10-Q

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, 2003
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 __

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No __

On June 30, 2003, there were issued and outstanding 146,640,225 shares of the registrant’s 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 Income	4
Statements of Cash Flows	5
Notes to Financial Statements	6
Remarks	11
Report of Independent Public Accountants	12
Management's Discussion and Analysis of Financial Condition
and Results of Operations	13
Quantitative and Qualitative Disclosures about Market Risks	29
Controls and Procedures	29
Part II.  Other Information	29
Signature	30
Exhibit Index	E-1

 

FREEPORT-McMoRan COPPER & GOLD INC.

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

FREEPORT-McMoRan COPPER & GOLD INC.

BALANCE SHEETS (Unaudited)

	June 30,		December 31,
	2003		2002
	(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	740,360	$	7,836
Restricted investments and cash		60,809		49,809
Accounts receivable		242,961		190,509
Inventories		380,610		387,247
Prepaid expenses and other		9,370		2,579
Total current assets		1,434,110		637,980
Property, plant, equipment and development costs, net		3,256,150		3,320,561
Deferred mining costs		99,887		78,235
Restricted investments and cash		23,708		58,137
Investment in PT Smelting		43,144		44,619
Other assets		92,556		52,661
Total assets	$	4,949,555	$	4,192,193
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	254,331	$	262,310
Current portion of long-term debt and short-term borrowings		144,196		77,112
Unearned customer receipts		35,574		36,754
Rio Tinto share of joint venture cash flows		54,039		51,297
Accrued interest payable		62,888		29,081
Accrued income taxes		78,085		81,319
Total current liabilities		629,113		537,873
Long-term debt, less current portion:
Convertible senior notes		1,178,750		603,750
Senior notes		715,977		450,000
Infrastructure asset financings		279,701		310,674
Atlantic Copper debt		172,385		233,642
Equipment and other loans		81,478		84,212
FCX and PT Freeport Indonesia credit facilities		-		279,000
Total long-term debt, less current portion		2,428,291		1,961,278
Accrued postretirement benefits and other liabilities		150,785		140,016
Deferred income taxes		751,328		706,510
Minority interest		154,905		129,687
Redeemable preferred stock		450,003		450,003
Stockholders' equity		385,130		266,826
Total liabilities and stockholders' equity	$	4,949,555	$	4,192,193

The accompanying notes are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

STATEMENTS OF INCOME (Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2003			2002			2003			2002
	(In Thousands, Except Per Share Amounts)
Revenues	$	609,455		$	407,999		$	1,134,051		$	800,679
Cost of sales:
Production and delivery		277,408			206,124			524,878			441,041
Depreciation and amortization		68,283			62,305			136,071			115,359
Total cost of sales		345,691			268,429			660,949			556,400
Exploration expenses		1,827			800			3,331			1,554
General and administrative expenses		20,711			16,360			37,219			32,772
Total costs and expenses		368,229			285,589			701,499			590,726
Operating income		241,226			122,410			432,552			209,953
Equity in PT Smelting earnings (losses)		2,270			(2,537	)		2,947			(3,359	)
Interest expense, net		(55,478	)		(43,492	)		(107,987	)		(87,774	)
Other expenses, net		(8,907	)		(9,331	)		(10,526	)		(9,295	)
Income before income taxes and minority interest		179,111			67,050			316,986			109,525
Provision for income taxes		(97,908	)		(46,040	)		(175,122	)		(74,854	)
Minority interest in net income of      consolidated subsidiaries		(14,259	)		(5,975	)		(25,170	)		(11,529	)
Net income before cumulative effect of changes in accounting principle		66,944			15,035			116,694			23,142
Cumulative effect of changes in accounting principle, net		-			-			9,082			(3,049	)
Net income		66,944			15,035			125,776			20,093
Preferred dividends		(9,572	)		(9,459	)		(19,159	)		(18,671	)
Net income applicable to common stock	$	57,372		$	5,576		$	106,617		$	1,422
Net income per share of common stock:
Basic:
Before cumulative effect		$0.39			$0.04			$0.67			$0.03
Cumulative effect		-			-			0.06			(0.02	)
Net income per share of common stock		$0.39			$0.04			$0.73			$0.01
Diluted:
Before cumulative effect		$0.37			$0.04			$0.64			$0.03
Cumulative effect		-			-			0.05			(0.02	)
Net income per share of common stock		$0.37			$0.04			$0.69			$0.01
Average common shares outstanding:
Basic
Basic		145,907			144,698			145,574			144,403
Diluted		190,990			147,370			190,122			146,410
Dividends paid per common share		$0.09			$  -			$0.09			$    -

The accompanying notes are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended June 30,
	2003			2002
	(In Thousands)
Cash flow from operating activities:
Net income	$	125,776		$	20,093
Adjustments to reconcile net income to net cash provided by        operating activities:
Depreciation and amortization		136,071			115,359
Cumulative effect of changes in accounting principle		(9,082	)		3,049
Deferred income taxes		37,451			25,368
Equity in PT Smelting losses (earnings)		(2,947	)		3,359
Minority interest's share of net income		25,170			11,529
Change in deferred mining costs		(21,652	)		(12,420	)
Currency translation loss		6,277			8,726
Amortization of deferred financing costs		9,571			6,005
Loss on early extinguishment of debt		5,010			-
Elimination (recognition) of profit on PT Freeport          Indonesia sales to PT Smelting		4,422			(1,091	)
Provision for inventory obsolescence		3,000			3,000
Other		9,745			4,214
(Increases) decreases in working capital:
Accounts receivable		(47,524	)		(21,076	)
Inventories		(11,309	)		(18,278	)
Prepaid expenses and other		(4,844	)		(2,894	)
Accounts payable and accrued liabilities		19,448			(13,145	)
Rio Tinto share of joint venture cash flows		2,718			31,087
Accrued income taxes		(3,234	)		(10,050	)
Increase in working capital		(44,745	)		(34,356	)
Net cash provided by operating activities		2 84,067			152,835
Cash flow from investing activities:
PT Freeport Indonesia capital expenditures		(58,565	)		(80,215	)
Atlantic Copper capital expenditures		(3,623	)		(1,254	)
Sale of restricted investments to fund interest costs		23,645			23,678
Sale of assets and other		1,890			(156	)
Net cash used in investing activities		(36,653	)		(57,947	)
Cash flow from financing activities:
Net proceeds from sales of senior notes		1,046,437			-
Proceeds from other debt		47,400			314,631
Repayments of debt		(5 93,742	)		(396,981	)
Cash dividends paid:
Common stock		(13,090	)		-
Preferred stock		(19,066	)		(18,350	)
Proceeds from exercised stock options		20,475			7,549
Financing costs		(3,304	)		(661	)
Net cash provided by (used in) financing activities		4 85,110			(93,812	)
Net increase in cash and cash equivalents		732,524			1,076
Cash and cash equivalents at beginning of year		7,836			7,587
Cash and cash equivalents at end of period	$	740,360		$	8,663

The accompanying notes are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

NOTES TO FINANCIAL STATEMENTS

1.

EARNINGS PER SHARE

Freeport-McMoRan Copper & Gold Inc.’s (FCX) basic net income per share of common stock was calculated by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period.  The following is a reconciliation of net income and weighted average common shares outstanding for purposes of calculating diluted net income per share (in thousands, except per share amounts):

	Three months ended June 30,						Six months ended June 30,
	2003			2002			2003			2002
Net income before preferred dividends and cumulative effect of changes in accounting principle	$	66,944		$	15,035		$	116,694		$	23,142
Preferred dividends		(9,572	)		(9,459	)		(19,159	)		(18,671	)
Net income before cumulative effect		57,372			5,576			97,535			4,471
Cumulative effect of changes in accounting principle		-			-			9,082			(3,049	)
Net income applicable to common stock		57,372			5,576			106,617			1,422
Plus income impact of assumed conversion of 8 ¼% Convertible Senior Notes, after taxes		12,688			-			25,341			-
Diluted net income applicable to common stock	$	70,060		$	5,576		$	131,958		$	1,422
Weighted average common shares outstanding		145,907			144,698			145,574			144,403
Add:  Shares issuable upon conversion of 8 ¼% Convertible Senior Notes		42,220			-			42,220			-
Dilutive stock options		2,664			2,406			2,120			1,731
Restricted stock		199			266			208			276
Weighted average common shares outstanding for purposes of calculating diluted net income per share		190,990			147,370			190,122			146,410
Diluted net income per share of common stock:
Before cumulative effect	$	0.37		$	0.04		$	0.64		$	0.03
Cumulative effect		-			-			0.05			(0.02	)
Net income per share of common stock	$	0.37		$	0.04		$	0.69		$	0.01

Outstanding stock options with exercise prices greater than the average market price of the common stock during the period are excluded from the computation of diluted net income per share of common stock. In addition, FCX’s convertible preferred stock and convertible senior notes are excluded for certain periods because including the conversion of these instruments would have increased reported diluted net income per share. A recap of the excluded amounts follows (in thousands, except exercise prices):

	Three months ended June 30,			Six months ended June 30,
	2003		2002	2003		2002
Weighted average outstanding options	2,285		7,833	2,759		9,709
Weighted average exercise price	$32.79		$23.43	$30.61		$22.24
Dividends on convertible preferred stock	$6,125		$6,125	$12,250		$12,250
Weighted average shares issuable upon conversion	11,690		11,690	11,690		11,690
Interest on 8 ¼% Convertible Senior Notes, net of taxes	-	a	$12,581	-	a	$25,310
Weighted average shares issuable upon conversion	-	a	42,220	-	a	42,220
Interest on 7% Convertible Senior Notes, net of taxes b	$10,354		-	$16,160		-
Weighted average shares issuable upon conversion b	18,625		-	14,406		-

a.

Included in diluted calculation.

b.

FCX’s 7% Convertible Senior Notes were issued on February 11, 2003, and are convertible into 18.6 million shares of common stock (see Note 4).

Stock-Based Compensation Plans.  As of March 31, 2003, FCX had three stock-based employee compensation plans and one stock-based director compensation plan, which are more fully described in Note 7 of FCX’s 2002 Annual Report on Form 10-K.  At FCX’s annual meeting of stockholders on May 1, 2003, stockholders approved a proposal to adopt FCX’s 2003 Stock Incentive Plan.  The 2003 Stock Incentive Plan provides for the issuance of stock options, stock appreciation rights, restricted stock and other stock-based awards for up to 8.0 million shares to eligible participants.  FCX accounts for all of its plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, which require compensation cost for stock-based employee compensation plans to be recognized based on the difference on the date of grant, if any, between the quoted market p rice of the stock and the amount an employee must pay to acquire the stock. The following table illustrates the effect on net income and earnings per share if FCX had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” which requires compensation cost for all stock-based employee compensation plans to be recognized based on the use of a fair value method (in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Net income applicable to common stock, as reported	$	57,372		$	5,576		$	106,617		$	1,422
Add:  Stock-based employee compensation expense included in reported net income for stock option conversions and stock appreciation rights, net of taxes and minority interests		1,423			455			2,046			686
Deduct:  Total stock-based employee compensation expense determined under fair value-based method for all awards, net of taxes and minority interests		(2,498	)		(2,137	)		(4,465	)		(4,185	)
Pro forma net income applicable to common stock	$	56,297		$	3,894		$	104,198		$	(2,077	)
Earnings per share:
Basic – as reported	$	0.39		$	0.04		$	0.73		$	0.01
Basic – pro forma	$	0.39		$	0.03		$	0.72		$	(0.01	)
Diluted – as reported	$	0.37		$	0.04		$	0.69		$	0.01
Diluted – pro forma	$	0.36		$	0.03		$	0.68		$	(0.01	)

For the pro forma computations, the values of option grants were calculated on the dates of grant using the Black-Scholes option-pricing model.  The weighted average fair value for stock option grants was $10.04 per option in the first six months of 2003 and $7.88 per option for the first six months of 2002.  The weighted average assumptions used include a risk-free interest rate of 3.7 percent in the first six months of 2003 and 5.0 percent in 2002; expected volatility of 47 percent in the first six months of 2003 and 2002; no annual dividends; and expected lives of 7 years.  No other discounts or restrictions related to vesting or the likelihood of vesting of stock options were applied.

2.

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE

Effective January 1, 2003, FCX adopted SFAS No. 143, “Accounting for Asset Retirement Obligations,” which requires recording the fair value of an asset retirement obligation associated with tangible long-lived assets in the period incurred.  Retirement obligations associated with long-lived assets included within the scope of SFAS No. 143 are those for which there is a legal obligation to settle under existing or enacted law, statute, written or oral contract or by legal construction.  

In 2002, FCX engaged an independent environmental consulting and auditing firm to assist in estimating PT Freeport Indonesia’s asset retirement obligations, and FCX engaged other consultants to assist in estimating Atlantic Copper’s and PT Smelting’s asset retirement obligations.  FCX estimated these obligations using an expected cash flow approach, in which multiple cash flow scenarios were used to reflect a range of possible outcomes.  FCX estimated these aggregate undiscounted obligations to be approximately $120 million for PT Freeport Indonesia, $17 million for Atlantic Copper and $11 million for PT Smelting.  To calculate the fair value of these obligations, FCX applied an estimated long-term inflation rate of 2.5 percent, except for Indonesian rupiah-denominated labor costs with respect to PT Freeport Indonesia’s and PT Smelting’s obligations, for which an estimated inflation rate of 9 percent was applied.  The projec ted cash flows were discounted at FCX’s estimated credit-adjusted, risk-free interest rates which ranged from 9.4 percent to 12.6 percent for the corresponding time periods over which these costs would be incurred.  After discounting the projected cash flows, a market risk premium of 10 percent was applied to the total to reflect what a third party might require to assume these asset retirement obligations.  The market risk premium was based on estimates of rates that a third party would have to pay to insure its exposure to possible future increases in the value of these obligations.  

At January 1, 2003, FCX estimated the fair value of its total asset retirement obligations to be $28.5 million.   FCX recorded the fair value of these obligations and the related additional assets as of January 1, 2003.  The net difference between FCX’s previously recorded reclamation and closure cost liability and the amounts estimated under SFAS No. 143, after taxes and minority interest, resulted in a gain of $9.1 million (after reduction by $8.5 million for taxes and minority interest sharing), $0.05 per share on a diluted basis, which was recognized as a cumulative effect adjustment for a change in accounting principle.  As a result of adopting SFAS No. 143, FCX expects future depreciation and amortization expense to be lower and production costs to be higher, with no significant net impact on net income during the near term.

Prior to adoption of SFAS No. 143, estimated future reclamation and mine closure costs for PT Freeport Indonesia’s current mining operations in Indonesia were accrued and charged to income over the estimated life of the mine by the unit-of-production method based on estimated recoverable proven and probable copper reserves.  Estimated future closure costs for Atlantic Copper’s and PT Smelting’s operations were not considered material and no accruals were made.  

The effect of adopting SFAS No. 143 was to increase net income by approximately $0.2 million, less than $0.01 per share in the second quarter of 2003 and $0.5 million, less than $0.01 per share in the first six months of 2003.  Presented below are FCX’s reported results and pro forma amounts that would have been reported in FCX’s Statements of Income had those statements been adjusted for the retroactive application of this change in accounting principle (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
Reported results:
Net income applicable to common stock	$	57,372	$	5,576	$	106,617	$	1,422
Basic net income per share of common stock		0.39		0.04		0.73		0.01
Diluted net income per share of common stock		0.37		0.04		0.69		0.01

Pro forma amounts assuming retroactive application     of new accounting principle:
Net income applicable to common stock	$	57,372	$	6,237	$	97,535	$	2,579
Basic net income per share of common stock		0.39		0.04		0.67		0.02
Diluted net income per share of common stock		0.37		0.04		0.64		0.02

Effective January 1, 2002, FCX changed its method of computing depreciation for PT Freeport Indonesia’s mining and milling life-of-mine assets.  Prior to January 1, 2002, PT Freeport Indonesia depreciated mining and milling life-of-mine assets on a composite basis.  Total historical capitalized costs and estimated future development costs relating to its developed and undeveloped reserves were depreciated using the unit-of-production method based on total developed and undeveloped proven and probable copper reserves.  Estimated future costs, which are significant, to develop PT Freeport Indonesia’s undeveloped ore bodies are expected to be incurred over the next 20 to 25 years.

