v) change in any
manner adverse to the interests of any holders of the Guaranteed Notes the
obligations of FCX pursuant to the FCX Guaranty.
Without the consent of any holder of Guaranteed Notes, the Issuer, FCX
and the Trustee may amend the Indenture to (i) cure any ambiguity, defect or
inconsistency, (ii) provide for the assumption by a successor to the Issuer or
FCX of the respective obligations of the Issuer or FCX under the Indenture,
(iii) provide for uncertificated Guaranteed Notes in addition to certificated
Guaranteed Notes, so long as such uncertificated Guaranteed Notes are in
registered form for United States federal income tax purposes, (iv) make any
change that does not adversely affect the rights of any holder of Guaranteed
Notes, (v) make any change to comply with any requirement of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act of 1939, as amended, or (vi) add to the covenants or obligations of the
Issuer or FCX under the Indenture or surrender any right, power or option
conferred by the Indenture on the Issuer or FCX.
Satisfaction, Discharge and Defeasance of the Indenture
The Issuer may satisfy and discharge the obligations of the Issuer and
FCX under the Indenture and the Guaranty by delivering to the Trustee for
cancellation all outstanding Guaranteed Notes or by depositing with the
Trustee, after the Guaranteed Notes have become due and payable, cash
sufficient to pay at the Stated Maturity all of the outstanding Guaranteed
Notes and paying all other sums payable under the Indenture by the Issuer.
Under terms satisfactory to the Trustee, the Issuer may discharge
substantially all obligations of the Issuer and FCX under the Indenture to
holders of Guaranteed Notes which by their terms are due and payable within
one year (or are scheduled for redemption within one year) by irrevocably
depositing with the Trustee in trust for the benefit of the holders, (i) money
in an amount or (ii) U.S. government obligations which through the payment of
interest and principal will provide, not later than one day before the due
date of payments in respect of the Guaranteed Notes, money in an amount, or
(iii) a combination thereof, sufficient to pay and discharge the principal of
and premium, if any, Additional Amounts, if any, and interest on, the
Guaranteed Notes then outstanding at and through the maturity or redemption
date; provided that FCX has theretofore assumed the obligations of the Issuer
under the Guaranteed Notes as described under "Assumption of Direct
Obligations by FCX."
FCX may also discharge substantially all of its obligations under the
Indenture ("defeasance"); provided that FCX has theretofore assumed the
obligations of the Issuer under the Guaranteed Notes as described under
"Assumption of Direct Obligations by FCX." Under terms satisfactory to the
Trustee, the Issuer and FCX may instead be released from the obligations
imposed by certain provisions of the Indenture, including the covenants
described above limiting liens, consolidations, mergers, transactions with
affiliates and investments by the Issuer and requiring repurchase of the
Guaranteed Notes in the event of certain Asset Dispositions and upon an
occurrence of any Repurchase Event and omit to comply with such provisions
without creating an Event of Default ("covenant defeasance"). Defeasance or
covenant defeasance may be effected only if, among other things, the Issuer or
FCX irrevocably deposits with the Trustee in trust for the benefit of the
holders, (i) money in an amount or (ii) United States government obligations
which through the payment of interest and principal will provide, not later
than one day before the due date of principal of, premium, if any, and each
installment of interest in respect of the Guaranteed Notes, money in an
amount, or (iii) a combination thereof, sufficient to pay and discharge the
principal of, premium, if any, and interest on the Guaranteed Notes then
outstanding at maturity or at the earliest date at which the Issuer or FCX may
redeem such Guaranteed Notes if the Issuer or FCX has made adequate
arrangements with the Trustee to redeem such Guaranteed Notes at such time.
Such a trust may only be established if the Issuer has delivered to the
Trustee an Opinion of Counsel acceptable to the Trustee (who may be counsel to
the Issuer) to the effect that the defeasance and discharge will not be
deemed, or result in, a taxable event, with respect to holders of the
Guaranteed Notes and that the creation of the trust will not violate the
Investment Company Act of 1940. The Indenture will not be discharged if,
among other things, an Event of Default, or an event which with notice or
lapse of time would have become an Event of Default, shall have occurred and
be continuing on the date of such deposit or during the period ending on the
91st day after such date. In the event of any such defeasance and discharge,
the holders of the Guaranteed Notes will thereafter be able to look only to
such trust fund for payment of principal and interest on the Guaranteed Notes.
Information Concerning the Trustee
Chemical Bank will initially be the Trustee and Registrar under the
Indenture. Chemical Bank has performed a variety of financial services for
FCX and is agent bank and a lender under FTX's Credit Agreement.
Financial Reports
The Issuer and FCX will each provide to the Trustee a copy of all
financial reports each files with the Commission. If, during any reporting
period, FCX is not required to file such reports with the Commission, FCX will
provide to the Trustee the same financial reports concerning FCX as if FCX
were so required.
Assumption of Direct Obligations by FCX
FCX may at any time directly assume, by a supplemental indenture, the
obligations of the Issuer for the payment of the principal of, premium, if
any, Additional Amounts, if any and interest on the Guaranteed Notes and for
the fulfillment of all covenants of the Issuer contained in the Indenture.
Upon such assumption by FCX, FCX will succeed to and be substituted in all
respects for the Issuer under the Indenture, and the Issuer will be released
from its obligations under the Indenture and the Guaranteed Notes.
TAXATION
The following summary of certain United States federal, Netherlands and
Indonesia income taxes is based on the advice of Miller & Chevalier,
Chartered, tax counsel to the Issuer and FCX, with respect to United States
federal income taxes, Stibbe Simont Monahan Duhot, Netherlands counsel to the
Issuer and FCX, with respect to Netherlands taxes and Drs. Siddharta &
Siddharta, a member firm of Coopers & Lybrand (International), Indonesia tax
advisors to the Issuer and FCX, with respect to Indonesian taxes. For purposes
of this summary, a "U.S. Holder" is any holder of Guaranteed Notes that is (i)
a citizen or resident of the United States, (ii) a corporation, partnership,
or other entity created or organized in or under the laws of the United
States, or (iii) an estate or trust the income of which is subject to United
States federal income taxation regardless of source. A "Non-U.S. Holder" is
any holder of Guaranteed Notes that is not a U.S. Holder. This summary is
addressed to original holders that hold the Guaranteed Notes as capital assets
and does not address aspects of United States federal income taxation that may
be applicable to particular U.S. Holders, such as insurance companies, banks,
or dealers in securities or currencies, or to U.S. Holders that will hold a
Guaranteed Note as part of a position in a "straddle" or as part of a hedging
transaction for United States tax purposes or that have a "functional
currency" other than the United States dollar. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE UNITED STATES, NETHERLANDS,
INDONESIA, AND ANY OTHER TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES.
United States Income Tax Considerations
The Issuer believes, and intends to take the position, that the
Guaranteed Notes are debt of the Issuer for U.S. federal income tax purposes.
It is possible because of the FCX Guaranty that the Internal Revenue Service
("IRS") could assert that the Guaranteed Notes are debt of FCX, but such a
characterization should not affect holders to which this summary applies.
Recently enacted legislation authorizes the Treasury Secretary to issue
regulations recharacterizing "multiple-party financing transactions" as a
transaction directly among any two or more of the parties involved where the
Secretary determines that such recharacterization is "appropriate" to prevent
avoidance of any United States federal taxes. It is possible that such
regulations could be issued and could apply retroactively to the Guaranteed
Notes with the result, depending on the scope of such regulations, that the
Guaranteed Notes might be recharacterized for United States federal tax
purposes as debt of FCX, AFIC, or an Infrastructure Affiliate. The following
discussion assumes that the Guaranteed Notes will be treated as debt of the
Issuer for federal income tax purposes.
Interest. The gross amount of interest (including Additional Amounts, if
any, paid in respect of withholding taxes) on a Guaranteed Note will be
included in the income of a U.S. Holder in accordance with the holder's usual
method of tax accounting, and will be treated as foreign source income for
United States federal income tax purposes.
Sale, Exchange or Disposition. A U.S. Holder will recognize gain or loss
upon the sale, exchange or other disposition of the Guaranteed Notes in an
amount equal to the difference between the amount realized upon the sale,
exchange or other disposition and the U.S. Holder's adjusted tax basis in such
Guaranteed Notes. Gain or loss recognized by a U.S. Holder on a sale,
exchange or other disposition of Guaranteed Notes will be long-term capital
gain or loss if the Guaranteed Notes have been held more than one year at the
time of the sale. Any gain or loss recognized by a U.S. Holder generally will
be treated as from sources within the United States.
Assumption of Guaranteed Notes by FCX. It is unclear whether the
assumption of the obligations of the Guaranteed Notes by FCX pursuant to its
option would constitute a taxable event for federal income tax purposes. Under
proposed Treasury regulations, an alteration of a legal right or obligation is
not a modification of a debt instrument if it occurs by operation of the
original terms of the instrument. If the assumption were treated as a
significant modification of the Guaranteed Notes, however, it would be treated
as a taxable exchange of the Guaranteed Notes for new notes of FCX ("New FCX
Notes"). Holders would recognize gain or loss on the exchange measured by the
difference between the issue price of the New FCX Notes (as determined under
applicable Treasury regulations) and the adjusted tax basis of the Guaranteed
Notes.
Taxation of Non-U.S. Holders. Non-U.S. Holders will not be subject to
United States federal income tax on payments of interest (and Additional
Amounts, if any) with respect to the Guaranteed Notes, unless such interest
and Additional Amounts are effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United States. If the Guaranteed
Notes were treated as FCX debt, Non-U.S. Holders would not be subject to
United States income or withholding taxes on interest (and Additional Amounts,
if any) so long as (1) the Guaranteed Note is not effectively connected with
the conduct by such Non-U.S. Holder of a trade or business in the United
States, (2) the Non-U.S. Holder is not related to FCX through stock ownership,
and (3) at least 80% of FCX's gross income for a relevant three-year testing
period has been derived from sources outside the United States and is
attributable to non-U.S active business operations. Significantly more than
80% of FCX's income (which is derived primarily from interest and dividends
from PT-FI) has been and is likely to continue to be active foreign business
income. A Non-U.S. Holder generally will not be subject to United States
federal income tax on any gain realized on the sale, exchange, or other
disposition of Guaranteed Notes, unless (i) such gain is effectively connected
with the conduct by such Non-U.S. Holder of a trade or business in the United
States, or (ii) in the case of gain realized by an individual Non-U.S. Holder,
such Non-U.S. Holder is present in the United States for 183 days or more
during the year of such sale, exchange or disposition and certain other
conditions are met. The same rules would apply to a sale, exchange or other
disposition if the Guaranteed Notes were treated as FCX debt.
Information Reporting and Backup Withholding. Certain payments in
respect of Guaranteed Notes may be subject to information reporting to the IRS
and to a 31% United States backup withholding tax. Backup withholding will
not apply, however, to a holder who furnishes a correct taxpayer
identification number or certificate of foreign status and makes any other
required certification or who is otherwise exempt from backup withholding.
Generally, a U.S. Holder will provide such certification on Form W-9 (Request
for Taxpayer Identification Number and Certification) and a Non-U.S. Holder
will provide such certification on Form W-8 (Certificate of Foreign Status).
