As filed with the United States Securities and Exchange
Commission on November 5, 2001.
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
(Exact name of registrant as specified in its charter)
Delaware 1615 Poydras Street 74-2480931
(State or other New Orleans, Louisiana 70112 (I.R.S. Employer
jurisdiction of (504) 582-4000 Identification Number)
incorporation or
organization)
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Richard C. Adkerson Copy to:
President and L. R. McMillan, II
Chief Financial Officer Jones, Walker, Waechter,
Freeport-McMoRan Copper & Gold Inc. Poitevent, Carrere & Denegre, L.L.P.
1615 Poydras Street 201 St. Charles Avenue, 51st Floor
New Orleans, Louisiana 70112 New Orleans, Louisiana 70112
(504) 582-4000 (504) 582-8188
(Name, address, including zip
code, and telephone number,
including area code, of
agent for service)
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. []
If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or
interest reinvestment plans, please check the following box.[x]
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities
Act, please check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement
number of the earlier effective registration statement for
the same offering. []
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. []
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title of each Amount offering aggregate
class of securities to be price per offering Amount of
to be registered registered unit price registration fee
-------------------------------------------------------------------------------
8 1/4% Convertible
Senior Notes due 2006 $603,750,000(1) $ 998.75(2) $602,995,313(2) $150,750
Class A Common Stock(3) - (3) $ - (5) $ - (5) $ - (5)
Class B Common Stock(4) - (4) $ - (5) $ - (5) $ - (5)
(1)Equals the aggregate principal amount of notes that were
originally issued by the registrant on August 7, 2001.
(2)Estimated solely for purposes of calculating the
registration fee pursuant to Rule 457(c), based upon the
average of the bid and asked price for the securities.
(3)The number of shares of class A common stock to be
issued upon conversion of the convertible notes based on
an initial conversion price of $14.30 per share is
42,220,280. In addition, the amount to be registered
includes an indeterminate number of shares issuable upon
conversion of the convertible notes, as such amount may
be adjusted due to stock splits, stock dividends and
anti-dilution provisions, and otherwise in accordance
with the indenture.
(4)The number of shares of class B common stock to be
issued upon conversion of the convertible notes based on
an initial conversion price of $14.30 per share is
42,220,280. In addition, the amount to be registered
includes an indeterminate number of shares issuable upon
conversion of the convertible notes, as such amount may
be adjusted due to stock splits, stock dividends and
anti-dilution provisions, and otherwise in accordance
with the indenture.
(5)No separate consideration will be received for the
common stock issuable upon conversion of the notes;
therefore, no registration fee is required pursuant to
Rule 457(i).
________________
The registrants hereby amend this registration statement
on such date or dates as may be necessary to delay its
effective date until the registrants shall file a further
amendment which specifically states that this registration
statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until
this registration statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may
determine.
The information in this prospectus is not complete and may
be changed. We may not sell these securities until the
registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an
offer to sell these securities and does not solicit an offer
to buy these securities in any jurisdiction where the offer
or sale is not permitted.
Prospectus
Subject to completion, dated November 5, 2001
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
$603,750,000
8 1/4% Convertible Senior Notes due 2006
Freeport-McMoRan Copper & Gold Inc.
Class A Common Stock
Class B Common Stock
Freeport-McMoRan Copper & Gold Inc. and its wholly
owned subsidiary, FCX Investment Ltd., issued the notes at
an issue price of $1,000 per note in a private placement in
August 2001. This prospectus may be used by selling
securityholders to resell notes or shares of our common
stock into which the notes are convertible.
Freeport-McMoRan Copper & Gold Inc. and FCX Investment
Ltd. are jointly and severally liable for the obligations
under the notes. Except with respect to descriptions of the
notes, the terms "we," "us," "our" and "the company" refer
only to Freeport-McMoRan Copper & Gold Inc.
The notes are convertible at the option of the holder
at any time on or prior to maturity into, at the option of
the holder, shares of class A or class B common stock of the
company. The notes are convertible at a conversion price of
$14.30 per share, which is equal to a conversion rate of
69.9301 shares of class A or class B common stock per $1,000
principal amount of notes, subject to adjustment. On
November 1, 2001, the closing prices of our class A and
class B common stock as reported on the New York Stock
Exchange were $10.70 and $11.14 per share, respectively.
We will pay interest on the notes on January 31 and
July 31 of each year, beginning January 31, 2002. The notes
will mature on January 31, 2006. We may redeem some or all
of the notes at any time after July 31, 2004 at the
redemption prices described in this prospectus.
The notes are our unsecured (except as described below)
and unsubordinated obligations and rank on a parity in
right of payment with all our existing and future unsecured
and unsubordinated indebtedness. In addition, the notes
will effectively rank junior to our secured indebtedness and
our subsidiaries' liabilities.
FCX Investment has pledged a portfolio of U.S.
government securities as security for the first six
scheduled interest payments on the notes.
Our class A and class B common stock are traded on the
New York Stock Exchange under the symbols "FCXA" and "FCX,"
respectively.
Investing in the notes involves significant risks that
are described in the "Risk Factors" section beginning on
page 10 of this Prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these
securities or passed on the adequacy or accuracy of this
prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is November 5, 2001.
Table of Contents
Page
Forward-Looking Statements 2
Summary 3
Selected Historical Consolidated Financial
and Operating Data 8
Risk Factors 10
Refinancing Transactions 16
Use of Proceeds 19
Dividend Policy 19
Ratio of Earnings to Fixed Charges 19
Description of the Notes 20
Certain United States Federal Income Tax Considerations 33
Description of Common Stock 36
Selling Securityholders 40
Plan of Distribution 44
Legal Matters 46
Experts 46
Where You Can Find Additional Information 47
_______________________
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not,
and the initial purchaser has not, authorized any person to
provide you with different information. If anyone provides
you with different or inconsistent information, you should
not rely on it. You should assume that the information
appearing in this prospectus is accurate only as of the date
on the front cover of this prospectus. Our business,
financial condition, result of operations and prospects may
have changed since that date. In addition, we are not, and
the initial purchaser is not, making an offer to sell these
securities in any jurisdiction where the offer or sale is
not permitted.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934,
both as amended. All statements other than statements of
historical fact are "forward-looking statements" for
purposes of federal and state securities laws, including
statements about anticipated sales volumes, production
volumes, ore grades, capital expenditures and debt costs;
statements of the plans, strategies and objectives of
management for future operations; statements regarding
future economic conditions or performance; statements
regarding exploration activities; statements about political
uncertainties, dealings with regulatory authorities or
dealings with indigenous people; statements of belief; and
statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may,"
"will," "estimate," "intend," "continue," "believe,"
"expect," "plan" or "anticipate" and other similar words.
Such forward-looking statements may be contained in the
sections "Summary" and "Risk Factors," among other places.
Although we believe that the expectations expressed in
our forward-looking statements are reasonable, actual
results could differ materially from those projected or
assumed in our forward-looking statements. Our future
financial condition and results of operations, as well as
any forward-looking statements, are subject to change and
are subject to inherent risks and uncertainties, such as
those disclosed in this prospectus. All forward-looking
statements contained or incorporated by reference in this
prospectus are made as of the date of this prospectus. We
do not intend, and we undertake no obligation, to update any
forward-looking statement. Currently known risk factors
include, but are not limited to, the factors described in
this prospectus in the section "Risk Factors." We urge you
to review carefully the section "Risk Factors" in this
prospectus for a more complete discussion of the risks of an
investment in the notes or the common stock into which the
notes are convertible.
2
SUMMARY
The following summary is qualified by the more detailed
information appearing elsewhere in this prospectus or
incorporated by reference and may not contain all of the
information that is important to you.
Company Overview
We are one of the world's largest copper and gold
mining companies in terms of reserves and production. We
believe we are one of the lowest cost copper producers in
the world, after taking into account customary credits for
related gold and silver production.
Our principal operating subsidiary is PT Freeport
Indonesia, a limited liability company organized under the
laws of the Republic of Indonesia and domesticated in
Delaware. PT Freeport Indonesia explores for, develops,
mines and processes ore containing copper, gold and silver.
Its operations are located in the remote rugged highlands of
the Sudirman Mountain Range in the province of Irian Jaya
(Papua), Indonesia, which is located on the western half of
the island of New Guinea. PT Freeport Indonesia markets its
concentrates containing copper, gold and silver worldwide.
During 2000, PT Freeport Indonesia's share of production and
sales totaled 1.4 billion pounds of copper and 1.9 million
ounces of gold. For 2001, PT Freeport Indonesia's share of
production and sales is expected to approximate 1.4 billion
pounds of copper and nearly 2.6 million ounces of gold. We
have an 85.86 percent ownership interest in this subsidiary
and the Government of Indonesia has a 9.36 percent interest.
PT Nusamba Mineral Industri, an Indonesian company, has most
of the remaining ownership interest in PT Freeport
Indonesia.
PT Freeport Indonesia's operations are conducted
pursuant to an agreement, called a Contract of Work, with
the Government of Indonesia. The Contract of Work allows us
to conduct extensive exploration, mining and production
activities in a 24,700-acre area that we call Block A. In
1988 we discovered our largest mine, Grasberg, in Block A.
Grasberg contains the largest single gold reserve and one of
the largest copper reserves of any mine in the world. The
Contract of Work also allows us to explore for minerals in a
0.5 million-acre area that we call Block B. At December 31,
2000, PT Freeport Indonesia's share of proved and probable
reserves totaled 38.9 billion pounds of copper and 50.3
million ounces of gold, all of which are located in Block A.
PT Freeport Indonesia's Contract of Work governs our
rights and obligations relating to taxes, exchange controls,
royalties, repatriation and other matters. The Contract of
Work provides a 35 percent corporate income tax rate for PT
Freeport Indonesia and a withholding tax rate of 10 percent
(based on the tax treaty between Indonesia and the United
States) on dividends and interest paid to us by PT Freeport
Indonesia. The Contract of Work also provides for royalties
on the metals that PT Freeport Indonesia sells.
Another of our operating subsidiaries, PT Irja Eastern
Minerals, which we refer to as Eastern Minerals, holds an
additional Contract of Work in Irian Jaya (Papua) covering
approximately 1.25 million acres and conducts exploration
activities under this Contract of Work. We have a 94.9
percent ownership interest in Eastern Minerals.
In 1996, we established joint ventures with Rio Tinto
plc, an international mining company with headquarters in
London, England. One joint venture covers PT Freeport
Indonesia's mining operations in Block A. This joint venture
gives Rio Tinto, through 2021, a 40 percent interest in
certain assets and in production above specified levels from
operations in Block A and, after 2021, a 40 percent interest
in all production in Block A. Under our joint venture
arrangements, Rio Tinto also has a 40 percent interest in
future development and exploration projects under PT
Freeport Indonesia's Contract of Work and Eastern Minerals'
Contract of Work. In addition, Rio Tinto has the option to
participate in 40 percent of any of our other future
exploration projects in Irian Jaya (Papua).
Under another joint venture agreement, we conduct
exploration activities in an area covering approximately 0.5
million acres contiguous to PT Freeport Indonesia's Block B
and one of Eastern Minerals' blocks. Rio Tinto has elected
to participate in 40 percent of our interest and cost in the
venture.
3
We also smelt and refine copper concentrates in Spain,
and market the refined copper products, through our wholly
owned subsidiary, Atlantic Copper, S.A. Atlantic Copper
produced 639.1 million pounds of new copper anodes during
2000. In addition, PT Freeport Indonesia has a 25 percent
interest in PT Smelting, an Indonesian company that operates
a copper smelter and refinery in Gresik, Indonesia. PT
Smelting produced 383.2 million pounds of new copper anodes
during 2000.
Our principal executive offices are located at 1615
Poydras Street, New Orleans, Louisiana 70112 and our
telephone number is (504) 582-4000.
FCX Investment Ltd.
FCX Investment Ltd. is a wholly owned finance
subsidiary of the company incorporated as a Cayman Islands
exempted limited liability company in June 2001. We
established FCX Investment for the purpose of co-issuing the
notes and purchasing and pledging U.S. government securities
as security for the benefit of the holders of the notes. See
"Description of the Notes." FCX Investment does not lease
or own any material facilities or other property or engage
in any other material operations. FCX Investment is
restricted from issuing any capital stock to any person
other than the company and its subsidiaries. FCX
Investment's registered office is located at Harbour Centre,
4th Floor, George Town, Grand Cayman, Cayman Islands,
British West Indies.
4
Refinancing Transactions
We have amended our existing bank credit facilities to
extend the maturities and to provide a mechanism for
financing any obligations we may have under the guarantee of
a commercial bank loan to Nusamba. We believe that these
transactions, together with our cash flows from operations,
will enable us to fund our ongoing capital expenditures and
meet our debt maturities over the next several years.
The following summarizes the terms of our amended
credit facilities. For a more complete description, see
"Refinancing Transactions," in this prospectus.
* aggregate commitments of $585.0 million, all
of which will be available to PT Freeport
Indonesia and $265.0 million of which will be
available to the company;
* aggregate commitments will be $734.0 million
if we are called on to perform under the Nusamba
guarantee;
* required repayments from available cash and
certain financing proceeds and, subject to
certain availability requirements, reductions in
commitments by those amounts;
* conversion to a term loan on December 31,
2003, except for a $150.0 million revolver
available for working capital purposes; maturity
on December 31, 2005;
* interest at LIBOR plus 4% with annual
increases of 0.125%, subject to potential
reductions if our credit ratings improve;
* ability to fund our 7.20% senior notes due
2026, which we expect to be required to repay in
November 2003;
* limitations on the amount of preferred stock
we may redeem and, if by August 2003 we have not
extended the maturity of a specified amount of
our redeemable preferred stock beyond 2005, then
we will not thereafter be permitted to redeem or
pay dividends on any of our preferred stock;
* financial covenants providing for maximum
debt to EBITDA levels and required debt service
coverage ratios; and
* prohibitions on our ability to repurchase and
pay dividends on our common stock; limitations on
investments, liens and capital expenditures to
specified budgets; and a requirement to implement
minimum hedging protection at certain copper
prices.
5
The Offering
The following is a brief summary description of some of
the terms of this offering. For a more complete description
of the terms of the notes, see "Description of the Notes"
and for a description of our common stock, see "Description
of Common Stock."
Notes and common
stock offered Selling securityholders
resale of $603,750,000 aggregate
principal amount of 8 1/4% Convertible
Senior Notes due January 31, 2006 or
shares of class A or class B common
stock issuable upon conversion of
the notes.
Maturity January 31, 2006
Interest 8 1/4% per annum on the principal
amount, payable semiannually on
January 31 and July 31, beginning on
January 31, 2002.
Conversion rights The notes are convertible, at the
option of the holder, at any time on
or prior to maturity into, at the
option of the holder, shares of
class A or class B common stock of
the company at a conversion price of
$14.30 per share, which is equal to
a conversion rate of approximately
69.9301 shares of class A or class B
common stock per $1,000 principal
amount of notes. The conversion rate
is subject to adjustment. See
"Description of the Notes -
Conversion Rights."
Security FCX Investment has purchased
and pledged to the trustee
under the indenture, as
security for the exclusive
benefit of the holders of the
notes, $139.8 million of U.S.
government securities, which
will be sufficient upon
receipt of scheduled
principal and interest
payments thereon, to provide
for the payment in full of
the first six scheduled
interest payments due on the
notes. See "Description of
the Notes - Security."
Ranking The notes are unsecured (except as
described above under "Security")
and unsubordinated obligations and
rank on a parity in right of payment
with all our existing and future
unsecured and unsubordinated
indebtedness. The indenture under
which the notes have been issued
does not prevent us or our
subsidiaries from incurring
additional indebtedness, which may
be secured by some or all of our
assets, or other obligations. As of
September 30, 2001, our secured
indebtedness was $140.6 million and
our unsecured and unsubordinated
indebtedness was $955.9 million. In
addition, we are structured as a
holding company and conduct
substantially all of our business
operations through our subsidiaries.
The notes are effectively
subordinated to all existing and
future indebtedness and other
liabilities and commitments of our
subsidiaries. As of September 30,
2001, our subsidiaries had aggregate
indebtedness of $1.6 billion.
Optional redemption We may redeem all or a portion of
the notes for cash at any time after
July 31, 2004 at the redemption
prices listed in this prospectus,
plus accrued and unpaid interest
(including liquidated damages, if
any) to, but excluding, the
redemption date. See "Description of
the Notes - Redemption of Notes at
Our Option."
6
Change of control Upon a change of control event, each
holder of the notes may require us
to repurchase some or all of its
notes at a repurchase price equal to
100% of the principal amount of the
notes plus accrued and unpaid
interest. The repurchase price is
payable:
* in cash; or
* at our option, subject to the
satisfaction of certain
conditions, in our class A or
class B (at the option of the
holder) common stock. The
number of shares of common
stock will equal the repurchase
price divided by 95% of the
average of the closing sale
prices of the applicable common
stock for the five consecutive
trading days ending on and
including the third day prior
to the repurchase date.
