SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
Commission File Number: 1-9916
Freeport-McMoRan Copper & Gold Inc.
Incorporated in Delaware 74-2480931
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No
On September 30, 1997, there were issued and outstanding 78,124,644
shares of the registrant's Class A Common Stock, par value $0.10 per
share, and 115,278,093 shares of its Class B Common Stock, par value
$0.10 per share.
<PAGE> 1
FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Income 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 6
Report of Independent Public Accountants 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information 15
Signature 16
Exhibit Index E-1
<PAGE> 2
FREEPORT-McMoRan COPPER & GOLD INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED BALANCE SHEETS (Unaudited)
<CAPTION>
September 30, December 31,
1997 1996
---------- ----------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 11,765 $ 37,118
Accounts receivable 204,843 236,750
Inventories 342,473 375,712
Prepaid expenses and other 12,482 11,636
---------- ----------
Total current assets 571,563 661,216
Property, plant and equipment, net 3,397,170 3,088,644
Other assets 171,013 115,674
---------- ----------
Total assets $4,139,746 $3,865,534
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 395,079 $ 358,255
Current portion of long-term debt and
short-term borrowings 116,108 136,617
Accrued income taxes 60,924 103,003
---------- ----------
Total current liabilities 572,111 597,875
Long-term debt, less current portion 1,998,334 1,426,299
Accrued postretirement benefits and
other liabilities 139,128 200,646
Deferred income taxes 392,972 359,684
Minority interests 74,258 105,644
Mandatory redeemable preferred stock 500,007 500,007
Stockholders' equity 462,936 675,379
---------- ----------
Total liabilities and stockholders'
equity $4,139,746 $3,865,534
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 3
<TABLE>
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues $ 489,522 $ 474,664 $1,580,252 $1,287,404
Cost of sales:
Production and delivery 262,296 230,646 774,700 674,374
Depreciation and
amortization 58,775 45,228 160,640 123,804
---------- ---------- ---------- ----------
Total cost of sales 321,071 275,874 935,340 798,178
Exploration expenses 5,085 - 14,047 -
General and
administrative expenses 26,949 28,468 83,139 101,734
---------- ---------- ---------- ----------
Total costs and
expenses 353,105 304,342 1,032,526 899,912
---------- ---------- ---------- ----------
Operating income 136,417 170,322 547,726 387,492
Interest expense, net (38,632) (28,566) (112,256) (81,641)
Other income (expense),
net 1,366 (1,894) 2,841 1,978
---------- ---------- ---------- ----------
Income before income
taxes and minority
interests 99,151 139,862 438,311 307,829
Provision for income
taxes (45,140) (65,297) (202,030) (140,651)
Minority interests
in net income of
consolidated
subsidiaries (8,394) (14,926) (39,786) (28,732)
---------- ---------- ---------- ----------
Net income 45,617 59,639 196,495 138,446
Preferred dividends (9,040) (13,513) (27,615) (40,825)
---------- ---------- ---------- ----------
Net income applicable
to common stock $ 36,577 $ 46,126 $ 168,880 $ 97,621
========== ========== ========== ==========
Net income per primary
and fully diluted
share of common stock $.19 $.24 $.84 $.50
========== ========== ========== ==========
Average common shares
outstanding 196,924 195,611 200,211 197,050
========== ========== ========== ==========
Dividends paid per
common share $.225 $.225 $.675 $.675
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 4
<TABLE>
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1997 1996
---------- ----------
(In Thousands)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 196,495 $ 138,446
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 160,640 123,804
Deferred income taxes 47,219 29,781
Recognition of unearned income (76,595) (30,011)
Deferral of unearned income 30,102 97,173
Minority interests' share of net income 39,786 28,732
Other (28,557) (18,490)
(Increase) decrease in working capital:
Accounts receivable 12,631 9,329
Inventories 22,122 (35,826)
Prepaid expenses and other (2,730) (2,485)
Accounts payable and accrued
liabilities 23,698 9,643
Accrued income taxes (39,158) (25,143)
---------- ----------
(Increase) decrease in working capital 16,563 (44,482)
---------- ----------
Net cash provided by operating activities 385,653 324,953
---------- ----------
Cash flow from investing activities:
Capital expenditures:
PT-FI (412,345) (235,675)
Atlantic Copper (9,719) (49,014)
Investment in Gresik smelter (24,620) (28,490)
Other 170 (250)
---------- ----------
Net cash used in investing activities (446,514) (313,429)
---------- ----------
Cash flow from financing activities:
Proceeds from debt 801,550 581,816
Repayment of debt (346,640) (149,849)
Net proceeds from infrastructure
financing 27,344 -
Purchase of FCX common shares (250,939) (220,997)
Cash dividends paid:
Common stock (134,827) (132,284)
Preferred stock (30,668) (38,147)
Minority interests (25,442) (32,722)
Other (4,870) 2,807
---------- ----------
Net cash provided by financing activities 35,508 10,624
---------- ----------
Net increase (decrease) in cash and
short-term investments (25,353) 22,148
Cash and short-term investments
at beginning of year 37,118 26,883
---------- ------------
Cash and short-term investments
at end of period $ 11,765 $ 49,031
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 5
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share," which simplifies the computation of
earnings per share (EPS). SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997 and
requires restatement for all prior period EPS data presented.
Adoption of SFAS 128 will not have a material impact on FCX's
previously reported earnings per share.
In June 1997, the FASB issued SFAS 130, "Reporting
Comprehensive Income," and SFAS 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS 130 establishes
standards for reporting and display of comprehensive income in the
financial statements. Comprehensive income is the total of net
income and all other nonowner changes in equity. SFAS 131 requires
that companies disclose segment data based on how management makes
decisions about allocating resources to segments and measuring their
performance. SFAS 130 and 131 are effective for 1998. Adoption of
these standards is not expected to have an effect on FCX's financial
position or results of operations.
