Cyprus Amax Minerals Reports a 1999 Second Quarter Loss

Of $34 Million from Continuing Operations DENVER (PROTEXT) - Cyprus Amax Minerals Company (NYSE: CYM) today reported a loss of $34 million from continuing operations for the 1999 second quarter, or 43 cents per share. This excludes a special charge of $13 million for the sale of the coal subsidiary and a $1 million after-tax loss from discontinued Domestic Coal operations. This compared with a 1998 loss from continuing operations of $35 million, or a loss of 43 cents per share. The 1998 loss included special charges of $38 million. The slight improvement was primarily attributable to lower copper cost of sales of 14 percent, lower exploration expenses and the absence of 1998 legal settlements, partially offset by lower metal realizations -- 20 percent in copper and 23 percent in molybdenum. In the second quarter of 1999, Cyprus Amax recorded a pre-tax gain of $3 million but an after-tax charge of $13 million, or 14 cents per share, on the sale of its coal subsidiary. In the second quarter of 1998, Cyprus Amax recorded an after-tax charge of $12 million, or 13 cents per share, on the sale of certain Appalachian and Midwest coal properties, and an after-tax charge of $26 million, or 27 cents per share, for settlements of long- standing legal actions primarily associated with the oil and gas properties acquired in the Amax merger and subsequently sold in 1994. Including the discontinued coal operations and special items in 1999 and 1998, the 1999 second quarter loss was $48 million, or 58 cents per share, compared with a 1998 second quarter loss of $36 million, or 44 cents per share. For the first six months of 1999, Cyprus Amax reported a loss of $74 million, or 92 cents per share, compared with a 1998 loss of $32 million, or 44 cents per share. Milton H. Ward, Chairman, President, and Chief Executive Officer stated, "On June 30, 1999, Cyprus Amax completed the sale of its Cyprus Amax Coal Company subsidiary to RAG International Mining GmbH. Under the terms of the sale, Cyprus Amax received cash payments of $1,039 million and RAG assumed debt of $46 million. RAG assumed other long-term obligations of approximately $300 million and Cyprus Amax expects to receive certain future production payments and insurance settlements from the Willow Creek mine. Cyprus Amax's Australian coal assets were not included in the transaction. Because of Cyprus Amax's expected tax position in 1999, cash federal and state income tax payments are expected to be about $55 million for 1999." Ward added, "We were excited to announce last week the strategic combination of Cyprus Amax with Asarco. This will result in a company with larger copper ore reserves and the financial capacity to develop, enhance and expand our copper assets. The combined company will have a beneficial interest in annual copper production of approximately 2 billion pounds, which will make us the second largest copper producer in the world. Additionally, the combined copper ore reserves will be approximately 62 billion pounds of contained copper." Ward continued, "The merger is expected to initially reduce the combined expenses of Cyprus Amax and Asarco by $150 million. This will come from reductions in corporate overhead, administrative costs, depreciation, and from operating synergies and efficiencies resulting from the close proximity of the mines. Subject to regulatory approvals and the approvals of the shareholders of both companies, we expect the merger to close in the fourth quarter of 1999." Ward concluded, "In spite of the continued weak copper and molybdenum realizations during the second quarter, our Copper/Molybdenum division has continued to show strong operational results. Copper cash costs were 51 cents per pound, with our domestic cash costs being in the mid-50 cents and our South American properties near 40 cents. The ability of the Copper/Molybdenum division to lower cash costs by about 