-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G8JBJyowsvNqMPymk4DsUnlWv4Qf/4Iy2x9C/+LuMwrnPJrL9E3EywnAlrhPnO8Q ITxE9DUd0tJm46VZ1zOCKA== /in/edgar/work/20000802/0000831259-00-000018/0000831259-00-000018.txt : 20000921 0000831259-00-000018.hdr.sgml : 20000921 ACCESSION NUMBER: 0000831259-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FREEPORT MCMORAN COPPER & GOLD INC CENTRAL INDEX KEY: 0000831259 STANDARD INDUSTRIAL CLASSIFICATION: [1000 ] IRS NUMBER: 742480931 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09916 FILM NUMBER: 684132 BUSINESS ADDRESS: STREET 1: 1615 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045824000 FORMER COMPANY: FORMER CONFORMED NAME: FREEPORT MCMORAN COPPER COMPANY INC DATE OF NAME CHANGE: 19910114 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 2000 Commission File Number: 1-9916 Freeport-McMoRan Copper & Gold Inc. Incorporated in Delaware 74-2480931 (IRS Employer Identification No.) 1615 Poydras Street, New Orleans, Louisiana 70112 Registrant's telephone number, including area code: (504) 582-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ On June 30, 2000, there were issued and outstanding 59,600,123 shares of the registrant's Class A Common Stock, par value $0.10 per share, and 93,296,274 shares of its Class B Common Stock, par value $0.10 per share. FREEPORT-McMoRan COPPER & GOLD INC. TABLE OF CONTENTS Page Part I. Financial Information Financial Statements: Condensed Balance Sheets 3 Statements of Operations 4 Statements of Cash Flow 5 Notes to Financial Statements 6 Remarks 8 Report of Independent Public Accountants 9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Part II. Other Information 20 Signature 20 Exhibit Index E-1 2 FREEPORT-McMoRan COPPER & GOLD INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. FREEPORT-McMoRan COPPER & GOLD INC. CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31, 2000 1999 ---------- ---------- (In Thousands) ASSETS Current assets: Cash and cash equivalents $ 5,861 $ 6,698 Accounts receivable 108,568 172,762 Inventories 387,343 368,125 Prepaid expenses and other 32,224 16,869 ---------- ---------- Total current assets 533,996 564,454 Property, plant and equipment, net 3,297,419 3,363,291 Investment in PT Smelting 68,150 66,070 Other assets 85,087 89,101 ---------- ---------- Total assets $3,984,652 $4,082,916 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 345,940 $ 317,339 Current portion of long-term debt and short-term borrowings 205,148 114,789 Unearned customer receipts 58,519 40,235 Accrued income taxes 3,220 42,704 ---------- ---------- Total current liabilities 612,827 515,067 Long-term debt, less current portion: FCX and PT Freeport Indonesia credit facilities 813,000 648,000 Senior notes 450,000 570,000 Infrastructure asset financings 421,621 443,150 Atlantic Copper debt 221,710 230,212 Equipment loans 60,064 65,656 Rio Tinto loan - 30,123 Other notes payable 46,896 46,329 Accrued postretirement benefits and other liabilities 97,171 114,677 Deferred income taxes 564,707 553,394 Minority interests 147,573 181,921 Redeemable preferred stock 487,507 487,507 Stockholders' equity 61,576 196,880 ---------- ---------- Total liabilities and stockholders' equity $3,984,652 $4,082,916 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 FREEPORT-McMoRan COPPER & GOLD INC. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- (In Thousands, Except Per Share Amounts) Revenues $397,348 $470,335 $864,940 $886,171 Cost of sales: Production and delivery 251,481 243,411 511,553 433,298 Depreciation and amortization 54,328 72,384 117,687 143,125 -------- -------- -------- -------- Total cost of sales 305,809 315,795 629,240 576,423 Exploration expenses 1,841 2,158 3,809 5,106 Equity in PT Smelting losses 5,878 4,942 3,637 12,465 General and administrative expenses 16,518 17,251 37,267 32,908 -------- -------- -------- -------- Total costs and expenses 330,046 340,146 673,953 626,902 -------- -------- -------- -------- Operating income 67,302 130,189 190,987 259,269 Interest expense, net (49,813) (47,904) (99,748) (98,223) Other expense, net (3,605) (1,204) (8,379) (3,345) -------- -------- -------- -------- Income before income taxes and minority interests 13,884 81,081 82,860 157,701 Provision for income taxes (18,252) (42,216) (58,725) (82,292) Minority interests in net income of consolidated subsidiaries (4,808) (11,322) (14,580) (21,422) -------- -------- -------- -------- Net income (loss) (9,176) 27,543 9,555 53,987 Preferred dividends (9,437) (8,582) (18,927) (17,316) -------- -------- -------- -------- Net income (loss) applicable to common stock $(18,613) $ 18,961 $ (9,372) $ 36,671 ======== ======== ======== ======== Net income (loss) per share of common stock: Basic $(.12) $.12 $(.06) $.22 ===== ==== ===== ==== Diluted $(.12) $.12 $(.06) $.22 ===== ==== ===== ==== Average common shares outstanding: Basic 158,379 163,465 159,851 163,741 ======= ======= ======= ======= Diluted 158,379 164,406 159,851 164,355 ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements. 4 FREEPORT-McMoRan COPPER & GOLD INC. STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended June 30, --------------------- 2000 1999 -------- --------- (In Thousands) Cash flow from operating activities: Net income $ 9,555 $ 53,987 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 117,687 143,125 Deferred income taxes 13,575 35,050 Equity in PT Smelting losses 3,637 12,465 Minority interests' share of net income 14,580 21,422 Other 14,795 12,310 (Increases) decreases in working capital: Accounts receivable 59,542 32,604 Inventories (16,295) (20,173) Prepaid expenses and other (878) (1,139) Accounts payable and accrued liabilities 68,258 (4,983) Accrued income taxes (56,222) (6,112) --------- --------- Decrease in working capital 54,405 197 --------- --------- Net cash provided by operating activities 228,234 278,556 --------- --------- Cash flow from investing activities: PT Freeport Indonesia capital expenditures (87,376) (72,841) Atlantic Copper capital expenditures (3,871) (3,728) Investment in PT Smelting (5,717) - Other (6,442) (833) --------- --------- Net cash used in investing activities (103,406) (77,402) --------- --------- Cash flow from financing activities: Net repayments to Rio Tinto (60,564) (107,515) Proceeds from other debt 368,538 131,027 Repayment of other debt (249,919) (182,247) Purchase of FCX common shares (122,358) (7,921) Cash dividends paid: Preferred stock (18,980) (19,204) Minority interests (30,808) (7,367) Other (11,574) (9,242) --------- --------- Net cash used in financing activities (125,665) (202,469) --------- --------- Net decrease in cash and cash equivalents (837) (1,315) Cash and cash equivalents at beginning of year 6,698 5,877 --------- --------- Cash and cash equivalents at end of period $ 5,861 $ 4,562 ========= =========
The accompanying notes are an integral part of these financial statements. 5 FREEPORT-McMoRan COPPER & GOLD INC. NOTES TO FINANCIAL STATEMENTS 1. EARNINGS PER SHARE Freeport-McMoRan Copper & Gold Inc.'s (FCX) basic net income (loss) per share of common stock was calculated by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share of common stock was calculated by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period plus the net effect of dilutive stock options. Stock options representing less than 0.1 million shares in the second quarter of 2000 and 0.7 million shares in the 2000 six-month period that otherwise would have been considered dilutive were excluded from the diluted net income (loss) per share calculation because of the net losses for the periods. Dilutive stock options represented 0.9 million shares in the second quarter of 1999 and 0.6 million shares in the 1999 six-month period. Options excluded from the computation of diluted net income (loss) per share of common stock, because their exercise prices were greater than the average market price of the common stock during the period, totaled options for 11.8 million shares (average price of $21.47 per share) in each of the 2000 periods and 11.1 million shares (average exercise price of $21.78 per share) in each of the 1999 periods. Convertible preferred stock outstanding was not included in the computation of diluted net income (loss) per share of common stock because doing so would have increased diluted net income per share of common stock or decreased diluted net loss per share of common stock. The preferred stock was convertible into 11.7 million shares of common stock, and the related accrued dividends totaled $6.1 million in the second quarter of 2000, $5.3 million in the second quarter of 1999, $12.2 million in the 2000 six-month period and $10.5 million in the 1999 six-month period. 2. FINANCIAL CONTRACTS At times, FCX has entered into financial contracts to manage certain risks resulting from fluctuations in commodity prices (primarily copper and gold), foreign currency exchange rates and interest rates by creating offsetting exposures. Costs or premiums and gains or losses on the contracts, including closed contracts, are recognized with the hedged transaction. Also, gains or losses are recognized if the hedged transaction is no longer expected to occur or if deferral criteria are not met. FCX monitors its credit risk on an ongoing basis and considers this risk to be minimal because its contracts are with a diversified group of financially strong counterparties. FCX currently has no copper and gold price protection contracts relating to its mine production other than its gold-denominated preferred stock. At June 30, 2000, FCX had redeemable preferred stock indexed to commodities, open foreign currency forward contracts, open forward copper sales and purchase contracts related to its smelter operations and interest rate swap contracts. Redeemable preferred stock indexed to commodities is treated as a hedge of future production and is carried at its original issue value. As principal payments occur, differences between the carrying value and the payment are recorded as an adjustment to revenues. Atlantic Copper, S.A., a wholly owned subsidiary of FCX (Atlantic Copper), hedges a portion of its anticipated Spanish peseta cash outflows with foreign currency forward contracts. In April 2000, PT Freeport Indonesia, FCX's majority-owned subsidiary, also entered into contracts to hedge a portion of its anticipated Australian dollar cash outflows with foreign currency forward contracts. Changes in market value of foreign currency forward contracts which protect anticipated transactions are recognized in the period incurred. Atlantic Copper also enters into futures contracts to hedge its price risk whenever its physical purchases and sales pricing periods do not match, and whenever it extends the pricing terms on its copper sales. Gains and losses on these contracts are recognized with the hedged transaction. Atlantic Copper has interest rate swap contracts to limit the effect of increases in the interest rates on variable- rate debt. The costs associated with these contracts are amortized to interest expense over the terms of the agreements. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133) which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. In June 1999, the FASB delayed SFAS 133's effective date by one year to fiscal years beginning after June 15, 2000 with earlier applicatioo permitted. FCX expects to adopt SFAS 133 eeffffective January 1, 2001. Adoption is expected to require FCX to report other comprehensive income or loss items for changes in the fair value of financial instruments that qualify as hedges. FCX expects to be able to continue its current accounting for its redeemable preferred stock indexed to commodities under the provisions of 6 SFAS 133 that allow such instruments issued before January 1, 1998 to be excluded from those instruments required to be adjusted for changes in their fair values. 3. INTEREST COST Interest expense excludes capitalized interest of $1.5 million in the second quarter of 2000, $0.8 million in the second quarter of 1999, $2.9 million in the first six months of 2000 and $1.3 million in the first six months of 1999. 4. BUSINESS SEGMENTS FCX has two operating segments: "mining and exploration" and "smelting and refining." The mining and exploration segment includes the copper and gold mining operations of PT Freeport Indonesia in Indonesia and FCX's Indonesian exploration activities. The smelting and refining segment includes Atlantic Copper's operations in Spain and PT Freeport Indonesia's equity investment in PT Smelting in Gresik, Indonesia. The segment data presented below were prepared on the same basis as the consolidated FCX financial statements.