2. FINANCIAL CONTRACTS
FCX has entered into financial contracts to manage certain risks
resulting from fluctuations in commodity prices (primarily copper
and gold), foreign exchange rates and interest rates by creating
offsetting exposures. Costs or premiums and gains or losses on the
contracts, including closed contracts, are recognized with the
hedged transaction. Also, gains or losses are recognized if the
hedged transaction is no longer expected to occur or if deferral
criteria are not met. FCX monitors its credit risk on an ongoing
basis and considers this risk to be minimal because its contracts
are with a diversified group of financially strong counterparties.
At September 30, 1997, FCX had redeemable preferred stock
indexed to commodities, deferred premiums on copper call option
contracts, deferred costs on foreign exchange option contracts, open
foreign exchange forward contracts and interest rate swap contracts.
Redeemable preferred stock indexed to commodities is treated as a
hedge of future production and is carried at its original issue
value. As principal payments occur, differences between the
carrying value and the payment will be recorded as an adjustment to
revenues.
Premiums received on the sale of copper call option contracts
are recorded as unearned income until the option contracts mature
when the premium is recorded as income. FCX hedges its anticipated
Spanish peseta cash flows with foreign exchange option contracts and
foreign exchange forward contracts. Gains and losses, including
costs, on option contracts that qualify as hedges are recognized in
income when the underlying hedged transaction is recognized or when
a previously anticipated transaction is no longer expected to occur.
Changes in market value of forward exchange contracts which protect
anticipated transactions are recognized in the period incurred. FCX
has interest rate swap contracts to limit the effect of increases in
the interest rates on floating rate debt. The costs associated with
these contracts are amortized to interest expense over the terms of
the agreements.
3. INTEREST COST
Interest expense excludes capitalized interest of $7.5 million in
the third quarter of 1997, $6.9 million in the third quarter of
1996, $14.3 million in the first nine months of 1997 and $22.1
million in the first nine months of 1996.
4. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first nine months of
1997 and 1996 was 4.3 to 1 and 3.7 to 1, respectively. For this
calculation, earnings consist of income from continuing operations
before income taxes, minority interests and fixed charges. Fixed
charges include interest and that portion of rent deemed
representative of interest.
----------------------
Remarks
The information furnished herein should be read in conjunction with
FCX's financial statements contained in its 1996 Annual Report to
stockholders and incorporated by reference in its Annual Report on
Form 10-K.
The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of the
results for the periods. All such adjustments are, in the opinion
of management, of a normal recurring nature.
<PAGE> 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Freeport-McMoRan Copper & Gold Inc.:
We have reviewed the accompanying condensed balance sheet of
Freeport-McMoRan Copper & Gold Inc. (a Delaware corporation) as of
September 30, 1997, the related statements of income for the three
and nine-month periods ended September 30, 1997 and 1996, and the
statements of cash flow for the nine month periods ended September
30, 1997 and 1996. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to the financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit
in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the balance sheet of Freeport-McMoRan
Copper & Gold Inc. as of December 31, 1996, and the related
statements of income, shareholders' equity and cash flows for the
year then ended (not presented herein), and in our report dated
January 21, 1997, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in
the accompanying condensed balance sheet as of December 31, 1996, is
fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
October 21, 1997
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
Freeport-McMoRan Copper & Gold Inc. (FCX) operates through its
majority-owned subsidiaries, P.T. Freeport Indonesia Company (PT-FI)
and P.T. IRJA Eastern Minerals Corporation (Eastern Mining), and
through Atlantic Copper Holding, S.A. (Atlantic), a wholly owned
subsidiary. PT-FI's operations involve mineral exploration and
development, mining and milling of ore containing copper, gold and
silver in Irian Jaya, Indonesia and the worldwide marketing of
concentrates containing those metals. PT-FI also has a 25 percent
interest in a joint venture to construct and operate a copper
smelter and refinery in Indonesia. Eastern Mining conducts mineral
exploration activities in Irian Jaya. Atlantic is engaged in the
smelting and refining of copper concentrates in Spain and the
marketing of refined copper products.
Summary comparative results for the third-quarter and nine-month
periods follow (in millions, except per share amounts):
Third Quarter Nine Months
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ----------- --------
Revenues $ 489.5 $ 474.7 $ 1,580.3 $1,287.4
Operating income 136.4 170.3 547.7 387.5a
Net income applicable
to common stock 36.6 46.1 168.9 97.6a
Net income per common
share 0.19 0.24 0.84 0.50a
Operating income (loss)
by subsidiary:
PT-FI $ 152.8 $ 175.1 $ 552.7 $393.2
Atlantic 9.4 2.4 19.0 2.7
Eastern Mining (2.2) - (7.7) -
Intercompany eliminations
and other b (23.6) (7.2) (16.3) (8.4)
---------- ---------- ----------- --------
$ 136.4 $ 170.3 $ 547.7 $387.5
========== ========== =========== ========
a. Includes charges totaling $17.4 million ($8.0 million to net
income or $0.04 per share) consisting of $12.7 million for stock
appreciation rights costs caused by the increase in FCX's common
stock price during the period, $3.0 million for costs related to a
civil disturbance during the period and $1.7 million ($1.2 million
to production cost and $0.5 million to general and administrative
expenses) for an early retirement program.
b. Profit on PT-FI sales to Atlantic is not reflected in FCX's
consolidated results until completion of the smelting and refining
process. The eliminations totaled $(20.1) million in the third
quarter of 1997, $(2.7) million in the third quarter of 1996, $(3.4)
million in the first nine months of 1997 and $3.5 million in the first
nine months of 1996. Concentrate sales to Atlantic may cause
fluctuations in FCX's consolidated quarterly earnings depending on the
timing of the shipments and prices.