Netherlands Tax Considerations
Payments under the Guaranteed Notes by the Issuer and by any paying agent
to a holder of the Guaranteed Notes will not be subject to Netherlands
withholding tax.
A holder of the Guaranteed Notes is not subject to Netherlands income tax
in respect of any payments under the Guaranteed Notes or in respect of any
gain realized on the alienation of the Guaranteed Notes, provided that such
holder:
i) is not a resident or deemed resident of The Netherlands;
ii) does not own an enterprise or an interest in an enterprise which is
carried on through a permanent establishment or permanent representative in
The Netherlands to which or to whom the Guaranteed Notes or the payments under
the Guaranteed Notes are attributable; and
iii) does not have a substantial interest or deemed substantial interest
in the share capital of the Issuer or, in the event a holder does have such
interest, such interest is attributable to an enterprise carried on by the
holder or on his behalf.
A taxpayer is considered to have a substantial interest in the share
capital of the Issuer if he owned during the preceding five years, directly or
indirectly, at least one third of the entire paid-in capital or of the paid-in
capital of a certain class or classes of shares in the Issuer. If the
taxpayer is an individual, shares owned by certain relatives will be
attributed to the taxpayer, but in the case of attribution from relatives the
taxpayer will only be deemed to own a substantial interest in the Issuer if he
owns, directly or indirectly, with attribution from his spouse, more than 7%
of the nominal paid-in capital of the Issuer or of a certain class or classes
of shares in the Issuer.
A holder of the Guaranteed Notes is not subject to Netherlands net wealth
tax in respect of the Guaranteed Notes, provided such holder is not an
individual, or, if such holder is an individual, provided that such holder
does not own an enterprise or an interest in an enterprise which is carried on
through a permanent establishment or permanent representative in The
Netherlands to which or to whom the Guaranteed Notes are attributable.
No gift, estate or inheritance tax arises in The Netherlands on a gift of
Guaranteed Notes by, or on the death of a holder of, the Guaranteed Notes who
is neither a resident nor a deemed resident of The Netherlands, unless such
holder of the Guaranteed Notes owns, or owned, an enterprise or an interest in
an enterprise which is carried on through a permanent establishment or
permanent representative in The Netherlands to which or to whom the Guaranteed
Notes are attributable.
Indonesia Tax Considerations
Payments of interest under the Underlying Notes are currently subject to
Indonesian withholding tax in the amount of 10%, a reduced rate applicable to
residents of The Netherlands under the double tax treaty between Indonesia and
Netherlands. AFIC has agreed, and each Infrastructure Affiliate will agree, to
pay Underlying Additional Amounts with respect to the Underlying Notes so that
the net amount received by the Issuer after such withholding will be equal to
the amount that would have been received if no such tax had been payable. If
PT-FI, AFIC and/or any Infrastructure Affiliate becomes legally obligated, as
a result of statutory or regulatory changes adopted on or after the date
hereof generally affecting Indonesian withholding taxes, to pay Underlying
Additional Amounts on the PT-FI Note or the Underlying Notes, as the case may
be, the Issuer may redeem the Guaranteed Notes, in whole but not in part, at
100% of the principal amount thereof plus accrued and unpaid interest on the
date of redemption. See "Description of the Guaranteed Notes--Tax
Redemption."
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the instruments governing certain indebtedness
of AFIC does not purport to be complete and is qualified in its entirety by
reference to such instruments, copies of which have been filed, or
incorporated by reference, as exhibits to the Registration Statement of which
this Prospectus is a part. Capitalized terms used but not defined herein have
the meanings ascribed to them in such instruments. Simultaneously with the
issuance of the Guaranteed Notes, the AFIC Credit Agreement and related
documents will be amended in certain respects, which will require the consent
of the lenders that are signatories under the AFIC Credit Agreement (the
"Banks"). Unless otherwise indicated the following descriptions of the AFIC
Credit Agreement assume the effectiveness of such amendments and consent.
AFIC Credit Agreement
Pursuant to the AFIC Credit Agreement dated as of December 15, 1993,
among AFIC, the Banks and The Chase Manhattan Bank (National Association), as
agent for the Banks (the "Agent"), the Banks have made a term loan to AFIC in
an aggregate principal amount of $60 million with a final maturity of December
15, 1999. The loan bears interest on the unpaid principal amount at a rate
per annum equal to a reserve adjusted eurodollar rate plus 2-1/2%. AFIC is
required to repay the principal amount of the loan in quarterly installments
of $750,000 commencing March 15, 1994 through September 15, 1999. In addition,
the AFIC Credit Agreement provides for mandatory prepayments upon the
occurrence of certain events.
Description of Guarantee and Security. The obligations of AFIC under the
AFIC Credit Agreement are guaranteed by PT-FI and they are secured by a pledge
of substantially all of AFIC's existing assets and related receivables but not
including the Master Services Agreements (other than the Bank Master Services
Agreement) or any of the infrastructure assets purchased with the proceeds of
this offering or any related receivables.
Covenants of AFIC and PT-FI. Financial covenants under the AFIC Credit
Agreement include (i) a requirement that AFIC maintain certain insurance
coverage and certain limitations with respect to the use of proceeds of such
insurance, (ii) restrictions on mergers, consolidations and acquisitions by
AFIC with certain limited exceptions related to identified infrastructure
assets (iii) restrictions on sales of assets (subject to certain limited
exceptions), (iv) a restriction on AFIC's entry into new lines of business,
(v) a limitation on AFIC granting liens in respect of its assets subject to
certain exceptions, including for liens created pursuant to the security
documents in favor of the Banks, (vi) a limitation on investments which may be
made by AFIC, (vii) a restriction on dividend payments by AFIC, subject to
certain exceptions for quarterly cash dividends so long as there is no default
on the loans and subject to certain other conditions, (viii) a limitation on
affiliate transactions and (ix) a restriction on the ability of AFIC to
transfer any ownership interests in AFIC or any securities convertible into
any such shares, without prior written consent of Banks.
The AFIC Credit Agreement also limits the ability of AFIC to incur
additional indebtedness other than indebtedness up to but not exceeding a
principal amount of $120 million in connection with the acquisition of project
assets in accordance with the AFIC Credit Agreement provided that, among other
things, (i) the debt/equity ratio in connection with any such acquisition
shall be no greater than 2:1, and (ii) the terms of such Debt, any guarantee
thereof or any security therefor shall be no less favorable to AFIC and PT-FI
and no more favorable to the persons providing such Debt than the terms
provided under the AFIC Credit Agreement.
Under the Guarantee Agreement, PT-FI has agreed to certain covenants,
including a limitation on its ability to incur debt. The Guarantee Agreement
requires that PT-FI maintain a Fixed Charge Ratio (as defined) as of the end
of any fiscal quarter of 1.25 to 1.
The Guarantee Agreement contains certain additional covenants, including
covenants which limit the ability of PT-FI to merge or consolidate with other
entities or to convey, sell, lease, transfer or otherwise dispose of a
substantial portion of its assets.
Events of Default. The AFIC Credit Agreement specifies certain events of
default which permit the Banks to declare all outstanding amounts under the
AFIC Credit Agreement to be due and payable. These include, among other
things, a default in the payment when due of any instalment of principal on
the loan; a default in the payment when due of any interest on the loan and
continuance of such default for five days after the due date; PT-FI default
in payment of any amounts due under the PT-FI Guarantee; bankruptcy of AFIC or
PT-FI; any representation, warranty or certificate by AFIC or PT-FI in the
AFIC Credit Agreement or related documents shall prove to have been taken in
any material respect when made; a default by AFIC or PT-FI in the performance
of its covenants set forth in the AFIC Credit Agreement or related agreements,
subject in the case of certain covenants to a notice requirement; a default by
AFIC in the payment when due of any amount in respect of any indebtedness
(other than the loan under the AFIC Credit Agreement) having an aggregate
principal amount of at least $500,000, or the occurrence of any events
specified in an agreement relating to any indebtedness (other than the loan
under the AFIC Credit Agreement) shall occur and the effect of such event is
to cause or (with or without the giving of any required notice or the
expiration of any grace period or both) to permit the holders of such
indebtedness to cause indebtedness of AFIC at least equal to $500,000 to
become due; cross-default of any PT-FI debt over $10 million, a default by
PT-FI under the FTX Credit Agreement; the New COW shall be terminated; PT-FI
shall fail to make payments under the Bank Master Services Agreement; judgment
and ERISA defaults; AFIC, ALatieF or PT-FI shall default in its obligations
under any Project Document without being remedied or waived within 30 days
after the occurrence thereof; FTX shall fail to own directly or indirectly,
beneficially or of record, at least 50.1% of the voting stock of PT-FI or
otherwise fail to possess the power to direct the management of PT-FI.
Bank Master Services Agreement. AFIC has entered into a Master Services
Agreement dated as of December 15, 1993 with PT-FI (the "Bank Master Services
Agreement") pursuant to which AFIC has agreed to assume responsibility for the
performance of certain administrative and supply services related to the
initial group of assets transferred by PT-FI to AFIC. PT-FI has in turn
agreed to provide certain support services including electricity, water, waste
disposal, transportation, maintenance and repairs, security and other similar
services necessary in connection with the ownership, construction, maintenance
and operation by AFIC of the acquired assets. These support services may
initially be provided by PT-FI to AFIC free of charge, although PT-FI reserves
the option to later establish reasonable charges and contractual arrangements
for any and all such support services.
PT-FI Credit Agreement
PT-FI entered into an amended $550 million credit agreement in June 1993
(the "PT-FI Credit Agreement"). The PT-FI Credit Agreement, guaranteed by FCX
and FTX, is structured as a three year revolving line of credit followed by a
3 1/2 year reducing revolving line of credit. The PT-FI Credit Agreement is
part of an $800 million committed credit facility available to FTX and its
subsidiaries including PT-FI and is subject to a borrowing base, redetermined
annually by the banks, which establishes maximum consolidated debt for FTX and
its subsidiaries, including PT-FI. PT-FI's limit under the facility is $550
million subject to the borrowing base discussed above. Interest is variable
and commitment fees are payable at 0.38% per annum on the average daily unused
commitment. The PT-FI Credit Agreement provides for working capital
requirements, specified coverage of fixed charges, and restrictions on other
borrowings. PT-FI has assigned its existing and future sales contracts and
pledged its rights under the New COW, accounts receivable and other assets as
security for its borrowings under the PT-FI Credit Agreement. As of December
31, 1993, $547.5 million was available under the current borrowing base and
$412.0 million of borrowings were unused under the credit facility. To the
extent FTX and its other subsidiaries incur additional debt, the amount
available to PT-FI under the PT-FI Credit Agreement may be reduced. The
average interest rate on borrowings under the PT-FI Credit Agreement was 4.4%
during 1993, 5.1% during 1992 and 7.4% during 1991.
The PT-FI Credit Agreement contains covenants addressing financial
reporting requirements, maintenance of insurance, limitations on mergers and
acquisitions, restrictions on asset dispositions, limitations on liens and
limitations on the incurrence of additional indebtedness and various other
covenants that are customary for credit facilities of this type.