Mining Smelting and and Eliminations FCX Exploration Refining and Other Total ----------- -------- ------------ -------- (In Thousands) Three months ended June 30, 2000 Revenues $259,885a $201,795 $ (64,332)b $397,348 Production and delivery 134,748 191,095 (74,362)b 251,481 Depreciation and amortization 46,123 7,088 1,117 54,328 Exploration expenses 1,487 - 354 1,841 Equity in PT Smelting losses - 5,878c - 5,878 General and administrative expenses 13,081 1,857 1,580 16,518 -------- -------- --------- -------- Operating income (loss) $ 64,446 $ (4,123) $ 6,979 $ 67,302 ======== ======== ========= ======== Interest expense, net $ 31,869 $ 6,094 $ 11,850 $ 49,813 ======== ======== ========= ======== Provision for income taxes $ 11,634 $ 264 $ 6,354 $ 18,252 ======== ======== ========= ======== Three months ended June 30, 1999 Revenues $347,480a $196,025 $ (73,170)b $470,335 Production and delivery 132,204 184,659 (73,452)b 243,411 Depreciation and amortization 63,950 7,317 1,117 72,384 Exploration expenses 2,265 - (107) 2,158 Equity in PT Smelting losses - 4,942c - 4,942 General and administrative expenses 13,111 2,332 1,808 17,251 -------- -------- --------- -------- Operating income (loss) $135,950 $ (3,225) $ (2,536) $130,189 ======== ======== ========= ======== Interest expense, net $ 34,469 $ 6,380 $ 7,055 $ 47,904 ======== ======== ========= ======== Provision (benefit) for income taxes$ 36,977 $ (703) $ 5,942 $ 42,216 ======== ======== ========= ======== Six months ended June 30, 2000 Revenues $567,380a $426,682 $(129,122)b $864,940 Production and delivery 278,488 402,445 (169,380)b 511,553 Depreciation and amortization 101,185 14,268 2,234 117,687 Exploration expenses 3,057 - 752 3,809 Equity in PT Smelting losses - 3,637c - 3,637 General and administrative expenses 30,017 4,174 3,076 37,267 -------- -------- --------- -------- Operating income $154,633 $ 2,158 $ 34,196 $190,987 ======== ======== ========= ======== Interest expense, net $ 65,559 $ 12,848 $ 21,341 $ 99,748 ======== ======== ========= ======== Provision for income taxes $ 34,756 $ 1,728 $ 22,241 $ 58,725 ======== ======== ========= ========
7 Six months ended June 30, 1999 Revenues $664,355a $378,226 $(156,410)b $886,171 Production and delivery 262,524 349,019 (178,245)b 433,298 Depreciation and amortization 126,280 14,611 2,234 143,125 Exploration expenses 4,749 - 357 5,106 Equity in PT Smelting losses - 12,465c - 12,465 General and administrative expenses 24,713 4,491 3,704 32,908 -------- -------- --------- -------- Operating income (loss) $246,089 $ (2,360) $ 15,540 $259,269 ======== ======== ========= ======== Interest expense, net $ 71,379 $ 13,416 $ 13,428 $ 98,223 ======== ======== ========= ======== Provision (benefit) for income taxes$ 64,555 $ (1,571) $ 19,308 $ 82,292 ======== ======== ========= ========
a. Includes PT Freeport Indonesia sales to PT Smelting totaling $58.9 million in the second quarter of 2000, $64.3 million in the second quarter of 1999, $129.4 million in the six- month period ended June 30, 2000 and $88.5 million in the six-month period ended June 30, 1999. b. Represents elimination of intersegment sales from PT Freeport Indonesia to Atlantic Copper and the change in deferred profits on intersegment sales remaining in Atlantic Copper's inventories. c. Includes effect of changes in deferred intercompany profits on 25 percent of PT Freeport Indonesia's sales to PT Smelting that remain in PT Smelting's inventory at period end, totaling $(0.7) million in the second quarter of 2000, $1.9 million in the second quarter of 1999, $(4.7) million in the six-month period ended June 30, 2000 and $4.3 million in the six-month period ended June 30, 1999. 5. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges for the first six months of 2000 and 1999 was 1.8 to 1 and 2.6 to 1, respectively. For this calculation, earnings consist of income from continuing operations before income taxes, minority interests and fixed charges. Fixed charges include interest and that portion of rent deemed representative of interest. ---------------------- Remarks The information furnished herein should be read in conjunction with FCX's financial statements contained in its 1999 Annual Report on Form 10-K. The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods. All such adjustments are, in the opinion of management, of a normal recurring nature. 8 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Board of Directors and Stockholders of Freeport-McMoRan Copper & Gold Inc.: We have reviewed the accompanying condensed balance sheet of Freeport-McMoRan Copper & Gold Inc. (a Delaware corporation) as of June 30, 2000, the related statements of operations for the three and six-month periods ended June 30, 2000 and 1999, and the statements of cash flow for the six-month periods ended June 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of Freeport-McMoRan Copper & Gold Inc. as of December 31, 1999, and the related statements of income, stockholders' equity and cash flow for the year then ended (not presented herein), and, in our report dated January 18, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP New Orleans, Louisiana July 18, 2000 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW Management's discussion and analysis presented below should be read in conjunction with our discussion and analysis and our financial statements contained in our 1999 Annual Report. The results of operations reported and summarized below are not necessarily indicative of future operating results. Summary comparative results for the second-quarter and six- month periods follow (in millions, except per share amounts):
Second Quarter Six Months -------------- -------------- 2000 1999 2000 1999 ------ ------ ------ ------ Revenues $397.3 $470.3 $864.9 $886.2 Operating income 67.3 130.2 191.0 259.3 Net income (loss) applicable to common stock (18.6) 19.0 (9.4) 36.7 Diluted net income (loss) per share of common stock (.12) .12 (.06) .22 Lower second-quarter and six-month 2000 consolidated revenues primarily reflect lower sales volumes at PT Freeport Indonesia resulting from delayed concentrate shipments because of weather and sea conditions at its port in Irian Jaya (Papua) and lower production, partially offset by higher copper prices. Second-quarter 2000 revenues benefited by $6.2 million ($3.0 million to net income/loss or $0.02 per share) from adjustments to prior period "open" concentrate sales. Second-quarter 1999 revenues benefited by $11.7 million ($5.7 million to net income or $0.03 per share) from adjustments to prior period open concentrate sales. Six-month 2000 revenues benefited by $10.5 million ($5.1 million to net income/loss or $0.03 per share) from adjustments to prior year concentrate sales. Six-month 1999 revenues benefited by $6.2 million ($3.0 million to net income or $0.02 per share) from adjustments to prior year concentrate sales. In late 1999, PT Freeport Indonesia began a program using forward contracts to fix the prices of a portion of its open concentrate sales when market conditions are favorable. During the second quarter of 2000 PT Freeport Indonesia entered into forward copper sales contracts to fix the price at $0.81 per pound on approximately 60 percent of its March 31, 2000 open concentrate sales. During the first quarter of 2000 PT Freeport Indonesia entered into forward copper sales contracts to fix the price at $0.85 per pound on approximately 50 percent of its December 31, 1999 open concentrate sales. We recorded $0.8 million of additional revenues in the second quarter of 2000 and $6.9 million in the first quarter of 2000 from these forward sales. These amounts are included in the $6.2 million and $10.5 million benefits mentioned above for the second-quarter and six- month 2000 periods, respectively. We remain unhedged with respect to our copper mine production. Cost of sales for the 2000 periods reflects lower depreciation and amortization because of lower sales volumes at PT Freeport Indonesia. Production and delivery costs were higher because of higher costs at Atlantic Copper resulting from increased sales volumes and higher copper concentrate costs, partly offset by the effects of favorable currency exchange rates. Higher equipment maintenance and fuel costs at PT Freeport Indonesia also contributed to the increases in production costs. PT Freeport Indonesia records its share of PT Smelting's operating losses under the equity method and eliminates profits on 25 percent of its copper concentrate sales to PT Smelting until PT Smelting makes the final sale. General and administrative expenses in the six-month 2000 period were higher primarily because of contribution commitments to support small business development programs within Irian Jaya (Papua) over a two-year period, partly offset by a reversal of costs for stock appreciation rights. The higher effective rate for income taxes in the 2000 periods as compared with the 1999 periods primarily reflects an increase in net interest costs at the parent company level, for which there is very little tax benefit, and lower reported PT Freeport Indonesia taxable income. Lower minority interest charges in the 2000 periods primarily reflect lower net income at PT Freeport Indonesia. 10 RESULTS OF OPERATIONS We have two operating segments: "mining and exploration" and "smelting and refining." The mining and exploration segment includes PT Freeport Indonesia's copper and gold mining operations in Indonesia and FCX's Indonesian exploration activities. The smelting and refining segment includes Atlantic Copper's operations in Spain and PT Freeport Indonesia's 25 percent equity investment in PT Smelting. Summary comparative operating income (loss) by segment for the second-quarter and six-month periods follows (in millions):