FCX's revenues are derived primarily from PT-FI's sale of copper
concentrates, which also contain significant amounts of gold, and
the sale of copper cathodes and wire rod by Atlantic. FCX's
revenues and net income can vary significantly with fluctuations in
the market prices of copper and gold. At various times, in response
to market conditions, FCX has entered into or liquidated copper and
gold price protection contracts for some portion of its expected
future mine production to mitigate the risk of adverse price
fluctuations (see "PT-FI Outlook and Price Protection Program").
Based on projected 1997 annual sales volumes, a $0.01 per pound
change in the average price realized on copper sales would have an
approximate $10 million impact on revenues and an approximate $5
million impact on net income. A $10 per ounce change in the average
price realized on annual gold sales would have an approximate $18
million impact on revenues and an approximate $9 million impact on
net income.
Higher third-quarter and nine-month 1997 revenues primarily reflect
higher PT-FI and Atlantic sales volumes partially offset by lower
gold realizations and higher intercompany sales compared with the
1996 periods. Third-quarter 1997 revenues benefited from forward
gold sales contracts but were also impacted adversely from re-
pricing prior period "open" concentrate sales. Nine-month 1997
revenues benefited from the sale of copper put option contracts and
the impact of forward copper and gold sales contracts, which
collectively provided $7.7 million to third-quarter revenues ($3.8
million to net income or $0.02 per share) and $80.2 million to nine-
month revenues ($39.1 million to net income or $0.20 per share).
Cost of sales for 1997 increased because of the higher sales volumes
and an increase in the PT-FI depreciation rate. FCX reported
exploration expense in the 1997 periods primarily for exploration
costs incurred in the Eastern Mining and PT-FI Block B areas not
reimbursed by Rio Tinto plc (Rio Tinto). As discussed below, Rio
Tinto funded all of FCX's 1996 exploration costs. General and
administrative expenses in the 1997 nine-month period were lower
primarily because of charges in 1996
<PAGE> 8
for stock appreciation rights.
Net interest expense primarily reflects higher average debt levels.
The provision for income taxes and minority interests charges in
1997 compared with the 1996 periods primarily reflect net income
levels at PT-FI. Preferred dividends in the 1997 periods were lower
when compared to the 1996 periods because in December 1996 the
depositary shares representing Convertible Exchangeable Preferred
Stock were all converted to FCX common stock or redeemed for cash.
RESULTS OF OPERATIONS
PT-FI Revenues A reconciliation of PT-FI revenues between the
periods follows (in millions):
Third Nine
Quarter Months
---------- ----------
Revenues -1996 $ 376.0 $ 991.2
Increases (decreases):
Sales volumes:
Copper 45.9 110.6
Gold 41.6 67.5
Price realizations:
Copper (6.6) 95.1
Gold (32.9) (36.1)
Adjustments to prior period open sales (20.8) 59.0
Treatment charges, royalties
and other (20.7) (53.5)
---------- ----------
Revenues -1997 $ 382.5 $ 1,233.8
========== ==========
PT-FI's third-quarter and nine-month 1997 revenues benefited from
higher sales volumes partially offset by lower gold prices compared
with the 1996 periods. Revenues also included net additions
totaling $7.7 million in the 1997 third quarter, $28.6 million in
the 1996 third quarter, $80.2 million in the 1997 nine-month period
and $26.9 million in the 1996 nine-month period recognized from PT-
FI's copper and gold hedging activities. PT-FI's 1997 revenues
included net downward adjustments of $20.9 million in the third
quarter and upward adjustments of $54.9 million in the nine-month
period on prior period open concentrate sales. PT-FI's 1996 revenues
included net downward adjustments of $0.1 million in the third
quarter and $4.1 million in the nine-month period on prior period
open concentrate sales. Treatment charges increased because of
higher sales volumes and tighter market conditions. Treatment rates
for a significant portion of PT-FI's 1998 projected sales will be
negotiated in the fourth quarter of 1997 based on current market
conditions. Additionally, royalties and a portion of treatment
charges vary with the price of copper.
PT-FI Outlook and Price Protection Program. PT-FI has commitments
from various parties, including Atlantic, to purchase virtually all
of its expected fourth-quarter 1997 production and 1998 production
at market prices. Sales for the fourth quarter of 1997 are
projected to approximate 285 million pounds of copper and 500,000
ounces of gold. Copper and gold sales for 1997 reflect production at
greater than mine-life grades during the year.
The significant decline in gold prices in early 1997 increased the
value of PT-FI's forward gold sales contracts covering 876,000
ounces of gold at an average price of $376.08 per ounce from
February 1997 through August 1997. In February 1997, PT-FI closed
these contracts and received $30.1 million cash. As a result, PT-FI
reported gold revenues through August 1997 at a higher price than
realized under its contract terms with customers, but PT-FI no
longer has forward gold sales positions. PT-FI recognized $6.0
million of gold revenues from forward sales contracts during the
third quarter of 1997 and $37.6 million during the first nine months
of 1997. PT-FI has suspended its program of selling gold forward on
a six-month basis but may reinstate the program in the future.
Future gold sales will be priced at current market prices as long as
the forward sales program is suspended. The closing London Bullion
Market Association spot gold price was $323.90 per ounce on October
20, 1997.
The significant decline in copper prices during 1996 increased the
value of put option contracts that PT-FI purchased under its price
protection program to provide a floor price of $0.90 per pound for
essentially all copper sales through the second quarter of 1997 at
an average cost of approximately $0.02 per pound. During the third
quarter of 1996, PT-FI sold all of its put option contracts covering
approximately 1.2 billion pounds of copper for $97.2 million cash.
As a result, PT-FI reported copper revenues through June 30, 1997 at
a higher price than realized under its copper concentrate sales
contracts, but PT-FI no longer has any price protection on its
future copper sales. As conditions warrant, PT-FI may enter into
new contracts for its future copper sales. PT-FI recognized $46.1
million of additional copper revenues in the first half of 1997 from
the sale of its put option contracts. The original
<PAGE> 9
acquisition cost of the contracts totaled $10.5 million. As of June
30, 1997, PT-FI had recognized the full $97.2 million from the 1996
sale of its copper put option contracts.
