10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)  

[x]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from .......... to ..........

Commission file number 1-9916

Freeport-McMoRan Copper & Gold Inc.

(Exact name of registrant as specified in its charter)

Delaware

74-2480931

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

1615 Poydras Street

New Orleans, Louisiana

70112

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:  (504) 582-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Class B Common Stock, par value $0.10 per share

New York Stock Exchange

Depositary Shares, Series II, representing 0.05 shares of Gold-

   Denominated Preferred Stock, Series II, par value $0.10 per share

New York Stock Exchange

Depositary Shares representing 0.009375 shares of Silver-

   Denominated Preferred Stock, par value $0.10 per share

New York Stock Exchange

8 ¼% Convertible Senior Notes due 2006 of the registrant and

   FCX Investment Ltd.

New York Stock Exchange

10 ⅛% Senior Notes due 2010 of the registrant

New York Stock Exchange

7% Convertible Senior Notes due 2011 of the registrant

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  X

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

The aggregate market value of classes of common stock held by non-affiliates of the registrant was approximately $6,956,277,000 on March 1, 2004, and approximately $2,522,311,000 on June 30, 2003.

On March 1, 2004, there were issued and outstanding 200,613,202 shares of Class B Common Stock and on June 30, 2003, there were issued and outstanding 146,640,225 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for our 2004 Annual Meeting to be held on May 6, 2004 are incorporated by reference into Part III (Items 10, 11, 12 and 13) of this report.

TABLE OF CONTENTS

Page

Part I

Items 1. and 2. Business and Properties

1

Item 3. Legal Proceedings

31

Item 4. Submission of Matters to a Vote of Security Holders

31

 Executive Officers of the Registrant

31

Part II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

32

Item 6. Selected Financial Data

34

Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results

 of Operations and Quantitative and Qualitative Disclosures about Market Risks

34

Item 8. Financial Statements and Supplementary Data

34

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

34

Item 9A. Controls and Procedures

35

Part III

Item 10. Directors and Executive Officers of the Registrant

35

Item 11. Executive Compensation

35

Item 12. Security Ownership of Certain Beneficial Owners and Management

                   and Related Stockholder Matters

35

Item 13. Certain Relationships and Related Transactions

36

Item 14. Principal Accountant Fees and Services.

36

Part IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

36

Signatures

S-1

Index to Financial Statements

F-1

Exhibit Index

E-1

PART I

Items 1. and 2.  Business and Properties.

All of our periodic report filings with the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are  available, free of charge, through our web site, www.fcx.com, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports.  These reports and amendments are available through our web site as soon as reasonably practicable after we electronically file or furnish such material to the SEC.

General

We are one of the world's largest copper and gold mining and production companies in terms of reserves and production.  We are also one of the lowest cost copper producers in the world, after taking into account credits for related gold and silver production.  Our principal asset is the Grasberg mine, which we discovered in 1988.  Grasberg contains the largest single gold reserve and one of the largest copper reserves of any mine in the world.

Our principal operating subsidiary is PT Freeport Indonesia, a limited liability company organized under the laws of the Republic of Indonesia and incorporated as a corporation in Delaware.  We own approximately 90.64 percent of PT Freeport Indonesia, and the Government of Indonesia owns the remaining approximate 9.36 percent.  PT Freeport Indonesia mines, processes and explores for ore containing copper, gold and silver. It operates in the remote highlands of the Sudirman Mountain Range in the province of Papua, Indonesia, which is on the western half of the island of New Guinea.  PT Freeport Indonesia markets its concentrates containing copper, gold and silver worldwide.

PT Freeport Indonesia conducts its operations pursuant to an agreement, called a Contract of Work, with the Government of Indonesia (see “Contracts of Work”).  The Contract of Work allows us to conduct extensive mining, production and exploration activities in a 24,700-acre area that we call Block A, which contains the Grasberg mine, and governs our rights and obligations relating to taxes, exchange controls, royalties, repatriation and other matters.  The Contract of Work also allows us to explore for minerals in an approximately 500,000 acre area that we call Block B.  Exploration activities in Block B have been suspended since 2000 (see “Contracts of Work”).  The term of our Contract of Work expires in 2021, but we can extend it for two 10-year periods subject to Indonesian government approval, which cannot be withheld or delayed unreasonably.

Another of our operating subsidiaries, PT Irja Eastern Minerals, which we refer to as Eastern Minerals, holds an additional Contract of Work in Papua covering approximately 1.2 million acres and conducts exploration activities, which have been suspended since 2000, under this Contract of Work (see “Contracts of Work”).  We have a 100 percent ownership interest in Eastern Minerals.

In 1996, we established joint ventures with Rio Tinto plc, which is an international mining company with headquarters in London, England.  Rio Tinto conducts mining operations in North America, South America, Asia, Europe and southern Africa.  One of our joint ventures with Rio Tinto covers PT Freeport Indonesia's mining operations in Block A.  This joint venture gives Rio Tinto, through 2021, a 40 percent interest in certain assets and in production above specified levels from operations in Block A and, after 2021, a 40 percent interest in all production in Block A.  Under our joint venture arrangements, Rio Tinto also has a 40 percent interest in PT Freeport Indonesia's Contract of Work and Eastern Minerals' Contract of Work.  In addition, Rio Tinto has the option to participate in 40 percent of any of our other future exploration projects in Papua.  To date, Rio Tinto has elected to participate in all explor ation projects, including PT Nabire Bakti Mining.  Rio Tinto, through one of its wholly owned subsidiaries, owns approximately 12 percent of our currently outstanding common stock.

Under another joint venture agreement through PT Nabire Bakti Mining, we conduct exploration activities, which have been suspended since 2000 (see “Contracts of Work”), in an area covering approximately 500,000 acres in five parcels contiguous to PT Freeport Indonesia's Block B and one of Eastern Minerals' blocks.

At December 31, 2003, PT Freeport Indonesia's share of proven and probable recoverable reserves totaled 39.7 billion pounds of copper and 46.6 million ounces of gold, all of which are located in Block A.  Our approximate 90.64 percent equity share of those proven and probable recoverable reserves totaled 36.0 billion pounds of copper and 42.2 million ounces of gold (see “Ore Reserves”).  In this annual report, we refer to (1) aggregate reserves, which means all reserves for the operations we manage, (2) PT Freeport Indonesia's share of reserves, which means the reserves net of Rio Tinto's interest under our joint venture arrangements and which are the reserves reported as those of our operations in our consolidated financial statements and (3) our equity share of reserves, which means PT Freeport Indonesia's share net of the 9.36 percent interest that the Government of Indonesia owns.

In July 2003, we acquired the 85.7 percent ownership interest in PT Puncakjaya Power owned by affiliates of Duke Energy Corporation.  Puncakjaya Power is the owner of assets supplying power to PT Freeport Indonesia’s operations, including the 3x65 megawatt coal-fired power facilities (see “Infrastructure”).

We also smelt and refine copper concentrates in Spain and market the refined copper products through our wholly owned subsidiary, Atlantic Copper, S.A. (see "Investment in Smelters").  In addition, PT Freeport Indonesia has a 25 percent interest in PT Smelting, an Indonesian company that operates a copper smelter and refinery in Gresik, Indonesia.  These smelters play an important role in our concentrate marketing strategy, as approximately one-half of PT Freeport Indonesia's concentrate production has been sold to Atlantic Copper and PT Smelting over the last several years.

The diagram below shows our corporate structure.

_______________

 (1) FM Services Company, a Delaware corporation, became our wholly owned subsidiary in October 2002.  FM Services Company provides us and two other publicly-traded companies with executive, administrative, financial, accounting, legal, tax and similar services.

The following four maps indicate

-

the distance from Papua to Bali (approximately 1,500 miles) and to Jakarta (approximately 2,000 miles);

-

the location of the Papua province in which we operate;

-

the location of our Contracts of Work areas within the Papua province; and

-

the infrastructure of our Contract of Work project area.

                                                  

(Gray area indicates our approved tailings management area based on Figure 3-14 from the 300k ANDAL.)

Contracts of Work

PT Freeport Indonesia and Eastern Minerals conduct their current exploration operations and PT Freeport Indonesia conducts its mining operations in Indonesia by virtue of their Contracts of Work. Both Contracts of Work govern our rights and obligations relating to taxes, exchange controls, royalties, repatriation and other matters.  Both Contracts of Work were concluded pursuant to the 1967 Foreign Capital Investment Law, which expresses Indonesia's foreign investment policy and provides basic guarantees of remittance rights and protection against nationalization, a framework for economic incentives and basic rules regarding other rights and obligations of foreign investors.  Specifically, the Contracts of Work provide that the Government of Indonesia will not nationalize or expropriate PT Freeport Indonesia's or Eastern Minerals' mining operations.  Any disputes regarding the provisions of the Contracts of Work are subject t o international arbitration.  We have experienced no disputes requiring arbitration during the 36 years we have operated in Indonesia.

PT Freeport Indonesia's Contract of Work covers both Block A, which was first included in a 1967 Contract of Work that was replaced by a new Contract of Work in 1991, and Block B, to which we gained rights in 1991.  The initial term of our Contract of Work expires in December 2021, but we can extend it for two 10-year periods subject to Indonesian government approval, which cannot be withheld or delayed unreasonably.  We originally had the rights to explore 6.5 million acres in Block B, but pursuant to the Contract of Work we have only retained the rights to approximately 500,000 acres, which we believe, following significant geological assessment, contain the most promising exploration opportunities.

Eastern Minerals signed its Contract of Work in August 1994.  The Contract of Work originally covered approximately 2.5 million acres.  Eastern Minerals' Contract of Work provides for a four-to-seven year exploratory term and a 30-year term for mining operations.  Subject to Indonesian government approval, which cannot be withheld or delayed unreasonably, we can extend this period for two 10-year periods.  Eastern Minerals’ Contract of Work requires us to relinquish our rights to 25 percent of the original 2.5-million-acre Contract of Work area at the end of each of three specified periods.  As of December 31, 2003, we had relinquished approximately 1.3 million acres, and within three months of resuming exploratory activity under the Contract of Work we must relinquish approximately 0.6 million additional acres.

In 2000, we suspended our exploration activities outside of Block A because of safety and security issues and because of uncertainty relating to a possible conflict between our mining and exploration rights in certain forest areas covered by our Contracts of Work and an Indonesian law enacted in 1999 prohibiting open-pit mining in forest preservation areas.  In 2001, we requested and received from the Government of Indonesia formal temporary suspensions of our obligations under the Contracts of Work in all areas outside of Block A.  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, 2004, for Eastern Minerals.  We are currently seeking renewal of the Block B suspension and expect to continue to seek suspension renewals for additional one-year periods by written request to the Government of Indonesia for each of the suspend ed areas if required.  We cannot predict when we will resume our exploration activities in these areas.

PT Freeport Indonesia pays a copper royalty under its Contact of Work that varies from 1.5 percent of copper net revenue at a copper price of $0.90 or less per pound to 3.5 percent at a copper price of $1.10 or more per pound. The Contract of Work royalty rate for gold and silver sales is 1.0 percent.

A large part of the mineral royalties under Government of Indonesia regulations are designated to the provinces from which the minerals are extracted. In connection with our "fourth concentrator mill expansion," PT Freeport Indonesia agreed to pay the Government of Indonesia voluntary additional royalties (royalties not required by our Contract of Work) to provide further support to the local governments and the people of Papua.  PT Freeport Indonesia pays the additional royalties on metal from production above 200,000 metric tons of ore per day.  The additional royalty for copper equals the Contract of Work royalty rate and for gold and silver equals twice the Contract of Work royalty rates.  Therefore, our royalty rate on copper net revenues from production above 200,000 metric tons of ore per day is double the Contract of Work royalty rate, and our royalty rates on gold and silver sales from production above 200, 000 metric tons of ore per day are triple the Contract of Work royalty rates.  The combined royalties, including the voluntary additional royalties which became effective January 1, 1999, totaled $26.5 million in 2003, $24.5 million in 2002 and $24.3 million in 2001.

Republic of Indonesia

General.  The Republic of Indonesia consists of more than 17,000 islands stretching 3,000 miles along the equator from Malaysia to Australia and is the fourth most populous nation in the world with over 200 million people.  Following many years of Dutch colonial rule, Indonesia gained independence in 1945 and now has a presidential republic system of government.

Our mining complex was Indonesia's first copper mining project and was the first major foreign investment in Indonesia following the economic development program instituted by the Indonesian government in 1967.  We work closely with the central, provincial and local governments in development efforts in the area surrounding our operations.  We have had positive relations with the Indonesian government since we commenced business activities in Indonesia in 1967, and we intend to continue to maintain positive working relationships with the central, provincial and local branches of the Indonesian government.

Political Developments.  In May 1998, President Suharto, Indonesia's political leader for more than 30 years, resigned in the wake of an economic crisis in Indonesia and other parts of Southeast Asia and in the face of growing social unrest.  Vice President B.J. Habibie succeeded Suharto.  In June 1999, Indonesia held a new parliamentary election on a generally peaceful basis as the first step in the process of electing a new president.  In October 1999, in accordance with the Indonesian constitution, the country's highest political institution (the People's Consultative Assembly), composed of the newly elected national parliament along with additional provincial and other representatives, elected Abdurrahman Wahid as president and Megawati Sukarnoputri as vice president.

There were repeated challenges to the political leadership of President Wahid after his election in October 1999.  In July 2001, the People's Consultative Assembly voted to remove President Wahid, and elected Vice President Megawati Sukarnoputri as the new president.  The international community, including the United States, expressed support for the President and her Cabinet.

Recent Developments.  President Megawati and her Cabinet marked their second anniversary in office during 2003 and have committed to continued efforts to restore the country's economy and investor confidence.  Progress in achieving these goals has been hindered by the global economic slow-down and issues internal to Indonesia.  President Megawati has supported the international community's efforts to counter terrorism, while addressing political complexities in Indonesia, the world's largest Muslim country.  The next presidential election is scheduled for July 2004.

On August 31, 2002, three people were killed and 11 others were wounded in an ambush by a group of unidentified assailants.  The assailants shot at several vehicles transporting international contract schoolteachers from PT Freeport Indonesia’s school in Tembagapura, their family members, and other contractors to PT Freeport Indonesia on the road near Tembagapura, the mining town where the majority of PT Freeport Indonesia's personnel reside.  The identity of the assailants remains unknown.  We, along with the U.S. government, the central Indonesian government, the Papuan provincial and local governments, and leaders of the local people residing in the area of our operations condemned the attack.  Indonesian authorities and the U.S. Federal Bureau of Investigation continue to investigate the incident and we are supporting and cooperating fully with these ongoing investigations.

On October 12, 2002, a bombing killed 202 people in the Indonesian province of Bali, which is 1,500 miles west of our mining and milling operations.  Indonesian authorities arrested 35 people in connection with this bombing and 29 of those arrested have been tried and convicted.  On August 5, 2003, 12 people were killed and over 100 others were injured by a car bomb detonated outside of the JW Marriott Hotel in Jakarta, Indonesia.  A terror suspect will stand trial in Jakarta and face dual charges of involvement in this incident and the October 12, 2002 bombing.  Press reports state that Indonesian police blame both attacks on international terrorist organizations.  Our mining and milling operations were not interrupted by the August 31, 2002, October 12, 2002, or August 5, 2003 incidents.

The Government of Indonesia, which provides security for PT Freeport Indonesia's personnel and operations (see “Security Matters”), has expressed a strong commitment to protect natural resources businesses operating in Indonesia, including PT Freeport Indonesia, with heightened security following the incidents discussed above.

Economic and Social Conditions.  The Indonesian economy grew by an estimated 4 percent in 2003 and 2002 and an estimated 3 percent in 2001.  Indonesia is Asia's second largest exporter of oil and has benefited from higher oil prices in recent years.  

After beginning the year at 8,940 rupiah to one U.S. dollar, the Indonesian currency averaged approximately 8,500 rupiah to one U.S. dollar during 2003 and closed at 8,437 rupiah to one U.S. dollar on December 31, 2003.  The stronger rupiah reflects the economic progress made by President Megawati's administration and weakness in the U.S. dollar.

Despite gradual improvements on the economic front, Indonesia's recovery remains vulnerable to ongoing political and social tensions.  Incidents of violence and separatist pressures continue to be reported.  Pro-independence movements in certain areas continue to be prominent, especially in the province of Aceh, where the Indonesian government signed a peace agreement with separatists in December 2002, and to a lesser extent in Papua.  The area surrounding our mining development is sparsely populated by local people and former residents of more populous areas of Indonesia, some of whom have resettled in Papua under the Government of Indonesia's transmigration program.  A segment of the local population is opposing Indonesian rule over Papua, and several separatist groups have sought political independence for the province.  In addition to the August 31, 2002, shooting incident, there have been sporadic attacks on ci vilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military in Papua.

While the uncertainties of the regional autonomy process have created concern among foreign investors, the Indonesian government has repeatedly assured investors that existing contracts would be honored.  Government officials have publicly stated that the Government of Indonesia will honor existing contracts and that they have no intention of revoking or unilaterally amending such contracts, specifically including PT Freeport Indonesia's Contract of Work.  Our belief that our Contracts of Work will continue to be honored is further supported by U.S. laws, which prohibit U.S. aid to countries that nationalize property owned by, or take steps to nullify a contract with, a U.S. citizen or company at least 50 percent owned by U.S. citizens if the foreign country does not within a reasonable time take appropriate steps to provide full value compensation or other relief under international law.

Our Investment in Indonesia and Papua.  We have a board-approved policy statement on social, employment and human rights, and have comprehensive and extensive social, cultural and community development programs, to which we have committed significant financial and managerial resources.  These policies and programs are designed to address the impact of our operations on the local villages and people and to provide assistance for the development of the local people.  While we believe these efforts should serve to avoid damage to and disruptions of our mining operations, our operations could be damaged or disrupted by social, economic and political forces beyond our control.

PT Freeport Indonesia contributes to the economies of Papua and the Republic of Indonesia through the payment of taxes, dividends and royalties; voluntary economic development programs; infrastructure development; employment; and the purchase of local and national goods.  In fact, PT Freeport Indonesia has frequently been one of the largest taxpayers in the Republic of Indonesia. In addition, it pays royalties on all minerals removed from the ground.

Moreover, since it began development activities more than thirty-five years ago, PT Freeport Indonesia has made significant investments in infrastructure both for its use and for use by the Papuan public.  These infrastructure improvements include medical facilities, roads, an airport and heliports, schools, housing, community buildings and places of worship.

PT Freeport Indonesia is also one of the largest private employers in Indonesia and by far the largest in Papua.  As of December 31, 2003, PT Freeport Indonesia directly employed 7,802 people; and 6,054 contract workers provided services to PT Freeport Indonesia.  In addition, 4,436 persons worked for privatized companies providing services within PT Freeport Indonesia's operations area.

Besides the estimated $2.3 billion paid in direct benefits to the Indonesian government under the Contract of Work from 1992 through 2003, PT Freeport Indonesia's operations have provided another $8.7 billion during this period in indirect benefits to Papua and the Republic of Indonesia in the form of wages and benefits paid to workers, purchases of goods and services, charitable contributions and reinvestments in operations.

Ore Reserves

During 2003, additions to the aggregate proven and probable reserves of the Grasberg and other Block A ore bodies totaled approximately 185.5 million metric tons of ore representing increases of 2.6 billion recoverable pounds of copper, 1.0 million recoverable ounces of gold and 16.8 million recoverable ounces of silver.  Approximately 126 million metric tons of the additions relate to additions to the Mill Level Zone ore body, resulting from PT Freeport Indonesia’s 2003 drilling program.  Year-end aggregate proven and probable recoverable reserves, net of 2003 production, were 2.7 billion metric tons of ore averaging 1.08 percent copper, 0.98 grams per metric ton (g/t) of gold and 3.72 g/t of silver representing 54.4 billion pounds of copper, 60.4 million ounces of gold and 159.4 million ounces of silver.  Our aggregate exploration budget for 2004, including Rio Tinto’s share, is expected to total approximately $13 million with most of the effort focused on drilling below the current Mill Level Zone ore body.  