After considering the inherent uncertainties and subjectivity relating to the long time frame over which these estimated costs would be incurred, and after consultation with the accounting staff of the Securities and Exchange Commission, management revised its depreciation methodology prospectively.  Effective January 1, 2002, depreciation for the mining and milling life-of-mine assets excludes consideration of future development costs.  Under the new methodology, PT Freeport Indonesia depreciates the capitalized costs of individual producing mines over the related proven and probable copper reserves.  Infrastructure and other common costs continue to be depreciated over total proven and probable copper reserves.  The cumulative effect of this change through December 31, 2001, as reflected in FCX’s first-quarter 2002 results, reduced net income by $3.0 million, net of taxes and minority interest sharing. The effect of the change in depreciation methodology was to reduce depreciation and amortization expense by $3.9 million in the second quarter of 2002 and $7.7 million in the first six months of 2002, thus increasing net income by $2.0 million, $0.01 per share, in the second quarter of 2002 and $4.0 million, $0.03 per share, in the first six months of 2002.  

3.

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 and Exploration			Smelting and Refining			Eliminations and Other			FCX Total
	(In Thousands)
Three months ended June 30, 2003:
Revenues	$	524,613	a	$	210,681		$	(125,839	)	$	609,455
Production and delivery		163,728			204,944			(91,264	)b		277,408
Depreciation and amortization		57,700			7,046			3,537			68,283
Exploration expenses		1,790			-			37			1,827
General and administrative expenses		22,404			2,761			(4,454	)		20,711
Operating income (loss)	$	278,991		$	(4,070	)	$	(33,695	)	$	241,226
Equity in PT Smelting earnings	$	-		$	2,270		$	-		$	2,270
Interest expense, net	$	14,520		$	4,222		$	36,736		$	55,478
Provision for income taxes	$	96,912		$	-		$	996		$	97,908
Capital expenditures	$	29,466		$	2,489		$	151		$	32,106
Total assets	$	3,615,896	c	$	705,340	d	$	628,319		$	4,949,555
Three months ended June 30, 2002:
Revenues	$	319,411	a	$	176,070		$	(87,482	)	$	407,999
Production and delivery		122,637			164,431			(80,944	)b		206,124
Depreciation and amortization		52,157			6,892			3,256			62,305
Exploration expenses		777			-			23			800
General and administrative expenses		17,022			2,110			(2,772	)		16,360
Operating income	$	126,818		$	2,637		$	(7,045	)	$	122,410
Equity in PT Smelting losses	$	-		$	(2,537	)	$	-		$	(2,537	)
Interest expense, net	$	18,797		$	4,742		$	19,953		$	43,492
Provision for income taxes	$	42,396		$	-		$	3,644		$	46,040
Capital expenditures	$	48,719		$	421		$	495		$	49,635
Total assets	$	3,225,780	c	$	633,647	d	$	332,901		$	4,192,328
Six months ended June 30, 2003:
Revenues	$	954,724	a	$	429,076		$	(249,749	)	$	1,134,051
Production and delivery		324,066			413,427			(212,615	)b		524,878
Depreciation and amortization		114,932			14,091			7,048			136,071
Exploration expenses		3,264			-			67			3,331
General and administrative expenses		38,826			5,188			(6,795	)		37,219
Operating income (loss)	$	473,636		$	(3,630	)	$	(37,454	)	$	432,552
Equity in PT Smelting earnings	$	-		$	2,947		$	-		$	2,947
Interest expense, net	$	29,872		$	8,200		$	69,915		$	107,987
Provision for income taxes	$	164,259		$	-		$	10,863		$	175,122
Capital expenditures	$	58,337		$	3,623		$	228		$	62,188

Six months ended June 30, 2002:
Revenues	$	589,137	a	$	375,597		$	(164,055	)	$	800,679
Production and delivery		253,268			353,910			(166,137	)b		441,041
Depreciation and amortization		95,679			13,644			6,036			115,359
Exploration expenses		1,500			-			54			1,554
General and administrative expenses		29,828			4,086			(1,142	)		32,772
Operating income	$	208,862		$	3,957		$	(2,866	)	$	209,953
Equity in PT Smelting losses	$	-		$	(3,359	)	$	-		$	(3,359	)
Interest expense, net	$	37,910		$	9,080		$	40,784		$	87,774
Provision for income taxes	$	63,137		$	-		$	11,717		$	74,854
Capital expenditures	$	79,207		$	1,254		$	1,008		$	81,469

a.     Includes PT Freeport Indonesia sales to PT Smelting totaling $154.6 million in the second quarter of 2003, $38.9 million  in the second quarter of 2002, $275.9

        million in the first six months of 2003 and $138.1 million in the first six months of 2002.
b.     Includes effect of changes in the deferral of intercompany profits on 25 percent of PT Freeport Indonesia’s sales to PT Smelting that are still in PT Smelting’s            inventory at quarter end, totaling $6.5 million in the second quarter of  2003, $(0.5) million in the second quarter of 2002, $4.4 million in the first six months of 2003 and  $(1.1) million in the first six months of 2002.

c.     Includes PT Freeport Indonesia’s trade receivables with PT Smelting totaling $49.5 million at June 30, 2003 and $16.1 million at June 30, 2002.  
 

d.     Includes PT Freeport Indonesia’s equity investment in PT Smelting totaling $43.1 million at June 30, 2003 and $54.9 million at June 30, 2002.

4.  

  SENIOR NOTE OFFERINGS AND TENDER OFFERS

On January 29, 2003, FCX sold $500 million of 10⅛% Senior Notes due 2010 for net proceeds of approximately $487 million.  Interest on the notes is payable semiannually on February 1 and August 1 of each year, beginning August 1, 2003.  FCX may redeem some or all of the notes at its option at a make-whole redemption price prior to February 1, 2007, and afterwards at stated redemption prices.  The indenture governing the notes contains restrictions on incurring debt, creating liens, entering into sale leaseback transactions, taking actions to limit distributions from certain subsidiaries, selling assets, entering into certain transactions with affiliates, paying cash dividends on common stock, repurchasing or redeeming common or preferred equity, prepaying subordinated debt and making investments.   The notes are unsecured.

On February 11, 2003, FCX sold $575.0 million of 7% Convertible Senior Notes due 2011 for net proceeds of approximately $559 million.  Interest on the notes is payable semiannually on March 1 and September 1 of each year, beginning September 1, 2003.  The notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of FCX’s common stock at a conversion price of $30.87 per share, which is equal to a conversion rate of approximately 32.39 shares of common stock per $1,000 principal amount of notes.  The notes are unsecured.  

FCX used a portion of the net proceeds from the offerings to repay all its outstanding bank debt, which totaled $279.0 million at December 31, 2002.  In March 2003, FCX and PT Freeport Indonesia terminated their lending commitments and established an interim credit facility totaling $150 million with JP Morgan.  The interim credit facility represents an amendment to the previous facility and requires the companies to provide $100 million of cash security, unless the availability is reduced.  The restrictive covenants in the previous credit facilities have been terminated.  This facility is expected to remain undrawn and FCX and PT Freeport Indonesia are discussing a possible new facility with potential lenders ..  At June 30, 2003, FCX and PT Freeport Indonesia had deferred financing costs related to the bank facilities totaling $10.1 million, which may be adjusted upon entering into a new facility.

In April 2003, FCX concluded tender offers for its 7.20% Senior Notes due 2026 and its 7.50% Senior Notes due 2006.  Of the total $450 million outstanding at March 31, 2003, notes with a face amount of $234.0 million were tendered for $239.0 million cash.  FCX recorded a charge to other expenses of $6.6 million ($4.8 million to net income) in the second quarter of 2003 associated with these early extinguishments of debt.   In July 2003, FCX purchased an additional $76.0 million face amount of its 7.20% Senior Notes for $77.2 million, and will record a charge to other expenses of $1.3 million ($0.9 million to net income) in the third quarter of 2003.   FCX currently is considering repaying other outstanding debt, which could result in the recognition of losses and gains in future periods.  Depending on the timing and structure of a new credit facility and repayments of other outstanding debt, certain of FCX’s and PT Freeport Indonesia’s deferred financing costs in addition to scheduled amortization may be charged to 2003 earnings.

5.

INTEREST COST

Interest expense excludes capitalized interest of $0.8 million in the second quarter of 2003, $3.5 million in the second quarter of 2002, $1.5 million in the first six months of 2003 and $6.6 million in the first six months of 2002.

6.

RATIO OF EARNINGS TO FIXED CHARGES

The ratio of earnings to fixed charges for the first six months of 2003 and 2002 was 3.8 to 1 and 2.1 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.

7.

  COMPREHENSIVE INCOME

A summary of FCX’s comprehensive income is shown below (in thousands).

	Three months ended June 30,						Six months ended June 30,
	2003			2002			2003			2002
Net income	$	66,944		$	15,035		$	125,776		$	20,093
Other comprehensive income (loss):
Change in unrealized derivatives’ fair value, net of taxes of $1.4 million for the three months ended June 30, 2002, and $2.8 million for the six months ended June 30, 2002		2,250			12,184			4,660			11,733
Reclass to earnings, net of taxes of $1.1 million for the three months ended June 30, 2002, and $1.7 million for the six months ended June 30, 2002		(1,982	)		(27	)		(3,006	)		1,264
Total comprehensive income	$	67,212		$	27,192		$	127,430		$	33,090

8.        NEW ACCOUNTING STANDARD AND INTERPRETATION NO. 46

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  The new standard is effective July 1, 2003, and will require FCX to reclassify its redeemable preferred stock as debt and classify future dividend payments on these instruments as interest expense.  Prior period financial statements are not permitted to be restated to reflect the changes in classification.  

In January 2003, the FASB issued interpretation No. 46, “Consolidation of Variable Interest Entities,” which addresses consolidation of variable interest entities.  This interpretation is effective for the third quarter of 2003 for variable interest entities acquired before February 1, 2003.   FCX is reviewing the provisions of Interpretations No. 46 and currently does not expect it to have an impact on its consolidated financial statements.

9.

OTHER MATTERS AND SUBSEQUENT EVENT

In May 2003, PT Freeport Indonesia received a U.S. federal grand jury subpoena for the production of documents in connection with an anti-trust investigation of the copper concentrate industry.  PT Freeport Indonesia has not been identified as a target and is cooperating fully with the investigation.

In July 2003, FCX acquired the 85.7 percent ownership interest in PT Puncakjaya Power (PJP) owned by affiliates of Duke Energy Corporation for $78 million cash.  PJP is the owner of assets supplying power to PT Freeport Indonesia’s operations, including the 3x65 megawatt coal-fired power facilities, diesel generating capacity and other project assets.  PT Freeport Indonesia purchases power from PJP under infrastructure asset financing arrangements.  At June 30, 2003, PT Freeport Indonesia had infrastructure asset financing obligations to PJP totaling $312.8 million.  As a result of this transaction, FCX’s consolidated balance sheet will no longer reflect PT Freeport Indonesia’s obligation to PJP, but instead will reflect the $258.8 million of PJP bank debt at June 30, 2003, a $54.0 million reduction in FCX’s consolidated debt.  

----------------------

Remarks

The information furnished herein should be read in conjunction with FCX's financial statements contained in its 2002 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.  

INDEPENDENT ACCOUNTANT ’ S REVIEW REPORT

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) and subsidiaries as of June 30, 2003, the related statements of income for the three-month and six-month periods ended June 30, 2003 and 2002, and the statements of cash flows for the six months ended June 30, 2003 and 2002.  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, which will be performed for the full year with the objective of expressing 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 accompanying financial statements as of June 30, 2003 and 2002, and for the three-month and six-month periods then ended 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 consolidated balance sheet of Freeport-McMoRan Copper & Gold Inc. as of December 31, 2002, and the related consolidated statements of income, stockholder’s equity, and cash flows for the year then ended (not presented herein) and in our report dated January 16, 2003 (except for Note 15, as to which the date is March 6, 2003), we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

ERNST & YOUNG LLP

New Orleans, Louisiana

July 17, 2003

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

In management’s discussion and analysis, “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold Inc. (FCX) and its consolidated subsidiaries.  References to “aggregate” amounts mean the total of our share and Rio Tinto plc’s share as our joint venture partner.  You should read our financial statements, the related discussion and analysis of financial condition and results of operations and our discussion of our “Business and Properties” in our Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission.  The results of operations reported and summarized below are not necessarily indicative of future operating results.

We operate through our majority-owned subsidiary, PT Freeport Indonesia, and through PT Irja Eastern Minerals (Eastern Minerals) and Atlantic Copper, S.A. (Atlantic Copper), our wholly owned subsidiaries.  PT Freeport Indonesia owns a 25 percent interest in PT Smelting, an Indonesian company which operates a copper smelter and refinery in Gresik, Indonesia. In addition to the PT Freeport Indonesia and Eastern Minerals exploration activities, we conduct other mineral exploration activities in Papua, Indonesia, pursuant to joint venture and other arrangements. Our field exploration activities outside of our current mining operations area in Block A have been temporarily suspended (see “Exploration Activities”).  

CONSOLIDATED RESULTS

Summary comparative results for the second-quarter and six-month periods follow (in millions, except per share amounts):

	Second Quarter				Six Months
	2003		2002		2003		2002
Revenues	$	609.5	$	408.0	$	1,134.1	$	800.7
Operating income		241.2		122.4		432.6		210.0
Net income applicable to common stock before cumulative effect adjustment		57.4		5.6		97.5		4.5
Net income applicable to common stock		57.4		5.6		106.6		1.4
Diluted net income per share:
Before cumulative effect adjustment		0.37		0.04		0.64		0.03
Applicable to common stock		0.37		0.04		0.69		0.01

Consolidated revenues include PT Freeport Indonesia’s sale of copper concentrates, which also contain significant amounts of gold and silver, and the sale by Atlantic Copper of copper anodes, cathodes, wire and wire rod, and gold in anodes and slimes.  Our revenues and net income vary significantly with fluctuations in the market prices of copper and gold and other factors. On limited past occasions, in response to market conditions, we have entered into copper and gold price protection contracts for a portion of our expected future mine production to mitigate the risk of adverse price fluctuations.  We currently have no copper or gold price protection contracts relating to our mine production. We have outstanding gold-denominated and silver-denominated preferred stock with dividends and redemption amounts determined by commodity prices.  Based on PT Freeport Indonesia’s projected share of 2003 copper sales (1.4 billion pounds), a $0.01 per pou nd change in the average price realized would have an approximate $14 million impact on annual revenues and an approximate $7 million impact on annual net income.  A $5 per ounce change in the average price realized on PT Freeport Indonesia’s share of projected 2003 gold sales (2.6 million ounces) would have an approximate $13 million impact on annual revenues and an approximate $7 million impact on annual net income.  

Consolidated revenues for the second quarter and first six months of 2003 reflect higher copper and gold revenues at PT Freeport Indonesia and at Atlantic Copper, compared with the same periods in 2002.  Higher revenues from PT Freeport Indonesia during the second quarter and first six months of 2003 resulted primarily from increases in sales volumes caused by the mining of higher grade ore and higher gold prices.  Atlantic Copper’s revenues improved compared with the second quarter and first six months of 2002 mainly because of higher gold sales volumes and prices.

Second-quarter 2003 consolidated revenues include net reductions of $0.6 million ($0.3 million to net income or less than $0.01 per share) primarily for metal volume adjustments based on final assays and final pricing of concentrates sold in prior quarters, compared with a decrease of $5.9 million ($3.0 million to net income or $0.02 per share) to second-quarter 2002 revenues.  Six-month 2003 consolidated revenues included net additions of $11.0 million ($5.7 million to net income or $0.03 per share), compared with net additions of $5.4 million ($2.8 million to net income or $0.02 per share) in the first six months of 2002, primarily for final pricing of concentrates sold in prior years.

Consolidated cost of sales for the 2003 periods were higher compared with the 2002 periods largely because of higher unit costs and sales volumes.  Exploration expenses increased to $1.8 million in the second quarter of 2003 and $3.3 million in the first six months of 2003, from $0.8 million and $1.6 million, respectively, in the 2002 periods reflecting increased drilling in Block A during 2003.  General and administrative expenses increased to $20.7 million in the second quarter of 2003 from $16.4 million in the second quarter of 2002, and to $37.2 million in the first six months of 2003 from $32.8 million in the first six months of 2002.  The increases reflect charges for stock appreciation rights caused by a higher FCX stock price and several other smaller items.

Consolidated net interest expense increased to $55.5 million in the second quarter of 2003 from $43.5 million in the second quarter of 2002, and to $108.0 million in the first six months of 2003 from $87.8 million in the first six months of 2002 primarily because of the two FCX senior notes issued in the first quarter of 2003 (see Note 4 and “Capital Resources and Liquidity – Financing Activities”).  