PT-FI's concentrate sales agreements, with regard to copper, provide
for provisional billings at the time of shipment with final
settlement generally based on the average London Metal Exchange
(LME) price for a specified future month. Copper revenues on
provisionally priced open pounds are adjusted monthly based on then
current prices. At September 30, 1997, FCX had consolidated copper
sales totaling 335.4 million pounds recorded at an average price of
$0.95 per pound remaining to be finally priced. Approximately 60
percent of these open pounds (average price of $0.95 per pound) are
expected to be finally priced during the fourth quarter of 1997 with
most of the remaining pounds (average price of $0.95 per pound) to
be priced during the first quarter of 1998. A one cent movement in
the average price used for these open pounds will have an
approximate $1.5 million impact on FCX's 1997 net income.
PT-FI Operating Results.
Third Quarter Nine Months
------------------ ------------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
Ore milled (metric tons
per day, MTPD) 132,400 127,500 129,100 127,100
Copper grade (%) 1.40 1.37 1.34 1.31
Gold grade (grams per
metric ton) 1.56 1.52 1.40 1.45
Recovery rate (%)
Copper 86.4 83.3 85.6 83.5
Gold 82.5 77.1 79.6 75.7
Copper
Production (000s of
recoverable pounds) 312,800 284,700 858,100 812,200
Sales (000s of
recoverable pounds) 332,600 285,300 894,600 779,500
Average realized
price a $.95 $.97 $1.07 $.96
Gold
Production
(recoverable ounces) 487,400 427,000 1,224,900 1,181,100
Sales
(recoverable ounces) 522,500 418,000 1,327,700 1,155,100
Average realized
price b $335.63 $398.60 $364.36 $391.55
Gross profit per
pound of copper
(cents):
Average realized
price 95.0 96.9 106.7 96.1
--------- --------- ------- ---------
Production costs:
Site production and
delivery 46.6 49.4 52.7 52.6c
Gold and silver
credits (53.3) (59.2) (54.4) (58.6)
Treatment charges 24.1 21.8 25.1 22.2
Royalty on metals 2.6 1.5 3.1 3.0
--------- --------- ------- ----------
Cash production
costs 20.0 13.5 26.5 19.2
Depreciation
and amortization 15.0 13.0 15.0 13.0
---------- --------- ------- ---------
Total production
costs 35.0 26.5 41.5 32.2
---------- ---------- ------- ---------
Revenue adjustments d (6.6) (1.0) 5.0 (2.4)
---------- ---------- ------- ---------
Gross profit per pound
of copper 53.4 69.4 70.2 61.5
========== ========== ======= =========
a. Amounts were $0.88 for the 1996 quarter, $1.01 for the 1997
nine-month period and $0.92 for the 1996 nine-month period before
adjustments from copper put option and forward sales contracts.
b. Amounts were $324.15 for the 1997 quarter, $382.76 for the 1996
quarter, $335.72 for the 1997 nine-month period and $387.08 for the
1996 nine-month period before adjustments from forward gold sales
contracts.
c. Includes $4.2 million (0.5 cents per pound) for costs related
to a first-quarter civil disturbance and an early retirement
program.
d. Reflects adjustments to PT-FI revenues for prior period
concentrate sales and amortization of the price protection program
cost.
Unit site production costs in the third quarter of 1997 were 6
percent below last year's third quarter because of strong operating
results, including record quarterly mill throughput and record
copper production. Higher gold grades and recovery rates offset by
lower prices and higher copper sales in the 1997 periods resulted in
lower gold credits compared with 1996. As discussed, unit treatment
charge rates were higher in the 1997 periods because of market
conditions and higher copper prices. PT-FI's copper royalty rate
varies from 1.5 percent, at a copper price of $0.90 or less, to 3.5
percent, at a copper price over $1.10, on copper net revenue. The
gold and silver royalty rate is 1.0 percent.
<PAGE> 10
PT-FI's depreciation rate of 15.0 cents per pound for 1997 reflects
an increase over the 1996 rate because of the first phase of the
enhanced infrastructure program (EIP) and other 1997 capital
additions. The EIP is designed to provide the infrastructure needed
for PT-FI's growing operations and for expected future growth, to
enhance the living conditions of PT-FI's employees, and to develop
and promote the growth of local and third party activities and
enterprises in Irian Jaya. The first phase of the EIP was completed
in 1996; therefore, the 1996 rate of 13.0 cents per pound did not
include the EIP for a full year.
Exploration Activities.
Delineation drilling continued at the underground Kucing Liar ore
body in PT-FI's Block A. The advance of the Kucing Liar/Lembah
Tembaga adit to the west and east from the Amole adit is allowing
for multiple drill rigs to be in operation. Drilling of the deep
Grasberg resulted in drill hole GR43-1 intersecting 337 meters of
mineralization with an average grade of 1.83 percent copper
equivalent and drill hole GR43-2, which is incomplete, intersecting
296 meters of mineralization with an average grade of 1.70 percent
copper equivalent. The bottom 200 meters of the GR43-1 hole and the
bottom 150 meters of the GR43-2 hole are below the current Grasberg
block cave reserves.
Drilling and trenching continues at the Wabu porphyry prospect
in Block B. A pre-feasibility study is now under way to determine
the potential for commercial operation of this prospect. Geologic
activities continued in Eastern Mining's Blocks I, II and III.
Geologic mapping and sampling have discovered several new targets
along the northern boundary of Block II which are scheduled for
drilling in early 1998.
Atlantic Results.
