Freeport-McMoRan 2008 Annual Report Download - page 46

Management’s Discussion and Analysis
DEBT MATURITIES AND OTHER CONTRACTUAL
OBLIGATIONS
Below is a summary of our total debt maturities at December 31,
2008 (in millions):
44 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report
In addition to debt maturities shown above, we have other
contractual obligations, which we expect to fund with projected
operating cash flows, proceeds from the equity offering
completed in February 2009, availability under our revolving
credit facilities or future financing transactions, if necessary.
A summary of these various obligations at December 31, 2008,
follows (in millions):
2009 2010 2011 2012 2013 Thereafter
Equipment loans and other $ 67 $ 10 $ 19 $ 96 $ 14 $ 111
Senior notes – – 116 – – 6,768
Revolving credit facilities – – – 150 – –
$ 67 $ 10 $ 135 $ 246 $ 14 $ 6,879
2010 to 2012 to
Total 2009 2011 2013 Thereafter
Scheduled interest payment obligations
a
$ 4,734 $ 570 $ 1,131 $ 1,103 $ 1,930
Reclamation and environmental obligations
b
9,612 174 305 259 8,874
Take-or-pay contracts
c
1,214 694 306 63 151
Operating lease obligations 82 26 39 12 5
Atlantic Copper obligation to insurance company
d
80 10 20 20 30
PT Freeport Indonesia mine closure and reclamation fund
e
18 1 1 1 15
Total contractual cash obligations
f
$ 15,740 $ 1,475 $ 1,802 $ 1,458 $ 11,005
a. Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2008, for variable-rate debt.
b. Represents estimated cash payments, on an escalated basis, associated with reclamation and environmental activities. The timing and the amount of these payments could change
as a result of changes in regulatory requirements, changes in scope and costs of reclamation activities and as actual spending occurs. Refer to Note 15 for additional discussion of
environmental and reclamation matters.
c. Represents contractual obligations for purchases of goods or services that are defined by us as agreements that are enforceable and legally binding and that specify all significant
terms. Take-or-pay contracts primarily comprise the procurement of copper concentrates and cathodes ($522 million), transportation ($184 million) and oxygen ($163 million). Some
of our take-or-pay contracts are settled based on the prevailing market rate for the service or commodity purchased, and in some cases, the amount of the actual obligation may
change over time because of market conditions. Obligations for copper concentrates and cathodes provide for deliveries of specified volumes, at market-based prices, primarily to
Atlantic Copper and the North America copper mines. Transportation obligations are primarily for South America contracted ocean freight rates and for North America natural gas
transportation. Oxygen obligations provide for deliveries of specified volumes, at fixed prices, primarily to Atlantic Copper.
d. In August 2002, Atlantic Copper complied with Spanish legislation by agreeing to fund 7.2 million euros annually for 15 years to an approved insurance company for an estimated
72 million euro contractual obligation to supplement amounts paid to certain retired employees. Atlantic Copper had $62 million recorded for this obligation at December 31, 2008.
e. Represents PT Freeport Indonesia’s commitments to contribute amounts to a cash fund designed to accumulate at least $100 million, including interest, by the end of our
Indonesian mining activities to pay for mine closure and reclamation.
f. This table excludes certain other obligations in our consolidated balance sheets, including estimated funding for pension obligations as the funding may vary from year to year
based on changes in the fair value of plan assets and actuarial assumptions and accrued liabilities totaling $159 million that relate to unrecognized tax benefits where the timing
of settlement is not determinable. This table also excludes purchase orders for the purchase of inventory and other goods and services, as purchase orders typically represent
authorizations to purchase rather than binding agreements.
In addition to the debt maturities and other contractual
obligations shown above, we have other commitments, which we
expect to fund with projected operating cash flows, available
credit facilities or future financing transactions, if necessary.
These include (i) PT Freeport Indonesia’s commitment to provide
one percent of its annual revenue for the development of the local
people in its area of operations through the Freeport Partnership
Fund for Community Development, (ii) Cerro Verde’s local mining
fund contributions equal to 3.75 percent of after-tax profits and
(iii) other commercial commitments, including standby letters of
credit, surety bonds and guarantees (refer to Notes 15 and 16 for
further discussion).
ENVIRONMENTAL AND RECLAMATION MATTERS
Environmental
The cost of complying with environmental laws is a fundamental
and substantial cost of our business. We had $1.4 billion at
December 31, 2008, and $1.3 billion at December 31, 2007,
recorded in our consolidated balance sheets for environmental
obligations attributed to CERCLA or analogous state programs
and for estimated future costs associated with environmental
matters at closed facilities and closed portions of certain
operating facilities.
During 2008, we incurred environmental capital expenditures
and other environmental costs (including our joint venture
partners’ shares) of $468 million for programs to comply with
applicable environmental laws and regulations that affect our
operations. Environmental capital expenditures and other