Second Quarter Six Months --------------- --------------- 2000 1999 2000 1999 ------ ------ ------ ------ Mining and exploration $ 64.4 $136.0 $154.6 $246.1 Smelting and refining (4.1) (3.2) 2.2 (2.4) Intercompany eliminations and other 7.0 (2.6) 34.2 15.6 ------ ------ ------ ------ FCX operating income a $ 67.3 $130.2 $191.0 $259.3 ====== ====== ====== ======
a. Profits on 100 percent of PT Freeport Indonesia's sales to Atlantic Copper and 25 percent of PT Freeport Indonesia's sales to PT Smelting are deferred until the final sale to third parties has occurred. Changes in the amount of these deferred profits benefited operating income by $11.2 million in the second quarter of 2000, $2.3 million in the second quarter of 1999, $46.5 million in the six-month 2000 period and $26.5 million in the six-month 1999 period. Our consolidated quarterly earnings fluctuate depending on the timing and prices of these sales. MINING AND EXPLORATION A summary of increases (decreases) in PT Freeport Indonesia revenues between the periods follows (in millions):
Second Six Quarter Months ------- ------ PT Freeport Indonesia revenues - 1999 periods $347.5 $664.4 Increases (decreases): Price realizations: Copper 27.7 66.9 Gold 2.3 4.6 Sales volumes: Copper (67.7) (94.3) Gold (71.7) (116.2) Adjustments, primarily for copper pricing on prior period open sales (0.1) 8.4 Treatment charges, royalties and other 21.9 33.6 ------ ------ PT Freeport Indonesia revenues - 2000 periods $259.9 $567.4 ====== ======
PT Freeport Indonesia's 2000 revenues for both second- quarter and six-month periods benefited from a 16 percent increase in copper price realizations compared to the 1999 periods. However, these increased realizations were more than offset by decreases in copper and gold sales volumes. Second- quarter 2000 copper sales volumes declined 28 percent and gold sales volumes declined 44 percent as compared to the 1999 period. Six-month 2000 copper sales volumes declined 20 percent and gold sales volumes declined 35 percent as compared to the 1999 period. The declines in sales volumes primarily relate to delayed concentrate shipments because of weather and sea conditions at PT Freeport Indonesia's portsite and lower production. PT Freeport Indonesia's second-quarter 2000 revenues included net upward adjustments on prior period open concentrate sales totaling $8.7 million compared with $16.8 million in 1999, an $8.1 million net reduction from 1999 to 2000. Six-month 2000 revenues included net upward adjustments on prior year open sales totaling $7.8 million compared with $8.2 million in 1999, a $0.4 million net reduction from 1999 to 2000. Treatment charges and royalties in total were lower in 2000 primarily because of lower sales volumes and because treatment rates were lower than in the prior year. PT Freeport Indonesia Sales Outlook and Price Protection Program Net of Rio Tinto plc's interest, PT Freeport Indonesia's share of sales for the third quarter of 2000 is projected to approximate 380 million pounds of copper and 460,000 ounces of gold. PT Freeport Indonesia's share of sales for 2000 is projected to approximate 1.4 billion pounds of copper and 1.9 million ounces of gold as ore grades are expected to improve significantly in the second half of 2000. Projected 11 2000 copper and gold sales reflect the expectation of slightly higher average mill throughput rates than in 1999, offset by lower average ore grades and the impact of the specified sharing arrangement with Rio Tinto, which will result in a smaller proportion of production attributed to PT Freeport Indonesia compared to 1999. At June 30, 2000, we had consolidated copper sales totaling 159.2 million pounds recorded at an average price of $0.79 per pound remaining to be finally priced. Approximately 90 percent of these open pounds are expected to be finally priced during the third quarter of 2000 with the remaining pounds to be priced during the fourth quarter of 2000. A one-cent movement in the average price used for these open pounds would have an approximate $0.8 million impact on our 2000 net income. In early July 2000, PT Freeport Indonesia entered into forward copper sales contracts to fix the price at $0.82 per pound on approximately 60 percent of its June 30, 2000 open pounds.
PT Freeport Indonesia Operating Results Second Quarter Six Months ----------------- ------------------ 2000 1999 2000 1999 ------- ------- ------- --------- PT Freeport Indonesia, Net of Rio Tinto's Interest Copper Production (000s of recoverable pounds) 287,300 358,900 595,800 713,200 Sales (000s of recoverable pounds) 256,200 355,300 562,100 701,600 Average realized price $.79 $.68 $.79 $.68 Gold Production (recoverable ounces) 358,800 590,800 806,100 1,200,600 Sales (recoverable ounces) 330,500 593,900 774,700 1,193,300 Average realized price $279.26 $272.17 $283.70 $277.71 Gross profit per pound of copper (cents): Average realized price 79.1 68.3 79.5 67.6 ----- ----- ----- ----- Production costs: Site production and delivery 51.1 37.1 49.1 37.3 Gold and silver credits (37.1) (46.5) (40.5) (48.3) Treatment charges 18.1 19.0 18.0 19.1 Royalty on metals 1.3 1.4 1.3 1.5 ----- ----- ----- ----- Cash production costs 33.4 11.0 27.9 9.6 Depreciation and amortization 18.0 18.0 18.0 18.0 ----- ----- ----- ----- Total production costs 51.4 29.0 45.9 27.6 ----- ----- ----- ----- Adjustments, primarily for copper pricing on prior year sales 4.6 3.4 0.3 (1.0) ----- ----- ----- ----- Gross profit per pound of copper 32.3 42.7 33.9 39.0 ===== ===== ===== ===== PT Freeport Indonesia, 100% Operating Statistics Ore milled (metric tons per day, MTPD) 218,500 216,800 225,000 219,500 Copper grade (percent) .94 1.16 .94 1.15 Gold grade (grams per metric ton) .86 1.39 .93 1.35 Recovery rate (percent) Copper 86.4 84.6 86.1 83.5 Gold 84.1 82.7 84.5 83.7 Copper Production (000s of recoverable pounds) 336,500 412,400 697,200 809,100 Sales (000s of recoverable pounds) 300,100 407,600 658,200 798,600 Gold Production (recoverable ounces) 442,900 739,300 999,900 1,470,700 Sales (recoverable ounces) 407,600 740,800 958,600 1,463,700
PT Freeport Indonesia's mill throughput averaged 218,500 MTPD for the second quarter of 2000. As expected, higher throughput and recovery rates in the 2000 periods were offset by lower ore grades. Although average mill throughput rates for the 2000 periods were higher as compared to the 1999 periods, the second-quarter 2000 rate declined from the first-quarter 2000 rate (231,600 MTPD) because of 12 temporary ore delivery bottlenecks during the quarter. In May 2000, PT Freeport Indonesia, in consultation with the Government of Indonesia, voluntarily agreed to temporarily limit its mill throughput rates from Grasberg open pit production (see "Environmental Matters"). Mill throughput rates will vary in the future based on the characteristics of the ore being processed as PT Freeport Indonesia manages its operations to optimize metal production. Copper and gold production volumes were lower in the 2000 periods as compared to the 1999 periods because of 1) changes in the sequence of mining material in the open pit which resulted in the deferral of high grade ore to the second half of 2000 and 2) reduced ore throughput rates. Unit site production and delivery costs in the second quarter of 2000 averaged $0.51 per pound of copper, $0.14 per pound higher than the $0.37 reported in the second quarter of 1999. The recent overburden stockpile slippage incident (see "Environmental Matters"), lower ore grades, and higher maintenance and fuel costs contributed to higher unit costs. The lower grades and higher costs also affected unit site production and delivery costs for the first six months of 2000 resulting in a $0.12 per pound increase as compared to the 1999 period. Gold credits in the 2000 periods, $0.37 per pound in the second quarter and $0.41 per pound in the six-month period, were lower as compared with the 1999 period amounts, $0.47 per pound in the second quarter and $0.48 per pound in the six-month period, because of lower gold ore grades. Unit treatment charges were lower in the 2000 periods because of related market conditions, which benefited producers. We conduct the majority of our operations in Indonesia and Spain where our functional currency is the U.S. dollar. All of our reevenues are denominated in U.S. dollass; however, some costs and certain asseet and liability accounts are denominated in Indonesian rupiah, Australian dollars or Spanish pesetas. Generally, our results are positively affected when the U.S. dollar strengthens against these foreign currencies and adversely affected when the U.S. dollar weakens against these foreign currencies. Since 1997, the Indonesian rupiah and the U.S. dollar exchange rate has been extremely volatile. The rupiah - U.S. dollar exchange rates were 6,970 rupiah to one U.S. dollar at December 31, 1999, 7,440 rupiah to one U.S. dollar at March 31, 2000, 8,725 rupiah to one U.S. dollar at June 30, 2000 and 8,875 rupiah to one U.S. dollar at July 24, 2000. Assuming estimated aggregate 2000 rupiah payments of 800 billion and a June 30, 2000 exchange rate of 8,725 rupiah to one U.S. dollar, a one-thousand- rupiah increase in the exchange rate would result in an approximate $9 million decrease in annual operating costs. A one- thousand-rupiah decrease in the exchange rate would result in an approximate $12 million increase in annual operating costs. PT Freeport Indonesia recorded aggregate gains (losses) totaling $0.6 million during the second quarter of 2000, $(0.2) million in the second quarter of 1999, $0.4 million in the six-month 2000 period and $(0.9) million during the six-month 1999 period related to its rupiah-denominated net assets. Operationally PT Freeport Indonesia has