Freeport-McMoRan 2011 Annual Report Download - page 36

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34 | FREEPORT-McMoRan COPPER & GOLD INC.
Interest Expense, Net
Consolidated interest expense (before capitalization) totaled
$421 million in 2011, $528 million in 2010 and $664 million in
2009. Lower interest expense primarily reected the impact
of debt repayments during 2011, 2010 and 2009 (refer to Note 9 for
discussion of debt repayments).
Capitalized interest is primarily related to our development
projects and totaled $109 million in 2011, $66 million in 2010 and
$78 million in 2009. Refer to “Operations” for further discussion
of current development projects.
Losses on Early Extinguishment of Debt
During 2011, we recorded losses on early extinguishment of debt
totaling $68 million ($60 million to net income attributable
to common stockholders or $0.06 per share) associated with the
redemption of our 8.25% Senior Notes, the revolving credit
facilities that were replaced in March 2011 and open-market
purchases of our 9.50% Senior Notes.
During 2010, we recorded losses on early extinguishment of debt
totaling $81 million ($71 million to net income attributable to
common stockholders or $0.07 per share) associated with the
redemption of our Senior Floating Rate Notes and open-market
purchases of our 8.25%, 8.375% and 9.50% Senior Notes.
During 2009, we recorded losses on early extinguishment of
debt totaling $48 million ($43 million to net income attributable
to common stockholders or $0.04 per share) associated with
the redemption of our 6.875% Senior Notes and open-market
purchases of our 8.25%, 8.375% and 8¾% Senior Notes.
Refer to Note 9 for further discussion of these transactions.
Provision for Income Taxes
Following is a summary of the approximate amounts in the
calculation of our consolidated provision for income taxes for 2011
and 2010 (in millions, except percentages):
Year Ended Year Ended
December 31, 2011 December 31, 2010
Income
Income Tax
Effective Tax Income Effective (Provision)
Income
a
Tax Rate Provision (Loss)
a
Tax Rate Benefit
U.S. $ 2,112 23% $ (478) $ 1,307 19% $ (244)
South America 3,017 36% (1,075)
b
2,995 33% (999)
Indonesia 2,923 43% (1,256) 4,069 42% (1,709)
Africa 357 34% (120) 395 30% (118)
Eliminations and other 409 N/A (158) (254) N/A 87
Consolidated FCX $ 8,818 35% $ (3,087) $ 8,512 35% $ (2,983)
a. Represents income (loss) by geographic location before income taxes and equity in affiliated companies’ net earnings.
b. On September 29, 2011, Peru enacted its new mining tax and royalty regime. Under the new regime, companies that do not have stability agreements will be subject to a revised royalty
and a special mining tax. Cerro Verde operates under a stability agreement and, therefore, is not subject to the revised royalty and special mining tax until its stability agreement expires
on December 31, 2013. The Peruvian government has also created a special mining burden that companies with stability agreements can elect to pay. The special mining burden is levied
on profits and is based on a sliding scale of 4 to 13 percent, with a maximum effective rate of 8.79 percent. Cerro Verde will elect to pay this special mining burden during the remaining
term of its stability agreement. As a result, Cerro Verde recognized additional current and deferred tax expense of $53 million ($49 million net of noncontrolling interests) in 2011. The
deferred portion of this accrual relates primarily to the assets recorded in connection with the 2007 acquisition of FMC.
Year Ended
December 31, 2009
Income
Tax
Income Effective (Provision)
(Loss)
a
Tax Rate Benefit
U.S. $ 98 36% $ (35)
b
South America 2,010 32% (650)
Indonesia 4,000 42% (1,697)
Africa (60) 25% 15
Eliminations and other (232) N/A 60
Consolidated FCX $ 5,816 40%
c
$ (2,307)
a. Represents income (loss) by geographic location before income taxes and equity in
affiliated companies’ net earnings.
b. Includes a favorable adjustment totaling $43 million resulting from completion of a review
of U.S. deferred income tax accounts.
c. The difference between our consolidated effective income tax rate of 40 percent and the
U.S. federal statutory rate of 35 percent primarily was attributable to the high proportion of
income earned in Indonesia, which was taxed at an effective tax rate of 42 percent.
Refer to Note 12 for further discussion of income taxes.
Our estimated consolidated eective tax rate for 2012 will vary
with commodity price changes and the mix of income from
international and U.S. operations. Assuming average prices of
$3.50 per pound for copper, $1,600 per ounce for gold, $13 per
pound for molybdenum and current sales volume and cost
estimates, we estimate our annual consolidated eective tax rate
will approximate 34 percent.
Following is a summary of the approximate amounts in the
calculation of our consolidated provision for income taxes for 2009
(in millions, except percentages):
MANAGEMENT’S DISCUSSION AND ANALYSIS