Under the terms of the PT-FI Credit Agreement, events of default include
failure to pay principal and interest when due, failure to comply with the
covenants set forth in the PT-FI Credit Agreement, cross-default to certain
other indebtedness, a bankruptcy filing on either a voluntary or involuntary
basis and the failure of FTX to own directly or indirectly such number of
shares of voting stock of PT-FI as is needed to effectively control its policy
and direction. However, a number of the events of default under the PT-FI
Credit Agreement also relate to FTX and its other subsidiaries as well as to
PT-FI and may occur independently of actions taken or not taken by PT-FI. As
of December 31, 1993, PT-FI was in compliance with the terms of the PT-FI
Credit Agreement.
DESCRIPTION OF FCX PREFERRED STOCK
AND SPECIAL PREFERENCE STOCK
Step-Up Convertible Preferred Stock
As of December 31, 1993, FCX had outstanding 700,000 shares of Step-Up
Convertible Preferred Stock, par value $0.10 per share. The Step-Up
Convertible Preferred Stock is represented by Depositary Shares, each of which
represents 0.05 shares of such stock. The Step-Up Convertible Preferred Stock
ranks, as to payment of dividends and distribution upon liquidation, pari
passu with Special Preference Stock (as defined below) and Gold-Denominated
Preferred Stock (as defined below) of FCX and senior to the Class A and Class
B Common Stock of FCX.
The Depositary Shares have a liquidation preference of $25.00 per share
(equivalent to $500.00 per share of Step-Up Convertible Preferred Stock) and
are convertible at the option of the holder at any time, unless previously
redeemed, into 0.813 shares of Class A Common Stock (equivalent to a
conversion price of $30.75 per share of Class A Common Stock), subject to
adjustment in certain circumstances. Dividends on the Step-Up Convertible
Preferred Stock are cumulative and are payable quarterly commencing November
1, 1993 in an amount equivalent to $1.25 per annum per Depositary Share
through August 1, 1996 and thereafter in an amount equivalent to $1.75 per
annum per Depositary Share until redemption or conversion.
The Depositary Shares are not redeemable prior to August 1, 1996.
Thereafter and prior to August 1, 1999, the Depositary Shares are redeemable
at the option of FCX, in whole or in part, for such number of shares of Class
A Common Stock as are issuable at a conversion rate of 0.813 shares of Class A
Common Stock for each Depositary Share, subject to adjustment in certain
circumstances. FCX may exercise this option only if the trading prices of the
Class A Common Stock as measured for a specified number of trading days prior
to public notice of the redemption have exceeded $38.44 per share, subject to
adjustment in certain circumstances. On and after August 1, 1999, the
Depositary Shares are redeemable, in whole or in part, at the option of FCX,
at a redemption price of $25.00 per Depositary Share plus accrued and unpaid
dividends. FCX may, at its option, subject to certain exceptions, pay the
redemption price in cash, Class A Common Stock or any combination thereof.
The Step-Up Convertible Preferred Stock has limited voting rights
triggered by the failure of FCX to pay dividends in an amount equal to six
full quarterly dividends or by the proposed amendment to the Certificate of
Incorporation of FCX so as to adversely affect the rights of holders of
Step-Up Convertible Preferred Stock. Voting rights are not triggered upon
amendment to the Certificate of Incorporation to authorize other series of
stock of FCX ranking on a parity with or junior to the Step-Up Convertible
Preferred Stock as to dividends or rights upon liquidation.
Special Preference Stock
As of December 31, 1993, FCX had outstanding 26,400,000 shares of 7%
Convertible Exchangeable Special Preference Stock, par value $0.10 per share
(the "Special Preference Stock"), a series of Special Stock. The Special
Preference Stock is represented by depositary shares, each of which represents
2 16/17 shares of Special Preference Stock. The Special Preference Stock is
redeemable at the option of FCX, in whole or in part, at prices declining to
$25 per depositary share, commencing on August 1, 1995. The Special
Preference Stock ranks, as to payment of dividends and distributions upon
liquidation, pari passu with the Step-Up Convertible Preferred Stock and the
Gold-Denominated Preferred Stock and prior to the Class A and Class B Common
Stock. Holders of shares of Special Preference Stock will be entitled to
receive cumulative cash dividends at an annual rate equivalent to $0.595 per
share ($1.75 per depositary share) when and as and if declared by the Board of
Directors of FCX, which dividends are payable quarterly. After full
cumulative dividends on Special Preference Stock for all past and current
quarterly dividend period, have been paid in full, the Special Preference
Stock will not be entitled to participate with the Class A and Class B Common
Stock in any further distributions by FCX (except upon liquidation,
dissolution or winding up of FCX). In the event of any such liquidation,
dissolution or winding up, after payment or provision for payment of the debts
and other liabilities of FCX, the holders of Special Preference Stock will be
entitled to receive out of the remaining net assets of FCX $8.50 per share
($25 per depositary share) in cash plus accrued and unpaid dividends before
any distribution is made or set apart for the holders of the Class A and Class
B Common Stock or any other stock of FCX ranking junior to the Special
Preference Stock as to dividends or distribution of assets upon liquidation,
dissolution or winding up of the affairs of FCX.
Each depositary share representing Special Preference Stock is
convertible at the option of the holder at any time, unless previously
redeemed, into 0.992 shares of Class A Common Stock (equivalent to a
conversion price of $25.20 per share of Class A Common Stock), subject to
adjustment in certain circumstances. The depositary shares are exchangeable
in whole at the option of FCX on any quarterly dividend payment date,
commencing August 1, 1994, for FCX's 7% Convertible Subordinated Debentures
due 2007 (the "Debentures") at a rate of $25.00 principal amount of Debentures
for each depositary share. The Debentures, if issued, will be convertible at
the option of the holder at any time, unless previously redeemed, into Class A
Common Stock at the conversion price for depositary shares for which the
Debentures have previously been exchanged, subject to adjustments in certain
circumstances.
The Special Preference Stock has limited voting rights triggered by the
failure of FCX to pay dividends in an amount equal to six full quarterly
dividends or by FCX's proposed amendment to its Certificate of Incorporation
so as to adversely affect the rights of holders of Special Preference Stock.
Voting rights are not triggered upon amendment to the Certificate of
Incorporation to authorize other series of stock of FCX, whether ranking
senior to, on a parity with or junior to the Special Preference Stock as to
dividends or rights upon liquidation.
Gold-Denominated Preferred Stock
As of December 31, 1993, FCX had outstanding 300,000 shares of
Gold-Denominated Preferred Stock (referred to herein as "Series I") and on
January 21, 1994 FCX issued 215,279 shares of Gold-Denominated Preferred
Stock, Series II (collectively, "Gold-Denominated Preferred Stock"). The
Gold-Denominated Preferred Stock is represented by Depositary Shares, each of
which represents 0.05 shares of such stock. The Gold-Denominated Preferred
Stock ranks, as to the payment of dividends and distribution upon liquidation
pari passu with the Special Preference Stock and the Step-Up Convertible
Preferred Stock and senior to FCX's Class A and Class B Common Stock.
The Depositary Shares have a liquidation preference equal to the dollar
equivalent value of 0.10 ounces of gold per Depositary Share plus accrued and
unpaid dividends. Dividends on the Gold-Denominated Preferred Stock are
cumulative and are payable quarterly, in the case of Gold-Denominated
Preferred Stock, Series I, commencing November 1, 1993 in an amount equal to
the dollar equivalent value of 0.000875 ounces of gold per Depositary Share
per quarter, and, in the case of Gold-Denominated Preferred Stock, Series II,
commencing May 1, 1994 in an amount equal to the dollar equivalent value of
0.0008125 ounces of gold per Depositary Share per quarter.
The Depositary Shares are subject to mandatory redemption, out of funds
legally available therefor, on August 1, 2003 and on February 1, 2006,
respectively, at an amount equal to the dollar equivalent value of 0.10 ounces
of gold per Depositary Share plus accrued and unpaid dividends. The
Depositary Shares are not subject to redemption at the option of FCX, except
in limited circumstances. FCX does not have the right to make any mandatory
or optional redemption of any Depositary Shares unless full cumulative
dividends for all past dividend periods shall have been paid or declared and
set aside for payment upon all Depositary Shares and all other outstanding
shares of stock of FCX ranking, as to dividends, on a parity with the
Depositary Shares. For purposes of this discussion, the "dollar equivalent
value" of a specified number of ounces of gold means that number of ounces
multiplied by a reference price determined by taking the average of the London
P.M. gold fixing price for an ounce of gold on a specified number of days
prior to the date of determination.
The Gold-Denominated Preferred Stock has limited voting rights triggered
by the failure of FCX to pay dividends in an amount equal to six full
quarterly dividends or by any amendment to FCX's Certificate of Incorporation
that would adversely affect the rights of holders of Gold-Denominated
Preferred Stock or create, authorize or issue any series or class of stock
ranking senior to the shares of Gold-Denominated Preferred Stock with respect
to dividends or distribution of assets upon liquidation, dissolution or
winding up of FCX. Voting rights are not triggered upon amendment to the
Certificate of Incorporation to authorize other series of stock of FCX ranking
on a parity with or junior to the Gold-Denominated Preferred Stock as to
dividends or rights upon liquidation, dissolution or winding up.
UNDERWRITING
The Underwriters named below have severally agreed to purchase from the
Issuer the following principal amounts of Guaranteed Notes:
Principal Amount
Underwriters of Guaranteed Notes
------------ -------------------
CS First Boston Corporation.....................
Chase Securities, Inc...........................
------------
Total $120,000,000
============
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Guaranteed Notes, if any
are purchased.
The Issuer has been advised by the Underwriters that the Underwriters
propose to offer all Guaranteed Notes to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of % of the principal amount per
Guaranteed Note; that the Underwriters and such dealers may allow a discount
of % of such principal amount on sales to certain other dealers; and that
after the initial public offering, the public offering price and concession
and discount may be changed by the Underwriters.
The Guaranteed Notes are a new issue of securities with no established
trading market. Each of the Underwriters has advised the Issuer that it
intends to act as a market maker for the Guaranteed Notes. However, the
Underwriters are not obligated to do so and any such market-making may be
discontinued at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Guaranteed Notes.
Chase Securities, Inc. is an affiliate of The Chase Manhattan Bank
(National Association), which is agent bank for the AFIC Credit Agreement and
a co-agent for the FTX Credit Agreement.
The Issuer and FCX have jointly and severally agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act of 1933, as amended (the"Securities Act"), and to
contribute to payments the Underwriters may be required to make in respect
thereof.
LEGAL MATTERS
The validity of the Guaranteed Notes will be passed upon by Davis Polk &
Wardwell. The tax matters under `Taxation" will be passed upon for the Issuer
and FCX by Miller & Chevalier, Chartered, tax counsel to the Issuer and FCX as
to matters of United States law, by Stibbe Simont Monahan Duhot, counsel to
the Issuer and FCX, as to matters of Netherlands law, and Drs. Siddharta &
Siddharta, a member firm of Coopers & Lybrand (International), tax advisors to
the Issuer and FCX as to matters of Indonesian law. Certain legal matters will
be passed upon for the Underwriters by Sullivan & Cromwell. Davis Polk &
Wardwell and Sullivan & Cromwell will rely upon the opinion of Stibbe Simont
Monahan Duhot as to all matters of Netherlands law.