See "Description of the Notes -
Change of Control Permits
Purchase of Notes at the Option
of the Holder."
Use of proceeds The selling securityholders will
receive all of the proceeds from the
sale of the notes and common stock
under this prospectus. We will not
receive any of the proceeds from the
sales by any selling securityholders
of notes or the underlying common
stock.
Trading The notes sold pursuant to this
prospectus will no longer be
eligible for trading on the PORTAL
Market. Our class A and class B
common stock are traded on the New
York Stock Exchange under the
symbols "FCXA" and "FCX,"
respectively.
Risk Factors See "Risk Factors" and the other
information in this prospectus for a
discussion of factors you should
carefully consider before deciding
to invest in the notes.
7
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth our selected historical
consolidated financial data as of and for the nine months
ended September 30, 2001 and 2000, which have been derived
from our unaudited consolidated financial statements, and as
of and for each of the five fiscal years ended December 31,
2000, which have been derived from our audited consolidated
financial statements. EBITDA and the operating data
presented in the following table are unaudited. The results
of operations for the nine months ended September 30, 2001
are not necessarily indicative of the results for the full
year. This data should be read in conjunction with our full
financial statements and notes thereto, and management's
discussion and analysis of financial condition and results
of operations incorporated by reference into this
prospectus.
Nine Months Ended
September 30,
----------------------
2001 2000
---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
Financial Data
Revenues $1,426,584 $1,338,777
Operating
income 449,856 273,291(a)
Net income
(loss)
applicable to
common stock 78,579 (18,564)(a)
Basic net
income (loss)
per common
share .55 (.12)(a)
Diluted net
income (loss)
per common share .54 (.12)(a)
Dividends paid
per common share - -
Basic average
shares
outstanding 143,944 156,597
Diluted average
shares
outstanding 144,907 156,597
At End of Period:
Property, plant
and equipment,
net 3,206,402 3,261,301
Total assets 4,035,684 3,981,173
Total debt 2,069,802 2,271,959
Redeemable
preferred stock 462,504 475,005
Stockholders'
equity 109,035 14,144
Other Financial Data:
Interest
expense, net 129,945 153,287
EBITDA(f) 599,280 423,712
Cash flow from
operating
activities(g) 475,117 304,921
Capital
expenditures 118,782 132,044
Cash flow
provided by
(used in)
financing
activities (196,239) (173,610)
PT Freeport
Indonesia
Operating
Data, Net of
Rio Tinto's
Interest
Copper
Production
(000s of
recoverable
pounds) 1,077,200 958,300
Sales (000s
of recoverable
pounds) 1,073,800 950,400
Average
realized price
(per pound) $.70 $.83
Net cash
production
cost cents 2.6 29.8
per pound
Gold
Production
(recoverable
ounces) 2,156,200 1,191,500
Sales
(recoverable
ounces) 2,144,600 1,197,400
Average
realized price
(per ounce) $268.70 $281.02
Years Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
Financial Data
Revenues $1,868,610 $1,887,328 $1,757,132 $2,000,904 $1,905,036
Operating
income 478,700(a) 568,242(b) 577,947(c) 657,738(d) 637,309(e)
Net income
(loss)
applicable to
common stock 39,500(a) 100,787(b) 118,317(c) 208,541(d) 174,680(e)
Basic net
income (loss)
per common
share .26(a) .62(b) .67(c) 1.06(d) .90(e)
Diluted net
income (loss)
per common share .26(a) .61(b) .67(c) 1.06(d) .89(e)
Dividends paid
per common share - - .20 .90 .90
Basic average
shares
outstanding 153,997 163,613 175,353 196,392 194,910
Diluted average
shares
outstanding 154,519 164,567 175,354 197,653 196,682
At End of Period:
Property, plant
and equipment,
net 3,248,710 3,381,465 3,504,221 3,558,736 3,106,042
Total assets 3,950,741 4,082,916 4,192,634 4,152,209 3,865,534
Total debt 2,190,025 2,148,259 2,456,793 2,388,982 1,562,916
Redeemable
preferred stock 475,005 487,507 500,007 500,007 500,007
Stockholders'
equity 37,931 196,880 103,416 278,892 675,379
Other Financial Data:
Interest
expense, net 205,346 194,069 205,588 151,720 117,291
EBITDA(f) 687,975 783,722 771,878 805,431 713,117
Cash flow from
operating
activities(g) 516,020 568,784 478,827 513,552 600,524
Capital
expenditures 176,676 160,822 292,083 584,912 492,238
Cash flow
provided by
(used in)
financing
activities (333,536) (407,937) (194,803) 50,906 (101,586)
PT Freeport Indonesia
Operating Data, Net of
Rio Tinto's Interest
Copper
Production
(000s of
recoverable
pounds) 1,388,100 1,428,100 1,427,300 1,166,500 1,118,800
Sales (000s
of recoverable
pounds) 1,393,700 1,441,000 1,419,500 1,188,600 1,097,000
Average
realized price
(per pound) $.82 $.75 $.73 $.94(h) $1.02(h)
Net cash
production
cost cents 23.0 9.2 11.0 22.0 16.3
per pound)
Gold
Production
(recoverable
ounces) 1,899,500 2,379,100 2,227,700 1,798,300 1,695,200
Sales
(recoverable
ounces) 1,921,400 2,423,900 2,190,300 1,888,100 1,698,900
Average
realized price
(per ounce) $276.06 $276.53 $290.57 $346.14(i) $390.96(i)
8
Nine Months Ended
September 30,
----------------------
2001 2000
---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
PT Freeport
Indonesia, 100%
Operating Data
Ore milled
(metric tons
per day) 238,100 223,900
Average ore
grade
Copper(percent) 1.04 .99
Gold (grams
per metric ton) 1.53 .92
Gold (ounce
per metric ton) .049 .030
Recovery rates
(percent)
Copper 87.1 87.1
Gold 89.0 83.7
Copper (000s of
recoverable
pounds)
Production 1,237,200 1,112,600
Sales 1,233,600 1,103,900
Gold
(recoverable
ounces)
Production 2,816,200 1,470,800
Sales 2,798,700 1,476,100
Years Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
PT Freeport
Indonesia, 100%
Operating Data
Ore milled
(metric tons
per day) 223,500 220,700 196,400 128,600 127,400
Average ore
grade
Copper(percent) 1.07 1.12 1.30 1.37 1.35
Gold (grams
per metric ton) 1.10 1.37 1.49 1.51 1.52
Gold (ounce
per metric ton) .035 .044 .048 .049 .049
Recovery rates
(percent)
Copper 88.2 84.6 86.9 85.4 83.8
Gold 84.3 83.7 85.3 81.4 77.1
Copper (000s of
recoverable
pounds)
Production 1,636,700 1,630,700 1,721,300 1,166,500 1,118,800
Sales 1,643,500 1,647,800 1,706,700 1,188,600 1,097,000
Gold
(recoverable
ounces)
Production 2,362,600 2,993,100 2,839,700 1,798,300 1,695,200
Sales 2,387,300 3,047,100 2,774,700 1,888,100 1,698,900
_____________________
(a) Includes net charges totaling $12.4 million ($8.0
million to net income or $0.05 per share) consisting of
$6.0 million for contribution commitments to support
small business development programs within Irian Jaya
(Papua) and $7.9 million for personnel severance costs,
partly offset by a $1.5 million gain for the reversal
of stock appreciation rights and related costs caused
by the decline in our common stock price.
(b) Includes charges totaling $8.8 million ($5.7 million to
net income or $0.03 per share) consisting of $3.6
million for an early retirement program, $1.4 million
for costs of stock appreciation rights caused by the
increase in our common stock price and $3.8 million for
certain nonrecurring costs.
(c) Includes net charges totaling $9.1 million ($4.4
million to net income or $0.03 per share) associated
with the sale of corporate aircraft.
(d) Includes a $25.3 million gain ($12.3 million to net
income or $0.06 per share) for the reversal of stock
appreciation rights and related costs caused by the
decline in our common stock price.
(e) Includes charges totaling $17.4 million ($8.0 million
to net income or $0.04 per share) consisting of $12.7
million for costs of stock appreciation rights caused
by the increase in our common stock price, $3.0 million
for costs related to a civil disturbance and $1.7
million for an early retirement program.
(f) EBITDA represents earnings before interest expense,
income taxes, depreciation and amortization. EBITDA
does not represent and should not be considered as an
alternative to net income or cash flow from operations
as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate
whether cash flow will be sufficient for cash
requirements. EBITDA may not necessarily be comparable
to similarly titled measures reported by other
companies as it is not calculated identically by all
companies.
(g) Cash flow from operating activities represents net
income before non-cash charges including depreciation
and amortization, deferred income taxes, minority
interests' share of net income, equity losses in PT
Smelting and other non-cash costs. Changes in working
capital also impact cash flow from operating
activities.
(h) Amounts were $0.90 in 1997 and $0.97 in 1996 before
hedging adjustments.
(i) Amounts were $326.08 in 1997 and $382.62 in 1996 before
hedging adjustments.
9
RISK FACTORS
An investment in any security involves risks.
Accordingly, before purchasing any securities offered by
this prospectus, you should carefully consider the following
factors, as well as the other information about us and our
business that is contained or incorporated by reference in
this prospectus and in any accompanying prospectus
supplement. This prospectus includes, and any accompanying
prospectus supplement may include, "forward-looking
statements" within the meaning of the federal securities
laws. Forward-looking statements are all statements other
than statements of historical facts, such as statements
regarding anticipated production volumes, sales volumes, ore
grades, commodity prices, reserve estimates, capital
expenditures, environmental reclamation and closure costs,
political, economic and social conditions in our areas of
operations, and exploration efforts and results. We caution
you that these statements are not guarantees of future
performance, and our actual results may differ materially
from those projected, anticipated or assumed in the
forward-looking statements. Important factors that can
cause our actual results to differ materially from those
anticipated in the forward-looking statements include the
following:
Risks Related to Our Business
The terrorist attacks in the United States on September 11,
2001, as well as the United States-led response and the
potential for future terrorist acts, have created economic
and political uncertainties that could have a material
adverse effect on our business and the prices of our
securities.
The terrorist attacks that took place in the United
States on September 11, 2001, as well as the United
States-led response to those attacks and the potential for
future terrorist acts, have caused uncertainty in the
world's financial and insurance markets and may
significantly increase political, economic and social
instability in the geographic areas in which we operate,
including the Republic of Indonesia where our primary
operating assets are located. Although limited, there have
been anti-American demonstrations in certain sections of
Indonesia reportedly led by radical Islamic activists.
Radical activists have also threatened to attack foreign
assets and have called for the expulsion of United States
and British citizens. While no such demonstrations have
occurred in Irian Jaya (Papua) and no terrorist attacks have
occurred in Indonesia, it is possible that further acts of
terrorism may be directed against the United States
domestically or abroad, and such acts of terrorism could be
directed against companies such as ours. The attacks and
the resulting economic and political uncertainties,
including the potential for further terrorist acts, may
cause the premiums charged for our insurance coverages to
increase and may cause some coverages to be unavailable
altogether. These developments may materially and adversely
affect our business and profitability and the prices of our
securities in ways we cannot predict at this time.
Because our primary operating assets are located in the
Republic of Indonesia, our business can be adversely
affected by Indonesian political, economic and social
events.
Maintaining a good working relationship with the
Indonesian government is important to us because all of our
mining operations are located in Indonesia and are conducted
pursuant to Contracts of Work with the Indonesian
government. PT Freeport Indonesia's and Eastern Minerals'
Contracts of Work were entered into under Indonesia's 1967
Foreign Capital Investment Law, which provides guarantees of
remittance rights and protection against nationalization.
These contracts also specifically provide that the
Indonesian government will not nationalize or expropriate PT
Freeport Indonesia's or Eastern Minerals' mining operations
and that disputes with the Indonesian government must be
submitted to international arbitration.
Certain government officials and others in Indonesia
have called into question the validity of contracts entered
into by the Government of Indonesia prior to October 1999,
including PT Freeport Indonesia's Contract of Work, which
was signed in December 1991. Consistent with the public
position expressed by then President Abdurrahman Wahid, current
President Megawati Sukarnoputri and several cabinet members
have publicly stated that the Government of Indonesia will
honor previously existing contracts and that they have no
intention of revoking or unilaterally amending such
contracts. In July 2001, Indonesia's highest
political institution, the People's Consultative Assembly,
elected then Vice President Megawati Sukarnoputri as the new
President. The international community, including the United
States, has
10
expressed support for the newly elected
President. In late September 2001, President Megawati
Sukarnoputri visited the United States for nine days and met
with U. S. President George W. Bush and other U. S.
Government officials.
We cannot assure you that the validity of, or our
compliance with the terms of, the Contract of Work will not
be challenged for political or other reasons. We intend to
pursue all actions to protect our rights under the Contract
of Work, which provides for international arbitration in the
case of certain disputes. Notwithstanding the international
arbitration provision, if a dispute arises under the
Contract of Work we face the risk of having to submit to the
jurisdiction of a foreign court or having to enforce the
judgment of a foreign court or arbitration panel against
Indonesia within its own territory.
The Contract of Work can be terminated by the
Government of Indonesia if PT Freeport Indonesia does not
perform its contractual obligations, which include the
payment of royalties and taxes to the government and the
satisfaction of certain mining, environmental, safety and
health standards. Indonesian government officials have
periodically raised questions regarding PT Freeport
Indonesia's compliance with Indonesian environmental laws
and regulations and the terms of the Contract of Work. In
order to address these questions, the Government of
Indonesia formed a fact-finding team in 2000 that reviewed
PT Freeport Indonesia's compliance with all aspects of its
Contract of Work. We cooperated fully with the fact-finding
team as it performed this review and we supported this
initiative as a means for the Government of Indonesia to
verify PT Freeport Indonesia's compliance with its Contract
of Work, including its environmental requirements. It is
uncertain if or when the Indonesian government will release
its report on its investigation. Although we believe that we
are in material compliance with all provisions of PT
Freeport Indonesia's Contract of Work, we cannot assure you
that the Indonesian government's report, if and when
released, will be consistent with our belief, or that our
compliance with the terms of the Contract of Work will not
be challenged for political or other reasons.
Indonesia continues to face political and economic
uncertainties, including separatist movements and civil and
religious strife in a number of provinces. In particular,
social, economic and political instability in the province
of Irian Jaya (Papua), where our mining operations are
located, could have a material adverse impact on us if it
results in damage to our property or interruption of our
activities. For example, we have temporarily suspended our
field exploration activities outside of Block A due to
security issues and regulatory issues involving a possible
conflict between our mining and exploration rights under our
Contract of Work and the requirements of certain recently
enacted Indonesian forestry laws. In August 1998, we
suspended operations for three days at our Grasberg mine in
response to a wildcat work stoppage (not authorized by the
workers' union) by a group of workers, a majority of whom
were employees of our contractors. The workers, who
voluntarily returned to work, cited employment issues as the
reasons for their work stoppage. The actions of the workers
were peaceful, there was no personal injury or property
damage, and our concentrate shipments were not interrupted.
In March 1996, local people engaged in acts of vandalism
that caused approximately $3.0 million of damages to our
property and caused us to close the Grasberg mine and mill
for three days as a precautionary measure, although our
concentrate shipments were not interrupted.
A segment of the local population is opposing
Indonesian rule over Irian Jaya (Papua), and several
separatist groups have sought political independence for the
province. New regional autonomy laws became effective
January 1, 2001, and there is a transition period to allow
the provinces to prepare for the assumption and
administration of these new responsibilities. The manner in
which new autonomy laws will be implemented and the degree
of political and economic autonomy that is being provided to
individual provinces, including Irian Jaya (Papua), is
uncertain and is a current issue in Indonesian politics.
In Irian Jaya (Papua), there have been sporadic attacks
on civilians by separatists and sporadic but highly
publicized conflicts between separatists and the Indonesian
military. On September 29, 2001, a group of separatists set
fire to facilities and took over an airfield in Ilaga, Irian
Jaya (Papua). The separatists occupied the airfield for
three days, after which Indonesian security forces
successfully reclaimed the airfield. Our mining operations
continued to operate normally and were not affected by the
incidents in Ilaga, which is approximately 50 miles
northeast of our mining operations and separated by a
rugged, 14,000-foot mountain range through which there are
no roads.
11
No recent incidents have been reported in PT Freeport
Indonesia's area of operations, where the local community
leaders continue to support peaceful solutions to the
complex issue of regional autonomy, although no assurances
can be given that the area will remain peaceful. We have a
board-approved policy statement on social and human rights,
and we have comprehensive and extensive social, cultural and
community development programs, to which we have committed
significant financial and managerial resources. These
policies and programs are designed to address the impact of
our operations on the local villages and people and to
provide assistance for the development of the local people.