benefited from a weakened rupiah currency, primarily through lower labor costs. During 1998, PT Freeport Indonesia began a currency hedging program to reduce its exposure to changes in the Indonesian rupiah and Australian dollar by entering into foreign currency forward contracts to hedge a portion of its anticipated payments in these currencies. The last of these contracts expired in September 1999. PT Freeport Indonesia recorded aggregate gains to production costs totaling $3.2 million in the second quarter of 1999 and $4.1 million in the first six months of 1999 related to these contracts. During the second quarter of 2000, PT Freeport Indonesia entered into foreign currency forward contracts to hedge a portion of its aggregate anticipated Australian dollar payments for the remainder of 2000 and for 2001. As of June 30, 2000, these contracts hedge 174.0 million of Australian dollar payments through December 2001, or approximately 80 percent of aggregate projected Australian dollar payments for the remainder of 2000 and 50 percent of aggregate projected 2001 Australian dollar payments at an average exchange rate of $0.59 to one Australian dollar. PT Freeport Indonesia recorded aggregate gains to production costs during the second quarter of 2000 totaling $2.3 million related to these contracts. In July 2000, PT Freeport Indonesia entered into foreign currency forward contracts to hedge a portion of its aggregate projected April through July 2001 Indonesian rupiah payments. The contracts hedge 60 billion of rupiah payments during the period covered at an exchange rate of 10,000 rupiah to one U.S. dollar. 13 Current accounting rules require us to record changes in market value on all of our open foreign currency contracts designated as hedges of anticipated payments to net income each reporting period. Effective January 2001, we will be able to elect to change our accounting method for foreign currency contracts and thereby record gains/losses on such contracts, which cover future periods, to other comprehensive income (i.e. a component of equity) instead of net income if the contracts qualify for hedge accounting treatment under recently promulgated accounting standards. Exploration Activities Our exploration activities are primarily focused on prospects in Irian Jaya (Papua), Indonesia. Rio Tinto shares in 40 percent of our exploration costs and results in Irian Jaya (Papua). Exploration drilling within PT Freeport Indonesia's Block A area continues to focus on converting resources to reserves at Kucing Liar, Deep Grasberg, the Deep Ore Zone and a newly defined surface target called Ertsberg East. Drilling between Deep Grasberg and Kucing Liar is proceeding with significant mineralized intervals intersected on the south side of the present Grasberg block cave reserve. Extensions of the Deep Ore Zone continue to be confirmed by recent drilling, and the continuity of mineralization adjacent to the existing block cave ore reserve is being confirmed. Drills have been moved to test mineralization in the Ertsberg East area for possible open-pit operations. Several other prospects are being reviewed in Block A. Field exploration activities outside of our current mining operations area have been suspended pending the resolution of a number of regulatory and local community issues. SMELTING AND REFINING Atlantic Copper Operating Results
Second Quarter Six Months ---------------- ---------------- 2000 1999 2000 1999 ------- ------- ------- ------- Revenues (in millions) $201.8 $196.0 $426.7 $378.2 Operating income (in millions) $1.8 $1.7 $5.8 $10.1 Concentrate treated (metric tons) 238,500 225,100 483,200 463,700 Anode production (000s of pounds) 167,800 153,700 346,100 317,700 Cathode and wire rod sales (000s of pounds) 147,100 138,100 284,200 276,500 Gold sales in anodes and slimes (ounces) 173,200 265,000 384,400 451,000
Atlantic Copper reported higher revenues in the 2000 periods as compared with the 1999 periods primarily because of higher copper prices and higher cathode and wire rod sales volumes. Second-quarter 2000 operating income was basically unchanged compared with the 1999 quarter. Cathode cash production costs of $0.12 per pound in the second-quarter and six-month 2000 periods were lower than the $0.15 per pound reported in the 1999 quarter and $0.14 per pound reported in the 1999 six-month period primarily because of higher production volumes and favorable currency exchange rates. The benefits from lower cathode cash production costs were essentially offset by lower treatment and refining rates ($0.17 per pound in the second quarter of 2000 compared with $0.19 per pound in the second quarter of 1999). Six-month 2000 operating income declined by $4.3 million compared with the six-month 1999 period primarily because of lower treatment charges ($0.17 per pound in 2000 and $0.21 per pound in 1999). Lower treatment charges, which negatively affect Atlantic Copper, benefit PT Freeport Indonesia as discussed above. A portion of Atlantic Copper's operating costs and certain Atlantic Copper asset and liability accounts are denominated in Spanish pesetas. Based on estimated 2000 peseta payments of 15 billion and a June 30, 2000 exchange rate of 174.1 pesetas to one U.S. dollar, a ten-peseta increase or decrease in the exchange rate could result in a corresponding approximate $5 million change in annual operating costs, before any hedging effects. Atlantic Copper had peseta-denominated net monetary liabilities at June 30, 2000 totaling $80.6 million recorded at an exchange rate of 174.1 pesetas to one U.S. dollar. Adjustments to these net liabilities to reflect changes in the exchange rate are recorded as currency transaction gains or losses in other income and totaled gains (losses) of $(0.3) million in the second quarter of 2000, $3.2 million in the second quarter of 1999, $2.1 million in the first six months of 2000 and $9.6 million in the first six months of 1999. 14 Atlantic Copper has a currency hedging program using foreign currency forward contracts to reduce its expoossure to changes in the U.S. dollar and Spanish peseta exchange rate. At June 30, 2000, Atlantic Copper had contracts to purchase 35.2 billion Spanish pesetas at an average exchange rate of 160.3 pesetas to one U.S. dollar through December 2003. These contracts currently hedge approximately 75 percent of Atlantic Copper's projected 2000 net peseta cash outflows and approximately 60 percent of Atlantic Copper's projected 2001 through 2003 net peseta cash outflows. In addition to the currency transaction gains noted above, Atlantic Copper recorded losses to other income related to its forward currency contracts totaling $1.8 million in the second quarter of 2000, $2.5 million in the second quarter of 1999, $7.8 million in the first six months of 2000 and $9.0 million in the first six months of 1999. Current accounting rules require us to record changes in market value on all of our open foreign currency contracts designated as hedges of anticipated payments to net income each reporting period. Effective January 2001, we will be able to elect to change our accounting method for foreign currency contracts and thereby record gains/losses on such contracts, which cover future periods, to other comprehensive income (i.e. a component of equity) instead of net income if the contracts qualify for hedge accounting treatment under recently promulgated accounting standards. PT Smelting Operating Results PT Freeport Indonesia accounts for its 25 percent interest in PT Smelting under the equity method. PT Smelting temporarily shut down its smelter, as planned, at the end of March 2000 for the tie-in of a new third anode furnace as well as for planned maintenance. The smelter restarted at the end of April and remains on schedule to operate at full design capacity of 200,000 metric tons of copper per year by the end of 2000. Our revenues include $58.9 million in the second quarter of 2000, $64.3 million in the second quarter of 1999, $129.4 million in the first six months of 2000 and $88.5 million in the first six months of 1999 from PT Freeport Indonesia sales to PT Smelting. PT Freeport Indonesia's share of PT Smelting's net operating losses, which are recorded as Equity in PT Smelting losses in the Statements of Operations, totaled $6.6 million in the second quarter of 2000, $3.0 million in the second quarter of 1999, $8.3 million in the first six months of 2000 and $8.2 million in the first six months of 1999. We also defer recognizing profits on 25 percent of PT Freeport Indonesia sales to PT Smelting, for which the final sale has not occurred. Changes in these deferred amounts resulted in additional income (losses) of $0.7 million in the second quarter of 2000, $(1.9) million in the second quarter of 1999, $4.7 million in the first six months of 2000 and a $(4.3) million in the first six months of 1999. Changes in these deferred profits are recorded as part of Equity in PT Smelting losses in the Statements of Operations. OTHER FINANCIAL RESULTS The FCX/Rio Tinto joint ventures incurred exploration costs of $2.7 million in the 2000 second quarter, $3.9 million in the 1999 second quarter, $5.5 million in the 2000 six-month period and $9.2 million in the 1999 six-month period. Substantially all costs in the joint venture areas are now being shared 60 percent by us and 40 percent by Rio Tinto. Second-quarter 2000 general and administrative expenses of $16.5 million were lower than the $17.3 million reported in the 1999 quarter mostly because the 1999 quarter included charges totaling $1.7 million for an early retirement program and for costs of stock appreciation rights because of an increase in our stock price during the 1999 quarter. Six-month 2000 general and administrative expenses were $4.4 