Other expenses include the impact of translating Atlantic Copper’s net euro-denominated liabilities, primarily its retiree pension obligation.  Changes in the U.S.$/euro exchange rate require us to adjust the dollar value of net euro-denominated liabilities and record the adjustment in earnings.  The exchange rate was $1.05 per euro at December 31, 2002, $1.09 per euro at March 31, 2003 and $1.14 per euro at June 30, 2003.  Exchange rate effects on net income from euro-denominated liabilities were charges of $3.8 million in the second quarter of 2003, $9.3 million in the second quarter of 2002, $6.3 million in the first six months of 2003 and $8.7 million in the first six months of 2002.  Other expenses for the second quarter of 2003 and the first six months of 2003 also include a $6.6 million ($4.8 million to net income) charge associated with the early extinguishment of debt (see Note 4).

The provision for income taxes for the second quarter and first six months of 2003 represented 55 percent of consolidated income before income taxes and minority interests compared with 69 percent for the second quarter of 2002 and 68 percent for the first six months of 2002.  The lower percentage for the 2003 periods primarily reflects the impact of higher income at PT Freeport Indonesia (see “Other Financial Results”).  

Effective January 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations,” which requires recording liabilities related to the legal obligations associated with the retirement of tangible long-lived assets at fair values in the periods in which the obligations are incurred (typically when the assets are acquired, constructed or installed).  When the liabilities for asset retirement obligations are initially recorded, capital costs of the related assets are increased by equal corresponding amounts.  The fair values of the liabilities are determined by estimating the asset retirement obligations, including consideration of inflation and a present value discount rate.  The fair values of the liabilities are also increased for a market risk premium to reflect what a third party would be expected to require to assume the liabilities.  Over time, changes in the fair values of the liabilities from revised estimates of the amount or timing of cash flows required to settle the future liability will be recognized by increasing or decreasing the liability and the related long-lived assets.  Changes resulting from the passage of time will be recognized as an increase in the liability and charged to expense. The capitalized asset costs will be depreciated over the related useful lives.

At January 1, 2003, we estimated the fair value of our asset retirement obligations to be $28.5 million.  We recorded the estimated fair value of these liabilities and increased assets and accumulated depreciation as of January 1, 2003.  Prior to the adoption of SFAS No. 143, estimated future reclamation and mine closure costs for our mining operations were accrued and charged to income over the estimated life of the mine using the unit-of-production method based on estimated recoverable proven and probable copper reserves.  The difference between our previously recorded estimated future reclamation and closure costs and the liabilities and net assets recorded under SFAS No. 143, after taxes and minority interest, resulted in a gain of approximately $9.1 million ($0.05 per share), which was recognized as a cumulative effect adjustment for a change in accounting principle.  As a result of adopting SFAS No. 143, we expect for the near term future depr eciation and amortization expense to be lower and production costs to be higher with no significant impact on earnings (see Note 2).

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, including those of Eastern Minerals.  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 follows (in millions):

	Second Quarter						Six Months
	2003			2002			2003			2002
Mining and exploration	$	279.0		$	126.8		$	473.6		$	208.9
Smelting and refining		(4.1	)		2.6			(3.6	)		4.0
Intercompany eliminations and other		(33.7	)		(7.0	)		(37.4	)		(2.9	)
FCX operating incomea	$	241.2		$	122.4		$	432.6		$	210.0

a.

We defer recognizing profits on PT Freeport Indonesia’s sales to Atlantic Copper and on 25 percent of PT Freeport Indonesia’s sales to PT Smelting until the final sale to third parties has occurred.  Changes in the amount of these deferred profits reduced operating income by $33.9 million in the second quarter of 2003, $6.1 million in the second quarter of 2002 and $35.9 million in the first six months of 2003, and increased operating income by $2.9 million in the first six months of 2002.  Our consolidated quarterly earnings fluctuate depending on the timing and prices of these sales.

MINING AND EXPLORATION

A summary of changes in PT Freeport Indonesia revenues between the periods follows (in millions):

	Second			Six
	Quarter			Months
PT Freeport Indonesia revenues – prior year period	$	319.4		$	589.1
Increases (decreases):
Sales volumes:
Copper		33.4			103.6
Gold		140.6			211.0
Price realizations:
Copper		2.8			8.7
Gold		33.1			64.4
Adjustments, primarily for copper pricing on prior period sales		6.5			0.8
Treatment charges, royalties and other		(11.2	)		(22.9	)
PT Freeport Indonesia revenues – current year period	$	524.6		$	954.7

PT Freeport Indonesia’s revenues for both the second quarter and first six months of 2003 benefited from higher copper and gold sales volumes because of higher grade material mined compared with the 2002 periods.  Copper sales volumes totaled 395.2 million pounds in the second quarter of 2003, 13 percent higher than the 350.4 million pounds in the second quarter of 2002.   Gold sales volumes totaled 849,200 ounces in the second quarter of 2003, 116 percent higher than the 393,700 ounces in the second quarter of 2002.  Second-quarter 2003 copper and gold sales exceeded previous quarterly estimates primarily because of the timing of mining material previously forecasted to be mined in the second half of 2003.  For the six month periods, copper sales volumes totaled 787.2 million pounds in 2003, 22 percent higher than the 646.5 million pounds in 2002, and gold sales volumes totaled 1,433,100 ounces, 96 percent higher than the 730,300 ounces in 2002.  Copper price realizations were only slightly higher in the 2003 periods.  Gold price realizations of $347.69 in the second quarter of 2003 were nearly $39 per ounce higher than second-quarter 2002 realizations, and realizations in the first six months of 2003 of $345.14 were nearly $45 per ounce higher than the prior year period. Treatment charges and royalties in total were higher in the 2003 periods primarily because of the higher sales volumes and higher gold prices.  Royalties totaled $9.8 million in the second quarter of 2003, $4.1 million in the second quarter of 2002, $16.7 million in the first six months of 2003 and $7.3 million in the first six months of 2002.

Substantially all of PT Freeport Indonesia’s concentrate sales contracts provide final copper pricing in a specified future period based on prices quoted on the London Metal Exchange (LME).   PT Freeport Indonesia records revenues and invoices its customers based on LME prices at the time of shipment.  Under accounting rules, these terms create an “embedded derivative” in our concentrate sales contracts which must be adjusted to fair value through earnings each period until the date of final copper pricing.  PT Freeport Indonesia’s second-quarter 2003 revenues include net additions of $7.6 million for adjustments to the fair value of embedded derivatives in concentrate sales contracts, compared with $4.1 million to second-quarter 2002 revenues.  PT Freeport Indonesia’s six-month 2003 revenues included net additions of $2.6 million for adjustments to the fair value of embedded derivatives in concentrate sales cont racts, compared with $14.4 million in the first six months of 2002.

At June 30, 2003, embedded derivatives on consolidated copper sales totaling 144.0 million pounds were recorded at an average price of $0.75 per pound. All of these sales are expected to be finally priced during the third quarter of 2003.  A one-cent movement in the average price used for these embedded derivatives will have an approximate $0.7 million impact on 2003 consolidated net income.

On limited occasions PT Freeport Indonesia has entered into derivative contracts to manage certain risks resulting from fluctuations in commodity prices.  During 2002 and the first six months of 2003, and as of June 30, 2003, PT Freeport Indonesia did not have any contracts in place for its copper and gold sales.  As conditions warrant, PT Freeport Indonesia may enter into new contracts for its future sales; however, it has no plans to do so in the foreseeable future.  

PT Freeport Indonesia has commitments from various parties, including Atlantic Copper and PT Smelting, to purchase all of its estimated remaining 2003 production.  Net of Rio Tinto’s interest, PT Freeport Indonesia’s share of sales for the third quarter of 2003 is projected to approximate 320 million pounds of copper and 640,000 ounces of gold. PT Freeport Indonesia’s share of sales for 2003 is projected to approximate 1.4 billion pounds of copper and 2.6 million ounces of gold, reflecting the expectation in 2003 of slightly lower copper ore grades and higher gold ore grades compared with 2002.

PT Freeport Indonesia Operating Results

	Second Quarter		Six Months
	2003	2002	2003	2002
PT Freeport Indonesia, Net of Rio Tinto’s Interest
Copper
Production (000s of recoverable pounds)	401,200	374,500	790,000	671,200
Production (metric tons)	181,900	169,900	358,300	304,500
Sales (000s of recoverable pounds)	395,200	350,400	787,200	646,500
Sales (metric tons)	179,300	158,900	357,100	293,200
Average realized price per pound	$.75	$.75	$.75	$.74
Gold
Production (recoverable ounces)	858,400	444,200	1,438,000	780,000
Sales (recoverable ounces)	849,200	393,700	1,433,100	730,300
Average realized price per ounce	$347.69	$308.76	$345.14	$300.17

Gross profit per pound of copper (cents):
Average realized price	75.3		74.6		74.7		73.6
Production costs:
Site production and delivery	40.0	a	34.9	a	39.9	a	38.8	a
Gold and silver credits	(76.2	)	(35.2	)	(64.5	)	(35.2	)
Treatment charges	17.4		17.5		17.6		18.4
Royalty on metals	2.5		1.2		2.1		1.1
Cash production costs	(16.3	)	18.4		(4.9	)	23.1
Depreciation and amortization	14.6		14.9		14.6		14.8
Total production costs	(1.7	)	33.3		9.7		37.9
Adjustments, primarily for copper pricing     on prior period open sales	1.2		0.1		1.7		1.9
Gross profit per pound of copper	78.2		41.4		66.7		37.6

Second Quarter		Six Months
2003	2002	2003	2002

PT Freeport Indonesia, 100% Operating Statistics
Ore milled (metric tons per day)	221,300	239,600	229,700	241,900
Average ore grade
Copper (percent)	1.24	1.14	1.19	1.02
Gold (grams per metric ton)	1.95	.98	1.59	.85
Gold (ounce per metric ton)	.063	.032	.051	.027
Recovery rates (percent)
Copper	89.8	87.1	89.1	86.4
Gold	87.9	86.3	87.2	86.0
Copper
Production (000s of recoverable pounds)	474,700	457,600	935,200	814,700
Production (metric tons)	215,300	207,600	424,200	369,500
Sales (000s of recoverable pounds)	467,600	428,300	932,100	784,700
Sales (metric tons)	212,100	194,300	422,800	355,900
Gold (recoverable ounces)
Production	1,091,900	581,000	1,829,300	1,000,000
Sales	1,080,100	516,200	1,822,600	936,100

a.

Net of deferred mining costs totaling $14.4 million (3.6 cents per pound) in the second quarter of 2003, $7.7 million (2.2 cents per pound) in the second quarter of 2002, $21.7 million (2.8 cents per pound) in the first six months of 2003 and $12.4 million (1.9 cents per pound) in the first six months of 2002.  

Net cash production costs per pound of copper is a measure intended to provide investors with information about the cash generating capacity of our mining operations in Indonesia.  This measure is presented by other copper and gold mining companies, although our measures may not be comparable to similarly titled measures reported by other companies.

We calculate gross profit per pound of copper under a “by-product” method, while the copper, gold and silver contained within our concentrates are treated as co-products in our financial statements.  We use the by-product method in the presentation of gross profit per pound because (1) the majority of our revenues are copper revenues, (2) we produce and sell one product, concentrates, which contains all three metals and (3) it is not possible to specifically assign our costs to revenues from the copper, gold and silver we produce in concentrates.  In the co-product method presentation below, costs are allocated to the different products based on their relative revenue values.  Presentations under both methods are shown below along with a reconciliation to amounts reported in the consolidated financial statements.

Three Months Ended June 30, 2003
	By-Product			Co-Product Method
(In Thousands)	Method			Copper			Gold			Silver			Total
Revenues	$	302,556		$	302,556		$	295,076		$	5,883		$	603,515
Site production and delivery		157,908			79,163			77,206			1,539			157,908
Gold and silver credits		(300,959	)		-			-			-			-
Treatment charges		68,613			34,397			33,547			669			68,613
Royalty on metals		9,814			4,920			4,798			96			9,814
Net cash production costs		(64,624	)		118,480			115,551			2,304			236,335
Depreciation and amortization		57,700			28,927			28,211			562			57,700
Total production costs		(6,924	)		147,407			143,762			2,866			294,035
Adjustments, primarily for copper pricing on prior period sales		(475	)		(475	)		-			-			(475	)
Gross profit	$	309,005		$	154,674		$	151,314		$	3,017		$	309,005
Pounds of copper sold (000)		395,200			395,200
Ounces of gold sold								849,200
Ounces of silver sold											1,310,500
	By-Product			Co-Product Method
	Method			Copper			Gold			Silver
Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		75.3			75.3			347.69			4.49
Site production and delivery		40.0			20.0			90.92			1.17
Gold and silver credits		(76.2	)		-			-			-
Treatment charges		17.4			8.7			39.50			0.51
Royalty on metals		2.5			1.2			5.65			0.07
Net cash production costs		(16.3	)		29.9			136.07			1.75
Depreciation and amortization		14.6			7.3			33.22			0.43
Total production costs		(1.7	)		37.2			169.29			2.18
Adjustments, primarily for copper pricing on prior period sales		1.2			1.0			(0.22	)		(0.01	)
Gross profit per pound/ounce		78.2			39.1			178.18			2.30
Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	603,515		$	157,908		$	57,700
Less:  Treatment charges per above		(68,613	)		N/A			N/A
Royalty per above		(9,814	)		N/A			N/A
Other		N/A			5,820			N/A
Adjustments, primarily for copper pricing on prior period sales per above		(475	)		N/A			N/A
Mining and exploration segment		524,613			163,728			57,700
Smelting and refining segment		210,681			204,944			7,046
Eliminations and other		(125,839	)		(91,264	)		3,537
As reported in FCX consolidated financial statements	$	609,455		$	277,408		$	68,283

Three Months Ended June 30, 2002
	By-Product			Co-Product Method
(In Thousands)	Method			Copper		Gold			Silver		Total
Revenues	$	259,624		$	259,624	$	118,956		$	4,363	$	382,943
Site production and delivery		122,198			82,847		37,959			1,392		122,198
Gold and silver credits		(123,319	)		-		-			-		-
Treatment charges		61,458			41,667		19,091			700		61,458
Royalty on metals		4,115			2,790		1,278			47		4,115
Net cash production costs		64,452			127,304		58,328			2,139		187,771
Depreciation and amortization		52,157			35,360		16,202			595		52,157
Total production costs		116,609			162,664		74,530			2,734		239,928
Adjustments, primarily for copper pricing on prior period sales		2,041			2,041		-			-		2,041
Gross profit	$	145,056		$	99,001	$	44,426		$	1,629	$	145,056
Pounds of copper sold (000)		350,400			350,400
Ounces of gold sold							393,700
Ounces of silver sold										951,600
Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		74.6			74.6		308.76			4.55
Site production and delivery		34.9			23.6		96.42			1.46
Gold and silver credits		(35.2	)		-		-			-
Treatment charges		17.5			11.9		48.49			0.74
Royalty on metals		1.2			0.8		3.25			0.05
Net cash production costs		18.4			36.3		148.16			2.25
Depreciation and amortization		14.9			10.1		41.15			0.62
Total production costs		33.3			46.4		189.31			2.87
Adjustments, primarily for copper pricing on prior period sales		0.1			0.1		(6.61	)		0.03
Gross profit per pound/ounce		41.4			28.3		112.84			1.71

Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	382,943		$	122,198		$	52,157
Less:  Treatment charges per above		(61,458	)		N/A			N/A
Royalty per above		(4,115	)		N/A			N/A
Other		N/A			439			N/A
Adjustments, primarily for copper pricing on prior period sales per above		2,041			N/A			N/A
Mining and exploration segment		319,411			122,637			52,157
Smelting and refining segment		176,070			164,431			6,892
Eliminations and other		(87,482	)		(80,944	)		3,256
As reported in FCX consolidated financial statements	$	407,999		$	206,124		$	62,305

Six Months Ended June 30, 2003
	By-Product			Co-Product Method
(In Thousands)	Method			Copper		Gold		Silver		Total
Revenues	$	589,088		$	589,088	$	496,223	$	11,484	$	1,096,795
Site production and delivery		314,666			169,007		142,364		3,295		314,666
Gold and silver credits		(507,707	)		-		-		-		-
Treatment charges		138,172			74,212		62,513		1,447		138,172
Royalty on metals		16,654			8,945		7,535		174		16,654
Net cash production costs		(38,215	)		252,164		212,412		4,916		469,492
Depreciation and amortization		114,932			61,730		51,999		1,203		114,932
Total production costs		76,717			313,894		264,411		6,119		584,424
Adjustments, primarily for copper pricing on prior period sales		12,755			12,755		-		-		12,755
Gross profit	$	525,126		$	287,949	$	231,812	$	5,365	$	525,126
Pounds of copper sold (000)		787,200			787,200
Ounces of gold sold							1,433,100
Ounces of silver sold									2,544,600
Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		74.7			74.7		345.14		4.49
Site production and delivery		39.9			21.5		99.34		1.29
Gold and silver credits		(64.5	)		-		-		-
Treatment charges		17.6			9.4		43.62		0.57
Royalty on metals		2.1			1.1		5.26		0.07
Net cash production costs		(4.9	)		32.0		148.22		1.93
Depreciation and amortization		14.6			7.8		36.28		0.47
Total production costs		9.7			39.8		184.50		2.40
Adjustments, primarily for copper pricing on prior period sales		1.7			1.7		1.12		0.02
Gross profit per pound/ounce		66.7			36.6		161.76		2.11

Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	1,096,795		$	314,666		$	114,932
Less:  Treatment charges per above		(138,172	)		N/A			N/A
Royalty per above		(16,654	)		N/A			N/A
Other		N/A			9,400			N/A
Adjustments, primarily for copper pricing on prior period sales per above		12,755			N/A			N/A
Mining and exploration segment		954,724			324,066			114,932
Smelting and refining segment		429,076			413,427			14,091
Eliminations and other		(249,749	)		(212,615	)		7,048
As reported in FCX consolidated financial statements	$	1,134,051		$	524,878		$	136,071

Six Months Ended June 30, 2002
	By-Product			Co-Product Method
(In Thousands)	Method			Copper		Gold		Silver		Total
Revenues	$	478,394		$	478,394	$	219,726	$	7,783	$	705,903
Site production and delivery		250,589			169,825		78,001		2,763		250,589
Gold and silver credits		(227,509	)		-		-		-		-
Treatment charges		119,027			80,666		37,049		1,312		119,027
Royalty on metals		7,332			4,969		2,282		81		7,332
Net cash production costs		149,439			255,460		117,332		4,156		376,948
Depreciation and amortization		95,679			64,842		29,782		1,055		95,679
Total production costs		245,118			320,302		147,114		5,211		472,627
Adjustments, primarily for copper pricing on prior period sales		9,593			9,593		-		-		9,593
Gross profit	$	242,869		$	167,685	$	72,612	$	2,572	$	242,869
Pounds of copper sold (000)		646,500			646,500
Ounces of gold sold							730,300
Ounces of silver sold									1,727,800
Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		73.6			73.6		300.17		4.48
Site production and delivery		38.8			26.3		106.81		1.60
Gold and silver credits		(35.2	)		-		-		-
Treatment charges		18.4			12.5		50.73		0.76
Royalty on metals		1.1			0.8		3.13		0.05
Net cash production costs		23.1			39.6		160.67		2.41
Depreciation and amortization		14.8			10.0		40.78		0.61
Total production costs		37.9			49.6		201.45		3.02
Adjustments, primarily for copper pricing on prior period sales		1.9			1.9		0.71		0.03
Gross profit per pound/ounce		37.6			25.9		99.43		1.49

Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	705,903		$	250,589		$	95,679
Less:  Treatment charges per above		(119,027	)		N/A			N/A
Royalty per above		(7,332	)		N/A			N/A
Other		N/A			2,679			N/A
Adjustments, primarily for copper pricing on prior period sales per above		9,593			N/A			N/A
Mining and exploration segment		589,137			253,268			95,679
Smelting and refining segment		375,597			353,910			13,644
Eliminations and other		(164,055	)		(166,137	)		6,036
As reported in FCX consolidated financial statements	$	800,679		$	441,041		$	115,359

Mill throughput per day averaged 221,300 metric tons of ore in the second quarter of 2003, 239,600 metric tons of ore in the second quarter of 2002, 229,700 metric tons of ore in the first six months of 2003 and 241,900 metric tons of ore in the first six months of 2002.  The lower mill throughput rates during the 2003 periods reflect the mining of harder ore at the Grasberg open pit.  Mill throughput rates vary based on the characteristics of the ore being processed as we manage our operations to optimize metal production.  

PT Freeport Indonesia reached its targeted production rate at the Deep Ore Zone (DOZ) underground mine of 35,000 metric tons of ore per day during the first quarter of 2003.  During the second quarter of 2003 new underground mining production records were established, with combined average production totaling approximately 50,200 metric tons of ore per day from the Intermediate Ore Zone and DOZ mines, representing 23 percent of second-quarter 2003 mill throughput.  DOZ production averaged 40,800 metric tons of ore per day during the second quarter of 2003, and studies are ongoing to evaluate additional low-cost expansion options for the DOZ underground operation. Production at the Intermediate Ore Zone mine has declined during 2003 and the mine is expected to deplete its ore reserves by the end of 2003.  Approximate average daily throughput processed at our mill facilities from each of our producing mines follows (metric tons of ore per day):

	Second Quarter		Six Months
	2003	2002	2003	2002
Grasberg open pit	171,100	202,100	179,600	207,200
Deep Ore Zone underground mine	40,800	19,300	38,300	15,400
Intermediate Ore Zone underground mine	9,400	18,200	11,800	19,300
Total mill throughput	221,300	239,600	229,700	241,900

PT Freeport Indonesia reported higher copper production in the 2003 periods, reflecting the continued mining of higher-grade ore which began late in the second quarter of 2002.  Second-quarter 2003 copper ore grades averaged 1.24 percent, compared with 1.14 percent in the second quarter of 2002.  Copper recovery rates also improved to 89.8 percent for the second quarter of 2003, compared with 87.1 percent for the second quarter of 2002.

Gold production for the second quarter of 2003 was a quarterly record and reflects significantly higher ore grades and higher mill recovery rates over the year-ago period.  In the second quarter of 2003, ore milled averaged 1.95 grams per metric ton (g/t), compared with 0.98 g/t in the second quarter of 2002. Gold recovery rates improved to 87.9 percent for the second quarter of 2003, compared with 86.3 percent for the second quarter of 2002.  As previously reported, we began to access higher-grade ore late in the second quarter of 2002.  

Unit site production and delivery costs in the second quarter of 2003 averaged $0.40 per pound of copper, $0.05 per pound higher than the $0.35 reported in the second quarter of 2002. For the first six months of 2003, unit site production and delivery costs of $0.40 per pound were $0.01 per pound higher than the $0.39 per pound in the 2002 period.  Unit site production and delivery costs in the 2003 periods increased from the prior year period because of stronger Indonesian and Australian currencies and higher mine maintenance and energy cost.  Higher grades of ore mined resulted in higher gold credits of $0.76 per pound in the 2003 quarter, compared with the 2002 quarter level of $0.35 per pound.  Gold credits for the first six months of 2003 of $0.65 per pound were also higher than the gold credits of $0.35 per pound in the 2002 period.  Gold ore grades for the second quarter of 2003 increased by 99 percent, compared with the second quarter of 200 2, and gold ore grades for the first six months of 2003 increased by 87 percent, compared with the first six months of 2002.

Unit net cash production costs, including gold and silver credits, totaled a record-low net credit of $(0.16) per pound for the second quarter of 2003, and for the full year 2003 we expect them to average a net credit of approximately $(0.04) per pound of copper, a new annual record assuming second half gold prices of $350 per ounce and annual gold sales of 2.6 million ounces.    

The functional currency for our operations in Indonesia and Spain is the U.S. dollar.  All of our revenues and significant costs are denominated in U.S. dollars; however, some costs and certain asset and liability accounts are denominated in Indonesian rupiah, Australian dollars or euros. Generally, our results are positively affected when the U.S. dollar strengthens in relation to these currencies and adversely affected when the U.S. dollar weakens in relation to these currencies.

PT Freeport Indonesia recorded losses totaling $1.3 million in the second quarter of 2003, $1.2 million in the second quarter of 2002, $1.8 million in the first six months of 2003 and $1.6 million in the first six months of 2002 related to its rupiah-denominated assets and liabilities. PT Freeport Indonesia’s labor costs are mostly rupiah-denominated.  At estimated annual aggregate rupiah payments of one trillion and an exchange rate of 8,265 rupiah to one U.S. dollar, the exchange rate at June 30, 2003, a one-thousand-rupiah increase in the exchange rate would result in an approximate $13 million decrease in aggregate annual operating costs or approximately $0.03 per share to consolidated net income on a diluted basis.  A one-thousand-rupiah decrease in the exchange rate would result in an approximate $17 million increase in aggregate annual operating costs or approximately $0.04 per share to consolidated net income on a diluted basis.  

PT Freeport Indonesia purchases certain materials and supplies denominated in Australian dollars.  At estimated annual aggregate Australian dollar payments of 225 million and an exchange rate of $0.67 to one Australian dollar, the exchange rate at June 30, 2003, a $0.01 increase or decrease in the exchange rate would result in an approximate $2 million change in aggregate annual costs or less than $0.01 per share to consolidated net income on a diluted basis.

                At times, PT Freeport Indonesia has entered into foreign currency forward contracts to hedge a portion of its aggregate anticipated Indonesian rupiah and Australian dollar payments.  PT Freeport Indonesia’s foreign currency forward contracts matured in December 2002 and PT Freeport Indonesia has no outstanding foreign currency forward contracts as of June 30, 2003.  PT Freeport Indonesia recorded net gains to production costs for its foreign currency contracts totaling $2.8 million in the second quarter of 2002 and $4.4 million in the first six months of 2002.

Exploration Activities  

Block A exploration efforts in the first half of 2003 were primarily associated with drilling near the Deep Ore Zone and the Kucing Liar mines to support the conversion of resources to proven and probable reserves.  Field exploration activities outside of our current mining operations area are in suspension because of safety and security issues and uncertainty relating to an Indonesian law enacted in 1999 prohibiting open-pit mining in protected forest areas.  The current suspensions were granted for one-year periods ending February 26, 2004, for Block B, March 31, 2004, for PT Nabire Bakti Mining and November 15, 2003, for Eastern Minerals. We expect to continue to seek suspension renewals for additional one-year periods for each of the suspended areas as required.

SMELTING AND REFINING

As the world’s single largest producer and supplier of custom concentrate, our investment in smelters (Atlantic Copper and PT Smelting) serves an important role in our concentrate marketing strategy.  PT Freeport Indonesia sells approximately one-half of its concentrate production to its affiliated smelters, Atlantic Copper and PT Smelting, and the remainder to other customers.   

Treatment charges for smelting and refining copper concentrates represent a cost to PT Freeport Indonesia and income to Atlantic Copper and PT Smelting.  Through our smelter investments, we are assured placement of a significant portion of our concentrate production and are able to achieve operating hedges.  While currently low smelting and refining charges adversely affect the operating results of Atlantic Copper, low charges benefit the operating results of PT Freeport Indonesia’s mining operations.  

As a result, changes in smelting and refining charge rates do not have a significant impact on our consolidated operating results. Taking into account taxes and minority ownership interests, an equivalent change in the smelting and refining rates PT Freeport Indonesia pays and the rates Atlantic Copper and PT Smelting receive, would essentially offset in our consolidated operating results.

Atlantic Copper Operating Results
($ In Millions)	Second Quarter			Six Months
	2003		2002	2003		2002
Gross profit	$(1.3	)	$4.7	$1.6		$8.0
Add depreciation and amortization expense	7.0		6.9	14.1		13.6
Other	0.4		1.0	0.3		1.5
Cash margin	$6.1		$12.6	$16.0		$23.1
Operating income (loss)	$(4.1	)	$2.6	$(3.6	)	$4.0
Concentrates and scrap treated (metric tons)	244,600		242,500	486,700		500,800
Anodes production (000s of pounds)	163,800		152,100	323,400		322,200
Cathodes, wire rod and wire sales (000s of pounds)	140,200		140,400	278,900		276,200
Gold sales in anodes and slimes (ounces)	205,600		159,800	447,600		411,400

                Atlantic Copper’s operating cash margin was $6.5 million lower in the 2003 quarter, compared with the 2002 quarter, and $7.1 million lower in the first six months of 2003, compared with the first six months of 2002, primarily because of lower treatment charge rates and higher unit costs.  Atlantic Copper’s cathode cash production costs per pound of copper, before currency hedging, averaged $0.16 in the second quarter of 2003 and the first six months of 2003, compared with $0.12 in the second quarter of 2002 and $0.11 in the first six months of 2002.  The higher unit costs in the 2003 periods primarily reflect a stronger euro currency in relation to the U.S. dollar, which added approximately $0.03 per pound to the 2003 second quarter and six-month periods when compared to the 2002 periods.  Atlantic Copper is planning a 45-day maintenance turnaround in the second quarter of 2004 .  The estimated cost of $24 million will be charged to expense when incurred , and Atlantic Copper’s operating results will reflect reduced production during the turnaround period.  Atlantic Copper’s average treatment rates continued at historically low levels of $0.15 per pound for the second quarter of 2003 and $0.16 per pound for the first six months of 2003, compared with $0.17 per pound for both 2002 periods.  In July 2003, Atlantic Copper successfully negotiated new labor contracts covering its smelter/refinery and copper wire manufacturing workforce in Huelva, Spain with no material changes in terms.

Cathode cash production cost per pound of copper is a measure intended to provide investors with information about the costs associated with our smelting operations in Spain.  Other smelting companies present this measure, although our measure may not be comparable to similarly titled measures reported by other companies.  Below is a reconciliation of our smelting and refining segment production costs to the production costs used to calculate our cathode cash production cost per pound of copper (in thousands, except per pound amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Smelting and refining segment production costs reported in FCX’s consolidated financial statements	$	204,944		$	164,431		$	413,427		$	353,910
Less:
Raw material purchase costs		(88,901	)		(79,670	)		(170,597	)		(160,945	)
Production costs of wire rod and wire		(16,658	)		(11,457	)		(35,831	)		(25,515	)
Production costs of anodes sold		(2,852	)		(1,114	)		(5,505	)		(3,850	)
Currency hedging		2,502			(651	)		4,117			(1,963	)
Other		(578	)		(811	)		(663	)		(1,514	)
Credits:
Gold and silver revenues		(71,116	)		(49,741	)		(152,189	)		(121,527	)
Acid and other by-product revenues		(4,760	)		(4,230	)		(9,345	)		(8,022	)
Production costs used in calculating cathode cash production cost per pound	$	22,581		$	16,757		$	43,414		$	30,574
Pounds of cathode produced		137,900			140,300			272,800			276,500
Cathode cash production cost per pound before hedging		$0.16			$0.12			$0.16			$0.11

The majority of Atlantic Copper’s revenues are denominated in U.S. dollars; however, operating costs, other than concentrate purchases, and certain asset and liability accounts are denominated in euros. Atlantic Copper’s estimated annual euro payments total approximately 100 million euros and at a June 30, 2003, exchange rate of $1.14 per euro, a $0.05 increase or decrease in the exchange rate would result in an approximate $5 million change in annual costs, before any hedging effects, or approximately $0.03 per share to our consolidated net income on a diluted basis.

In connection with refinancing its debt in June 2000, Atlantic Copper’s lenders required a significantly expanded program to hedge anticipated euro-denominated operating costs.  In March 2003, Atlantic Copper’s lenders agreed to waive the requirements to hedge anticipated euro-denominated operating costs and interest costs.  Atlantic Copper has extend ed the waiver through September 2003.  At June 30, 2003, Atlantic Copper had contracts to purchase 31.3 million euros at an average exchange rate of $1.02 per euro through December 2003.  These contracts currently hedge approximately 63 percent of Atlantic Copper’s projected remaining 2003 euro disbursements.  Each $0.01 change in the US$/euro exchange rate impacts the market value of these contracts by approximately $0.3 million.  Atlantic Copper’s operating results reflect gains (losses) on currency hedging contracts that matured during the periods totaling $2.5 million in the second quarter of 2003, $(0.7) in the second quarter of 2002, $4.1 million in the first six months of 2003 and $(2.0) million in the first six months of 2002.  Atlantic Copper recorded gains to Other Comprehensive Income, a component of stockholders’ equity, totaling $0.1 million in the second quarter of 2003, $12.1 million in the second quarter of 2002, $1.1 million in the first six months of 20 03 and $11.0 million in the first six months of 2002 for its currency hedging contracts that remained open as of the end of those periods.

Atlantic Copper had euro-denominated net monetary liabilities at June 30, 2003, totaling $81.4 million recorded at an exchange rate of $1.14 per euro.  The exchange rate was $1.09 per euro at March 31, 2003, and $1.05 per euro at December 31, 2002.  Adjustments to Atlantic Copper’s euro-denominated net liabilities to reflect changes in the exchange rate are recorded in other expenses and totaled a charge of $3.8 million in the second quarter of 2003, $9.3 million in the second quarter of 2002, $6.3 million in the first six months of 2003 and $8.7 million in the first six months of 2002.

We are currently reviewing options with respect to Atlantic Copper's financial obligations as a result of the effect of continued low treatment rates on its results.  These options include the possibility of restructuring Atlantic Copper's debt, additional capital contributions by FCX and business combination transactions. As of June 30, 2003, FCX’s net investment in Atlantic Copper totaled approximately $36 million and Atlantic Copper's debt under nonrecourse financing arrangements totaled $273.4 million ..