Third Quarter Nine Months
----------------- ------------------
1997 1996 1997 1996
------- ------- -------- --------
Revenues (in millions) $229.5 $200.1 $663.3 $569.1
Concentrate treated
(metric tons) 241,600 220,900 683,100 586,400
Anode production
(000s of pounds) 169,000 152,400 471,100 397,000
Cathode and wire rod
sales (000s of pounds) 133,000 123,200 375,900 341,900
Atlantic reported higher revenues and cost of sales in the 1997
periods because of increases in production from its newly expanded
facilities. Atlantic reached its full production capacity of
270,000 metric tons of metal per year in June 1996 and completed a
$13.0 million "debottlenecking" project in June 1997 which increased
annual production capacity by 20,000 metric tons. Atlantic also is
benefiting from higher treatment and refining rates in 1997 ($0.26
per pound in third-quarter 1997 compared with $0.23 per pound in
third-quarter 1996). Cathode cash production costs ($0.12 per
pound) in the 1997 quarter were 20 percent lower than in the 1996
quarter. Higher treatment charges, which negatively affect PT-FI,
benefit Atlantic. The effect of an equivalent change in treatment
charges on PT-FI and Atlantic largely offset in FCX's consolidated
financial results, after taking into account income taxes and
minority interests. In May 1997, Atlantic entered into contracts to
hedge a portion of its treatment charges for June 1997 through
September 1997 because of the increases in copper prices. Atlantic
collected $2.5 million, recognizing $0.6 million in second-quarter
1997 operating income and $1.9 million in the third quarter of 1997.
A portion of Atlantic's operating costs and certain Atlantic
assets and liabilities are denominated in Spanish pesetas. On an
annual basis, a one peseta change in the U.S. dollar and Spanish
peseta exchange rate results in an approximate $1.5 million change
in FCX's annual net income before any hedging effects. FCX's other
income included currency translation gains totaling $2.3 million in
the third quarter of 1997, $0.6 million in the third quarter of
1996, $14.4 million in the 1997 nine-month period and $8.2 million
in the 1996 nine-month period.
Atlantic has a currency hedging program to reduce its exposure
to changes in the U.S. dollar and Spanish peseta exchange rate that
involves foreign exchange option and forward contracts. These
contracts currently hedge approximately 80 percent of Atlantic's
projected net peseta cash outflows through October 1998. In
addition to the currency translation gains noted above, Atlantic
recorded losses to other income related to its foreign currency
contracts totaling $0.7 million in the third quarter of 1997 and
$6.5 million in the 1997 nine-month period.
Other Financial Results. The FCX/Rio Tinto joint ventures incurred
$10.0 million of exploration costs in the 1997 third quarter and
$35.3 million in the nine-month 1997 period, compared with $9.8
million in the 1996 quarter and $27.1 million in the nine-month 1996
period as they continued to aggressively explore
<PAGE> 11
the Contract of Work (COW) areas. FCX reported $5.1 million of
exploration expense in the third quarter of 1997 primarily for
exploration costs incurred in the Eastern Mining and PT-FI Block B areas.
Costs in these areas are now being shared 60 percent by FCX and 40 percent
by Rio Tinto. All 1996 exploration costs were reimbursed by Rio Tinto.
Approximately $14.1 million in PT-FI's Block A remains to be applied
to the Rio Tinto $100 million exploration funding received in 1996.
FCX expects fourth-quarter 1997 exploration expenses to total
approximately $5 million.
FCX's total interest cost (before capitalization) rose to
$126.5 million for the nine-month 1997 period from $103.8 million in
the 1996 period because of an increase in debt levels associated
with the expansions and the FCX share purchase programs. FCX
capitalized $14.3 million of interest costs in the first nine months
of 1997 primarily for the "fourth concentrator mill expansion"
project. Because of the EIP project at PT-FI and the expansion at
Atlantic, $22.1 million of interest was capitalized during the first
nine months of 1996. Interest expense is expected to be higher
throughout 1997 because of the infrastructure transactions with P.T.
ALatieF Nusakarya Corporation (ALatieF) discussed below, higher debt
levels and reduced capitalized interest.
FCX's effective tax rate was 46 percent for the first nine
months of 1997 and 1996. PT-FI's COW provides a 35 percent income
tax rate and a 10 percent withholding on dividends paid to FCX by
PT-FI and on interest for debt incurred after the signing of the
COW. The withholding rate declined from 15 percent to 10 percent
beginning February 1997 because of an amendment to the United
States/Indonesia tax treaty. Included in the 1997 provision for
income taxes is $9.5 million representing additional amounts payable
pursuant to an Indonesian Presidential Decree. No income taxes are
recorded at Atlantic, which is subject to taxation in Spain, because
it has not generated taxable income in recent years.
CAPITAL RESOURCES AND LIQUIDITY
FCX's primary sources of cash are operating cash flows and
borrowings, while its primary cash outflows include capital
expenditures, dividends and purchases of its common stock. Net cash
provided by operating activities was $385.7 million for the first
nine months of 1997, compared with $325.0 million for the 1996
period. Net cash used in investing activities of $446.5 million in
the 1997 period compared with $313.4 in the 1996 period, primarily
reflects increased PT-FI capital expenditures associated with the
"fourth concentrator mill expansion," which are being funded with
nonrecourse borrowings from Rio Tinto. Net cash provided by
financing activities totaled $35.5 million in 1997 compared with
$10.6 million in 1996.
Operating Activities Higher net income in 1997 and a decrease in
working capital were the primary reasons for higher net cash
provided by operating activities. PT-FI collected $30.1 million
from closed gold forward sales contracts in 1997 and recognized
$76.6 million of gains on the closed gold forward sales contracts
and copper put options contracts sold in 1996. The decrease in
working capital for 1997 primarily reflects a decrease in product
inventories.
Investing Activities FCX's 1997 capital expenditures have increased
compared to the 1996 period primarily because of PT-FI's "fourth
concentrator mill expansion." Atlantic completed its expansion to
270,000 metric tons per year in 1996 and its $13.0 million
debottlenecking project in June 1997.