Pursuant to joint venture arrangements between PT Freeport Indonesia and Rio Tinto, Rio Tinto has a 40 percent interest in production from reserves above those reported at December 31, 1994.  Net of Rio Tinto’s share, PT Freeport Indonesia's share of proven and probable recoverable copper, gold and silver reserves was 39.7 billion pounds of copper, 46.6 million ounces of gold and 116.8 million ounces of silver as of December 31, 2003.  FCX's equity interest in proven and probable recoverable reserves as of December 31, 2003, was 36.0 billion pounds of copper, 42.2 million ounces of gold and 105.9 million ounces of silver.  We estimated recoverable reserves using an average copper price of $0.85 per pound and an average gold price of $270 per ounce.  With respect to the proven and probable reserves presented below, if metal prices were adjusted to the approximate average London spot prices for the past three years, i .e., copper prices adjusted from $0.85 per pound to $0.74 per pound and gold prices adjusted from $270 per ounce to $315 per ounce, there would be no change in our proven and probable reserves.

All of our proven and probable recoverable reserves lie within Block A.  The Grasberg deposit contains the largest single gold reserve and is one of the largest copper reserves of any mine in the world.  Aggregate Grasberg open pit and underground proven and probable recoverable ore reserves as of December 31, 2003, are shown below along with those of our other deposits.  Reserve calculations were prepared by our employees under the supervision of George MacDonald, our Vice President of Exploration, and were reviewed and verified by Independent Mining Consultants, Inc., experts in mining, geology and reserve determination.  See "Risk Factors."  We developed our current mine plan based on completing the mining of all of our currently designated recoverable reserves before the end of 2041, which would be the expiration of our Contract of Work including two 10-year extensions.  Prior to the expiration of the initial term of our Contract of Work in December 2021, under our current mine plan we expect to mine approximately 48 percent of aggregate proven and probable ore, representing approximately 62 percent of PT Freeport Indonesia's share of recoverable copper reserves and approximately 72 percent of PT Freeport Indonesia's share of recoverable gold reserves.

	Proven				Probable					Total
	Metric Tons of Ore (000s)a	Average Ore Grade			Metric Tons of Ore (000s)a	Average Ore Grade				Metric Tons
		Copper	Gold	Silver		Copper	Gold	Silver		of Ore (000s)a
		(%)	(g/t)	(g/t)		(%)	(g/t)		(g/t)
Developed and producing:
Grasberg open pit	250,299	1.14	1.50	2.51	500,454	1.03	1.12		2.43	750,753
Deep Ore Zone	70,041	0.99	0.67	5.46	100,091	0.90	0.60		4.61	170,132
Undeveloped:
Grasberg block cave	133,653	1.12	1.09	2.92	740,701	1.02	0.76		2.90	874,354
Kucing Liar	190,147	1.29	1.01	4.89	308,852	1.32	1.28		6.09	498,999
Mill Level Zone block     cave	71,774	0.92	0.78	3.91	86,999	0.83	0.74		3.95	158,773
Mill Level Zone sublevel        cave	2,226	0.97	0.59	5.39	15,375	0.97	0.50		4.67	17,601
Ertsberg Stockwork Zone	25,941	0.52	0.94	1.74	95,773	0.49	0.89		1.63	121,714
Big Gossan	2,468	2.20	0.93	14.08	30,438	2.86	1.01		17.07	32,906
Dom block cave	11,894	1.18	0.31	6.40	31,757	1.07	0.31		5.76	43,651
Dom open pit	6,882	1.87	0.46	9.88	20,118	1.78	0.42		9.50	27,000
Total	765,325	1.13	1.11	3.72	1,930,558	1.07	0.92		3.71	2,695,883

	Mill Recoveries (%)			Proven and Probable Recoverable Reservesb
	Copper	Gold	Silver	Copper	Gold	Silver
				(Billions of Lbs.)	(Millions of Ozs.)	(Millions of Ozs.)
Developed and producing:
Grasberg open pit	87.0	86.9	65.9	14.7	25.4	30.1
Deep Ore Zone	85.2	76.2	63.8	2.9	2.6	13.3
Undeveloped:
Grasberg block cave	89.0	72.2	74.0	17.2	16.0	46.4
Kucing Liar	89.4	50.7	55.9	12.4	9.3	38.8
Mill Level Zone block cave	85.5	76.6	63.8	2.5	2.9	9.8
Mill Level Zone sublevel cave	85.5	76.6	63.8	0.4	0.2	1.3
Ertsberg Stockwork Zone	87.8	78.1	63.8	1.1	2.7	3.2
Big Gossan	85.0	79.1	63.8	1.7	0.8	8.7
Dom block cave	82.6	75.2	62.0	0.8	0.3	4.0
Dom open pit	69.0	68.0	59.0	0.7	0.2	3.8
Total	87.6	73.3	64.4	54.4	60.4	159.4
PT Freeport Indonesia’s share				39.7	46.6	116.8
FCX’s equity share				36.0	42.2	105.9

a.

Ore reserve tonnage estimates are after application of applicable mining recovery factors.

b.

Proven and probable recoverable reserves represent estimated metal quantities from which we expect to be paid after application of estimated mill recovery rates and smelter recovery rates of 96.5 percent for copper, 97.0 percent for gold and 76.9 percent for silver.  The term “recoverable reserve” means that part of a mineral deposit which we estimate can be economically and legally extracted or produced at the time of the reserve determination.

The following table sets forth the average drill hole spacing for each of our ore bodies.  Drill hole spacing data is used by mining professionals, such as mining engineers, in determining the suitability of data coverage (on a relative basis) in a given deposit type and mining method scenario so as to achieve a given level of confidence in the resource estimate.  Drill hole spacing is only one of several criteria necessary to establish confidence level for resource classification.  Drilling programs are typically designed to achieve an optimum sample spacing to support the level of confidence in results that fit a particular stage of development of a mineral deposit.  We calculated the average drill hole spacing within each ore body using the distance from the center of each block in the resource model to the nearest drill hole composite.  We then calculated the averages of these values within the volume of each or e body and report them under the column entitled "Average Distance: To Nearest Sample."  This value represents at least one-half of the average drill hole spacing within each deposit.  We calculated the value under the column entitled "Average Distance: Between Drill Holes" by multiplying the average minimum distance value by two, and this value represents the maximum average drill hole spacing.

		Spacing (in meters)			Average Distance (in meters)
Deposit	Mining Unit	Surface Drilling Grids	Underground  (& Surface)    Drill Fans	Drilling Method	To Nearest Sample	Between    Drill Holes  (less than)
Grasberg	Open Pit	50	75	Core	45	89
Grasberg	Block Cave	-	100	Core	46	92
Deep Ore Zone	Block Cave	-	50	Core	13	25
Kucing Liar	Block Cave	-	75	Core	36	72
Mill Level Zone	Sublevel Cave	-	50	Core	27	54
Ertsberg Stockwork Zone	Block Cave	100	50	Core	26	52
Big Gossan	Open Stope	100	50	Core	22	45
Dom	Block Cave	-	50	Core	26	52
Dom	Open Pit	-	50	Core	25	50
Mill Level Zone	Block Cave	-	50	Core	27	54

Mining Operations

We and our predecessors have conducted exploration and mining operations in Block A since 1967 and have been the only operator of those operations.  Following are descriptions of ore mines in production, significant ore mines in development and our ore bodies.

Mines in Production.  We currently have two mines in operation: the Grasberg open pit and the Deep Ore Zone.  As of December 31, 2003, our capital expenditures incurred to date for our mining operations in Indonesia totaled $4.9 billion.  Our mine development, expansion and infrastructure capital expenditures totaled approximately $48 million in 2003, $69 million in 2002 and $84 million in 2001.  These expenditures primarily relate to development of the Deep Ore Zone ore body.  We began open-pit mining of the Grasberg ore body in January 1990.  Production is at the 3,520-to 4,250-meter elevation level and totaled 57.4 million metric tons of ore in 2003 and 71.0 million metric tons of ore in 2002, which provided 77 percent of our 2003 mill feed and 83 percent of our 2002 mill feed.  The underground Grasberg reserves will be mined using the block-cave method near the end of open-pit mining, which is e xpected to continue until approximately 2015.

The Deep Ore Zone ore body lies vertically below the Intermediate Ore Zone.  We began production from the Deep Ore Zone ore body in 1989, but we suspended production in 1991 in favor of production from the Grasberg deposit.  Production using the block-cave method at the Deep Ore Zone restarted in September 2000.  Production is at the 3,150-meter elevation level and totaled 14.8 million metric tons of ore in 2003 and 7.9 million metric tons of ore in 2002.  The Deep Ore Zone performed above design capacity of 35,000 metric tons of ore per day and studies are ongoing to evaluate additional low-cost expansion options to increase production.  Production from the Deep Ore Zone averaged 40,500 metric tons of ore per day in 2003.  

The Intermediate Ore Zone was an underground block-cave operation that began production in the first half of 1994.  Production totaled 2.5 million metric tons of ore in 2003 and 7.1 million metric tons of ore in 2002.  The Intermediate Ore Zone was depleted during the third quarter of 2003.  During its 10-year life, the Intermediate Ore Zone operation produced almost 30 percent more copper and gold than the initial reserve estimates.

Our principal source of power for all our operations is a coal-fired power plant that we built in conjunction with our fourth concentrator expansion (see “Infrastructure Improvements”).  Medium-speed diesel generators supply peaking and backup power.  A combination of naturally occurring mountain streams and water derived from our underground operations provides water for our operations.  The average annual rainfall in the project area is 180 inches.

Mines in Development.  Five other significant ore bodies, referred to as the Kucing Liar, Mill Level Zone,  Ertsberg Stockwork Zone, Big Gossan and the Dom are located in Block A.  These ore bodies are at various stages of development, and are included in our proven and probable recoverable reserves.  We incurred $3.6 million for mine development, expansion and infrastructure capital expenditures related to these ore bodies during the three years ended December 31, 2003.  See “Risk Factors.”

The Kucing Liar ore body lies on the southern flank of and underneath the southern portion of the Grasberg open pit at the 2,500- to 3,100-meter elevation level.  We are reviewing development plans for Kucing Liar.

The Mill Level Zone ore body lies directly below the Deep Ore Zone mine at the 2,900-meter elevation.  This ore represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry.  Drilling efforts continue to determine the extent of this ore body, which we expect to mine using a block-cave method after we complete mining at the Deep Ore Zone ore body.

The Ertsberg Stockwork Zone ore body extends off the southwest side of the Deep Ore Zone ore body at the 3,150- to 3,750-meter elevation level.  Drilling efforts continue to determine the extent of this ore body, which we expect to mine using a block-cave method after we complete mining at the Deep Ore Zone ore body.

The Big Gossan ore body is located approximately 1,000 meters southwest of the original Ertsberg open-pit deposit.  We began the initial underground development of the ore body in 1993 when we drove tunnels from the mill area into the ore zone at the 3,000-meter elevation level.  A stope and fill mining method will be used on the Big Gossan deposit.  A feasibility study and an update to the site-wide development plan will be completed in 2004 to determine when to begin production.

The Dom ore body lies approximately 1,500 meters southeast of the depleted Ertsberg open-pit deposit.  We completed pre-production development at the Dom, including all maintenance, warehouse and service facilities, just as the Grasberg mine began open-pit production in 1990.  We have deferred production at the Dom ore body and may not reinitiate until after completion of open-pit mining at Grasberg.

The projected aggregate capital expenditures required to reach full production capacity for each of our undeveloped ore bodies based on our latest mine plans and our proven and probable recoverable reserves as of December 31, 2003, are shown below (in millions).  Actual costs could differ materially from these estimates as we will not incur most of the expenditures for several years and we will incur them over a period of several years.  Based on our current estimates, we expect these expenditures to average between $35 million and $215 million annually, during the next 15 years.  In addition, these costs will be shared with Rio Tinto in accordance with our joint venture agreement.

Grasberg block cave	$980
Kucing Liar block cave	550
Mill Level Zone block cave	265
Dom block cave	185
Ertsberg Stockwork Zone block cave	180
Big Gossan	145
Dom open pit	30
Mill Level Zone sublevel cave	30
Total	$2,365

Description of Ore Bodies.  Our ore bodies are located within and around two main igneous intrusions, the Grasberg monzodiorite and the Ertsberg diorite.  The host rocks of these ore bodies include both carbonate and clastic rocks that form the ridge crests and upper flanks of the Sudirman Range, and the igneous rocks of monzonitic to dioritic composition that intrude them.  The igneous-hosted ore bodies (the Grasberg open pit and block cave, and the Ertsberg Stockwork Zone block cave) occur as vein stockworks and disseminations of copper sulphides, dominated by chalcopyrite and, to a much lesser extent, bornite.  The sedimentary-rock hosted ore bodies occur as "magnetite-rich, calcium/magnesian skarn" replacements, whose location and orientation are strongly influenced by major faults and by the chemistry of the carbonate rocks along the margins of the intrusions.

The copper mineralization in these skarn deposits is also dominated by chalcopyrite, but higher bornite concentrations are common.  Moreover, gold occurs in significant concentrations in all of the district's ore bodies, though rarely visible to the naked eye.  These gold concentrations usually occur as inclusions within the copper sulphide minerals, though, in some deposits, these concentrations can also be strongly associated with pyrite.

The following diagram indicates the relative elevations (in meters) of our reported reserve ore bodies.

The following map, which encompasses an area of approximately 42 square kilometers (approximately 16 square miles), indicates the relative positions and sizes of our reported reserve ore bodies and their locations.

               

The following chart illustrates our current plans for sequencing and producing each of our ore bodies and the years in which we currently expect that production of each ore body will begin and end.  Production volumes are typically lower in the first few years of each ore body as development activities are ongoing and as the mine ramps up to full production.  Currently, the Grasberg open pit and Deep Ore Zone are our only producing mines.  The ultimate timing of the start of production from our undeveloped mines is dependent upon a number of factors, including the results of our exploration efforts, and may vary from the dates shown below.

During 2003, we mined an average of 598,800 metric tons of material per day, including ore and overburden, and we do not require any additional approvals for higher rates.  During 2002, we mined an average of 704,900 metric tons of material per day.  The decrease in 2003 production levels is due to the fourth quarter slippage and debris flow events that occurred in a section of the Grasberg open pit; we expect to return to normal production levels in the second quarter of 2004 (see “Grasberg Open Pit Slippage”).  The following chart illustrates our current aggregate mill capacity; our aggregate permitted mill capacity; and our projected milling rates.  The decline in milling rates in 2015 reflects the expected completion date of open-pit mining at the Grasberg ore body.  We are continuing to develop mine plans to optimize production levels and to offset the anticipated decline in 2015.

Milling and Production

The ore from our mines moves by a conveyor system to a series of shafts through which it drops to our milling and concentrating complex located approximately 2,900 meters above sea level.  At the mill, the ore is crushed and ground and mixed in tanks with water and small amounts of flotation reagents where it is continuously agitated with air.  During this physical separation process, copper-, gold- and silver-bearing particles rise to the top of the tanks and are collected and thickened into a concentrate.  The concentrate leaves the mill complex as a slurry, consisting of approximately 65 percent solids by weight, and is pumped through three parallel 115-kilometer pipelines to our coastal port site facility at Amamapare where it is filtered, dried and stored for shipping.  Ships are loaded at dock facilities at the port until they draw their maximum dock-side water, and they then move to deeper water, where loading is completed from shuttling barges.

Our production results for the last three years are as follows:

	Years Ended December 31,			Percentage Change
	2003	2002	2001	2002 to 2003	2001 to 2002
Mill throughput (metric tons of ore per day)	203,000	235,600	237,800	(14)%	(1)%
Copper production, net to PT Freeport Indonesia (000 pounds)	1,291,600	1,524,200	1,393,400	(15)%	9%
Gold production, net to PT Freeport Indonesia (ounces)	2,463,300	2,296,800	2,634,900	7%	(13)%
Average net cash production costs (credits) per pound of coppera	$(0.02)	$0.08	$0.07	125%	14%

a.

Includes site production and delivery costs, smelting and refining costs, and royalties, less credits for gold and silver sales.

Mill throughput averaged 203,000 metric tons of ore per day during 2003, 32,600 metric tons per day lower than the 235,600 metric tons of ore per day during 2002.  In October 2003, a slippage of material occurred in a section of the Grasberg open pit.  The area affected by the slippage included two active mining areas which were scheduled to be mined in the fourth quarter of 2003.  PT Freeport Indonesia does not expect the Grasberg slippage to affect long-term mine plans (see “Grasberg Open Pit Slippage”).  

Copper production for 2003 was 1.3 billion pounds, 232.6 million pounds lower than that for 2002 primarily because of lower average copper ore grades and lower mill throughput caused by the slippage and debris flow events.  Gold production for 2003 was 166,500 ounces higher than that for 2002 primarily because of higher average gold grades.

Average net cash production costs per pound of copper of a net credit of $(0.02) for 2003 were an annual record low compared with $0.08 for 2002.  Higher gold credits in 2003 offset higher site production and delivery costs.  Average net cash production costs were higher for the year 2002 compared with 2001 primarily because of lower gold credits.  Our average net cash production costs per pound of copper vary with the amount of gold we sell and gold prices, among other factors.  Once we complete our open-pit mining operations at the Grasberg mine by approximately 2015 and transition to underground, we expect our share of annual copper and gold production to be lower than current levels, and all other factors being equal, our average net cash production costs to increase.  For more information regarding our operating and financial results, see “Item 6. Selected Financial Data” and & #147;Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risks.”

Grasberg Open Pit Slippage

On October 9, 2003, a slippage of material occurred in a section of the Grasberg open pit.  Eight workers perished and five workers were injured in the incident.  The area affected by the slippage, comprising approximately five percent of the surface area of the massive Grasberg pit, included two active mining areas that were scheduled to be mined in 2003 and 2004.   On December 12, 2003, a debris flow involving a relatively small amount of loose material occurred in the same area of the Grasberg open pit resulting in only minor property damage.  Following these two events, PT Freeport Indonesia redirected its open-pit operations to accelerate removal of waste material from the south wall to restore safe access to the higher grade ore areas in the pit.  These activities have resulted in reduced production levels.  Ore previously forecast to be mined in 2004 is currently available for mining and will be min ed once safe access is assured. Based on the substantial progress achieved to date, PT Freeport Indonesia expects to return to its key ore areas in the second quarter of 2004.

As a result of the fourth quarter slippage and debris flow events, PT Freeport Indonesia notified its copper concentrate customers that it was declaring force majeure under the terms of its contracts as it would be unable to satisfy its annual sales and delivery commitments.  Under those contracts, a declaration of force majeure allows PT Freeport Indonesia to cancel, reduce or delay the sale and delivery of concentrates to its customers during the affected period caused by an event of force majeure.  PT Freeport Indonesia is working with its customers to keep them apprised of the timing of the expected return to normal operations and concentrate deliveries.

In the near term, PT Freeport Indonesia’s ore is expected to be limited to its Deep Ore Zone underground mine and low grade material from the open pit. As a result of the mine sequencing changes at the open pit, a portion of the higher grade ore previously forecast to be mined in 2004 is expected to be deferred to future periods, with the substantial majority of the deferred ore expected to be mined in 2005. These mine sequencing changes are not expected to affect long-term mine plans or recoverable ore reserves.  Our 2004 annual sales are expected to approximate 1.0 billion pounds of copper and 1.5 million ounces of gold with a significant portion expected in the second half, and 1.5 billion pounds of copper and 2.9 million ounces of gold in 2005.