30 percent in the last 3 years reflects their unwavering commitment to our Quest 21 quality management program and the desire to be the best. We believe that our domestic operations are in a cost leadership position in the southwest United States and this will add a lot to achieving the operating synergies and efficiencies that will come from the combined Cyprus Amax and Asarco company." SECOND QUARTER HIGHLIGHTS (ALL COMPARISONS ARE VERSUS SECOND QUARTER 1998 UNLESS OTHERWISE STATED): (Segment income is earnings before corporate overhead, interest, equity and other, income taxes, and minority interest.) COPPER/MOLYBDENUM -- Copper/Molybdenum earned $16 million, $28 million less than in 1998. -- Copper realizations averaged 70 cents per pound, 17 cents lower than in 1998. -- Copper production increased to 257 million pounds from 234 million pounds. -- Copper net cash costs dropped to 51 cents per pound, a reduction of 6 cents per pound, reflecting lower cost production from domestic and South American operations. Excluding the by- product credit, net cash costs were 11 cents per pound lower or 16 percent. This improvement in cash costs reflects the mines' continuous focus and commitment to the Quest 21 quality management programs, which have resulted in on-going productivity and cost improvements. -- Cost of goods sold dropped to 63 cents per pound, a reduction of 10 cents per pound, due to lower worldwide costs. -- Copper price protection strategies are in place for the second half of 1999 that will ensure a minimum average realization on an LME basis of 69 cents per pound, at a cost of 2 cents per pound, on 400 million pounds of production. -- Primary molybdenum earnings were $1 million, $15 million lower than in 1998 primarily due to $1.23 per pound lower molybdenum realizations and lower sales volumes. COAL-DISCONTINUED OPERATIONS -- Coal operations earned $1 million, which was $17 million lower than in 1998. The 1999 result excludes a pre-tax gain on the sale of the coal subsidiary of $3 million. The 1998 result excludes the $16 million loss on the sale of certain Appalachian and Midwest coal properties. The after-tax loss was $1 million in both 1999 and 1998. -- Earnings decreased primarily due to lower earnings in Pennsylvania resulting from the delay in the start-up of the new longwall in the Northeast district and lower earnings in Utah due to the continued recovery efforts resulting from the underground fire at the Willow Creek mine that occurred in late 1998. In June 1999, the Twentymile mine had a longwall move that was originally planned for the third quarter. Additionally, in the third quarter of 1999 a portion of the Willow Creek insurance recovery is expected. EXPLORATION -- Exploration expense was $4 million, $12 million lower than in 1998, principally due to constraining exploration spending in 1999. OTHER -- All Other Minerals reported a loss of $3 million compared to a loss of $25 million in 1998. The $22 million variance is primarily due to the absence of a litigation settlement associated with the oil and gas properties acquired with the Amax merger and subsequently sold in 1994. -- Revenue of $277 million was $157 million lower than in 1998 due to lower copper and molybdenum realizations, and the absence of revenues due to the sales of eastern coal properties and lithium and the merger of Amax Gold in 1998. -- Equity Investments and Other incurred a loss of $8 million compared with a $2 million loss in 1998. Oakbridge reported a loss of $5 million compared with a $2 million loss in 1998. The loss is due to the effects of an Australian dollar hedge book, which should be mostly closed out by the end of 1999, and higher production costs. Additionally, equity losses of $3 million for Kinross were attributable to the current low gold prices. -- Net interest expense of $30 million was $9 million less than 1998 reflecting the significant reduction in debt. -- During the quarter, $200 