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 March 31, 1998
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 March 31, 1998, there were issued and outstanding 72,570,444
shares of the registrant's Class A Common Stock, par value $0.10 per
share, and 108,333,838 shares of its Class B Common Stock, par value
$0.10 per share.
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 7
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>
March 31, December 31,
1998 1997
---------- ----------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,850 $ 8,959
Accounts receivable 163,969 129,611
Inventories 315,153 314,800
Prepaid expenses and other 8,014 9,719
---------- ----------
Total current assets 498,986 463,089
Property, plant and equipment, net 3,541,857 3,521,715
Investment in PT Smelting 85,146 83,061
Other assets 95,407 84,344
---------- ----------
Total assets $4,221,396 $4,152,209
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 360,468 $ 363,294
Current portion of long-term debt and
short-term borrowings 105,188 80,852
Accrued income taxes 37,752 31,519
---------- ----------
Total current liabilities 503,408 475,665
Long-term debt, less current portion:
FCX and PT-FI credit facilities 367,000 250,000
Senior notes 570,000 570,000
Infrastructure asset financings, net 647,049 664,506
Rio Tinto loan 439,399 464,360
Atlantic Copper debt 300,616 311,223
Other notes payable 41,557 48,041
Accrued postretirement benefits and other
liabilities 122,333 125,980
Deferred income taxes 417,512 403,047
Minority interests 65,604 60,488
Mandatory redeemable preferred stock 500,007 500,007
Stockholders' equity, including $10.2 million
of cumulative foreign currency translation
adjustments 246,911 278,892
---------- ----------
Total liabilities and stockholders'
equity $4,221,396 $4,152,209
========== ==========
</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
March 31,
------------------------
1998 1997
---------- ----------
(In Thousands, Except Per
Share Amounts)
<S> <C> <C>
Revenues $ 396,132 $ 523,780
Cost of sales:
Production and delivery 185,858 249,486
Depreciation and amortization 58,275 47,256
---------- ----------
Total cost of sales 244,133 296,742
Exploration expenses 2,647 2,728
General and administrative expenses 19,548 26,702
---------- ----------
Total costs and expenses 266,328 326,172
---------- ----------
Operating income 129,804 197,608
Interest expense, net (48,580) (33,148)
Other income (expense), net (1,299) 1,998
---------- ----------
Income before income taxes and minority
interests 79,925 166,458
Provision for income taxes (37,156) (78,605)
Minority interests in net income of
consolidated subsidiaries (7,142) (16,032)
---------- ----------
Net income 35,627 71,821
Preferred dividends (9,035) (9,370)
---------- ----------
Net income applicable to common stock $ 26,592 $ 62,451
========== ==========
Net income per share of common stock:
Basic $.15 $.31
========== ==========
Diluted $.15 $.31
========== ==========
Average common shares outstanding:
Basic 181,251 201,334
========== ==========
Diluted 181,374 203,047
========== ==========
Dividends paid per common share $.05 $.225
========== ==========
</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>
Three Months Ended
March 31,
--------------------------
1998 1997
---------- ----------
(In Thousands)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 35,627 $ 71,821
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 58,275 47,256
Deferred income taxes 14,465 26,790
Deferral of unearned income - 30,102
Recognition of unearned income - (29,606)
Minority interests' share of net income 7,142 16,032
Other (9,314) (9,187)
(Increase) decrease in working capital:
Accounts receivable (32,878) (38,680)
Inventories (240) 20,994
Prepaid expenses and other 1,707 (2,658)
Accounts payable and accrued
liabilities 12,003 (492)
Accrued income taxes 4,265 (58,245)
---------- ----------
Increase in working capital (15,143) (79,081)
---------- ----------
Net cash provided by operating activities 91,052 74,127
---------- ----------
Cash flow from investing activities:
Capital expenditures:
PT-FI (94,741) (123,777)
Atlantic Copper (2,294) (3,439)
Investment in PT Smelting (2,553) (8,232)
---------- ----------
Net cash used in investing activities (99,588) (135,448)
---------- ----------
Cash flow from financing activities:
Proceeds from Rio Tinto 3,600 105,240
Proceeds from other debt 127,863 102,123
Repayment of other debt (45,270) (73,568)
Net proceeds from infrastructure
financing - 27,344
Purchase of FCX common shares (49,485) (47,434)
Cash dividends paid:
Common stock (9,083) (45,416)
Preferred stock (9,810) (10,433)
Minority interests (2,026) (8,491)
Other (4,362) (98)
---------- ----------
Net cash provided by financing activities 11,427 49,267
---------- ----------
Net increase (decrease) in cash and cash
equivalents 2,891 (12,054)
Cash and cash equivalents at beginning of
year 8,959 37,118
---------- ----------
Cash and cash equivalents at end of
period $ 11,850 $ 25,064
========== ==========
</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). Freeport-McMoRan Copper & Gold Inc. (FCX)
adopted SFAS 128 in the fourth quarter of 1997 and restated prior
periods' EPS data as required by SFAS 128.
Basic net income per share of common stock was calculated by
dividing net income applicable to common stock by the weighted-
average number of common shares outstanding during the period.
Diluted net income per share of common stock was calculated by
dividing net income applicable to common stock by the weighted-
average number of common shares outstanding during the period plus
the net effect of dilutive stock options which represented 0.1
million shares and 1.7 million shares in the first quarter of 1998
and 1997, respectively.