PT Freeport Indonesia maintains property damage and business interruption insurance related to its operations.  We have notified our insurers that we will be presenting a claim and are in the process of quantifying the extent of our losses from the October 9 and December 12 events.  Any losses covered by insurance would be subject to a deductible of approximately $40 million, and any insurance recovery will depend on several factors such as the extent of business interruption losses on a daily basis, the time period during which our production is constrained, the condition of the equipment that was damaged and the costs associated with the recovery and clean-up operations.  No assurance can be provided at this time about the extent to which our losses will be covered by insurance.

Exploration

As a result of our joint venture arrangements, Rio Tinto generally pays for 40 percent of our joint venture exploration and exploratory drilling costs in Papua.  The joint ventures incurred total exploration costs of $10.5 million in 2003 and $4.8 million in 2002.  The joint ventures' exploration budget for 2004 totals approximately $13 million with most of the effort focused on drilling below the current Mill Level Zone ore body.

In June 1998, we entered into a joint venture agreement to conduct exploration activities in PT Nabire Bakti Mining's Contract of Work area, which currently covers approximately 500,000 acres in several blocks contiguous to PT Freeport Indonesia's Block B and one of Eastern Minerals' blocks in Papua.  Rio Tinto shares in 40 percent of our interest and costs in this exploration joint venture.  We and Rio Tinto can earn up to a 62 percent interest in the PT Nabire Bakti Mining Contract of Work by spending up to $21 million on exploration and other activities in the joint venture areas.  We have spent $16.5 million through December 31, 2003.

With the subsequent approval of the Indonesian government, in 2000 we temporarily suspended our field exploration activities in Block B, which includes the Wabu Ridge gold prospect, as well as in the other Contract of Work areas of Eastern Minerals and PT Nabire Bakti Mining.  The suspensions are due to safety and security issues and uncertainty relating to a possible conflict between our mining and exploration rights in certain forest areas covered by the Contracts of Work and an Indonesian law enacted in 1999 prohibiting open-pit mining in forest preservation areas.  We cannot predict when we will be able to resume our exploration activities in these areas.  We expect to continue to seek renewals of these suspensions for each of the suspended areas if required.  All of the suspended areas are outside of our current mining operations area.

Infrastructure

The location of our mining operations in a remote area requires that our operations be virtually self-sufficient.  In addition to the mining facilities described above, in the course of the development of our project we have constructed ourselves or participated with others in the construction of an airport, a port, a 119 kilometer road, an aerial tramway, two hospitals and related medical facilities, and two town sites with housing, schools and other facilities sufficient to support more than 17,000 persons.

In 1996, we completed a significant infrastructure program, which includes various residential, community and commercial facilities.  We designed the program to provide the infrastructure needed for our operations, to enhance the living conditions of our employees, and to develop and promote the growth of local and other third party activities and enterprises in Papua.  We have developed the facilities through joint ventures or direct ownership involving local Indonesian interests and other investors.

In July 2003, we acquired the 85.7 percent ownership interest in Puncakjaya Power owned by affiliates of Duke Energy Corporation for $68.1 million cash, net of $9.9 million of cash acquired.  Puncakjaya Power is the owner of assets supplying power to PT Freeport Indonesia’s operations, including the 3x65 megawatt coal-fired power facilities.  PT Freeport Indonesia purchases power from Puncakjaya Power under infrastructure asset financing arrangements.  At December 31, 2003, PT Freeport Indonesia had infrastructure asset financing obligations to Puncakjaya Power totaling $295.5 million.  As a result of this transaction, our consolidated balance sheet no longer reflects PT Freeport Indonesia’s obligation to Puncakjaya Power, but instead reflects the Puncakjaya Power bank debt which totaled $235.5 million and a receivable from Rio Tinto totaling $83.9 million for its share of the obligation to Puncakjaya Power at December 31, 2003.  

Marketing

PT Freeport Indonesia sells its copper concentrates, which contain significant quantities of gold and silver, under United States dollar-denominated sales agreements, mostly to companies in Asia and Europe and to international trading companies.  We sell substantially all of our budgeted production of copper concentrates under long-term contracts with selling prices based on world metals prices (generally the London Metal Exchange settlement prices for Grade A copper).  Under these contracts, initial billing occurs at the time of shipment and final settlement on the copper portion is generally based on average prices for a specified future period.  Gold generally is sold at the average London Bullion Market Association price for a specified month near the month of shipment.

Revenues from concentrate sales are recorded net of royalties (see "Contracts of Work"), treatment and all refining charges (including participation charges, if applicable, based on the market prices of metals), and the impact of derivative financial instruments, if any, used to hedge against risks from metals price fluctuations.  Moreover, because a portion of the metals contained in copper concentrates is unrecoverable as a result of the smelting process, our revenues from concentrate sales are also recorded net of allowances based on the quantity and value of these unrecoverable metals.  These allowances are a negotiated term of our contracts and vary by customer.  Treatment and refining charges represent payments to smelters and refiners and are either fixed or in certain cases vary with the price of copper.  We sell a small amount of copper concentrates in the spot market.  See "Risk Factors.&quo t;

We have commitments, including commitments from Atlantic Copper and PT Smelting, for essentially all of our estimated 2004 production.  We estimate our share of sales for 2004 to approximate 1.0 billion pounds of copper and 1.5 million ounces of gold.  Projected 2004 copper and gold sales reflect the expectation of lower production during the first half of 2004 because of our efforts to restore safe access to high-grade areas in the Grasberg open pit with higher sales projected in 2005.  See "Risk Factors."

PT Freeport Indonesia has a long-term contract through 2007 to provide Atlantic Copper with a quantity of copper concentrates at market prices which currently approximates 60 percent of Atlantic Copper’s annual copper concentrate requirements.  PT Freeport Indonesia's agreement with PT Smelting provides, for the life of PT Freeport Indonesia's mines, for the supply of 100 percent of the copper concentrate requirements necessary to produce 205,000 metric tons of copper (essentially the Gresik smelter’s original design capacity) on a priority basis.  PT Freeport Indonesia has also entered into a separate agreement to provide PT Smelting with an incremental supply of copper concentrates at market prices for the majority of PT Smelting’s additional requirements through 2004.  For the first 15 years of PT Smelting's operations beginning in December 1998, the treatment and refining charges on the majority of the conc entrate PT Freeport Indonesia supplies will not fall below a specified minimum rate, currently $0.23 per pound, which has been the rate since PT Smelting began operating in 1998.  The rate is scheduled to decline to a floor of $0.21 per pound in early 2004.  We anticipate that PT Freeport Indonesia will sell approximately 50 percent of its annual concentrate production to Atlantic Copper and PT Smelting.  A recap of PT Freeport Indonesia's aggregate percentage concentrate sales to its affiliates and to other parties for the last three years follows:

	2003	2002	2001
PT Smelting	30%	26%	28%
Atlantic Copper	25%	24%	23%
Other parties	45%	50%	49%
	100%	100%	100%

Investment in Smelters

Our investment in smelters (Atlantic Copper and PT Smelting) serves an important role in our concentrate marketing strategy.  PT Freeport Indonesia generally 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 downstream integration, we are assured placement of a significant portion of our concentrate production and operating hedges for treatment and refining charges.  While currently low smelting and refining charges have adversely affected the operating results of Atlantic Copper, these low charges have benefited the operating results to PT Freeport Indonesia's mining operations.

Atlantic Copper, S.A.  We own 100 percent of Atlantic Copper.  Atlantic Copper completed the last expansion of its production capacity in 1997 and its smelter currently has a design capacity of 290,000 metric tons of copper per year.  We have no present plans to expand Atlantic Copper's production capacity.  During 2003, Atlantic Copper treated 964,400 metric tons of concentrate and scrap and produced 290,300 metric tons of new copper anodes.  During 2002, Atlantic Copper treated a record 1,016,700 metric tons of concentrate and scrap and produced 298,000 metric tons of new copper anodes.  Atlantic Copper is planning a 45-day major maintenance turnaround in the second quarter of 2004.  Major maintenance turnarounds of this duration typically occur approximately every nine years for Atlantic Copper, with significantly shorter term maintenance turnarounds occurring in the interim.  Atlantic Coppe r purchased approximately 61 percent of its 2003 concentrate requirements from PT Freeport Indonesia at market prices.  Atlantic Copper has experienced no material operating problems, and we are not aware of any potential material environmental liabilities at Atlantic Copper.

We contributed $10.0 million to Atlantic Copper in 2003, $25.0 million in 2002 and $7.6 million in 2001 and we expect to make significant additional contributions in 2004.  The funds are intended to strengthen Atlantic Copper's financial structure during this period of extremely low treatment and refining charge rates, which have negatively affected Atlantic Copper's results.  We are reviewing the cost structure of Atlantic Copper and continue to assess means of improving its financial performance.  Our total investment in Atlantic Copper through December 31, 2003, was $254.9 million.

PT Smelting.  PT Freeport Indonesia's Contract of Work required us to construct or cause to be constructed a smelter in Indonesia if we and the Indonesian government determined that such a project would be economically viable.  In 1995, following the completion of a feasibility study, we entered into agreements relating to the formation of PT Smelting and the construction of the copper smelter in Gresik, Indonesia.

PT Smelting is a joint venture among PT Freeport Indonesia, Mitsubishi Materials Corporation, Mitsubishi Corporation and Nippon Mining & Metals Co., Ltd., which own 25 percent, 60.5 percent, 9.5 percent and 5 percent, respectively, of the outstanding PT Smelting common stock.  In accordance with the joint venture agreements, PT Freeport Indonesia provides nearly all of PT Smelting's copper concentrate requirements.  In December 2003, PT Smelting’s shareholder agreement was amended to eliminate PT Freeport Indonesia’s assignment of its earnings in PT Smelting to support a 13 percent cumulative annual return to the other owners for the first 20 years of operations.  No amounts were paid under this assignment.  PT Freeport Indonesia's total investment in PT Smelting through December 31, 2003, was $97.3 million.

During 2003, PT Smelting treated 824,800 metric tons of concentrate and produced 247,400 metric tons of new copper anodes.  During 2002, PT Smelting treated 719,600 metric tons of concentrate and produced 211,200 metric tons of new copper anodes.  PT Smelting is planning a 33-day major maintenance turnaround in the first half of 2004.  Major maintenance turnarounds of this duration typically occur approximately every four years for PT Smelting, with significantly shorter term maintenance turnarounds in the interim.  PT Smelting has no present plans to expand its treatment capacity and has experienced no material operating problems.  We are not aware of any potential material environmental liabilities at PT Smelting.

Competition

We compete with other mining companies in the sale of our mineral concentrates and the recruitment and retention of qualified personnel.  Some competing companies possess financial resources greater than ours and possess multiple mining assets less geographically concentrated in a single area than ours.  We believe, however, that we are one of the lowest cost copper producers in the world, which gives us a significant competitive advantage.

Social Development, Employment and Human Rights

We have a social, employment and human rights policy designed to result in our operating in compliance with the laws in the areas of our operations, and in a manner that respects basic human rights and the culture of the people who are indigenous to the area.  We continue to incur significant costs on social and cultural activities, primarily in Papua.  These activities include:

*  comprehensive job training programs;

*  basic education programs;

*  several public health programs, including extensive malaria control;

*  agricultural assistance programs;

*  a business incubator program to encourage the local people to establish their own small scale businesses;

*  cultural preservation programs; and

*  charitable donations.

In 1996, PT Freeport Indonesia agreed to commit at least one percent of its revenues for the subsequent 10 years to the Freeport Partnership Fund for Community Development (formerly the Freeport Fund for Irian Jaya Development) to support village-based health, education, economic and social development programs in its area of operations.  This commitment replaced our community development programs in which we spent a similar amount of money each year.  Our contributions totaled $17.4 million in 2003, $15.2 million in 2002 and $14.1 million in 2001 to the Freeport Partnership Fund for Community Development.

Lembaga Pembangunan Masyarakat Amungme Kamoro (LPMAK) oversees disbursement of the funds we contribute to the fund.  LPMAK's board of commissioners is made up of a leader of the Amungme people, a leader of the Kamoro people, leaders of the three local churches, a representative of the local government and a representative of PT Freeport Indonesia.

We believe that our social and economic development programs are responsive to the issues raised by the local villages and people and should help us to avoid disruptions of mining operations.  Nevertheless, social and political instability in the area may adversely impact our mining operations.  See "Risk Factors."

In December 2000, we endorsed the joint U.S. State Department-British Foreign Office Voluntary Principles on Human Rights and Security.  Several major natural resources companies and important human rights organizations also endorsed the Voluntary Principles.  We participated in drafting these principles with all of the parties involved and incorporated them into our social and human rights policy.

Security Matters

Consistent with our Contract of Work and duty to protect our employees and property, we have taken appropriate steps to provide a safe and secure working environment. As part of its security program, PT Freeport Indonesia maintains its own internal security department, which performs functions such as protecting company facilities, monitoring the shipment of company goods through the airport and terminal, assisting in traffic control and aiding rescue operations.  PT Freeport Indonesia's civilian security employees (numbering about 670) are unarmed and perform duties consistent with their internal security role.  PT Freeport Indonesia's share of costs for its internal civilian security department totaled $11.2 million for 2003, $7.7 million for 2002 and $6.8 million for 2001.  The security department has received human rights training and each member is required to certify his or her compliance with our human rights policy.

PT Freeport Indonesia, and all businesses and residents of Indonesia, relies on the Government of Indonesia for the provision of public order, upholding the rule of law and the protection of personnel and property.  The Grasberg mine has been designated by the Government of Indonesia as one of Indonesia's vital national assets.  This designation results in the military’s playing a significant role in protecting the area of our operations.  The Government of Indonesia is responsible for employing police and military personnel and directing their operations.

From the outset of PT Freeport Indonesia’s operations, the government has looked to PT Freeport Indonesia to provide logistical and infrastructure support and assistance for these necessary services because of the limited resources of the Indonesian government and the remote location of and lack of development in Papua.  PT Freeport Indonesia’s financial support for the Indonesian government security institutions assigned to the operations area represents a prudent response to its requirements to protect its workforce and property, better ensuring that personnel are properly fed and lodged, and have the logistical resources to patrol PT Freeport Indonesia’s roads and secure its operating area.  In addition, provision of such support and oversight is consistent with PT Freeport Indonesia’s obligations under the Contract of Work, reflects our philosophy of responsible corporate citizenship, and is in keeping with our commitment to pursue practices that will promote human rights, which include our endorsement of the joint U.S. State Department-British Foreign Office Voluntary Principles on Human Rights and Security.

PT Freeport Indonesia's share of support costs for the government-provided security, involving over 2,300 Indonesian government security personnel currently located in the general area of our operations, was $5.9 million for 2003, $5.6 million for 2002 and $4.7 million for 2001.  This supplemental support consists of various infrastructure and other costs, such as food, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military/police.  PT Freeport Indonesia's capital costs for associated infrastructure was $0.6 million for 2003, $0.4 million for 2002 and $0.5 million in 2001.  

Environmental Matters

We have an environmental policy that commits us not only to compliance with applicable federal, state and local environmental statutes and regulations, but also to continuous improvement of our environmental performance at every operational site.  We believe that we conduct our Indonesian operations pursuant to all necessary permits and are in compliance in all material respects with applicable Indonesian environmental laws, rules and regulations.

Mining operations on the scale of our operations in Papua involve significant environmental challenges, primarily related to the disposition of tailings, which are the crushed and ground rock material resulting from the physical separation of commercially valuable minerals from the ore.  We have comprehensive, ongoing environmental management and monitoring plans for the disposal of tailings resulting from our milling operations, which the Government of Indonesia has approved.  Pursuant to these plans, we manage and monitor the impact of our tailings disposal on the ecosystem of the Ajkwa River and the ecosystems of adjoining water bodies and the surrounding coastal areas.  In 1997, we completed an engineered levee system to minimize the impact of the tailings through a controlled deposition area located on a portion of the flood plain on the Ajkwa River.  We will revegetate and reclaim the Modified Ajkwa Deposition Area when our mining operations are completed.

In furtherance of our commitments to the Indonesian government pursuant to our tailings management plan, we monitor the acid-neutralizing capacity of tailings on a daily basis to ensure the discharge of non-acid generating tailings into our tailings deposition area.  The net acid-neutralizing capacity of our tailings discharge is maintained through a managed program of blending underground ore with ore from the open pit, the addition of supplemental limestone (or lime) to the ore blend, and the addition of lime for control of the pH levels in the flotation system.  Daily samples are collected and tested and this data is communicated to our mill operations so that adjustments in ore blending and lime/limestone addition can be made as appropriate.

With respect to overburden, acid rock drainage generation is our primary environmental issue.  Our approaches to this issue include the prevention of acid rock drainage generation, the control of acid rock drainage migration, and the capture and treatment of acid rock drainage emanating from the overburden stockpile.  In addition, tests have shown the feasibility of revegetating the overburden stockpile and, as a result, we have engaged in stockpile reclamation as an additional means of mitigating acid rock drainage.  

We have made significant capital expenditures with respect to the capture and treatment of acid rock drainage and additional capital expenditures are currently in progress.  In addition, we are in the process of developing and implementing technology for the treatment of captured acid rock drainage.  In the interim, acid rock drainage collected by boreholes near the base of the overburden stockpile is neutralized.

We have also committed to the Indonesian government to have independent external environmental audits of our Papuan operations performed by qualified experts every three years, with the results to be made public.  We have had three independent environmental audits conducted by internationally recognized consulting and auditing firms.  SGS International Certification Services Indonesia, a member of the Société Générale de Surveillance Group, completed the 2002 environmental audit.  The 2002 audit found that the overall approach to practical management of environmental issues at PT Freeport Indonesia is considered to be very sound.  There were no audit findings requiring corrective action.  We also are continuing our annual internal audits, through the life of our mining operations, so that our environmental management and monitoring programs will remain sound and our operations will remain in mate rial compliance with local laws.

In connection with obtaining our environmental approvals from the Indonesian government, we committed to performing a one-time environmental risk assessment on the impacts of our tailings management plan.  We completed this extensive environmental risk assessment with more than 90 scientific studies conducted over four years and submitted it to the Indonesian government in December 2002.  We developed the risk assessment plan with input from an independent review panel, which included representatives from the Indonesian government, academia, and non-governmental organizations.  The risks that we identified during this process were in line with our impact projections of the tailings management program contained in our environmental approval documents.

We have environmental approvals from the Government of Indonesia to expand our milling rate up to a maximum of 300,000 metric tons of ore per day.  In 2003, we averaged 203,000 metric tons of ore per day and in 2002 we averaged 235,600 metric tons of ore per day.

The cost of complying with environmental laws is a fundamental cost of our business.  We incurred aggregate environmental capital expenditures and other environmental costs totaling $72.1 million in 2003, $62.6 million in 2002 and $78.2 million in 2001, including tailings management levee maintenance and mine reclamation.  In 2004, we expect to incur approximately $11 million of aggregate environmental capital expenditures and $43 million of other environmental costs.  These environmental expenditures are part of our overall 2004 operating budget.