EXPERTS
The audited financial statements of FCX and the audited balance sheet of
the Issuer included in this Prospectus have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said reports.
The audited financial statements of Rio Tinto Minera, S.A. as of and for
the year ended December 31, 1992 incorporated in this Prospectus by reference
to FCX's Current Report on Form 8-K dated April 13, 1993, as amended on August
5, 1993, have been audited by Coopers & Lybrand, S.A. as indicated in their
Report of the Auditors with respect thereto and are incorporated herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
PT-FI's reserves as of December 31, for the years 1989 through 1993
included herein and incorporated herein by reference have been verified by
Independent Mining Consultants, Inc., and such reserve information has been
included herein in reliance upon the authority of said firm as experts in
mining, geology and reserve determinations.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement filed by
the Issuer and FCX with the Commission in compliance with United States
federal securities laws. This Prospectus omits certain of the information
contained in the Registration Statement in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Issuer, FCX and the Guaranteed Notes. In addition, the Issuer and FCX, in
compliance with applicable state securities laws, have made certain required
filings. Statements contained herein concerning the provisions of any document
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
AVAILABLE INFORMATION
FCX is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports and other information with the
Commission. Reports, proxy statements and other information filed by FCX with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 or at its Regional Offices located at Suite 1400, Northwestern
Atrium Center, 500 West Madison, Chicago, Illinois 60661 and 13th Floor, 7
World Trade Center, New York, New York 10007, and copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain securities
of FCX are listed on the New York Stock Exchange (the "NYSE") and on The
Australian Stock Exchange. Reports, proxy statements and other information
concerning FCX can be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
The Issuer is a special purpose entity, is a wholly owned subsidiary of
FCX and is not engaged in any business operations independent of FCX. In view
of the FCX guaranty, the Issuer does not intend to provide separate reports to
holders of the Guaranteed Notes.
INDEX TO FINANCIAL STATEMENTS
Page
----
P.T. ALatieF Freeport Finance Company B.V. (Audited)
Report of Independent Public Accountants F-2
Balance Sheet as of February 3, 1994 and Note to Balance Sheet F-3
Freeport-McMoRan Copper & Gold Inc. Financial Statements (Audited):
Report of Independent Public Accountants F-4
Balance Sheets as of December 31, 1991 and 1992 F-5
Statements of Income for the years ended December 31,
1990, 1991 and 1992 F-6
Statements of Cash Flow for the years ended December 31,
1990, 1991 and 1992 F-7
Statements of Stockholders' Equity for the years ended
December 31, 1990, 1991 and 1992 F-8
Notes to Financial Statements F-9
Freeport-McMoRan Copper & Gold Inc. Financial Statements (Unaudited):
Condensed Balance Sheet as of December 31, 1993 F-15
Statement of Income for the year ended December 31, 1993 F-16
Statement of Cash Flow for the year ended December 31, 1993 F-17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To P.T. ALatieF Freeport Finance Company B.V.:
We have audited the accompanying balance sheet of P.T. ALatieF Freeport
Finance Company B.V. (a Netherlands corporation) as of February 3, 1994. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of P.T. ALatieF Freeport Finance
Company B.V. as of February 3, 1994 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN & CO.
New Orleans, Louisiana,
February 10, 1994
P.T. ALATIEF FREEPORT FINANCE COMPANY B.V.
BALANCE SHEET
February 3, 1994
Cash $20,510
=======
Common stock, issued and outstanding 40 shares $20,510
=======
Note to Balance Sheet
Basis of Presentation
P.T. ALatieF Freeport Finance Company B.V. (the "Issuer") is a wholly
owned subsidiary of Freeport-McMoRan Copper & Gold Inc. ("FCX"). The Issuer
was organized to issue notes and lend the net proceeds thereof to P.T. ALatieF
Freeport Infrastructure Corporation and one or more affiliated entities which
will use the proceeds of such loan to purchase infrastructure assets from P.T.
Freeport Indonesia Company, a subsidiary of FCX.
The Issuer was formed on February 3, 1994 with a capital contribution
from FCX of 40,000 Dutch Guilders. The Issuer's authorized capital amounts to
200,000 Dutch Guilders and is divided into 200 shares with a par value of
1,000 Dutch Guilders. The accompanying balance sheet has been converted to
United States dollars using the exchange rate on the date of formation.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Freeport-McMoRan Copper &
Gold Inc.:
We have audited the accompanying balance sheets of Freeport-McMoRan
Copper & Gold Inc. (a Delaware Corporation) as of December 31, 1992 and 1991,
and the related statements of income, cash flow and stockholders' equity for
each of the three years in the period ended December 31, 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Freeport-McMoRan
Copper & Gold Inc. as of December 31, 1992 and 1991 and the results of its
operations and its cash flow for each of the three years in the period ended
December 31, 1992 in conformity with generally accepted accounting principles.
As discussed in Note 7 to the financial statements, effective January 1,
1991, Freeport-McMoRan Copper & Gold Inc. changed its method of accounting for
postretirement benefits other than pensions.
ARTHUR ANDERSEN & CO.
New Orleans, Louisiana,
January 26, 1993
FREEPORT-MCMORAN COPPER & GOLD INC.
BALANCE SHEETS
December 31,
____________________
1991 1992
________ _______
(amounts in thousands)
ASSETS
Current assets:
Cash and short-term investments $ 80,776 $ 371,842
Amount due from sale of subsidiary interest 212,485 --
Amount due from FTX 20,000 --
Accounts receivable:
Customers 54,525 130,587
Other 18,863 20,249
Inventories:
Product 27,159 13,911
Materials and supplies 94,455 118,347
Prepaid expenses 2,021 6,178
--------- ---------
Total current assets 510,284 661,114
--------- ---------
Property, plant and equipment 1,012,029 1,443,939
Less accumulated depreciation and amortization 410,354 450,527
--------- ---------
Net property, plant and equipment 601,675 993,412
--------- ---------
Receivable from the Government of Indonesia 12,446 7,001
Other assets 33,210 32,478
--------- ---------
Total assets $1,157,615 $1,694,005
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 31,860 $ 84,903
Current portion of long-term debt -- 78,571
Royalties payable 5,644 3,973
Due to FTX and affiliates 4,219 --
Accrued income and other taxes -- 1,129
--------- ---------
Total current liabilities 41,723 168,576
Long-term debt, less current portion 397,000 471,429
Zero coupon exchangeable notes 234,961 173,583
Accrued postretirement benefits and other liabilities 13,774 15,558
Deferred income taxes 144,799 196,953
Deferred gain on sale of subsidiary interest 138,576 --
Minority interest 14,237 21,449
Stockholders' equity:
Depositary shares, at liquidation value -- 224,400
Class A common stock, par value $.10 2,000 5,318
Class B common stock, par value $.10 7,106 14,213
Capital in excess of par value of common stock 163,439 353,697
Retained earnings -- 48,829
--------- ---------
172,545 646,457
--------- ---------
Total liabilities and stockholders' equity $1,157,615 $1,694,005
========= ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-MCMORAN COPPER & GOLD INC.
STATEMENTS OF INCOME
Years Ended December 31,
------------------------------
1990 1991 1992
______ ______ ______
(amounts in thousands,
except per share amounts)
Revenues $434,148 $467,522 $714,315
Costs of sales:
Site production and delivery 160,045 204,353 308,948
Depreciation and amortization 35,479 38,397 48,272
-------- -------- --------
Total cost of sales 195,524 242,750 357,220
-------- -------- --------
Exploration expenses 4,086 6,502 12,185
General and administrative expenses 29,989 40,550 68,481
-------- -------- --------
Total costs and expenses 229,599 289,802 437,886
-------- -------- --------
Operating income 204,549 177,720 276,429
Interest expense, net (13,517) (21,451) (18,897)
Other income, net 1,203 3,477 7,162
-------- -------- --------
Income before income taxes
and minority interest 192,235 159,746 264,694
Provision for income taxes (88,330) (45,585) (103,726)
Minority interest (13,726) (12,199) (31,075)
-------- -------- --------
Income before change in accounting principle 90,179 101,962 129,893
Cumulative effect of change in accounting
principle, net of taxes of $5,007 and
minority interest of $570 -- (5,803) --
-------- -------- --------
Net income 90,179 96,159 129,893
Preferred dividends -- -- (7,025)
-------- -------- --------
Net income applicable to common stock $ 90,179 $ 96,159 $122,868
-------- -------- --------
-------- -------- --------
Per share of common stock:
Income before change in accounting principle $.52 $.56 $.66
Cumulative effect of change in accounting
principle -- (.03) --
---- ---- ----
$.52 $.53 $.66
---- ---- ----
---- ---- ----
Average common shares outstanding 173,432 182,130 187,343
======== ======== ========
Dividends per share of common stock $.69 $.55 $.60
==== ==== ====
The accompanying notes are an integral part of these financial statements.
FREEPORT-MCMORAN COPPER & GOLD INC.
STATEMENTS OF CASH FLOW
Years Ended December 31,
------------------------
1990 1991 1992
---- ---- ----
(amounts in thousands)
Cash flow from operating activities:
Net income $ 90,179 $ 96,159 $ 129,893
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of change in accounting
principle -- 5,803 --
Depreciation and amortization 35,479 38,397 48,272
Deferred income taxes 40,016 17,052 52,154
Amortization of discount on zero coupon
exchangeable notes -- 9,162 17,297
Minority interest's share of net income 13,726 12,199 31,075
(Increase) decrease in working capital:
Amount due from FTX -- (20,000) 20,000
Accounts receivable (8,646) (24,647) (77,448)
Inventories (26,614) (50,086) (10,644)
Prepaid expenses (562) (939) (4,157)
Accounts payable and accrued liabilities 17,094 547 49,925
Royalties payable 2,083 (655) (1,671)
Due to FTX and affiliates 1,975 (686) (4,219)
Accrued income and other taxes (16,112) (9,988) 1,129
Other (2,314) 1,554 963
-------- -------- --------
Net cash provided by operating activities 146,304 73,872 252,569
-------- -------- --------
Cash flow from investing activities:
Capital expenditures (187,544) (239,954) (367,842)
Purchase of indirect interest in PT-FI -- -- (211,892)
Purchase of PT-FI stock by FCX (91,543) -- --
-------- -------- --------
Net cash used in investing activities (279,087) (239,954) (579,734)
-------- -------- --------
Cash flow from financing activities:
Cash dividends paid
Common stock (118,924) (100,171) (111,365)
Preference stock -- -- (4,407)
Minority interest (19,690) (8,945) (15,643)
Proceeds from sale of Class A common stock -- -- 174,142
Sale of subsidiary interest -- -- 212,485
Proceeds from sale of depositary shares -- -- 217,867
Conversion of zero coupon exchangeable notes -- -- (7,848)
Proceeds from issuance of zero coupons
exchangeable notes -- 218,560 --
Proceeds from long-term debt 164,000 103,000 153,000
Net decrease in short-term debt -- (10,000) --
Sale of Class B shares to FTX 91,543 -- --
-------- -------- --------
Net cash provided by financing activities 116,929 202,444 618,231
-------- -------- --------
Net increase (decrease) in cash and
short-term investments (15,854) 36,362 291,066
Cash and short-term investments at
beginning of year 60,268 44,414 80,776
-------- -------- --------
Cash and short-term investments at
end of year $ 44,414 $ 80,776 $371,842
======== ======== ========
Interest paid $ 21,011 $ 32,482 $ 22,581
======== ======== ========
Income taxes paid $ 64,427 $ 38,521 $ 50,029
======== ======== ========
The accompanying notes, which include information in Notes 2 and 5
regarding noncash transactions,
are an integral part of these financial statements.