Options to purchase common stock that were outstanding during the
periods presented but were not included in the computation of
diluted EPS totaled options for 10.1 million shares (including
approximately 1.3 million stock appreciation rights for 1.3 million
shares that were converted to an equivalent number of options in the
first quarter of 1998) at an average exercise price of approximately
$23 per share in first-quarter 1998 and options for 1.7 million
shares at an average exercise price of approximately $35 per share
in first-quarter 1997. These were excluded because the exercise
prices for these options were greater than the average market price
of the common shares during the period. The FCX convertible
preferred stock outstanding was not included in the computation of
diluted EPS because including the conversion of these shares would
have increased EPS. The preferred stock was convertible into 11.7
million shares of common stock in 1998 and 1997. Dividends accrued
on convertible preferred stock totaled $5.3 million in 1998 and
1997.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive
Income," which 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, of which FCX only has cumulative foreign currency
translation adjustments. There were no changes to the cumulative
foreign currency translation adjustments balance during the periods
presented. SFAS 130 is effective for 1998 and adoption of this
standard had no effect on FCX's financial position or results of
operations.
2. FINANCIAL CONTRACTS
At certain times, FCX has entered into financial contracts to manage
certain risks resulting from fluctuations in commodity prices
(primarily copper and gold), foreign currency 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 March 31, 1998, FCX had redeemable preferred stock indexed
to commodities, deferred costs on closed foreign currency option
contracts, open foreign currency forward contracts, open forward
copper sales and purchase 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.
FCX hedges a portion of its anticipated Spanish peseta,
Indonesian rupiah and Australian dollar cash outflows with foreign
currency forward contracts. Changes in market value of foreign
currency forward contracts which protect anticipated transactions
are recognized in the period incurred. Atlantic Copper, S.A., a wholly
owned subsidiary of FCX enters into future contracts to hedge its price risk
whenever its physical purchases and sales pricing periods do not
match. Gains and losses on futures contracts are recognized with
the hedged transaction. 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.
<PAGE> 6
3. INTEREST COST
Interest expense excludes capitalized interest of $10.1 million in
the first quarter of 1998 and $1.7 million in the first quarter of
1997.
4. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first three months of
1998 and 1997 was 2.2 to 1 and 5.7 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 1997 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.
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
March 31, 1998, and the related statements of income and cash flow
for the three-month periods ended March 31, 1998 and 1997. These
financial statements are the responsibility of the Company's
management.
We conducted our reviews 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 financial data and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted
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 reviews, 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, 1997, and the related
statements of income, shareholders' equity and cash flow for the
year then ended (not presented herein), and, in our report dated
January 20, 1998, 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, 1997, is
fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
April 21, 1998
<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, 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
P.T. Smelting Co. (PT Smelting), an Indonesian company formed to
construct and operate a copper smelter and refinery in Gresik,
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 first-quarter periods
follow (in millions, except per share amounts):
First Quarter
---------------
1998 1997
------ ------
Revenues $396.1 $523.8
Operating income 129.8 197.6
Net income applicable to common stock 26.6 62.5
Diluted net income per share of common stock .15 .31
FCX's revenues include 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
vary significantly with fluctuations in the market prices of copper
and gold and other factors. At various times, in response to market
conditions, FCX has entered into 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"). FCX currently has no copper or gold
price protection contracts relating to its mine production. Based
on PT-FI's projected 1998 sales volumes, a $0.01 per pound change in
the average price realized on copper sales would have an approximate
$14 million impact on revenues and an approximate $7 million impact
on net income. A $10 per ounce change in the average price realized
on PT-FI annual gold sales would have an approximate $22 million
impact on revenues and an approximate $11 million impact on net
income.
Lower first-quarter 1998 revenues primarily reflect significantly
lower copper and gold realizations, partially offset by higher sales
volumes at PT-FI because of increased production from the "fourth
concentrator mill expansion" which is currently in its start-up
phase. First-quarter 1998 revenues benefited by $18.0 million ($8.8
million to net income or $0.05 per share) from repricing December
31, 1997 "open" concentrate sales, while the first-quarter 1997
period benefited from copper put option contracts, forward gold
sales and re-pricing December 31, 1996 open concentrate sales, which
collectively provided $68.7 million to first-quarter 1997 revenues
($33.5 million to net income or $0.16 per share).
Cost of sales for 1998 decreased $52.6 million compared with the
1997 quarter primarily because of lower labor costs reflecting the
devaluation of the Indonesian rupiah, economies of scale associated
with the PT-FI expansion and cost reduction efforts, partially
offset by higher sales volumes and an increase in the PT-FI
depreciation rate resulting from additional capital assets being
subject to depreciation. Exploration costs are now being shared 60
percent by FCX and 40 percent by Rio Tinto plc (Rio Tinto) in all
exploration areas except PT-FI's Block A where $7.8 million remains
to be applied against Rio Tinto's $100 million exploration funding
received in 1996. General and administrative expenses in the 1998
period were lower primarily because of cost sharing with Rio Tinto,
cost reduction efforts and lower employee costs. Increased net
interest expense primarily reflects higher average debt levels. The
lower provision for income taxes and minority interests charges in
first-quarter 1998 compared with the 1997 period primarily reflect
reduced net income levels at PT-FI.
RESULTS OF OPERATIONS
FCX has two operating segments: "mining and exploration" and
"smelting and refining." The mining and exploration segment
includes PT-FI's copper and gold mining operations in Indonesia and
the Indonesian
<PAGE> 8
exploration activities of both PT-FI and Eastern
Mining. The smelting and refining segment includes Atlantic's
operations in Spain and PT-FI's equity investment in PT Smelting.