We are currently revegetating portions of the affected areas of the tailings deposition area.  Upon the completion of our mining operations, we will fulfill the remaining commitments we made to the Indonesian government in connection with our tailings management plan.  Our options for revegetation of affected areas of the deposition area include forage crops and grasses, fruits, grains and vegetables, and other traditional food and medicinal crops.  Decisions on these options are made after consultation with local and regional government and local residents.  In addition to the revegetation and reclamation of the deposition area, we will continue to operate our wastewater treatment plants as long as necessary.  We will also monitor and test the water discharged from our mine and the pH, sulfate and electrical conductivity levels of ground water in the deposition area.  In addition, we will provide flood protect ion to surrounding areas by diverting the Ajkwa and Otomona Rivers and enhancing levee embankments.  The stability of our levees will be ensured through periodic visual inspection, revegetation of the levee embankments, and the transfer of our levee roads for public use.  Moreover, we will submit an annual written report to the Indonesian government regarding our reclamation activities.

Our ultimate reclamation and closure activities will be determined after consultation with the Indonesian government, affected local residents and other affected parties.  Our best estimate is that PT Freeport Indonesia's total aggregate reclamation and closure obligations totaled approximately $130 million as of December 31, 2003.  Estimates of reclamation and closure costs involve complex issues requiring integrated assessments over a period of many years, and we may revise them as we perform more complete studies.  Some reclamation costs will be incurred during mining activities, while most closure costs and the remaining reclamation costs will be incurred at the end of mining activities, which are currently estimated to continue for more than 30 years.

Moreover, we cannot predict with any certainty the ultimate future uses of the tailings deposition area once our mining operations are completed.  In addition to forage crop and grass planting and food and medicinal crop production, possible future uses of the tailings deposition area include rainforest production, production of timber, fuel woods, fruits and nuts and other economic forestry, and the cultivation of fish, shellfish and other aquaculture.  The ultimate future uses will be determined after consultation with local and regional government and local residents.

In 1996, we began contributing to a cash fund ($5.0 million balance at December 31, 2003) designed to accumulate at least $100 million by the end of our Indonesian mining activities.  We plan to use this fund, including accrued interest, to pay for mine closure and reclamation costs.  Any incremental costs in excess of this $100 million fund are expected to be incurred throughout the life of the mine and would be funded by operational cash flow or other sources.  An increasing emphasis on environmental issues and future changes in regulations could require us to incur additional costs that would be charged against future operations.  Estimates involving environmental matters are by their nature imprecise and changes in government regulations, operations, technology and inflation could require us to revise them over time.

In 1998, a court in Huelva, Spain found an employee of Atlantic Copper guilty of a criminal offense against the environment in connection with Atlantic Copper's transportation and use of weak acid and spent electrolyte at a facility owned and operated by Minas de Rio Tinto, S.A.L.  The court fined the employee approximately $48,000.  The Huelva court ruling did not prohibit Atlantic Copper's Huelva complex from continuing to engage in these operations.  Moreover, Atlantic Copper's weak acid and spent electrolyte transport and use operations have been authorized by Spanish environmental regulators.  Atlantic Copper has voluntarily constructed an on-site plant for the treatment of weak acid and recycling of spent electrolyte.  Since June 2001, no weak acid or spent electrolyte has been sent to the Minas de Rio Tinto facilities.

We believe that Atlantic Copper's facilities and operations are in compliance in all material respects with all applicable Spanish environmental laws, rules and regulations.  However, in July 2002, the Integrated Pollution Prevention and Control guidelines were adopted under Spanish law with a phase in for compliance by 2007.  Atlantic Copper, working with local environmental authorities, is continually assessing the impact of these new guidelines on its operations, and has budgeted approximately $30 million as its best estimate of the required capital expenditures through 2007 to comply.  In 2002, the Environmental Management Systems at Atlantic Copper’s operations in Huelva, Cordoba and Barcelona were audited by the Spanish Association for Standardization and Certification (AENOR), in accordance with the ISO 14001:96 international certification standard and the new European Union Environmental, Eco-Management and Eco-A uditing (EMAS) Regulation No. 761/2001.  AENOR is a Spanish not-for-profit entity that has been accredited by the Spanish government to inspect, audit and certify environmental management systems. Atlantic Copper received positive results from the audits, which are required annually to retain the ISO 14001 certification that Atlantic Copper achieved in prior years.  

The Indonesian and Spanish governments may periodically revise their environmental laws and regulations or adopt new ones, and we cannot predict the effects on our operations of new or revised regulations.  We have expended significant resources, both financial and managerial, to comply with environmental regulations and permitting and approval requirements, and we anticipate that we will continue to do so in the future.  There can be no assurance that we will not incur additional significant costs and liabilities to comply with such current and future regulations or that such regulations will not materially affect our operations.  See "Risk Factors."

Wanagon Overburden Stockpile Slippage

In May 2000, a slippage occurred in the overburden stockpile at the Wanagon basin following a period of excessive rainfall, causing a wave of water and material to overflow from the basin.  Four employees of a contractor to PT Freeport Indonesia were working in the area and perished.  Contained within the mud were the treatment solids from the lime precipitation of acid rock drainage, which then entered the tailings river system near the village of Banti.  We incurred environmental costs for overburden disposition, overburden stockpile stabilization, laboratory testing and consulting studies relating to the Wanagon overburden waste stockpile.  PT Freeport Indonesia charged $2.9 million to its 2000 production costs, primarily for assets lost as a result of the incident.

Sampling and monitoring were renewed and expanded at a number of stations covering the entire tailings system between the mine and estuary.  A specific environmental risk analysis was conducted as a result of this event and used data from the monitoring program.  No long-term environmental effects were found from the direct monitoring nor predicted by the environmental risk assessment.  The slippage caused a flow of sediments containing elevated levels of precipitated copper.  As a result, water quality in the river was temporarily diminished due to higher levels of total suspended solids.  According to water quality tests, the pre-slippage water quality in the river was substantially reestablished by the following day and was fully reestablished within 22 days after the incident.

PT Freeport Indonesia engaged international experts and outside consultants led by a team from the Institute of Technology of Bandung (Indonesia) to conduct a comprehensive study of the cause of the slippage and to recommend a future course of action.  Working with the close cooperation of the Indonesian Department of Energy and Natural Resources and also BAPEDAL (the Indonesian environmental protection agency), we initiated an overburden stockpile stabilization program and voluntarily agreed to a temporary limitation on average production from the Grasberg open pit of 200,000 metric tons per day.  Underground ore production was not affected.  A safe-zone based on engineering calculations was subsequently identified along the Wanagon River and within the village of Banti.  The residents within this zone were temporarily moved to Tembagapura, our original mining town site, and the houses were removed.  These families were relocated to new housing designed according to their wishes and located on higher ground in Banti.

After successful completion of the stabilization program and consultation with affected local residents, and with the approval of the Indonesian government, normal overburden placement at the Wanagon overburden stockpile resumed and the restriction on production from the Grasberg open pit was lifted at the end of 2000.

Employees and Relationship with FM Services Company

As of December 31, 2003, PT Freeport Indonesia had 7,802 employees (approximately 98 percent Indonesian) and 6,054 contract workers, the vast majority of whom were Indonesian.  Approximately 40 percent of our Indonesian employees are members of the All Indonesia Workers' Union, which operates under Government of Indonesia supervision.  PT Freeport Indonesia has a labor agreement covering all of its hourly-paid Indonesian employees, the key provisions of which are renegotiated biannually.  In June 2003, PT Freeport Indonesia and its workers agreed to terms for a new labor agreement that expires September 30, 2005.  PT Freeport Indonesia's relations with the workers' union have generally been positive.  In addition, 4,436 persons worked for privatized companies providing services within PT Freeport Indonesia’s operations area.

As of December 31, 2003, Atlantic Copper had 784 employees, of which approximately 75 percent are covered by union contracts.  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.  Atlantic Copper's union contract in Cordoba, Spain expired December 31, 2003, and it expects to begin negotiations for a new contract in March 2004.  Atlantic Copper’s union contracts in Huelva and Barcelona will expire on December 31, 2004, and December 31, 2006, respectively.  Atlantic Copper experienced no work stoppages in 2003 and relations with these unions have also generally been good.

FM Services Company (FM Services) has furnished executive, administrative, financial, accounting, legal, tax and similar services to us.  FM Services became our wholly owned subsidiary in October 2002, when we purchased the remaining 50 percent ownership in FM Services from McMoRan Exploration Co. (McMoRan) for $1.3 million.  As of December 31, 2003, FCX had 14 employees and FM Services had 149 employees.  FM Services employees continue to provide services to McMoRan, a publicly traded company engaged in the exploration, development and production of oil and gas, and Stratus Properties Inc., a publicly traded company engaged in the development of real estate.

Nusamba Loan Guarantee

In 1997, PT Nusamba Mineral Industri (Nusamba), an Indonesian company and a subsidiary of PT Nusantara Ampera Bakti, acquired from a third party approximately 51 percent of the capital stock of PT Indocopper Investama.  PT Indocopper Investama is an Indonesian company whose only significant assets are its approximate 9.36 percent ownership of PT Freeport Indonesia's common stock and its 10.0 percent ownership of Eastern Minerals' stock.  Nusamba paid $61.6 million in cash and financed $253.4 million of the $315.0 million purchase price with a variable-rate commercial loan from a syndicate of commercial banks, including JPMorgan Chase Bank as agent, which was to mature in March 2002.  We guaranteed the Nusamba loan for the purpose of continuing minority Indonesian ownership of PT Freeport Indonesia.  We also agreed to lend to Nusamba any amounts to cover any shortfalls between the interest payments due on the commercial l oan and dividends received by Nusamba from PT Indocopper Investama.  Through December 31, 2001, we loaned Nusamba $68.9 million to cover such shortfalls and we charged $7.3 million of this amount to expense because the loans exceeded Nusamba's initial cash investment.

In early 2002, Nusamba informed us that it did not expect to be able to repay the bank loan or our loan at maturity.  On February 27, 2002, we repaid the bank loan as provided for under the terms of our credit facilities and acquired Nusamba's ownership in PT Indocopper Investama.  For accounting purposes, the transactions were deemed effective as of December 31, 2001.  As a result of our payment of the Nusamba bank loan, our ownership interest in PT Freeport Indonesia increased to 90.64 percent from 85.87 percent and our ownership interest in Eastern Minerals increased to 100 percent from 95 percent.

Risk Factors

This report contains “forward-looking statements” within the meaning of the federal securities laws.  Forward-looking statements are all statements other than statements of historical facts, such as statements regarding anticipated production volumes, sales volumes, ore grades, commodity prices, development and capital expenditures, mine production and development plans, environmental reclamation and closure cost and plans, reserve estimates, political, economic and social conditions in our areas of operations, and exploration efforts and results.  Except for our ongoing obligations under the federal securities laws, we do not intend, and we undertake no obligation, to update or revise any forward-looking statements.  Readers are cautioned that forward-looking statements are not guarantees of future performance and actual results may differ materially from those projected, anticipated or assumed in the forward-looking statements.  Important factors that could cause our actual results to differ materially from those anticipated in the forward-looking statements include the following:

Because our primary operating assets are located in the Republic of Indonesia, our business may be adversely affected by Indonesian political, economic and social uncertainties, in addition to the usual risks associated with conducting business in a foreign country.

Indonesia continues to face political, economic and social uncertainties, including separatist movements and civil and religious strife in a number of provinces. In particular, several separatist groups are opposing Indonesian rule over the province of Papua, where our mining operations are located, and have sought political independence for the province. In response to demands for political independence, new Indonesian regional autonomy laws became effective January 1, 2001. However, the manner in which the new laws will be implemented and the degree of political and economic autonomy that they may bring to individual provinces, including Papua, is uncertain and is a current issue in Indonesian politics. Moreover, in Papua there have been sporadic attacks on civilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military. Social, economic and political instability in Papua could materia lly and adversely affect us if this instability results in damage to our property or interruption of our activities.

Maintaining a good working relationship with the Indonesian government is important to us because all of our mining operations are located in Indonesia and are conducted pursuant to Contracts of Work with the Indonesian government.  Accordingly, we are also subject to the usual risks associated with conducting business in and with a foreign country, including the risk of forced modification of existing contracts; changes in the country’s laws and policies, including those relating to taxation, royalties, imports, exports and currency, and the risk of having to submit to the jurisdiction of a foreign court or arbitration panel or having to enforce the judgment of a foreign court or arbitration panel against a sovereign nation within its own territory. In addition, we are subject to the risk of expropriation, and our insurance does not cover losses caused by expropriation.

Our current credit ratings have an impact on the availability and cost of capital to us. Because our primary business operations are in Indonesia, reductions in the sovereign credit rating of Indonesia have historically had an adverse effect on our credit ratings, and we believe that this correlation is likely to continue.

Social, economic and political instability in Papua could materially and adversely affect us if this instability results in damage to our property or interruption of our activities.

On August 31, 2002, three people were killed and 11 others were wounded in an ambush by a group of unidentified assailants.  The assailants shot at several vehicles transporting international contract teachers from our school in Tembagapura, their family members, and other contractors to PT Freeport Indonesia on the road near Tembagapura, the mining town where the majority of PT Freeport Indonesia’s personnel reside. The identity of the assailants remains unknown. Some press reports have indicated that members of the military may be responsible for the attack, but military officials have denied these allegations. Other press reports have indicated that Papuan separatists may be responsible for the attack, but representatives of the separatists have denied these allegations. We, the U.S. government, the central Indonesian government, the Papuan provincial and local governments, and leaders of the local people residing in the area o f our operations condemned the attack. Indonesian authorities and the U.S. Federal Bureau of Investigation continue to investigate the incident and we are supporting and cooperating fully with the investigations.

On October 12, 2002, a bombing killed over 200 people in the Indonesian province of Bali, which is 1,500 miles west of our mining and milling operations. Indonesian authorities arrested 35 people in connection with this bombing and 29 of those arrested have been tried and convicted. On August 5, 2003, 12 people were killed and over 100 others were injured by a car bomb detonated outside of the JW Marriott Hotel in Jakarta, Indonesia. A terror suspect will stand trial in Jakarta and face dual charges of involvement in this incident and the October 12, 2002 bombing. Press reports state that Indonesian police blame both attacks on international terrorist organizations. Our mining and milling operations were not interrupted by the August 31, 2002, October 12, 2002, or August 5, 2003 incidents.

We cannot predict whether there will be additional incidents similar to the recent shooting or bombings. If there were to be additional separatist, terrorist or other violence in Indonesia, it could materially and adversely affect our business and profitability in ways that we cannot predict at this time.

In addition to the usual risks encountered in the mining industry, we face additional risks because our operations are located on difficult terrain in a very remote area.

Our mining operations are located in steeply mountainous terrain in a very remote area in Indonesia. Because of these conditions, we have had to overcome special engineering difficulties and develop extensive infrastructure facilities. In addition, the area receives considerable rainfall, which has led to periodic floods and mudslides. The mine site is also in an active seismic area and has experienced earth tremors from time to time. In addition to these special risks, we are also subject to the usual risks associated with the mining industry, such as the risk of encountering unexpected geological conditions that may result in cave-ins and flooding of mine areas. Our insurance may not sufficiently cover an unexpected natural or operating disaster.

On October 9, 2003, a slippage of material occurred in a section of the Grasberg open pit, resulting in eight fatalities. On December 12, 2003, a debris flow involving a relatively small amount of loose material occurred in the same section of the open pit resulting in only minor property damage. All material involved in the affected mining areas has been removed. The events caused us to alter our short term mine sequencing plans, which is adversely affecting our near-term production. While we expect to resume normal production activities in the second quarter of 2004, no assurance can be given that these events will not adversely affect production over the longer term or that similar events will not occur in the future. As a result of the fourth quarter slippage and debris flow events, PT Freeport Indonesia notified its copper concentrate customers that it was declaring force majeure under the terms of its contracts as it would be unable t o satisfy its annual sales and delivery commitments. No assurance can be given that any concentrate customers will not challenge the declaration of force majeure or assert claims for the failure to sell and deliver copper concentrates.

The terrorist attacks in the United States on September 11, 2001, the potential for additional future terrorist acts and other recent events have created economic and political uncertainties that could materially and adversely affect our business and the prices of our securities.

Terrorist attacks and other recent events have caused uncertainty in the world’s financial and insurance markets and may significantly increase global political, economic and social instability, including in Indonesia. In addition to the Bali and the JW Marriott Hotel bombings, there have been anti-American demonstrations in certain sections of Indonesia reportedly led by radical Islamic activists. Radical activists have also threatened to attack foreign interests and have called for the expulsion of United States and British citizens and companies from Indonesia.

It is possible that further acts of terrorism may be directed against the United States domestically or abroad, and such acts could be directed against properties and personnel of companies such as ours. The attacks and the resulting economic and political uncertainties, including the potential for further terrorist acts, have caused our insurance premiums to increase significantly. Moreover, while our property and business interruption insurance covers damages to insured property directly caused by terrorism, this insurance does not cover damages and losses caused by war. Terrorism and war developments may materially and adversely affect our business and profitability and the prices of our securities in ways that we cannot predict at this time.

Our profitability can vary significantly with fluctuations in the market prices of copper and gold.

Our revenues are derived primarily from the sale of copper concentrates, which also contain significant quantities of gold and silver, and from the sale of copper cathodes, anodes, wire rod and wire. Although we sell most of our copper concentrates under long-term contracts, the selling price is based on world metal prices at or near the time of shipment and delivery.

Copper and gold prices fluctuated widely in 2002 and 2003.  During 2002, the daily closing prices on the London spot market ranged from 64 cents to 77 cents per pound for copper and $278 to $349 per ounce for gold. During 2003, the daily closing prices on the London spot market ranged from 70 cents to $1.05 per pound for copper and $320 to $417 per ounce for gold.

World copper prices have historically fluctuated widely and are affected by numerous factors beyond our control, including:

*  the strength of the United States economy and the economies of other industrialized and developing nations;

*  available supplies of copper from mine production and inventories;

*  sales by holders and producers of copper;

*  demand for industrial products containing copper; and

*  speculation.

World gold prices also have historically fluctuated widely and are affected by numerous factors beyond our control, including:

*  the strength of the United States economy and the economies of other industrialized and developing nations

*  global or regional political or economic crises;

*  the relative strength of the United States dollar and other currencies;

*  expectations with respect to the rate of inflation;

*  interest rates;

*  sales of gold by central banks and other holders;

*  demand for jewelry containing gold; and

*  speculation.

Any material decrease in market prices of copper or gold would materially and adversely affect our results of operations and financial condition.  See the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Disclosures about Market Risks - Commodity Price Risk” for an analysis of the effect on our revenues and net income of changes in copper and gold prices.  

Our Contracts of Work are subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of a foreign court or arbitration panel.

PT Freeport Indonesia’s Contracts of Work and other Contracts of Work in which we have an interest were entered into under Indonesia’s 1967 Foreign Capital Investment Law, which provides guarantees of remittance rights and protection against nationalization. Our Contracts of Work can be terminated by the Government of Indonesia if we do not satisfy our contractual obligations, which include the payment of royalties and taxes to the government and the satisfaction of certain mining, environmental, safety and health requirements. Indonesian government officials have periodically raised questions regarding our compliance with Indonesian environmental laws and regulations and the terms of the Contracts of Work. In order to address these questions, the Indonesian government formed a fact-finding team in 2000 that reviewed our compliance with all aspects of PT Freeport Indonesia’s Contract of Work. When or whether the Indonesian go vernment will release any report on its investigation is uncertain. In addition, we cannot assure you that the Indonesian government’s report, if and when it is released, will conclude that we are complying with all of the provisions of PT Freeport Indonesia’s Contract of Work.