While we believe these efforts should serve to avoid damage
to and disruptions of our mining operations, our operations
could be damaged or disrupted by social, economic and
political forces beyond our control.
In addition to the specific risks described above, we
are also subject to the usual risks associated with
conducting business in a foreign country. These risks
include the risk of war, revolution, civil unrest,
expropriation, forced modification of existing contracts,
changes in the country's laws or policies, including laws or
policies relating to taxation, royalties, imports, exports
and currency, and the risk of having to submit to the
jurisdiction of a foreign court or having to enforce the
judgment of a foreign court or arbitration panel against a
sovereign nation within its own territory.
We have guaranteed an obligation of an Indonesian entity,
and have lent funds to the entity, and the entity may not be
able to pay its debts.
In 1997 we guaranteed a $253.4 million loan from a
commercial bank to PT Nusamba Mineral Industri. Nusamba used
the loan proceeds plus $61.6 million of cash, for a total of
$315.0 million, to purchase stock in PT Indocopper
Investama, a company whose only significant asset is 9.36
percent of PT Freeport Indonesia's stock. Nusamba owns
approximately 51 percent of PT Indocopper Investama's stock
and we own approximately 49 percent. The loan is secured by
a pledge of the PT Indocopper Investama stock owned by
Nusamba and is due in March 2002. It is uncertain whether
Nusamba will pay its bank debt at maturity. If we are
required to perform under our guarantee of Nusamba's debt,
our amended bank credit facilities provide us a mechanism to
finance our guarantee obligation. We also agreed to lend
Nusamba any amounts necessary to cover shortfalls between
the interest payments on the loan and dividends received by
Nusamba on the PT Indocopper Investama stock. At September
30, 2001, we had loaned Nusamba $65.3 million, also due in
March 2002, for this purpose.
The PT Indocopper Investama stock is the only
significant asset of Nusamba. The estimated fair market
value of the stock, based on the current value of our common
stock, is currently significantly below the $318.7 million
aggregate principal amount of the commercial bank loan and
our loans to Nusamba. If Nusamba does not pay the commercial
bank loan when due, and we are obligated to pay the loan, we
will seek to recover the PT Indocopper Investama stock as
provided by the financing documents, which are governed by
Indonesian law.
Servicing our debt will require a significant amount of
cash, and our ability to generate sufficient cash depends on
many factors, some of which are beyond our control.
Our ability to make payments on and to refinance our
debt depends on our ability to generate sufficient cash
flow. This, to a significant extent, is subject to commodity
prices and general economic, financial, regulatory,
political and other factors that are beyond our control. In
addition, our ability to borrow funds in the future to
service our debt will depend on our meeting the financial
covenants in our amended bank credit facilities and other
debt agreements we may have in the future. Future borrowings
may not be available to us under our amended bank credit
facilities or otherwise in amounts sufficient to enable us
to pay our debt or to fund other liquidity needs. As a
result, we may need to refinance all or a portion of our
debt on or before maturity. Any inability to generate
sufficient cash flow or refinance our debt on favorable
terms could have a material adverse effect on our financial
condition.
Political and economic conditions in Indonesia have had
a negative effect on our credit ratings. The major credit
rating agencies have had a policy of limiting the credit
ratings of companies with operations limited to a particular
country to the credit rating for the sovereign debt of that
country. The current sovereign credit ratings of Indonesia
are B3 by Moody's Investors Service and CCC+ by Standard &
Poor's. Accordingly, our credit ratings
12
are currently B3 by
Moody's Investors Service and CCC+ by Standard & Poor's.
Our current credit ratings have an impact on the
availability and cost of capital to us. As a result, in
connection with our amended bank credit facilities, we have
agreed to apply our future cash flows, after servicing
scheduled debt payments and funding capital expenditures, to
reducing amounts owed to the banks. Funding major new
expansion projects would require new sources of capital, and
the availability and cost of capital for projects in
Indonesia is uncertain because of global financial markets'
assessment of Indonesia's political and economic conditions.
Covenants in our amended credit facilities impose
restrictions on us.
Our amended bank credit facilities prohibit the
repurchase of, and payment of dividends on, our common stock
and limit, among other things, our ability to redeem and pay
dividends on our preferred stock in certain circumstances;
make investments; engage in transactions with affiliates;
and create liens on our assets. Further, our amended bank
credit facilities require us to maintain specified financial
ratios and satisfy financial condition tests. Events beyond
our control, including changes in general economic and
business conditions, may affect our ability to satisfy these
covenants, which could result in a default under our amended
bank credit facilities. If an event of default under our
amended credit facilities occurs, the banks could elect to
declare all amounts outstanding thereunder, together with
accrued interest, to be immediately due and payable. An
event of default under our amended bank credit facilities
may also give rise to an event of default under our existing
and future debt agreements.
Our mining operations create difficult and costly
environmental challenges, and future changes in
environmental laws, or unanticipated environmental impacts
from our operations, could require us to incur increased
costs.
Mining operations on the scale of our operations in
Irian Jaya (Papua) involve significant environmental
challenges. Our primary challenge is to dispose of the large
amount of crushed and ground rock material, called tailings,
that results from the process by which we physically
separate the copper, gold and silver from the ore that we
mine. Under our tailings management plan, the river system
near our mine transports the tailings to the lowlands where
deposits of the tailings and natural sediments are
controlled through a levee system for future revegetation
and reclamation. This plan has been approved by the
Government of Indonesia.
Another of our major environmental challenges is
managing overburden, which is the rock that must be moved
aside in order to reach the ore in the mining process. In
the presence of air, water and naturally occurring bacteria,
some overburden can cause acid rock drainage, or acidic
water containing dissolved metals which, if not properly
managed, can have a negative impact on the environment. Our
overburden management plan, which has been approved by the
Government of Indonesia, is designed to minimize these
impacts, although we cannot assure that it will do so.
Our environmental management programs, which include
independent external environmental audits, are designed to
manage and minimize the impact on the environment. We have
expended significant financial and managerial resources to
comply with Indonesian environmental regulations and the
environmental permitting and approval requirements.
Notwithstanding our permitting and approvals, certain
Indonesian governmental officials have from time to time
raised issues with respect to our tailings management plan
and overburden management plan, including a suggestion that
a pipeline system rather than our current system be
implemented for tailings disposal. Our ongoing assessment of
tailings management has identified significant unresolved
technical, environmental and economic issues associated with
a pipeline system.
We believe that we are in material compliance with our
environmental permits and approvals. We anticipate that we
will continue to spend significant financial and managerial
resources on environmental compliance. In addition, changes
in Indonesian environmental laws or unanticipated
environmental impacts from our operations could require us
to incur significant additional costs.
13
The volume and grade of the reserves we recover and our
rates of production may be more or less than anticipated.
Our reserve amounts are determined in accordance with
established mining industry practices and standards, but are
estimates only. Our mines may not conform to standard
geological expectations. Because ore bodies do not contain
uniform grades of minerals, our metal recovery rates will
vary from time to time, which will result in variations in
the volumes of minerals that we can sell from period to
period. Some of our reserves may become unprofitable to
develop if there are unfavorable long-term market price
fluctuations in copper and gold, or if there are significant
increases in our operating and capital costs. In addition,
our exploration programs may not result in the discovery of
additional mineral deposits that we can mine profitably.
Our net income can vary significantly with fluctuations in
the market prices of copper and gold.
Our revenues are derived primarily from the sale of
copper concentrates, which also contain significant amounts
of gold, and from the sale of copper cathodes, copper wire
rod and copper wire. Most of our copper concentrates are
sold under long-term contracts, but the selling price is
based on world metal prices at or near the time of shipment
and delivery. World metal prices for copper and gold
historically have fluctuated widely and are affected by
numerous factors beyond our control. Any material decrease
in market prices of copper or gold would have a material
adverse impact on our results of operations and financial
condition.
In addition to the usual risks encountered in the mining
industry, we face additional risks because our operations
are located an difficult terrain in a very remote area of
the world.
Our mining operations are located in steeply
mountainous terrain in a very remote area in Indonesia.
These conditions have required us to overcome special
engineering difficulties and to develop extensive
infrastructure facilities. In addition, the area receives
considerable rainfall, which has led to periodic floods and
mud slides. The mine site is also in an active seismic area
and has experienced earth tremors from time to time. In
addition to these special risks, we are also subject to the
usual risks associated with the mining industry, such as the
risk of encountering unexpected geological conditions that
may result in cave-ins and flooding of mine areas. We have
insurance involving amounts and types of coverage we believe
are appropriate for our activities, but our insurance may
not be sufficient to cover an unexpected natural or
operating disaster.
Movements in foreign currency exchange rates or interest
rates could have a negative effect on our operating results.
All of our revenues are denominated in U.S. dollars.
However, some of our costs and some of our asset and
liability accounts are denominated in Indonesian rupiah,
Australian dollars or Spanish pesetas/euros. Generally, our
results are adversely affected when the U.S. dollar weakens
against these foreign currencies and positively affected
when the U.S. dollar strengthens against these foreign
currencies.
From time to time we have in the past and may in the
future implement currency hedges intended to reduce our
exposure to changes in foreign currency exchange rates.
However, our hedging strategies may not be successful, and
any of our unhedged foreign exchange payment requirements
will continue to be subject to market fluctuations.
In addition, our amended bank credit facilities are
based on fluctuating interest rates. Accordingly, an
increase in interest rates could have an adverse impact on
our results of operations and financial condition.
Because we are primarily a holding company, our ability to
pay our debts depends upon the ability of our subsidiaries
to pay us dividends and to advance us funds. In addition,
our ability to participate in any distribution of our
subsidiaries' assets is generally subject to the prior
claims of the subsidiaries' creditors.
Because we conduct business primarily through PT
Freeport Indonesia, our major subsidiary, and other
subsidiaries, our ability to pay our debts depends upon the
earnings and cash flow of PT Freeport Indonesia and our
other subsidiaries and their ability to pay us dividends and
to advance us funds. Contractual and legal restrictions
applicable to our subsidiaries could also limit our ability
to obtain cash from them. Our rights to participate in any
14
distribution of our subsidiaries' assets upon their
liquidation, reorganization or insolvency would generally be
subject to the prior claims of the subsidiaries' creditors,
including trade creditors and preferred stockholders, if
any.
Risks Related to the Notes
Our stock price has been and may continue to be volatile.
The trading price of our common stock has been and may
continue to be subject to large fluctuations and, therefore,
the trading price of the notes may fluctuate significantly,
which may result in losses to investors. Our stock price may
increase or decrease in response to a number of events and
factors, including:
* current events affecting the political,
economic and social situation in Indonesia;
* trends in our industry and the markets in
which we operate;
* changes in the market price of the
commodities we sell;
* changes in financial estimates and
recommendations by securities analysts;
* acquisitions and financings;
* quarterly variations in operating results;
* the operating and stock price performance of
other companies that investors may deem
comparable; and
* purchases or sales of blocks of our common
stock.
Part of this volatility, however, is attributable to
the current state of the stock market, in which wide price
swings are common. This volatility may adversely affect the
prices of our common stock and the notes regardless of our
operating performance.
An active trading market for the notes may not develop.
Upon their original issuance, the notes became eligible
for trading on The PORTAL Market. The notes sold pursuant
to this prospectus, however, will no longer be eligible for
trading on The PORTAL Market. Although we intend to apply
for listing on the New York Stock Exchange of the notes sold
pursuant to this prospectus, we cannot assure you that an
active trading market for the notes will develop or be
sustained. If an active market for the notes fails to
develop or be sustained, the notes could trade at prices
that may be lower than the initial offering price of the
notes. Whether or not the notes will trade at lower prices
depends on many factors, including:
* prevailing interest rates and the markets for
similar securities;
* the market price of our common stock;
* general economic conditions; and
* our financial condition, historic financial
performance and future prospects.
Any Rating of the Notes May Cause Their Trading Price to
Fall.
If the ratings agencies rate the notes, they may assign
a lower rating than expected by investors. Rating agencies
also may lower ratings on the notes in the future. If the
rating agencies assign a lower than expected rating or
reduce their ratings in the future, the trading price of the
notes would decline.
15
REFINANCING TRANSACTIONS
We have amended our existing credit facilities to
extend the maturities and to provide a mechanism for
financing any obligations we may have under our guarantee of
the commercial bank loan to Nusamba. We believe that our
amended credit facilities together with our cash flows from
operations will enable us to fund our ongoing capital
expenditures and meet our debt maturities over the next
several years. In addition to the amended credit facilities
and note issuance of the notes (collectively the
"refinancing transactions"), we intend to refinance or
restructure our series I gold-denominated preferred stock to
extend its mandatory redemption date.
Previous Credit Facilities and Maturities
Our previously existing bank credit facilities provided
total availability of $1.0 billion, subject to a borrowing
base that was redetermined annually. The facilities were
scheduled to mature in December 2002. The outstanding
balance at September 30, 2001 was $214.0 million, with
$336.0 million available to PT Freeport Indonesia and $450.0
million available to the company and PT Freeport Indonesia.
The $253.4 million bank loan to PT Nusamba Mineral
Industri that we guarantee matures in March 2002. It is
uncertain whether Nusamba will pay its debt at maturity. If
we are required to perform under our guarantee of Nusamba's
debt, the amended credit facilities provide a mechanism to
finance our guarantee obligation. Other significant
maturities through 2006 include the expected repayment of
the senior notes of $250.0 million in 2003 and $200.0
million in 2006, and the redemption of preferred stock
totaling approximately $185.4 million in 2003 and $136.0
million in 2006, based on gold and silver prices as of
September 28, 2001.
Amended Credit Facilities
The following summarizes the terms of our amended
credit facilities.
Commitments and Availability
The aggregate commitments under the amended credit
facilities total $734.0 million including $253.4 million if
we are required to perform in March 2002 under the Nusamba
guarantee, leaving $480.6 million currently available.
Nusamba indirectly owns 4.7% of PT Freeport Indonesia
through its approximate 51% ownership of PT Indocopper
Investama. To secure its commercial bank loan, Nusamba
pledged its ownership in PT Indocopper Investama. If Nusamba
does not pay the loan when due and we are required to
perform under the guarantee, we would fund the $253.4
million obligation under the amended credit facilities and
would seek to recover the PT Indocopper Investama stock as
provided by the Nusamba financing documents, which are
governed by Indonesian law.
Maturities and Term Loan Conversion
Amounts that we borrowed under the amended facilities
mature on December 31, 2005. On December 31, 2003, all
revolving loans will become term loans, except for a $150.0
million revolver for working capital purposes.
We are able to use the amounts available under the
amended facilities to pay interest and principal
requirements on our other debt when due. We are required to
use all available cash flow after debt service and capital
expenditures to reduce amounts outstanding under the amended
facilities, subject to limited exceptions.
Mandatory Repayments and Reductions in Commitments
If we raise proceeds through future offerings, 25% of
the proceeds from debt issuances and 50% of the proceeds
from equity issuances will be available to us for general
corporate purposes so long as commitments are reduced with
the balance of such financing proceeds. All other proceeds
from financings and all available cash of the company and PT
Freeport Indonesia will be used to pay outstanding
borrowings under the amended credit
16
facilities and the
commitments under the facilities will be reduced by those
amounts, except as necessary to maintain availability to
repay $250.0 million for the 7.20% senior notes and to
preserve the $150.0 million revolving facility that will
continue to be available through December 31, 2005.
Interest Rates and Fees
Interest rates on all loans under the facilities,
including any amounts used to fund our obligations under the
Nusamba guarantee, are LIBOR plus 4.0% with annual increases
of 0.125% on each anniversary of the closing of the amended
facilities.
Series I Gold-Denominated Preferred Stock Due in 2003
Prior to the mandatory redemption date in August 2003,
we intend to refinance or restructure our obligation to
redeem our series I gold-denominated preferred stock. Under
the amended credit facilities, we have limitations on the
amount of preferred stock we may redeem and, if by August
2003 we have not extended the maturity of 80% of the series
I gold-denominated preferred stock beyond 2005, we will not
thereafter be permitted to redeem or pay dividends on any of
our preferred stock.
Other Covenants
The covenants under the amended credit facilities
include (a) a minimum consolidated debt service coverage
ratio of 1.25:1.0 through December 31, 2002, and thereafter
1.5:1.0, and (b) a maximum ratio of consolidated debt to
EBITDA equal to 4.25:1.0 through September 30, 2002, and
thereafter 3.5:1.0. The covenants also include prohibitions
on common stock dividends and common stock repurchases,
prohibitions on changes in control of the company or PT
Freeport Indonesia, limitations on capital expenditures to
specified budgets, limitations on investments, limitations
on liens, limitations on transactions with affiliates, and a
requirement to implement minimum hedging protection for
copper prices under certain circumstances.