Summary comparative operating income for the first-quarter periods
follows (in millions):
First Quarter
----------------------
1998 1997
---------- ----------
Mining and exploration $ 121.0 $ 183.0
Smelting and refining 11.4 3.7
Intercompany eliminations and other a (2.6) 10.9
---------- ----------
FCX operating income $ 129.8 $ 197.6
========== ==========
a. Profit on PT-FI sales to Atlantic is reflected in FCX's
consolidated results upon completion of the smelting and refining
prcess. Additional profits recognized on PT-FI's sales to Atlantic
totaled $1.0 million in the first quarter of 1998 and $15.1 million
in the first quarter of 1997. Concentrate sales to Atlantic may
cause fluctuations in FCX's consolidated quarterly earnings depending
on the timing of the shipments and prices.
MINING AND EXPLORATION
A summary of increases (decreases) in PT-FI revenues between the
periods follows (in millions):
First
Quarter
----------
Sales volumes:
Copper $ 36.4
Gold 18.1
Price realizations:
Copper (100.6)
Gold (42.3)
Adjustments to prior period open sales (26.4)
Treatment charges, royalties and other 7.1
----------
Net decrease in PT-FI revenues from prior-year
quarter $ (107.7)
==========
PT-FI's first-quarter 1998 revenues benefited from a 13 percent
increase in copper sales volumes and a 12 percent increase in gold
sales volumes, offset by a 31 percent decline in copper realizations
and a 26 percent decline in gold realizations. PT-FI's first-quarter
1997 realizations benefited from copper put option contracts and
forward gold sales which collectively added a net $31.8 million to
revenues (see further discussion below). PT-FI's 1998 revenues
included net upward adjustments on prior period open concentrate
sales of $18.6 million compared with $45.0 million in 1997.
Treatment charges increased because of higher sales volumes, but
were offset by lower royalties. Treatment rates for a significant
portion of PT-FI's 1998 projected sales were 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 1998 production at market prices. PT-FI's share of
sales for the second quarter of 1998 is projected to approximate 335
million pounds of copper and 450,000 ounces of gold. PT-FI's share
of sales for 1998 is projected to approximate 1.4 billion pounds of
copper and 2.2 million ounces of gold. Copper and gold sales for
1998 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 $14.1
million of gold revenues from forward sales contracts during the
first quarter 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
$307.45 per ounce on April 20, 1998.
<PAGE> 9
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 a net
$17.7 million of additional copper revenues in the first quarter of
1997 from the sale of its 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 March 31, 1998, FCX had consolidated copper
sales totaling 214.3 million pounds recorded at an average price of
$0.78 per pound remaining to be finally priced. Approximately 90
percent of these open pounds are expected to be finally priced
during the second quarter of 1998 with the remaining pounds to be
priced during the third quarter of 1998. A one cent movement in the
average price used for these open pounds will have an approximate $1
million impact on FCX's 1998 net income.
PT-FI Operating Results.
First Quarter
----------------------
1998 1997
---------- ----------
Ore milled (metric tons per day, MTPD) 166,000 124,000
Copper grade (%) 1.26 1.26
Gold grade (grams per metric ton) 1.41 1.33
Recovery rate (%)
Copper 86.9 84.3
Gold 82.8 76.4
Copper
Production (000s of recoverable pounds) 288,900a 252,500
Sales (000s of recoverable pounds) 288,200b 256,100
Average realized price $.78 $1.13c
Gold
Production (recoverable ounces) 433,000a 350,600
Sales (recoverable ounces) 419,800b 373,500
Average realized price $290.12 $390.80d
Gross profit per pound of copper (cents):
Average realized price 78.3 113.2c
---------- ----------
Production costs:
Site production and delivery 35.7 59.3
Gold and silver credits (42.1) (56.2)
Treatment charges 24.6 25.5
Royalty on metals 1.1 3.2
---------- ----------
Cash production costs 19.3 31.8
Depreciation and amortization 17.0 15.0
---------- ----------
Total production costs 36.3 46.8
---------- ----------
Revenue adjustments e 6.4 15.2
---------- ----------
Gross profit per pound of copper 48.4 81.6
========== ==========
a. Amounts are PT-FI's share of aggregate production totaling
347.4 million pounds of copper and 543,400 ounces of gold.
b. Amounts are PT-FI's share of aggregate sales totaling 341.5
million pounds of copper and 516,500 ounces of gold.
c. Amount was $1.04 before hedging adjustments.
d. Amount was $351.79 before hedging adjustments.
e. Reflects adjustments to PT-FI revenues for prior period
concentrate sales, and amortization of the price protection program
cost in the first quarter of 1997.
<PAGE> 10
Unit site production and delivery costs in the first quarter of 1998
averaged $0.36 per pound of copper, 40 percent below the $0.59 per
pound reported in the first quarter of 1997 because of lower labor
costs reflecting the devaluation of the Indonesian rupiah, lower
power costs, economies of scale from the fourth concentrator mill
expansion and cost reduction efforts. Higher gold grades, recovery
rates and sales volumes in 1998 were offset by a 26 percent decline
in gold realizations and resulted in lower gold credits compared
with 1997. Unit treatment charges were lower in the 1998 period
primarily because of lower price participation which varies with the
price of copper. On metal produced from mill throughput up to
200,000 MTPD, 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. On metal produced from mill throughput
in excess of 200,000 MTPD, PT-FI's copper royalty rate varies from
3.0 percent, at a copper price of $0.90 or less, to 7.0 percent, at
a copper price over $1.10, on copper net revenue. The gold and
silver royalty rate is 2.0 percent. At a gold price of $300 per
ounce, PT-FI's 1998 average unit cash production costs, including
gold and silver credits, are expected to be less than $0.20 per
pound of copper.