million higher compared to the 1999 period primarily because of a $6.0 million charge for contribution commitments to support small business development programs within Irian Jaya (Papua) that will be paid over a two- year period. The six-month 2000 period also included an $0.8 million charge for personnel severance costs, offset by a $1.5 million reversal of costs for stock appreciation rights because of a decrease in our common stock price. Our total interest costs (before capitalization) were $51.4 million for the 2000 quarter, $48.7 million in the 1999 quarter, $102.6 million in the first six months of 2000 and $99.5 million in the first six months of 1999. Higher interest rates in the 2000 periods were only partially offset by lower debt levels. We capitalized $1.5 million of interest costs in the second quarter of 2000, $0.8 million in the second quarter of 1999, $2.9 million in the first six months of 2000 and $1.3 million in the first six months of 1999. Our effective tax rate was 71 percent for the first six months of 2000 and 52 percent for the first six months of 1999. The combination of lower reported PT Freeport Indonesia taxable income and higher parent company costs in the first six months of 2000 caused the majority of the increase in the effective 15 tax rate compared with the 1999 period. PT Freeport Indonesia's Contract of Work provides a 35 percent income tax rate and a 10 percent withholding on dividends paid to FCX by PT Freeport Indonesia and on interest for debt incurred after the signing of the Contract of Work. No income taxes are recorded at Atlantic Copper, which is subject to taxation in Spain, because it has not generated significant taxable income in recent years and has a substantial tax loss carryforward for which no financial statement benefit has been provided. Additionally, our parent company costs generate only a small U.S. tax benefit because our parent company has no U.S.-sourced income. CAPITAL RESOURCES AND LIQUIDITY Our primary sources of cash are operating cash flows and borrowings, while our primary uses of cash include capital expenditures, repayments of debt, dividends and purchases of our common stock. Net cash provided by operating activities was $228.2 million for the first six months of 2000, compared with $278.6 million for the 1999 period. Net cash used in investing activities totaled $103.4 million in the 2000 period, compared with $77.4 million in the 1999 period, primarily for PT Freeport Indonesia capital expenditures. Net cash used in financing activities totaled $125.7 million in 2000 compared with $202.5 million in 1999. Operating Activities Lower net income and non-cash charges were only partly offset by working capital changes in the first six months of 2000, resulting in a decrease in operating cash flow of $50.3 million, to $228.2 million, from the year-ago period. The net decrease in working capital for the first six months of 2000 primarily reflects an increase in accounts payable and accrued liabilities and the collection of accounts receivable. The net decrease in working capital for the first six months of 1999 primarily reflects the collection of accounts receivable partly offset by an increase in inventories. Investing Activities Our six-month 2000 capital expenditures were higher compared to the 1999 period primarily because of payments for deferred purchases of mine equipment. Our capital expenditures for 2000 are expected to total approximately $200 million, including $35 million for underground mine development, primarily the Deep Ore Zone, which is expected to start production later this year and ramp up to full production of 25,000 metric tons of ore per day by 2004. Funding is expected to be provided by operating cash flow and PT Freeport Indonesia's bank credit facilities $133.0 million commitment available at July 24, 2000). Atlantic Copper has an unfunded contractual obligation ($62.2 million at Junee 30, 2000) to supleement amounts paid to retired employeess. Spanish legislation requires that Atlantic Copper fund this obligation over a multi-year period commencing in 2001. Atlantic Copper is reviewing its options for complying with Spanish laws. Financing Activities Repayments to Rio Tinto totaled $60.6 million in the first six months of 2000 and $107.5 million in the first six months of 1999 from PT Freeport Indonesia's share of incremental cash flow attributable to the fourth concentrator mill expansion. After less than 2 / years, PT Freeport Indonesia has fully repaid the $450 million loan from Rio Tinto, which funded PT Freeport Indonesia's share of the fourth concentrator mill expansion. PT Freeport Indonesia's 60 percent share of incremental cash flows from the expansion is now available for PT Freeport Indonesia's general uses . Net borrowings of other debt totaled $118.6 million in the first six months of 2000, compared with net repayments of $51.2 million in the first six months of 1999. In 1998, PT Freeport Indonesia reacquired for $30 million an aggregate one-third interest in certain infrastructure asset joint ventures owned by PT AlatieF Nusakarya Corporation, an Indonesian investor. The joint ventures had purchased $270.0 million of infrastructure assets from PT Freeport Indonesia during the period from December 1993 to March 1997, and PT Freeport Indonesia had sold its one-third interest in the joint ventures to PT AlatieF in March 1997. In April 2000, PT Freeport Indonesia paid $12.5 million to increase its aggregate ownership interest in the joint ventures to 47 percent. We are consolidating the joint ventures for financial reporting purposes because the agreements provide the joint venture partners with a guaranteed annual return on their investment. PT Freeport Indonesia expects to purchase the remaining 53 percent interest in the joint ventures with an additional cash payment and the assumption of certain debt in the third quarter of 2000. PT Freeport Indonesia's increased ownership in the joint ventures will benefit net income because it will eliminate PT Freeport Indonesia's obligation to pay a guaranteed 15 percent after-tax return to the previous owners in the joint ventures. 16 In June 2000, our Board of Directors authorized a 20 million share increase in our open market share repurchase program, bringing the total shares approved for purchase under this program to 80 million. During the first six months of 2000, we acquired 10.6 million of our shares for $129.2 million (an average of $12.15 per share). During the first six months of 1999, we acquired 0.8 million of our shares for $7.8 million (an average of $9.20 per share). From inception of this program in July 1995 through July 24, 2000, we have purchased a total of 64.3 million shares for $1.2 billion (an average of $18.49 per share) and approximately 15.7 million shares remain available under the program. The timing of future purchases is dependent upon many factors, including the price of common shares, our business and financial position, and general economic and market conditions. In response to volatile copper and gold markets, in early 1998 we began an effort to reduce our costs and enhance our production. Our overall strategy remains focused on optimizing the performance of our expanded milling facilities so that we can achieve higher sales levels at low costs. PT Freeport Indonesia is implementing a number of initiatives in 2000 designed to further improve operating processes and reduce costs. We believe we have the overall financial flexibility to continue to invest in operations and maintain our exploration program while still retaining our options to reduce our overall debt levels or repurchase FCX shares. As discussed above, our credit facility availability at July 24, 2000 was $133.0 million. We believe we can continue to generate sufficient cash flows from operations to meet our planned capital requirements without obtaining new capital, barring any unforeseen events. However, because of the economic and political issues affecting Indonesia and the volatility of copper and gold prices, our ability to obtain capital is limited at this time, and the cost of new capital, if available, would be high. In 1997, we guaranteed a $254.0 million loan from a commercial bank to PT Nusamba Mineral Industri, an Indonesian company. Nusamba used the funds to purchase from a third party for $315 million approximately 51 percent of the capital stock of PT Indocopper Investama Corporation, a company whose only significant asset is 9.4 percent of PT Freeport Indonesia's stock. We own the remaining 49 percent of PT Indocopper Investama. The loan is secured by a pledge of the PT Indocopper Investama stock owned by Nusamba and is due March 2002. The purchase price was negotiated based primarily on FCX's market value at the time of the transaction. We also agreed to lend to Nusamba any amounts necessary to cover shortfalls between the interest payments on the loan and the dividends received by Nusamba on the PT Indocopper Investama stock. At June 30, 2000, we had loaned $54.0 million to Nusamba for this purpose. The amount of any future shortfalls will depend primarily on the level of PT Freeport Indonesia's dividends to PT Indocopper Investama. Once the total of the guaranteed loan and the amounts we have subsequently loaned to Nusamba reach the original purchase price ($315 million), we expect to begin expensing any additional amounts we loan to Nusamba. The effect of the current economic and political situation in Indonesia on Indonesian companies, including Nusamba, is uncertain. Should these uncertainties result in our being required to honor our guarantee of Nusamba's commercial bank loan, we would anticipate negotiating satisfaction of the amounts due with the bank on mutually acceptable