Freeport-McMoRan 2012 Annual Report Download - page 49

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MANAGEMENT’S DISCUSSION AND ANALYSIS
offset by higher tax payments and the timing of payments for
accounts payable and accrued liabilities.
Excluding impacts for pending acquisitions, and based on
current mine plans and subject to future copper, gold and
molybdenum prices, we expect estimated operating cash flows
for the year 2013 plus available cash 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 operating cash
flows for the year 2013.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized
interest, totaled $3.5 billion in 2012 (including $2.2 billion for
major projects), $2.5 billion in 2011 (including $1.4 billion for major
projects) and $1.4 billion in 2010 (including $0.7 billion for major
projects). The increase in capital expenditures in 2012, compared
with 2011, primarily reflected higher capital spending associated
with the expansion projects at Tenke, Cerro Verde and Morenci, and
the underground development projects at Grasberg. The increase
in capital expenditures in 2011, compared with 2010, primarily
reflected higher capital spending for construction on the Climax
molybdenum mine, the underground development projects at
Grasberg and the expansion project at Tenke.
Excluding amounts for pending acquisitions, capital
expenditures for the year 2013 are expected to approximate
$4.6 billion, including $2.8 billion for major projects and $1.8 billion
for sustaining capital. Major projects for 2013 primarily include
underground development activities at Grasberg and the
expansion projects at Cerro Verde and Morenci. We are also
considering additional investments at several of our sites. Capital
spending plans will continue to be reviewed and adjusted in
response to changes in market conditions and other factors. Refer
to “Operations” for further discussion.
Investment in MMR. In December 2010, we completed the
purchase of 500,000 shares of MMR’s 5.75% Convertible Perpetual
Preferred Stock for an aggregate purchase price of $500 million.
Dividends received in 2012 and 2011 were recorded as a return of
investment because of MMR's reported losses. Refer to Note 6
for further discussion and to Note 1 for discussion of the proposed
acquisition of MMR.
Financing Activities
Debt Transactions. In February 2012, we sold $3.0 billion in senior
notes in three tranches with a weighted-average interest rate of
approximately three percent. Net proceeds from this offering,
plus cash on hand, were used to redeem the remaining $3.0 billion
of our 8.375% Senior Notes.
During 2011, we redeemed the remaining $1.1 billion of our
outstanding 8.25% Senior Notes. In addition, we made open-
market purchases of $35 million of our 9.5% Senior Notes and
repaid the remaining $84 million of our 8.75% Senior Notes.
During 2010, we redeemed all of our $1 billion Senior Floating
Rate Notes, and also made open-market purchases of $565 million
of our senior notes.
Refer to Note 9 for further discussion of these debt repayment
transactions.
Dividends and Other Equity Transactions. We paid dividends
on our common stock totaling $1.1 billion in 2012, $1.4 billion in
2011 (including $474 million for a supplemental dividend on our
common stock paid in June 2011) and $885 million in 2010
(including $472 million for a supplemental dividend on our
common stock paid in December 2010).
The current annual dividend rate for our common stock is
$1.25 per share ($0.3125 per share quarterly). Refer to Note 11 for
further discussion. The declaration of dividends is at the
discretion of the Board and will depend upon our financial results,
cash requirements, future prospects, the impact of proposed
acquisitions and other factors deemed relevant by the Board.
The Board will continue to review our financial policy on an
ongoing basis.
During 2010, our 6¾% Mandatory Convertible Preferred Stock
converted into 78.9 million shares of our common stock (refer to
Note 11 for further discussion). As a result, we no longer have
requirements to pay preferred stock dividends. Preferred stock
dividends paid totaled $95 million in 2010.
Cash dividends and other distributions paid to noncontrolling
interests totaled $113 million in 2012, $391 million in 2011 and
$816 million in 2010, reflecting dividends and distributions paid to
the noncontrolling interest owners of PT Freeport Indonesia
and our South America mines. Lower noncontrolling interest
payments in 2012 compared with 2011, primarily reflected lower
dividends to the noncontrolling interest holders of PT Freeport
Indonesia as a result of lower production in 2012. Lower
noncontrolling interest payments in 2011, compared with 2010,
primarily reflected lower dividends to the noncontrolling interest
holders of Cerro Verde related to capital retained for the
expansion project.
CONTRACTUAL OBLIGATIONS
We have contractual and other long-term obligations, including
debt maturities, which we expect to fund with available cash,
projected operating cash flows, availability under our revolving
credit facility or future financing transactions, if necessary.