PT-FI's capital expenditures for the fourth quarter of 1997 are
expected to approximate $50 million (excluding the "fourth
concentrator mill expansion" discussed below), representing mine and
mill sustaining capital and long-term enhancement projects. Funding
is expected to be provided by operating cash flow, PT-FI's bank
credit facilities ($749.0 million commitment available at October
20, 1997) and other financing sources. FCX and Rio Tinto are
continuing construction on the "fourth concentrator mill expansion"
of PT-FI's facilities. The optimum rate following this expansion is
expected to be at least 190,000-200,000 MTPD, subject to certain
approvals. Completion is anticipated in the first quarter of 1998.
Costs for the expansion are expected to approximate $960 million,
including both working capital and $300 million for a coal-fired
power plant and related facilities. The new power plant facilities
are expected to be sold in late 1997 to the joint venture that owns
the assets which currently provide electricity to PT-FI.
Pursuant to the Rio Tinto joint venture, Rio Tinto has a 40
percent interest in certain assets and future production exceeding
specified annual amounts of copper, gold, and silver through 2021
from expansion of PT-FI's existing mining and milling capacity
financed by Rio Tinto. To finance the expansion, Rio Tinto will
provide up to $750 million for defined costs, of which 40 percent
will be funded directly and 60 percent will be loaned to PT-FI on a
nonrecourse basis. Expansion costs above $750 million will be
funded 60 percent by PT-FI and 40 percent by Rio Tinto except for
approximately $80
<PAGE> 12
million for costs to be funded by PT-FI to enhance
the profitability of PT-FI's existing operations. Incremental cash
flow attributable to such expansion projects will be shared on the
basis of 60 percent to PT-FI and 40 percent Rio Tinto. PT-FI has
assigned its interest in such incremental cash flow to Rio Tinto
until Rio Tinto has received an amount of funds from such assigned
interest equal to the funds loaned to PT-FI plus interest based on
Rio Tinto's cost of borrowing. The incremental production from the
expansion, as well as production from PT-FI's existing operations
will share proportionately in operating and administrative costs.
PT-FI will continue to receive 100 percent of the cash flow from
specified annual amounts of copper, gold and silver through 2021
calculated by reference to its proved and probable reserves as of
December 31, 1994.
Atlantic received $7.5 million from the Spanish government in
May 1997, which represented the final installment of $52.8 million
in total grants related to Atlantic's expansion of its production
capacity to 270,000 metric tons of metal per year. Atlantic
completed a $13.0 million "debottlenecking" project in June 1997
that has increased annual production capacity by 20,000 metric tons
and improved its profitability.
Construction began in 1996 on PT-FI's 25 percent owned, 200,000
metric tons of metal per year copper smelter/refinery complex in
Gresik, Indonesia. The estimated aggregate project cost, before
working capital requirements, is approximately $625 million. This
project is being financed by a $300 million nonrecourse term loan
and a $110 million working capital facility from a group of
commercial banks. The remaining funding is being provided pro rata
by PT-FI (25 percent) and the other owners (75 percent). Upon
completion of the Gresik smelter in mid-1998 and the PT-FI "fourth
concentrator mill expansion," FCX anticipates that approximately 50
percent of PT-FI's annual concentrate production will be sold to
Atlantic and the Gresik smelter at market prices.
Financing Activities Net proceeds from debt totaled $454.9 million
in the first nine months of 1997, including $315.8 million of
nonrecourse borrowings from Rio Tinto, while the 1996 period
included $432.0 million of net proceeds from debt. In March 1997,
PT-FI completed the final $75 million sale of infrastructure assets
to joint ventures owned one-third by PT-FI and two-thirds by
ALatieF, an Indonesian investor. The sales to the ALatieF joint
ventures totaled $270.0 million during the period from December 1993
to March 1997. PT-FI subsequently sold its one-third interest in
the joint ventures to ALatieF and is leasing the infrastructure
assets under capital lease arrangements. PT-FI continues to
guarantee an approximately $50 million bank loan associated with the
purchases. PT-FI no longer consolidates the joint ventures. Because
of PT-FI's sale of its interest in the joint ventures and the
resulting change in accounting for these transactions as capital
leases rather than consolidation, PT-FI's interest expense is higher
and minority interest charges are lower.
In August 1997 FCX announced a new open market share purchase
program for an additional 20 million shares bringing the total
shares approved for purchase under the open market share purchase
programs to 40 million. During the first nine months of 1997, FCX
acquired an aggregate 9.1 million of its Class A and B common shares
for $252.7 million (an average of $27.87 per share) under its open
market share purchase programs. From inception of these programs
through October 20, 1997, FCX has purchased a total of 21.0 million
shares for $581.6 million (an average of $27.74 per share). The
timing of future purchases is dependent upon many factors, including
the price of common shares, the Company's business and financial
position, and general economic and market conditions.
OTHER MATTERS
Beginning in 1995, PT-FI has participated in an independent
social/cultural audit of its Irian Jaya operations under a voluntary
program monitored by the Indonesian Government. The audit was
conducted by LABAT-Anderson, an internationally recognized
consulting firm, and their final report was made public in August
1997. All of the recommendations in LABAT-Anderson's report had
previously been implemented by PT-FI or are in the process of being
implemented.
In March 1997, PT Nusamba Mineral Industri (Nusamba), a
subsidiary of PT Nusantara Ampera Bakti, acquired from a third party
approximately 51 percent of the capital stock of P.T. Indocopper
Investama Corporation (PT-II). FCX owns 49 percent of the capital
stock of PT-II and PT-II owns 9.4 percent of the outstanding PT-FI
stock. Nusamba financed $254.0 million of the $315.0 million
purchase price with a commercial loan. FCX has agreed that if
Nusamba defaults on the loan, FCX will purchase the PT-II stock or
the lenders' interest in the commercial loan for the amount then due
by Nusamba under the loan. FCX also agreed to lend to Nusamba any
shortfalls between the interest payments due on the commercial loan
and the dividends received by Nusamba from PT-II. At September 30,
1997, $5.6 million was due from Nusamba because of interest payment
shortfalls.