terms. However, any such terms likely would be restrictive and costly, given commercial lending markets' assessment of Indonesian creditors. DEVELOPMENTS IN INDONESIA The Indonesian government continues to try to address the important political and economic issues it faces. Regarding economic matters, political and social issues facing Indonesia continue to strain the President's and government's efforts to achieve economic recovery in Indonesia, including its widespread provinces. After trading in a range of 7,000-8,000 rupiah to one U.S. dollar during the first quarter of 2000, in early July 2000 the Indonesian currency weakened to a 16-month low, approximating 9,500 rupiah to one U.S. dollar. The Indonesian government continues to face the important tasks of restructuring the country's debt and the banking system. President Wahid and other government representatives also have made significant efforts to encourage renewal of foreign investment in Indonesia. With respect to political matters, the government is developing and implementing new laws granting greater autonomy to the provincial governments, while continuing to preserve the central government's sovereignty. Although some in the Indonesian media and others have called for re-negotiation of existing contracts and agreements between the central government and foreign-owned companies, including PT Freeport Indonesia's Contract of Work, President Wahid and other senior 17 government officials have made numerous public statements that existing contracts would be honored and will remain unaffected by any changes in provincial autonomy. While the Indonesian government permitted the Papuans to meet to voice their aspiattiions, the President and other Indonesian leaders have made it clear that Irian Jaya (Papua) must remain part of Indonesia. Moreover, the U.S. Government, Japan, Australia and the European Union, have stated that they do not support Independence for Irian Jaya (Papua) and strongly support the territorial integrity of Indonesia. Key Papuan leaders have said independence should be regarded as a long-term goal and that they should pursue that goal peacefully. We regard the statement of the Papuan Congress to be part of the ongoing dialogue between Jakarta and the Papuans over greater autonomy and thus is indicative of Indonesia's new democratic form of government. Recently, certain non-governmental organizations have criticized PT Freeport Indonesia's independent environmental audit by Montgomery Watson, which was publicly released in December 1999. In response to this criticism, the Indonesian environmental minister has requested clarification of several of the audit's findings, which we have provided. Additionally, the Indonesian government has formed a "fact-finding" team to review these and other criticisms. This team consists of members of the Department of Mines and Energy (DOME), the Department of Finance, the environmental ministry and representatives of provincial and local governments in Irian Jaya (Papua). PT Freeport Indonesia welcomes this team and is cooperating fully in this effort, as we believe it represents an opportunity for responsible members of the government to develop an objective, first-hand understanding of our operations. ENVIRONMENTAL MATTERS On May 4, 2000, an incident at the Wanagon overburden stockpile involving the slippage of overburden caused a wave of water and material to overtop the Wanagon basin spillway and enter the nearby Wanagon valley. Four employees of a contractor of PT Freeport Indonesia working in the area perished in the incident. All other workers in the area were located and were unharmed. No injuries were reported at Banti, the nearest village inhabited by local people, located approximately 12 kilometers downstream of the Wanagon basin. PT Freeport Indonesia charged $2.9 million to second-quarter production costs primarily for assets lost as a result of the incident. Daily rainfall amounts for the four days preceding the incident were about 40 millimeters, nearly five times normal levels, and are believed to have contributed to the slippage. PT Freeport Indonesia environmental specialists have been taking water samples in the Wanagon River and other locations downstream to assess the environmental impact. Based on the analysis to- date, no threat to human health and no long-term environmental impacts have been identified as a result of the overflow event. The material in the Wanagon basin includes the byproduct of treating acid rock drainage from the overburden in the basin with lime as approved by the DOME in PT Freeport Indonesia's mine plan. The overflow from the basin consisted of this material together with crushed overburden, which is natural rock, and other natural sediments. PT Freeport Indonesia notified the appropriate officials of the DOME and BAPEDAL, Indonesia's Environmental Ministry, and cooperated with a joint team of DOME and BAPEDAL representatives who have studied the incident. Shortly after the incident, the DOME informed PT Freeport Indonesia that it must suspend stockpiling overburden in the immediate area affected by the slippage. PT Freeport Indonesia had not stockpiled overburden in the Wanagon area since the end of March 2000. On May 24, 2000, PT Freeport Indonesia, in consultation with the Government of Indonesia, voluntarily agreed to temporarily limit production at its Grasberg open pit to an average of no more than 200,000 MTPD pending the conclusion of technical studies and recommendations for safe re-use of the Wanagon basin. In early July 2000, PT Freeport Indonesia began implementing an overburden stockpile stabilization plan at the Wanagon overburden stockpile. The plan, approved by the DOME, involves the placement of eight million metric tons of overburden within a sixty-day period. During the sixty-day period, PT Freeport Indonesia will submit a comprehensive report to DOME on its overburden stockpile plan for the Wanagon basin area. After submitting its report to DOME, PT Freeport Indonesia expects to resume normal overburden placement activities, with certain modifications based on studies following the May 4th incident. 18 CAUTIONARY STATEMENT Our discussion and analysis contains forward-looking statements in which we discuss factors we believe may affect our performance in the future. Forward-looking statements are all statements other than historical facts, such as those regarding anticipated sales volumes, ore grades, commodity prices, capital expenditures, debt repayments, political, economic and social conditions in our areas of operations, treatment charge rates, exploration efforts and results, the availability of financing and PT Smelting operating levels. 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 unanticipated declines in the average grades of ore mined, unanticipated milling and other processing problems, labor relations, weather conditions, the speculative nature of mineral exploration, fluctuations in interest rates and other adverse financial market conditions, and other factors described in more detail under the heading "Cautionary Statements" in our Form 10-K for the year ended December 31, 1999. 19 PART II. OTHER INFORMATION Item 1. Legal Proceedings. Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La. Filed June 19, 1996). The plaintiff alleged environmental, human rights and social/cultural violations in Indonesia and seeks unspecified monetary damages and other equitable relief. In addition, the plaintiff alleged that she was a third-party beneficiary under the 1967 and the 1991 Contracts of Work, and claimed that she had not received fair compensation for her land rights. On March 21, 2000 the trial court dismissed the entire case with prejudice, granting FCX's exception of no cause of action. On March 24, 2000, the plaintiff filed a petition of appeal to the Louisiana Fourth Circuit. FCX will continue to defend this action vigorously. In addition to the foregoing proceedings, FCX may be from time to time involved in various legal proceedings of a character normally incident to the ordinary course of its business. Management believes that potential liability in any proceedings would not have a material adverse effect on the financial condition or results of operations of FCX. FCX maintains liability insurance to cover some, but not all, potential liabilities normally incident to the ordinary course of its business as well as other insurance coverage customary in its business, with coverage limits as management deems prudent. Item 6. Exhibits and Reports on Form 8-K. (a) The exhibits to this report are listed in the Exhibit Index beginning on Page E-1 hereof. (b) During the quarter for which this report is filed, the registrant filed three Current Reports on Form 8-K dated May 4, 2000, May 24, 2000 and June 23, 2000 reporting information under items 5 and 7. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FREEPORT-McMoRan COPPER & GOLD INC. By: \s\ C. Donald Whitmire, Jr. -------------------------------- C. Donald Whitmire, Jr. Vice President and Controller-Financial Reporting (authorized signatory and Principal Accounting Officer) Date: August 2, 2000 20 Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX Exhibit Number Description - ----- ----------- 2.1 Agreement, dated as of May 2, 1995 by and between Freeport- McMoRan Inc. (FTX) and FCX and The RTZ Corporation PLC, RTZ Indonesia Limited, and RTZ America, Inc. (the Rio Tinto Agreement). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FTX dated as of May 26, 1995. 2.2 Amendment dated May 31, 1995 to the Rio Tinto Agreement. Incorporated by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q of FTX for the quarter ended June 30, 1995. 