Freeport-McMoRan 2011 Annual Report Download - page 29

2011 ANNUAL REPORT | 27
Operating Cash Flows. Our operating cash ows vary with prices
realized from copper, gold and molybdenum sales, our sales
volumes, production costs, income taxes and other working capital
changes and other factors. Based on projected consolidated sales
volumes and unit net cash costs for 2012, and assuming average
prices of $3.50 per pound of copper, $1,600 per ounce of gold and
$13 per pound of molybdenum in 2012, consolidated operating
cash ows are estimated to approximate $4.7 billion in 2012, net of
an estimated $0.8 billion for working capital requirements.
Projected operating cash ows for the year 2012 also reect
estimated taxes of $2.1 billion (refer to “Consolidated Results —
Provision for Income Taxes” for discussion of our projected annual
consolidated eective tax rate for 2012). e impact of price changes
in 2012 on operating cash ows would approximate $300 million
for each $0.10 per pound change in the average price of copper,
$50 million for each $50 per ounce change in the average price of
gold and $90 million for each $2 per pound change in the average
price of molybdenum.
COPPER, GOLD AND MOLYBDENUM MARKETS
World prices for copper, gold and molybdenum can uctuate
signicantly. During the period from January 2002 through
January 2012, the London Metal Exchange (LME) spot copper
price varied from a low of $0.64 per pound in 2002 to a record high
of $4.60 per pound in February 2011; the London gold price
uctuated from a low of $278 per ounce in 2002 to a record high of
$1,895 per ounce in September 2011; and the Metals Week
Molybdenum Dealer Oxide weekly average price ranged from a low
of $2.40 per pound in 2002 to a high of $39.25 per pound in 2005.
Copper, gold and molybdenum prices are aected by numerous
factors beyond our control as described further in our “Risk
Factors” contained in Part I, Item 1A of our Form 10-K for the year
ended December31,2011.
Historical LME Copper Prices
rough January 31, 2012
is graph presents LME spot copper prices and reported stocks of
copper at the LME and the New York Mercantile Exchange
(COMEX) from January 2002 through January 2012. From 2006
through most of 2008, limited supplies, combined with growing
demand from China and other emerging economies, resulted in
high copper prices and low levels of inventories. In late 2008,
slowing consumption, turmoil in the United States (U.S.) nancial
markets and concerns about the global economy led to a sharp
decline in copper prices, which reached a low of $1.26 per pound in
December 2008. Copper prices have since improved from the
2008 lows, attributable to a combination of strong demand from
emerging markets and limitations on available supply. During
2011, LME spot copper prices ranged from $3.08 per pound to
$4.60 per pound, averaged $4.00 per pound and closed at $3.43 per
pound on December30, 2011. Combined LME and COMEX
inventories rose somewhat in 2011, compared to year-end 2010
levels, primarily as a result of reduced Chinese imports.
We believe the underlying fundamentals of the copper business
remain positive, supported by the signicant role of copper in the
global economy, limited supplies from existing mines and the
absence of signicant new development projects. Future copper
prices are expected to be volatile and are likely to be inuenced by
demand from China (which represented approximately 40 percent
of global consumption in 2011), economic activity in the U.S. and
other industrialized countries, the timing of the development of
new supplies of copper and production levels of mines and copper
smelters. e LME spot copper price closed at $3.81 per pound on
February15,2012.
London Gold Prices
rough January 31, 2012
is graph presents London PM gold prices from January 2002
through January 2012. During 2011, gold prices were volatile
ranging from $1,319 per ounce to a record high of $1,895 per
ounce, averaging $1,572 per ounce and closing at $1,575 per ounce
on December30, 2011. We believe the outlook for gold remains
positive, supported by continued macroeconomic uncertainty and
elevated sovereign debt levels. Gold prices closed at $1,726 per
ounce on February15,2012.
MANAGEMENT’S DISCUSSION AND ANALYSIS
1,500
2002 20062004 2008 2010 2012
$5.00
$4.00
$3.00
$2.00
$4.50
$3.50
$2.50
$1.00
$1.50
$0.50
1,200
900
600
300
Dollars per pound
000s of metric tons
2002 20062004 2008 2010 2012
$1,950
$1,350
$1,550
$750
$1,750
$950
$1,150
$550
$350
Dollars per ounce
LME Copper Prices
LME & COMEX Exchange Stocks*
* Excludes Shanghai stocks, producer, consumer and merchant stocks.