Freeport McMoRan : Reports Second-Quarter And Six-Month 2023 Results

Freeport-McMoRan

Reports Second-Quarter and Six-Month 2023 Results

• • Solid production performance
  • Strong balance sheet and financial flexibility
  • Positive outlook for cash flow generation to support continued organic growth and cash returns to shareholders
• Net income attributable to common stock in second-quarter 2023 totaled $343 million, $0.23 per share, and adjusted net income attributable to common stock totaled $500 million, $0.35 per share, after excluding net charges totaling $157 million, $0.11 per share.
• Consolidated production totaled 1.1 billion pounds of copper, 483 thousand ounces of gold and 21 million pounds of molybdenum in second-quarter 2023.
• Consolidated sales totaled 1.0 billion pounds of copper, 495 thousand ounces of gold and 20 million pounds of molybdenum in second-quarter 2023. Second-quarter 2023 copper sales volumes were 3% below the April 2023 estimate, reflecting shipping delays in Indonesia associated with the renewal of PT Freeport Indonesia's (PT-FI) export license.
• Consolidated sales for the year 2023 are expected to approximate 4.0 billion pounds of copper, 1.75 million ounces of gold and 79 million pounds of molybdenum, including 1.0 billion pounds of copper, 420 thousand ounces of gold and 20 million pounds of molybdenum in third-quarter 2023.
• Average realized prices in second-quarter 2023 were $3.84 per pound for copper, $1,942 per ounce for gold and $24.27 per pound for molybdenum.
• Average unit net cash costs in second-quarter 2023 were $1.47 per pound of copper. Unit net cash costs for the year 2023 are expected to average $1.55 per pound of copper.
• Operating cash flows totaled $1.7 billion (including $0.2 billion of working capital and other sources) in second-quarter 2023. Based on current sales volume and cost estimates, and assuming average prices of $3.90 per pound for copper, $1,950 per ounce for gold and $20.00 per pound for molybdenum for the second half of 2023, operating cash flows are expected to approximate $6.4 billion for the year 2023.
• Capital expenditures totaled $1.2 billion (including $0.4 billion for major mining projects and $0.5 billion for the Indonesia smelter projects) in second-quarter 2023. Capital expenditures for the year 2023 are expected to approximate $4.8 billion (including $2.0 billion for major mining projects and $1.6 billion for the Indonesia smelter projects).
• At June 30, 2023, consolidated debt totaled $9.5 billion and consolidated cash and cash equivalents totaled $6.7 billion, resulting in net debt of $2.8 billion ($0.9 billion excluding net debt for the Indonesia smelter projects). Refer to the supplemental schedule, "Net Debt," on page IX.

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PHOENIX, AZ, July 20, 2023 - Freeport-McMoRan Inc. (NYSE: FCX) reported second-quarter 2023 net income attributable to common stock of $343 million, $0.23 per share, and adjusted net income attributable to common stock of $500 million, $0.35 per share, after excluding net charges totaling $157 million, $0.11 per share, primarily associated with charges for an unfavorable tax ruling at Cerro Verde, adjustments to environmental obligations and an accrual of a potential administrative fine in Indonesia. For additional information, refer to the supplemental schedule, "Adjusted Net Income," on page VII.

Richard C. Adkerson, Chairman and Chief Executive Officer, said, "Our global team continues to execute our strategy and deliver strong results. During the second quarter, we achieved solid production performance, managed costs efficiently and advanced several important value-enhancing initiatives. As a leading supplier of copper with long-lived reserves, organic growth opportunities, a solid balance sheet and a proven track record for successful project development, we are positioned for a bright future for the benefit of all stakeholders."

SUMMARY FINANCIAL DATA

		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2023			2022			2023			2022
		(in millions, except per share amounts)
Revenuesa,b	$	5,737	$	5,416	$	11,126	$	12,019
Operating incomea	$	1,410	$	1,736	$	3,011	$	4,545
Net income attributable to common stockc,d,e	$	343	$	840	$	1,006	$	2,367
Diluted net income per share of common stock	$	0.23	$	0.57	$	0.69	$	1.61
Diluted weighted-average common shares outstanding		1,442			1,457			1,443			1,463
Operating cash flowsf	$	1,673	$	1,621	$	2,723	$	3,312
Capital expenditures	$	1,163	$	863	$	2,284	$	1,586
At June 30:
Cash and cash equivalents	$	6,683	$	9,492	$	6,683	$	9,492
Total debt, including current portion	$	9,495	$	11,092	$	9,495	$	11,092