2.3 Distribution Agreement dated as of July 5, 1995 between FTX and FCX. Incorporated by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q of FTX for the quarter ended September 30, 1995 (the FTX 1995 Third Quarter Form 10-Q). 3.1 Composite copy of the Certificate of Incorporation of FCX. Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of FCX for the quarter ended June 30, 1995 (the FCX 1995 Second Quarter Form 10-Q). 3.2 Amended By-Laws of FCX dated as of March 12, 1999. Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1998 (the 1998 FCX Form 10-K). 4.1 Certificate of Designations of the Step-Up Convertible Preferred Stock of FCX. Incorporated by reference to Exhibit 4.2 to the FCX 1995 Second Quarter Form 10-Q. 4.2 Deposit Agreement dated as of July 1, 1993 among FCX, ChaseMellon Shareholder Services, L.L.C. (ChaseMellon), as Depositary, and holders of depositary receipts (Step-Up Depositary Receipts) evidencing certain Depositary Shares, each of which, in turn, represents 0.05 shares of Step-Up Convertible Preferred Stock. Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1993 (the FCX 1993 Form 10- K). 4.3 Form of Step-Up Depositary Receipt. Incorporated by reference to Exhibit 4.6 to the FCX 1993 Form 10-K. 4.4 Certificate of Designations of the Gold-Denominated Preferred Stock of FCX. Incorporated by reference to Exhibit 4.3 to the FCX 1995 Second Quarter Form 10-Q. 4.5 Deposit Agreement dated as of August 12, 1993 among FCX, ChaseMellon, as Depositary, and holders of depositary receipts (Gold-Denominated Depositary Receipts) evidencing certain Depositary Shares, each of which, in turn, represents 0.05 shares of Gold-Denominated Preferred Stock. Incorporated by reference to Exhibit 4.8 to the FCX 1993 Form 10-K. 4.6 Form of Gold-Denominated Depositary Receipt. Incorporated by reference to Exhibit 4.9 to the FCX 1993 Form 10-K. 4.7 Certificate of Designations of the Gold-Denominated Preferred Stock, Series II (the Gold-Denominated Preferred Stock II) of FCX. Incorporated by reference to Exhibit 4.4 to the FCX 1995 Second Quarter Form 10-Q. 4.8 Deposit Agreement dated as of January 15, 1994, among FCX, ChaseMellon, as Depositary, and holders of depositary receipts (Gold-Denominated II Depositary Receipts) evidencing certain Depositary Shares, each of which, in turn, represents 0.05 shares of Gold-Denominated Preferred Stock II. Incorporated by reference to Exhibit 4.2 to the Quarterly Report on Form 10-Q of FCX for the quarter ended March 31, 1994 (the FCX 1994 First Quarter Form 10-Q). E-1 Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX Exhibit Number Description - ----- ----------- 4.9 Form of Gold-Denominated II Depositary Receipt. Incorporated by reference to Exhibit 4.3 to the FCX 1994 First Quarter Form 10-Q. 4.10 Certificate of Designations of the Silver-Denominated Preferred Stock of FCX. Incorporated by reference to Exhibit 4.5 to the FCX 1995 Second Quarter Form 10-Q. 4.11 Deposit Agreement dated as of July 25, 1994 among FCX, ChaseMellon, as Depositary, and holders of depositary receipts (Silver-Denominated Depositary Receipts) evidencing certain Depositary Shares, each of which, in turn, initially represents 0.025 shares of Silver-Denominated Preferred Stock. Incorporated by reference to Exhibit 4.2 to the July 15, 1994 Form 8-A. 4.12 Form of Silver-Denominated Depositary Receipt. Incorporated by reference to Exhibit 4.1 to the July 15, 1994, Form 8-A. 4.13 $550 million Composite Restated Credit Agreement dated as of July 17, 1995 (the PT Freeport Indonesia Credit Agreement) among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, Chemical Bank, as administrative agent and FCX collateral agent, and The Chase Manhattan Bank (National Association), as documentary agent. Incorporated by reference to Exhibit 4.16 to the Annual Report of FCX on Form 10-K for the year ended December 31, 1995 (the FCX 1995 Form 10-K). 4.14 Amendment dated as of July 15, 1996 to the PT Freeport Indonesia Credit Agreement among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, Chemical Bank, as administrative agent and FCX collateral agent, and The Chase Manhattan Bank (National Association), as documentary agent. Incorporated by reference to Exhibit 4.2 to the Quarterly Report of FCX on Form 10-Q for the quarter ended September 30, 1996 (the FCX 1996 Third Quarter Form 10-Q). 4.15 Amendment dated as of October 9, 1996 to the PT Freeport Indonesia Credit Agreement among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, The Chase Manhattan Bank (formerly Chemical Bank), as administrative agent, security agent and JAA security agent, and The Chase Manhattan Bank (as successor to The Chase Manhattan Bank (National Association)), as documentary agent. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of FCX dated and filed November 13, 1996 (the FCX November 13, 1996 Form 8-K). 4.16 Amendment dated as of March 7, 1997 to the PT Freeport Indonesia Credit Agreement among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, The Chase Manhattan Bank, as administrative agent, security agent and JAA security agent, and The Chase Manhattan Bank, as dooccumentary agent. Incorporated by reference to Exhibit 4.16 to the Annual Report of FCX on Form 10-K for the year ended December 31, 1997 (the FCX 1997 Form 10-K). 4.17 Amendment dated as of July 24, 1997 to the PT Freeport Indonesia Credit Agreement among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, The Chase Manhattan Bank, as administrative agent, security agent and JAA security agent, and The Chase Manhattan Bank, as documentary agent. Incorporated by reference to Exhibit 4.17 to the FCX 1997 Form 10-K. E-2 Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX Exhibit Number Description - ----- ----------- 4.18 $200 million Credit Agreement dated as of June 30, 1995 (the CDF) among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, Chemical Bank, as administrative agent and FCX collateral agent, The Chase Manhattan Bank (National Association), as documentary agent. Incorporated by reference to Exhibit 4.2 to the FCX 1995 Third Quarter Form 10-Q. 4.19 Amendment dated as of July 15, 1996 to the CDF among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, Chemical Bank, as administrative agent and FCX collateral agent, and The Chase Manhattan Bank (National Association), as documentary agent. Incorporated by reference to Exhibit 4.1 to the FCX 1996 Third Quarter Form 10-Q. 4.20 Amendment dated as of October 9, 1996 to the CDF among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, The Chase Manhattan Bank (formerly Chemical Bank), as administrative agent, security agent and JAA security agent, and The Chase Manhattan Bank (as successor to The Chase Manhattan Bank (National Association)), as documentary agent. Incorporated by reference to Exhibit 10.1 to the FCX November 13, 1996 Form 8-K. 4.21 Amendment dated as of March 7, 1997 to the CDF among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, The Chase Manhattan Bank, as administrative agent, security agent and JAA security agent, and The Chase Manhattan Bank, as documentary agent. Incorporated by reference to Exhibit 4.21 to the FCX 1997 Form 10-K. 4.22 Amendment dated as of July 24, 1997 to the CDF among PT Freeport Indonesia, FCX, the several financial institutions that are parties thereto, First Trust of New York, National Association, as PT Freeport Indonesia Trustee, The Chase Manhattan Bank, as administrative agent, security agent and JAA security agent, and The Chase Manhattan Bank, as documentary agent. Incorporated by reference to Exhibit 4.22 to the FCX 1997 Form 10-K. 4.23 Senior Indenture dated as of November 15, 1996 from FCX to The Chase Manhattan Bank, as Trustee. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of FCX dated November 13, 1996 and filed November 15, 1996. 4.24 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. Incorporated by reference to Exhibit 4.20 to the FCX 1996 Form 10-K. 4.25 Certificate of Designations of Series A Participating Cumulative Preferred stock of FCX. Incorporated by reference to Exhibit 4.25 to the Quarterly Report on Form 10-Q of FCX for the quarter ended March 31, 2000 (the FCX 2000 First Quarter Form 10-Q). 4.26 Rights Agreement dated as of May 3, 2000 between FCX and Chasemellon Shareholder Services, L.L.C., as Rights Agent. Incorporated by reference to Exhibit 4.26 to the FCX 2000 First Quarter Form 10-Q. 10.1 Contract of Work dated December 30, 1991 between the Government of the Republic of Indonesia and PT Freeport Indonesia. Incorporated by reference to Exhibit 10.2 to the FCX 1995 Form 10-K. 10.2 Contract of Work dated August 15, 1994 between the Government of the Republic of Indonesia and PT Irja Eastern Minerals Corporation. Incorporated by reference to Exhibit 10.2 to the FCX 1995 Form 10-K. E-3 Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX Exhibit Number Description - ----- ----------- 10.3 Agreement dated as of October 11, 1996 to Amend and Restate Trust Agreement among PT Freeport Indonesia, FCX, the RTZ Corporation PLC, P.T. RTZ-CRA Indonesia, RTZ Indonesian Finance Limited and First Trust of New York, National Association, and The Chase Manhattan Bank, as Administrative Agent, JAA Security Agent and Security Agent. Incorporated by reference to Exhibit 10.3 to the FCX November 13, 1996 Form 8-K. 10.4 Credit Agreement dated October 11, 1996 between PT Freeport Indonesia and RTZ Indonesian Finance Limited. Incorporated by reference to Exhibit 10.4 to the FCX November 13, 1996 Form 8-K. 10.5 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. Incorporated by reference to Exhibit 10.5 to the FCX November 13, 1996 Form 8-K. 10.6 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. Incorporated by reference to Exhibit 10.3 of the FCX 1996 Form 10-K. 10.7 Put and Guaranty Agreement dated as of