Security and Guarantees
The obligations of the company and PT Freeport
Indonesia under the amended credit facilities are secured by
a first security lien on most of PT Freeport Indonesia's
assets and by the company's pledge of (1) 50.1% of the
outstanding capital stock of PT Freeport Indonesia, (2) the
approximate 49% of the outstanding capital stock of PT
Indocopper Investama owned by us and (3) the approximate 51%
of the outstanding capital stock of PT Indocopper Investama
securing the original Nusamba loan, if acquired by us. PT
Freeport Indonesia's obligations continue to be secured by
its pledge of its rights under the Contract of Work. In
addition, PT Freeport Indonesia has guaranteed the company's
obligations under the amended credit facilities.
17
Revised Debt and Redeemable Preferred Stock Maturities
Following is a summary of our debt and redeemable
preferred stock maturities under the amended credit
facilities, including the Nusamba loan maturity, based on
loan balances as of September 30, 2001, and gold and silver
prices (which determine the preferred stock redemption
amounts) as of September 28, 2001:
2001 2002 2003 2004 2005 2006 Thereafter
----- ------ ------ ----- ------ -------- ------
(In Millions)
Bank credit
facilities(a) $ - $ - $ - $ - $214.0 $ - $ -
Infrastructure
financings and 16.4 112.5 56.9 62.3 45.6 47.7 187.1
equipment loans
7.20% Senior
Notes due 2026(b) - - 250.0 - - - -
7.50% Senior
Notes due 2006(c) - - - - - 200.0 -
8 1/4% Convertible
Senior Notes
due 2006 - - - - - 603.8 -
Atlantic Copper
facilities and
other 3.0 75.6 20.1 10.1 24.1 24.1 116.5
----- ------ ------ ----- ------ -------- ------
Total debt
maturities 19.4 188.1 327.0 72.4 283.7 875.6 303.6
Nusamba loan
guarantee(d) - - - - 253.4 - -
Redeemable
preferred
stock(e) - 10.9 185.4 10.9 10.9 136.0 -
----- ------ ------ ----- ------ -------- ------
Total
maturities $19.4 $199.0 $512.4 $83.3 $548.0 $1,011.6 $303.6
===== ====== ====== ===== ====== ======== ======
__________
(a) Reflects December 2005 maturity based on amended bank credit
facilities closed on October 19, 2001.
(b) Although due in 2026, the holders of the 7.20% senior notes may, and
are expected to, elect early repayment in November 2003.
(c) Due November 15, 2006, after the maturity of the convertible senior
notes.
(d) If we are required to perform under this guarantee in March 2002, we
intend to fund the $253.4 million obligation under our amended credit
facilities.
(e) Represents $10.9 million each year for our silver-denominated
preferred stock, $174.5 million in August 2003 for our series I gold-
denominated preferred stock, and $125.1 million in February 2006 for
our series II gold-denominated preferred stock.
Increased Cost of Debt
In connection with the amended bank credit facilities,
we incurred premiums, fees and expenses that resulted in a
cash outlay of approximately $19.0 million. This cash
outlay, together with our refinancing transactions, results
in an expected approximate 125 basis-point increase in our
average borrowing cost.
18
USE OF PROCEEDS
The selling securityholders will receive all of the
proceeds from the sale of the notes and common stock under
this prospectus. We will not receive any of the proceeds
from the sale by any selling shareholders of notes or the
underlying common stock.
DIVIDEND POLICY
In December 1998, in response to low commodity market
prices for copper and gold, our board of directors
authorized the elimination of the regular quarterly cash
dividend on our common stock. Our amended bank credit
facilities prohibit the payment of dividends on our common
stock. As a result, for the foreseeable future, we do not
anticipate declaring or paying any cash dividends on our
common stock. Any future determination to declare or pay
cash dividends will be made by our board of directors in
light of our credit facilities, earnings, financial
position, capital requirements and such other factors as our
board of directors deems relevant at such time.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was as follows
for the years and periods indicated.
Nine months ended
Years ended December 31, September 30,
------------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ---- ----
4.5x 3.8x 2.5x 2.9x 2.3x 1.8x 3.3x
For this calculation, earnings consist of (1) income
from continuing operations before income taxes, (2) minority
interests and (3) fixed charges. Fixed charges include
interest and that portion of rent our management believes to
be representative of interest.
19
DESCRIPTION OF THE NOTES
The notes were issued under an indenture between us and
The Bank of New York, as trustee, dated August 7, 2001. The
terms of the notes include those provided in the indenture
and those provided in the registration rights agreement,
which we entered into with the initial purchaser of the
notes. As used in this description, the words "we," "us," or
"our" refers to Freeport-McMoRan Copper & Gold Inc. and FCX
Investment Ltd. as co-obligors of the notes and the name
"Freeport-McMoRan" refers to Freeport-McMoRan Copper & Gold
Inc.
The following description of provisions of the notes is
not complete and is subject to, and qualified in its
entirety by reference to, the notes, the indenture and the
registration rights agreement. We will provide you with a
copy of any of the foregoing documents without charge upon
request.
General
The notes are our general unsecured (except to the
extent described under "Security" below) and unsubordinated
obligations and are convertible into class A or class B
common stock of Freeport-McMoRan, at the option of the
holders, as described under "Conversion Rights" below. The
notes are limited to $603,750,000 aggregate principal amount
and will mature on January 31, 2006, unless earlier redeemed
by us or repurchased by us at the option of the holder upon
the occurrence of a Change of Control (as defined below).
The notes bear interest from August 7, 2001 at the rate
of 8 1/4% per year. Interest is payable semi-annually on
January 31 and July 31 of each year to holders of record at
the close of business on the preceding January 15 and July
15, respectively, beginning January 31, 2002. We may pay
interest on notes represented by certificated notes by check
mailed to such holders. However, a holder of notes with an
aggregate principal amount in excess of $5,000,000 is paid
by wire transfer in immediately available funds at the
election of such holder. Interest is computed on the basis
of a 360-day year comprised of twelve 30-day months.
Interest will cease to accrue on a note upon its maturity,
conversion, redemption or purchase by us upon a Change of
Control.
Principal is payable, and the notes may be presented
for conversion, registration of transfer and exchange,
without service charge, at our office or agency in New York
City, which shall initially be the office or agency of the
trustee in New York, New York. See "Form, Denomination and
Registration" below.
The indenture does not contain any financial covenants
or any restrictions on the payment of dividends, the
repurchase of our securities or the incurrence of
indebtedness. The indenture also does not contain any
covenants or other provisions that afford protection to
holders of notes in the event of a highly leveraged
transaction or a Change of Control of Freeport-McMoRan
except to the extent described under "Change of Control
Permits Purchase of Notes at the Option of the Holder"
below.
Security
FCX Investment has purchased and pledged to the trustee
as security for the exclusive benefit of the holders of the
notes (and not for the benefit of our other creditors), U.S.
government securities in the amount of $139.8 million to
provide for payment in full of the first six scheduled
interest payments due on the notes.
The U.S. government securities have been pledged by FCX
Investment to the trustee for the exclusive benefit of the
holders of the notes and are held by the trustee in a pledge
account. Immediately prior to an interest payment date, the
trustee will release from the pledge account proceeds
sufficient to pay interest then due on the notes. A failure
to pay interest on the notes when due through the first six
scheduled interest payment dates will constitute an
immediate event of default under the indenture, with no
grace period.
The pledged U.S. government securities and the pledge
account also secure the repayment of the principal amount
and premium on the notes. If prior to July 31, 2004
* an event of default under the notes occurs
and is continuing and
20
* the trustee or the holders of 25% in
aggregate principal amount of the notes accelerate
the notes by declaring the principal amount of the
notes to be immediately due and payable (by
written consent, at a meeting of note holders or
otherwise), except for the occurrence of an event
of default relating to our bankruptcy, insolvency
or reorganization, upon which the notes will be
accelerated automatically.
then the proceeds from the pledged U.S. government
securities will be promptly released to note holders,
subject to the automatic stay provisions of bankruptcy law,
if applicable. Distributions from the pledge account will be
applied:
* first, to any accrued and unpaid interest on
the notes, and
* second, to the extent available, to the
repayment of a portion of the principal amount of
the notes.
However, if any event of default is cured prior to the
acceleration of the notes by the trustee or holders of the
notes referred to above, the trustee and the holders of the
notes will not be able to accelerate the notes as a result
of that event of default.
For example, if the first two interest payments were
made when due but the third interest payment was not made
when due and the note holders promptly exercised their right
to declare the principal amount of the notes to be
immediately due and payable then, assuming automatic stay
provisions of bankruptcy law are inapplicable and the
proceeds of the pledged U.S. government securities are
promptly distributed from the pledge account,
* an amount equal to the interest payment due
on the third interest payment would be distributed
from the pledge account as accrued interest and
* the balance of the proceeds of the pledge
account would be distributed as a portion of the
principal amount of the notes.
In addition, note holders would have an unsecured claim
against the issuer for the remainder of the principal amount
of their notes.
Once we make the first six scheduled interest payments
on the notes, all of the remaining pledged U.S. government
securities, if any, will be released to FCX Investment from
the pledge account and thereafter the notes will be
unsecured.
Conversion Rights
The holders of notes may, at any time prior to the
close of business on the final maturity date of the notes,
convert any outstanding notes (or portions thereof) into, at
the option of the holders, class A or class B common stock
of Freeport-McMoRan, initially at a conversion price of
$14.30 per share of class A or class B common stock, which
is equal to a conversion rate of approximately 69.9301
shares of class A or class B common stock per $1,000
principal amount of notes. The conversion rate is subject to
adjustment upon the occurrence of some events described
below. Holders may convert notes only in denominations of
$1,000 and whole multiples of $1,000. Except as described
below, no adjustment will be made on conversion of any notes
for interest accrued thereon or dividends paid on any common
stock. Notwithstanding the above, if notes are converted
after a record date but prior to the next succeeding
interest payment date, holders of such notes at the close of
business on the record date will receive the interest
payable on such notes on the corresponding interest payment
date notwithstanding the conversion. Such notes, upon
surrender for conversion, must be accompanied by funds equal
to the amount of interest payable on the principal amount of
notes so converted, unless such notes have been called for
redemption on a redemption date that occurs after a regular
record date and on or prior to the third business day after
the interest payment date to which it relates, in which case
no such payment shall be required. We are not required to
issue fractional shares of common stock upon conversion of
notes and instead will pay a cash adjustment based upon the
market price of the common stock on the last trading day
before the date of the conversion. In the case of notes
21
called for redemption, conversion rights will expire at the
close of business on the business day preceding the date
fixed for redemption, unless we default in payment of the
redemption price.
A holder may exercise the right of conversion by
delivering the note to be converted to the specified office
of a conversion agent, with a completed notice of
conversion, together with any funds that may be required as
described in the preceding paragraph. The conversion date
will be the date on which the notes, the notice of
conversion and any required funds have been so delivered. A
holder delivering a note for conversion will not be required
to pay any taxes or duties relating to the issuance or
delivery of the common stock for such conversion, but will
be required to pay any tax or duty which may be payable
relating to any transfer involved in the issuance or
delivery of the common stock in a name other than the holder
of the note. Certificates representing shares of common
stock will be issued or delivered only after all applicable
taxes and duties, if any, payable by the holder have been
paid. If any note is converted prior to the expiration of
the holding period applicable for sales thereof under Rule
144(k) under the Securities Act (or any successive
provision), the common stock issuable upon conversion will
not be issued or delivered in a name other than that of the
holder of the note unless the applicable restrictions on
transfer have been satisfied.
The initial conversion rate will be adjusted for
certain events, including:
* the issuance of Freeport-McMoRan common stock
as a dividend or distribution on Freeport-McMoRan
common stock;
* certain subdivisions and combinations of
Freeport-McMoRan common stock;
* the issuance to all holders of
Freeport-McMoRan common stock of certain rights or
warrants to purchase Freeport-McMoRan common stock
(or securities convertible into Freeport-McMoRan
common stock) at less than (or having a conversion
price per share less than) the current market
price of Freeport-McMoRan common stock;
* the dividend or other distribution to all
holders of Freeport-McMoRan common stock or shares
of Freeport-McMoRan capital stock (other than
common stock) of evidences of indebtedness or
assets (including securities, but excluding (A)
those rights and warrants referred to above, (B)
dividends and distributions in connection with a
reclassification, change, consolidation, merger,
combination, sale or conveyance resulting in a
change in the conversion consideration pursuant to
the second succeeding paragraph or (C) dividends
or distributions paid exclusively in cash);
* dividends or other distributions consisting
exclusively of cash to all holders of
Freeport-McMoRan common stock to the extent that
such distributions, combined together with (A) all
other such all-cash distributions made within the
preceding 12 months for which no adjustment has
been made plus (B) any cash and the fair market
value of other consideration paid for any tender
offers by Freeport-McMoRan or any of its
subsidiaries for Freeport-McMoRan common stock
concluded within the preceding 12 months for which
no adjustment has been made, exceeds 5% of our
market capitalization on the record date for such
distribution; market capitalization is the product
of the then current market price of
Freeport-McMoRan common stock times the number of
shares of Freeport-McMoRan common stock then
outstanding; and
* the purchase of Freeport-McMoRan common stock
pursuant to a tender offer made by
Freeport-McMoRan or any of its subsidiaries to the
extent that the same involves an aggregate
consideration that, together with (A) any cash and
the fair market value of any other consideration
paid in any other tender offer by Freeport-McMoRan
or any of its subsidiaries for Freeport-McMoRan
common stock expiring within the 12 months
preceding such tender offer for which no
adjustment has been made plus (B) the aggregate
amount of any all-cash distributions referred to
in the immediately preceding bullet above to all
holders of Freeport-McMoRan common stock within 12
months preceding the expiration of tender offer
for which no adjustments have been made, exceeds
5% of our market capitalization on the expiration
of such tender offer.
22
No adjustment in the conversion rate will be required
unless such adjustment would require a change of at least 1%
in the conversion rate then in effect at such time. Any
adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent
adjustment. Except as stated above, the conversion rate will
not be adjusted for the issuance of our common stock or any
securities convertible into or exchangeable for our common
stock or carrying the right to purchase any of the
foregoing.
Under the Rights Agreement of Freeport-McMoRan, upon
conversion of the notes into Freeport-McMoRan common stock,
to the extent that the Rights Agreement is still in effect
upon conversion, you will receive, in addition to the
Freeport-McMoRan common stock, the rights under the Rights
Agreement whether or not the rights have separated from the
Freeport-McMoRan common stock at the time of conversion,
subject to certain limited exceptions.
In the case of:
* any reclassification or change of
Freeport-McMoRan common stock (other than changes
resulting from a subdivision or combination) or
* a consolidation, merger or combination
involving Freeport-McMoRan or a sale or conveyance
to another corporation of all or substantially all
of Freeport-McMoRan's property and assets,
in each case as a result of which holders of
Freeport-McMoRan common stock are entitled to receive stock,
other securities, other property or assets (including cash
or any combination thereof) with respect to or in exchange
for Freeport-McMoRan common stock, the holders of the notes
then outstanding will be entitled thereafter to convert
those notes into the kind and amount of shares of stock,
other securities or other property or assets (including cash
or any combination thereof) which they would have owned or
been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had
such notes been converted into Freeport-McMoRan common stock
immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance.
We may not become a party to any such transaction
unless its terms are consistent with the foregoing.
If a taxable distribution to holders of
Freeport-McMoRan common stock or other transaction occurs
which results in any adjustment of the conversion price, the
holders of notes may, in certain circumstances, be deemed to
have received a distribution subject to U.S. income tax as a
dividend. In certain other circumstances, the absence of an
adjustment may result in a taxable dividend to the holders
of common stock. See "Certain United States Federal Income
Tax Considerations."
We may from time to time, to the extent permitted by
law, reduce the conversion price of the notes by any amount
for any period of at least 20 days. In that case we will
give at least 15 days' notice of such decrease. We may make
such reductions in the conversion price, in addition to
those set forth above, as the board of directors deems
advisable to avoid or diminish any income tax to holders of
Freeport-McMoRan common stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes.
Ranking
The notes are our unsecured (except to the extent
described under "Security" above) and unsubordinated
obligations. The notes rank on a parity (except to the
extent described under "Security" above) in right of payment
with all of our existing and future unsecured and
unsubordinated indebtedness. However, the notes are
subordinated to our existing and future secured indebtedness
as to the assets securing such indebtedness. As of September
30, 2001, our secured indebtedness was $140.6 million and
our unsecured and unsubordinated indebtedness was $955.6
million.
In addition, the notes are effectively subordinated to
all existing and future liabilities of our subsidiaries.
Freeport-McMoRan is a holding company and conducts business
through its various subsidiaries. As a result,
23
Freeport-McMoRan's cash flow and consequent ability to meet
its debt obligations primarily depend on the earnings of its
subsidiaries, and on dividends and other payments from its
subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and
operating requirements of Freeport-McMoRan's subsidiaries,
could limit its ability to obtain cash from its subsidiaries
for the purpose of meeting debt service obligations,
including the payment of principal and interest on the
notes. Any rights to receive assets of any subsidiary upon
its liquidation or reorganization and the consequent right
of the holders of the notes to participate in those assets
will be subject to the claims of that subsidiary's
creditors, including trade creditors, except to the extent
that Freeport-McMoRan is recognized as a creditor of that
subsidiary, in which case its claims would still be
subordinate to any security interests in the assets of that
subsidiary. As of September 30, 2001, our subsidiaries had
aggregate indebtedness of $1.6 billion.