PT Smelting Operating Results
	Second Quarter				Six Months
	2003		2002		2003		2002
	(In millions)
PT Freeport Indonesia sales to PT Smelting	$154.6		$38.9		$275.9		$138.1
Equity in PT Smelting earnings (losses)	2.3		(2.5	)	2.9		(3.4	)
PT Freeport Indonesia profits (deferred) recognized	(6.5	)	0.5		(4.4	)	1.1

PT Freeport Indonesia accounts for its 25 percent interest in PT Smelting using the equity method and provides PT Smelting with substantially all of its concentrate requirements.  PT Smelting treated 208,400 metric tons of concentrate in the second quarter of 2003, 60 percent more than the 130,600 metric tons treated in the 2002 quarter, and 420,700 metric tons in the first six months of 2003, 36 percent more than the 308,300 metric tons treated in the first six months of 2002.  The lower level of concentrate treated in 2002 and the lower anodes and cathodes production and sales were caused by a scheduled maintenance turnaround.  PT Smelting’s copper cathode cash production costs per pound (see below) totaled $0.10 in the second quarter of 2003 and first six months of 2003, compared with $0.25 in the 2002 second quarter and $0.18 for the first six months of 2002, reflecting the impact of the 28-day maintenance turnaround in May 2002. The next maintenance turnaround is scheduled to occur in 2004.

Cathode cash production cost per pound of copper is a measure intended to provide investors with information about the costs associated with our 25 percent-owned smelting operations in Indonesia.  Other smelting companies present this measure, although our measure may not be comparable to similarly titled measures reported by other companies.  Below is a reconciliation of the production costs used to calculate PT Smelting’s cathode cash production cost per pound of copper to our equity in PT Smelting earnings (losses) reported in FCX’s consolidated financial statements (in thousands, except per pound amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Production costs – PT Smelting (100%)	$	14,161		$	21,301		$	27,428		$	34,928
Add:   Gold and silver refining charges		1,372			646			2,863			1,888
Less:  Acid and other by-product revenues		(1,873	)		(1,088	)		(3,888	)		(2,493	)
Production cost of anodes sold		(1,173	)		2,518			(2,424	)		3,088
Production cost used in calculating cathode cash production cost	$	12,487		$	23,377		$	23,979		$	37,411
Cathode production (pounds)		124,100			92,400			245,100			210,200
Cathode cash production cost per pound	$	0.10		$	0.25		$	0.10		$	0.18

Reconciliation to Amounts Reported
Production costs per above	$	(14,161	)	$	(21,301	)	$	(27,428	)	$	(34,928	)
Other costs		(180,984	)		(93,309	)		(367,279	)		(228,512	)
Revenue and other income		204,463			104,704			406,977			250,490
PT Smelting net income (loss)		9,318			(9,906	)		12,270			(12,950	)
PT Freeport Indonesia’s 25% equity interest		2,330			(2,477	)		3,068			(3,238	)
Amortization of excess investment cost		(60	)		(60	)		(121	)		(121	)
Equity in PT Smelting earnings (losses) per FCX consolidated financial statements	$	2,270		$	(2,537	)	$	2,947		$	(3,359	)

Our revenues include PT Freeport Indonesia’s sales to PT Smelting, but we defer recognizing profits on 25 percent of PT Freeport Indonesia sales to PT Smelting remaining in PT Smelting’s inventory at the end of the period.  The effect of changes in these deferred profits was the deferral of operating profits totaling $6.5 million in the second quarter of 2003 and $4.4 million in the first six months of 2003, and the recognition of operating profits of $0.5 million in the second quarter of 2002 and $1.1 million in the first six months of 2002.

OTHER FINANCIAL RESULTS

The FCX/Rio Tinto joint ventures incurred $2.8 million of aggregate exploration costs in the second quarter of 2003, $1.3 million in the second quarter of 2002, $5.2 million in the first six months of 2003 and $2.5 million in the first six months of 2002.  Our exploration program for 2003 is focused on targets in Block A that have high potential to add reserves and to provide information to support future exploration.  We incurred $1.8 million of exploration expense in the second quarter of 2003, $0.8 million in the second quarter of 2002, $3.3 million in the first six months of 2003 and $1.6 million in the first six months of 2002, representing our share of exploration costs.

Second-quarter 2003 general and administrative expenses of $20.7 million were $4.3 million higher than the $16.4 million reported in the 2002 quarter, while general and administrative expenses for the first six months of 2003 were $4.4 million higher at $37.2 million, compared with $32.8 million reported in the 2002 period.  The increase in the second quarter of 2003 primarily relates to a $1.5 million increase in costs for stock appreciation rights compared with the 2002 quarter caused by an increase in FCX’s stock price.  Other causes for the increase include higher costs at Atlantic Copper, primarily because of a stronger euro currency, higher insurance costs and higher legal costs.

                Total interest cost (before capitalization) was $56.3 million in the second quarter of 2003, $47.0 million in the second quarter of 2002, $109.4 million in the first six months of 2003 and $94.4 million in the first six months of 2002. Interest costs increased in the 2003 periods primarily because of the two senior note offerings completed during the first quarter of 2003 which increased average outstanding debt balances and interest rates (see “Capital Resources and Liquidity – Financing Activities”).  We capitalized $0.8 million of interest costs in the second quarter of 2003, $3.5 million in the second quarter of 2002, $1.5 million in the first six months of 2003 and $6.6 million in the first six months of 2002.  Capitalized interest costs primarily related to the development of the Deep Ore Zone mine which reached targeted capacity in the first quarter of 2003.

The provision for income taxes as a percentage of consolidated income before income taxes and minority interest totaled 55 percent for the second quarter of 2003, 69 percent for the second quarter of 2002, 55 percent for the first six months of 2003 and 68 percent for the first six months of 2002.  PT Freeport Indonesia’s Contract of Work provides for a 35 percent corporate income tax rate, and the tax treaty between Indonesia and the United States provides for a withholding tax of 10 percent on dividends and interest that PT Freeport Indonesia pays to our parent company.  We also incur a U.S. alternative minimum tax at a rate of 2 percent based primarily on consolidated income, net of smelting and refining results.  We currently record no income taxes at Atlantic Copper, which is subject to taxation in Spain, because it has not generated significant taxable income in recent years and has substantial tax loss carry forwards for which we have provide d no financial statement benefit.

We receive minimal tax benefit from costs incurred by our parent company, primarily because it generates no taxable income from U.S. sources.  We also currently receive no tax benefit from losses in our smelting and refining segment because those losses cannot be used to offset PT Freeport Indonesia’s profits in Indonesia.  Thus, the percentage of our provision for income taxes compared to our consolidated income before income taxes and minority interest will decrease as PT Freeport Indonesia’s income increases and vice versa absent changes in Atlantic Copper and the parent company costs.  Parent company costs consist primarily of interest, depreciation and amortization, and general and administrative expenses.  Summaries of the significant components of our calculation of the consolidated provision for income taxes are shown below (in thousands, except percentages).

	Three months ended June 30,						Six months ended June 30,
	2003			2002			2003			2002
Mining and exploration segment operating income	$	278,991		$	126,818		$	473,636		$	208,862
Mining and exploration segment interest expense, net		(14,520	)		(18,797	)		(29,872	)		(37,910	)
Intercompany operating profit recognized (deferred)		(33,877	)		(6,059	)		(35,885	)		2,893
Book taxable income		230,594			101,962			407,879			173,845
Indonesian corporate income tax rate (35%) plus U.S. alternative minimum tax rate (2%)		37%			37%			37%			37%
Corporate income taxes		85,320			37,726			150,915			64,323
PT Freeport Indonesia net income		145,274			64,236			256,964			109,522
Withholding tax on FCX’s equity share		9.064%			9.064%			9.064%			9.064%
Withholding taxes		13,168			5,822			23,291			9,927
Other		(580	)		2,492			916			604	a
FCX consolidated provision for income taxes	$	97,908		$	46,040		$	175,122		$	74,854
FCX consolidated effective tax rate		55%			69%			55%			68%
a.  Includes a $2.4 million tax refund.

CAPITAL RESOURCES AND LIQUIDITY

Net cash provided by operating activities was $2 84.1 million for the first six months of 2003, compared with $152.8 million for the first six months of 2002. Net cash used in investing activities totaled $36.7 million in the first six months of 2003, compared with $57.9 million in the 2002 period. Net cash provided by financing activities totaled $4 85 ..1 million in the first six months of 2003 compared with a use of $93.8 million in the first six months of 2002.

Operating Activities  

Operating cash flow improved $1 31 ..3 million to $2 84 ..1 million in the first six months of 2003 from $152.8 million in the first six months of 2002 primarily because of higher net income.  Working capital changes related to the timing of certain receipts and payments reduced operating cash flow by $44.7 million in the first six months of 2003 and $34.4 million in the first six months of 2002.

Investing Activities  

Capital expenditures for PT Freeport Indonesia and Atlantic Copper totaled $62.2 million for the first six months of 2003 and $81.5 million for the first six months of 2002.  Our capital expenditures for 2003 are expected to total approximately $160 million, including approximately $40 million to complete expansion of the Deep Ore Zone mine to 35,000 metric tons of ore per day and to complete work on the Grasberg overburden handling system.  We expect to fund our 2003 capital expenditures with operating cash flows and available cash.  We sold $23.6 million of our restricted investments in the first quarter of 2003 and $23.7 million in the first quarter of 2002 and used the proceeds to pay scheduled semiannual payments of interest on our 8 ¼% Convertible Senior Notes.  Restricted investments totaling $73.5 million at June 30, 2003, are scheduled to fund interest payments on our 8 ¼% Convertible Senior Notes through July 2004.

In July 2003, FCX acquired the 85.7 percent ownership interest in PT Puncakjaya Power (PJP) owned by affiliates of Duke Energy Corporation for $78 million cash.  PJP is the owner of assets supplying power to PT Freeport Indonesia’s operations, including the 3x65 megawatt coal-fired power facilities, diesel generating capacity and other project assets.  PT Freeport Indonesia purchases power from P JP under infrastructure asset financing arrangements.   At June 30, 2003, PT Freeport Indonesia had infrastructure asset financing obligations to PJP totaling $312.8 million.  As a result of this transaction, our consolidated balance sheet will no longer reflect PT Freeport Indonesia’s obligation to PJP, but instead will reflect the $258.8 million of PJP bank debt at June 30, 2003, a $54.0 million reduction in our consolidated debt.   The transaction is expected to have a net positive effect on consolidated earnings of approximately $1 2 million per year, primarily from reduced interest costs.

Financing Activities

During the first quarter of 2003, we completed two senior note offerings.  On January 29, 2003, we sold $500 million of 10⅛% Senior Notes due 2010.  Interest on the notes is payable semiannually on February 1 and August 1 of each year, beginning August 1, 2003.  We may redeem some or all of the notes at our option at a make-whole redemption price prior to February 1, 2007, and afterwards at stated redemption prices.  The indenture governing the notes contains restrictions on incurring debt, creating liens, entering into sale leaseback transactions, taking actions to limit distributions from certain subsidiaries, selling assets, entering into transactions with affiliates, paying cash dividends on common stock, repurchasing or redeeming common or preferred equity, prepaying subordinated debt and making investments.  Pursuant to the restricted payment covenant, the amount available for dividend and other restricted payments as of June 30, 2003, was approximat ely $170 million.

On February 11, 2003, we sold $575.0 million of 7% Convertible Senior Notes due 2011.  Interest on the notes is payable semiannually on March 1 and September 1 of each year, beginning September 1, 2003.  The notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of FCX common stock at a conversion price of $30.87 per share, which is equal to a conversion rate of approximately 32.39 shares of common stock per $1,000 principal amount of notes.

We used a portion of the $1.046 billion in net proceeds from the two note offerings to repay all of our outstanding amounts under our bank credit facilities. Following the sale of the notes and repayment of the outstanding amounts under the bank credit facilities, FCX and PT Freeport Indonesia had remaining a revolving credit facility with $150 million available under the terms of the bank credit facilities. We subsequently terminated our lending commitments and established an interim credit facility totaling $150 million with JP Morgan.  The interim credit facility represents an amendment to the previous facility and requires us to provide $100 million of cash security, unless we elect to reduce the available $150 million commitment.  The banks waived the restrictive covenants. This facility is expected to remain undrawn and to be replaced with a new facility later in 2003.  At June 30, 2003, FCX and PT Freeport Indonesia had deferred financing costs related to this facility totaling $10.1 million, which may be a djusted upon entering into a new facility.

In February 2003, our Board of Directors authorized the initiation of an annual cash dividend on FCX’s common stock of $0.36 per share ($0.09 payable quarterly).  In April and July 2003, our Board of Directors approved $0.09 per share dividends on our common stock payable May 1, 2003, and August 1, 2003, respectively.

In June 2000, our Board of Directors authorized a 20-million-share increase in our open market share purchase program, bringing the total shares approved for purchase under this program to 80 million. From inception of these programs in July 1995, we have purchased 70.7 million shares for $1.24 billion (an average of $17.53 per share) and approximately 9.3 million shares remain available under the program. We have not purchased any of our shares since the first quarter of 2001 and our bank credit facilities prohibited common stock purchases until we recently amended them.   The timing of future purchases is dependent upon may factors, including the price of our common shares, our business and financial position, and general economic and market conditions.   As noted earlier, FCX’s 10 ⅛% Senior Notes contain limitations on restricted payments, including common stock purchases.

In April 2003, we concluded tender offers to purchase any and all of our outstanding 7.20% Senior Notes due 2026 and our 7.50% Senior Notes due 2006.  Of the $450 million outstanding at March 31, 2003, notes with a face amount of $234.0 million were tendered for $239.0 million cash.  We recorded a charge to other expenses of $6.6 million, $4.8 million to net income, in the second quarter of 2003 associated with these early extinguishments of debt.   In July 2003, we purchased an additional $76.0 million face amount of our 7.20% Senior Notes for $77.2 million, and will record a charge to other expenses of $1.3 million ($0.9 million to net income) in the third quarter of 2003.   We are currently reviewing our options for repaying other outstanding debt, which could result in the recognition of losses and gains in future periods.  Depending on the timing and structure of a new credit facility and repayments of other outstanding debt, certain of our deferred financing costs in addition to scheduled amortization may be charged to 2003 earnings.

Below is a summary (in millions) of our debt and redeemable preferred stock maturities based on loan balances as of June 30, 2003, and the June 30, 2003, London P.M. gold fixing price for one ounce of gold ($346.00) and the London silver fixing price for one ounce of silver ($4.51) in the London bullion market (which determine the preferred stock redemption amounts).  As of July 31, 2003, our cash and cash equivalent balances totaled approximately $ 665 million.

	2003		2004		2005		2006		2007		Thereafter
7.20% Senior Notes due 2026 a	$	149.5	$	-	$	-	$	-	$	-	$	-
Infrastructure financings and     equipment loans		21.1		47.1		57.4		61.1		38.4		179.3
Atlantic Copper facilities and other		38.7		67.6		24.2		24.1		88.7		30.0
7.50% Senior Notes due 2006		-		-		-		66.5		-		-
8¼% Convertible Senior Notesb		-		-		-		603.8		-		-
10⅛% Senior Notes due 2010		-		-		-		-		-		500.0
7% Convertible Senior Notesb		-		-		-		-		-		575.0
Total debt maturities		209.3		114.7		81.6		755.5		127.1		1,284.3
Redeemable preferred stockc		218.3		10.7		10.7		159.7		-		-
Total maturities at June 30, 2003	$	427.6	$	125.4	$	92.3	$	915.2	$	127.1	$	1,284.3

a.

Although due in 2026, the holders of the 7.20% Senior Notes may, and are expected to, elect early repayment in November 2003.  In July 2003, we purchased $76.0 million of these notes.

b.

Conversion price is $14.30 per share for the 8 ¼% Convertible Senior Notes and $30.87 per share for the 7% Convertible Senior Notes.

c.

Represents $10.7 million each year for our Silver-Denominated Preferred Stock, $207.6 million in August 2003 for our Gold-Denominated Preferred Stock, and $149.0 million in February 2006 for our Gold-Denominated Preferred Stock, Series II. In accordance with SFAS No. 150 (see Note 8), FCX’s mandatorily redeemable preferred stock will be classified as debt effective July 1, 2003.  On August 1, 2003, we redeemed the Gold-Denominated Preferred Stock for $210.5 million and a portion of the Silver-Denominated Preferred Stock for $10.8 million.

