Freeport-McMoRan 2013 Annual Report Download - page 58

MANAGEMENT’S DISCUSSION AND ANALYSIS
56 | FREEPORT-McMoRan
working capital uses and changes in other tax payments) and
$6.6 billion in 2011 (net of $461 million for working capital uses
and changes in other tax payments).
Consolidated operating cash flows for 2013 benefited from our
oil and gas operations (which generated $1.8 billion of operating
cash flows for the seven-month period following the acquisition
date), higher copper and gold sales volumes and a decrease in
working capital uses and changes in other tax payments,
primarily associated with changes in accrued income taxes,
inventories and accounts receivable. Partly offsetting these
increases was the impact of lower metals price realizations.
Lower consolidated operating cash flows for 2012, compared
with 2011, primarily reflected lower copper and gold sales volumes,
lower copper price realizations and an increase in working capital
uses and changes in other tax payments, primarily associated with
changes in accounts receivable, partly offset by timing of
payments for accounts payable and accrued liabilities.
Based on current operating plans and subject to future copper,
gold, molybdenum and crude oil prices, we expect estimated
consolidated operating cash flows for the year 2014, plus available
cash and availability under our revolving credit facility and
uncommitted lines of credit, to be sufficient to fund our budgeted
capital expenditures, dividends, noncontrolling interest
distributions and other cash requirements for the year. Refer to
“Outlook” for further discussion of projected consolidated
operating cash flows for the year 2014.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized
interest, totaled $5.3 billion in 2013, including $2.3 billion for
major projects at mining operations and $1.45 billion for oil and
gas operations for the seven-month period following the
acquisition date. Capital expenditures, including capitalized
interest, totaled $3.5 billion in 2012 ($2.2 billion for major projects
at mining operations) and $2.5 billion in 2011 ($1.4 billion for
major projects at mining operations).
Increased capital expenditures for major projects at mining
operations in 2013 were primarily associated with the expansion
projects at Morenci and Cerro Verde and our underground
development activities at Grasberg, partly offset by decreased
spending for the expansion at Tenke, which was completed in early
2013, and at the Climax mine, which began commercial operations
in May 2012. Refer to “Operations” for further discussion.
Capital expenditures are expected to approximate $7 billion for
the year 2014, including $3 billion for major projects at our mining
operations and $3 billion for our oil and gas operations. Major
projects at our mining operations for 2014 primarily include the
ongoing expansion projects at Morenci and Cerro Verde and
underground development activities at Grasberg. Capital
spending plans remain under review and will be revised as market
conditions warrant. Refer to “Operations” for further discussion.
the U.S. from cash balances and availability from our revolving
credit facility and uncommitted lines of credit (refer to Note 8).
With the exception of TFM, we have not elected to permanently
reinvest earnings from our foreign subsidiaries, and we have
recorded deferred tax liabilities for foreign earnings that are
available to be repatriated to the U.S. From time to time, our foreign
subsidiaries distribute earnings to the U.S. through dividends that
are subject to applicable withholding taxes and noncontrolling
interests’ share.
Debt
At December 31, 2013, we had total debt of $20.7 billion. Following
is a summary of total debt and related weighted-average interest
rates at December 31, 2013 (in billions, except percentages):
Weighted-
Average
Interest Rate
Acquisition-related debt $ 10 . 5
a
3.0%
Assumed debt of PXP 6.7 6.8%
FCX’s previously existing debt 3.5 3.4%
$ 2 0.7 4.2%
a. Proceeds from the issuance of $6.5 billion of senior notes and a $4.0 billion unsecured
term loan were used to finance the acquisitions of PXP and MMR, repay certain PXP debt
and for general corporate purposes. Refer to Note 8 for further discussion.
Based on current sales volume and cost estimates and assuming
average prices of $3.25 per pound of copper, $1,200 per ounce
of gold, $9.50 per pound of molybdenum and $105 per barrel of
Brent crude oil, we are targeting reductions in total debt to
$12 billion by year-end 2016, most of which is projected to occur
in 2016. We will continue to review our portfolio of assets and will
consider opportunities to accelerate our deleveraging plans
through potential asset sales, joint venture transactions or further
adjustments to capital spending plans.
Upon closing of the PXP acquisition, we replaced our revolving
credit facility with a new $3.0 billion senior unsecured revolving
credit facility, which is available through May 2018. At December 31,
2013, we had no borrowings and $46 million of letters of credit
issued under our revolving credit facility, resulting in availability
of $3.0 billion.
In 2013, we entered into uncommitted unsecured lines of credit
with three financial institutions totaling $450 million, which have
terms and pricing that are more favorable than our revolving
credit facility. As of December 31, 2013, there were no borrowings
drawn on these lines of credit.
Cerro Verde expects to complete bank financing to fund a portion
of its current expansion project in first-quarter 2014.
Operating Activities
We generated consolidated operating cash flows totaling $6.1 billion
in 2013 (net of $377 million for working capital uses and changes
in other tax payments), $3.8 billion in 2012 (net of $1.4 billion for