Moreover, in recent years, certain government officials and others in Indonesia have questioned the validity of contracts entered into by the Government of Indonesia prior to October 1999 (i.e., during the Suharto regime), including PT Freeport Indonesia’s Contract of Work, which was signed in December 1991. We cannot assure you that the validity of, or our compliance with the Contracts of Work will not be challenged for political or other reasons. PT Freeport Indonesia’s Contracts of Work and our other Contracts of Work require that disputes with the Indonesian government be submitted to international arbitration. Notwithstanding that provision, if a dispute arises under the Contracts of Work, we face the risk of having to submit to the jurisdiction of a foreign court or arbitration panel, and if we prevail in such a dispute, we will face the additional risk of having to enforce the judgment of a foreign court or arbitrati on panel against Indonesia within its own territory.

Any suspension of required activities under our Contracts of Work requires the consent of the Indonesian government.

Our Contracts of Work permit us to suspend certain contractually required activities, including exploration, for a period of one year by making a written request to the Indonesian government. These requests are subject to the approval of the Indonesian government and are renewable annually. If we do not request a suspension or are denied a suspension, then we are required to continue our activities under the Contract of Work or potentially be declared in default. Moreover, if a suspension continues for more than one year for reasons other than force majeure and the Indonesian government has not approved such continuation, then the government would be entitled to declare a default under the Contract of Work.

With the approval of the Indonesian government in 2001, we suspended our field exploration activities outside of Block A due to safety and security issues and uncertainty relating to a possible conflict between our mining and exploration rights in certain forest areas covered by the Contracts of Work and an Indonesian law enacted in 1999 prohibiting open-pit mining in forest preservation areas. We cannot predict when we will be able to resume our exploration activities in these areas. We expect to continue to seek renewals of these suspensions for each of the suspended areas if required.

Our mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from our operations, could require us to incur increased costs.

Mining operations on the scale of our operations in Papua involve significant environmental risks and challenges. Our primary challenge is to dispose of the large amount of crushed and ground rock material, called tailings, that results from the process by which we physically separate the copper, gold and silver bearing materials from the ore that we mine. Our tailings management plan uses the river system near our mine to transport the tailings to the lowlands where the tailings and natural sediments are deposited in a controlled area contained within a levee system that will be reclaimed and revegetated. We incurred aggregate costs relating to tailings management of $8.3 million in 2003, $7.0 million in 2002 and $9.7 million in 2001.

Another major environmental challenge is managing overburden, which is the rock that must be moved aside in the mining process in order to reach the ore. In the presence of air, water and naturally occurring bacteria, some overburden can cause acid rock drainage, or acidic water containing dissolved metals which, if not properly managed, can have a negative impact on the environment.

Certain Indonesian governmental officials have from time to time raised issues with respect to our tailings and overburden management plans, including a suggestion that we implement a pipeline system rather than our river deposition system for tailings disposal. Because our mining operations are remotely located in steep mountainous terrain and in an active seismic area, a pipeline system would be costly, difficult to construct and maintain, and more prone to catastrophic failure. For these reasons, we do not believe that a pipeline system is practical.

We anticipate that we will continue to spend significant financial and managerial resources on environmental compliance. In addition, changes in Indonesian environmental laws or unanticipated environmental impacts from our operations could require us to incur significant unanticipated costs.

The volume and grade of the reserves we recover and our rates of production may be more or less than we anticipate.

Our reserve amounts are determined in accordance with established mining industry practices and standards, but are merely estimates of the mineral deposits that can be recovered economically and legally. In addition, our ore bodies may not conform to standard geological expectations. Because ore bodies do not contain uniform grades of minerals, our metal recovery rates will vary from time to time, which will result in variations in the volumes of minerals that we can sell from period to period. Some of our reserves may become unprofitable to develop if there are unfavorable long-term market price fluctuations in copper and gold, or if there are significant increases in our operating or capital costs. In addition, our exploration programs may not result in the discovery of additional mineral deposits that we can mine profitably.

We do not expect to mine all of our reserves before the initial term of our Contract of Work expires.

All of our current proven and probable reserves, including the Grasberg deposit, are located in Block A. The initial term of our Contract of Work covering these reserves expires at the end of 2021. We can extend this term for two successive 10-year periods, subject to the approval of the Indonesian government, which under our Contract of Work cannot be withheld or delayed unreasonably. Our reserves reflect estimates of minerals that can be recovered through the end of 2041 (i.e., through the expiration of the two 10-year extensions) and our current mine plan has been developed, and our operations are based on the assumption that we will receive the two 10-year extensions. As a result, we will not mine all of our reserves during the current term of our Contract of Work, and there can be no assurance that the Indonesian government will approve the extensions. Prior to the end of 2021, we expect to mine approximately 48 percent of aggre gate proven and probable recoverable ore at December 31, 2003, representing approximately 62 percent of PT Freeport Indonesia’s share of recoverable copper reserves and approximately 72 percent of its share of recoverable gold reserves.

Servicing our debt will require a significant amount of cash, and our ability to generate sufficient cash depends on many factors, some of which are beyond our control.

Our ability to make payments on and to refinance our maturing debt depends on our ability to generate sufficient cash flow. This ability, to a significant extent, is subject to commodity prices and general economic, financial, regulatory, political and other factors that are beyond our control. In addition, our ability to borrow funds in the future to service our debt will depend on meeting the financial covenants in our bank credit facilities, our

10 ⅛% senior notes due 2010, our 6 ⅞% senior notes due 2014 and other debt agreements we may have in the future. Future borrowings may not be available to us under our bank credit facilities or from the capital markets in amounts sufficient to enable us to pay our obligations as they mature or to fund other liquidity needs. As a result, we may need to refinance all or a portion of our debt on or before maturity. Any inability to generate sufficient cash flow or refinance our debt on favorable terms could materially and adversely affect our financial condition.

Covenants in our bank credit facilities impose restrictions on us.

Although we currently have no amounts outstanding under our bank credit facilities, our bank credit facilities:

*  restrict the repurchase of, and payment of dividends on, our common stock under certain circumstances;

*  limit, among other things, our ability to:

        *  incur additional indebtedness;

        *  make investments;

        *  engage in transactions with affiliates;

        *  create liens on our assets; and

*  require us to maintain specified financial ratios and satisfy financial condition tests.

Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy these covenants, which could result in a default. If an event of default occurs, the banks could declare any amounts outstanding together with accrued interest, to be immediately due and payable. An event of default under our bank credit facilities may also give rise to an event of default under our other existing and future debt agreements.

Covenants in our 10 ⅛% senior notes due 2010 and 6 ⅞% senior notes due 2014 also impose restrictions on us.

Our 10 ⅛% senior notes and our 6 ⅞% senior notes limit, among other things, our ability to:

*  pay dividends on our common stock and repurchase and redeem certain classes of our capital stock;

*  incur additional indebtedness;

*  make investments;

*  engage in transactions with affiliates; and

*  create liens on our assets.

Movements in foreign currency exchange rates or interest rates could negatively affect our operating results.

All of our revenues and significant costs are denominated in U.S. dollars. However, some of our costs, assets and liabilities are denominated in Indonesian rupiah, Australian dollars or euros. As a result, we are generally less profitable when the U.S. dollar weakens against these foreign currencies.

The rupiah/U.S. dollar daily closing exchange rate ranged from 8,124 to 9,074 rupiah per U.S. dollar during 2003, and on December 31, 2003, the closing exchange rate was 8,437 rupiah per U.S. dollar compared with 8,940 rupiah per U.S. dollar on December 31, 2002. The Australian dollar/U.S. dollar and euro/U.S. dollar exchange rates fluctuated substantially in 2002 and 2003. During 2003, the Australian dollar/U.S. dollar daily closing exchange rate ranged from $0.56 to $0.75 per Australian dollar and the euro/U.S. dollar daily closing exchange rate ranged from $1.04 to $1.26 per euro. On December 31, 2003 and 2002, the closing exchange rates were $0.75 per Australian dollar and $1.26 per euro and $0.56 per Australian dollar and $1.05 per euro, respectively.

From time to time, we have in the past and may in the future implement currency hedges intended to reduce our exposure to changes in foreign currency exchange rates. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange payment requirements will continue to be subject to market fluctuations. In addition, our bank credit facilities are based on fluctuating interest rates. Accordingly, an increase in interest rates could adversely affect our results of operations and financial condition.  See the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Disclosures about Market Risks - Foreign Currency Exchange Risk” for an analysis of the effect on our operating costs of changes in exchange rates.

Because we are a holding company, our ability to pay our debts depends upon the ability of our subsidiaries to pay us dividends and to advance us funds.  In addition, our ability to participate in any distribution of our subsidiaries' assets is generally subject to the prior claims of the subsidiaries' creditors.

Because we conduct business primarily through PT Freeport Indonesia, our major subsidiary, and other subsidiaries, our ability to pay our debts depends upon the earnings and cash flow of PT Freeport Indonesia and our other subsidiaries and their ability to pay us dividends and to advance us funds.  Contractual and legal restrictions applicable to our subsidiaries could also limit our ability to obtain cash from them.  Our rights to participate in any distribution of our subsidiaries' assets upon their liquidation, reorganization or insolvency would generally be subject to the prior claims of the subsidiaries' creditors, including any trade creditors and preferred shareholders.

Arthur Andersen LLP, our former auditors, audited certain financial information included in this Form 10-K.  In the event such financial information is later determined to contain false or misleading statements, you may be unable to recover damages from Arthur Andersen LLP.

Arthur Andersen LLP completed its audit of our financial statements for the year ended December 31, 2001 and issued its report with respect to such financial statements on February 8, 2002.  Subsequently, Arthur Andersen was convicted of obstruction of justice for activities relating to its previous work for Enron Corp.

In July 2002, our board of directors, at the recommendation of our audit committee, approved the appointment of Ernst & Young LLP as our independent public accountants to audit our financial statements for 2002.  Ernst & Young replaced Arthur Andersen, which had served as our independent auditors since 1988.  We had no disagreements with Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure or auditing scope or procedure.  Arthur Andersen audited the financial statements that we include in this Form 10-K as of December 31, 2001, and for the year ended December 31, 2001, as set forth in their reports herein.

In June of 2002, Arthur Andersen was convicted of obstructing justice, which is a felony offense.  The SEC prohibits firms convicted of a felony from auditing public companies.  Arthur Andersen is thus unable to consent to the incorporation of its audit opinion on our 2001 financial statements into this Form 10-K.  Under these circumstances, Rule 437a under the Securities Act permits us to file this Form 10-K, which is incorporated by reference into registration statements on file with the SEC, without a written consent from Arthur Andersen.  

The Securities Act of 1933 (the “Securities Act") provides that if part of a registration statement at the time it becomes effective contains an untrue statement of a material fact, or omits a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may assert a claim against, among others, an accountant who has consented to be named as having certified any part of the registration statement or as having prepared any report for use in connection with the registration statement.  As a result, with sales of our securities pursuant to our registration statements that occur after this Form 10-K is filed with the SEC, Arthur Andersen will not have any liability under the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen or any omissions of a material fact required to be stated therein.  Accordingly, purchasers of those securities would be unable to assert a claim against Arthur Andersen under the Securities Act.

Item 3.  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.

Item 4.  Submission of Matters to a Vote of Security Holders.

Not applicable.

Executive Officers of the Registrant.

Certain information as of March 1, 2004 about our executive officers, including their position or office with FCX, PT Freeport Indonesia and Atlantic Copper, is set forth in the following table and accompanying text:

Name	Age	Position or Office
James R. Moffett	65	Chairman of the Board of FCX.  President Commissioner of PT Freeport Indonesia.
Richard C. Adkerson	57	President and Chief Executive Officer of FCX.  Director and Executive Vice President of PT Freeport Indonesia.  Chairman of the Board of Directors of Atlantic Copper.
Michael J. Arnold	51	Chief Administrative Officer of FCX.  Director and Executive Vice          President of PT Freeport Indonesia.
Mark J. Johnson	44	Senior Vice President and Chief Operating Officer of FCX.
Adrianto Machribie	62	President Director of PT Freeport Indonesia.
Kathleen L. Quirk	40	Senior Vice President, Chief Financial Officer and Treasurer of FCX.  Commissioner of PT Freeport Indonesia.

James R. Moffett has served as Chairman of the Board of FCX since 1992.  Mr. Moffett previously served as the Chief Executive Officer of FCX from July 1995 until December 2003.  He is also President Commissioner of PT Freeport Indonesia and Co-Chairman of the Board of McMoRan Exploration Co. (McMoRan).  

Richard C. Adkerson has served as FCX’s President since April 1997 and Chief Executive Officer since December 2003.  Mr. Adkerson previously served as FCX’s Chief Financial Officer from October 2000 to December 2003.  Mr. Adkerson is also a director and Executive Vice President of PT Freeport Indonesia, Chairman of the Board of Directors of Atlantic Copper, and Co-Chairman of the Board of McMoRan.  From November 1998 to February 2004, he also served as President and Chief Executive Officer of McMoRan.

Michael J. Arnold has served as the Chief Administrative Officer of FCX since December 2003.  He also served as a director and Executive Vice President of PT Freeport Indonesia since May 1998.  Mr. Arnold joined Freeport-McMoRan Inc. in 1991, serving as Freeport-McMoRan Inc.’s Chief Management Information Officer, and subsequently in a number of senior administrative positions for Freeport-McMoRan Inc. and FCX.

Mark J. Johnson has served as the Senior Vice President and Chief Operating Officer of FCX since December 2003 and as Vice President of PT Freeport Indonesia since February 2002.  He previously served as Vice President of FCX from July 2001 to December 2003.  Mr. Johnson’s 18-year career with Freeport-McMoRan has included significant work with PT Freeport Indonesia’s mine and milling operations and responsibility for mine planning at the Grasberg operations.  

Adrianto Machribie has served as President Director of PT Freeport Indonesia since March 1996.  

Kathleen L. Quirk has served as our Senior Vice President, Chief Financial Officer and Treasurer since December 2003.  She previously served as the Vice President and Treasurer of FCX from February 2000 to December 2003, and as Vice President from February 1999 to February 2000.  Ms. Quirk has also served as a Commissioner of PT Freeport Indonesia since April 2000, as the Senior Vice President and Treasurer of McMoRan since April 2002 and as Vice President and Treasurer of McMoRan from January 2000 to April 2002.

PART II

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters.

Reclassification of Class A and Class B Common Shares

On May 2, 2002, FCX’s stockholders approved a proposal to reclassify its Class A and Class B common stock into a single class of common stock on a one share-for-one share basis.  The reclassification simplified the company’s capital structure, enhanced the company’s ability to structure and execute equity-based transactions, increased the trading liquidity of the company’s common stock, and generated administrative cost savings.

Class A Common Shares

Our Class A common shares traded on the New York Stock Exchange (NYSE) under the symbol “FCX.A” until they were converted into Class B common shares on May 3, 2002.  The FCX.A share price was reported daily in the financial press under “FMCGA” in most listings of NYSE securities.  NYSE composite tape Class A common share price ranges from January 1, 2002, through May 3, 2002, follow:

	2002
	High		Low
First Quarter	$	17.70	$	12.45
Second Quarter (through May 3)		18.55		16.72
Third Quarter		N/A		N/A
Fourth Quarter		N/A		N/A

Class B Common Share

Our Class B common shares trade on the NYSE under the symbol “FCX.”  The FCX share price is reported daily in the financial press under “FMCG” in most listings of NYSE securities.  At year-end 2003, the number of holders of record of our Class B common shares was 9,937.  NYSE composite tape Class B common share price ranges during 2003 and 2002 follow:

	2003				2002
	High		Low		High		Low
First Quarter	$	19.30	$	16.01	$	17.84	$	13.06
Second Quarter		25.70		16.72		20.83		16.60
Third Quarter		34.57		23.45		18.50		11.75
Fourth Quarter		46.74		32.73		16.96		9.95

As of March 1, 2004, there were approximately 9,769 holders of record of our Class B common stock.

Common Share Dividends

There were no cash dividends paid on FCX common stock during 2002.  In February 2003, the Board of Directors authorized a new cash dividend policy for FCX’s common stock with the initial $0.09 per share quarterly dividend being paid on May 1, 2003.  Below is a summary of the common stock cash dividend declared and paid for the quarterly periods of 2003:

	Amount Per Share	Record Date	Payment Date
First Quarter	N/A	N/A	N/A
Second Quarter	$0.09	Apr. 15, 2003	May 1, 2003
Third Quarter	0.09	July 15, 2003	Aug. 1, 2003
Fourth Quarter	0.09	Oct. 15, 2003	Nov. 3, 2003

In October 2003, the Board of Directors authorized an increase in the cash dividend policy for FCX common stock.  The new policy provides for an annual dividend of $0.80 per share, payable quarterly ($0.20 per share) with the increase taking effect with the February 2, 2004 dividend payment.

The declaration and payment of dividends is at the discretion of our Board and will depend on our financial results, cash requirements, future prospects and other factors deemed relevant by the Board.  In addition, payment of dividends on our common stock and purchases of common stock are subject to limitations under our 10⅛% Senior Notes and 6 ⅞% Senior Notes and, in certain circumstances, our credit facility.

 

Item 6.  Selected Financial Data.

The information set forth under the caption “Selected Financial and Operating Data” of our 2003 Annual Report is incorporated herein by reference.

Our ratio of earnings to fixed charges was as follows for the years presented.

	Years Ended December 31,
	2003	2002	2001	2000	1999
Ratio of earnings to fixed charges	3.9x	3.4x	2.9x	2.3x	3.0x
Ratio of earnings to fixed charges and preferred stock dividends	3.0x	2.5x	2.1x	1.7x	2.2x

For the ratio of earnings to fixed charges calculation, earnings consist of pre-tax income from continuing operations before minority interests in consolidated subsidiaries, income or loss from equity investees and fixed charges.  Fixed charges include interest and that portion of rent deemed representative of interest.  For the ratio of earnings to fixed charges and preferred stock dividends calculation, we assumed that our preferred stock dividend requirements were equal to the pre-tax earnings that would be required to cover those dividend requirements.  We computed those pre-tax earnings using actual tax rates for each year.

Items 7.  and 7A.  Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risks.

The information set fourth under the caption “Management’s Discussion and Analysis” of our 2003 Annual Report is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data.

Our financial statements and the notes thereto, the report thereon of Ernst & Young LLP, and the report of management, each as set forth in our 2003 Annual Report, are incorporated herein by reference.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Arthur Andersen LLP audited our financial statements for 2001 and had served as our independent auditors since 1988.  On July 10, 2002, we decided to replace Arthur Andersen as our independent accountants.  This action was taken with the approval of our board of directors, which approved the decision reached by its audit committee.  Arthur Andersen ceased to practice before the SEC effective August 31, 2002.

The audit reports issued by Arthur Andersen on our consolidated financial statements as of and for the year ended December 31, 2001, did not contain an adverse opinion or disclaimer of opinion, nor was either qualified or modified as to uncertainty, audit scope or accounting principle.  During the fiscal year that ended December 31, 2001 and continuing through July 10, 2002, we had no disagreements with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, that, if not resolved to Arthur Andersen’s satisfaction, would have caused them to make reference to the matter of disagreement in their report on the financial statements.  Arthur Andersen has communicated to us that they have informed the SEC that they are unable to provide letters that corroborate or invalidate the statements we have made in this disclosure, as required by the SEC.  

None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred during the fiscal year ended December 31, 2001 and the subsequent interim period through July 10, 2002.

Also on July 10, 2002, we appointed Ernst & Young LLP to replace Arthur Andersen as our independent accountants.  Our board also approved the audit committee’s selection of Ernst & Young LLP.  In February 2003, our audit committee appointed Ernst & Young LLP as our independent accountants for 2003.  During the fiscal year ended December 31, 2001 and the subsequent interim period through July 10, 2002, we did not consult with Ernst & Young LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

Item 9A.  Controls and Procedures.

(a)

Evaluation of disclosure 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 defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a date within 90 days prior to the filing of this annual report on Form 10-K.  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 Commission filings.

