Freeport-McMoRan Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Freeport-McMoRan (FCX) is a major copper producer, with operations in North America, South America and Indonesia, including the Grasberg minerals district. The interim financial statements are unaudited; the independent accountant’s review reported no material modifications needed for GAAP conformity.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $6.321 billion | $5.389 billion; up 17% |
| Operating income | $1.634 billion | $1.601 billion; up 2% |
| Operating margin | 25.8% | 29.7% |
| Net income attributable to common stockholders | $473 million; diluted EPS $0.32 | $663 million; diluted EPS $0.46 |
| Net income attributable to noncontrolling interests | $689 million | $386 million |
| Operating cash flow | $1.896 billion | $1.050 billion |
| Capital expenditures | $1.254 billion | $1.121 billion |
| Cash flow less capital expenditures | Approximately $642 million | Approximately negative $71 million |
Revenue growth primarily reflected higher copper and gold sales volumes, led by PT Freeport Indonesia (PT-FI), partly offset by lower realized copper and molybdenum prices, higher export duties and royalties, and unfavorable adjustments to prior-period provisional copper sales. Copper sales volumes were 1.108 billion pounds versus 832 million pounds; gold sales were 568,000 ounces versus 270,000 ounces. Average realized prices were $3.94 per pound for copper, $2,145 per ounce for gold and $20.38 per pound for molybdenum.
Higher PT-FI volumes lifted total net income, but FCX’s share was lower as noncontrolling-interest attribution increased following the change in PT-FI ownership economics. Q1 2024 earnings also included a $182 million net international tax benefit related to resolution of Indonesian historical tax matters, partly offset by a $109 million oil-and-gas abandonment charge and $56 million of environmental obligation revisions.
Balance sheet and liquidity
- At March 31, 2024, cash and cash equivalents were $5.208 billion; current restricted cash was $1.034 billion, including $0.9 billion of PT-FI export proceeds temporarily held in Indonesian banks.
- Total debt was $9.425 billion, compared with $9.422 billion at December 31, 2023. FCX reported net debt of $0.3 billion excluding $3.0 billion of debt for the Indonesia smelter projects. This is a company-defined, non-GAAP measure.
- FCX reported no borrowings under its $3.0 billion revolving facility; PT-FI and Cerro Verde also had no revolver borrowings. FCX had $7 million of letters of credit under its facility. A $0.7 billion senior-note maturity is scheduled for November 2024.
- The Board declared a $0.15-per-share dividend, comprising a $0.075 base and $0.075 variable dividend, paid May 1, 2024. No shares were repurchased in Q1; approximately $3.2 billion remained authorized.
Guidance, developments and key risks
- 2024 sales guidance: 4.15 billion pounds of copper, 2.0 million ounces of gold and 84 million pounds of molybdenum. Q2 sales are expected to approximate 1.0 billion pounds of copper, 500,000 ounces of gold and 21 million pounds of molybdenum.
- Management estimates 2024 operating cash flow of approximately $7.4 billion, assuming specified sales and cost estimates, PT-FI export-license extensions beyond May, and remaining-year average prices of $4.25 per pound copper, $2,300 per ounce gold and $20 per pound molybdenum. Estimated 2024 capital expenditures are $4.6 billion, including $1.0 billion for the Indonesia smelter projects. These are forward-looking estimates, not guarantees.
- Projected 2024 copper-mine unit net cash costs are $1.57 per pound consolidated, net of by-product credits. FCX estimates a 35% consolidated effective tax rate for the year under its stated assumptions.
- The Manyar smelter was targeting substantial construction completion in May 2024, with ramp-up through year-end; the precious metals refinery was expected to be commissioned in the second half. PT-FI was seeking Indonesian approval to continue concentrate and anode-slime exports beyond May until the smelter projects are fully commissioned. Delays or limits could reduce production or add costs.
- PT-FI’s copper-concentrate export duty was 7.5%; Q1 duties were $156 million versus $17 million a year earlier. FCX cited regulatory uncertainty in Indonesia, weather and water availability, commodity-price volatility, mine operating risks, and labor and environmental matters. Cerro Verde reached a labor agreement in April and expects approximately $80 million of nonrecurring charges; further charges may arise from negotiations with its other union.
- Q1 included $256 million of mining asset-retirement-obligation additions, primarily reflecting revised closure estimates under the Global Industry Standard on Tailings Management. FCX may record further adjustments. It also paid a previously accrued $15 million settlement into trust for Louisiana coastal-erosion litigation.
Most important facts for investors to verify
- Whether PT-FI receives timely export approvals beyond May 2024 and whether the Indonesia smelter and refinery meet construction, commissioning and ramp-up schedules.
- Actual copper, gold and molybdenum volumes, realized prices, export duties and costs versus management’s 2024 assumptions.
- How much of reported cash is restricted or attributable to noncontrolling interests, and progress on smelter-related debt and the November 2024 maturity.
- The durability of Q1 cash generation and the effect of the Indonesian tax resolution, environmental revisions and abandonment obligations on subsequent results.
- Potential additional closure obligations, Cerro Verde labor costs, and other regulatory, weather, water-supply and operating developments.