FREEPORT-MCMORAN COPPER & GOLD INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31,
--------------------------
1990 1991 1992
---- ---- ----
(amounts in thousands)
Convertible Exchangeable Special
Preference Stock:
Sale of 8,976,000 Depositary Shares
representing 26,400,000 shares of
Special Stock $ -- $ -- $224,400
-------- -------- --------
Class A common stock:
Balance at beginning of year 2,000 2,000 2,000
Two-for-one stock split -- -- 2,000
Sale of shares to the public -- -- 863
Conversion of zero coupon exchangeable notes -- -- 455
-------- -------- --------
Balance at end of year 2,000 2,000 5,318
-------- -------- --------
Class B common stock:
Balance at beginning of year 6,538 7,106 7,106
Two-for-one stock split -- -- 7,107
Sale of shares to FTX 568 -- --
-------- -------- --------
Balance at end of year 7,106 7,106 14,213
-------- -------- --------
Capital in excess of par value of common stock:
Balance at beginning of year 77,051 167,451 163,439
Sale of Class A and Depositary Shares -- -- 166,746
Conversion of zero coupon exchangeable notes -- -- 69,945
Two-for-one stock split -- -- (9,107)
Sale of Class B shares to FTX 90,975 -- --
Cash dividends (575) (4,012) (37,326)
-------- -------- --------
Balance at end of year 167,451 163,439 353,697
-------- -------- --------
Retained earnings:
Balance at beginning of year 28,170 -- --
Net income 90,179 96,159 129,893
Dividends on common stock (118,349) (96,159) (74,039)
Dividends on preference stock -- -- (7,025)
-------- -------- --------
Balance at end of year -- -- 48,829
-------- -------- --------
Total stockholders' equity $176,557 $172,545 $646,457
======== ======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-MCMORAN COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation. The consolidated financial statements of
Freeport-McMoRan Copper & Gold Inc. ("FCX" or the "Company") include the
accounts of its majority-owned subsidiary, P.T. Freeport Indonesia Company
("PT-FI"), formerly Freeport Indonesia, Incorporated ("FII"). References to
PT-FI are also references to FII where appropriate. FCX has no significant
operations other than its investment in PT-FI. Reclassifications were made to
prior year financial statements to conform to the 1992 presentation. All
significant intercompany transactions have been eliminated.
Cash and Short-Term Investments. The Company considers highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents. PT-FI's cash is not available to FCX until cash dividends are
paid by PT- FI. At December 31, 1992, PT-FI's net assets totaled $132.7
million, including $111.4 million of retained earnings which are available to
pay future dividends. On January 5, 1993, PT-FI declared a $38.3 million
dividend of which $30.7 million was due to FCX. At January 26, 1993, $36
million of cash and short-term investments were reserved for debt service
under the terms of the Company's credit agreement.
Inventories. Inventories are generally stated at the lower of average
cost or market and removed at average cost.
Mineral Exploration and Development Costs. Mineral exploration costs are
expensed as incurred, except in the year the property is deemed to contain a
viable mineral deposit, in which case they are capitalized. Development costs
are capitalized. Mine and mill assets, including estimated future capital
costs, are depreciated on the unit- of-production method while the remaining
assets are depreciated on a straight-line basis.
Revenues. Revenues represent sales of metal concentrates, net of
royalties, treatment costs, and the amortization of the price protection
program. Concentrate sales agreements provide for provisional billings based
on world metals prices, primarily the London Metal Exchange, with actual
settlement based on appropriate future copper prices. Revenues, recorded
initially using provisional prices, are adjusted as current prices warrant.
At December 31, 1992, copper sales totaling 164.6 million pounds, recorded at
an average price of $1.04 per pound, remained to be contractually priced at
various times in 1993. Gold sales are priced according to individual contract
terms.
The Company implemented a price protection program for virtually all of
the estimated copper sales expected to be priced in 1993 and 1994 at an
average floor price of $.90 per pound of copper, and for virtually all of the
estimated gold sales expected to be priced during 1993 at an average floor
price of $320 per ounce of gold, while allowing full benefit from prices above
those amounts. The cost of this program ($13.5 million at December 31, 1992)
is included in product inventories and will be amortized as an adjustment to
revenues as sales are priced during the respective years.
Royalties paid to the Government of Indonesia (the "Indonesian
Government") totaled $10.2 million in 1990, $10.5 million in 1991, and $15.7
million in 1992.
2. Purchase and Sale of PT-FI Shares
In 1990, FCX used proceeds from the sale of Class B common stock (Note 3)
to purchase FII shares from minority interest holders. In January 1991, the
Indonesian Government increased its ownership in FII from 8.9% to 10% by
purchasing FII shares owned by FCX for $18.1 million. The Indonesian
Government is paying for this purchase by having PT-FI withhold 40% of PT-FI
dividends on all Indonesian Government owned shares until the debt is
satisfied. No interest is payable on the outstanding balance of the purchase
price.
In late December 1991, FCX exchanged 21,300 shares of FII common stock
for a subordinated promissory note from FII in the amount of $212.5 million.
This exchange reduced FCX's ownership in FII to approximately 89% with the
remaining 11% being owned by the Indonesian Government. Quarterly interest
payments on the note, at a rate equal to the effective rate under PT-FI's
credit agreement, commenced in January 1992 and principal is payable in twenty
equal, quarterly installments beginning January 2000. If interest or
principal is in arrears, PT-FI cannot pay dividends on its common stock.
On December 30, 1991, FII assigned and transferred all of its assets to
PT-FI which also assumed all of the liabilities and obligations of FII.
Subsequently, on December 30, 1991, PT-FI and the Indonesian Government signed
a new contract of work ("New COW") which has a 30-year term with two 10-year
extensions permitted and covers the previous 24,700 acre mining area and
approximately 6.5 million additional acres. Following the execution of the
New COW, FII was merged into PT-FI and ceased to exist.
The New COW required FCX to increase the ownership by Indonesian entities
in PT-FI to 20%, which was achieved through the sale of 10% of PT-FI common
stock to an entity owned by Indonesian investors. FCX guaranteed the buyer's
financing for this purchase and, accordingly, deferred the gain on the sale.
As a result of this sale, the FCX and Indonesian Government ownership
interests in PT- FI at December 31, 1991, were reduced to 80% and 10%,
respectively.
On December 23, 1992, FCX purchased approximately 49% of the capital
stock of a publicly traded Indonesian entity which now owns the 10% interest
in PT-FI referred to above. The previously recorded deferred gain was
eliminated against the cost of the additional indirect PT-FI interest.
Each transaction discussed above used the fair market value of FCX Class
A common stock at the time of the agreements as the basis to calculate the
purchase and sale prices.
3. Stockholders' Equity
In May 1992, FCX's Certificate of Incorporation was amended to increase
the total number of authorized shares of capital stock to 312 million, of
which 110 million consist of Special stock, 200 million consist of Class B
common stock and 2 million consist of Preferred stock. FCX subsequently
effected a two-for-one split of its Class A and Class B common stock.
Accordingly, all per share amounts reflect the stock split.
On January 5, 1993, FCX declared a quarterly cash dividend of $.15 per
share on its Class A and Class B common stock and $.4375 per depositary share
payable February 1, 1993.
Common Stock. In 1990, the Company sold 5.7 million shares of Class B
common stock to Freeport-McMoRan Inc. ("FTX") for $91.5 million.
Concurrently, FCX used the sales proceeds to purchase PT-FI shares from
minority interest holders. The sale and purchase prices were based on the
fair market value of FCX Class A common stock at the time the agreements were
negotiated.
Special and Preferred Stock. At December 31. 1992, there were 53.2
million shares of Special stock, par value $.10, issued and outstanding as
Class A common stock and 2 million shares of Preferred stock, par value $.10
authorized and unissued.
In July 1992, FCX sold 8.6 million shares of its Class A common stock and
9 million depositary shares ("Depositary Shares") to the public. Each
Depositary Share represents 2-16/17 shares of its 7% Convertible Exchangeable
Special Preference Stock, has a cumulative annual cash dividend of $1.75
(payable quarterly), a $25 liquidation preference, and is convertible at the
option of the holder into approximately 0.992 shares of FCX Class A common
stock. A portion of the proceeds were used to purchase the 49% interest in
the publicly traded Indonesian entity which owns a 10% interest in PT-FI and
$145.7 million, net of $4.3 million of expenses, was loaned to PT-FI on
January 5, 1993, in exchange for an 8.235% convertible subordinated debenture
due August 1, 2007.
4. Income Taxes
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No 109. The effect of the change was immaterial.
Substantially all temporary differences relate to property, plant and
equipment.
Income taxes charged against income are as follows:
Years Ended December 31,
------------------------
1990 1991 1992
------ ------ ------
(amounts in thousands)
Income taxes currently
payable:
Indonesian $44,286 $20,198 $ 45,996
United States 3,878 3,178 5,376
State 150 150 200
------- ------- --------
48,314 23,526 51,572
------- ------- --------
Deferred income taxes:
Indonesian 40,060 43,240 52,771
Adjustment for change in
rates under New COW -- (26,465) --
United States (44) 277 (617)
------- ------- --------
40,016 17,052 52,154
------- ------- --------
Income taxes charged
to income $88,330 $40,578 $103,726
======= ======= ========
The principal reasons for the differences between income taxes computed
at the contractual Indonesian tax rate and income taxes charged against income
are as follows:
Years Ended December 31,
-----------------------------------------------
1990 1991 1992
---------------- -------------- --------------
Percent Percent Percent
of Income of Income of Income
Before Before Before
Income Income Income
Amount Taxes Amount Taxes Amount Taxes
------ -------- ------ -------- ------ --------
(dollar amounts in thousands)
Income taxes computed at
contractual Indonesian
rate $80,739 42% $62,342 42% $92,643 35%
Indonesian tax withheld
on dividend payments -- -- -- -- 11,732 4
Increase (decrease)
attributable to:
Adjustment for change in
rates under New COW -- -- (26,465) (18) -- --
United States tax 4,110 2 3,370 2 5,302 2
Other, net 3,481 2 1,331 1 (5,951) (2)
------- --- ------- --- -------- ---
Income taxes charged to
income $88,330 46% $40,578 27% $103,726 39%
======= === ======= === ======== ===
5. Long-Term Debt
The Company has a credit agreement which provides project financing of
up to $550 million (the "Credit Agreement") for the ongoing mine/mill
expansion. Principal payments become due in 14 equal, semiannual installments
beginning June 30, 1993. Based on the outstanding indebtedness at December
31, 1992, $78.6 million is due to be paid annually through 1999. Interest is
based on the London Interbank Offered Rate ("LIBOR"), while commitment fees
are payable at .25% per annum on the average daily unused commitment. The
average interest rate was 7.4% during 1991 and 5.1% during 1992. Under the
Credit Agreement, FTX cannot reduce its beneficial ownership in PT-FI below
50.1% and PT-FI is limited to $25 million in additional indebtedness,
excluding certain amounts loaned by FCX to PT-FI. PT-FI has pledged its New
COW, sales agreements, and certain required cash balances for the benefit of
lenders. PT-FI is required to escrow the equivalent of projected interest
payments and 50% of projected principal payments due within six months and
such amount is not available for dividend payments.