(b)

Changes in internal controls.  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 III

Item 10.  Directors and Executive Officers of the Registrant.

The information set forth under the caption “Information About Nominees and Directors” of our definitive Proxy Statement to be filed with the Commission, relating to our 2004 Annual Meeting to be held on May 6, 2004, is incorporated herein by reference.  The information required by Item 10 regarding our executive officers appears in a separately captioned heading after Item 4 in Part I of this report.

Item 11.  Executive Compensation.

The information set forth under the captions “Director Compensation” and “Executive Officer Compensation” of our definitive Proxy Statement to be filed with the Commission, relating to our 2004 Annual Meeting to be held on May 6, 2004, is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information set forth under the captions “Stock Ownership of Directors and Executive Officers” and “Stock Ownership of Certain Beneficial Owners” of our definitive Proxy Statement to be filed with the Commission, relating to our 2004 Annual Meeting to be held on May 6, 2004, is incorporated herein by reference.

Equity Compensation Plan Information as of December 31, 2003

The company has five equity compensation plans with currently outstanding awards.  All of which have been previously approved by our stockholders.  The plans are: the 1995 Stock Option Plan for Non-Employee Directors (Director Plan), the Adjusted Stock Award Plan, the 1995 Stock Option Plan, the 1999 Stock Incentive Plan and the 2003 Stock Incentive Plan.  The following table presents information as of December 31, 2003 regarding these five equity compensation plans under which Class B common stock may be issued to employees and non-employees as compensation.  

 

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	9,792,832(1)	$19.38	8,170,613(2)
Equity compensation plans not approved by security holders	—	—	—
Total	9,792,832(1)	$19.38	8,170,613(2)

___________________

(1)

In addition, there were 195,314 nonvested restricted stock units as of December 31, 2003.

(2)

As of December 31, 2003, there were 8,000,000 shares remaining available for future issuance under the 2003 Stock Incentive Plan, 110,613 shares remaining available for future issuance under the 1999 Stock Incentive Plan and 60,000 shares remaining available for future issuance under the 1995  Stock Option Plan for Non-Employee Directors.  All of these shares could be issued under the terms of the plan (a) upon the exercise of options, stock appreciation rights and limited rights, or (b) in the form of restricted stock or “other stock-based awards,” which awards are valued in whole or in part on the value of the shares of Class B common stock, with the number of “other stock based awards” limited to 400,000 for the 2003 Stock Incentive Plan.

Item 13.  Certain Relationships and Related Transactions.

The information set forth under the caption “Certain Transactions” of our definitive Proxy Statement to be filed with the Commission, relating to our 2004 Annual Meeting to be held on May 6, 2004, is incorporated herein by reference.

Item 14.  Principal Accountant Fees and Services.

The information set forth under the caption “Independent Auditors” of our definitive Proxy Statement to be filed with the Commission, relating to our 2004 Annual Meeting to be held on May 6, 2004, is incorporated herein by reference.

PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1).

Financial Statements.

Reference is made to the Index to Financial Statements appearing on page F-1 hereof.

(a)(2).

Financial Statement Schedules.

Reference is made to the Index to Financial Statements appearing on page F-1 hereof.

(a)(3).

Exhibits.

Reference is made to the Exhibit Index beginning on page E-1 hereof.

(b).  

Reports on Form 8-K.

During the last quarter of the period covered by this report and for the 2004 period through March 8, 2004, we filed 11 Current Reports on Form 8-K reporting events under Item 5 dated October 15, 2003, November 26, 2003, December 4, 2003, December 8, 2003, December 10, 2003, December 18, 2003, December 22, 2003, January 7, 2004, January 27, 2004, January 29, 2004 and February 3, 2004.  We filed three Current Reports on Form 8-K reporting events under Item 12 dated October 16, 2003, November 10, 2003 and January 20, 2004.  We filed one Current Report on Form 8-K reporting events under Item 9 dated October 10, 2003; and one under Items 5 and 9 dated October 9, 2003.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 9, 2004.

Freeport-McMoRan Copper & Gold Inc.

By:     /s/ Richard C. Adkerson

                                                                                                                     Richard C. Adkerson
                                                                                                                       President and
                                                                                                                       Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities indicated on March 9, 2004.

*                  James R. Moffett	Chairman of the Board
*                  B. M. Rankin, Jr.	Vice Chairman of the Board
/s/ Richard C. Adkerson    Richard C. Adkerson	President and Chief Executive Officer (Principal Executive Officer)
/s/ Kathleen L. Quirk    Kathleen L. Quirk	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
*                                         C. Donald Whitmire, Jr.	Vice President and Controller - Financial Reporting (Principal Accounting Officer)
*                  Robert J. Allison, Jr.	Director
*                  R. Leigh Clifford	Director
*                   Robert A. Day	Director
*                  Gerald J. Ford	Director
*                                           H. Devon Graham, Jr.	Director
*                                          Oscar Y. L. Groeneveld	Director
*                                             J. Bennett Johnston	Director
*                                            Bobby Lee Lackey	Director
*                  J. Taylor Wharton	Director
*By:           /s/ Richard C. Adkerson                 Richard C. Adkerson Attorney-in-Fact

FREEPORT-McMoRan COPPER & GOLD INC.

INDEX TO FINANCIAL STATEMENTS

Our financial statements and the notes thereto, and the report of Ernst & Young LLP included elsewhere in this Form 10-K are incorporated herein by reference.  The financial statements in schedule I listed below should be read in conjunction with our financial statements included elsewhere in this Form 10-K.

	Page
Report of Independent Auditors	F-1
Report of Independent Public Accountants	F-2
Schedule I-Condensed Financial Information of Registrant	F-3
Schedule II-Valuation and Qualifying Accounts	F-6

Schedules other than the ones listed above have been omitted since they are either not required, not applicable or the required information is included in the financial statements or notes thereto.

REPORT OF INDEPENDENT AUDITORS

We have audited the consolidated financial statements of Freeport-McMoRan Copper & Gold Inc. (the Company) as of December 31, 2003 and 2002 and for the years then ended, and have issued our report thereon dated January 28, 2004.  Our audits also included the schedules listed in the index above for this Form 10-K.  The schedules listed in the index above are the responsibility of the Company's management.  Our responsibility is to express an opinion based on our audits.  The Company’s consolidated financial statements and related schedules for the year ended December 31, 2001 were audited by other auditors who have ceased operations and whose report with respect to the schedules dated February 8, 2002, indicated that such schedules for fiscal 2001 fairly state, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.

In our opinion, the fiscal 2003 and 2002 schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

Ernst & Young LLP

New Orleans, Louisiana,

January 28, 2004

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Freeport-McMoRan Copper & Gold Inc.’s filing on Form 10-K for the fiscal year ended December 31, 2001.  This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K for the fiscal year ended December 31, 2003.

We have audited, in accordance with auditing standards generally accepted in the United States, the financial statements as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 included in Freeport-McMoRan Copper & Gold Inc.'s Annual Report to stockholders included elsewhere in this Form 10-K, and have issued our report thereon dated February 8, 2002 (except with respect to the payment of the Nusamba loan discussed in Note 2, as to which the date is February 27, 2002).  Our report on the financial statements includes an explanatory paragraph with respect to the change in the method of accounting for derivative instruments and hedging activities effective January 1, 2001, as discussed in Note 1 to the financial statements.  Our audits were made for the purpose of forming an opinion on those statements taken as a whole.  The schedules listed in the index above are the responsibility of the Compa ny's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements.  These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

Arthur Andersen LLP

New Orleans, Louisiana,

February 8, 2002

FREEPORT-McMoRan COPPER & GOLD INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS

	December 31,
	2003			2002
Assets:	(In Thousands)
Cash	$	205,704		$	310
Restricted investments		23,964			96,946
Interest receivable		1,218			2,271
Due from affiliates		35,507			20,340
Notes receivable from PT Freeport Indonesia		204,882			450,003
Investments in PT Freeport Indonesia and PT Indocopper Investama		2,022,655			1,607,097
Investment in Atlantic Copper		4,879			55,712
Investment in PT Puncakjaya Power		76,683			-
Other assets		87,206			76,113
Total assets	$	2,662,698		$	2,308,792
Liabilities and Stockholders' Equity:
Accounts payable and accrued liabilities	$	9,530		$	11,982
Accrued interest payable		46,643			25,887
Loan due to PT Freeport Indonesia		-			81,500
Long-term debt, including current portion		1,667,723	a		1,357,023
Other long-term liabilities		21,572			18,931
Deferred income taxes		141,246			96,640
Redeemable preferred stock		-	a		450,003
Stockholders' equity		775,984			266,826
Total liabilities and stockholders' equity	$	2,662,698		$	2,308,792

a.

Effective July 1, 2003, Freeport-McMoRan Copper & Gold Inc. (FCX) adopted Statement of Financial Accounting Standards (SFAS) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” and reclassified its mandatorily redeemable preferred stock as debt ($204.9 million outstanding at December 31, 2003).  SFAS No. 150 does not allow restatement of prior periods.

The footnotes to the consolidated financial statements of FCX contained in FCX's 2003 Annual Report to stockholders included elsewhere herein are an integral part of these statements.

FREEPORT-McMoRan COPPER & GOLD INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF INCOME

	Years Ended December 31,
	2003			2002			2001
	(In Thousands)
Income from investments in PT Freeport Indonesia and PT
Indocopper Investama, net of PT Freeport Indonesia tax provision	$	421,493		$	343,738		$	255,247
Net loss from investment in Atlantic Copper		(58,538	)		(34,550	)		(43,071	)
Income from investment in PT Puncakjaya Power		6,521			-			-
Intercompany charges and eliminations		72,588	a		(4,645	)a		2,752
General and administrative expenses		(14,937	)		(11,095	)		(6,568	)
Depreciation and amortization		(13,557	)		(15,598	)		(5,510	)
Interest expense, net		(151,453	)		(104,794	)		(77,492	)
Interest income on PT Freeport Indonesia notes receivable:
Gold and silver production payment loans		13,683			16,280			15,331
Promissory notes		-			7,992			6,102
Other income (expense), net		4,715			2,905			(5,484	)
Losses on early extinguishment and conversion of debt		(30,268	)		-			-
Provision for income taxes		(43,912	)		(35,579	)		(28,282	)
Cumulative effect of change in accounting principle, net		(24,675	)b		-			-
Net income		181,660			164,654			113,025
Preferred dividends		(27,441	)		(37,604	)		(36,529	)
	$	154,219		$	127,050		$	76,496

a.

Includes reimbursements from PT Freeport Indonesia and Rio Tinto, FCX’s joint venture partner, totaling $69.1 million in 2003 and $6.8 million in 2002 for FCX stock option exercises.

b.

Effective July 1, 2003, FCX adopted SFAS No. 150 and reclassified its mandatorily redeemable preferred stock as debt ($204.9 million outstanding at December 31, 2003).  SFAS No. 150 does not allow restatement of prior periods.

The footnotes to the consolidated financial statements of FCX contained in FCX's 2003 Annual Report to stockholders included elsewhere herein are an integral part of these statements.

FREEPORT-McMoRan COPPER & GOLD INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF CASH FLOW

	Years Ended December 31,
	2003			2002			2001
	(In Thousands)
Cash flow from operating activities:
Net income	$	181,660		$	164,654		$	113,025
Adjustments to reconcile net income to net cash used in operating activities:
Income from investments in PT Freeport Indonesia and      PT Indocopper Investama		(421,493	)		(343,738	)		(255,247	)
Deferred income taxes		41,669			34,616			21,139
Net loss from investment in Atlantic Copper		58,538			34,550			43,071
Income from investment in PT Puncakjaya Power		(6,521	)		-			-
Elimination of intercompany profit		(3,500	)		11,412			(2,752	)
Dividends received from PT Freeport Indonesia and PT Indocopper Investama		-			-			45,805
Dividends received from PT Puncakjaya Power		9,736			-			-
Depreciation and amortization		13,557			15,598			5,510
Losses on early extinguishment and conversion of debt		30,268			-			-
Cumulative effect of change in accounting principle		24,675			-			-
(Increase) decrease in interest receivable and due from affiliates		(13,437	)		(5,159	)		4,343
Increase in accounts payable and accrued liabilities		21,833			2,497			15,313
Other		12,481			(23,260	)a		(5,164	)a
Net cash used in operating activities		(50,534	)		(108,830	)		(14,957	)
Cash flow from investing activities:
Sale (purchase) of restricted investments		73,629			47,938			(139,762	)
Investment in PT Freeport Indonesia		-			(1,027	)		-
Investment in Atlantic Copper		(10,000	)		-			-
Investment in PT Puncakjaya Power		(78,367	)		-			-
Other		(2,083	)		(5,022	)		(3,971	)
Net cash provided by (used in) investing activities		(16,821	)		41,889			(143,733	)
Cash flow from financing activities:
Cash dividends paid:
Common stock		(41,682	)		-			-
Step-up convertible preferred stock		(24,552	)		(24,500	)		(24,500	)
Mandatory redeemable preferred stock		(9,181	)		(12,795	)		(12,113	)
Net proceeds from sale of senior notes		1,046,437			-			582,619
Proceeds from other debt		-			183,355			4,059
Repayment of debt		(931,136	)		(275,505	)		(411,701	)
Partial redemption of preferred stock		-			(11,671	)		(10,386	)
Redemption of step-up convertible preferred stock		(5,792	)		-			-
Repayment from PT Freeport Indonesia		245,121			118,972			30,386
Borrowings from (repayments to) PT Freeport Indonesia		(81,500	)		81,500			-
Loans to Nusamba		-			-			(5,548	)
Purchases of FCX common shares		-			-			(3,436	)
Proceeds from exercised stock options		68,776			7,777			597
Other		6,258			(534	)		8,204
Net cash provided by financing activities		272,749			66,599			158,181
Net increase (decrease) in cash and cash equivalents		205,394			(342	)		(509	)
Cash at beginning of year		310			652			1,161
Cash at end of year	$	205,704		$	310		$	652
Interest paid	$	126,875		$	107,116		$	62,386
Taxes paid	$	1,026		$	1,689		$	7,625

a.

Includes support payments to Atlantic Copper totaling $25.0 million in 2002 and $7.6 million in 2001.

The footnotes to the consolidated financial statements of FCX contained in FCX's 2003 Annual Report to stockholders included elsewhere herein are an integral part of these statements.

FREEPORT-McMoRan COPPER & GOLD INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Col. A	Col B			Col. C					Col. D				Col. E
				Additions
		Balance at Beginning of Period			Charged to Costs and Expense		Charged to Other Accounts			Other Add (Deduct)				Balance at End of Period
Reserves and allowances deducted from asset accounts:
2003
Materials and supplies reserves:
PT Freeport Indonesia			$15,303			$6,000		$   -			$(5,193	)a			$16,110
Atlantic Copper			520			978		-			-				1,498
2002
Materials and supplies reserves:
PT Freeport Indonesia			17,144			6,000		-			(7,841	)a			15,303
Atlantic Copper			323			197		-			-				520
Allowance for uncollectible
value-added taxes			8			-		-			(8	)b			-
Allowance for uncollectible
accounts receivable			941			-		-			(941	)c			-
2001
Materials and supplies reserves:
PT Freeport Indonesia			16,808			6,000		-			(5,664	)a			17,144
Atlantic Copper			323			-		-			-				323
Allowance for uncollectible
value-added taxes			300					-			(292	)b			8
Allowance for uncollectible
accounts receivable			2,500					-			(1,559	)c			941
Reclamation and mine     shutdown reserves:
2003
PT Freeport Indonesia			$29,175			$2,781		$605			$(6,865	)d			$25,696
Atlantic Copper			-			170		-			620				790
2002
PT Freeport Indonesia			24,097			5,078		-			-				29,175
2001
PT Freeport Indonesia			19,220			4,877		-			-				24,097

a.

Primarily represents write-offs of obsolete materials and supplies inventories.

b.

Represents a reversal of previously accrued amounts based on an updated analysis of historical refunds of value-added tax payments.

c.

Represents amounts collected.

d.

Includes $(1.2) million for liabilities settled in 2003, $(4.3) million for changes in reclamation and closure estimates and $(1.4) million for cumulative effect adjustment for adoption of SFAS No. 143, “Accounting for Asset Retirement Obligations.”

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 (the FCX 2002 First Quarter Form 10-Q).
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 February 3, 2004.
4.1	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, represented 0.05 shares of Gold-Denominated Preferred Stock II.  Incorporated by reference to Exhibit 4.5 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 Gold-Denominated II Depositary Receipt.  Incorporated by reference to Exhibit 4.6 to the FCX 2002 Second Quarter Form 10-Q.
4.3	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 represented 0.025 shares of Silver-Denominated Preferred Stock.  Incorporated by reference to Exhibit 4.7 to the FCX 2002 Second Quarter Form 10-Q.
4.4	Form of Silver-Denominated Depositary Receipt.  Incorporated by reference to Exhibit 4.8 to the FCX 2002 Second Quarter Form 10-Q.
4.5	Amended and Restated Credit Agreement dated as of September 30, 2003, but effective as of October 2, 2003, 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 Arranger, and JPMorgan Chase Manhattan Bank as Administrative Agent, Issuing Bank, Security Agent, JAA Security Agent and Documentation Agent.  Incorporated by reference to Exhibit 4.7 to the Quarterly Report on Form 10-Q of FCX for the quarter ended September 30, 2003.
4.6	Indenture dated as of August 7, 2001, from FCX and FCX Investment Ltd. to The Bank of New York, as trustee with respect to the 8 ¼% Convertible Senior Notes due 2006.  Incorporated by reference to Exhibit 4.1 to the FCX November 5, 2001 Form S-3.