PT-FI's depreciation rate of 17.0 cents per pound for 1998 reflects
an increase over the 1997 rate for a half year of depreciation on
the fourth concentrator mill expansion and other capital additions.
FCX conducts the majority of its operations in Indonesia and Spain
where its functional currencies are U.S. dollars. All of FCX's
revenues are denominated in U.S. dollars; however, some costs and
certain asset and liability accounts are denominated in either
Indonesian rupiah, Australian dollars or Spanish pesetas.
Generally, FCX's results are positively affected when the U.S.
dollar strengthens against these foreign currencies and adversely
affected when the U.S. dollar weakens against these foreign
currencies.
Over the past several years, and more dramatically in the
second half of 1997 and the first quarter of 1998, the Indonesian
rupiah weakened against the U.S. dollar. During the first quarter
of 1998 PT-FI recorded losses totaling $5.4 million related to its
rupiah denominated net assets. Operationally PT-FI has benefited
from this weakening primarily through lower labor costs. During the
first quarter of 1998, PT-FI began a currency hedging program to
reduce its exposure to changes in the Indonesian rupiah and
Australian dollar by entering into foreign currency forward
contracts to hedge a portion of its anticipated payments in these
currencies. At March 31, 1998, these contracts hedged 95 billion of
rupiah payments and 56.8 million of Australian dollar payments
through December 1998. PT-FI recorded net gains to production costs
in the first quarter of 1998 totaling $1.3 million related to these
contracts.
Assuming estimated 1998 rupiah payments of 500 billion and a
March 31, 1998 exchange rate of 8,300 rupiah to one U.S. dollar, a
one thousand rupiah increase in the exchange rate could result in an
approximate $6 million decrease in costs and a one thousand rupiah
decrease in the exchange rate could result in an approximate $8
million increase in costs before any hedging effects.
Rio Tinto Joint Venture
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 fourth concentrator mill expansion,
Rio Tinto provided a $450 million nonrecourse loan to PT-FI.
Incremental cash flow attributable to such expansion project is now
being shared on the basis of 60 percent to PT-FI and 40 percent Rio
Tinto. PT-FI has assigned its interest in its share of incremental
cash flow to Rio Tinto until Rio Tinto receives an amount of funds
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,
are sharing proportionately in operating, nonexpansion capital 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.
Exploration Activities
FCX continues an aggressive exploration program in Irian Jaya, in
the Block A and Block B areas of PT-FI's Contract of Work (COW), and
in the Eastern Mining COW. In Block A, which contains PT-FI's
mining and milling operations, delineation drilling is currently
under way at Kucing Liar, Deep Grasberg and DOZ. Reconnaissance work
also began in the first quarter of 1998 on several prospects in the
southern part of Block A. In Block B, a pre-feasibility study at
the Wabu Ridge Gold Project is nearing completion. At current gold
prices, the existing known resource at Wabu is not believed to be
economically feasible to
<PAGE> 11
develop at this time. Elsewhere in Block B, condemnation
work in anticipation of the final land
relinquishment in December 1998 is essentially complete and efforts
are now being focused on the most promising prospects. In the
Eastern Mining COW areas, geologic mapping and sampling have
identified several new targets which will be scheduled for drilling
during early 1998.
SMELTING AND REFINING
Atlantic Operating Results.
First Quarter
------------------
1998 1997
-------- --------
Revenues (in millions) $188.5 $222.1
Operating income (in millions) $11.9 $3.7
Concentrate treated (metric tons) 249,900 232,400
Anode production (000s of pounds) 164,000 155,700
Cathode and wire rod sales (000s of pounds) 131,100 121,600
Gold sales in anodes and slimes (ounces) 173,900 123,000
Atlantic reported lower revenues and cost of sales in the 1998
period because of lower copper and gold prices. Operating income
increased by $8.2 million over the 1997 quarter, reflecting record
quarterly volumes of concentrate treated, higher cathode and wire
rod sales volumes and lower unit costs compared with the 1997
quarter. 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. As a result,
Atlantic treated 8 percent more concentrate in the first quarter of
1998 compared with the first quarter of 1997. Atlantic also
benefited from higher treatment and refining rates in the first
quarter of 1998 ($0.26 per pound in first-quarter 1998 compared with
$0.25 per pound in first-quarter 1997). Cathode cash production
costs of $0.12 per pound in the 1998 quarter were 8 percent lower
than the $0.13 per pound reported in the 1997 quarter. Higher
treatment charges, which negatively affect PT-FI, benefit Atlantic
and vice versa. 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.
A portion of Atlantic's operating costs and certain Atlantic
assets and liabilities are denominated in Spanish pesetas. Based on
estimated 1998 peseta payments of 15 billion and a March 31, 1998
exchange rate of 157 pesetas to one U.S. dollar, a ten peseta
increase in the exchange rate could result in an approximate $6
million decrease in costs and a ten peseta decrease in the exchange
rate could result in an approximate $6 million increase in costs
before any hedging effects. FCX's other income included currency
translation gains totaling $2.2 million in the first quarter of 1998
and $9.6 million in the first quarter of 1997 related to net peseta-
denominated liabilities.
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 currency forward contracts. These contracts
currently hedge approximately 80 percent of Atlantic's projected net
peseta cash outflows through April 1999. In addition to the
currency translation gains noted above, Atlantic recorded losses to
other income related to its foreign currency contracts totaling $2.0
million in the first quarter of 1998 and $4.5 million in the first
quarter of 1997.