In 1991, the Company entered into an interest rate exchange agreement
resulting in a fixed rate of 8.3% on $100 million of debt through December
1999. Based on market conditions at December 31, 1992, unwinding this
interest swap would cost an estimated $7.8 million.
In July 1991, FCX sold $1.035 billion face amount of subordinated Zero
Coupon Exchangeable Notes (the "Notes") maturing in 2011. The net proceeds of
$218.6 million were loaned to PT-FI under similar terms. Each Note has a
7.75% yield to maturity and is exchangeable, at the holder's option, into the
value of 0.6015 ounce of gold or 15.01 shares of FCX's Class A common stock.
Any Note will be purchased by FCX, at the option of the holder, as of July 2,
1996, 2001, or 2006, at the issue price plus accrued original issue discount.
FCX's obligations under the Notes may be satisfied by payments in its Class A
common stock, cash or a combination of both, at FCX's option. During 1992,
$326.4 million face amount of the Notes was presented for exchange for which
FCX issued approximately 4.5 million shares of its Class A common stock and
paid $7.9 million in cash. As a result of the issuance by FCX of its Class A
common stock, it is contemplated that PT-FI will, subject to receipt of
appropriate approvals, issue shares of its stock to FCX as repayment for Notes
converted for FCX stock. Based on the December 31, 1992 closing market
price, the outstanding balance of this publicly held debt had a market value
of $233 million.
Capitalized interest totaled $8.2 million in 1990, $18.3 million in 1991,
and $24 million in 1992, respectively.
6. Major Customers
Historically, most of the Company's concentrate sales have been made
under long-term contracts. The following table details the percentage of
total product sales by customer:
Years Ended December 31,
1990 1991 1992
------ ------ ------
Long-term contracts
Japanese companies 47% 36% 34%
Swiss firm 22 17 13
German firm 14 11 7
Other - 12 12
Spot sales 17 24 34
The contract with a group of Japanese companies extends through December
31, 2000, whereas the contracts with the Swiss and German firms extend through
December 31, 1995 and December 31, 1994, respectively. Certain terms of these
long-term contracts are negotiated annually. There are several other
agreements in place, each of which accounted for less than 10% of 1992 sales.
The Company made spot sales from the portion of its output which was not
committed by long-term contracts. FCX has obtained sales commitments for
virtually all of its estimated 1993 and 1994 production.
In early 1993, FTX signed a definitive agreement to acquire a 65%
interest in Rio Tinto Minera, S.A. ("RTM"), the metals subsidiary of Ercros,
S.A., for approximately $54 million. The principal asset of RTM is a copper
smelter with an annual capacity of approximately 150,000 metric tons of metal,
representing approximately 450,000 metric tons of concentrate. FTX plans to
expand the smelter's annual production capacity to approximately 180,000
metric tons of metal by 1995. The Company has entered into a long-term
agreement with RTM to provide the smelter with copper concentrate beginning in
1993. The definitive agreement enables FTX to transfer the rights and
obligations of this acquisition to FCX.
7. Transactions with FTX
Management Services Agreement. FTX furnishes general executive,
administrative, financial, accounting, legal, environmental, tax, research and
development, and certain other services to the Company under a management
services agreement terminable by either party on December 31 in any year, upon
six months' written notice. These costs, which include related overhead, are
noninterest bearing, reimbursed monthly and totaled $19 million in 1990, $33.4
million in 1991, and $44.9 million in 1992.
Pensions Plans. Substantially all the employees seconded to the Company
from FTX are covered by FTX's defined benefit plan for salaried employees. The
accumulated benefits and plan assets are not determined separately from FTX
and amounts allocated to FCX under this plan have not been material. As of
December 31, 1992, FTX's accumulated benefit obligation under the plan was
fully accrued.
The Company has a defined benefit plan covering substantially all of its
Indonesian national employees which is funded through cash payments to
retirees at the date of retirement. Benefits are based on years of service
and level of compensation. The actuarial present value of the accumulated
benefit obligation, determined by the projected credit method, was fully
accrued at December 31, 1992, and amounted to $4 million. The projected
benefit obligation at December 31, 1992, was $8 million assuming a discount
rate of 8.5% and an annual increase in future compensation levels of 5%. The
pension expense for the three years ended December 31, 1992, was not material.
Other Postretirement Benefits. FTX provides certain health care and life
insurance benefits for retired employees, including employees seconded to FCX.
Effective January 1, 1991, FCX adopted Statement of Financial Accounting
Standards No. 106 ("FAS 106") requiring current accrual for postretirement
benefits other than pensions, recording an $11.4 million charge as the
cumulative effect of the accounting change. The FAS 106 expense totaled $1.3
million ($.4 million for service cost and $.9 million in interest for prior
period services) in 1991 and $1.3 million ($.3 million for service cost and $1
million in interest for prior period services) in 1992. Previously, such costs
were expensed when paid.
The actuarial present value of the accumulated postretirement benefit
obligation as of December 31, 1992, none of which has been funded, is $12.1
million ($7.1 million for retirees, $2.3 million for fully eligible active
plan participants, and a net $2.7 million for other active plan participants),
which has been accrued. In determining the FAS 106 amounts, FTX used an
initial health care cost trend rate of 12 percent, decreasing 1/2% per year
until reaching 6%. A 1% increase in the trend rate would increase the FAS 106
amounts by approximately 10%. The weighted average discount rate used was 9%
in 1991 and 8.5% in 1992. FCX anticipates funding these costs, in addition to
the annual cash costs, over the expected life of its mineral reserves. FTX
has the right to modify or terminate these benefits.
8. Long-Term Contracts and Leases
FXC's minimum annual contractual charges under noncancellable long-term
contracts and leases, which expire during the period 1993 to 2000, total $24.4
million, including $6.9 million in 1993, $5.7 million in 1994, $3.7 million in
1995, $2.4 million in 1996, and $5.6 million in 1997. Total rental expense
under long-term contracts and leases amounted to $2.2 million, $3.3 million,
and $3.9 million in 1990, 1991, and 1992, respectively.
9. Mineral Reserves (Unaudited)
The Company's estimated proved and probable mineral reserves were as
follows:
Average Ore Grade Per Ton Payable Content
Year ----------------------------------- -----------------------
End Ore Copper Gold Silver Copper Gold Silver
- --------------- ------ ------------ ------------- ------ ------ --------
(Metric Tons) (%) (Grams)(Ounce)(Grams)(Ounce) (billions(millions(millions
of lbs.)of ozs.)of ozs.)
1988 204,492,000 1.60 1.06 .034 6.24 .201 6.4 5.8 27.4
1989 256,400,000 1.64 1.24 .040 5.23 .168 8.3 8.1 27.2
1990 445,741,000 1.59 1.71 .055 4.60 .148 13.9 19.5 34.7
1991 768,045,000 1.45 1.66 .053 3.86 .124 21.8 32.4 50.0
1992 733,173,000 1.47 1.72 .055 3.87 .124 20.9 32.1 44.7
10. Summarized Quarterly Financial Information (Unaudited)
Operating Net Net Income
Revenues Income Income Per Share
-------- --------- ------ ----------
(amounts in thousands, except per share amounts)
1991
1st Quarter $119,160 $ 47,745 $ 16,262a $.09a
2nd Quarter 73,728 24,365 9,353 .05
3rd Quarter 153,228 56,937 24,807 .14
4th Quarter 121,406 48,673 45,737b .25b
-------- -------- --------
$467,522 $177,720 $ 96,159 .53
======== ======== ========
1992
1st Quarter $106,749 $ 35,212 $ 17,312 $.10
2nd Quarter 241,684 109,261 49,716 .27
3rd Quarter 157,114 58,658 23,379 .12
4th Quarter 208,768 73,298 32,461 .17
-------- -------- --------
$714,315 $276,429 $122,868 .66
======== ======== ========
a. Includes a $5.8 million ($.03 per share) cumulative effect of change in
accounting for postretirement benefits other than pensions.
b. Reflects a $26.5 million ($.15 per share) reduction in PI-FI's tax
provision due to the signing of the New COW (Note 4).
FREEPORT-MCMORAN COPPER & GOLD INC.
CONDENSED BALANCE SHEET
(Unaudited)
December 31,
1993
------------
(in thousands)
ASSETS
Current assets:
Cash and short-term investments $ 13,798
Accounts receivable:
Customers 122,527
Other 66,202
Inventories:
Product 58,247
Materials and supplies 153,681
Prepaid expenses 13,787
----------
Total current assets 428,242
----------
Property, plant and equipment 2,172,222
Less accumulated depreciation and amortization 525,619
----------
Net property, plant and equipment 1,646,603
----------
Other assets 41,808
----------
Total assets $2,116,653
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 218,083
Current portion of long-term debt and short-term
borrowings 48,791
Accrued income and other taxes 20,865
----------
Total current liabilities 287,739
Long-term debt, less current portion 109,829
Zero coupon exchangeable notes due 2011 102,039
Accrued postretirement benefits and other liabilities 188,165
Deferred income taxes 201,553
Minority interest 46,781
Mandatory redeemable gold denominated
preferred stock 232,620
Stockholders' equity 947,927
----------
Total liabilities and stockholders' equity $2,116,653
==========
FREEPORT-MCMORAN COPPER & GOLD INC.
STATEMENT OF INCOME
(Unaudited)
Year ended
December 31, 1993
-----------------
(in thousands,
except per share amounts)
Revenues $925,932
--------
Cost of sales:
Site production and delivery 558,253
Depreciation and amortization 67,906
--------
Total cost of sales 626,159
Exploration expenses 33,748
Provision for restructuring and valuation of assets 50,880
General and administrative expenses 75,727
--------
Total costs and expenses 786,514
--------
Operating income 139,418
Interest expense, net (15,327)
Other income (expense), net (2,216)
--------
Income before income taxes and minority interest 121,875
Provision for income taxes (63,677)
Minority interest (7,382)
--------
Net income 50,816
Preferred dividends (28,954)
--------
Net income applicable to common stock $ 21,862
========
Net income per share of common stock $.11
====
Average common shares outstanding 197,929
========
Dividends per common share $.60
====
FREEPORT-MCMORAN COPPER & GOLD INC.