March 21, 1997 between FCX and The Chase Manhattan Bank. Incorporated by reference to Exhibit 10.7 to the FCX 1997 Form 10-K. 10.8 Subordinated Loan Agreement dated as of March 21, 1997 between FCX and PT Nusamba Mineral Industri. Incorporated by reference to Exhibit 10.8 to the FCX 1997 Form 10-K. 10.9 Amended and Restated Power Sales Agreement dated as of December 18, 1997 between PT Freeport Indonesia and P.T. Puncakjaya Power. Incorporated by reference to Exhibit 10.9 to the FCX 1997 Form 10-K. 10.10 Option, Mandatory Purchase and Right of First Refusal Agreement dated as of December 19, 1997 among PT Freeport Indonesia, P.T. Puncakjaya Power, Duke Irian Jaya, Inc., Westcoast Power, Inc. and P.T. Prasarana Nusantara Jaya. Incorporated by reference to Exhibit 10.10 to the FCX 1997 Form 10-K. Executive Compensation Plans and Arrangements (Exhibits 10.11 through 10.33) 10.11 Annual Incentive Plan of FCX as amended effective February 2, 1999. Incorporated by reference to Exhibit 10.11 to the 1998 FCX Form 10-K. 10.12 1995 Long-Term Performance Incentive Plan of FCX. Incorporated by reference to Exhibit 10.9 to the FCX 1996 Form 10-K. 10.13 FCX Performance Incentive Awards Program as amended effective February 2, 1999. Incorporated by reference to Exhibit 10.13 to the 1998 FCX Form 10-K. 10.14 FCX President's Award Program. Incorporated by reference to Exhibit 10.8 to the FCX 1995 Form 10-K. 10.15 FCX Adjusted Stock Award Plan, as amended. Incorporated by reference to Exhibit 10.15 to the 1997 FCX Form 10-K. E-4 Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX Exhibit Number Description - ------ ----------- 10.16 FCX 1995 Stock Option Plan. Incorporated by reference to Exhibit 10.13 to the FCX 1996 Form 10-K. 10.17 FCX 1995 Stock Option Plan for Non-Employee Directors, as amended. Incorporated by reference to Exhibit 10.17 to the FCX 1997 Form 10-K. 10.18 FCX 1999 Stock Incentive Plan. Incorporated by reference to Exhibit 10.18 to the Quarterly Report on Form 10-Q of FCX for the quarter ended June 30, 1999. 10.19 FCX 1999 Long-Term Performance Incentive Plan. Incorporated by reference to Exhibit 10.19 to the Annual Report of FCX on Form 10-K for the year ended December 31, 1999 (the FCX 1999 Form 10-K). 10.20 Financial Counseling and Tax Return Preparation and Certification Program of FCX. Incorporated by reference to Exhibit 10.12 to the FCX 1995 Form 10-K. 10.21 FM Services Company Performance Incentive Awards Program as amended effective February 2, 1999. Incorporated by reference to Exhibit 10.19 to the 1998 FCX Form 10-K. 10.22 FM Services Company Financial Counseling and Tax Return Preparation and Certification Program. Incorporated by reference to Exhibit 10.14 to the FCX 1995 Form 10-K. 10.23 Consulting Agreement dated as of December 22, 1988 between FTX and Kissinger Associates, Inc. (Kissinger Associates). Incorporated by reference to Exhibit 10.21 to the FCX 1997 Form 10-K. 10.24 Letter Agreement dated May 1, 1989 between FTX and Kent Associates, Inc. (Kent Associates, predecessor in interest to Kissinger Associates). Incorporated by reference to Exhibit 10.22 to the FCX 1997 Form 10-K. 10.25 Letter Agreement dated January 27, 1997 among Kissinger Associates, Kent Associates, FTX, FCX and FMS. Incorporated by reference to Exhibit 10.20 to the FCX 1996 Form 10-K. 10.26 Agreement for Consulting Services between FTX and B. M. Rankin, Jr. effective as of January 1, 1991 (assigned to FMS as of January 1, 1996). Incorporated by reference to Exhibit 10.24 to the FCX 1997 Form 10-K. 10.27 Supplemental Agreement between FMS and B. M. Rankin Jr. dated December 15, 1997. Incorporated by reference to Exhibit 10.25 to the FCX 1997 Form 10-K. 10.28 Supplemental Agreement between FMS and B.M. Rankin Jr. dated December 7, 1998. Incorporated by reference to Exhibit 10.26 to the 1998 FCX Form 10-K. 10.29 Letter Agreement effective as of January 7, 1997 between Senator J. Bennett Johnston, Jr. and FMS. Incorporated by reference to Exhibit 10.25 of the FCX 1996 Form 10-K. 10.30 Supplemental Letter Agreement dated April 13, 2000 between J. Bennett Johnston, Jr. and FMS. Incorporated by reference to Exhibit 10.30 to the FCX 2000 First Quarter Form 10-Q. 10.31 Letter Agreement dated January 25, 1999 between FMS and Rene L. Latiolais. Incorporated by reference to Exhibit 10.30 to the 1998 FCX Form 10-K. 10.32 Supplemental Letter Agreement dated August 4, 1999 between FMS and Rene L. Latiolais. Incorporated by reference to Exhibit 10.32 of the FCX 1999 Form 10-K. E-5 Freeport-McMoRan Copper & Gold Inc. EXHIBIT INDEX Exhibit Number Description - ----- 10.33 Supplemental Letter Agreement dated July 10, 2000 between FMS and Rene L. Latiolais. 10.34 Letter Agreement dated November 1, 1999 between FMS and Gabrielle K. McDonald. Incorporated by reference to Exhibit 10.33 of the FCX 1999 Form 10-K. 10.35 Supplemental Letter Agreement dated May 17, 2000 between FMS and Gabrielle K. McDonald. 10.36 Concentrate Purchase and Sales Agreement dated effective December 11, 1996 between PT Freeport Indonesia and P T Smelting. Incorporated by reference to Exhibit 10.34 of the FCX 1999 Form 10-K. 15.1 Letter dated July 18, 2000 from Arthur Andersen LLP regarding unaudited interim financial statements. 27.1 FCX Financial Data Schedule. E-6 EX-10 2 0002.txt Exhibit 10.33 July 10, 2000 Mr. Rene L. Latiolais 2305 Barton Creek Boulevard Villa 42, Box 3 Austin, Texas 78735 Supplemental Agreement to the Consulting Agreement dated January 25, 1999 and the Supplemental Agreement dated August 4, 1999. This Supplemental Agreement corrects and replaces the Supplemental Agreement dated June 14, 2000. Dear Mr. Latiolais This letter refers to the Consulting Agreement (the "Agreement") dated January 25, 1999, and the Supplemental Agreement dated August 4, 1999 (the "Supplemental") between you and FM Services Company (the "Company"). By way of this Supplemental Agreement, the Company would like to amend your Supplemental Agreement dated August 4, 1999 to reflect a new annual fee of $230,000, payable monthly effective July 1, 2000. Additionally, your consulting services will be required only "as needed." All other terms and conditions of the Agreement between you and FM Services shall remain the same. Please confirm that the foregoing correctly sets forth your understanding with respect to this matter by signing both originals of this letter and returning one to me. Very truly yours, /s/ Stephen M. Jones Stephen M. Jones Vice Chairman and Secretary AGREED TO AND ACCEPTED BY: /s/ Rene L. Latiolais _______________________________________ Rene L. Latiolais DATE: 7/26/00 ______________________________________ EX-10 3 0003.txt Exhibit 10.35 May 17, 2000 The Honorable Gabrielle K. McDonald 425 E. 58th Street, # 31D New York, NY 10022-2300 Dear Judge McDonald: Supplemental Agreement Providing a Change to the Consulting Agreement of November 1, 1999 This Supplemental Agreement refers to the consulting agreement of November 1, 2000 (the "Consulting Agreement"), with the undersigned, FM Services Company (the "Company"), with respect to your performance of consulting services for FM Services and its subsidiaries and affiliates (collectively with FM Services, the "Freeport Entities"). By way of this Supplemental Agreement, the Company would like to amend your Consulting Agreement, increasing your annual retainer to $500,000 effective January 1, 2000, and through December 31, 2001. The annual retainer for the calendar year 2002 will return to $250,000. Payment representing your increase retroactive to the first of the year will be sent to you shortly. The third quarter payment (due in July) will reflect our new Agreement in the amount of $125,000. By way of this Supplemental Agreement, you and the Company agree that the consulting services under this Agreement shall be increased from 20% to not more than 50% of your time on an annual basis through December 31, 2001. The consulting services under this Agreement for the calendar year 2002 will return to 20% of your time on an annual basis. All other terms and conditions of the Consulting Agreement shall remain unchanged. Please confirm that the foregoing correctly sets forth your understanding with respect to this matter by signing both originals of this Supplemental Agreement and returning one to me. Very truly yours, Richard C. Adkerson Chairman FM Services Company AGREED TO AND ACCEPTED: BY: __________________________________ DATE: ______________________________ The Honorable Gabrielle K. McDonald EX-15 4 0004.txt Exhibit 15.1 July 18, 2000 Freeport-McMoRan Copper & Gold Inc. 1615 Poydras St. New Orleans, LA 70112 Gentlemen, We are aware that Freeport-McMoRan Copper & Gold Inc. has incorporated by reference in its Registration Statements (File Nos. 33-63271, 33-63269, 33- 63267, 333-85803 and 333-31584) its Form 10-Q for the quarter ended June 30, 2000, which includes our report dated July 18, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the Act), this report is not considered a part of the registration statements prepared or certified by out firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, /s/ Arthur Andersen LLP EX-27 5 0005.txt
5 This schedule contains summary financial information extracted from Freeport-McMoRan Copper & Gold Inc. unaudited financial statements at June 30, 2000 and for the six months then ended, and is qualified in its entirety by reference to such financial statements. 0000831259 FREEPORT-MCMORAN COPPER & GOLD INC. 1,000 6-MOS DEC-31-2000 JUN-30-2000 5,861 0 84,227 0 387,343 533,996 5,023,222 1,725,803 3,984,652 612,827 2,013,291 487,507 349,990 21,876 (310,290) 3,984,652 864,940 864,940 629,240 629,240 3,809 0 99,748 82,860 58,725 9,555 0 0 0 (9,372) (.06) (.06)
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