4.7	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.
4.8	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.
4.9	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 the 7.50% Senior Notes due 2006 and the 7.20% Senior Notes due 2026.  Incorporated by reference to Exhibit 4.5 to the FCX November 5, 2001 Form S-3.
4.10	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.
4.11	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.
4.12	Indenture dated as of February 3, 2004, from FCX to The Bank of  New York, as Trustee, with respect to the 6 ⅞% Senior Notes due 2014.
4.13	Registration Rights Agreement dated as of February 3, 2004, by and between FCX, J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., Banc One Capital Markets, Inc., Hibernia Southcoast Capital, Inc., HSBC Securities (USA) Inc. and Scotia Capital (USA) Inc.
4.14	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 Quarterly Report on Form 10-Q of FCX for the quarter ended March 31, 2000.
4.15	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.
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 Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1997 (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 10.42)
10.9	Annual Incentive Plan of FCX as amended effective February 2, 1999.  Incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1998 (the FCX 1998 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 FCX 1998 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.
10.13	FCX 1995 Stock Option Plan.
10.14	FCX 1995 Stock Option Plan for Non-Employee Directors.
10.15	FCX 1999 Stock Incentive Plan.
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	FCX 2003 Stock Incentive Plan.
10.19	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.
10.20	FM Services Company Performance Incentive Awards Program as amended effective February 2, 1999.  Incorporated by reference to Exhibit 10.19 to the FCX 1998 Form 10-K.
10.21	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.
10.22	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.
10.23	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.
10.24	Letter Agreement dated January 27, 1997, among Kissinger Associates, Kent Associates, FTX, FCX and FMS.  Incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 2001 (the FCX 2001 Form 10-K).
10.25	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.
10.26	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.
10.27	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.
10.28	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.
10.29	Supplemental Letter Agreement dated July 14, 2003, between J. Bennett Johnston, Jr. and FMS.  Incorporated by reference to Exhibit 10.28 to the Quarterly Report on Form 10-Q of FCX for the quarter ended June 30, 2003 (the FCX 2003 Second Quarter Form 10-Q).
10.30	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.
10.31	Supplemental Letter Agreement dated July 14, 2003, between FMS and Gabrielle K. McDonald.  Incorporated by reference to Exhibit 10.30 to the FCX 2003 Second Quarter Form 10-Q.
10.32	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.
10.33	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.
10.34	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.
10.35	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.
10.36	First Amendment to Executive Employment Agreement dated December 10, 2003, between FCX and James R. Moffett.
10.37	First Amendment to Executive Employment Agreement dated December 10, 2003, between FCX and Richard C. Adkerson.
10.38	First Amendment to Change of Control Agreement dated December 10, 2003, between FCX and James R. Moffett.
10.39	First Amendment to Change of Control Agreement dated December 10, 2003, between FCX and Richard C. Adkerson.
10.40	Change of Control Agreement dated February 3, 2004, between FCX and Michael J. Arnold.
10.41	Change of Control Agreement dated February 3, 2004, between FCX and Mark J. Johnson.
10.42	Change of Control Agreement dated February 3, 2004, between FCX and Kathleen L. Quirk.
12.1	FCX Computation of Ratio of Earnings to Fixed Charges.
13.1	Those portions of the 2003 Annual Report to stockholders of FCX that are incorporated herein by reference.
14.1	Ethics and Business Conduct Policy.
18.1	Letter from Arthur Andersen LLP regarding change in accounting.  Incorporated by reference to Exhibit 18.1 to the FCX 2002 First Quarter Form 10-Q.
21.1	Subsidiaries of FCX.
23.1	Consent of Ernst & Young LLP.
23.2	Consent of Independent Mining Consultants, Inc.
24.1	Certified resolution of the Board of Directors of FCX authorizing this report to be signed on behalf of any officer or director pursuant to a Power of Attorney.
24.2	Powers of Attorney pursuant to which this report has been signed on behalf of certain officers and directors of FCX.
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-3

Exhibit 3.3 to FCX 2003 10-K  (F5016840.DOC;1)

EX-4

Exhibit 4.12 FCX Form 10-K  (F5016834.DOC;1)

EX-4

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT dated February 3, 2004 (the “Agreement”) is entered into by and among Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), and J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., Banc One Capital Markets, Inc., Hibernia Southcoast Capital, Inc., HSBC Securities (USA) Inc. and Scotia Capital (USA) Inc. (the “Initial Purchasers”).

The Company and the Initial Purchasers are parties to the Purchase Agreement dated January 28, 2004 (the “Purchase Agreement”), which provides for the sale by the Company to the Initial Purchasers of $350,000,000 aggregate principal amount of the Company’s  6.875% Senior Notes due 2014 (the “Securities”).  As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

1.

Definitions.  As used in this Agreement, the following terms shall have the following meanings:

“Business Day” shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

“Closing Date” shall mean the Closing Date as defined in the Purchase Agreement.

“Company” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

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

“Exchange Dates” shall have the meaning set forth in Section 2(a)(ii) hereof.

“Exchange Offer” shall mean the exchange offer by the Company of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.

“Exchange Offer Registration” shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof.

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein.

“Exchange Securities” shall mean senior notes issued by the Company under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

“Holders” shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term “Holders” shall include Participating Broker-Dealers.

“Initial Purchasers” shall have the meaning set forth in the preamble.

“Indenture” shall mean the Indenture relating to the Securities dated as of February 3, 2004 between the Company and The Bank of New York, as trustee, and as the same may be amended from time to time in accordance with the terms thereof.

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities owned directly or indirectly by the Company or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount.

“Participating Broker-Dealers” shall have the meaning set forth in Section 4(a) hereof.

“Person” shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

“Prospectus” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein.

“Purchase Agreement” shall have the meaning set forth in the preamble.

“Registrable Securities” shall mean the Securities; provided that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities has been declared effective under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Securities are eligible to be sold pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act or (iii) when such Securities cease to be outstanding.

“Registration Expenses” shall mean any and all expenses incident to the performance of or compliance by the Company with this Agreement, including, without limitation:  (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any Underwriters or Holders in connection with blue sky qualification of any Exchange Securities or Registrable Securities), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any o ther documents relating to the performance of and compliance with this Agreement, (iv) all rating-agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers) and (viii) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or “comfort” letters required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discou nts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

“Registration Statement” shall mean any registration statement of the Company that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein.

“SEC” shall mean the Securities and Exchange Commission.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.

“Shelf Effectiveness Period” shall have the meaning set forth in Section 2(b) hereof.

“Shelf Registration” shall mean a registration effected pursuant to Section 2(b) hereof.

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company that covers all the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein.

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as amended from time to time.

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

“Underwriter” shall have the meaning set forth in Section 3 hereof.

“Underwritten Offering” shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public.

2.

Registration Under the Securities Act.  (a)  To the extent not prohibited by any applicable law or applicable interpretations of the Staff of the SEC, the Company shall use its reasonable best efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) have such Registration Statement remain effective until 180 days after the closing of the Exchange Offer.  The Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use its reasonable best efforts to complete the Exchange Offer not later than 60 days after such effective date.

The Company shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law:

(i)

that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange;

(ii)

the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the “Exchange Dates”);

(iii)

that any Registrable Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement;

(iv)

that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) and in the manner specified in the notice, prior to the close of business on the last Exchange Date; and

(v)

that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing its election to have such Securities exchanged.

As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, (iii) it is not an “affiliate” (within the meaning of Rule 405 under Securities Act) of the Company and (iv) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, then such Holder will deliver a Prospectus in connection with any resale of such Exchange Securities.

As soon as practicable after the last Exchange Date, the Company shall:

(i)

accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and

(ii)

deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder.

The Company shall use its reasonable best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer.  The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff of the SEC.

(a)

In the event that (i) the Company determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the last Exchange Date because it would violate any applicable law or applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason completed by October 4, 2004 or (iii) within 120 days of completion of the Exchange Offer any Initial Purchaser shall so request in connection with any offering or sale of Registrable Securities, the Company shall use its reasonable best efforts to cause to be filed as soon as practicable after such determination, date or request, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders thereof and to have such Shelf Registration Statement declared e ffective by the SEC.

In the event that the Company is required to file a Shelf Registration Statement pursuant to clause (iii) of the preceding sentence, the Company shall use its reasonable best efforts to file and have declared effective by the SEC a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer.

The Company agrees to use its reasonable best efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) under the Securities Act with respect to the Registrable Securities or such shorter period that will terminate when all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the “Shelf Effectiveness Period”).  The Company further agrees to supplement or amend the Shelf Registration Statement and the related Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder of Registrab le Securities with respect to information relating to such Holder, and to use its reasonable best efforts to cause any such amendment to become effective and such Shelf Registration Statement and Prospectus to become usable as soon as thereafter practicable.  The Company agrees to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

(b)

The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and Section 2(b) hereof.  Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

(c)

An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC.

In the event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required hereby, is not declared effective on or prior to October 4, 2004, the interest rate on the Registrable Securities will be increased by 1.00% per annum until the Exchange Offer is completed or the Shelf Registration Statement, if required hereby, is declared effective by the SEC or the Securities become freely tradable under the Securities Act.

If the Shelf Registration Statement has been declared effective and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period, then the interest rate on the Registrable Securities will be increased by 1.00% per annum commencing on the 31st day in such 12-month period and ending on such date that the Shelf Registration Statement has again been declared effective or the Prospectus again becomes usable.

(d)

Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company’s obligations under Section 2(a) and Section 2(b) hereof.

3.

Registration Procedures.  In connection with its obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company shall as expeditiously as possible:

(e)

prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective for the applicable period in accordance with Section 2 hereof;

(f)

prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;

(g)

in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Initial Purchasers, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto, in order to facilitate the sale or other disposition of the Registrable Securities thereunder; and the Company consents to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law;

(h)

use its reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC; cooperate with the Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that the Company shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not other wise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not so subject;

(i)

in the case of a Shelf Registration, notify each Holder of Registrable Securities, counsel for such Holders and counsel for the Initial Purchasers promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Regis trable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to an offering of such Registrable Securities cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate;

(j)

use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order;

(k)

in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested);

(l)

in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as the selling Holders may reasonably request at least two Business Days prior to the closing of any sale of Registrable Securities;

(m)

in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use its reasonable best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company shall notify the Holders of Registrable Securities to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus until t he Company has amended or supplemented the Prospectus to correct such misstatement or omission;

(n)

a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or of any document that is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, to the Holders of Registrable Securities and their counsel) and make such of the representatives of the Company as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) available for discussion of such document; and the Company shall not, at any time after initial filing of a Registration Statement, file any Pros pectus, any amendment of or supplement to a Registration Statement or a Prospectus, or any document that is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall object;

(o)

obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement;

(p)

cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

(q)

in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities (an “Inspector”), any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all pertinent financial and other records, documents and properties of the Company, and cause the respective officers, directors and employees of the Company to supply all information reasonably requested by any such Inspector, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that if any such information is identified by the Company as being confidential or proprietary, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of any Inspector, Holder or Underwriter;

(r)

in the case of a Shelf Registration, use its reasonable best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements;

(s)

if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company has received notification of the matters to be incorporated in such filing; and

(t)

in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when request ed, (ii) obtain an opinion of counsel to the Company (which counsel and opinion, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain “comfort” letters from the independent certified public accountants of the Company (and, if necessary, any other certified public accountant of any subsidiary of the Company, or of any business acquired by the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters in connection with underwritten offerings and (iv) deliver such documents and certificates a s may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement.

In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Securities to furnish to the Company such information regarding such Holder and the proposed disposition by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.

In the case of a Shelf Registration Statement, each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(iii) or 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof and, if so directed by the Company, such Holder will deliver to the Company all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities that is current at the time of receipt of such notice.

If the Company shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company may give any such notice only twice during any 365-day period and any such suspensions shall not exceed 30 days for each suspension and there shall not be more than two suspensions in effect during any 365-day period.

The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering.  In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the “Underwriters”) that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering.

4.

Participation of Broker-Dealers in Exchange Offer.  (a)  The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a “Participating Broker-Dealer”) may be deemed to be an “underwriter” within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities.

The Company understands that it is the Staff’s position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act.

(u)

In light of the above, and notwithstanding the other provisions of this Agreement, the Company agrees to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement), if requested by the Initial Purchasers or by one or more Participating Broker-Dealers, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above.  The Company further agrees that Participating Broker-Dealers shall be authorized to deliver such Prospectus during such period in connection with the resales contemplated by this Section 4.

(v)

The Initial Purchasers shall have no liability to the Company or any Holder with respect to any request that they may make pursuant to Section 4(b) above.

5.

Indemnification and Contribution.  (a)  The Company agrees to indemnify and hold harmless each Initial Purchaser and each Holder, their respective affiliates, directors and officers and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any Prospectus or any omission or alleged omission to state therein a material fact required to be stated therei n or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Initial Purchaser or any Holder furnished to the Company in writing through J.P. Morgan Securities Inc. or any selling Holder expressly for use therein.  In connection with any Underwritten Offering permitted by Section 3, the Company will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities-industry professionals participating in the distribution, their respective affiliates and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection wi th any Registration Statement.

(w)

Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Initial Purchasers and the other selling Holders, their respective affiliates, the directors of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement an d any Prospectus.

(x)

If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such Person (the “Indemnified Person”) shall promptly notify the Person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 5 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 5.  If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person, (iii) the Indem nified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred.  Any such separate firm (x) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser shall be designated in writing by J.P. Morgan Securities Inc., (y) for any Holder, its affiliates, directors and officers and any control Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company.  The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment.  Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after rec eipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement.  No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

(y)

If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect no t only the relative benefits referred to in clause (i) but also the relative fault of the Company on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative fault of the Company on the one hand and the Holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(z)

The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above.  The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim.  Notwithstanding the provisions of this Section 5, in no event shall a Holder be required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Secu rities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(aa)

The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity.

(bb)

The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers or any Holder, their respective affiliates or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company, its respective affiliates or the officers or directors of or any Person controlling the Company, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement.

6.

General.

(cc)

No Inconsistent Agreements.  The Company represents, warrants and agrees that (i) the rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding securities issued by the Company under any other agreement and (ii) the Company has not entered into, and on or after the date of this Agreement will not enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.

(dd)

Amendments and Waivers.   The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder.  Any amendments, modifications, supplements, waivers or consents pursuant to this Section 6(b) shall be by a writing executed by each of the parties hereto.

(ee)

Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if to the Company, initially at the Company’s address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c); and (iii) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is giv en in accordance with the provisions of this Section 6(c).  All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.  Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.

(ff)

Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be e ntitled to receive the benefits hereof.  The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement.

(gg)

Purchases and Sales of Securities. The Company shall not, and shall use its reasonable best efforts to cause its affiliates (as defined in Rule 405 under the Securities Act) not to, purchase and then resell or otherwise transfer any Registrable Securities.

(hh)

Third-Party Beneficiaries.  Each Holder shall be a third-party beneficiary to the agreements made hereunder between the Company and the Initial Purchasers and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder.

(ii)

Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(jj)

Headings.  The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof.

(kk)

Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

(ll)

Miscellaneous.  This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto.  If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  The Company and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

FREEPORT-MCMORAN COPPER & GOLD INC.

By /s/ Kathleen L. Quirk     

     Name: Kathleen L. Quirk

     Title: Senior Vice President, Chief Financial Officer and Treasurer

Confirmed and accepted as of the date first above written:

J.P. MORGAN SECURITIES INC.

For itself and on behalf of the

several Initial Purchasers

By /s/ Geoffrey Benson

Authorized Signatory

EX-10

FREEPORT-McMoRan COPPER & GOLD INC.

ADJUSTED STOCK AWARD PLAN

SECTION 1

Purpose.  The purpose of the Freeport-McMoRan Copper & Gold Inc. Adjusted Stock Award Plan (the "Plan") is to provide for the issuance and administration of certain awards relating to common stock of the Company issued to employees, officers and directors of Freeport-McMoRan Inc. ("FTX"), the Company’s current parent, in connection with FTX’s distribution to FTX stockholders of all of the Class B Common Stock of the Company.

SECTION 2

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

"Award" shall mean any Option, Limited Right, Stock Appreciation Right or Stock Incentive Unit granted under this Plan.

"Award Agreement" shall mean any 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.

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

"Committee" shall mean a committee of the Board designated by the Board to administer the Plan and composed of not fewer than two directors, each of whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3 and, to the extent necessary to comply with Section 162(m) only, is an "outside director" under Section 162(m).  Until otherwise determined by the Board, the Committee shall be the Corporate Personnel Committee of the Board.

"Company" shall mean Freeport-McMoRan Copper & Gold Inc.

"Consent Solicitation Statement" shall mean the consent solicitation statement dated February 7, 1995 distributed to Company stockholders in connection with the transactions relating to the Distribution.

"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.

"Distribution" shall mean the distribution by FTX of all the then outstanding Shares owned by FTX to the holders of FTX common stock, as described in the Consent Solicitation Statement.

"Distribution Date" shall mean the effective date of the Distribution.

"Eligible Individual" shall mean any present or former employee, officer or director of FTX who on the Distribution Date holds an FTX Award.

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

"FTX Award" shall mean any of the FTX Options, FTX Director Options, FTX SARs and FTX SIUs, and any limited rights appertaining thereto.

"FTX Director Option" shall mean an option to purchase FTX common stock granted under the FTX 1988 Stock Option Plan for Non-Employee Directors that is outstanding and unexercised on the Distribution Date.

"FTX Option" shall mean an option to purchase FTX common stock granted by FTX to a present or former officer or employee of FTX that is outstanding and unexercised on the Distribution Date.

"FTX SAR" shall mean a stock appreciation right granted to a present or former officer or employee of FTX that is outstanding and unexercised on the Distribution Date.

"FTX SIU" shall mean a stock incentive unit granted under the FTX 1992 Stock Incentive Unit Plan that is outstanding and unexercised on the Distribution Date.

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

"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 option granted under Section 6 of the Plan.

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

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

"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.

"SAR" shall mean a Stock Appreciation Right.

"SEC" shall mean the Securities and Exchange Commission, including the staff thereof, or any successor thereto.

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

"SIU" shall mean any Stock Incentive Unit.

"Shares" shall mean the shares of Class B Common Stock, par value $.10 per share, 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 award of stock appreciation rights granted under Section 7 of the Plan.

"Stock Incentive Unit" shall mean any award of stock incentive units granted under Section 9 of the Plan.

"Subsidiary" shall mean 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.

SECTION 3

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 interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; 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 make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.  The Committee shall have no discretion relating to the timing, price and size of Awards granted under the Plan, which shall be determined in accordance with the provisions of Sections 6 through 9. &nb sp;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.

SECTION 4

Eligibility.  Each Eligible Individual shall be granted an Award in accordance with the provisions of the Plan.

SECTION 5

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

(i)  Calculation of Number of Shares Available.  The number of Shares with respect to which Awards may be granted under the Plan shall be such number of Shares as results from the application of the award formulas set forth in Sections 6 through 8.  Such number of Shares shall not be reduced by the number of Shares with respect to which SIUs shall be granted, which shall be determined in accordance with Section 9.  If, after the effective date of the Plan, an Award granted under the Plan expires or is exercised, forfeited, canceled or terminated without the delivery of Shares, then the Shares covered by such Award or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such expiration, exercise, forfeiture, cancellation or termination, shall not thereafter be available for grants or Awards under the Plan.

(ii)  Sources of 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.

(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 Share s (or other securities or property) subject to outstanding Awards, and (ii) 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; provided, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

SECTION 6

(a)  Stock Options.  Immediately prior to the Distribution, each holder of an FTX Option or an FTX Director Option shall receive an Option to purchase such number of Shares (disregarding any fractional Share) as such holder would be eligible to receive in the Distribution with respect to the number of shares of FTX common stock subject to such FTX Award if such holder were the owner of record of such FTX shares on the record date for the Distribution.  Except as set forth in paragraph 6(b), each such Option shall have the same remaining term and other terms and conditions (whether such terms and conditions are contained in the related FTX Award agreement or in the plan under which such FTX Award was made) and shall be exercisable to the same extent as the FTX Award from which they were derived, with such changes and modifications as are necessary to substitute the Company for FTX as the issuer of the Option; provided, however, if the FTX Award from which an Option is derived has a term that will expire prior to one hundred and eighty days after the effective date of the Distribution, the term of such Option shall expire on the one hundred and eightieth day after the effective date of the Distribution.  Notwithstanding the foregoing, no Option shall be exercisable prior to the ninetieth day after the effective date of the Distribution.

(b)  Exercise Price.  The per Share exercise price of each Option granted pursuant to paragraph 6(a) shall be the per share exercise price or grant price of the FTX Award from which such Option was derived multiplied by a fraction, the numerator of which is the per Share fair market value at the time of the Distribution, determined as set forth below, and the denominator of which is the per share fair market value of FTX common stock (trading with due bills) at the time of the Distribution, determined as set forth below.  For purposes of this paragraph 6(b), the per Share fair market value at the time of the Distribution shall be the weighted average when-issued per Share price on the New York Stock Exchange on the first day on which the Shares are traded on a when-issued basis on the New York Stock Exchange, and the per share fair market value of FTX common stock (tradin g with due bills) at the time of the Distribution shall be the weighted average per share price of FTX common stock (trading with due bills) on the New York Stock Exchange on such trading day.

(c)  Tax-Offset Payment Right.  If the FTX Award from which the Option granted under this Section 6 derives contained a right to receive a cash payment upon exercise of such FTX Award related to and intended to defray the income tax liability associated therewith, the Option granted under this Section 6 shall contain a similar tax-offset payment right feature.