STATEMENT OF CASH FLOW
(Unaudited)
Year ended
December 31, 1993
-----------------
(in thousands)
Cash flow from operating activities:
Net income $ 50,816
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 67,906
Provision for restructuring and valuation of assets,
net of payments 29,836
Deferred income taxes 4,600
Amortization of discount on zero coupon exchangeable
notes 10,844
Minority interest's share of net income 7,382
(Increase) decrease in working capital, net of
acquisition:
Accounts receivable (16,904)
Inventories (41,669)
Prepaid expenses (10,503)
Accounts payable and accrued liabilities 30,292
Accrued income and other taxes 19,736
Other 6,209
--------
Net cash provided by operating activities 158,545
--------
Cash flow from investing activities:
Capital expenditures (453,122)
Acquisition of RTM, net of cash required (10,390)
--------
Net cash used in investing activities (463,512)
--------
Cash flow from financing activities:
Cash dividends paid:
Common stock (118,575)
Preferred stock (22,981)
Minority interest (19,143)
Proceeds from debt 397,971
Repayment of debt (931,439)
Net proceeds from infrastructure financing 80,000
Net proceeds from sale of:
Step-Up preferred stock 340,700
Mandatory redeemable gold denominated
preferred stock 220,390
--------
Net cash used in financing activities (53,077)
--------
Net decrease in cash and short-term investments (358,044)
Cash and short-term investments at beginning of year 371,842
--------
Cash and short-term investments at end of year $ 13,798
========
No dealer, salesman, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Issuer, FCX or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any of the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no change
in the affairs of the Issuer or FCX since such date.
TABLE OF CONTENTS
Page
Incorporation of Documents by Reference.................. 2
Enforcement of Civil Liabilities......................... 2
Prospectus Summary....................................... 3
Special Considerations................................... 12
Use of Proceeds.......................................... 15
FCX Capitalization....................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................. 17
Business of FCX.......................................... 23
Business of the Issuer................................... 32
Management of FCX........................................ 36
Relationship of the FCX Group
with the FTX Group..................................... 39
Description of the Guaranteed Notes...................... 41
Taxation................................................. 56
Description of Certain Indebtedness...................... 58
Description of FCX Preferred Stock and
Special Preference Stock............................... 61
Underwriting............................................. 63
Legal Matters............................................ 63
Experts.................................................. 64
Additional Information................................... 64
Available Information.................................... 64
Index to Financial Statements............................ F-1
P.T. ALatieF Freeport
Finance Company B.V.
$120,000,000
% Senior Notes Due 2001
Unconditionally Guaranteed by
Freeport-McMoRan
Copper & Gold Inc.
-------------------
P R O S P E C T U S
-------------------
CS First Boston
Chase Securities, Inc.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth an itemized statement of certain expenses
expected to be incurred in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts:
Registration Fee.................................. $41,380
NASD Filing Fee................................... 12,500
Printing and Engraving Fees....................... *
Rating Agency Fees................................ *
Legal Fees and Expenses........................... *
Accounting Fees and Expenses...................... *
Blue Sky Fees and Expenses........................ *
Trustee's Fees and Expenses....................... *
Miscellaneous..................................... *
--------
Total $ *
========
All fees are estimated, except SEC and NASD Fees.
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of Delaware empowers FCX, to
the extent permitted by its certificate of incorporation, to indemnify,
subject to the standards therein prescribed, any person in connection with any
action, suit or proceeding brought or threatened by reason of the fact that
such person is or was a director, officer, employee or agent of FCX or is or
was serving as such with respect to another corporation or other entity at the
request of FCX. Article XXV of the By-Laws of FCX and Article NINTH of the
Certificate of Incorporation of FCX provide that each person who was or is
made a party to (or is threatened to be made a party to) or is otherwise
involved in any action, suit or proceeding by reason of the fact that such
person is or was a director, officer, employee or agent of FCX shall be
indemnified and held harmless by FCX to the fullest extent authorized by the
General Corporation Law of Delaware against all expenses, liability and loss
(including, without limitation, attorneys' fees, judgments, fines and amounts
paid in settlement) reasonably incurred by such person in connection
therewith. The rights conferred by Article XXV and Article NINTH, as the case
may be, are contractual rights and include the right to be paid by FCX the
expenses incurred in defending such action, suit or proceeding in advance of
the final disposition thereof.
Article NINTH of the Certificate of Incorporation of FCX provides that
the directors of FCX will not be personally liable to FCX or its stockholders
for monetary damages resulting from breaches of their fiduciary duty as
directors except (a) for any breach of the duty of loyalty to FCX or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of
the General Corporation Law of Delaware, which makes directors liable for
unlawful dividends or unlawful stock repurchases or redemptions or (d) for
transactions from which directors derive improper personal benefit.
FCX has an insurance policy insuring FCX and its directors and officers
against certain liabilities, including liabilities under the Securities Act of
1933.
Item 16. Exhibits
(a) Exhibits
Exhibit No.Description
- ----------------------
1.01 --Form of Underwriting Agreement.*
4.01 --Form of Indenture (including the form
of the Guaranteed Note) among the Issuer, FCX
and Chemical Bank, as Trustee.*
5.01 --Opinion of Davis Polk & Wardwell with
respect to the legality of the Guaranteed Notes.*
5.02 --Opinion of Stibbe Simont Monahan Duhot with
respect to the legality of the Guaranteed
Notes.*
10.01 --Credit Agreement, dated as of December
15, 1993, among AFIC, each of the banks that is,
or may from time to time become, party thereto,
and The Chase Manhattan Bank (National
Association), as Agent.*
10.02 --Credit Agreement, dated as of June 1, 1993,
among PT-FI, FTX, FCX, each of the banks
that is party thereto, Morgan Guaranty
Trust Company of New York and Chemical Bank,
as Agent.*
12.01 --Statement re: Computation of the Ratio
of Earnings to Fixed Charges (FCX).
23.01 --Consent of Arthur Andersen & Co.
23.02 --Consent of Coopers & Lybrand, S.A.
23.03 --Consent of Davis Polk & Wardwell (see
Exhibit 5.01).*
23.04 --Consent of Miller & Chevalier,
Chartered*
23.05 --Consent of Independent Mining
Consultants, Inc.
23.06 --Consent of Drs. Siddharta & Siddharta,
a member firm of Coopers & Lybrand
(International).
24.01 --Powers of Attorney.
25.01 --Statement of Eligibility of Trustee.*
* To be filed by amendment.
Item 17. Undertakings.
FCX hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of its annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless
in the opinion of their respective counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by any of them is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Each of the undersigned Registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrants pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, P.T.
ALatief Freeport Finance Company B.V. certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3, and
has duly caused this Registration Statement and any amendments thereto to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New Orleans, State of Louisiana, on the 14th day of February, 1994.
P.T. ALATIEF FREEPORT
FINANCE COMPANY B.V.
By /s/ Rene L. Latiolais
-------------------------------
Rene L. Latiolais
Managing Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and any amendments thereto have been signed by the
following persons in the capacities indicated on the 14th day of February,
1994:
Signature Title
--------- -----
/s/ Rene L. Latiolais
- ------------------------------------ Managing Director
Rene L. Latiolais (Principal Executive Officer)
*
- ------------------------------------ Managing Director,
Robert M. Wohleber (Principal Financial Officer and
Principal Accounting Officer)
*
- ------------------------------------ Managing Director
John G. Amato
*
- ------------------------------------ Managing Director
Henry A. Miller
/s/ Michael C. Kilanowski, Jr.
- ------------------------------------ Authorized U.S. Representative
Michael C. Kilanowski, Jr.
/s/ Rene L. Latiolais
*By------------------------------------
Rene L. Latiolais
(Attorney-in-fact pursuant to powers
of attorney which are filed as Exhibits
to this Registration Statement
and any amendments thereto)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Freeport-McMoRan Copper & Gold Inc. certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement and any amendments thereto to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New Orleans, State of Louisiana, on the 14th day of February, 1994.
FREEPORT-MCMORAN COPPER & GOLD INC.
By: /s/ James R. Moffett
---------------------------------
James R. Moffett
Chairman of the Board and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and any amendments thereto have been signed below by
the following persons in the capacities indicated on the 14th day of February,
1994:
Signature Title
--------- -----
/s/ James R. Moffett
- ------------------------------------ Chairman of the Board
James R. Moffett and Director
*
- ------------------------------------ President, Chief Executive Officer
George A. Mealey and Director
(Principal Executive Officer)
*
- ------------------------------------ Director
Leland O. Erdahl
*
- ------------------------------------ Director
Ronald Grossman
*
- ------------------------------------ Director
Rene L. Latiolais
*
- ------------------------------------ Director
Wolfgang F. Siegel
*
- ------------------------------------ Director
Elwin E. Smith
*
- ------------------------------------ Director
Eiji Umene
*
- ------------------------------------ Controller
C. Donald Whitmire (Principal Accounting Officer)
*
- ------------------------------------ Vice President
Stephen M. Jones (Principal Financial Officer)
*By: /s/ James R. Moffett
--------------------------------
James R. Moffett
(Attorney-in-fact pursuant to powers
of attorney which are filed as Exhibits
to this Registration Statement
and any amendments thereto)
APPENDIX A
A chart showing ownership structure of the Issuer, PT-FI, AFIC and
Infrastructure Affiliate, and in particular:
(i) 81.3% direct equity ownership of PT-FI by FCX; (ii) 100% equity
ownership of the Issuer by FCX and the Guaranty of the Issuer's Guaranteed
Notes by FCX; (iii) 49% equity ownership of P.T. Indocopper Investama
Corporation by FCX; (iv) 9.35% equity ownership of PT-FI by P.T.
Indocopper Investama Corporation; (v) 9.35% equity ownership of PT-FI by
the Indonesian Government; (vi) 33.3% equity ownership of AFIC and
Infrastructure Affiliates by PT-FI and Master Services Agreements between
PT-FI and AFIC, and between PT-FI and Infrastructure Affiliates; (vii)
66.7% equity ownership of AFIC and Infrastucture Affiliates by ALatieF and
(viii) $120 million loan from the Issuer to AFIC and Infrastructure
Affiliates.
APPENDIX B
Map showing location of PT-FI's Contract of Work Area and principal
ore bodies.
Exhibit 12.01
_____________
Years Ended December 31,
1993 1992 1991 1990 1989
(In Thousands)
Income from continuing
operations $ 50,816 $129,893 $101,962 $ 90,179 $ 98,927
Add:
Provision for income taxes 63,677 103,726 45,585 88,330 89,624
Minority interest share of net
income 7,382 31,075 12,199 13,726 17,415
Interest expense 15,327 18,897 21,451 13,517 187
Rental expense factor(a) 3,190 876 841 693 223
Earnings available for fixed
charges $140,392 $284,467 $182,038 $206,445 $206,376
Interest expense $ 15,327 $ 18,897 $ 21,451 $ 13,517 $ 187
Capitalized interest 24,519 23,974 18,276 8,244 7,074
Rental expense factor(a) 3,190 876 841 693 223
Fixed charges $ 43,036 $ 43,747 $ 40,568 $ 22,454 $ 7,484
Ratio of earnings to fixed
charges(b) 3.3x 6.5x 4.5x 9.2x 27.6x
a. Portion of rent which is deemed representative of interest.
b. For purposes of this calculation, earnings consist of income from
continuing operations before income taxes, minority interest and fixed
charges. Fixed charges include interest and that portion of rent deemed
representative of interest.
