SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 20, 1996
FREEPORT-McMoRan COPPER & GOLD INC.
Delaware 1-9916 74-2480931
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
1615 Poydras Street
New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Item 5. Other Events.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
From time to time Freeport-McMoRan Copper & Gold Inc. (FCX)
will make written and oral forward-looking statements about
matters that involve risks and uncertainties that could cause
actual results to differ materially from projected results.
Important factors that could cause actual results to differ
materially include, among others:
* Fluctuations in the market prices of copper and gold
* The political, social and economic risks associated with
operations in Indonesia, Spain and other countries where
FCX may conduct operations
* General domestic and international economic and political
conditions
* Fluctuations in foreign currency exchange rates
(particularly the Spanish peseta and Indonesian rupiah)
* The availability of smelting capacity in relation to the
worldwide supply of concentrates, and the ability of FCX
to retain and obtain favorable concentrate sales
contracts with customers
* Unexpected geological conditions or rock stability
conditions resulting in cave-ins, floodings, rock-bursts
or rock slides
* Difficulties associated with managing complex operations
in a remote and rugged mountainous area
* Unanticipated declines in the average grades of ore mined
* Unanticipated milling and other processing problems
* The speculative nature of mineral exploration
* Environmental risks
* Changes in laws and government regulations, including
those relating to taxes and the environment
* The availability and timing of receipt of necessary
governmental permits and approvals relating to
operations, expansion of operations, and financing of
operations
* Difficulties in reaching agreements, or resolving
disputes, with joint venture partners, government
officials, suppliers or customers
* Fluctuations in interest rates and other adverse
financial market conditions
* Other unanticipated difficulties in obtaining necessary
financing
* The failure of equipment or processes to operate in
accordance with specifications or expectations
* Labor relations
* Accidents
* Unusual weather or operating conditions
* Force majeure events
* Other risk factors described from time to time in FCX's
filings with the Securities and Exchange Commission
Many of these factors are beyond FCX's ability to control or
predict. Investors are cautioned not to place undue reliance on
forward-looking statements. FCX disclaims any intent or
obligation to update its forward-looking statements, whether as a
result of receiving new information, the occurrence of future
events or otherwise.
A more detailed discussion of certain of the foregoing
factors follows.
Price of Minerals
Because FCX's revenues are derived primarily from the sale
of concentrates containing copper and gold, FCX's earnings are
directly related to market prices for copper and gold. Prices
for such minerals historically have fluctuated widely and are
affected by numerous factors beyond FCX's control. FCX may enter
financial arrangements to manage or hedge against such risks and
may discontinue such hedging transactions at any time without
notice.
Location and Industry Risks
P.T. Freeport Indonesia Company (PT-FI), FCX's principal
operating subsidiary, conducts its mining operations in steeply
mountainous terrain in Irian Jaya, a remote area of Indonesia. As
a result, PT-FI has been required to overcome significant
engineering difficulties and build extensive infrastructure
facilities. The area is subject to considerable rainfall that
causes periodic floods and mud slides. The mine site is in an
active seismic area, which experiences earth tremors from time to
time. None of these factors has caused personal injury to PT-FI
employees, 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.
PT-FI also is subject to the usual risks encountered in the
mining industry, including unexpected geological conditions
resulting in cave-ins, floodings and rock-bursts and unexpected
changes in rock stability conditions. PT-FI has substantial
insurance involving such amounts and types of coverage as it
believes are appropriate for its exploration, development, mining
and processing activities in Indonesia.
Political Factors
The Republic of Indonesia gained independence in 1945 and
now has a presidential republic system of government in which
parliamentary and presidential elections are held every five
years. President Suharto, who assumed power in 1966 and is
now 75, was reelected in 1993 to a sixth consecutive five-year
term expiring in 1998. FCX cannot predict when the presidency
will be transferred from President Suharto to a successor or
the effect, if any, of that succession on FCX's operations.
Maintaining a good relationship with the Indonesian
Government is of particular importance to FCX because its
principal operations are located in Indonesia. PT-FI's mining
complex was Indonesia's first copper mining project and was the
first major foreign investment in Indonesia following the
economic development program instituted by the Suharto
administration in 1967. PT-FI works closely with the central,
provincial and local governments in development efforts in the
vicinity of its operations.
FCX operates in Indonesia through two Contracts of Work
(COWs), both of which have 30-year terms, provide for two 10-year
extensions under certain conditions, and govern the rights and
obligations of FCX's operating subsidiaries relating to taxes,
exchange controls, repatriation and other matters. Both COWs were
concluded pursuant to the 1967 Foreign Capital Investment Law,
which expresses Indonesia's foreign investment policy and
provides basic guarantees of remittance rights and protection
against nationalization, a framework for economic incentives and
basic rules regarding other rights and obligations of foreign
investors.