Redemption of Notes at Our Option
The notes are not redeemable prior to July 31, 2004. At
any time on or after that date, we may redeem the notes for
cash, in whole or in part, on at least 30 but not more than
60 days' notice, at the following prices (expressed in
percentages of the principal amount), together with accrued
and unpaid interest to, but excluding, the date fixed for
redemption. However, if a redemption date is an interest
payment date, the semi-annual payment of interest becoming
due on such date shall be payable to the holder of record as
of the relevant record date and the redemption price shall
not include such interest payment.
During the twelve months commencing July 31 of the
years set forth below:
Year Redemption Price
2004 102.75%
2005 and thereafter 100.92%
If we do not redeem all of the notes, the trustee will
select the notes to be redeemed in principal amounts of
$1,000 or whole multiples of $1,000 by lot or on a pro rata
basis. If any notes are to be redeemed in part only, a new
note or notes in principal amount equal to the unredeemed
principal portion thereof will be issued. If a portion of a
holder's notes is selected for partial redemption and the
holder converts a portion of its notes, the converted
portion will be deemed to be taken from the portion selected
for redemption.
No sinking fund is provided for the notes.
Change of Control Permits Purchase of Notes at the Option of
the Holder
If a Change of Control occurs, each holder of notes will
have the right to require us to repurchase all of that
holder's notes not previously called for redemption, or any
portion of those notes that is equal to $1,000 or a whole
multiple of $1,000, on the date that is 45 days after the
date we give notice at a repurchase price equal to 100% of
the principal amount of the notes to be repurchased,
together with interest accrued and unpaid to, but excluding,
the repurchase date.
Instead of paying the repurchase price in cash, we may
pay the repurchase price in either, at the option of the
holder, class A or class B common stock of Freeport-McMoRan
if we so elect in the notice referred to below. The number
of shares of common stock a holder will receive will equal
the repurchase price divided by 95% of the average of the
closing sale prices of the applicable common stock for the
five trading days immediately preceding and including the
third day prior to the repurchase date. However, we may not
pay in common stock unless we satisfy certain conditions
prior to the repurchase date as provided in the indenture.
Within 30 days after the occurrence of a Change of
Control, we are required to give notice to all holders of
notes, as provided in the indenture, of the occurrence of
the Change of Control and of their resulting repurchase
right. We must also deliver a copy of our notice to the
trustee. To exercise the repurchase right, a holder of notes
must deliver prior to or on the repurchase date irrevocable
written notice to the trustee of the holder's exercise of
its repurchase right, together with the notes with respect
to which the right is being exercised. A "Change of Control"
24
will be deemed to have occurred at such time after the
original issuance of the notes when the following has
occurred:
* any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange
Act")), acquires the beneficial ownership (as
defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed
to have "beneficial ownership" of all securities
that such person has the right to acquire, whether
such right is exercisable immediately or only
after the passage of time), directly or
indirectly, through a purchase, merger or other
acquisition transaction, of 50% or more of the
total voting power of the total outstanding voting
stock of Freeport-McMoRan other than an
acquisition by us, any of our subsidiaries or any
of our employee benefit plans;
* Freeport-McMoRan consolidates with, or merges
with or into, another person or conveys,
transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or
any person consolidates with or merges with or
into Freeport-McMoRan, other than:
* any transaction (A) that does not result in
any reclassification (excluding a reclassification
combining Freeport-McMoRan's class A and class B
common stock into one class), conversion, exchange
or cancellation of outstanding shares of
Freeport-McMoRan's capital stock and (B) pursuant
to which holders of Freeport-McMoRan's capital
stock immediately prior to the transaction have
the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power
of all shares of Freeport-McMoRan's capital stock
entitled to vote generally in the election of
directors of the continuing or surviving person
immediately after the transaction; and
* any merger solely for the purpose of changing
Freeport-McMoRan's jurisdiction of incorporation
and resulting in a reclassification, conversion or
exchange of outstanding shares of common stock
solely into shares of common stock of the
surviving entity;
* during any consecutive two-year period,
individuals who at the beginning of that two-year
period constituted the board of directors of
Freeport-McMoRan (together with any new directors
whose election to such board of directors, or
whose nomination for election by stockholders, was
approved by a vote of a majority of the directors
then still in office who were either directors at
the beginning of such period or whose election or
nomination for election was previously so
approved) cease for any reason to constitute a
majority of the board of directors of
Freeport-McMoRan then in office; or
* Freeport-McMoRan's stockholders pass a
special resolution approving a plan of liquidation
or dissolution and no additional approvals of
stockholders are required under applicable law to
cause a liquidation or dissolution.
The definition of Change of Control includes a phrase
relating to the lease, transfer, conveyance or other
disposition of "all or substantially all" of
Freeport-McMoRan's assets. There is no precise established
definition of the phrase "substantially all" under
applicable law. Accordingly, the ability of a holder of
notes to require us to repurchase such notes as a result of
a lease, transfer, conveyance or other disposition of less
than all of Freeport-McMoRan's assets may be uncertain.
Our right to pay the repurchase price in common stock is
subject to our satisfying various conditions, including:
* the registration of the common stock under
the Securities Act and the Exchange Act, if
required; and
* any necessary qualification or registration
under applicable state securities law or the
availability of an exemption from such
qualification and registration.
25
If such conditions are not satisfied with respect to a
holder prior to the close of business on the repurchase
date, we will pay the repurchase price of the notes to the
holder entirely in cash. We may not change the form of
consideration to be paid for the notes once we have given
the notice that we are required to give to holders of notes,
except as described in the first sentence of this paragraph.
We will comply with the provisions of any tender offer
rules under the Exchange Act that may then be applicable,
and will file any schedule required under the Exchange Act
in connection with any offer by us to purchase notes at the
option of the holders of notes upon a Change of Control. In
some circumstances, the Change of Control purchase feature
of the notes may make more difficult or discourage a
takeover of us and thus the removal of incumbent management.
The Change of Control purchase feature, however, is not the
result of management's knowledge of any specific effort to
accumulate shares of common stock or to obtain control of us
by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series
of anti-takeover provisions. Instead, the Change of Control
purchase feature is the result of negotiations between us
and the initial purchaser.
We may to the extent permitted by applicable law, at any
time purchase the notes in the open market or by tender at
any price or by private agreement. Any note so purchased by
us may, to the extent permitted by applicable law, be
reissued or resold or may be surrendered to the trustee for
cancellation. Any notes surrendered to the trustee may not
be reissued or resold and will be canceled promptly.
The foregoing provisions would not necessarily protect
holders of the notes if highly leveraged or other
transactions involving us occur that may adversely affect
holders. Our ability to repurchase notes upon the occurrence
of a Change of Control is subject to important limitations.
The occurrence of a Change of Control could cause an event
of default under, or be prohibited or limited by, the terms
of indebtedness that we may incur in the future. Further, we
cannot assure you that we would have the financial
resources, or would be able to arrange financing, to pay the
repurchase price for all the notes that might be delivered
by holders of notes seeking to exercise the repurchase
right. Any failure by us to repurchase the notes when
required following a Change of Control would result in an
event of default under the indenture. Any such default may,
in turn, cause a default under indebtedness that we may
incur in the future.
Events of Default
Each of the following will constitute an event of default
under the indenture:
(1) our failure to pay when due the principal of
or premium, if any, on any of the notes at
maturity, upon redemption or exercise of a
repurchase right or otherwise;
(2) our failure to pay an installment of interest
(including liquidated damages, if any) on any of
the notes for 30 days after the date when due;
provided that a failure to make any of the first
six scheduled interest payments on the notes on
the applicable interest payment date will
constitute an event of default with no grace or
cure period;
(3) failure by us to deliver shares of common
stock, together with cash instead of fractional
shares, when those shares of common stock, or cash
instead of fractional shares, are required to be
delivered following conversion of a note, and that
default continues for 10 days;
(4) failure by us to give the notice regarding a
Change of Control within 30 days of the occurrence
of the Change of Control;
(5) our failure to perform or observe any other
term, covenant or agreement contained in the notes
or the indenture for a period of 60 days after
written notice of such failure, requiring us to
remedy the same, shall have been given to us by
the trustee or to us and the trustee by the
holders of at least 25% in aggregate principal
amount of the notes then outstanding;
26
(6) in the event of either (a) our failure or the
failure of any of our significant subsidiaries to
make any payment by the end of the applicable
grace period, if any, after the final scheduled
payment date for such payment with respect to any
indebtedness for borrowed money in an aggregate
principal amount in excess of $10 million, or (b)
the acceleration of indebtedness for borrowed
money of the company or any of our significant
subsidiaries in an aggregate amount in excess of
$10 million because of a default with respect to
such indebtedness, without such indebtedness
referred to in either (a) or (b) above having been
discharged, cured, waived, rescinded or annulled,
for a period of 30 days after written notice to us
by the trustee or to us and the trustee by holders
of at least 25% in aggregate principal amount of
the notes then outstanding;
(7) certain events of our bankruptcy, insolvency
or reorganization; and
(8) the failure of the pledge agreement to be in
full force and effect or to give the trustee the
liens, rights powers and privileges purported to
be created thereby.
The term "significant subsidiary" means a subsidiary,
including its subsidiaries, that meets any of the following
conditions:
* Freeport-McMoRan's and its other
subsidiaries' investments in and advances to the
subsidiary exceed 20% of the total assets of
Freeport-McMoRan and its subsidiaries consolidated
as of the end of the most recently completed
fiscal year;
* Freeport-McMoRan's and its other
subsidiaries' proportionate share of the total
assets (after intercompany eliminations) of the
subsidiary exceeds 20% of the total assets of
Freeport-McMoRan and its subsidiaries consolidated
as of the end of the most recently completed
fiscal year; or
* Freeport-McMoRan's and its other
subsidiaries' equity in the income from continuing
operations before income taxes, extraordinary
items and cumulative effect of a change in
accounting principle of the subsidiary exceeds 20%
of such income of Freeport-McMoRan and its
subsidiaries consolidated for the most recently
completed fiscal year.
The indenture provides that the trustee shall, within 90
days of the occurrence of a default, give to the registered
holders of the notes notice of all uncured defaults known to
it, but the trustee shall be protected in withholding such
notice if it, in good faith, determines that the withholding
of such notice is in the best interest of such registered
holders, except in the case of a default in the payment of
the principal of, or premium, if any, or interest on, any of
the notes when due or in the payment of any redemption or
repurchase obligation.
If an event of default specified in clause (7) above
occurs and is continuing, then automatically the principal
of all the notes and the interest thereon shall become
immediately due and payable. If an event of default shall
occur and be continuing, other than with respect to clause
(7) above (the default not having been cured or waived as
provided under "Modifications and Waiver" below), the
trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding may declare
the notes due and payable at their principal amount together
with accrued interest, and thereupon the trustee may, at its
discretion, proceed to protect and enforce the rights of the
holders of notes by appropriate judicial proceedings. Such
declaration may be rescinded or annulled with the written
consent of the holders of a majority in aggregate principal
amount of the notes then outstanding upon the conditions
provided in the indenture. However, if an event of default
is cured prior to such declaration by the trustee or holders
of the notes as discussed above, the trustee and the holders
of the notes will not be able to make such declaration as a
result of that cured event of default.
Overdue payments of interest, liquidated damages and
premium, if any, and principal shall accrue interest at 10
1/4%.
The indenture contains a provision entitling the trustee,
subject to the duty of the trustee during default to act
with the required standard of care, to be indemnified by the
holders of notes before proceeding to exercise any
27
right or power under the indenture at the request of such holders.
The indenture provides that the holders of a majority in
aggregate principal amount of the notes then outstanding
through their written consent may direct the time, method
and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power
conferred upon the trustee.
We are required to furnish annually to the trustee a
statement as to the fulfillment of our obligations under the
indenture.
Consolidation, Merger or Assumption
We may, without the consent of the holders of notes,
consolidate with, merge into or transfer all or
substantially all of our assets to any other corporation
organized under the laws of the United States or any of its
political subdivisions provided that:
* the surviving corporation assumes all our
obligations under the indenture and the notes;
* at the time of such transaction, no event of
default, and no event which, after notice or lapse
of time, would become an event of default, shall
have happened and be continuing; and
* certain other conditions are met.
Modifications and Waiver
The indenture (including the terms and conditions of the
notes) may be modified or amended by us and the trustee,
without the consent of the holder of any note, for the
purposes of, among other things:
* adding to our covenants for the benefit of
the holders of notes;
* surrendering any right or power conferred
upon us;
* providing for the assumption of our
obligations to the holders of notes in the case of
a merger, consolidation, conveyance, transfer or
lease;
* reducing the conversion price, provided that
the reduction will not adversely affect the
interests of holders of notes in any material
respect;
* complying with the requirements of the SEC in
order to effect or maintain the qualification of
the indenture under the Trust Indenture Act of
1939, as amended;
* making any changes or modification to the
indenture necessary in connection with the
registration of the notes under the Securities Act
as contemplated by the registration rights
agreement, provided that this action does not
adversely affect the interest of the holders of
the notes in any material respects;
* curing any ambiguity or correcting or
supplementing any defective provision contained in
the indenture; provided that such modification or
amendment does not adversely affect the interests
of the holders of the notes in any material
respect; or
* adding or modifying any other provisions
which we and the trustee may deem necessary or
desirable and which will not adversely affect the
interests of the holders of notes in any material
respect.
Modifications and amendments to the indenture or to the
terms and conditions of the notes may also be made, and past
default by us may be waived with the written consent of the
holders of at least a majority in
28
aggregate principal amount
of the notes at the time outstanding. However, no such
modification, amendment or waiver may, without the written
consent or the affirmative vote of the holder of each note
so affected:
* change the maturity of the principal of or
any installment of interest on that note
(including any payment of liquidated damages);
* reduce the principal amount of, or any
premium or interest on (including any payment of
liquidated damages), any note;
* change the currency of payment of such note
or interest thereon;
* impair the right to institute suit for the
enforcement of any payment on or with respect to
any note;
* except as otherwise permitted or contemplated
by provisions concerning corporate
reorganizations, adversely affect the repurchase
option of holders upon a Change of Control or the
conversion rights of holders of the notes;
* modify the provisions of the indenture
relating to the pledge of securities as
contemplated under "- Security" above in a manner
that adversely affects the interests of the
holders of notes; or
* reduce the percentage in aggregate principal
amount of notes outstanding necessary to modify or
amend the indenture or to waive any past default.
Form, Denomination and Registration
The notes were issued in fully registered form, without
coupons, in denominations of $1,000 principal amount and
whole multiples of $1,000.
Global Notes: Book-Entry Form. The notes were offered
only to qualified institutional buyers as defined in Rule
144A under the Securities Act ("QIBs"). Except as provided
below, the notes are evidenced by one or more global notes
deposited with the trustee as custodian for The Depository
Trust Company, New York, New York ("DTC"), and registered in
the name of Cede & Co. as DTC's nominee. The global notes
and any notes issued in exchange therefor are subject to
certain restrictions on transfer set forth in the global
notes and in the indenture and bear a restrictive legend.
Record ownership of the global notes may be transferred, in
whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee, except as set forth below.
A QIB may hold its interests in a global note directly
through DTC if such QIB is a participant in DTC, or
indirectly through organizations which are direct DTC
participants. Transfers between direct DTC participants will
be effected in the ordinary way in accordance with DTC's
rules and will be settled in same-day funds. QIBs may also
beneficially own interests in the global notes held by DTC
through certain banks, brokers, dealers, trust companies and
other parties that clear through or maintain a custodial
relationship with a direct DTC participant, either directly
or indirectly. So long as Cede & Co., as nominee of DTC, is
the registered owner of the global notes, Cede & Co. for all
purposes will be considered the sole holder of the global
notes. Except as provided below, owners of beneficial
interests in the global notes will not be entitled to have
certificates registered in their names, will not receive or
be entitled to receive physical delivery of certificates in
definitive form, and will not be considered holders thereof.
The laws of some states require that certain persons take
physical delivery of securities in definitive form.
Consequently, the ability to transfer a beneficial interest
in the global notes to such persons may be limited. We will
wire, through the facilities of the trustee, principal,
premium, if any, and interest payments on the global notes
to Cede & Co., the nominee for DTC, as the registered owner
of the global notes. We, the trustee and any paying agent
will have no responsibility or liability for paying amounts
due on the global notes to owners of beneficial interests in
the global notes. It is DTC's current practice, upon
receipt of any payment of principal of and premium, if any,
and interest on the global notes, to credit participants'
accounts on the payment date in amounts proportionate to
their respective beneficial interests in the notes
represented by the global notes, as shown on the records of
DTC, unless DTC believes that it will not receive payment on
the payment date. Payments by DTC participants to owners of
beneficial interests in notes represented by the global
notes held through DTC participants will be the
responsibility
29
of DTC participants, as is now the case with
securities held for the accounts of customers registered in
"street name."