OTHER FINANCIAL RESULTS
The FCX/Rio Tinto joint ventures incurred $8.7 million of
exploration costs in the 1998 first quarter, compared with $13.5
million in the 1997 quarter, as the joint ventures continue to
explore aggressively the COW areas. FCX reported $2.6 million of
exploration expense in the first quarter of 1998 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. The 1997 quarter primarily included
only exploration costs incurred in the Eastern Mining area.
Approximately $7.8 million in PT-FI's Block A remains to be applied
to the Rio Tinto $100 million exploration funding received in 1996.
First quarter 1998 general and administrative expenses declined
27 percent compared with the prior year period primarily because of
the effect of sharing these costs with Rio Tinto pursuant to joint
venture agreements, initiatives to reduce costs and a decline in
executive compensation.
<PAGE> 12
FCX's total interest cost (before capitalization) rose to $58.7
million for the 1998 quarter from $34.8 million in the 1997 quarter
because of an increase in debt levels associated with the expansions
and the FCX share purchase programs. FCX capitalized $10.1 million
of interest costs in the first quarter of 1998 and $1.7 million of
interest costs in the first quarter of 1997 primarily for the fourth
concentrator mill expansion project, which is now in the start-up
phase.
FCX's effective tax rate was 46 percent for the first quarter
of 1998 and 47 percent for the first quarter of 1997. 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. No income taxes
are recorded at Atlantic, which is subject to taxation in Spain,
because it has not generated taxable income in recent years and it
has a substantial tax loss carryforward.
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 $91.1 million for the first
quarter of 1998, compared with $74.1 million for the 1997 period.
Net cash used in investing activities of $99.6 million in the 1998
period, compared with $135.4 million in the 1997 period, primarily
for PT-FI capital expenditures. Net cash provided by financing
activities totaled $11.4 million in 1998 compared with $49.3 million
in 1997.
Operating Activities. Lower net income in the first quarter of 1998
was offset by working capital changes that resulted in first-quarter
1998 net cash provided by operating activities increasing by $16.9
million over the year-ago quarter. PT-FI collected $30.1 million
from closed gold forward sales contracts in 1997 and recognized
$29.6 million of gains on the closed gold forward sales contracts
and copper put options contracts sold in 1996. The net increase in
working capital for the first quarter of 1998 primarily reflects a
decrease related to provisional payments on sales contracts, while
the net increase in working capital for the first quarter of 1997
primarily reflects the payment of accrued income taxes.
Investing Activities. FCX's 1998 capital expenditures were lower
compared to the 1997 period primarily because of the near completion
of PT-FI's fourth concentrator mill expansion. PT-FI's capital
expenditures for the remainder of 1998 are expected to approximate
$200-$250 million, representing primarily mine and mill sustaining
capital and long-term enhancement projects. Funding is expected to
be provided by operating cash flow and PT-FI's bank credit
facilities ($612.0 million commitment available at April 20, 1998,
subject to $522.9 million borrowing base availability).
Construction of PT Smelting's 200,000 metric tons of metal per
year copper smelter/refinery complex in Gresik, Indonesia is
progressing on schedule and within budget. 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). Completion of the facility is expected in mid-1998 with
first production and sales expected in the fourth quarter of 1998
followed by a ramp-up to design capacity over an approximate 24
month period. FCX anticipates that after this ramp-up, PT-FI will
sell approximately 50 percent of its annual concentrate production
to Atlantic and PT Smelting at market prices.
Financing Activities. Net proceeds from debt totaled $131.5 million
in the first quarter of 1998 and $207.4 million in the first quarter
of 1997, including $3.6 million and $105.2 million, respectively, of
nonrecourse borrowings from Rio Tinto. 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.
In August 1997 FCX announced a new open market share purchase
program for an additional 20 million shares of its Class A and Class
B common shares, bringing the total shares approved for purchase
under the open market share purchase programs to 40 million. During
the first quarter of 1998, FCX acquired 3.4 million of its shares
for $49.5 million (an average of $14.77 per share) under its open
market share purchase programs. From inception of these programs
through April 20, 1998, FCX has purchased a total of 33.5 million
shares for $818.2 million (an average of $24.41 per share) and
approximately 6.5
<PAGE> 13
million shares remain available under the
programs. 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.
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, PT Smelting's smelter/refinery costs and the
availability of financing. Important factors that may cause future
results to differ from FCX's expectations 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 under the heading "Cautionary Statements" in FCX's Form 10-K
for the year ended December 31, 1997.
--------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
<PAGE> 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders of the Company was held
May 5, 1998 (the Annual Meeting). Proxies were solicited pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
(b) At the Annual Meeting, Leon A. Davis, James R. Moffett,
George Putnam, and B. M. Rankin, Jr. were elected to serve until the
2001 Annual Meeting of Stockholders. In addition to the directors
elected at the Annual Meeting, the terms of the following directors
continued after the Annual Meeting: Robert W. Bruce III, Robert A.
Day, William B. Harrison, Jr., J. Bennett Johnston, Henry A.
Kissinger, Bobby Lee Lackey, Rene L. Latiolais, Jonathan C. A.
Leslie, George A. Mealey, Gabrielle K. McDonald and J. Taylor
Wharton.