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, the earnings impact of acquiring an interest in PJP, debt maturities and other commitments, establishment of a new credit facility, and political, economic and social conditions in our areas of operations.  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 “Risk Factors” in our Form 10-K for the year ended December 31, 2002.  

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

There have been no significant changes in our market risks since the year ended December 31, 2002.  For more information, please read the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002.

Item 4.  Controls and Procedures.

Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” as of a date within 90 days prior to the filing of this quarterly report on Form 10-Q.  Based on their evaluation, they have concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to FCX (including our consolidated subsidiaries) required to be disclosed in our periodic Securities and Exchange Commission filings.  

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II.   OTHER INFORMATION

Item 1.  Legal Proceedings.  We are involved from time to time in various legal proceedings of a character normally incident to the ordinary course of our business.  We believe that potential liability in such proceedings would not have a material adverse effect on our financial condition or results of operations.  We maintain liability insurance to cover some, but not all, potential liabilities normally incident to the ordinary course of our business as well as other insurance coverage customary in our business, with coverage limits that we deem prudent.

In May 2003, PT Freeport Indonesia received a U.S. federal grand jury subpoena for the production of documents in connection with an anti-trust investigation of the copper concentrate industry.  PT Freeport Indonesia has not been identified as a target and is cooperating fully with the investigation.

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 six Current Reports on Form 8-K reporting events under Item 5 dated April 3, 2003, April 4, 2003, April 17, 2003, April 24, 2003, May 13, 2003, June 20, 2003 and one Current Report on Form 8-K reporting events under Item 12 dated April 17, 2003.

FREEPORT-McMoRan COPPER & GOLD INC.

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 11 , 2003

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 Registration Statement on Form S-3 of FCX filed November 5, 2001 (the FCX November 5, 2001 Form S-3).  

2.2

      Amendment dated May 31, 1995 to the Rio Tinto Agreement.  Incorporated by reference to Exhibit 2.2 to the FCX November 5, 2001 Form S-3.  

2.3

      Distribution Agreement dated as of July 5, 1995 between FTX and FCX.  Incorporated by reference to Exhibit 2.3 to the FCX November 5, 2001 Form S-3.  

3.1          Amended and Restated 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 March 31, 2002.

3.2

      Certificate of Amendment to Amended and Restated 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 March 31, 2003 (the FCX 2003 First Quarter Form 10-Q).

3.3

      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

      Deposit Agreement dated as of July 1, 1993 among FCX, Mellon Securities Trust Company,  (Mellon), 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 4.1 to the Quarterly Report on Form 10-Q of FCX for the quarter ended June 30, 2002 (the FCX 2002 Second Quarter Form 10-Q).

4.2

      Form of Step-Up Depositary Receipt. Incorporated by reference to Exhibit 4.2 to the FCX 2002 Second Quarter Form 10-Q.

4.3

      Deposit Agreement dated as of August 12, 1993 among FCX, Mellon, 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 4.3 to the FCX 2002 Second Quarter Form 10-Q.

4.4

      Form of Gold-Denominated Depositary Receipt. Incorporated by reference to Exhibit 4.4 to the FCX 2002 Second Quarter Form 10-Q.

4.5

      Deposit Agreement dated as of January 15, 1994, among FCX, Mellon, 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 4.5 to the FCX 2002 Second Quarter Form 10-Q.

4.6

      Form of Gold-Denominated II Depositary Receipt. Incorporated by reference to Exhibit 4.6 to the FCX 2002 Second Quarter Form 10-Q.

4.7

      Deposit Agreement dated as of July 25, 1994 among FCX, Mellon, 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 4.7 to the FCX 2002 Second Quarter Form 10-Q.

4.8

      Form of Silver-Denominated Depositary Receipt. Incorporated by reference to Exhibit 4.8 to the FCX 2002 Second Quarter Form 10-Q.

4.9

      Amended and Restated Credit Agreement dated as of October 19, 2001 among FCX, PT Freeport Indonesia, the several financial institutions that are parties thereto, U.S. Bank Trust National Association, as PT Freeport Indonesia Trustee, J.P. Morgan Securities Inc., as A rranger, and The Chase Manhattan Bank as A dministrative A gent, S ecurity A gent, JAA S ecurity A gent and D ocumentary A gent.  Incorporated by reference to Exhibit 4.13 to the Quarterly Report on Form 10-Q of FCX for the quarter ended September 30, 2001.

4.10

      Indenture dated as of August 7, 2001 from FCX and FCX Investment Ltd. to The Bank of New York, as trustee.  Incorporated by reference to Exhibit 4.1 to the FCX November 5, 2001 Form S-3.

4.11

      Registration Rights Agreement dated as of August 7, 2001 by and between FCX and FCX Investment Ltd., as issuers, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchaser. Incorporated by reference to Exhibit 4.2 to the FCX November 5, 2001 Form S-3.

4.12

      Collateral Pledge and Security Agreement dated as of August 7, 2001 by and among FCX Investment Ltd., as pledgor, The Bank of New York, as trustee, and The Bank of New York, as collateral agent. Incorporated by reference to Exhibit 4.3 to the FCX November 5, 2001 Form S-3.

4.13

      Senior Indenture dated as of November 15, 1996 from FCX to The Chase Manhattan Bank, as Trustee.  Incorporated by reference to Exhibit 4.4 to the FCX November 5, 2001 Form S-3.

4.14

      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 4.5 to the FCX November 5, 2001 Form S-3.

4.15

      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.

4.16

      Amendment No. 1 to Rights Agreement dated as of February 26, 2002 between FCX and Mellon Investor Services. Incorporated by reference to Exhibit 4.16 to the FCX 2002 First Quarter Form 10-Q.

4.17

      Amendment to Amended and Restated Credit Agreement dated as of December 17, 2002.  Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of FCX dated January 16, 2003.

4.18

      Amendment to Amended and Restated Credit Agreement dated as of March 21, 2003.

4.19

      Indenture dated as of January 29, 2003 from FCX to The Bank of New York, as Trustee, with respect to the 10 ⅛% Senior Notes due 2010.  Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of FCX dated February 6, 2003.

4.20

      Indenture dated as of February 11, 2003 from FCX to The Bank of New York, as Trustee, with respect to the 7% Convertible Senior Notes due 2011.  Incorporated by reference to the Current Report on Form 8-K of FCX dated February 11, 2003.

4.21

      Registration Rights Agreement dated as of February 11, 2003, by and between FCX and Merrill Lynch, Pierce, Fenner & Smith Incorporated.  Incorporated by reference to Exhibit 4.20 to the Annual Report of FCX on Form 10-K for the year ended December 31, 2002.

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 10.1 to the FCX November 5, 2001 Form S-3.

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 November 5, 2001 Form S-3.

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 Current Report on Form 8-K of FCX dated November 13, 1996 and filed November 15, 1996.  

10.4

      Concentrate Purchase and Sales Agreement dated effective December 11, 1996 between PT Freeport Indonesia and PT Smelting.  Incorporated by reference to Exhibit 10.3 to the FCX November 5, 2001 Form S-3.  

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 10.4 to the FCX November 5, 2001 Form S-3.

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 10.5 to the FCX November 5, 2001 Form S-3.

10.7

      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.

10.8       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 10.9 through 10.3 5 )

10.9         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.
 

10.10        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.

10.11        FCX President’s Award Program.  Incorporated by reference to Exhibit 10.7 to the FCX November 5, 2001 Form S-3.

10.12        FCX Adjusted Stock Award Plan, as amended.  Incorporated by reference to Exhibit 10.15 to the 1997 FCX Form K.

10.13        FCX 1995 Stock Option Plan.  Incorporated by reference to Exhibit 10.8 to the FCX November 5, 2001 Form S-3.

10.14        FCX 1995 Stock Option Plan for Non-Employee Directors, as amended.  Incorporated by reference to Exhibit 10.1 the FCX 1997 Form 10-K.

10.15        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.

10.16

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).

10.17

FCX Stock Appreciation Rights Plan dated May 2, 2000. Incorporated by reference to Exhibit 10.20 to the Quarterly Report on Form 10-Q of FCX for the quarter ended June 30, 2001 (the FCX 2001 Second Quarter Form 10-Q).

10.18

Amended Financial Counseling and Tax Return Preparation and Certification Program of FCX.  Incorporated by reference to Exhibit 10.18 to the FCX 2003 First Quarter Form 10-Q.

10.19

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.

10.20

Amended FM Services Company Financial Counseling and Tax Return Preparation and Certification Program.  Incorporated by reference to Exhibit 10.20 to the FCX 2003 First Quarter Form 10-Q .

10.21

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.

10.22

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.

10.23

Letter Agreement dated January 27, 1997 among Kissinger Associates, Kent Associates, FTX, FCX and FMS.  Incorporated by reference to Exhibit 10.26 to the FCX 2001 Form 10-K.  

10.24

Agreement for Consulting Services between FTX and B. M. Rankin, Jr. effective as of January 1, 1990 (assigned to FMS as of January 1, 1996). Incorporated by reference to Exhibit 10.24 to the FCX 1997 Form 10-K.

10.25

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.

10.26

Supplemental Agreement between FMS and B. M. Rankin, Jr. dated February 2, 2001.  Incorporated by reference to Exhibit 10.29 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 2000 (the FCX 2000 Form 10-K).

10.27

Letter Agreement effective as of January 7, 1997 between Senator J. Bennett Johnston, Jr. and FMS.  Incorporated by reference to Exhibit 10.31 to the FCX 2001 Form 10-K.  

10.28

Supplemental Letter Agreement dated July 14, 2003 between J. Bennett Johnston, Jr. and FMS.  

10.29

Letter Agreement dated November 1, 1999 between FMS and Gabrielle K. McDonald.   Incorporated by reference to Exhibit 10.33 to the FCX 1999 Form 10-K.

10.30

Supplemental Letter Agreement dated July 14, 2003 between FMS and Gabrielle K. McDonald.

10.31

Executive Employment Agreement dated April 30, 2001 between FCX and James R. Moffett. Incorporated by reference to Exhibit 10.35 to the FCX 2001 Second Quarter Form 10-Q.

10.32

Executive Employment Agreement dated April 30, 2001 between FCX and Richard C. Adkerson. Incorporated by reference to Exhibit 10.36 to the FCX 2001 Second Quarter Form 10-Q.

10.33

Change of Control Agreement dated April 30, 2001 between FCX and James R. Moffett. Incorporated by reference to Exhibit 10.37 to the FCX 2001 Second Quarter Form 10-Q.

10.34

Change of Control Agreement dated April 30, 2001 between FCX and Richard C. Adkerson. Incorporated by reference to Exhibit 10.38 to the FCX 2001 Second Quarter Form 10-Q.

10.35

FCX 2003 Stock Incentive Plan, as amended.

15.1   

        Letter dated July 17, 2003 from Ernst & Young LLP regarding unaudited interim financial statements.

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d – 14(a).

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a).

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

EX-4

EXECUTION VERSION

AMENDMENT dated as of March 21, 2003 (this “Amendment”) to the Amended and Restated Credit Agreement dated as of October 19, 2001, as amended (the “Credit Agreement”), among FREEPORT-MCMORAN COPPER & GOLD INC., a Delaware Corporation (“FCX”), PT FREEPORT INDONESIA, a limited liability company organized under the laws of the Republic of Indonesia and domesticated under the laws of Delaware (“PTFI” and together with FCX, the “Borrowers”), the Lenders party thereto, U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, as FI Trustee, and JPMORGAN CHASE BANK, a New York banking corporation (“JPMCB”), as Administrative Agent, Security Agent, JAA Security Agent and Documentation Agent.

WHEREAS, pursuant to the Credit Agreement, the Lenders have extended credit to the Borrowers, and have agreed to extend credit to the Borrowers, in each case pursuant to the terms and subject to the conditions set forth therein;

WHEREAS, on or prior to the date hereof (a) the Borrowers have (i) prepaid all Term Loans, (ii) repaid all Tranche A Revolving Loans and terminated the Tranche A Revolving Commitments, (iii) repaid all Tranche B Revolving Loans and reduced the aggregate amount of the Tranche B Revolving Lenders’ Tranche B Revolving Commitments to $150,000,000 and (iv) reimbursed all LC Disbursements and (b) all outstanding Tranche B Revolving Loans and Tranche B Revolving Commitments have been assigned to JPMCB pursuant to a Master Assignment and Acceptance dated on or prior to the effective date hereof (the “Master Assignment”);

WHEREAS, the Borrowers have requested that the Lenders approve amendments to certain provisions of the Credit Agreement;

WHEREAS, the Lenders are willing, on the terms, subject to the conditions and to the extent set forth below, to amend such provisions; and

WHEREAS, capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, as amended hereby.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree, on the terms and subject to the conditions set forth herein, as follows:

SECTION 1.

Amendments.  Effective as of the Amendment Effective Date (as defined in Section 4 hereof), the Credit Agreement is hereby amended as follows:

(a)

The following definitions are added to Section 1.01 in their appropriate alphabetical positions:

 “2003 Amendment and Restatement” means an amendment and restatement of this Agreement to be consummated after the March 2003 Amendment Effective Date and after completion of a general syndication to Persons that will become Lenders under this Agreement of the Commitments existing on the March 2003 Amendment Effective Date (and any other commitments provided for in such amendment and restatement).

“Cash Collateral Requirement” means the requirement that one or more Loan Parties provide to the Administrative Agent on the March 2003 Amendment Effective Date and at all times thereafter maintain, pursuant to Section 5.17, collateral consisting of cash and readily marketable Permitted Investments having an aggregate value (determined by valuing Permitted Investments at their then-current market values, as determined by the Administrative Agent in accordance with its customary practices) equal to at least (a) the aggregate amount of the Tranche B Revolving Commitments minus (b) $50,000,000.

“Combined Cash Balances” means, on any date, the aggregate amount of cash and marketable debt securities in the form of Permitted Investments held by FCX, PTFI and any Subsidiary Guarantor. In determining the aggregate amount of the Combined Cash Balances, (a) the computation shall exclude (i) all such cash and marketable securities held pursuant to the Cash Collateral Requirement and (ii) all cash and marketable debt securities subject to agreements, Liens (except for Liens (other than those created by Section 5.17) for the benefit of the Secured Parties) or other arrangements that restrict the use of such cash or marketable securities in the business of FCX and the Restricted Subsidiaries.

“Commitment Fee Applicable Rate” means, for any day, 0.50% if the Revolving Exposure is zero on such day and the Applicable Rate otherwise; provided that if the syndication of the 2003 Amendment and Restatement has not commenced by September 30, 2003, the Commitment Fee shall be the Applicable Rate for each day on or after such day.

“March 2003 Amendment” means the Amendment to this Agreement dated as of March 21, 2003.

“March 2003 Amendment Effective Date” means the date on which the March 2003 Amendment becomes effective in accordance with its terms.

(b)

The definition of “Permitted Investments” in Section 1.01 is hereby amended and restated in its entirety to read as follows:

"Permitted Investments” means:

(a)

Direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b)

Government sponsored agency debt obligations including Student Loan Marketing Association (Sallie Mae), Federal National Mortgage Association (Fannie Mae), Federal Home Loan Bank, Federal Home Loan Mortgage Corp. (Freddie Mac), and Federal Farm Credit Bank.

(c)

Investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(d)

Investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts which has a short-term deposit rating issued by Moody’s of P-2;

(e)

Overnight repurchase agreements relating to securities described in clause (a), (b) or (c) above; and

(f)

Investments in readily marketable money market funds registered under the Investment Company Act of 1940 and which have the highest ratings obtainable from S&P and Moody’s.”

(c)

The definition of “Tranche B Revolving Commitment Termination Date” in Section 1.01 is hereby amended and restated in its entirety to read as follows:

“Tranche B Revolving Commitment Termination Date” shall mean the Maturity Date.”

(d)

Section 2.11(a) is hereby amended by deleting the phrase “Applicable Rate” therein and substituting therefor “Commitment Fee Applicable Rate”.

(e)

Section 2.11 is hereby amended by adding a new paragraph (e) thereto to read as follows:

“(e)(i) The Borrowers agree to pay to the Administrative Agent for the account of each Revolving Lender a lump sum fee (the “within 270 days within 270 days”) equal to 1.0% of the Revolving Commitment of such Revolving Lender on the earlier to occur of (i) the first date after the March 2003 Amendment Effective Date on which the Revolving Exposure is greater than zero and (ii) September 30, 2003, if the syndication of the 2003 Amendment and Restatement has not commenced by such date. In the event that (x) the Agreement is terminated on or prior to September 30, 2003 or (y) the Revolving Exposure is not greater than zero on any date after the March 2003 Amendment Effective Date and prior to September 30, 2003, and the general syndication of the 2003 Amendment and Restatement has commenced on or prior to September 30, 2003, no Exposure Fee will be payable hereunder.