If you would like to convert your notes into common stock
pursuant to the terms of the notes, you should contact your
broker or other direct or indirect DTC participant to obtain
information on procedures, including proper forms and cut-
off times, for submitting those requests. Because DTC can
only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and other banks, your
ability to pledge your interest in the notes represented by
global notes to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical
certificate. Neither we nor the trustee (nor any registrar,
paying agent or conversion agent under the indenture) will
have any responsibility for the performance by DTC or direct
or indirect DTC participants of their obligations under the
rules and procedures governing their operations. DTC has
advised us that it will take any action permitted to be
taken by a holder of notes, including, without limitation,
the presentation of notes for conversion as described below,
only at the direction of one or more direct DTC participants
to whose account with DTC interests in the global notes are
credited and only for the principal amount of the notes for
which directions have been given.
DTC has advised us as follows: DTC is a limited purpose
trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial
Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for
DTC participants and to facilitate the clearance and
settlement of securities transactions between DTC
participants through electronic book-entry changes to the
accounts of its participants, thereby eliminating the need
for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other
organizations such as the initial purchaser of the notes.
Certain DTC participants or their representatives, together
with other entities, own DTC. Indirect access to the DTC
system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain
a custodial relationship with, a participant, either
directly or indirectly. Although DTC has agreed to the
foregoing procedures in order to facilitate transfers of
interests in the global notes among DTC participants, it is
under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any
time. If DTC is at any time unwilling or unable to continue
as depositary and a successor depositary is not appointed by
us within 90 days, we will cause notes to be issued in
definitive form in exchange for the global notes. None of
us, the trustee or any of their respective agents will have
any responsibility for the performance by DTC or direct or
indirect DTC participants of their obligations under the
rules and procedures governing their operations, including
maintaining, supervising or reviewing the records relating
to, or payments made on account of, beneficial ownership
interests in global notes. According to DTC, the foregoing
information with respect to DTC has been provided to its
participants and other members of the financial community
for informational purposes only and is not intended to serve
as a representation, warranty or contract modification of
any kind.
Certificated notes may be issued in exchange for
beneficial interests in notes represented by the global
notes only in the limited circumstances set forth in the
indenture.
Governing Law
The indenture and the notes are governed by, and
construed in accordance with, the law of the State of New
York.
Concerning the Trustee
The Bank of New York, as trustee under the indenture, has
been appointed by us as paying agent, conversion agent,
registrar and custodian with regard to the notes. Mellon
Investor Services LLC is the transfer agent and registrar
for Freeport-McMoRan 's common stock. The trustee or its
affiliates may from time to time in the future provide
banking and other services to us in the ordinary course of
their business.
30
Registration Rights
When we issued the notes, we entered into a registration
rights agreement with the initial purchaser of the notes.
As required under that agreement, we have filed with the
SEC, at our expense, a shelf registration statement, of
which this prospectus forms a part, covering resales by
holders of the notes and the common stock issuable upon
conversion of the notes. Under the terms of the registration
rights agreement, we have agreed to use our best efforts to:
* cause the registration statement to become
effective as promptly as is practicable, but in no
event later than 180 days after the earliest date
of original issuance of any of the notes; and
* keep the registration statement effective
until such date that the holders of the notes and
the common stock issuable upon conversion of the
notes are able to sell all such securities
immediately without restriction pursuant to the
volume limitations of Rule 144 under the
Securities Act or any successor rule thereto or
otherwise.
We also agreed to provide to each registered holder
copies of the prospectus, notify each registered holder when
the shelf registration statement has become effective and
take certain other actions as are required to permit
unrestricted resales of the notes and the common stock
issuable upon conversion of the notes. A holder who sells
those securities pursuant to the shelf registration
statement generally will be required to be named as a
selling stockholder in the related prospectus and to deliver
a prospectus to purchasers and will be bound by the
provisions of the registration rights agreement, which are
applicable to that holder (including certain indemnification
provisions). Each holder must notify us not later than three
business days prior to any proposed sale by that holder
pursuant to the shelf registration statement. This notice
will be effective for five business days. We may suspend the
holder's use of the prospectus for a reasonable period not
to exceed 30 days in any 90-day period, and not to exceed an
aggregate of 90 days in any 12-month period, if we, in our
reasonable judgment, believe we may possess material
non-public information the disclosure of which would have a
material adverse effect on us and our subsidiaries taken as
a whole. Each holder, by its acceptance of a note, agrees to
hold any communication by us in response to a notice of a
proposed sale in confidence.
If,
* on the 90th day following the earliest date
of original issuance of any of the notes, the
shelf registration statement, of which this
prospectus forms a part, has not been filed with
the SEC; or
* on the 180th day following the earliest date
of original issuance of any of the notes, the
shelf registration statement has not been declared
effective; or
* the registration statement shall cease to be
effective or fail to be usable without being
succeeded within five business days by a
post-effective amendment or a report filed with
the SEC pursuant to the Exchange Act that cures
the failure of the registration statement to be
effective or usable; or
* on the 30th day of any period that the
prospectus has been suspended as described in the
preceding paragraph, such suspension has not been
terminated (each, a "registration default"),
additional interest as liquidated damages will
accrue on the notes, from and including the day
following the registration default to but
excluding the day on which the registration
default has been cured.
Liquidated damages will be paid semi-annually in arrears,
with the first semi-annual payment due on the first interest
payment date, as applicable, following the date on which
such liquidated damages begin to accrue, and will accrue at
a rate per year equal to:
* an additional 0.25% of the principal amount
to and including the 90th day following such
registration default; and
31
* an additional 0.5% of the principal amount
from and after the 91st day following such
registration default.
In no event will liquidated damages accrue at a rate per
year exceeding 0.5%. If a holder has converted some or all
of its notes into common stock, the holder will be entitled
to receive equivalent amounts based on the principal amount
of the notes converted.
The summary herein of certain provisions of the
registration rights agreement between us and the initial
purchaser is subject to, and is qualified in its entirety by
reference to, all the provisions of the registration rights
agreement, a copy of which has been filed as an exhibit to
the registration statement of which this prospectus is a
part or is available upon request to the Company.
Upon their original issuance, the notes became eligible
for trading on The PORTAL Market. The notes sold pursuant
to this prospectus, however, will no longer be eligible for
trading on The PORTAL Market. Although we intend to apply
for listing on the New York Stock Exchange of the notes sold
pursuant to this prospectus, we cannot assure you that an
active trading market for the notes will develop or as to
the liquidity or sustainability of any such market, the
ability of the holders to sell their notes or the price at
which holders of the notes will be able to sell their notes.
Future trading prices of the notes will depend on many
factors, including, among other things, prevailing interest
rates, our operating results, the price of our common stock
and the market for similar securities.
32
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S.
federal income tax consequences to a holder with respect to
the purchase, ownership and disposition of the notes or our
common stock acquired upon conversion of a note as of the
date hereof. This summary is generally limited to holders
who will hold the notes and the shares of common stock into
which the notes are convertible as "capital assets" within
the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended (the "Code") and who acquire the notes in
this offering at the initial offering price, and does not
deal with special situations including those that may apply
to particular holders such as exempt organizations, holders
subject to the U.S. federal alternative minimum tax,
non-U.S. citizens and foreign corporations or other foreign
entities, dealers in securities, commodities or foreign
currencies, financial institutions, insurance companies,
regulated investment companies, holders whose "functional
currency" is not the U.S. dollar and persons who hold the
notes or shares of common stock in connection with a
"straddle," "hedging," "conversion" or other risk reduction
transaction.
The federal income tax considerations set forth below are
based upon the Code, Treasury Regulations promulgated
thereunder, court decisions, and Internal Revenue Service
("IRS") rulings now in effect, all of which are subject to
change. Prospective investors should particularly note that
any such change could have retroactive application so as to
result in federal income tax consequences different from
those discussed below. We have not sought any ruling from
the IRS with respect to statements made and conclusions
reached in this discussion and there can be no assurance
that the IRS will agree with such statements and
conclusions.
Based on currently applicable authorities, we will treat
the notes as indebtedness for U.S. federal income tax
purposes. However, since the notes have certain equity
characteristics, it is possible that the IRS will contend
that the notes should be treated as an equity interest in,
rather than indebtedness of our company. Except as otherwise
noted, the remainder of this discussion assumes that the
notes will constitute indebtedness for U.S. tax purposes.
INVESTORS CONSIDERING THE PURCHASE OF THE NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER
THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION
OR UNDER ANY APPLICABLE TAX TREATY.
Taxation of Interest
Holders will be required to recognize as ordinary income
any interest paid or accrued on the notes, in accordance
with their regular method of tax accounting.
Conversion or Repurchase for Common Stock
A Holder will not recognize income, gain or loss upon
conversion of the notes solely into our common stock (except
with respect to any amounts attributable to accrued interest
on the notes, which will be treated as interest for federal
income tax purposes), and except with respect to cash
received in lieu of fractional shares. If we repurchase a
note in exchange for common stock pursuant to exercise of
the repurchase right upon a change of control, although the
matter is not entirely clear, such exchange should be
treated in the same manner as a conversion of the note as
described in the preceding sentence. The holder's tax basis
in the common stock received on conversion or repurchase of
a note for common stock pursuant to the repurchase right
will be the same as the holder's adjusted tax basis in the
notes exchanged therefore at the time of conversion or
repurchase (reduced by any basis allocable to a fractional
share), and the holding period for the common stock received
on conversion or repurchase will include the holding period
of the notes that were converted or repurchased.
Cash received in lieu of a fractional share of common
stock upon conversion of the notes into common stock or upon
a repurchase for common stock of a note pursuant to exercise
of the repurchase right upon a change of control will
generally be treated as a payment in exchange for the
fractional share of common stock. Accordingly, the receipt
of cash in lieu of a fractional share of common stock
generally will result in capital gain or loss measured
33
by the difference between the cash received for the fractional
share and the holder's adjusted tax basis in the fractional
share.
Dividends on Common Stock
We do not anticipate paying any dividends on our common
stock in the foreseeable future. However, if we do make
distributions on our common stock, the distributions will
constitute dividends for U.S. federal income tax purposes to
the extent of our current or accumulated earnings and
profits as determined under U.S. federal income tax
principles. To the extent that a holder receives
distributions on shares of common stock that would otherwise
constitute dividends for U.S. federal income tax purposes
but that exceed our current and accumulated earnings and
profits, such distributions will be treated first as a
non-taxable return of capital reducing the holder's basis in
the shares of common stock. Any such distributions in excess
of the holder's basis in the shares of common stock will
generally be treated as capital gain. Subject to applicable
limitations, dividends paid to holders that are U.S.
corporations will qualify for the dividends-received
deduction so long as there are sufficient earnings and
profits.
Disposition, Redemption or Repurchase for Cash
Except as set forth above under "Conversion or Repurchase
for Common Stock," holders generally will recognize capital
gain or loss upon the sale, redemption, including a
repurchase by us for cash pursuant to the repurchase right,
or other taxable disposition of the notes or common stock in
an amount equal to the difference between:
* the holder's adjusted tax basis in the notes
or common stock (as the case may be); and
* the amount of cash and fair market value of
any property received from such disposition (other
than amounts attributable to accrued interest on
the notes, which will be treated as interest for
federal income tax purposes).
A holder's adjusted tax basis in a note generally will
equal the cost of the note to such holder. (For a discussion
of the holder's basis in shares of our common stock, see
"Conversion or Repurchase for Common Stock").
Gain or loss from the taxable disposition of the notes or
common stock generally will be long-term capital gain or
loss if the notes and/or shares of common stock were held
for more than one year at the time of the disposition. The
deductibility of capital losses is subject to limitations.
Adjustment of Conversion Price
The conversion price of the notes is subject to
adjustment under certain circumstances. Under Section 305 of
the Code and the Treasury Regulations issued thereunder,
certain adjustments to (or the failure to make such
adjustments to) the conversion price of the notes that
increase the proportionate interest of a holder in our
assets or earnings and profits may result in a taxable
constructive distribution to the holders of the notes,
whether or not the holders ever convert the notes. Such
constructive distribution will be treated as a dividend,
resulting in ordinary income (and a possible dividends
received deduction in the case of corporate holders) to the
extent of our current or accumulated earnings and profits,
with any excess treated first as a tax-free return of
capital which reduces the holder's tax basis in the notes to
the extent thereof and thereafter as gain from the sale or
exchange of the notes. Generally, a holder's tax basis in a
note will be increased to the extent any such constructive
distribution is treated as a dividend. Moreover, if there is
an adjustment (or a failure to make an adjustment) to the
conversion price of the notes that increases the
proportionate interest of the holders of outstanding common
stock in our assets or earnings and profits, then such
increase in the proportionate interest of the holders of the
common stock generally will be treated as a constructive
distribution to such holders, taxable as described above. As
a result, holders of notes could have taxable income as a
result of an event pursuant to which they receive no cash or
property.
34
Backup Withholding and Information Reporting
We or our designated paying agent will, where required,
report to holders of notes or common stock and the IRS the
amount of any interest paid on the notes or dividends paid
with respect to the common stock (or other reportable
payments) in each calendar year and the amount of tax, if
any, withheld with respect to such payments.
Under the backup withholding provisions of the Code and
the applicable Treasury Regulations, a holder of notes or
our common stock acquired upon the conversion of a note may
be subject to backup withholding at the rate of 31% with
respect to dividends or interest paid on, or the proceeds of
a sale, exchange or redemption of, the notes or the common
stock, unless:
* such holder is a corporation or comes within
certain other exempt categories and when required
demonstrates this fact; or
* provides a correct taxpayer identification
number, certifies as to no loss of exemption from
backup withholding and otherwise complies with
applicable requirements of the backup withholding
rules.
The amount of any backup withholding from a payment to a
holder will be allowed as a credit against the holder's
federal income tax liability and may entitle such holder to
a refund, provided that the required information is
furnished to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND
IS NOT TAX ADVICE. ACCORDINGLY, YOU SHOULD CONSULT YOUR OWN
TAX ADVISER AS TO PARTICULAR TAX CONSEQUENCES TO YOU OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR
COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED
CHANGES IN APPLICABLE LAWS.
35
DESCRIPTION OF COMMON STOCK
General
As of the date of this prospectus, our certificate of
incorporation authorized us to issue up to 211,800,000
shares of class A common stock, par value $0.10 per share,
and 211,800,000 shares of class B common stock, par value
$0.10 per share. As of September 30, 2001, 55,459,026 shares
of our class A common stock and 88,514,099 shares of our
class B common stock were outstanding. Our class A common
stock and class B common stock are listed on the New York
Stock Exchange.
Voting Rights
With respect to the election of directors, holders of
class A common stock, voting together with holders of voting
preferred stock, are entitled to elect 20 percent of the
authorized number of members of our board of directors,
excluding those directors that holders of preferred stock
have the exclusive right to elect. Each share of class A
common stock and each share of voting preferred stock has
one vote. Holders of class B common stock are entitled to
elect the remaining directors. Each holder of class B common
stock has one vote per share. With respect to all other
matters submitted to a vote of our shareholders, except as
required by law, the holders of the class A and class B
common stock vote together as a single class, and record
holders of each class have one vote per share.
The special voting rights of our class A common stock and
voting preferred stock may be eliminated by the vote of a
majority of the class A and class B common shares present
and voting at any annual or special meeting of stockholders.
We previously represented to the Internal Revenue Service
that we would not change the special voting rights of the
class A and class B common stock until after July 2000.
While we have not taken steps to eliminate the special
voting rights or combine the two classes into a single class
of common stock, we may do so in the future.
Dividends
Holders of our class A and class B common stock will
share ratably in any cash dividend that may from time to
time be declared by our board of directors. Dividends
consisting of shares of class A or class B common stock also
may be declared and will be paid as follows:
* shares of class A common stock may be paid
only to holders of shares of class A common stock,
and shares of class B common stock may be paid
only to holders of shares of class B common stock;
and
* shares will be paid proportionately with
respect to each outstanding class A or class B
common share.
Our amended credit facilities prohibit the payment of
dividends on our common stock. See "Refinancing
Transactions" and "Dividend Policy."
Other Rights
In the case of any reorganization or consolidation or
merger of our company with another company, holders of
shares of class A or class B common stock will be entitled
to receive stock, other securities and property of the same
kind and amount as that received by the other class.
However, holders of each class may receive different kinds
of shares if the only difference in the shares is the
inclusion of voting rights that continue the special voting
rights regarding the election of directors described above.