(c) At the Annual Meeting, holders of the Company's Class A
Common Stock and the Company's Preferred Stock, voting as a class,
elected one director with the number of votes cast for or withheld
from the nominee as follows:
Name For Withheld
---- --- --------
Leon A. Davis 63,494,687 252,809
At the Annual Meeting, holders of shares of the Company's Class B
Common Stock elected three directors with the number of votes cast
for or withheld from each nominee as follows:
Name For Withheld
---- --- --------
James R. Moffett 92,358,920 1,933,843
George Putnam 92,441,302 1,851,461
B. M. Rankin, Jr. 92,452,872 1,839,891
With respect to the election of directors, there were no abstentions
or broker non-votes.
At the Annual Meeting, the stockholders also voted on and
approved a proposal to ratify the appointment of Arthur Andersen LLP
to act as the independent auditors to audit the financial statements
of the Company and its subsidiaries for the year 1998. Holders of
156,413,175 shares voted for, holders of 341,460 shares voted
against and holders of 280,144 shares abstained from voting on, such
proposal. There were no broker non-votes with respect to such
proposal.
At the Annual Meeting, the stockholders voted on and rejected a
stockholder proposal to eliminate the classification of the
Company's board of directors. Holders of 38,844,648 shares voted
for, holders of 97,389,470 shares voted against and holders of
1,925,992 shares abstained from voting on, such proposal. There
were 18,874,669 broker non-votes with respect to such proposal.
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 three Current Reports on Form 8-K, dated
January 6, 1998 and March 27, 1998 reporting information under Item
5 and dated March 17, 1998 reporting information under Item 7.
<PAGE> 15
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 hereunto duly authorized.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ C. Donald Whitmire, Jr.
---------------------------
C. Donald Whitmire, Jr.
Vice President and
Controller-Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: May 8, 1998
<PAGE> 16
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement, dated as of May 2, 1995 by and between Freeport-
McMoRan Inc. (FTX) and FCX and The RTZ Corporation PLC, RTZ
Indonesia Limited, and RTZ America, Inc. (the Rio Tinto
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 Rio Tinto 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. 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,
ChaseMellon Shareholder Services, L.L.C. (ChaseMellon), 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,
ChaseMellon, 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,
ChaseMellon, 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).
<PAGE> E-1
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 Deposit Agreement dated as of July 25, 1994 among FCX,
ChaseMellon, 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 Amendment dated as of March 7, 1997 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, as
administrative agent, security agent and JAA security agent,
and The Chase Manhattan Bank, 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, 1997 (the
FCX 1997 Form 10-K).
4.17 Amendment dated as of July 24, 1997 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, as
administrative agent, security agent and JAA security agent,
and The Chase Manhattan Bank, as documentary agent.
Incorporated by referene to Exhibit 4.17 to the FCX 1997 Form
10-K.
4.18 $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, 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.
4.19 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.
<PAGE> E-2
4.20 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.
4.21 Amendment dated as of March 7, 1997 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, as administrative agent,
security agent and JAA security agent, and The Chase Manhattan
Bank, as documentary agent. Incorporated by reference to
Exhibit 4.21 to the FCX 1997 Form 10-K.
4.22 Amendment dated as of July 24, 1997 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, as administrative agent,
security agent and JAA security agent, and The Chase Manhattan
Bank, as documentary agent. Incorporated by reference to
Exhibit 4.22 to the FCX 1997 Form 10-K.
4.23 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.
4.24 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.
10.1 Contract of Work dated December 30, 1991 between The
Government of the Republic of Indonesia and PT-FI.
Incorporated by reference to Exhibit 10.2 to the FCX 1995 Form
10-K.
10.2 Contract of Work dated August 15, 1994 between The Government
of the Republic of Indonesia and P.T. IRJA Eastern Minerals
Corporation. Incorporated by reference to Exhibit 10.2 to the
FCX 1995 Form 10-K.
10.3 Agreement dated as of October 11, 1996 to Amend and Restate
Trust Agreement among PT-FI, FCX, the RTZ Corporation PLC,
P.T. RTZ-CRA Indonesia, RTZ Indonesian Finance Limited and
First Trust of New York, National Association, and The Chase
Manhattan Bank, as Administrative Agent, JAA Security Agent
and Security Agent. Incorporated by reference to Exhibit 10.3
to the FCX November 13, 1996 Form 8-K.
10.4 Credit Agreement dated October 11, 1996 between PT-FI and RTZ
Indonesian Finance Limited. Incorporated by reference to
Exhibit 10.4 to the FCX November 13, 1996 Form 8-K.
10.5 Participation Agreement dated as of October 11, 1996 between
PT-FI and P.T. RTZ-CRA Indonesia with respect to a certain
contract of work. Incorporated by reference to Exhibit 10.5
to the FCX November 13, 1996 Form 8-K.
10.6 Second Amended and Restated Joint Venture and Shareholders'
Agreement dated as of December 11, 1996 among Mitsubishi
Materials Corporation, Nippon Mining and Metals Company,
Limited and PT-FI. Incorporated by reference to Exhibit 10.3
of the FCX 1996 Form 10-K.
10.7 Put and Guaranty Agreement dated as of March 21, 1997 between
FCX and The Chase Manhattan Bank. Incorporated by reference
to Exhibit 10.7 to the FCX 1997 Form 10-K.
10.8 Subordinated Loan Agreement dated as of March 21, 1997 between
FCX and PT Nusamba Mineral Industri. Incorporated by
reference to Exhibit 10.8 to the FCX 1997 Form 10-K.
<PAGE> E-3
10.9 Amended and Restated Power Sales Agreement dated as of
December 18, 1997 between PT-FI and P.T. Puncakjaya Power.
Incorporated by reference to Exhibit 10.9 to the FCX 1997 Form
10-K.