million was borrowed against the Revolving Credit Agreement. The funds were used to repay $86 million of Cyprus Australia Coal debt and $50 million on the Cyprus Amax term loan. The $200 million outstanding on the revolver will be repaid in the third quarter. -- Since the Board approval in August 1998 of a program to buy back common shares on the open market, 1.5 million shares have been purchased through July 20, 1999 at an average cost of $10.74 per share or $16 million. No repurchases were made during the second quarter of 1999. In view of the announced merger, the repurchase program has been suspended. Cyprus Amax Minerals Company, headquartered in Englewood, Colorado, is a leading producer of copper, the world's largest producer of molybdenum, and holds a 30% interest in Kinross Gold Corporation. Cyprus Amax is exploring for minerals worldwide. Actual results may vary materially from any forward-looking statements the Company makes. Refer to the Cautionary Statement and Risk Factors contained in the Company's 1998 Form 10-K. To obtain a faxed copy of this or any Cyprus Amax news release, call 1-800-758-5804, ext. 224250. News releases can also be accessed via the Internet at the Cyprus Amax Web Site, http://www.cyprusamax.com. Cyprus Amax Minerals Company Key Operating Data Three and Six Months Ended June 30 Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 Copper/Molybdenum Copper Sales Volume - Millions of Lbs. 279 295 583 568 Produced Copper Sold - Millions of Lbs. 233 251 519 494 Copper Production - Millions of Lbs. 257 234 511 467 Average Realization - $/Lb. of Copper .70 .87 .68 .87 Cost of Sales - $/Lb. .63 .73 .64 .74 Net Cash Cost - $/Lb. .51 .57 .50 .57 Full Cost - $/Lb. .63 .72 .63 .72 Molybdenum Sales - Millions of Lbs. 14 16 28 32 Molybdenum Production - Millions of Lbs. 15 16 31 31 Average Realization - $/Lb. 4.08 5.31 4.11 5.20 Coal(1) Sales - Millions of Tons(2) 16 19 33 37 Production - Millions of Tons(2) 15 18 32 36 Average Realization - $/Ton 11.65 11.35 11.45 11.60 Average Cost of Sales - $/Ton 11.63 10.58 10.94 10.63 Average Cash Cost - $/Ton 9.75 8.75 9.26 8.89 Average Unit Cost - $/Ton 11.63 10.56 10.81 10.69 (1) Restated in 1998 to exclude sold properties in the second quarter of 1998. (2) Includes Oakbridge equity share. Cyprus Amax Minerals Company Consolidated Statement of Income Three and Six Months Ended June 30 (In Millions, Except Per Share Data) hree Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 Revenue $277 $434 $560 $870 Costs and Expenses Cost of Sales 206 299 428 606 Selling and Administrative Expenses 18 46 34 69 Depreciation, Depletion, and Amortization 52 74 104 148 Write-Downs and Special Charges -- 4 -- 4 Exploration 4 16 8 25 Total Costs and Expenses 280 439 574 852 Income (Loss) From Operations (3) (5) (14) 18 Interest Income 3 4 7 7 Interest Expense (34) (43) (69) (90) Capitalized Interest 1 -- 2 3 Equity Investments and Other (8) (2) (18) (2) Loss from Continuing Operations Before Income Taxes and Minority Interest (41) (46) (92) (64) Income Tax Benefit (Provision) 8 10 14 4 Minority Interest (1) 1 -- 2 Loss from Continuing Operations (34) (35) (78) (58) Income (Loss) from Operations of Discontinued Domestic Coal Division, Net of Applicable Taxes of $1 (1) (1) 17 26 Loss on Disposal of Domestic Coal Division, Net of Applicable Taxes of $16 (13) -- (13) -- Net Loss (48) (36) (74) (32) Preferred Stock Dividends (5) (5) (9) (9) Loss Applicable to Common Shares $(53) $(41) $(83) $(41) Earnings (Loss) Per Common Share Basic and Diluted(1) Loss from Continuing Operations $(.43) $(.43) $(.96) $(.72) Income (Loss) from Discontinued Domestic Coal Division, Net of Taxes $(.15) $(.01) $.04 $.28 Weighted Average Common Shares Outstanding Basic 90.5 93.7 90.5 93.7 Diluted 100.6 103.3 100.3 103.3 Common Shares Outstanding at End of Period 90.5 93.7 90.5 93.7 (1) Diluted earnings (loss) per share were anti-dilutive. Cyprus Amax Minerals Company Financial