In the event of a voluntary or involuntary liquidation,
dissolution or winding up of our company, prior to any
distributions to the holders of our common stock, the
holders of preferred stock will receive any payments to
which they are entitled. Subsequent to those payments, the
holders of our class A and class B common stock will share
ratably, according to the number of shares held by them, in
our remaining assets, if any.
36
Shares of our class A and class B common stock are not
redeemable and have no subscription, conversion or
preemptive rights. Both classes of common stock are freely
transferable, except for the common stock issuable upon
conversion of the notes.
In 1995, in connection with Rio Tinto plc's purchase of
23.9 million shares of our class A common stock, we entered
into an agreement that provided Rio Tinto with certain
preemptive rights and first offer rights if we issued common
stock, including securities convertible into common stock,
in a future public or non-public offering. In addition, the
agreement provides Rio Tinto with registration rights.
Although Rio Tinto has rights under the agreement to
purchase notes in this offering, Rio Tinto has waived its
rights to purchase any of the notes.
Provisions of Our Certificate of Incorporation
Our certificate of incorporation contains provisions that
are designed in part to make it more difficult and
time-consuming for a person to obtain control of our company
unless they pay a required value to our stockholders. Some
provisions also are intended to make it more difficult for a
person to obtain control of our board of directors. These
provisions reduce the vulnerability of our company to an
unsolicited takeover proposal. On the other hand, these
provisions may have an adverse effect on the ability of
stockholders to influence the governance of our company. You
should read our certificate of incorporation and bylaws for
a more complete description of the rights of holders of our
common stock.
Classified Board of Directors. Our certificate of
incorporation divides the members of our board of directors,
other than those that may be elected solely by the holders
of our preferred stock, into three classes serving
three-year staggered terms. The classification of directors
has the effect of making it more difficult for our
stockholders to change the composition of our board. At
least two annual meetings of stockholders may be required
for the stockholders to change a majority of the directors,
whether or not a majority of stockholders believes that this
change would be desirable.
Supermajority Voting/Fair Price Requirements. Our
certificate of incorporation provides that the approval of
the holders of two-thirds of our outstanding common stock is
required for:
* any merger or consolidation of our company or
any of our subsidiaries with or into any person or
entity, or any affiliate of that person or entity,
who was within the two years prior to the
transaction a beneficial owner of 20 percent or
more of our common stock or any class of our
common stock (an "interested party");
* any merger or consolidation of an interested
party with or into our company or any of our
subsidiaries;
* any sale, lease, mortgage, pledge or other
disposition of more than 10 percent of the fair
market value of the assets of our company or any
of our subsidiaries in one or more transactions
involving an interested party;
* the adoption of any plan or proposal for
liquidation or dissolution of our company proposed
by or on behalf of any interested party;
* the issuance or transfer by our company or
any of our subsidiaries of securities having a
fair market value of $10.0 million or more to any
interested party; or
* any recapitalization, reclassification,
merger or consolidation of our company or any of
our subsidiaries that would increase an interested
party's voting power in our company or any of our
subsidiaries.
However, the two-thirds voting requirement is not
applicable if:
37
* our board approves the transaction, or
approves the acquisition of the common stock that
caused the interested person to become an
interested person, and the vote includes the
affirmative vote of a majority of our directors
who are not affiliates of the interested party and
who were members of our board prior to the time
the interested party became the interested party;
* the transaction is solely between us and any
of our wholly owned subsidiaries or between any of
our wholly owned subsidiaries; or
* the transaction is a merger or consolidation
and the consideration to be received by our common
stockholders is at least as high as the highest
price per share paid by the interested party for
our common stock on the date the common stock was
last acquired by the interested party or during a
period of two years prior.
Supermajority Voting/Amendments to Certificate of
Incorporation. The affirmative vote of at least two-thirds
of our company's outstanding common stock is required to
amend, alter, change or repeal the provisions in our
certificate of incorporation providing for the fair price
requirements described above or our classified board of
directors with staggered three-year terms.
Removal of Directors; Filling Vacancies on Board of
Directors. Directors may be removed, with cause, by the vote
of the holders of all classes of stock entitled to vote at
an election of directors, voting together as a single class.
Directors may not be removed without cause by stockholders.
Vacancies in a directorship may be filled by the vote of the
class or classes of shares that had previously elected the
director creating the vacancy, or by the remaining directors
or director elected by that class. The board may increase
the number of directors and fill the newly created
directorships, but following the enlargement, 80 percent of
the members of the enlarged board must consist of directors
elected by the holders of our class B common stock.
Rights Agreement
Our Rights Agreement is designed to deter abusive
takeover tactics and to encourage prospective acquirors to
negotiate with our board rather than attempt to acquire the
company in a manner or on terms that the board deems
unacceptable. Under our Rights Agreement, each outstanding
share of class A and class B common stock includes an
associated preferred stock purchase right. If the rights
become exercisable, each right will entitle its holder to
purchase one one-hundredth (1/100) of a share of our series
A participating cumulative preferred stock at an exercise
price of $60 per unit, subject to adjustment. The rights
trade with all outstanding shares of our class A and class B
common stock. The rights will separate from our common stock
and become exercisable upon the earlier of-
* the tenth day following a public announcement that a
person or group of affiliated or associated persons (other
than Rio Tinto Indonesia Limited and its affiliates or
associates) has acquired beneficial ownership of 20 percent
or more of our outstanding common stock, or 20 percent or
more of either our class A common stock or class B common
stock (an "acquiring person"); or
* the tenth business day, or any later date as determined
by our board prior to the time that any person or group
becomes an acquiring person, following the commencement of
or announcement of an intention to make a tender offer or
exchange offer that, if consummated, would result in the
person or group becoming an acquiring person.
Term of Rights. The rights will expire on May 3, 2010,
unless we extend this date or redeem or exchange the rights
as described below.
Exercise After Someone Becomes An Acquiring Person. After
any person or group becomes an acquiring person, each holder
of a right will be entitled to receive upon exercise that
number of shares of our class B common stock having a market
value of two times the exercise price of the right. However,
this right will not apply to an acquiring person, whose
rights will be void.
38
Upon the occurrence of certain events after someone
becomes an acquiring person, each holder of a right, other
than the acquiring person, will be entitled to receive, upon
exercise of the right, common stock of the acquiring company
having a market value equal to two times the exercise price
of the right. These rights will arise only if after a person
or group becomes an acquiring person:
* we are acquired in a merger or other business
combination; or
* we sell or otherwise transfer 50 percent or
more of our assets or earning power.
Adjustment. The exercise price, the number of rights
outstanding, and the number of preferred shares issuable
upon exercise of the rights are subject to adjustment from
time to time to prevent certain types of dilution. We will
not issue fractional preferred stock shares. Instead, we
will make a cash adjustment based on the market price of the
preferred stock prior to the date of exercise.
Rights, Preferences, and Limitations of Rights. Preferred
stock purchasable upon exercise of the rights will not be
redeemable. Each share of preferred stock will entitle the
holder to receive a preferential quarterly dividend payment
of the greater of $1.00 or 100 times the dividend declared
per share of our common stock. In the event of liquidation,
the holders of each share of our preferred stock will be
entitled to a preferential liquidation payment of the
greater of $0.10 per share or 100 times the payment made per
share of our common stock. Each share of our preferred stock
will entitle the holder to 100 votes and will vote together
with our class B common stock, or if we no longer have
separate classes of common stock, our common stock. Finally,
in the event of any merger, consolidation or other
transaction in which our common stock is exchanged, each
share of our preferred stock will entitle the holder to
receive 100 times the amount received per share of common
stock. These rights are protected by customary antidilution
provisions. Because of the nature of our preferred stock's
dividend, liquidation and voting rights, the value of each
one one-hundredth interest in a share of preferred stock
should approximate the value of one share of our class B
common stock.
Exchange and Redemption. After a person or group becomes
an acquiring person, we may exchange the rights, in whole or
in part, at an exchange ratio, subject to adjustment, of one
share of our class B common stock, or one one-hundredth of a
share of preferred stock, per right. We generally may not
make an exchange after any person or group becomes the
beneficial owner of 50 percent or more of our common stock
or 50 percent or more of our class A common stock or class B
common stock.
We may redeem the rights in whole, but not in part, at a
price of $0.01 per right, subject to adjustment, at any time
prior to any person or group becoming an acquiring person.
The redemption of the rights may be made effective at such
time, on such basis and with such conditions as our board of
directors in its sole discretion may establish. Once
redeemed, the rights will terminate immediately and the only
right of the rights holders will be to receive the cash
redemption price.
Amendments. We may amend the terms of the rights without
the consent of the rights holders, including an amendment to
lower the thresholds described above. However, after any
person or group becomes an acquiring person, we may not
amend the terms of the rights in any way that adversely
affects the interests of the rights holders.
39
SELLING SECURITYHOLDERS
The notes originally were issued by us and sold by
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as the initial purchaser in transactions
exempt from the registration requirements of the Securities
Act to persons reasonably believed by the initial purchases
to be qualified institutional buyers. Selling
securityholders, including their transferees, pledgees or
donees or their successors, may from time to time offer and
sell any or all of the notes and the common stock into which
the notes are convertible pursuant to this prospectus. The
selling securityholders may offer all, some or none of the
notes and the common stock into which the notes are
convertible.
The table below sets forth information, as of October 31,
2001, with respect to the selling securityholders and the
principal amounts of notes and amounts of common stock
beneficially owned by each selling securityholder that may
be offered under this prospectus by the selling
securityholders. The information is based on information
provided by or on behalf of the selling securityholders.
The selling securityholders identified below may have sold,
transferred or otherwise disposed of all or a portion of
their notes or common stock since the date on which they
provided the information regarding their notes or common
stock in transactions exempt from the registration
requirements of the Securities Act.
Because the selling securityholders may offer all or some
portion of the notes or the common stock to be offered by
them, we cannot estimate the amount of any sales.
The initial purchaser of the notes or its affiliates have
engaged in, and may in the future engage in, investment
banking and other commercial dealings in the ordinary course
of business with us. They have received customary fees and
commissions for these transactions. The initial purchaser
of the notes is an affiliate of a lender under our bank
credit facility. Such affiliates of the initial purchaser
received their proportionate share of the repayment by us of
amounts outstanding under our bank credit facility from the
sale of the notes to the initial purchaser. To our
knowledge, none of the other selling securityholders has had
any position, office or other material relationship with us
or our affiliates within the past three years.
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
AAM Zazove International
Convertible Fund L.P. $ 500,000 * 34,965
Absolute Return Fund Ltd. 150,000 * 10,489
Advent Convertible Master
Cayman L.P. 4,940,000 * 345,454
AIG SoundShore Holdings Ltd. 7,556,000 1.25% 528,391
AIG SoundShore Opportunity
Holding Fund Ltd. 4,354,000 * 304,475
AIG SoundShore Strategic
Holding Fund Ltd. 2,590,000 * 181,118
American Motorist Insurance
Company 658,000 * 46,013
American Samoa Government 27,000 * 1,888
Arapahoe County Colorado 64,000 * 4,475
BP Amoco PLC, Master Trust 1,084,000 * 75,804
40
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
Beta Equities Inc. 6,115,000 1.01% 427,622
CALAMOS Market Neutral Fund -
CALAMOS Investment Trust 2,000,000 * 139,860
Chrysler Corporation Master
Retirement Plan 30,000 * 2,097
Circlet (IMA) Limited 3,000,000 * 209,790
City of New Orleans 264,000 * 18,461
City University of New York 158,000 * 11,048
Commonfund Global Macro Company 842,000 * 58,881
1976 Distribution Trust FBO A.R.
Lauder/Zinterhofer 9,000 * 629
1976 Distribution Trust FBO
Jane A. Lauder 17,000 * 1,188
Delta Air Lines Master Trust
(c/o Oaktree Capital
Management, LLC) 10,000 * 699
Delta Pilots D & S Trust 5,000 * 349
Estate of James Campbell 172,000 * 12,027
Global Bermuda Limited
Partnership 2,000,000 * 139,860
GM Employees Global Grp Pen Tr
(Abs Return Portfolio) 1,500,000 * 104,895
General Motor Welfare Benefit
Trust (VEBA) 3,000,000 * 209,790
Goldman Sachs and Company 8,350,000 1.38% 583,916
Grady Hospital Foundation 139,000 * 9,720
Granville Capital Corporation 3,000,000 * 209,790
HBK Master Fund L.P. 2,500,000 * 174,825
HFR Convertible Arbitrage
Account 435,000 * 30,419
HFR Zazove Master Trust 150,000 * 10,489
Highbridge International LLC 14,500,000 2.40% 1,013,986
Hotel Union & Hotel Industry of
Hawaii 291,000 * 20,349
Independence Blue Cross 280,000 * 19,580
James Campbell Corporation, The 226,000 * 15,804
Jefferies & Company Inc. 7,000 * 489
Lakeshore International, Ltd. 8,250,000 1.37% 576,923
Lexington (IMA) Limited 80,000 * 5,594
Lipper Convertibles, L.P. 5,000,000 * 349,650
Lipper Offshore Convertibles,L.P. 2,500,000 * 174,825
Local Iniatiatives Support
Corporation 66,000 * 4,615
McMahan Securities Co. L.P. 1,450,000 * 101,398
Merced Partners Limited
Partnership 4,500,000 * 314,685
Minnesota Power and Light 285,000 * 19,930
Municipal Employees 239,000 * 16,713
41
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
Nabisco Holdings 37,000 * 2,587
New Orleans Firefighters
Pension / Relief Fund 144,000 * 10,069
Occidental Petroleum
Corporation 267,000 * 18,671
Omega Capital Investors, L.P. 761,000 * 53,216
Omega Capital Partners, L.P. 9,407,000 1.56% 657,832
Omega Overseas Partners, Ltd. 7,875,000 1.30% 550,699
OCM Convertible Trust 30,000 * 2,097
Oz Master Fund, Ltd. 4,770,000 * 333,566
Partner Reinsurance Company Ltd. 60,000 * 4,195
Peoples Benefit Life Insurance
Company TEAMSTERS 1,000,000 * 69,930
Policeman and Firemen
Retirement System of the City
of Detroit 693,000 * 48,461
Pro-mutual 780,000 * 54,545
Ramius Capital Group 279,000 * 19,510
Raytheon Master Pension Trust 219,000 * 15,314
RCG Latitude Master Fund Ltd. 1,115,000 * 77,972
RCG Multi Strategy LP 106,000 * 7,412
RJR Reynolds 112,000 * 7,832
Retail Clerks Pension Trust 1,500,000 * 104,895
Retail Clerks Pension Trust #2 1,000,000 * 69,930
2000 Revocable Trust FBO A.R.
Lauder/Zinterhofer 9,000 * 629
St. Albans Partners Ltd. 4,000,000 * 279,720
San Diego County Employees
Retirement Association 650,000 * 45,454
SG Cowen Securities Corporation 200,000 * 13,986
Shell Pension Trust 653,000 * 45,664
State Employees' Retirement
Fund of the State of Delaware 10,000 * 699
State of Connecticut Combined
Investment Funds 20,000 * 1,398
State of Maryland Retirement
Agency 3,342,000 * 233,706
Susquehanna Capital Group 11,500,000 1.90% 804,195
Tamarack International, Ltd. 4,750,000 * 332,167
TQA Master Fund Ltd. 3,000,000 * 209,790
TQA Master Plus Fund Ltd. 3,000,000 * 209,790
Tribeca Investments, L.L.C. 4,500,000 * 314,685
Vanguard Convertible Securities
Fund, Inc. 675,000 * 47,202
Viacom Inc. Pension Plan Master
Trust 31,000 * 2,167
42
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
Zazove Hedged Convertible Fund
L.P. 600,000 * 41,958
Zazove Income Fund L.P. 500,000 * 34,965
Zurich Institutional Benchmarks 162,000 * 11,328
Zurich Institutional Benchmarks
Master Fund Ltd. 600,000 * 41,958
----------- ----- ----------
TOTAL 161,650,000 26.77% 11,304,162
=========== ===== ==========
___________________
* less than 1%
(1) The notes are convertible into shares of class A or
class B common stock at a conversion price of $14.30
per share.
43
PLAN OF DISTRIBUTION
The selling securityholders and their successors,
including their transferees, pledgees or donees or their
successors, may sell the notes and our common stock into
which the notes are convertible directly to purchasers or
through underwriters, brokers-dealers or agents, who may
receive compensation in the form of discounts, concessions
or commissions from the selling securityholders or the
purchasers. These discounts, concessions or commissions as
to any particular underwriter, broker-dealer or agent may be
in excess of those customary in the types of transactions
involved.
The notes and common stock issuable upon conversion of
the notes may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at
prices related to the prevailing market prices, at varying
prices determined at the time of sale, or at negotiated
prices. These sales may be effected in transactions, which
may involve crosses or block transactions:
* on any national securities exchange or U.S.
inter-dealer system of a registered national
securities association on which the notes or our
common stock may be listed or quoted at the time
of sale;
* in the over-the-counter market;
* otherwise than on these exchanges or systems
or in the over-the-counter market;
* through the writing of options, whether the
options are listed on an options exchange or
otherwise; or
* through the settlement of short sales.