10.10 Option, Mandatory Purchase and Right of First Refusal
Agreement dated as of December 19, 1997 among PT-FI, P.T.
Puncakjaya Power, Duke Irian Jaya, Inc., Westcoast Power, Inc.
and P.T. Prasarana Nusantara Jaya. Incorporated by reference
to Exhibit 10.10 to the FCX 1997 Form 10-K.
Executive Compensation Plans and Arrangements (Exhibits 10.11
through 10.28)
10.11 Annual Incentive Plan of FCX. Incorporated by reference to
Exhibit 10.8 to the FCX 1996 Form 10-K.
10.12 1995 Long-Term Performance Incentive Plan of FCX.
Incorporated by reference to Exhibit 10.9 to the FCX 1996 Form
10-K.
10.13 FCX Performance Incentive Awards Program. Incorporated by
reference to Exhibit 10.7 to the FCX 1995 Form 10-K.
10.14 FCX President's Award Program. Incorporated by reference to
Exhibit 10.8 to the FCX 1995 Form 10-K.
10.15 FCX Adjusted Stock Award Plan, as amended. Incorporated by
reference to Exhibit 10.15 to the 1997 FCX Form 10-K.
10.16 FCX 1995 Stock Option Plan. Incorporated by reference to
Exhibit 10.13 to the FCX 1996 Form 10-K.
10.17 FCX 1995 Stock Option Plan for Non-Employee Directors, as
amended. Incorporated by reference to Exhibit 10.17 to the
FCX 1997 Form 10-K.
10.18 Financial Counseling and Tax Return Preparation and
Certification Program of FCX. Incorporated by reference to
Exhibit 10.12 to the FCX 1995 Form 10-K.
10.19 FM Services Company Performance Incentive Awards Program.
Incorporated by reference to Exhibit 10.13 to the FCX 1995
Form 10-K.
10.20 FM Services Company Financial Counseling and Tax Return
Preparation and Certification Program. Incorporated by
reference to Exhibit 10.14 to the FCX 1995 Form 10-K.
10.21 Consulting Agreement dated as of December 22, 1988 between FTX
and Kissinger Associates, Inc. (Kissinger Associates).
Incorporated by reference to Exhibit 10.21 to the FCX 1997
Form 10-K.
10.22 Letter Agreement dated May 1, 1989 between FTX and Kent
Associates, Inc. (Kent Associates, predecessor in interest to
Kissinger Associates). Incorporated by reference to Exhibit
10.22 to the FCX 1997 Form 10-K.
10.23 Letter Agreement dated January 27, 1997 among Kissinger
Associates, Kent Associates, FTX, FCX and FMS. Incorporated
by reference to Exhibit 10.20 to the FCX 1996 Form 10-K.
10.24 Agreement for Consulting Services between FTX and B. M.
Rankin, Jr. effective as of January 1, 1991 (assigned to FMS
as of January 1, 1996). Incorporated by reference to Exhibit
10.24 to the FCX 1997 Form 10-K.
10.25 Supplemental Agreement between FMS and B. M. Rankin Jr. dated
December 15, 1997. Incorporated by reference to Exhibit 10.25
to the FCX 1997 Form 10-K.
<PAGE> E-4
10.26 Letter Agreement dated March 8, 1996 between George A. Mealey
and FCX. Incorporated by reference to Exhibit 10.22 of the
FCX 1996 Form 10-K.
10.27 Letter Agreement effective as of January 4, 1997 between
Senator J. Bennett Johnston, Jr. and FCX. Incorporated by
reference to Exhibit 10.25 of the FCX 1996 Form 10-K.
10.28 Letter Agreement dated December 22, 1997 between FMS and Rene
L. Latiolais. Incorporated by reference to Exhibit 10.28 to
the FCX 1997 Form 10-K.
15.1 Letter dated April 21, 1998 from Arthur Andersen LLP regarding
unaudited interim financial statements.
