Freeport-McMoRan 2004 Annual Report Download - page 36
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Please find page 36 of the 2004 Freeport-McMoRan annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’s Discussion and Analysis
34| FREEPORT-McMoRan COPPER & GOLD INC.
PT Smelting Operating Results –
2004 Compared with 2003
PTFreeportIndonesiaaccountsforits25percentinterest
inPTSmeltingusingtheequitymethodandprovides
PTSmeltingwithsubstantiallyallofitsconcentrate
requirements(seeNote9of“NotestoConsolidatedFinancial
Statements”).Duringthesecondquarterof2004,PTSmelting
completeda31-daymaintenanceturnaroundandresumed
normaloperations.Majormaintenanceturnaroundsofthis
durationtypicallyoccurapproximatelyeveryfouryearsforPT
Smelting,withsignificantlyshorter-termmaintenanceturn-
aroundsintheinterim.PTSmeltingalsocompletedarefinery
expansionduringthemaintenanceturnaround,increasingits
productioncapacitytoapproximately250,000metrictonsof
coppermetalperyear.PTSmeltingtreated758,100metric
tonsofconcentratein2004and824,800metrictonsin2003.
PTSmeltingreportedproductionof464.0millionpounds
ofcathodesandsalesof462.9millionpoundsofcathodes
in2004,comparedwithproductionof492.4millionpounds
andsalesof493.5millionpoundsin2003.PTSmelting’sunit
cathodecashproductioncostsaveraged$0.12perpound
in2004and$0.10perpoundin2003.The2004unitcosts
reflecttheimpactoflowervolumesin2004resultingfrom
thescheduledmaintenanceturnaround.
PT Smelting Operating Results –
2003 Compared with 2002
PTSmeltingtreated824,800metrictonsofconcentratein
2003,15percentmorethanthe719,600metrictonstreated
in2002.PTSmelting’scoppercathodecashproductioncosts
perpoundtotaled$0.10in2003,comparedwith$0.14in
2002,reflectingtheimpactofthe28-daymaintenance
turnaroundinMay2002.
CAPITAL RESOURCES AND LIQUIDITY
Ouroperatingcashflowsvarywithpricesrealizedforcopper
andgoldsales,ourproductionlevels,productioncosts,cash
paymentsforincometaxesandinterest,workingcapital
changesandotherfactors.Basedonthecurrentstrongprices
forcopperandgoldandourcurrentmineplans,weexpect
togeneratecashflowssignificantlyaboveourplanned
capitalexpenditures,scheduleddebtmaturitiesandother
cashrequirementsin2005andfortheforeseeablefuture.
Wemayuseavailablecashtoreducedebtinadvanceof
scheduledmaturities,payadditionaldividends(seediscus-
sionofsupplementaldividendsbelow)orpurchaseshares
ofourcommonstockunderoursharepurchaseprogram,
dependingonourfinancialresults,cashrequirements,
futureprospectsandotherfactors.
Operating Activities
Ouroperatingcashflowstotaled$341.4millionin2004,
including$85.9millionreceivedasasettlementfrom
insurancecoveragerelatedtothefourth-quarter2003slippage
anddebrisflowevents(seediscussionabove)and$130.7
millioninworkingcapitalrequirements,comparedwith$572.1
millionin2003.Thedecreasein2004fromtheprioryear
reflectstheextendedmaintenanceturnaroundatAtlantic
Copperandincreasedworkingcapitalrequirements.For2004,
significantusesofcashfromoperatingactivitiesincluded
increasesindeferredminingcosts,accountsreceivable
andinventories.For2003,significantusesincludedincreases
indeferredminingcostsandinventories,andpaymentof
incometaxes,partlyoffsetbyanincreaseinouraccounts
payableandaccruedliabilities.Wehave$195millionavailable
underourrevolvingcreditfacilityandnoamountshavebeen
borrowedunderthisfacility.AtDecember31,2004,wehad
$551.5millionofcashandcashequivalents.
Operatingcashflowstotaled$572.1millionin2003,
comparedwith$512.7millionin2002.Workingcapital,
excludingcash,increasedby$18.1millionin2002primarily
becauseofincreasesinaccountsreceivableandinventories,
partlyoffsetbyanincreaseinaccruedincometaxespayable.
Operatingactivitiesareexpectedtogeneratepositive
cashflowsfortheforeseeablefuturebasedonanticipated
operatingresultsandmetalprices.Usingcurrentsales
estimatesandassumingmetalspricesof$1.35perpoundof
copperand$420perounceofgold,weexpectourconsoli-
datedoperatingcashflowstoexceed$1.1billionin2005.
Each$0.10perpoundchangeincopperpriceswouldaffect
2005cashflowsbyapproximately$75million,including
theeffectsofpricechangesonroyaltycostsandtreatment
charges,andeach$25perouncechangeingoldpriceswould
affect2005cashflowsbyapproximately$36million.
Investing Activities
Ourtotal2004capitalexpenditureswere$141.0million
comparedto$139.2millionin2003.Thelargestindividual
capitalexpendituresfor2004primarilyrelatedtolong-
termdevelopmentprojects,includingdevelopmentofthe
DOZmine,totalingapproximately$37million.Our2003
capitalexpendituresincludedtheexpansionoftheDOZ
mine(approximately$22million)andworkontheGrasberg
overburdenhandlingsystem(approximately$21million).
Capitalexpendituresin2002,whichtotaled$188.0million,
includedcostsattheGrasbergopen-pitoperationstotaling
approximately$59millionforreplacementcapitalsuchas
newtrucks,shovels,andmajordevelopmentcoststotaling
approximately$69millionfortheoverburdenhandling
systemandtheDOZmine.