<PAGE> 13
CAUTIONARY STATEMENT
Management's discussion and analysis of financial condition and
results of operations contains forward-looking statements regarding
copper and gold sales volumes, exploration activities, capital
expenditures, expansion costs, Gresik smelter costs and the
availability of financing. Important factors that might cause
future results to differ from these projections include
unanticipated declines in the average grades of ore mined,
unanticipated milling and other processing problems, the speculative
nature of mineral exploration, fluctuations in interest rates and
other adverse financial market conditions, and other factors
described in more detail in FCX's Form 10-K for the year ended
December 31, 1996 filed with the Securities and Exchange Commission.
--------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
<PAGE> 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed in the Exhibit
Index beginning on Page E-1 hereof.
(b) During the quarter for which this report is filed,
the registrant filed one Current Report on Form 8-K, dated August 6,
1997 reporting information under Item 5. No financial statements
were filed in connection with such reports.
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto 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: November 13, 1997
<PAGE> 16
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
- ------ ----------- -----------
2.1 Agreement, dated as of May 2, 1995 by and between FTX and FCX and
The RTZ Corporation PLC, RTZ Indonesia Limited, and RTZ America,
Inc. (the "RTZ Agreement"). Incorporated by reference to Exhibit
2.1 to the Current Report on Form 8-K of FTX dated as of May 26,
1995.
2.2 Amendment dated May 31, 1995 to the RTZ Agreement. Incorporated
by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q of
FTX for the quarter ended June 30, 1995.
2.3 Distribution Agreement dated as of July 5, 1995 between FTX and
FCX. Incorporated by reference to Exhibit 2.1 to the Quarterly
Report on Form 10-Q of FTX for the quarter ended September 30, 1995
(the "FTX 1995 Third Quarter Form 10-Q").
3.1 Composite copy of the Certificate of Incorporation of FCX.
Incorporated by reference to Exhibit 3.1 to the Quarterly Report on
Form 10-Q of FCX for the quarter ended June 30, 1995 (the "FCX 1995
Second Quarter Form 10-Q").
3.2 By-Laws of FCX, as amended. Incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K of FCX for the fiscal year
ended December 31, 1996 (the "FCX 1996 Form 10-K").
4.1 Certificate of Designations of the Step-Up Convertible Preferred
Stock of FCX. Incorporated by reference to Exhibit 4.2 to the FCX
1995 Second Quarter Form 10-Q.
4.2 Deposit Agreement dated as of July 1, 1993 among FCX, Chase
Mellon Shareholder Services, L.L.C., as Depositary, and holders of
depositary receipts ("Step-Up Depositary Receipts") evidencing
certain Depositary Shares, each of which, in turn, represents 0.05
shares of Step-Up Convertible Preferred Stock. Incorporated by
reference to Exhibit 4.5 to the Annual Report on Form 10-K of FCX
for the fiscal year ended December 31, 1993 (the "FCX 1993 Form
10-K").
4.3 Form of Step-Up Depositary Receipt. Incorporated by reference to
Exhibit 4.6 to the FCX 1993 Form 10-K.
4.4 Certificate of Designations of the Gold-Denominated Preferred
Stock of FCX. Incorporated by reference to Exhibit 4.3 to the FCX
1995 Second Quarter Form 10-Q.
4.5 Deposit Agreement dated as of August 12, 1993 among FCX, Chase
Mellon Shareholder Services, L.L.C., as Depositary, and holders of
depositary receipts ("Gold-Denominated Depositary Receipts")
evidencing certain Depositary Shares, each of which, in turn,
represents 0.05 shares of Gold-Denominated Preferred Stock.
Incorporated by reference to Exhibit 4.8 to the FCX 1993 Form 10-K.
4.6 Form of Gold-Denominated Depositary Receipt. Incorporated by
reference to Exhibit 4.9 to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the Gold-Denominated Preferred
Stock, Series II (the "Gold-Denominated Preferred Stock II") of FCX.
Incorporated by reference to Exhibit 4.4 to the FCX 1995 Second
Quarter Form 10-Q.
4.8 Deposit Agreement dated as of January 15, 1994, among FCX, Chase
Mellon Shareholder Services, L.L.C., as Depositary, and holders of
depositary receipts ("Gold-Denominated II Depositary Receipts")
evidencing certain Depositary Shares, each of which, in turn,
represents 0.05 shares of Gold-Denominated Preferred Stock II.
Incorporated by reference to Exhibit 4.2 to the Quarterly Report on
Form 10-Q of FCX for the quarter ended March 31, 1994 (the "FCX 1994
First Quarter Form 10-Q").
4.9 Form of Gold-Denominated II Depositary Receipt. Incorporated by
reference to Exhibit 4.3 to the FCX 1994 First Quarter Form 10-Q.
4.10 Certificate of Designations of the Silver-Denominated Preferred
Stock of FCX. Incorporated by reference to Exhibit 4.5 to the FCX
1995 Second Quarter Form 10-Q.
4.11 D eposit Agreement dated as of July 25, 1994 among FCX, Chase
Mellon Shareholder Services, L.L.C., as Depositary, and holders of
depositary receipts ("Silver-Denominated Depositary Receipts")
evidencing certain Depositary Shares, each of which, in turn,
initially represents 0.025 shares of Silver-Denominated Preferred
Stock. Incorporated by reference to Exhibit 4.2 to the July 15,
1994 Form 8-A.
4.12 Form of Silver-Denominated Depositary Receipt. Incorporated by
reference to Exhibit 4.1 to the July 15, 1994, Form 8-A.