In connection with the sale of the notes and common stock
issuable upon conversion of the notes, the selling
securityholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in
turn engage in short sales of the notes or common stock in
the course of hedging the positions they assume. The selling
securityholders also may sell the notes or common stock
issuable upon conversion of the notes, short and deliver
these securities to close out their short positions, or loan
or pledge the notes or common stock to broker-dealers that
in turn may sell these securities.
The aggregate proceeds to the selling securityholders
from the sale of the notes or common stock offered by them
will be the purchase price of the notes or common stock less
discounts and commissions, if any. Each of the selling
securityholders reserves the right to accept and, together
with their agents from time to time, to reject, in whole or
in part, any proposed purchase of notes or common stock to
be made directly or through agents. We will not receive any
of the proceeds from the sales by selling securityholders.
Our class A and class B common stock are traded on the
New York Stock Exchange under the symbols "FCXA" and "FCX,"
respectively. The notes sold pursuant to this prospectus
will no longer be eligible for trading on The PORTAL Market.
We do not intend to list the notes for trading on any
national securities exchange or on the New York Stock
Exchange and can give no assurance about the development of
any trading market for the notes.
In order to comply with the securities laws of some
states, if applicable, the notes and common stock may be
sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the
notes and common stock may not be sold unless they have been
registered or qualified for sale or an exemption from
registration or qualification requirements is available and
is complied with.
The selling securityholders and any underwriters, broker-
dealers or agents that participate in the sale of the notes
and common stock may be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933. Any discounts,
commissions, concessions or profit they earn on any resale
of the shares may be underwriting discounts and commissions
under the Securities Act. Selling securityholders who are
"underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933 will be subject to the prospectus
delivery requirements of the Securities Act of 1933. The
selling securityholders have acknowledged that they
understand their obligations to
44
comply with the provisions
of the Securities Exchange Act of 1934 and the rules
thereunder relating to stock manipulation, particularly
Regulation M.
In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 or Rule 144A of
the Securities Act of 1933 may be sold under Rule 144 or
Rule 144A rather than under this prospectus. A selling
securityholder may not sell any notes or common stock
described in this prospectus and may not transfer, devise or
gift these securities by other means not described in this
prospectus.
To the extent required, the specific notes or shares of
our common stock to be sold, the names of the selling
securityholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts
with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of
which this prospectus is a part.
We entered into a registration rights agreement for the
benefit of holders of the notes to register their notes and
our common stock under applicable federal and state
securities laws under specific circumstances and at specific
times. The registration rights agreement provides for cross-
indemnification of the selling securityholders and us and
our respective directors, officers and controlling persons
against specific liabilities in connection with the offer
and sale of the notes and our common stock, including
liabilities under the Securities Act of 1933.
We have agreed to pay substantially all of the expenses
of registering the notes and common stock under the
Securities Act of 1933 and of compliance with blue sky laws,
including registration and filing fees, printing and
duplicating expenses, legal fees of our counsel, fees for
one legal counsel retained by the selling securityholders
and fees of the trustee under the indenture pursuant to
which we originally issued the notes and of the registrar
and transfer agent of our common stock. If the notes or the
common stock into which the notes may be converted are sold
through underwriters or broker-dealers, the selling
securityholders will be responsible for underwriting
discounts, underwriting commissions and agent commissions.
Under the registration rights agreement, we are obligated
to use reasonable efforts to keep the registration statement
effective until, and therefore this offering will terminate
on, the earlier of: (1) the date on which all securities
offered under this prospectus have been sold pursuant to
this prospectus, and (2) the date on which all outstanding
securities held by non-affiliates of ours may be resold
without registration under the Securities Act of 1933
pursuant to Rule 144(k) under the Securities Act of 1933.
45
LEGAL MATTERS
The validity of the securities will be passed upon for us
by Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P.
EXPERTS
Our audited financial statements and schedules included
in this prospectus and incorporated by reference to our
Annual Report on Form 10-K for the year ended December 31,
2000 have been audited by Arthur Andersen LLP, independent
public accountants as indicated in their reports contained
in our Annual Report on Form 10-K. We have relied upon
their authority as experts in accounting and auditing in
giving these reports. Our future audited financial
statements and schedules and the reports of our independent
public accountants also will be incorporated by reference in
this prospectus in reliance upon the authority of our
accountants as experts in giving those reports to the extent
our auditors have audited those financial statements and
consented to the use of their reports thereon.
Our reserves as of December 31, 2000 included in this
prospectus and incorporated by reference to our Annual
Report on Form 10-K for the year ended December 31, 2000,
have been verified by Independent Mining Consultants, Inc.
This reserve information has been included in this
prospectus and incorporated by reference herein in reliance
upon the authority of Independent Mining Consultants, Inc.
as experts in mining, geology and reserve determination.
46
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the information and reporting
requirements of the Securities Exchange Act of 1934, as
amended, under which we file periodic reports, proxy
statements and other information with the SEC. Copies of the
reports, proxy statements and other information may be
examined without charge at the following SEC public
reference rooms: 450 Fifth Street, N.W. Room 1024,
Washington, D.C. 20549; and 500 West Madison Street, Suite
1400, Chicago, IL 60661. We also file information
electronically with the SEC. Our electronic filings are
available from the SEC's Internet site at
http://www.see.gov. Copies of all or a portion of our
filings may also be obtained from the Public Reference
Section of the SEC upon payment of prescribed fees. Please
call the SEC at 800-SEC-0330 for further information.
We have agreed that if, at any time that the notes or the
common stock issuable upon conversion of the notes are
"restricted securities" within the meaning of the Securities
Act of 1933 and we are not subject to the information
reporting requirements of the Securities Exchange Act of
1934, we will furnish to holders of the notes and such
common stock and to prospective purchasers designated by
them the information required to be delivered pursuant to
Rule 144A(d) (4) under the Securities Act of 1933 to permit
compliance with Rule 144A in connection with resales of the
notes and such common stock.
We are "incorporating by reference" specified documents
that we file with the SEC, which means:
* incorporated documents are considered part of this
prospectus;
* we are disclosing important information to you by
referring you to those documents, and
* information that we file in the future with the SEC
will automatically update and supersede this prospectus.
We incorporate by reference the documents listed below
and any documents that we file with the SEC under Section
13(c) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this
prospectus and before the end of the offering of the notes:
(1) our current reports on Form 8-K, filed on January
2, 2001, July 30, 2001, August 2, 2001 and
September 26, 2001;
* our annual report on Form 10-K for the fiscal
year ended December 31, 2000 filed March 23, 2001;
* our quarterly reports on Form 10-Q for the
fiscal quarters ended March 31, 2001 filed May 7,
2001; June 30, 2001 filed July 30, 2001; and
September 30, 2001 filed November 1, 2001.
At your request, we will provide you with a free copy of
any of these filings (except for exhibits, unless the
exhibits are specifically incorporated by reference into the
filing). You may request copies by writing or calling us at:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Christopher D. Sammons
Investor Relations
(504) 582-4000
47
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
$603,750,000
8 1/4% Convertible Senior Notes due 2006
Freeport-McMoRan Copper & Gold Inc.
Class A Common Stock
Class B Common Stock
PROSPECTUS
November 5, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated fees and expenses payable by us in
connection with the issuance and distribution of the
securities being registered are as follows:
SEC registration fee $150,750
Printing costs 20,000*
Legal fees and expenses 70,000*
Accounting fees and expenses 30,000*
Rating agency fees 50,000*
Blue sky fees and expenses 10,000*
Trustee's and registrar's fees 20,000*
Miscellaneous 9,250*
--------
Total $360,000*
========
*All amounts listed above other than the registration
fee are estimated.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware
empowers us to indemnify, subject to the standards
prescribed in that Section, any person in connection with
any action, suit or proceeding brought or threatened by
reason of the fact that the person is or was our director,
officer, employee or agent. Article VIII of our Certificate
of Incorporation and Article XXV of our by-laws provides
that each person who was or is made a party to, or is
threatened to be made a party to, or is otherwise involved
in, any action, suit, or proceeding by reason of the fact
that the person is or was our director, officer, employee or
agent shall be indemnified and held harmless by us to the
fullest extent authorized by the General Corporation Law of
Delaware. The indemnification covers all expenses,
liability and loss reasonably incurred by the person and
includes attorneys' fees, judgments, fines and amounts paid
in settlement. The rights conferred by Article VIII of our
Certificate of Incorporation and Article XXV of our by-laws
are contractual rights and include the right to be paid by
us the expenses incurred in defending the action, suit or
proceeding in advance of its final disposition.
Article VIII of our Certificate of Incorporation
provides that our directors will not be personally liable to
us or our stockholders for monetary damages resulting from
breaches of their fiduciary duty as directors except
(1) for any breach of the duty of loyalty to us or our
stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation
of law, (3) under Section 174 of the General Corporation Law
of Delaware, which makes directors liable for unlawful
dividend or unlawful stock repurchases or redemptions or
(4) transactions from which directors derive improper
personal benefit.
We have an insurance policy insuring our directors and
officers against certain liabilities, including liabilities
under the Securities Act of 1933.
Item 16. Exhibits.
1.1 Purchase Agreement dated as of August 7, 2001
among the Registrants and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
2.1 Agreement dated as of May 2, 1995 by and
between Freeport-McMoRan Inc. (FTX) and
Freeport-McMoRan Copper & Gold Inc. (FCX) and The
RTZ Corporation PLC., RTZ Indonesia Limited, and
RTZ America, Inc. (the Rio Tinto Agreement).
2.2 Amendment dated May 31, 1995 to the Rio Tinto
Agreement.
II-1
2.3 Distribution Agreement dated as of July 5,
1995 between FTX and FCX.
3.1 Composite Copy of the Certificate of
Incorporation of FCX.
4.1 Indenture dated as of August 7, 2001 among
the Registrants and The Bank of New York, including
the form of the notes.
4.2 Registration Rights Agreement dated as of
August 7, 2001 among the Registrants and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
4.3 Collateral Pledge and Security Agreement
dated as of August 7, 2001 between FCX Investment
Ltd. and The Bank of New York.
4.4 Senior Indenture dated as of November 15,
1996 from FCX to The Chase Manhattan Bank, as
Trustee.
4.5 First Supplemental Indenture dated as of
November 18, 1996 from FCX to The Chase Manhattan
Bank, as Trustee, providing for the issuance of the
Senior Notes and supplementing the Senior Indenture
dated November 15, 1996 from FCX to such Trustee,
providing for the issuance of Debt Securities.
5.1 Opinion of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P. as to the
legality of the securities.
10.1 Contract of Work dated December 30, 1991
between the Government of the Republic of Indonesia
and PT Freeport Indonesia.
10.2 Contract of Work dated August 15, 1994
between the Government of the Republic of Indonesia
and PT Irja Eastern Minerals Corporation.
10.3 Concentrate Purchase and Sales Agreement
dated effective December 11, 1996 between PT
Freeport Indonesia and PT Smelting.
10.4 Participation Agreement dated as of October
11, 1996 between PT Freeport Indonesia and P.T.
RTZ-CRA Indonesia with respect to a certain
contract of work.
10.5 Second Amended and Restated Joint Venture and
Shareholders' Agreement dated as of December 11,
1996 among Mitsubishi Materials Corporation, Nippon
Mining and Metals Company, Limited and PT Freeport
Indonesia.
10.6 1995 Long-Term Performance Incentive Plan of
FCX.
10.7 FCX President's Award Program.
10.8 FCX 1995 Stock Option Plan.
12.1 Computation of Ratio of Earnings to Fixed
Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P. included as
part of Exhibit 5.
23.3 Consent of Independent Mining Consultants,
Inc.
II-2
24.1 Powers of Attorney.
25.1 Form T-1; Statement of Eligibility of the
Trustee under the Trust Indenture Act.
Item 17. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
this registration statement; notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
SEC pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective
registration statement.
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this registration
statement or any material change to such
information in this registration statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(b) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(2) The undersigned registrant hereby undertakes
that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expenses
incurred or paid by a director, officer or
controlling person of the Registrant in the
successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the Registrant will,
II-3
unless in the
opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to
file an application for the purpose of determining
the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture
Act of 1939 in accordance with the rules and
regulations prescribed by the SEC under section
305(b)(2) of the Trust Indenture Act.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, Freeport-McMoRan Copper & Gold Inc. certifies that it
had reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New Orleans,
Louisiana, on November 5, 2001.
Freeport-McMoRan Copper & Gold Inc.
By: /S/ Richard C. Adkerson
-----------------------
Richard C. Adkerson
President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons and in the capacities indicated on
November 5, 2001.
Signature Title
---------- -----
Chairman of the Board,
* Chief Executive
James R. Moffett Officer and Director
(Principal Executive
Officer)
Vice Chairman of the
* Board and Director
B. M. Rankin, Jr.
/s/Richard C. Adkerson President and
Richard C. Adkerson Chief Financial
Officer (Principal
Financial Officer)
Vice President and
Controller -
* Financial Reporting
C. Donald Whitmire, Jr. (Principal Accounting
Officer)
* Director
Robert J. Allison, Jr.
* Director
Robert W. Bruce III
* Director
R. Leigh Clifford
S-1
* Director
Robert A. Day
* Director
Gerald J. Ford
* Director
H. Devon Graham, Jr.
* Director
Steven Green
* Director
Oscar L. Groeneveld
* Director
J. Bennett Johnston
* Director
Bobby Lee Lackey
* Director
Gabrielle K. McDonald
* Director
J. Stapleton Roy
* Director
J. Taylor Wharton
*By: /S/Richard C. Adkerson
Richard C. Adkerson
Attorney-in-Fact
S-2
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, FCX Investment Ltd. certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in New Orleans, Louisiana, on
November 5, 2001.
FCX Investment Ltd.
By: /S/Richard C. Adkerson
Richard C. Adkerson
President
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons and in the capacities indicated on
November 5, 2001.
Signature Title
--------- -----
/s/Richard C. Adkerson
Richard C. Adkerson President and Director
(Prinicipal Executive, Financial
and Accounting Officer and
Authorized Representative in
the United States)
S-3
EXHIBIT INDEX
1.1 Purchase Agreement dated as of August 7, 2001
among the Registrants and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
2.1 Agreement dated as of May 2, 1995 by and
between Freeport-McMoRan Inc. (FTX) and
Freeport-McMoRan Copper & Gold Inc. (FCX) and The
RTZ Corporation PLC., RTZ Indonesia Limited, and
RTZ America, Inc. (the Rio Tinto Agreement).
2.2 Amendment dated May 31, 1995 to the Rio Tinto
Agreement.
2.3 Distribution Agreement dated as of July 5,
1995 between FTX and FCX.
3.1 Composite Copy of the Certificate of
Incorporation of FCX.
4.1 Indenture dated as of August 7, 2001 among
the Registrants and The Bank of New York,
including the form of the notes.
4.2 Registration Rights Agreement dated as of
August 7, 2001 among the Registrants and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
4.3 Collateral Pledge and Security Agreement
dated as of August 7, 2001 between FCX Investment
Ltd. and The Bank of New York.
4.4 Senior Indenture dated as of November 15,
1996 from FCX to The Chase Manhattan Bank, as
Trustee.
4.5 First Supplemental Indenture dated as of
November 18, 1996 from FCX to The Chase Manhattan
Bank, as Trustee, providing for the issuance of
the Senior Notes and supplementing the Senior
Indenture dated November 15, 1996 from FCX to such
Trustee, providing for the issuance of Debt
Securities.
5.1 Opinion of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P. as to the
legality of the securities.
10.1 Contract of Work dated December 30, 1991
between the Government of the Republic of
Indonesia and PT Freeport Indonesia.
10.2 Contract of Work dated August 15, 1994
between the Government of the Republic of
Indonesia and PT Irja Eastern Minerals
Corporation.
10.3 Concentrate Purchase and Sales Agreement
dated effective December 11, 1996 between PT
Freeport Indonesia and PT Smelting.
10.4 Participation Agreement dated as of October
11, 1996 between PT Freeport Indonesia and P.T.
RTZ-CRA Indonesia with respect to a certain
contract of work.
10.5 Second Amended and Restated Joint Venture and
Shareholders' Agreement dated as of December 11,
1996 among Mitsubishi Materials Corporation,
Nippon Mining and Metals Company, Limited and PT
Freeport Indonesia.
10.6 1995 Long-Term Performance Incentive Plan of
FCX.
10.7 FCX President's Award Program.
E-1
10.8 FCX 1995 Stock Option Plan.
12.1 Computation of Ratio of Earnings to Fixed
Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P. included as
part of Exhibit 5.
23.3 Consent of Independent Mining Consultants,
Inc.
24.1 Powers of Attorney
25.1 Form T-1; Statement of Eligibility of the
Trustee under the Trust Indenture Act.
E-2