1. For segment financial results, refer to the supplemental schedules, "Business Segments," beginning on page XI.
2. Includes (unfavorable) favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(118) million ($(45) million to net income attributable to common stock or $(0.03) per share) in second-quarter 2023, $(355) million ($(154) million to net income attributable to common stock or $(0.10) per share) in second-quarter 2022, $182 million ($61 million to net income attributable to common stock or $0.04 per share) for the first six months of 2023 and $65 million ($27 million to net income attributable to common stock or $0.02 per share) for the first six months of 2022. For further discussion, refer to the supplemental schedule, "Derivative Instruments," beginning on page IX.
3. Includes net charges totaling $157 million ($0.11 per share) in second-quarter 2023, $14 million ($0.01 per share) in second- quarter 2022, $251 million ($0.17 per share) for the first six months of 2023 and $52 million ($0.04 per share) for the first six months of 2022 that are described in the supplemental schedule, "Adjusted Net Income," on page VII.
4. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. For a summary of net impacts from changes in these deferrals, refer to the supplemental schedule, "Deferred Profits," on page X.
5. Beginning January 1, 2023, FCX's economic and equity ownership interest in PT-FI is 48.76%. Prior to January 1, 2023, FCX's economic interest in PT-FI approximated 81%.
6. Working capital and other sources (uses) totaled $237 million in second-quarter 2023, $100 million in second-quarter 2022, $(230) million for the first six months of 2023 and $(711) million for the first six months of 2022.

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SUMMARY OPERATING DATA

		Three Months Ended			Six Months Ended
		June 30,				June 30,
Copper (millions of recoverable pounds)		2023			2022			2023			2022
Production		1,067	a	1,075			2,032	a		2,084
Sales, excluding purchases		1,029	1,087			1,861		2,111
Average realized price per pound	$	3.84	$	4.03	$	3.91		$	4.18
Site production and delivery costs per poundb	$	2.39	$	2.09	$	2.47		$	2.06
Unit net cash costs per poundb	$	1.47	$	1.41	$	1.60		$	1.37
Gold (thousands of recoverable ounces)
Production		483	a	476			888	a		891
Sales		495	476			765		885
Average realized price per ounce	$	1,942	$	1,827	$	1,946		$	1,861
Molybdenum (millions of recoverable pounds)
Production		21			23			42			44
Sales, excluding purchases		20			20			39			39
Average realized price per pound	$	24.27	$	19.44	$	27.24		$	19.37

1. Beginning on January 1, 2023, PT-FI's commercial arrangement with PT Smelting converted from a concentrate sales agreement to a tolling arrangement, which resulted in a change in timing of sales. At June 30, 2023, approximately 85 million pounds of copper and 40 thousand ounces of gold from PT-FI's production was deferred in inventory and will be sold in future periods.
2. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit net cash costs (credits) by operating division to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIV.

Consolidated Sales Volumes

Second-quarter 2023 sales:

• Copper sales of 1.029 billion pounds were 3% lower than the April 2023 estimate of 1.065 billion pounds and 5% below the second-quarter 2022 sales of 1.087 billion pounds, primarily reflecting shipping delays in Indonesia associated with the renewal of PT-FI's export license.
• Gold sales of 495 thousand ounces approximated the April 2023 estimate of 500 thousand ounces and were 4% above second-quarter 2022 sales of 476 thousand ounces.
• Molybdenum sales of 20 million pounds approximated the April 2023 estimate and second-quarter 2022 sales.
  Consolidated sales volumes for the year 2023 are expected to approximate 4.0 billion pounds of copper,

1.75 million ounces of gold and 79 million pounds of molybdenum, including 1.0 billion pounds of copper, 420 thousand ounces of gold and 20 million pounds of molybdenum in third-quarter 2023. Projected sales volumes assume the resumption of exports at PT-FI beginning in late July 2023, and are dependent on operational performance, weather-related conditions, timing of shipments and other factors detailed in the Cautionary Statement below. Further delays in obtaining PT-FI's export license could impact FCX's production and sales volumes and financial results.

Consolidated Unit Net Cash Costs

Second-quarter 2023 consolidated average unit net cash costs (net of by-product credits) for FCX's copper mines of $1.47 per pound of copper were lower than the April 2023 estimate of $1.51 per pound, primarily reflecting higher by-product credits. Second-quarter 2023 consolidated average unit net cash costs (net of by-product credits) were 4% higher than second-quarter 2022 average unit net cash costs of $1.41 per pound, primarily reflecting higher unit net cash costs in North America. Refer to "Mining Operations" below for further discussion.