27.1 FCX Financial Data Schedule.
27.2 FCX Restated Financial Data Schedule.
27.3 FCX Restated Financial Data Schedule.
27.4 FCX Restated Financial Data Schedule.
<PAGE> E-5
Exhibit 15.1
April 21, 1998
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
March 31, 1998, which includes our report dated April 21,
1998 covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the
Securities Act of 1933 (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>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Freeport-McMoRan Copper & Gold Inc. unaudited financial statements at March 31,
1998 and for the three months then ended, and is qualified in its entirety by
reference to such financial statements. The earnings per share (EPS) data
shown below was prepared in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Accordingly, basic and diluted EPS
amounts have been entered in place of primary and fully diluted amounts,
respectively.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,850
<SECURITIES> 0
<RECEIVABLES> 131,255
<ALLOWANCES> 0
<INVENTORY> 315,153
<CURRENT-ASSETS> 498,986
<PP&E> 4,689,915
<DEPRECIATION> 1,148,058
<TOTAL-ASSETS> 4,221,396
<CURRENT-LIABILITIES> 503,408
<BONDS> 2,365,621
500,007
349,990
<COMMON> 21,847
<OTHER-SE> (124,927)
<TOTAL-LIABILITY-AND-EQUITY> 4,221,396
<SALES> 396,132
<TOTAL-REVENUES> 396,132
<CGS> 244,133
<TOTAL-COSTS> 244,133
<OTHER-EXPENSES> 2,647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,580
<INCOME-PRETAX> 79,925
<INCOME-TAX> 37,156
<INCOME-CONTINUING> 35,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,627
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Freeport-McMoRan Copper & Gold Inc. adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," (SFAS 128) in the fourth quarter of
1997 and restated prior years' earnings per share (EPS) data as required by SFAS
128. Presented below are the restated financial data schedules for the 1997
interim periods, including basic and diluted EPS amounts in place of primary
and fully diluted EPS amounts, respectively.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 25,064 23,607 11,765
<SECURITIES> 0 0 0
<RECEIVABLES> 194,752 162,763 134,640
<ALLOWANCES> 0 0 0
<INVENTORY> 350,204 391,372 342,473
<CURRENT-ASSETS> 657,958 661,738 571,563
<PP&E> 4,140,531 4,274,047 4,437,933
<DEPRECIATION> 933,576 984,796 1,040,763
<TOTAL-ASSETS> 3,995,994 4,105,713 4,139,746
<CURRENT-LIABILITIES> 562,443 576,336 572,111
<BONDS> 1,663,328 1,794,159 1,998,334
500,007 500,007 500,007
349,990 349,990 349,990
<COMMON> 21,816 21,830 21,842
<OTHER-SE> 269,729 246,803 246,803
<TOTAL-LIABILITY-AND-EQUITY> 3,995,994 4,105,713 4,139,746
<SALES> 523,780 1,090,730 1,580,252
<TOTAL-REVENUES> 523,780 1,090,730 1,580,252
<CGS> 296,742 614,269 935,340
<TOTAL-COSTS> 296,742 614,269 935,340
<OTHER-EXPENSES> 2,728 8,962 14,047
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 33,148 73,624 112,256
<INCOME-PRETAX> 166,458 339,160 438,311
<INCOME-TAX> 78,605 156,890 202,030
<INCOME-CONTINUING> 71,821 150,878 196,495
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 71,821 150,878 196,495
<EPS-PRIMARY> .31 .66 .85
<EPS-DILUTED> .31 .66 .84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Freeport-McMoRan Copper & Gold Inc. adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," (SFAS 128) in the fourth quarter of
1997 and restated prior years' earnings per share (EPS) data as required by SFAS
128. Presented below are the restated financial data schedules for the 1996
periods, including basic and diluted EPS amounts in place of primary and fully
diluted EPS amounts, respectively.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 19,761 45,035 49,031 37,118
<SECURITIES> 0 0 0 0
<RECEIVABLES> 145,053 77,389 101,551 176,920
<ALLOWANCES> 0 0 0 0
<INVENTORY> 393,818 386,310 408,609 375,712
<CURRENT-ASSETS> 685,976 635,506 712,962 661,216
<PP&E> 3,616,874 3,687,116 3,806,519 3,977,353
<DEPRECIATION> 754,253 797,213 841,113 888,709
<TOTAL-ASSETS> 3,639,244 3,623,955 3,782,410 3,865,534
<CURRENT-LIABILITIES> 482,208 480,117 487,154 597,875
<BONDS> 1,328,338 1,360,650 1,493,390 1,426,266
500,007 500,007 500,007 500,007
573,887 569,434 568,844 349,990
<COMMON> 20,804 20,907 20,911 21,805
<OTHER-SE> 127,894 116,069 55,165 303,584
<TOTAL-LIABILITY-AND-EQUITY> 3,639,244 3,623,955 3,782,410 3,865,534
<SALES> 388,392 812,740 1,287,404 1,905,036
<TOTAL-REVENUES> 388,392 812,740 1,287,404 1,905,036
<CGS> 240,003 522,304 798,178 1,125,841
<TOTAL-COSTS> 240,003 522,304 798,178 1,125,841
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 23,530 53,075 81,641 117,291
<INCOME-PRETAX> 82,920 167,967 307,829 521,946
<INCOME-TAX> 38,621 75,354 140,651 247,168
<INCOME-CONTINUING> 36,136 78,807 138,446 226,249
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 36,136 78,807 138,446 226,249
<EPS-PRIMARY> .11 .26 .50 .90
<EPS-DILUTED> .11 .26 .50 .89
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Freeport-McMoRan Copper & Gold Inc. adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," (SFAS 128) in the fourth quarter of
1997 and restated prior years' earnings per share (EPS) data as required by SFAS
128. Presented below are the restated financial data schedules for the 1995 and
1994 YEAR periods, included basic and diluted EPS amounts in place of primary
and full diluted EPS amounts, respectively.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 26,883 44,252
<SECURITIES> 0 0
<RECEIVABLES> 139,808 153,585
<ALLOWANCES> 0 0
<INVENTORY> 354,728 314,022
<CURRENT-ASSETS> 653,274 603,394
<PP&E> 3,566,808 2,958,644
<DEPRECIATION> 721,183 598,155
<TOTAL-ASSETS> 3,581,746 3,040,197
<CURRENT-LIABILITIES> 526,785 431,576
<BONDS> 1,080,289 525,612
500,007 500,007
573,900 573,900
<COMMON> 20,666 20,595
<OTHER-SE> 287,108 400,480
<TOTAL-LIABILITY-AND-EQUITY> 3,581,746 3,040,197
<SALES> 1,834,335 1,212,284
<TOTAL-REVENUES> 1,834,335 1,212,284
<CGS> 1,058,762 815,361
<TOTAL-COSTS> 1,058,762 815,361
<OTHER-EXPENSES> 13,888 7,778
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 50,080 0
<INCOME-PRETAX> 544,762 279,092
<INCOME-TAX> 234,044 123,412
<INCOME-CONTINUING> 253,618 130,241
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 253,618 130,241
<EPS-PRIMARY> .98 .38
<EPS-DILUTED> .98 .38
</TABLE>
