Freeport-McMoRan 2014 Annual Report Download - page 99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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$552 million. FCX had $579 million in intercompany loans
outstanding to Atlantic Copper at December 31, 2014.
FCX owns 100 percent of FM O&G, which has a portfolio of oil
and gas assets. At December 31, 2014, FM O&G’s net assets
totaled $7.2 billion and its accumulated deficit totaled $4.4 billion.
FCX had $4.6 billion in intercompany loans to FM O&G at
December 31, 2014.
Joint Ventures. FCX has the following unincorporated joint
ventures with third parties.
Rio Tinto. PT-FI and Rio Tinto have established an unincorporated
joint venture pursuant to which Rio Tinto has a 40 percent
interest in PT-FI’s Contract of Work (COW) and the option to
participate in 40 percent of any other future exploration projects
in Papua, Indonesia.
Pursuant to the joint venture agreement, Rio Tinto has
a 40 percent interest in certain assets and future production
exceeding specified annual amounts of copper, gold and silver
through 2021 in Block A of PT-FI’s COW, and, after 2021, a
40 percent interest in all production from Block A. All of PT-FI’s
proven and probable reserves and all its mining operations are
located in the Block A area. PT-FI receives 100 percent of
production and related revenues from reserves established as
of December 31, 1994 (27.1 billion pounds of copper, 38.4 million
ounces of gold and 75.8 million ounces of silver), divided into
annual portions subject to reallocation for events causing changes
in the anticipated production schedule. Production and related
revenues exceeding those annual amounts (referred to as
incremental expansion revenues) are shared 60 percent PT-FI and
40 percent Rio Tinto. Operating, nonexpansion capital and
administrative costs are shared 60 percent PT-FI and 40 percent
Rio Tinto based on the ratio of (i) the incremental expansion
revenues to (ii) total revenues from production from Block A, with
PT-FI responsible for the rest of such costs. PT-FI will continue to
receive 100 percent of the cash flow from specified annual
amounts of copper, gold and silver through 2021 calculated by
reference to its proven and probable reserves as of December 31,
1994, and 60 percent of all remaining cash flow. Expansion
capital costs are shared 60 percent PT-FI and 40 percent Rio Tinto.
The payable to Rio Tinto for its share of joint venture cash
flows was $29 million at December 31, 2014, and $33 million at
December 31, 2013.
Sumitomo. FCX owns an 85 percent undivided interest in
Morenci via an unincorporated joint venture. The remaining
15 percent is owned by Sumitomo, a jointly owned subsidiary of
Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation.
Each partner takes in kind its share of Morenci’s production. FMC
purchased 82 million pounds of Morenci’s copper cathode from
Sumitomo at market prices for $257 million during 2014. FCX had
a receivable from Sumitomo of $11 million at December 31, 2014,
and $12 million at December 31, 2013.
NOTE 4. INVENTORIES, INCLUDING LONG-TERM MILL
AND LEACH STOCKPILES
The components of inventories follow:
December 31, 2014 2013
Current inventories:
Mill stockpiles $ 86 $ 91
Leach stockpiles 1,828 1,614
a
Total current mill and leach stockpiles $ 1, 91 4 $ 1,705
Total materials and supplies, net
b
$ 1,886 $ 1,730
Raw materials (primarily concentrates) $ 288 $ 238
Work-in-process 174 199
Finished goods 1,099 1,146
Total product inventories $ 1,561 $ 1,583
Long-term inventories:
Mill stockpiles $ 360 $ 698
Leach stockpiles 1,819 1,688
Total long-term mill and leach stockpiles
c
$ 2 ,17 9 $ 2 ,3 86
a. Amount is net of a $76 million charge associated with updated mine plans at Morenci that
resulted in a loss in recoverable copper in leach stockpiles.
b. Materials and supplies inventory was net of obsolescence reserves totaling $20 million at
December 31, 2014, and $24 million at December 31, 2013.
c. Estimated metals in stockpiles not expected to be recovered within the next 12 months.
NOTE 5. PROPERTY, PLANT, EQUIPMENT AND MINING
DEVELOPMENT COSTS, NET
The components of net property, plant, equipment and mining
development costs follow:
December 31, 2014 2013
Proven and probable mineral reserves $ 4,651 $ 4,651
VBPP 1,042 1,044
Mining development and other 4,712 4,335
Buildings and infrastructure 5,100 4,334
Machinery and equipment 11,251 10,379
Mobile equipment 3,926 3,903
Construction in progress 6,802 5,603
Property, plant, equipment and mining
development costs 37,484 34,249
Accumulated depreciation, depletion and amortization (11,264) (10,207)
Property, plant, equipment and mining
development costs, net $ 26,220 $ 24,042
FCX recorded $2.2 billion for VBPP in connection with the FMC
acquisition in 2007 and transferred $2 million to proven and
probable mineral reserves during 2014, $22 million during 2013
and $762 million prior to 2013. Cumulative impairments of
VBPP total $482 million, which were primarily recorded in 2008.
Capitalized interest, which primarily related to FCX’s
mining operations’ capital projects, totaled $148 million in 2014,
$105 million in 2013 and $81 million in 2012.