Assuming average prices of $1,950 per ounce of gold and $20.00 per pound of molybdenum for the second half of 2023 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of

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by-product credits) for FCX's copper mines are expected to average $1.55 per pound of copper for the year 2023 (including $1.61 per pound of copper in third-quarter 2023). Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum. The impact of price changes during the second half of 2023 on consolidated unit net cash costs for the year 2023 would approximate $0.03 per pound of copper for each $100 per ounce change in the average price of gold and $0.01 per pound of copper for each $2 per pound change in the average price of molybdenum.

Estimated consolidated unit net cash costs for the second half of 2023 do not include export duties at PT-FI that may be assessed under the revised regulation issued in mid-July 2023 as export duties applicable to PT-FI are specified in its special mining license (IUPK) (refer to Indonesia Regulatory Matters below for further discussion).

The assessment of a 7.5% export duty on PT-FI sales during the second half of 2023 would impact estimated consolidated unit net cash costs by $0.07 per pound of copper for the year 2023.

MINING OPERATIONS

Leaching Innovation Initiatives. FCX is advancing a series of initiatives across its North America and South America operations to incorporate new applications, technologies and data analytics to its leaching processes. FCX believes these leach innovation initiatives provide opportunities to produce incremental copper from its large existing leach stockpiles. Initial results support the potential for incremental low-cost additions to FCX's production and reserve profile and FCX is targeting an annual run rate of approximately 200 million pounds of copper per year through these initiatives by the end of 2023. FCX is pursuing new technology applications that have the potential for significant increases in recoverable metal beyond the initial target.

North America Copper Mines. FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. In addition to copper, certain of these mines produce molybdenum concentrate, gold and silver. All of the North America mining operations are wholly owned, except for Morenci. FCX records its 72% undivided joint venture interest in Morenci using the proportionate consolidation method.

Operating and Development Activities. FCX has substantial reserves and future opportunities in the U.S., primarily associated with existing mining operations.

FCX is planning an expansion to double the concentrator capacity of the Bagdad operation in northwest Arizona and expects to complete a feasibility study in late 2023. In parallel, FCX is advancing plans for expanded tailings infrastructure projects to support Bagdad's long-range plans. The timing of future development will be dependent on market conditions, labor and supply chain considerations and other economic factors.

At Safford/Lone Star, production from oxide ores is approaching 300 million pounds of copper per year, which reflects expansion of the initial design capacity of 200 million pounds of copper per year. FCX has conducted significant exploration drilling in the area in recent years. The positive drilling results indicate opportunities to expand production to include sulfide ores in the future. FCX is advancing metallurgical testing and mine development planning for a potential significant long-term investment for development of identified large sulfide resources.

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Operating Data. Following is summary consolidated operating data for the North America copper mines:

		Three Months Ended			Six Months Ended
		June 30,				June 30,
Copper (millions of recoverable pounds)		2023			2022			2023			2022
Production		354			382			686			736
Sales, excluding purchases		339			389			671			770
Average realized price per pound	$	3.92	$	4.36	$	4.03	$	4.46
Molybdenum (millions of recoverable pounds)
Productiona		9			8			16			15
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments	$	2.93	$	2.50	$	2.92	$	2.44
By-product credits		(0.55)			(0.35)			(0.57)			(0.35)
Treatment charges		0.13			0.11			0.13			0.10
Unit net cash costs	$	2.51		$	2.26		$	2.48		$	2.19

1. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which include sales of molybdenum produced at the North America copper mines.
2. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIV.

FCX's consolidated copper sales volumes from North America of 339 million pounds in second-quarter 2023 were lower than second-quarter 2022 copper sales volumes of 389 million, primarily reflecting lower ore grades and the timing of shipments, partly offset by incremental copper associated with leach initiatives. North America copper sales are estimated to approximate 1.4 billion pounds for the year 2023.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $2.51 per pound of copper in second-quarter 2023 were higher than second-quarter 2022 unit net cash costs of $2.26 per pound, primarily reflecting the impact of lower sales volumes and increased costs of maintenance, supplies and labor, partly offset by higher molybdenum by-product credits and lower costs of energy.

Average unit net cash costs (net of by-product credits) for the North America copper mines are expected to approximate $2.56 per pound of copper for the year 2023, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $20.00 per pound for the second half of 2023. North America's average unit net cash costs for the year 2023 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the second half of 2023.

South America Mining. FCX operates two copper mines in South America - Cerro Verde in Peru (in which FCX owns a 53.56% interest) and El Abra in Chile (in which FCX owns a 51% interest). These operations are consolidated in FCX's financial statements. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.

Operating and Development Activities. El Abra's large sulfide resource supports a potential major mill project similar to the large-scale concentrator at Cerro Verde. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project. FCX is advancing plans to invest in water infrastructure to provide options to extend existing operations, while continuing to monitor potential changes in Chile's regulatory and fiscal matters.

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