PT-FI's mining operations are located in the Indonesian
province of Irian Jaya, which occupies the western half of the
island of New Guinea and became part of Indonesia during the
early 1960's. The area surrounding PT-FI's mining development is
sparsely populated by primitive indigenous tribes and former
residents of more populous areas of Indonesia, some of whom have
resettled in Irian Jaya under the Indonesian Government's
transmigration program. Certain members of the indigenous
population oppose Indonesian rule over Irian Jaya, and several
small separatist groups seek political independence for the
province. Sporadic attacks on civilians by the separatists and
sporadic but highly publicized conflicts between separatists and
the Indonesian military have led to allegations of human rights
violations. PT-FI personnel have not been involved in those
conflicts, although the Indonesian military occasionally has
exercised its right to appropriate transportation and other
equipment of PT-FI, and some of that equipment allegedly has been
used by the military in its security operations. As a result,
certain groups have criticized PT-FI for alleged involvement in
those activities. Although such criticisms are unwarranted,
actions by these groups could have a disruptive effect on
operations.
PT-FI's policy has been to operate in Irian Jaya in
compliance with all Indonesian laws and in a manner that improves
the lives of the indigenous population. PT-FI incurs significant
costs associated with its social and cultural activities. Such
activities include comprehensive job training programs, basic
education programs, extensive malaria control and general public
health programs, agricultural assistance programs, a business
incubator program to encourage the local people to establish
their own small scale businesses, cultural preservation programs
and charitable donations.
Following civil disturbances in the mining town of
Tembagapura and the lowlands town of Timika in early 1996 and as
a result of subsequent meetings with tribal leaders, PT-FI, in
cooperation with the Indonesian Government, agreed to
redistribute and refocus its community development programs by
dedicating 1% of PT-FI's revenues over the next ten years to fund
these efforts and, among other things, to increase the number of
local Irianese in its work force. The Indonesian Government
agreed as part of its development efforts in Irian Jaya to create
an integrated development plan calling for the participation of
local indigenous tribes in creating and developing the community
development projects funded by PT-FI. While management believes
that its efforts to be responsive to the issues relating to the
impact of its operations on the local indigenous tribes should
serve to avoid further disruptions of mining operations, social
and political instability in the area may, in the future, have an
adverse impact on PT-FI's mining operations.
Speculative Nature of Mineral Exploration
Mineral exploration is highly speculative and involves many
risks. Once mineral deposits are discovered, it may take a number
of years from the initial phases of drilling until production is
possible, during which time the economic feasibility of
production may change. Substantial expenditures are required to
establish ore reserves through drilling, to determine the best
processes to extract the minerals from the ore and, in the case
of new properties, to construct mining and processing facilities.
As a result of these uncertainties, no assurance can be given
that FCX's exploration programs will result in the discovery of
commercially exploitable mineral deposits.
Reserves
FCX's reserve amounts are estimates that are determined in
accordance with established mining industry practices and
standards. PT-FI's mines in production or development may not
conform to geological or other expectations, so that the volume
and grade of reserves recovered and the rates of production may
be more or less than anticipated. Because ore bodies do not
contain uniform grades of minerals, ore recovery rates will vary
from time to time, resulting in variations in volumes of minerals
sold from period to period. Further, market price fluctuations
in copper and gold, and changes in operating and capital costs
may render certain ore reserves uneconomic to develop and may
ultimately result in a restatement of FCX's proved and probable
reserves.
Environmental and Government Regulations
PT-FI's exploration and mining activities in Irian Jaya
involve significant engineering and environmental challenges that
relate primarily to the location of the mine in remote, rugged
highlands and the disposition of tailing through discharge into a
river that deposits them in a controlled deposition area near the
sea. PT-FI has sought to preserve and protect the environment in
its area of operations.
FCX has expended significant resources, both financial and
managerial, to comply with environmental regulations and
permitting and approval requirements and anticipates that it will
continue to do so in the future. There can be no assurance that
additional significant costs and liabilities will not be incurred
to comply with such current and future regulations.
Holding Company Structure
Because FCX is primarily a holding company which conducts
business through its subsidiaries, its ability to meet its
financial obligations and to pay dividends on its Preferred and
Common Stock will depend on the earnings and cash flow of its
subsidiaries and the ability of its subsidiaries to pay dividends
and to advance funds to FCX. Under certain circumstances,
contractual and legal restrictions, as well as the financial
condition and operating requirements of PT-FI and other
subsidiaries, could limit FCX's ability to obtain cash from its
subsidiaries for the purpose of meeting its debt service
obligations or paying dividends.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ Michael A. Weaver
------------------------------
Michael A. Weaver
Controller - Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: December 20, 1996