4.13 $550 million Composite Restated Credit Agreement dated as of
July 17, 1995 (the "PT-FI Credit Agreement") among PT-FI, FCX, the
several financial institutions that are parties thereto, First Trust
of New York, National Association, as PT-FI Trustee, Chemical Bank,
as administrative agent and FCX collateral agent, and The Chase
Manhattan Bank (National Association), as documentary agent.
Incorporated by reference to Exhibit 4.16 to the Annual Report of
FCX on Form 10-K for the year ended December 31, 1995 (the "FCX 1995
Form 10-K").
4.14 Amendment dated as of July 15, 1996 to the PT-FI Credit
Agreement among PT-FI, FCX, the several financial institutions that
are parties thereto, First Trust of New York, National Association,
as PT-FI Trustee, Chemical Bank, as administrative agent and FCX
collateral agent, and The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by reference to
Exhibit 4.2 to the Quarterly Report of FCX on Form 10-Q for the
quarter ended September 30, 1996 (the "FCX 1996 Third Quarter Form
10-Q").
4.15 Amendment dated as of October 9, 1996 to the PT-FI Credit
Agreement among PT-FI, FCX, the several financial institutions that
are parties thereto, First Trust of New York, National Association,
as PT-FI Trustee, The Chase Manhattan Bank (formerly Chemical Bank),
as administrative agent, security agent and JAA security agent, and
The Chase Manhattan Bank (as successor to The Chase Manhattan Bank
(National Association)), as documentary agent. Incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K of FCX
dated and filed November 13, 1996 (the "FCX November 13, 1996 Form
8-K").
4.16 $200 million Credit Agreement dated as of June 30, 1995 (the
"CDF") among PT-FI, FCX, the several financial institutions that are
parties thereto, First Trust of New York, National Association, as
PT-FI Trustee, Chemical Bank, as administrative agent and FCX
collateral agent, and The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by reference to
Exhibit 4.2 to the FCX 1995 Third Quarter Form 10-Q.
4.17 Amendment dated as of July 15, 1996 to the CDF among PT-
FI, FCX, the several financial institutions that are parties
thereto, First Trust of New York, National Association, as PT-FI
Trustee, Chemical Bank, as administrative agent and FCX collateral
agent, and The Chase Manhattan Bank (National Association), as
documentary agent. Incorporated by reference to Exhibit 4.1 to the
FCX 1996 Third Quarter Form 10-Q.
4.18 Amendment dated as of October 9, 1996 to the CDF among PT-FI,
FCX, the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT-FI Trustee, The
Chase Manhattan Bank (formerly Chemical Bank), as administrative
agent, security agent and JAA security agent, and The Chase
Manhattan Bank (as successor to The Chase Manhattan Bank (National
Association)), as documentary agent. Incorporated by reference to
Exhibit 10.1 to the FCX November 13, 1996 Form 8-K.
4.19 Senior Indenture dated as of November 15, 1996 from FCX to The
Chase Manhattan Bank, as Trustee. Incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K of FCX dated November
13, 1996 and filed November 15, 1996 (the "FCX November 15, 1996
Form 8-K").
4.20 First Supplemental Indenture dated as of November 18, 1996 from
FCX to The Chase Manhattan Bank, as Trustee, providing for the
issuance of the Senior Notes and supplementing the Senior Indenture
dated November 15, 1996 from FCX to such Trustee, providing for the
issuance of Debt Securities. Incorporated by reference to Exhibit
4.20 to the FCX 1996 Form 10-K.
11.1 Computation of Net Income per Common and Common Equivalent
Share.
15.1 Letter dated October 21, 1997 from Arthur Andersen LLP
regarding unaudited interim financial statements.
27.1 Financial Data Schedule
EXHIBIT 11.1
FREEPORT-McMoRan COPPER & GOLD INC.
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Primary:
Net income
applicable to common
stock $ 36,577 $ 46,126 $ 168,880 $ 97,621
========== ========== ========== ==========
Average common
shares outstanding 195,461 193,815 198,694 195,201
Common stock equivalents:
Stock options 1,463 1,796 1,517 1,849
---------- ---------- ---------- ----------
Common and common
equivalent shares 196,924 195,611 200,211 197,050
========== ========== ========== ==========
Net income per
common and common
equivalent share $.19 $.24 $.84 $.50
==== ==== ==== ====
Fully diluted: (1)
Net income applicable to common stock :
Net Income $ 36,577 $ 46,126 $ 168,880 $ 97,621
Plus preferred dividends - - - -
---------- ---------- ---------- ----------
Net Income
applicable to common
stock $ 36,577 $ 46,126 $ 168,880 $ 97,621
========== ========== ========== ==========
Average common
shares outstanding 195,461 193,815 198,694 195,201
Common stock
equivalents: Stock
options 1,463 1,872 1,517 1,872
Convertible
securities:
Preferred stock - - - -
---------- ---------- ---------- ----------
Common and common
equivalent shares 196,924 195,687 200,211 197,073
========== ========== ========== ==========
Net income per common
and common
equivalent share $.19 $.24 $.84 $.50
==== ==== ==== ====
(1) This calculation is submitted in accordance with Regulation S-K
item 601 (b)(11), despite not being required by APB Opinion No. 15
because it results in no dilution.
Exhibit 15.1
October 21, 1997
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras St.
New Orleans, LA 70112
Gentlemen,
We are aware that Freeport-McMoRan Copper & Gold Inc. has
incorporated by reference in its Registration Statements (File Nos.
33-63271, 33-63269, 33-63267, 33-45787, 33-52503, 33-63376, and 333-
02699) its Form 10-Q for the quarter ended September 30, 1997, which
includes our report dated October 21, 1997 covering the unaudited
interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1993 (the Act), this report is
not considered a part of the registration statements prepared or
certified by our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/Arthur Andersen LLP
Arthur Andersen LLP
<TABLE> <S> <C>
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<NAME> FREEPORT-MCMORAN COPPER & GOLD INC.
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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500,007
349,990
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