(f) Section 4.02 is hereby amended by (i) adding a new paragraph (c) thereto to read as follows:

“(c) At the time of and immediately after giving effect to such Borrowing, the Combined Cash Balances are not less than $100,000,000.”

and (ii) deleting the phrase “(a) and (b)” from the last sentence thereof and substituting therefor “(a), (b) and (c)”.

(g) Paragraph (g) of Section 5.01 is hereby amended by deleting from the end thereof the word “and” and a new paragraph (h) is hereby inserted to read as follows:

“(h) by 3:00 p.m. (New York City time) on each monthly testing date, a certificate of a Financial Officer of FCX stating whether or not the Borrowers are in compliance with the Cash Collateral Requirement and setting forth the calculation of and certifying the Combined Cash Balances as of such monthly testing date. The monthly testing date shall be the last day of each month, or when such date is not a Business Day, the next succeeding Business Day; and”

(h)

A new Section 5.17 is hereby added to read as follows:

“SECTION 5.17.

Cash Collateral Requirement.

(a)

The Cash Collateral Requirement will be satisfied by securing the Obligations with cash collateral in accordance with the provisions of this paragraph. On the March 2003 Amendment Effective Date, the Borrowers will cause to be delivered by one or more Loan Parties to the Administrative Agent, acting on behalf of the Secured Parties, cash for deposit in a cash collateral account with the Administrative Agent and in the name of the Administrative Agent and for the benefit of the Secured Parties (the “Cash Collateral Account”) in an aggregate amount equal to the amount required for compliance with the Cash Collateral Requirement. Such deposit (and any other deposits of funds into such account) shall be held by the Administrative Agent as collateral for the payment of the obligations, and the Borrowers hereby grant the Administrative Agent, for the benefit of the S ecured Parties, a security interest in all funds and investments from time to time in the Cash Collateral Account, and all earnings thereon and proceeds thereof, to secure such obligations. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, except as expressly provided herein, over such account. Other than any interest or profits earned on the investment of such deposits in Permitted Investments, which investments shall be made by the Administrative Agent at the direction of the Borrowers, and in any event at the Borrowers’ risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall be distributed from time to time to the Borrowers at their request, provided that no Default has occurred and is continuing and that the Cash Collateral Requirement continues to be satisfied after any such distribution. On the Maturity Date or such earlier date on which the Loans become due and payable or the Agr eement is terminated, the Administrative Agent shall, and is hereby directed by the Borrowers to, convert sufficient investments in the Cash Collateral Account into cash to pay the full amount of the Obligations, pro rata in accordance with the outstanding principal amounts thereof. Any excess cash collateral or investments shall automatically be released from any lien created in favor of the Administrative Agent, for the benefit of the Secured Parties, and shall be paid or delivered to the Borrowers in accordance with the Borrowers’ written instructions.

(b)

At any time when there is a reduction of the Tranche B Revolving Commitments pursuant to Section 2.07 and no Default or Event of Default has occurred and is continuing, the Borrowers may notify the Administrative Agent thereof and request a release of excess cash collateral. Such notice shall state (i) the amount to be released (which amount, when deducted from the Cash Collateral Account, shall not cause the Borrowers to be out of compliance with the Cash Collateral Requirement), (ii) the date on which the release shall take place (which shall be at least two Business Days from the date of such notice) and (iii) a certification by a Financial Officer that (A) no Default or Event of Default has occurred and is continuing and (B) after giving effect to the requested release, the Borrowers will be in compliance with the Cash Collateral Requirement. Upon proper notice from the Borr owers pursuant to this paragraph, the Administrative Agent must release the excess cash collateral on the date specified in such notice.”

(i)

A new Section 6.22 is hereby added to read as follows:

“SECTION 6.22.

Minimum Cash Balance. The Borrowers will not permit the Combined Cash Balances on any date on which the Revolving Exposure is greater than zero to be less than $100,000,000.”

SECTION 2.

Suspension of Covenants. (a) Sections 5.01 (c) (iii), 5.01 (c) (iv), 5.01 (c) (viii), 5.01 (c) (ix), 5.01 (e), 5.11, 5.12, 5.13(b), 5.13(d) and 5.16 and (b) the provisions of Article VI, with the exception of Sections 6.18, 6.19 and 6.22, are all hereby suspended until December 30, 2003, and the Borrowers shall not, prior to such date, be required to comply with such suspended provisions nor shall any non-compliance with such provisions during the period prior to December 31, 2003, be deemed to result in a Default or Event of Default. If the 2003 Amendment and Restatement shall not have become effective in accordance with its terms by December 31, 2003, all provisions of Article VI shall become effective in accordance with their terms on such date and the suspension provided hereby shall automatically terminate.

SECTION 3.

Representations and Warranties. Each of the Borrowers represents and warrants to each of the Lenders that (a) the representations and warranties of the Borrowers set forth in the Loan Documents are true and correct in all material respects on and as of the date of this Amendment, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties are true and correct in all material respects as of such earlier date) and (b) no Default or Event of Default has occurred and is continuing.

SECTION 4.

Conditions to Effectiveness. This Amend-ment shall become effective as of the first date on which the following conditions have been satisfied (the “Amendment Effective Date”):

(a)

The Administrative Agent (or its counsel) shall have received duly executed counterparts hereof that, when taken together, bear the signatures of each of the Borrowers, the Administrative Agent and all the Lenders;

(b)

All legal matters incident to this Amendment shall be satisfactory to the Administrative Agent;

(c)

The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder or under any other Loan Document, such expenses to include the legal fees of Cravath, Swaine & Moore, counsel to the Administrative Agent;

(d)

The Administrative Agent (or its counsel) shall have received from each of the Borrowers, the Administrative Agent and each Lender having a Tranche B Revolving Commitment or holding Tranche B Revolving Loans immediately prior to the effectiveness of the assignments effected by the Master Assignment either (i) a counterpart of the Master Assignment signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of the Master Assignment) that such party has signed a counterpart of the Master Assignment under which each Lender party thereto, other than JPMCB, shall assign all of its Tranche B Revolving Commitments and outstanding Tranche B Revolving Loans to JPMCB;

(e)

The amendment fee referred to in Section 5 hereof shall have been paid.

SECTION 5.

Amendment Fee. In consideration of the agreements of the Lenders contained herein, the Borrowers agree to pay to each Lender, through the Administrative Agent, an amendment fee (the “Amendment Fee”) equal to 0.15% of the Revolving Commitment (whether used or unused) of such Lender on the date the Amendment Fee is due and payable, provided that such Lender approves this Amendment and returns to the Administrative Agent or its counsel an executed signature page hereto no later than 5:00 p.m., New York City time, on March 21, 2003. The Amendment Fee shall be payable to the Administrative Agent, for the accounts of the Lenders entitled thereto, in immediately available funds on the earlier to occur of (a) the first date after the March 2003 Amendment Effective Date on which the Revolving Commitments are reduced and (b) April 18, 2003. Once paid, the A mendment Fee shall not be refundable.

SECTION 6.

Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7.

Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

FREEPORT-MCMORAN COPPER & GOLD INC.

By:	\s\ Richard C. Adkerson
Name:	Richard C. Adkerson
Title:	President and Chief Financial Officer

PT FREEPORT INDONESIA

By:	\s\ Robert R. Boyce
Name:	Robert R. Boyce
Title:	Treasurer

JPMORGAN CHASE BANK, individually and as Administrative Agent, Security Agent, JAA Security Agent and Documentary Agent

By:	\s\ James H. Ramage
Name:	James H. Ramage
Title:	Managing Director

EX-10

July 14, 2003

Mr. J. Bennett Johnston, Jr.

1317 Merrie Ridge Road

McLean, VA 22101

Re:

Supplemental Agreement No. 2  to the

Consulting Agreement of January 7, 1997

Dear Bennett:

In connection with the recent increase in the FCX annual director fee from $25,000 to $40,000, we believe that it is appropriate to increase your annual consulting retainer, which encompasses annual director fees.  Accordingly, enclosed is a supplement to your consulting agreement increasing your annual retainer from $250,000 to $265,000 effective as of May 1, 2003.  We would appreciate you signing and returning it to us for our records.

The enclosed payment of $6,250 represents your increase from May 1, 2003 to September 30, 2003.  Your fourth quarter consulting retainer payment to be received in October will be $66,250, which will reflect our new agreement.

All of us in the Freeport-McMoRan organization appreciate very much your contributions and efforts on behalf of our companies.  

I look forward to seeing you soon.

Best personal regards.

Sincerely,

                                                                        /s/ Richard C. Adkerson

Richard C. Adkerson

RCA:tml

Enclosures

EX-10

[FM Services Company Letterhead]

July 14, 2003

The Honorable Gabrielle K. McDonald

2001 Holcombe Blvd., #3201

Houston, Texas 77030

Supplemental Agreement to the

Consulting Agreement of November 1, 1999

Dear Judge McDonald:

This Supplemental Agreement refers to the consulting agreement of November 1, 1999 (the “Consulting Agreement”) between you and FM Services Company (the “Company”), with respect to your performance of consulting services for the Company and its subsidiaries and affiliates.

By way of this Supplemental Agreement, the Company would like to amend your Consulting Agreement, increasing your annual retainer to $265,000 effective as of May 1, 2003.  All other terms and conditions of the Consulting Agreement shall remain unchanged.

Please confirm that the foregoing correctly represents your understanding with respect to this matter by signing both originals of this letter and returning one to me.

Very truly yours,

/s/ Richard C. Adkerson

Richard C. Adkerson

Chairman

FM Services Company

AGREED TO AND ACCEPTED:

/s/ Gabrielle K. McDonald

The Honorable Gabrielle K. McDonald

Date:

July 16, 2003

EX-10

FREEPORT-McMoRan COPPER & GOLD INC.

2003 STOCK INCENTIVE PLAN

SECTION 1

Purpose.  The purpose of the Freeport-McMoRan Copper & Gold Inc. 2003 Stock Incentive Plan (the “Plan”) is to motivate and reward key employees, consultants and advisers by giving them a proprietary interest in the Company’s success.

SECTION 2

Definitions.  As used in the Plan, the following terms shall have the meanings set forth below:

“Award” shall mean any Option, Stock Appreciation Right, Limited Right, Restricted Stock or Other Stock-Based Award.

“Award Agreement” shall mean any notice of grant, written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.

“Board” shall mean the Board of Directors of the Company.

“Class B Common Stock” shall mean the Class B Common Stock, $.10 par value per share of the Company.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“Committee” shall mean, until otherwise determined by the Board, the Corporate Personnel Committee of the Board.

“Company” shall mean Freeport-McMoRan Copper & Gold Inc.

“Designated Beneficiary” shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive the benefits due the Participant under the Plan in the event of the Participant’s death.  In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant’s estate.

“Eligible Individual” shall mean (i) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any such person who is also a director of the Company, (ii) any employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary, (iii) any officer or employee of an entity with which the Company has contracted to receive executive, management or legal services who provides services to the Company or a Subsidiary through such arrangement, (iv) any consultant or adviser to the Company, a Subsidiary or to an entity described in clause (iii) hereof who provides services to the Company or a Subsidiary through such arrangement and (v) any person who has agreed in writing to become a person described in clauses (i), (ii), (iii) or (iv) within not more than 30 days following the dat e of grant of such person’s first Award under the Plan.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

“Incentive Stock Option” shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

“Limited Right” shall mean any right granted under Section 8 of the Plan.

“Nonqualified Stock Option” shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option.

“Offer” shall mean any tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, as a result of which any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall beneficially own more than 40% of all classes and series of the Company’s stock outstanding, taken as a whole, that has voting rights with respect to the election of directors of the Company (not including any series of preferred stock of the Company that has the right to elect directors only upon the failure of the Company to pay dividends).

“Offer Price” shall mean the highest price per Share paid in any Offer that is in effect at any time during the period beginning on the ninetieth day prior to the date on which a Limited Right is exercised and ending on and including the date of exercise of such Limited Right.  Any securities or property that comprise all or a portion of the consideration paid for Shares in the Offer shall be valued in determining the Offer Price at the higher of (i) the valuation placed on such securities or property by the person or persons making such Offer, or (ii) the valuation, if any, placed on such securities or property by the Committee or the Board.

“Option” shall mean an Incentive Stock Option or a Nonqualified Stock Option.

“Other Stock-Based Award” shall mean any right or award granted under Section 10 of the Plan.

“Participant” shall mean any Eligible Individual granted an Award under the Plan.

“Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

“Restricted Stock” shall mean any restricted stock granted under Section 9 of the Plan.

 “Section 162(m)” shall mean Section 162(m) of the Code and all regulations promulgated thereunder as in effect from time to time.

“Shares” shall mean the shares of Class B Common Stock of the Company and such other securities of the Company or a Subsidiary as the Committee may from time to time designate.

“Stock Appreciation Right” shall mean any right granted under Section 7 of the Plan.

“Subsidiary” shall mean (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.

SECTION 3

(a)

Administration.  The Plan shall be administered by the Committee.  Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to an Eligible Individual; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.  Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any stockholder of the Company and any Eligible Individual.

(b)

Delegation.  Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant and set the terms of, to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by Eligible Individuals who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor section thereto, or who are otherwise not subject to such Section; provided, however, that the per share exercise price of any Option granted under this Section 3(b) shall be equal to the fair market value of the underlying Shares on the date of grant.

SECTION 4

Eligibility.  Any Eligible Individual shall be eligible to be granted an Award.

SECTION 5

(a)

Shares Available for Awards.  Subject to adjustment as provided in Section 5(b):

(i)

Calculation of Number of Shares Available.

(A)

Subject to the other provisions of this Section 5(a), the number of Shares with respect to which Awards payable in Shares may be granted under the Plan shall be 8,000,000 shares of Class B Common Stock.  Awards that by their terms may be settled only in cash shall not be counted against the maximum number of Shares provided herein.

(B)

The number of Shares that may be issued pursuant to Incentive Stock Options may not exceed 8,000,000 Shares.

(C)

Subject to the other provisions of this Section 5(a):

(1)

the maximum number of Shares with respect to which Awards in the form of Restricted Stock or Other Stock-Based Awards payable in Shares for which a per share purchase price that is less than 100% of the fair market value of the securities to which the Award relates shall be 2,000,000 Shares; and

(2)

no more than 400,000 Shares may be issued pursuant to Awards in the form of Other Stock-Based Awards payable in Shares for which the vesting period is less than three years (with incremental vesting permitted), or one year (with incremental vesting permitted) if the grant or vesting is subject to the attainment of specified performance goals.  If (x) an Other Stock-Based Award is granted with a minimum vesting period of at least three years or a minimum vesting period of at least one year, subject to the attainment of specific performance goals, and (y) the vesting of such Award is accelerated in accordance with Section 12(a) hereof as a result of the Participant’s death, retirement or other termination of employment or cessation of consulting or advisory services to the Company, or a change in control of the Company, such Shares shall not count against the 400,000 limitation described herein.

(D)

To the extent any Shares covered by an Award are not issued because the Award is forfeited or canceled or the Award is settled in cash, such Shares shall again be available for grant pursuant to new Awards under the Plan.

(E)

In the event that Shares are issued as Restricted Stock or Other Stock-Based Awards under the Plan and thereafter are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such Shares shall again be available for grant pursuant to new Awards under the Plan.

(F)

If the exercise price of any Option is satisfied by tendering Shares to the Company, only the number of Shares issued net of the Shares tendered shall be deemed issued for purposes of determining the maximum number of Shares available for issuance under Section 5(a)(i)(A).  However, all of the Shares issued upon exercise shall be deemed issued for purposes of determining the maximum number of Shares that may be issued pursuant to Incentive Stock Options.

(ii)

Shares Deliverable Under Awards.  Any Shares delivered pursuant to an Award may consist of authorized and unissued Shares or of treasury Shares, including Shares held by the Company or a Subsidiary and Shares acquired in the open market or otherwise obtained by the Company or a Subsidiary.  The issuance of Shares may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

(iii)

Individual Limit.  Any provision of the Plan to the contrary notwithstanding, no individual may receive in any year Awards under the Plan, whether payable in cash or Shares, that relate to more than 2,500,000 Shares.

(iv)

Use of Shares.  Subject to the terms of the Plan and the overall limitation on the number of Shares that may be delivered under the Plan, the Committee may use available Shares as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including, but not limited to, the Company’s Annual Incentive Plan and the plans or arrangements of the Company or a Subsidiary assumed in business combinations.