Summary by Business Segment Three and Six Months Ended June 30 (In Millions) Three Months Ended June 30, Six Months Ended June 30, Earnings Earnings (Loss) from (Loss) from Sales Revenue Operations Sales Revenue Operations 1999 1998 1999 1998 1999 1998 1999 1998 Copper/Molybdenum $271 $355 $16 $44 $547 $690 $23 $81 Exploration -- -- (4) (16) -- -- (8) (25) All Other Minerals 6 79 (3) (25) 13 180 (5) (17) Total $277 $434 9 3 $560 $870 10 39 Corporate (12) (8) (24) (21) Interest, Equity and Other (38) (41) (78) (82) Loss from Continuing Operations Before Income Taxes and Minority Interest (41) (46) (92) (64) Income Tax Benefit (Provision) 8 10 14 4 Minority Interest (1) 1 -- 2 Loss from Continuing Operations (34) (35) (78) (58) Income (Loss) from Operations of Discontinued Domestic Coal Division, Net of Applicable Taxes of $1 (1) (1) 17 26 Loss on Disposal of Domestic Coal Division, Net of Applicable Taxes of $16 (13) -- (13) -- Net Loss $(48) $(36) $(74) $(32) Cyprus Amax Minerals Company Consolidated Balance Sheet (In Millions) June 30, December 31, 1999 1998 ASSETS Cash and Cash Equivalents $1,275 $353 Accounts Receivable, Net 37 48 Notes Receivable, Net 46 69 Inventories 294 386 Prepaid Expenses 28 52 Deferred Income Taxes 32 13 Total Current Assets 1,712 921 Properties - At Cost, Net 2,546 3,842 Equity Investments 328 345 Other Assets 160 233 Total Assets $4,746 $5,341 LIABILITIES and SHAREHOLDERS' EQUITY Short-Term Debt and Current Portion of Long-Term Debt $328 $161 Other Current Liabilities 414 510 Long-Term Debt 1,499 1,677 Capital Lease Obligations 26 41 Deferred Employee and Retiree Benefits 179 345 Deferred Closure, Reclamation and Environmental 178 300 Deferred Income Taxes 14 57 Other Noncurrent Liabilities and Deferred Credits 29 59 Minority Interest 20 34 Total Shareholders' Equity 2,059 2,157 Total Liabilities and Shareholders' Equity $4,746 $5,341 Cyprus Amax Minerals Company Consolidated Statement of Cash Flows Six Months Ended June 30 (In Millions) Six Months Ended June 30, 1999 1998 Operating Activities Net Loss $(74) $(32) Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities Depreciation, Depletion, and Amortization 146 205 Write-downs and Special Charges -- 4 Deferred Income Taxes (61) -- Loss (Gain) on Sale of Assets (3) 19 Changes in Assets and Liabilities Net of Effects from Businesses Sold 19 (79) Other, Net 20 12 Net Cash Provided by Operating Activities 47 129 Investing Activities Capital Expenditures (121) (117) Capitalized Interest (3) (3) Advances and Investments, Net to Affiliates (10) (58) Collections on Notes Receivable 3 3 Proceeds from Sale of Assets 1,024 93 Cash Effect of Deconsolidating Amax Gold Inc. -- (17) Net Cash Provided by (Used for) Investing Activities 893 (99) Financing Activities Net Borrowings on Short-Term Debt 219 18 Payments on Short-Term Debt (5) (15) Net Proceeds from Issuance of Long-Term Debt 5 3 Payments on Debt and Other Obligations (171) (51) Payments on Capital Lease Obligations (34) (5) Stock Activity, Net -- -- Dividends to Minority Interests -- (4) Dividends Paid (32) (46) Net Cash Used for Financing Activities (18) (100) Net Increase (Decrease) in Cash and Cash Equivalents 922 (70) Cash and Cash Equivalents at Beginning of Year 353 250 Cash and Cash Equivalents at End of Period $1,275 $180 ots Original Text Service: Cyprus Amax Minerals Company Internet: http://www.newsaktuell.de Contact: Gerald J. Malys, Senior Vice President & Chief Financial Officer, 303-643-5060, or John Taraba, Vice President & Controller, 303-643-5244, both of Cyprus Amax Minerals Company Company News On-Call: http://www.prnewswire.com/comp/224250.html or fax, 800-758-5804, ext. 224250 Web site: http://www.cyprusamax.com Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. Protext is a commercial service providing distribution of press releases from clients, who are identified in the text of Protext reports and who bear full responsibility for their contents.