Exhibit 23.01
_____________
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent
to the use of our reports (and to all references to
our Firm) included in or made a part of this
registration statement filed by P.T. ALatieF Freeport
Finance Company B.V.
/s/ Arthur Andersen & Co.
New Orleans, Louisiana
February 14, 1994
Exhibit 23.02
_____________
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
registration statement of P.T. ALatieF Freeport
Finance Company BV, as issuer and Freeport-McMoRan
Copper & Gold Inc. (FCX) as Registrant on Form S-3 of
our report dated March 31, 1993, except for Note 11 as
to which the date is Jul 30, 1993, on our audit of the
consolidated financial statements of Rio Tinto Minera,
S.A. as of December 31, 1992 and for the year then
ended included in FCX's Report on Form 8-K dated April
13, 1993 as amended on August 5, 1993. We also
consent to the reference to our firm under the caption
"Experts".
Coopers & Lybrand, S.A.
Madrid, Spain
February 14, 1994
Exhibit 23.05
_____________
INDEPENDENT
MINING CONSULTANTS, INC.
February 11, 1994
P.Y. ALatieF Freeport Finance Company B.V.
Building "Coolse Poort"
Coolsingel 139 (9th Floor)
3012 AG Rotterdam
The Netherlands
Freeport-McMoRan Copper & Gold Inc.
First Interstate Bank Building
One East First Street, Suite 1600
Reno, Nevada 89501
Dear Sirs:
We refer to the proposed Prospectus forming
part of the Registration Statement on Form S-3 of P.T.
ALatieF Freeport Finance Company B.V. and Freeport-
McMoRan Copper and Gold Inc. to be filed with the
Securities and Exchange Commission.
We consent to the references to our firm in
such prospectus under the captions "Prospectus
Summary", "Business of FCX - Ore Reserves of PT-FI"
and "Experts". We also consent to the use of the
summaries of our report under the captions "Prospectus
Summary" and "Business of FCX - Ore Reserves of PT-FI".
Sincerely,
/s/ John M. Marek
John M. Marek
President
Exhibit 23.06
_____________
Drs. Siddharta & Siddharta
a member firm of
Coopers & Lybrand (International)
Ref. No.: L-120294/TS
Freeport McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, LA 70112
USA
Gentlemen,
Consent
_______
We hereby consent to the reference to our
firm under the caption "Taxation" in the Registration
Statement dated today relating to the $120,000,000
Senior Notes to be issued by P.T. ALatieF Freeport
Finance Company B.V.
Yours faithfully,
Drs. Siddharta & Siddharta
Registered Public Accountants
/s/ Istama T. Siddharta
Drs. Istama T. Siddharta
________________________
Managing Partner
Exhibit 24.01
_______________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a managing director or both of P.T. ALatieF
Freeport Company Finance B.V. ("AFIC-BV"), does hereby
make, constitute, and appoint RENE L. LATIOLAIS,
ROBERT M. WOHLEBER and HENRY A. MILLER, and each of
them acting individually, his true and lawful attorney
with power to act without the others and with full
power of substitution and resubstitution to execute,
deliver, and file, for and on behalf of him and in his
name and in his capacity or capacities as aforesaid, a
Registration Statement of AFIC-BV, a Netherlands
corporation, on Form S-3 (or on such other Form as may
be determined to be applicable) providing for the
registration under the Securities Act of 1933, as
amended, of debt securities and of other securities,
if any, into which such debt securities may be
converted or exchanged, and any amendment or
amendments to such Registration Statement and any
exhibit thereto or other document in support thereof
or supplemental thereto, and the undersigned hereby
grants to said attorneys and each of them full power
and authority to do and perform each and every act and
thing whatsoever that said attorney or attorneys may
deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities
as aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ John G. Amato
_____________________________
John G. Amato
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a managing director or both of P.T. ALatieF
Freeport Company Finance B.V. ("AFIC-BV"), does hereby
make, constitute, and appoint JOHN G. AMATO, ROBERT M.
WOHLEBER and HENRY A. MILLER, and each of them acting
individually, his true and lawful attorney with power
to act without the others and with full power of
substitution and resubstitution to execute, deliver,
and file, for and on behalf of him and in his name and
in his capacity or capacities as aforesaid, a
Registration Statement of AFIC-BV, a Netherlands
corporation, on Form S-3 (or on such other Form as may
be determined to be applicable) providing for the
registration under the Securities Act of 1933, as
amended, of debt securities and of other securities,
if any, into which such debt securities may be
converted or exchanged, and any amendment or
amendments to such Registration Statement and any
exhibit thereto or other document in support thereof
or supplemental thereto, and the undersigned hereby
grants to said attorneys and each of them full power
and authority to do and perform each and every act and
thing whatsoever that said attorney or attorneys may
deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities
as aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Rene L. Latiolais
_____________________________
Rene L. Latiolais
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a managing director or both of P.T. ALatieF
Freeport Company Finance B.V. ("AFIC-BV"), does hereby
make, constitute, and appoint RENE L. LATIOLAIS, JOHN
G. AMATO and ROBERT M. WOHLEBER, and each of them
acting individually, his true and lawful attorney with
power to act without the others and with full power of
substitution and resubstitution to execute, deliver,
and file, for and on behalf of him and in his name and
in his capacity or capacities as aforesaid, a
Registration Statement of AFIC-BV, a Netherlands
corporation, on Form S-3 (or on such other Form as may
be determined to be applicable) providing for the
registration under the Securities Act of 1933, as
amended, of debt securities and of other securities,
if any, into which such debt securities may be
converted or exchanged, and any amendment or
amendments to such Registration Statement and any
exhibit thereto or other document in support thereof
or supplemental thereto, and the undersigned hereby
grants to said attorneys and each of them full power
and authority to do and perform each and every act and
thing whatsoever that said attorney or attorneys may
deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities
as aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Henry A. Miller
_____________________________
Henry A. Miller
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a managing director or both of P.T. ALatieF
Freeport Company Finance B.V. ("AFIC-BV"), does hereby
make, constitute, and appoint RENE L. LATIOLAIS, JOHN
G. AMATO and HENRY A. MILLER, and each of them acting
individually, his true and lawful attorney with power
to act without the others and with full power of
substitution and resubstitution to execute, deliver,
and file, for and on behalf of him and in his name and
in his capacity or capacities as aforesaid, a
Registration Statement of AFIC-BV, a Netherlands
corporation, on Form S-3 (or on such other Form as may
be determined to be applicable) providing for the
registration under the Securities Act of 1933, as
amended, of debt securities and of other securities,
if any, into which such debt securities may be
converted or exchanged, and any amendment or
amendments to such Registration Statement and any
exhibit thereto or other document in support thereof
or supplemental thereto, and the undersigned hereby
grants to said attorneys and each of them full power
and authority to do and perform each and every act and
thing whatsoever that said attorney or attorneys may
deem necessary or advisable to carry out fully the
intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities
as aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Robert M. Wohleber
_____________________________
Robert M. Wohleber
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Leland O. Erdahl
_____________________________
Leland O. Erdahl
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 7th day of
February, 1994.
/s/ Ronald Grossman
_____________________________
Ronald Grossman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Stephen M. Jones
_____________________________
Stephen M. Jones
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Rene L. Latiolais
_____________________________
Rene L. Latiolais
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
JOHN G. AMATO and MICHAEL C. KILANOWSKI, JR., and each
of them acting individually, his true and lawful
attorney with power to act without the others and with
full power of substitution and resubstitution to
execute, deliver, and file, for and on behalf of him
and in his name and in his capacity or capacities as
aforesaid, a Registration Statement of FCX, a Delaware
corporation, on Form S-3 (or on such other Form as may
be determined to be applicable) providing for the
registration under the Securities Act of 1933, as
amended, of a guaranty with respect to the debt
securities and of other securities, if any, into which
such debt securities may be converted or exchanged, of
P.T. ALatieF Freeport Finance Company B.V. and any
amendment or amendments to such Registration Statement
and any exhibit thereto or other document in support
thereof or supplemental thereto, and the undersigned
hereby grants to said attorneys and each of them full
power and authority to do and perform each and every
act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out
fully the intent of the foregoing as the undersigned
might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and
confirming all acts and things that said attorney or
attorneys may do or cause to be done by virtue of
these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ George A. Mealey
_____________________________
George A. Mealey
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint GEORGE A. MEALEY,
JOHN G. AMATO and MICHAEL C. KILANOWSKI, JR., and each
of them acting individually, his true and lawful
attorney with power to act without the others and with
full power of substitution and resubstitution to
execute, deliver, and file, for and on behalf of him
and in his name and in his capacity or capacities as
aforesaid, a Registration Statement of FCX, a Delaware
corporation, on Form S-3 (or on such other Form as may
be determined to be applicable) providing for the
registration under the Securities Act of 1933, as
amended, of a guaranty with respect to the debt
securities and of other securities, if any, into which
such debt securities may be converted or exchanged, of
P.T. ALatieF Freeport Finance Company B.V. and any
amendment or amendments to such Registration Statement
and any exhibit thereto or other document in support
thereof or supplemental thereto, and the undersigned
hereby grants to said attorneys and each of them full
power and authority to do and perform each and every
act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out
fully the intent of the foregoing as the undersigned
might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and
confirming all acts and things that said attorney or
attorneys may do or cause to be done by virtue of
these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ James R. Moffett
_____________________________
James R. Moffett
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Wolfgang F. Siegel
_____________________________
Wolfgang F. Siegel
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Elwin E. Smith
_____________________________
Elwin E. Smith
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ Eiji Umene
_____________________________
Eiji Umene
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned, in his capacity or capacities as an
officer or a member of the Board of Directors or both
of Freeport-McMoRan Copper & Gold Inc. ("FCX"), does
hereby make, constitute, and appoint JAMES R. MOFFETT,
GEORGE A. MEALEY, JOHN G. AMATO and MICHAEL C.
KILANOWSKI, JR., and each of them acting individually,
his true and lawful attorney with power to act without
the others and with full power of substitution and
resubstitution to execute, deliver, and file, for and
on behalf of him and in his name and in his capacity
or capacities as aforesaid, a Registration Statement
of FCX, a Delaware corporation, on Form S-3 (or on
such other Form as may be determined to be applicable)
providing for the registration under the Securities
Act of 1933, as amended, of a guaranty with respect to
the debt securities and of other securities, if any,
into which such debt securities may be converted or
exchanged, of P.T. ALatieF Freeport Finance Company
B.V. and any amendment or amendments to such
Registration Statement and any exhibit thereto or
other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys and each of them full power and authority to
do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the
foregoing as the undersigned might or could do
personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts
and things that said attorney or attorneys may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has
executed this power of attorney this 8th day of
February, 1994.
/s/ C. Donald Whitmire
_____________________________
C. Donald Whitmire