(b)

Adjustments.  In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, Subsidiary securities, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in its sole discretion and in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or pro perty) with respect to which Awards may be granted, (ii) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award and, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award and, if deemed appropriate, adjust outstanding Awards to provide the rights contemplated by Section 11(b) hereof; provided, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto and, with respect to all Awards under the Plan, no such adjustment shall be authorized to the extent that such authority would be inconsistent with the requirements for full deductibility under Section 162(m); and provided further that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

SECTION 6

(a)

Stock Options.  Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Eligible Individuals to whom Options shall be granted, the number of Shares to be covered by each Option, the option price thereof and the conditions and limitations applicable to the exercise of the Option and the other terms thereof.  The Committee shall have the authority to grant Incentive Stock Options, Nonqualified Stock Options or both.  In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be required by Section 422 of the Code, as from time to time amended, and any implementing regulations.  Except in the case of an Option granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the exercise pri ce of any Option granted under this Plan shall not be less than 100% of the fair market value of the underlying Shares on the date of grant.

(b)

Exercise.  Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter, provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of 10 years after the date of such grant.  The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any condition relating to the application of Federal or state securities laws, as it may deem necessary or advisable.  An option may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of Shares to be purchased.  The exercise notice shall be accompanied by the full purchase price for the Shares.

(c)

Payment.  The Option price shall be payable in United States dollars and may be paid by (i) cash or cash equivalent; (ii) delivery of shares of Class B Common Stock, which shares shall be valued for this purpose at the fair market value (valued in accordance with procedures established by the Committee) on the business day immediately preceding the date such Option is exercised and, unless otherwise determined by the Committee, shall have been held by the optionee for at least six months; or (iii) in such other manner as may be authorized from time to time by the Committee.  Prior to the issuance of Shares upon the exercise of an Option, a Participant shall have no rights as a shareholder.

SECTION 7

(a)

Stock Appreciation Rights.  Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Eligible Individuals to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Award of Stock Appreciation Rights, the grant price thereof and the conditions and limitations applicable to the exercise of the Stock Appreciation Right and the other terms thereof.  Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any other Award.  Stock Appreciation Rights granted in tandem with or in addition to an Option or other Award may be granted either at the same time as the Option or other Award or at a later time.  Stock Appreciation Rights shall not be exercisable after the expiration of 10 years after the date of grant.  Except in the case of a Stock Appreciation Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Stock Appreciation Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Stock Appreciation Right on the date of grant or, in the case of a Stock Appreciation Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award.

(b)

A Stock Appreciation Right shall entitle the holder thereof to receive upon exercise, for each Share to which the Stock Appreciation Right relates, an amount equal to the excess, if any, of the fair market value of a Share on the date of exercise of the Stock Appreciation Right over the grant price.  Any Stock Appreciation Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Stock Appreciation Right that it shall or may be settled in cash, Shares or a combination of cash and Shares.

SECTION 8

(a)

Limited Rights.  Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Eligible Individuals to whom Limited Rights shall be granted, the number of Shares to be covered by each Award of Limited Rights, the grant price thereof and the conditions and limitations applicable to the exercise of the Limited Rights and the other terms thereof.  Limited Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any Award.  Limited Rights granted in tandem with or in addition to an Award may be granted either at the same time as the Award or at a later time.  Limited Rights shall not be exercisable after the expiration of 10 years after the date of grant and shall only be exercisable during a period determined at the time of grant by the Committee beginning not earlier than one day and ending not more than ninety days after the expiration date of an Offer.  Except in the case of a Limited Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Limited Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Limited Right on the date of grant or, in the case of a Limited Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award.

(b)

A Limited Right shall entitle the holder thereof to receive upon exercise, for each Share to which the Limited Right relates, an amount equal to the excess, if any, of the Offer Price on the date of exercise of the Limited Right over the grant price.  Any Limited Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Limited Right that it shall or may be settled in cash, Shares or a combination of cash and Shares.

SECTION 9

(a)

Grant of Restricted Stock.  Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Eligible Individuals to whom Restricted Stock shall be granted, the number of Shares to be covered by each Award of Restricted Stock and the terms, conditions, and limitations applicable thereto.  The Committee shall also have authority to grant restricted stock units.  Restricted stock units shall be subject to the requirements applicable to Other Stock-Based Awards under Section 10.  An Award of Restricted Stock may be subject to the attainment of specified performance goals or targets, restrictions on transfer, forfeitability provisions and such other terms and conditions as the Committee may determine, subject to the provisions of the Plan.  An award of Restricted Stock may be made in lieu of the payment of cash compensation otherwise due to an Eligible Individual.  To the extent that Restricted Stock is intended to qualify as “performance- based compensation” under Section 162(m), it must meet the additional requirements imposed thereby.

(b)

The Restricted Period.  At the time that an Award of Restricted Stock is made, the Committee shall establish a period of time during which the transfer of the Shares of Restricted Stock shall be restricted (the “Restricted Period”).  Each Award of Restricted Stock may have a different Restricted Period.  A Restricted Period of at least three years is required, with incremental vesting of the Award over the three-year period permitted.  However, if the grant or vesting of the Shares is subject to the attainment of specified performance goals, a Restricted Period of at least one year with incremental vesting is permitted.  The expiration of the Restricted Period shall also occur as provided in the Award Agreement in accordance with Section 12(a) hereof.

(c)

Escrow.  The Participant receiving Restricted Stock shall enter into an Award Agreement with the Company setting forth the conditions of the grant.  Certificates representing Shares of Restricted Stock shall be registered in the name of the Participant and deposited with the Company, together with a stock power endorsed in blank by the Participant.  Each such certificate shall bear a legend in substantially the following form:

The transferability of this certificate and the shares of Class B Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Freeport-McMoRan Copper & Gold Inc. 2003 Stock Incentive Plan (the “Plan”) and a notice of grant issued thereunder to the registered owner by Freeport-McMoRan Copper & Gold Inc.  Copies of the Plan and the notice of grant are on file at the principal office of Freeport-McMoRan Copper & Gold Inc.

(d)

Dividends on Restricted Stock.  Any and all cash and stock dividends paid with respect to the Shares of Restricted Stock shall be subject to any restrictions on transfer, forfeitability provisions or reinvestment requirements as the Committee may, in its discretion, prescribe in the Award Agreement.

(e)

Forfeiture.  In the event of the forfeiture of any Shares of Restricted Stock under the terms provided in the Award Agreement (including any additional Shares of Restricted Stock that may result from the reinvestment of cash and stock dividends, if so provided in the Award Agreement), such forfeited shares shall be surrendered and the certificates canceled.  The Participants shall have the same rights and privileges, and be subject to the same forfeiture provisions, with respect to any additional Shares received pursuant to Section 5(b) or Section 11(b) due to a recapitalization, merger or other change in capitalization.

(f)

Expiration of Restricted Period.  Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee or at such earlier time as provided for in the Award Agreement or an amendment thereto, the restrictions applicable to the Restricted Stock shall lapse and a stock certificate for the number of Shares of Restricted Stock with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions and legends, except any that may be imposed by law, to the Participant or the Participant’s estate, as the case may be.

(g)

Rights as a Shareholder.  Subject to the terms and conditions of the Plan and subject to any restrictions on the receipt of dividends that may be imposed in the Award Agreement, each Participant receiving Restricted Stock shall have all the rights of a shareholder with respect to Shares of stock during any period in which such Shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such Shares.

(h)

Performance-Based Restricted Stock under Section 162(m).  The Committee shall determine at the time of grant if a grant of Restricted Stock is intended to qualify as “performance-based compensation” as that term is used in Section 162(m).  Any such grant shall be conditioned on the achievement of one or more performance measures.  The performance measures pursuant to which the Restricted Stock shall vest shall be any or a combination of the following:  earnings per share, return on assets, an economic value added measure, shareholder return, earnings, return on equity, return on investment, cash provided by operating activities, increase in cash flow, return on cash flow, or increase in production of the Company, a division of the Company or a Subsidiary.  For any performance period, such performance objectives may be measured on an absolute basis or relative to a group of peer companies selected by the Committee, relative to internal goals or relative to levels attained in prior years.  For grants of Restricted Stock intended to qualify as “performance-based compensation,” the grants of Restricted Stock and the establishment of performance measures shall be made during the period required under Section 162(m).

SECTION 10

(a)

Other Stock-Based Awards.  The Committee is hereby authorized to grant to Eligible Individuals an “Other Stock-Based Award,” which shall consist of an Award that is not an instrument or Award specified in Sections 6 through 9 of this Plan, the value of which is based in whole or in part on the value of Shares, including a restricted stock unit.  Other Stock-Based Awards may be awards of Shares or may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible or exchangeable into or exercisable for Shares), as deemed by the Committee consistent with the purposes of the Plan.  The Committee shall determine the terms and conditions, including any vesting requirements, of any such Other Stock-Based Award and may provide that such awards would be payable in whole or in part in cash.  To the extent that an Other Stock-Based Award is intended to qualify as “performance-based compensation” under Section 162(m), it must be made subject to the attainment of one or more of the performance goals specified in Section 10(b) hereof and meet the additional requirements imposed by Section 162(m).  

(b)

Performance-Based Other Stock-Based Awards under Section 162(m).  The Committee shall determine at the time of grant if the grant of an Other Stock-Based Award is intended to qualify as “performance-based compensation” as that term is used in Section 162(m).  Any such grant shall be conditioned on the achievement of one or more performance measures.  The performance measures pursuant to which the Other Stock-Based Award shall vest shall be any or a combination of the following:  earnings per share, return on assets, an economic value added measure, shareholder return, earnings, return on equity, return on investment, cash provided by operating activities, increase in cash flow, return on cash flow, or increase in production of the Company, a division of the Company or a Subsidiary.  For any performance period, such performance objectives may be measured on an absolute ba sis or relative to a group of peer companies selected by the Committee, relative to internal goals or relative to levels attained in prior years.  For grants of Other Stock-Based Awards intended to qualify as “performance-based compensation,” the grants of Other Stock-Based Awards and the establishment of performance measures shall be made during the period required under Section 162(m).

(c)

Dividend Equivalents.  In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under this Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may provide the holder thereof with dividends or dividend equivalents, payable in cash, Shares, Subsidiary securities, other securities or other property on a current or deferred basis.

SECTION 11

(a)

Amendment or Discontinuance of the Plan.  The Board may amend or discontinue the Plan at any time; provided, however, that no such amendment may

(i)

without the approval of the stockholders, (a) increase, subject to adjustments permitted herein, the maximum number of shares of Class B Common Stock that may be issued through the Plan, (b) materially increase the benefits accruing to Participants under the Plan, (c) materially expand the classes of persons eligible to participate in the Plan, or (d) amend Section 11(c) to permit a reduction in the exercise price of Options; or

(ii)

materially impair, without the consent of the recipient, an Award previously granted.

(b)

Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 5(b) hereof) affecting the Company, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

(c)

Cancellation.  Any provision of this Plan or any Award Agreement to the contrary notwithstanding, the Committee may cause any Award granted hereunder to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to such canceled Award.  Notwithstanding the foregoing, except for adjustments permitted under Sections 5(b) and 11(b), no action by the Committee shall cause a reduction in the exercise price of Options granted under the Plan without the approval of the stockholders of the Company.  The determinations of value under this subparagraph shall be made by the Committee in its sole discretion.

SECTION 12

(a)

Award Agreements.  Each Award hereunder shall be evidenced by an agreement or notice delivered to the Participant (by paper copy or electronically) that shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Award of the death, retirement or other termination of employment or cessation of consulting or advisory services of the Participant and the effect thereon, if any, of a change in control of the Company.

(b)

Withholding.      A Participant may be required to pay to the Company, and the Company shall have the right to deduct from all amounts paid to a Participant (whether under the Plan or otherwise), any taxes required by law to be paid or withheld in respect of Awards hereunder to such Participant.  The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award.

(i)

At any time that a Participant is required to pay to the Company an amount required to be withheld under the applicable tax laws in connection with the issuance of shares of Class B Common Stock under the Plan, the Participant may, if permitted by the Committee, satisfy this obligation in whole or in part by electing (the “Election”) to have the Company withhold from the issuance shares of Class B Common Stock having a value equal to the amount required to be withheld.  The value of the shares withheld shall be based on the fair market value of the Class B Common Stock on the date that the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the “Tax Date”).

(ii)

Each Election must be made prior to the Tax Date.  The Committee may suspend or terminate the right to make Elections at any time.

(iii)

If permitted by the Committee, a Participant may also satisfy his or her total tax liability related to the Award by delivering Shares owned by the Participant.  The value of the Shares delivered shall be based on the fair market value of the Shares on the Tax Date.

(c)

Transferability.  No Awards granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a Participant except: (i) by will; (ii) by the laws of descent and distribution; (iii) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto; or (iv) if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, Options and Limited Rights granted in tandem therewith may be transferred or assigned (w) to Immediate Family Members, (x) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the partners, (y) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the members, or (z) to a trust for the benefit of Immediate Family Members; provided, however, that no more than a de minimus beneficial interest in a partnership, limited liability company or trust described in (x), (y) or (z) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned solely by Immediate Family Members.  “Immediate Family Members” shall be defined as the spouse and natural or adopted children or grandchildren of the Participant and their spouses.  To the extent that an Incentive Stock Option is permitted to be transferred during the lifetime of the Participant, it shall be treated thereafter as a Nonqualified Stock Option.  Any attempted assignment, transfer, pledge, hypothecation or other disposition of Awards, or levy of attachment or similar process upon Awards not specifically permitted herein, shall be null and void and without effect.  The designation of a Designated Benef iciary shall not be a violation of this Section 12(c).

(d)

Share Certificates.  All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(e)

No Limit on Other Compensation Arrangements.  Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, stock appreciation rights, restricted stock, and other types of Awards provided for hereunder (subject to stockholder approval of any such arrangement if approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.

(f)

No Right to Employment.  The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of or as a consultant or adviser to the Company or any Subsidiary or in the employ of or as a consultant or adviser to any other entity providing services to the Company.  The Company or any Subsidiary or any such entity may at any time dismiss a Participant from employment, or terminate any arrangement pursuant to which the Participant provides services to the Company or a Subsidiary, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.  No Eligible Individual or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Eligible Individuals, Participants or holders or beneficiaries of Awards.

(g)

Governing Law.  The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware.

(h)

Severability.  If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(i)

No Trust or Fund Created.  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person.  To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.

(j)

No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.

(k)

Deferral Permitted.  Payment of cash or distribution of any Shares to which a Participant is entitled under any Award shall be made as provided in the Award Agreement.  Payment may be deferred at the option of the Participant if provided in the Award Agreement.

(l)

Headings.  Headings are given to the subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

SECTION 13

Term of the Plan.  Subject to Section 11(a), no Awards may be granted under the Plan later than ten years after the date the Plan was adopted by the Board; provided, however, that Awards granted prior to such date shall remain in effect until such Awards have either been satisfied, expired or canceled under the terms of the Plan, and any restrictions imposed on Shares in connection with their issuance under the Plan have lapsed.

EX-15

INDEPENDENT ACCOUNTANT’S REVIEW REPORT

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) and subsidiaries as of June 30, 2003, the related statements of income for the three-month and six-month periods ended June 30, 2003 and 2002, and the statements of cash flows for the six months ended June 30, 2003 and 2002.  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, which will be performed for the full year with the objective of expressing 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 accompanying financial statements as of June 30, 2003 and 2002, and for the three-month and six-month periods then ended 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 consolidated balance sheet of Freeport-McMoRan Copper & Gold Inc. as of December 31, 2002, and the related consolidated statements of income, stockholder’s equity, and cash flows for the year then ended (not presented herein) and in our report dated January 16, 2003 (except for Note 15, as to which the date is March 6, 2003), we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ ERNST & YOUNG LLP

New Orleans, Louisiana

July 17, 2003

EX-31

CERTIFICATION

I, James R. Moffett, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Freeport-McMoRan Copper & Gold Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  August 11, 2003

/s/ James R. Moffett               

                James R. Moffett

            Chairman of the Board

         and Chief Executive Officer

EX-31

CERTIFICATION

I, Richard C. Adkerson, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Freeport-McMoRan Copper & Gold Inc.;

  2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

        3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

        4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

         5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

        6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  August 11, 2003                                                                                                                                              

                                                                                                                                                                        ;                         /s/ Richard C. Adkerson            

Richard C. Adkerson

President and

                                                                                                                                                                        ;                             Chief Financial Officer

EX-32

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report on Form 10-Q of Freeport-McMoRan Copper & Gold Inc. (the “Company”) for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James R. Moffett, as Chairman and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 11, 2003

                                                                                        /s/ James R. Moffett

James R. Moffett

Chairman of the Board and

Chief Executive Officer

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report on Form 10-Q of Freeport-McMoRan Copper & Gold Inc. (the “Company”) for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard C. Adkerson, as President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 11, 2003

               /s/ Richard C. Adkerson

Richard C. Adkerson

President and

Chief Financial Officer

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.