(d)  Payment.  No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company.  Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by applying cash amounts payable by the Company upon the exercise of such Option or other Awards by the holder thereof or by exchanging whole Shares owned by such holder (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash, cash equivalents, cash amounts so payable by the Company upon exercises of Awards and the fair market value of any such whole Shares so tendered to the Company, valued (in accordance with procedures established by the Committee) as of the effective date of such exercise, is at least equal to such option price.

SECTION 7

(a)  Stock Appreciation Rights.  Immediately prior to the Distribution, each holder of an FTX SAR shall receive a Stock Appreciation Right relating to such number of Shares (disregarding any fractional Share) as such holder would be eligible to receive in the Distribution with respect to the number of shares of FTX common stock to which such FTX SAR relates if such holder were the owner of record of such FTX shares on the record date for the Distribution.  Except as set forth below, each such SAR shall have the same remaining term and other terms and conditions (whether such terms and conditions are contained in the related FTX SAR agreement or in the plan under which such FTX SAR was awarded) and shall be exercisable to the same extent as the FTX SAR from which they were derived, with such changes and modifications as are necessary to substitute the Company for FTX as th e issuer of the SAR.  The per Share grant price of each SAR shall be determined in the same manner as the exercise price of Options granted pursuant to Section 6, as described in paragraph 6(b).

(b)  A Stock Appreciation Right shall entitle the holder thereof to receive upon exercise, for each Share to which the SAR relates, an amount in cash equal to the excess, if any, of the fair market value of a Share on the date of exercise of the SAR over the grant price.

SECTION 8

(a)  Limited Rights.  Each holder of an FTX Option shall receive, at the same time as and in tandem with each Option granted to such holder under Section 6, Limited Rights equal in number to the number of Shares subject to such Option with which such Limited Rights are in tandem.  Such Limited Rights shall have a grant price equal to the exercise price of the Option with which it is in tandem, and shall in all other respects contain the same terms and conditions as in the agreement pertaining to the FTX Option from which they derived.

(b)  A Limited Right shall entitle the holder thereof to receive upon exercise, for each Share to which the Limited Right relates, an amount in cash 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 only be exercisable during a period beginning not earlier than one day and ending not more than ninety days after the expiration date of an Offer.

SECTION 9

(a)  Stock Incentive Units.  Immediately prior to the Distribution, each holder of an FTX SIU shall receive a Stock Incentive Unit relating to such number of Shares (disregarding any fractional Share) as such holder would be eligible to receive in the Distribution with respect to the number of shares of FTX common stock to which such FTX SIU relates if such holder were the owner of record of such FTX shares on the record date for the Distribution.  Except as set forth below, each such SIU shall have the same remaining term and other terms and conditions (whether such terms and conditions are contained in the related FTX SIU agreement or in the plan under which such FTX SIU was awarded) and shall be exercisable to the same extent as the FTX SIU from which they were derived, with such changes and modifications as are necessary to substitute the Company for FTX as the issuer of the SIU.  The per Share exercise price of each SIU shall be determined in the same manner as the exercise price of Options granted pursuant to Section 6, as described in paragraph 6(b).

(b)  A Stock Incentive Unit shall entitle the holder thereof to receive upon exercise, for each Share to which the SIU relates, an amount in cash equal to the excess, if any, of the fair market value of a Share on the date of exercise of the SIU over the exercise price.  In the event that the SIU is exercised during a period beginning not earlier than one day after the expiration date of an Offer and ending not more than ninety days after the expiration date of such Offer, an SIU shall entitle the  holder thereof to receive upon exercise, for each Share to which the SIU relates, the higher of (i) the amount described in the first sentence of this paragraph 9(b) and (ii) an amount in cash equal to the excess, if any, of the Offer Price on the date of exercise of the SIU over the exercise price.

SECTION 10

(a)  Amendments to the Plan.  The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement. Notwithstanding anything to the contrary contained herein, (i) the Committee may amend the Plan in such manner as may be necessary for the Plan to conform with local rules and regulations in any jurisdiction outside the United States and (ii) any amendment, suspension or termination made in accordance with this paragraph 10(a) that would adversely affect a holder’s rights under an Award made under the Plan may not be made without such holder’s consent.

(b)  Amendments to Awards.  The Committee may amend, modify or terminate any outstanding Award with the holder’s consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, (i) to change the date or dates as of which an Award becomes exercisable, or (ii) to cancel an Award and grant a new Award in substitution therefor under such different terms and conditions as it determines in its sole and complete discretion to be appropriate.

(c)  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 paragraph 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.

(d)  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.  The determinations of value under this subparagraph shall be made by the Committee in its sole discretion.

SECTION 11

(a)  Award Agreements.  Each Award hereunder shall be evidenced by a writing delivered to the Participant that shall specify the terms and conditions thereof and any rules applicable thereto and that shall, in accordance with the provisions of the Plan, replicate as closely as possible the terms, conditions and other contractual attributes of the FTX Award from which the Award is derived, as in effect on the Distribution Date.

(b)  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) as to Options only, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, (a) to Immediate Family Members, (b) 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, (c) 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 ( d) 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 (b), (c) or (d) 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.  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 Beneficiary shall not be a violation of this Section 11(b).

(c)  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 SEC, 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.

(d)  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 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.

(e)  No Right to Employment.  The grant of an Award shall not be construed as giving a Participant the right to be engaged or employed by or retained in the employ of FTX, the Company or any Subsidiary.  FTX, the Company or any Subsidiary may at any time dismiss a Participant from engagement or employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement or any agreement relating to the engagement or employment of the Participant by FTX, the Company or any Subsidiary.

(f)  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.

(g)  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.

(h)  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.

(i)  No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine, in accordance with the terms of the Plan, as applicable, 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.

(j)  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.

(k) Withholding.  (i) A Participant shall 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.

(ii) 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 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 having a value equal to the minimum amount required to be withheld.  The value of the Shares withheld shall be based on the fair market value of the Shares on the date as of which the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the "Tax Date").

(iii) If permitted by the Committee, a Participant may also satisfy up to his or her total tax liability related to an Award by delivering Shares owned by the Participant, which Shares may be subject to holding period requirements determined by the Committee.  The value of the Shares delivered shall be based on the fair market value of the Shares on the Tax Date.

(iv) Each Election to have Shares withheld must be made prior to the Tax Date. If a Participant wishes to deliver Shares in payment of taxes, the Participant must so notify the Company prior to the Tax Date.

SECTION 12

Effective Date of the Plan.  The Plan shall be effective as of the date of its approval by the holders of the common stock of the Company.

SECTION 13

Term of the Plan.  Subject to paragraph 5(b), no Award shall be granted under the Plan except the Awards provided for in Sections 6, 7, 8 and 9.  Awards granted hereunder shall continue until their respective expiration dates, and the authority of the Committee to administer, interpret, amend, alter, adjust, suspend, discontinue, or terminate, in accordance with the provisions of the Plan, any such Award or to waive any conditions or rights under any such Award shall extend until the latest such date.

EX-10

FREEPORT-McMoRan COPPER & GOLD INC.

1995 STOCK OPTION PLAN

SECTION 1

Purpose.  The purpose of the Freeport-McMoRan Copper & Gold Inc. 1995 Stock Option Plan (the "Plan") is to motivate and reward key personnel by giving them a proprietary interest in the Company's continued 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 or Other Stock-Based Award.

"Award Agreement" shall mean any 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.

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

"Committee" shall mean a committee of the Board designated by the Board to administer the Plan and composed of not fewer than two directors, each of which directors, to the extent necessary to comply with Rule 16b-3 only, is a "disinterested person" within the meaning of Rule 16b-3.  Until otherwise determined by the Board, the Committee shall be 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.

"Employee" 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 or management services who provides services to the Company or a Subsidiary through such arrangement and (iv) any person who has agreed in writing to become a person described in clauses (i), (ii) or (iii) within not more than 30 days following the date 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 9 of the Plan.

"Participant" shall mean any Employee granted an Award under the Plan.

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

"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.

"SAR" shall mean any Stock Appreciation Right.

"SEC" shall mean the Securities and Exchange Commission, including the staff thereof, or any successor thereto.

"Shares" shall mean the shares of Class B Common Stock, par value $0.10 per share, 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

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 Employee; (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 b e 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 Employee.

SECTION 4

Eligibility.  Any Employee who is not a member of the Committee 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.  The number of Shares with respect to which Awards may be granted under the Plan shall be 10,000,000.  Shares subject to Awards that are not granted in tandem with an Option and that by their terms may be settled only in cash shall not be counted against such total, except as may be required to comply with Rule 16b-3.  If, after the effective date of the Plan, an Award granted under the Plan expires or is exercised, forfeited, canceled or terminated without the delivery of Shares, then the Shares covered by such Award or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such expiration, exercise, forfeiture, cancellation or termination without the delivery of Shares, shall again be, or shall beco me, Shares with respect to which Awards may be granted.

(ii)  Substitute Awards.  Any Shares delivered by the Company, any Shares with respect to which Awards are made by the Company, or any Shares with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired company or a company with which the Company combines, shall not, except in the case of Shares with respect to which Awards are granted to Employees who are officers or directors of the Company for purposes of Section 16 of the Exchange Act or any successor section thereto, be counted against the Shares available for Awards under the Plan.

(iii)  Sources of 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.

(iv)  Individual Limit.  Any provision of the Plan to the contrary notwithstanding, no individual may receive in any year Awards under the Plan that relate to more than 1,750,000 Shares.

(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 Share s (or other securities or property) 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 9(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) of the Code and the regulations thereunder; and provided further, that the number of S hares 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 Employees to whom Options shall be granted, the number of Shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option.  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 price 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.  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, no Option shall be exercisable earlier than six months after the date of grant.

(c)  Payment.  No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company.  Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by applying cash amounts payable by the Company upon the exercise of such Option or other Awards by the optionee or by exchanging whole Shares owned by the optionee (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash, cash equivalents, cash amounts so payable by the Company upon exercises of Awards and the fair market value of any such whole Shares so tendered to the Company, valued (in accordance with procedures established by the Committee) as of the effective date of such exercise, is at least equal to such option price.

SECTION 7

(a)  Stock Appreciation Rights.  Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees 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 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 earlier than six months after the date of grant nor after the expiration of 10 years after the date of grant. & nbsp;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 Participant to receive upon exercise, for each Share to which the SAR 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 Employees 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 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 earlier than six months after the date of grant nor 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 n ot 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 Participant 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)  Other Stock-Based Awards.  The Committee is hereby authorized to grant to eligible Employees an "Other Stock-Based Award", which shall consist of an Award, the value of which is based in whole or in part on the value of Shares, that is not an instrument or Award specified in Sections 6 through 8 of this Plan.  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 of any such Other Stock-Based Award.  Except in the case of an Other Stock-Based Award granted in assumption of or in substitution for an outsta nding award of a company acquired by the Company or with which the Company combines, the price at which securities may be purchased pursuant to any Other Stock-Based Award granted under this Plan, or the provision, if any, of any such Award that is analogous to the purchase or exercise price, shall not be less than 100% of the fair market value of the securities to which such Award relates on the date of grant.

(b)  Dividend Equivalents.  In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under this Section 9 or as an Award granted pursuant to Sections 6 through 8 hereof, may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, Subsidiary securities, other securities or other property on a current or deferred basis.

SECTION 10

(a)  Amendments to the Plan.  The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement, including for these purposes any approval requirement that is a prerequisite for exemptive relief from Section 16(b) of the Exchange Act or any successor provision thereto.  Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary for the Plan to conform with local rules and regulations in any jurisdiction outside the United States.

(b)  Amendments to Awards.  The Committee may amend, modify or terminate any outstanding Award with the Participant's consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, (i) to change the date or dates as of which an Award becomes exercisable, or (ii) to cancel an Award and grant a new Award in substitution therefor under such different terms and conditions as it determines in its sole and complete discretion to be appropriate.

(c)  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.

(d)  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.  The determinations of value under this subparagraph shall be made by the Committee in its sole discretion.

SECTION 11

(a)  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 Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by, Employees 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.

(b)  Award Agreements.  Each Award hereunder shall be evidenced by a writing delivered to the Participant 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 of the Participant and the effect thereon, if any, of a change in control of the Company.

(c)  Withholding.  (i) A Participant shall 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.

(ii) 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 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 having a value equal to the minimum amount required to be withheld.  The value of the Shares withheld shall be based on the fair market value of the Shares on the date as of which the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the "Tax Date").

(iii) If permitted by the Committee, a Participant may also satisfy up to his or her total tax liability related to an Award by delivering Shares owned by the Participant, which Shares may be subject to holding period requirements determined by the Committee.  The value of the Shares delivered shall be based on the fair market value of the Shares on the Tax Date.

(iv) Each Election to have Shares withheld must be made prior to the Tax Date. If a Participant wishes to deliver Shares in payment of taxes, the Participant must so notify the Company prior to the Tax Date.

(d)  Nontransferability.  No Award shall be transferable by a Participant other than by will or the laws of descent and distribution or, to the maximum extent permitted by Rule 16b-3, pursuant to a qualified domestic relations order ("QDRO"), as determined by the Committee.  An Award may be exercised, during the Participant's lifetime, only by the Participant or the transferee under the QDRO.  The designation of a Designated Beneficiary shall not be a violation of this paragraph 11(d).

(e)  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 SEC, 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.

(f)  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 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.

(g)  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 the Company or any Subsidiary or in the employ of 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, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.  No Employee, Participant or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees, Participants or holders or beneficiaries of Awards.

(h)  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.

(i)  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.

(j)  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.

(k)  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.

(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 12

Effective Date of the Plan.  The Plan shall be effective as of the date of its approval by the holders of the common stock of the Company.

SECTION 13

Term of the Plan.  No Award shall be granted under the Plan after the fifth anniversary of the effective date of the Plan; however, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may, and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, extend beyond such date.

                                                                                                                                                            &nb sp;   

EX-10

FREEPORT-McMoRan COPPER & GOLD INC.

1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

ARTICLE I

PURPOSE OF THE PLAN

The purpose of the 1995 Stock Option Plan for Non-Employee Directors (the "Plan") is to align more closely the interests of the non-employee directors of Freeport-McMoRan Copper & Gold Inc. (the "Company") with that of the Company’s stockholders by providing for the automatic grant to such directors of stock options ("Options") to purchase Shares (as hereinafter defined) and Stock Appreciation Rights (as hereinafter defined), in accordance with the terms of the Plan.

ARTICLE II

DEFINITIONS

For the purposes of this Plan, the following terms shall have the meanings indicated:

Amendment Date:  May 2, 2000.

Award:  Any Option, including any Pre-Amendment Option, or Stock Appreciation Right granted under this Plan.

Award Agreement:  Any written agreement, contract, notice, or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by the individual granted such Award.

Board:  The Board of Directors of the Company.

Change in Control:  A Change in Control shall be deemed to have occurred if either (a) any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall, otherwise than as a result of the Distribution, beneficially own more than 20% 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) pursuant to a tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, or (b) there shall be a change in the composition of the Board at any time within two years after any tender offer, exchange offer, merger, consolidation, sale of assets or contested ele ction, or any combination of those transactions (a "Transaction"), so that (i) the persons who were directors of the Company immediately before the first such Transaction cease to constitute a majority of the Board of Directors of the corporation which shall thereafter be in control of the companies that were parties to or otherwise involved in such Transaction, or (ii) the number of persons who shall thereafter be directors of such corporation shall be fewer than two-thirds of the number of directors of the Company immediately prior to such first Transaction.  A Change in Control shall be deemed to take place upon the first to occur of the events specified in the foregoing clauses (a) and (b).

Code:  The Internal Revenue Code of 1986, as amended from time to time.

Committee:  A committee of the Board designated by the Board to administer the Plan and composed of not fewer than two directors, each of whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3 and, to the extent necessary to comply with Section 162(m) only, is an "outside director" under Section 162(m).  Until otherwise determined by the Board, the Committee shall be the Corporate Personnel Committee of the Board.

Distribution:  The distribution by Freeport-McMoRan Inc. ("FTX") of all the then outstanding Shares owned by FTX to the holders of FTX common stock.

Election Period:  The period beginning on the third business day following a date on which the Company releases for publication its quarterly or annual summary statements of sales and earnings, and ending on the twelfth business day following such date.

Eligible Director:  A director of the Company who is not, and within the preceding one year has not been, an officer or an employee of the Company or a Subsidiary, an officer or an employee of an entity with which the Company has contracted to receive executive or management services, or otherwise eligible for selection to participate in any plan of the Company or any Subsidiary that entitles the participants therein to acquire stock, stock options or stock appreciation rights of the Company or its Subsidiaries.

Exchange Act:  The Securities Exchange Act of 1934, as amended from time to time.

Fair Market Value:  Except as provided below in connection with a cashless exercise, for any purpose relevant under the Plan, the fair market value of a Share or any other security shall be the average of the high and low quoted per Share or security sale prices on the Composite Tape for New York Stock Exchange-Listed Stocks on the date in question or, if there are no reported sales on such date, on the last preceding date on which any reported sale occurred.  If on the date in question the Shares or other securities in question are not listed on such Composite Tape, the fair market value shall be the average of the high and low quoted sale prices on the New York Stock Exchange on such date or, if no sales occurred on such date, on the last previous day on which a sale on the New York Stock Exchange is reported.  In the context of a cashless exercise, the fair market value shall be the pri ce at which the Shares are actually sold.

    Grant Date:  August 1, 1995 and the anniversary of such date in each subsequent year through and including 2004.

Option Cancellation Gain:  With respect to the cancellation of an Option pursuant to Section 3 of Article IV hereof, the excess of the Fair Market Value as of the Option Cancellation Date (as that term is defined in Section 3 of Article IV hereof) of all the outstanding Shares covered by such Option, whether or not then exercisable, over the purchase price of such Shares under such Option.

Participant:  Any individual granted an Award under this Plan.

Pre-Amendment Option:  An Option granted under this Plan prior to the Amendment Date and outstanding as of the Amendment Date.

Rule 16b-3:  Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.

SAR:  A Stock Appreciation Right.

SEC:  The Securities and Exchange Commission, including the staff thereof, or any successor thereto.

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

Shares:  Shares of Class B Common Stock, par value $0.10 per share, of the Company and any shares into which such Shares may be converted or combined in accordance with the terms of the Company’s Certificate of Incorporation.

Stock Appreciation Right:  Any award of stock appreciation rights granted under Article VII of this Plan.

Subsidiary:  Any corporation of which stock representing at least 50% of the ordinary voting power is owned, directly or indirectly, by the Company; and any other entity of which equity securities or interests representing at least 50% of the ordinary voting power or 50% of the total value of all classes of equity securities or interests of such entity are owned, directly or indirectly, by the Company.

Tax-Offset Payment Right:  A right to receive a cash payment upon the exercise of a Pre-Amendment Option related to and intended to defray the income tax liability associated with the exercise of such Pre-Amendment Option.

ARTICLE III

ADMINISTRATION OF THE PLAN

This Plan shall be administered by the Board.  The Board will interpret this Plan and may from time to time adopt such rules and regulations for carrying out the terms and provisions of this Plan as it may deem best; however, the Board shall have no discretion with respect to the selection of directors who receive Awards, the timing of the grant of Awards, the number of Shares subject to any Awards or the purchase or grant price thereof.  Notwithstanding the foregoing, the Committee shall have the authority to make all determinations with respect to the transferability of Awards in accordance with Article VIII hereof.  All determinations by the Board or the Committee shall be made by the affirmative vote of a majority of its respective members, but any determination reduced to writing and signed by a majority of its respective members shall be fully as effective as if it had been made by a majori ty vote at a meeting duly called and held.  Subject to any applicable provisions of the Company’s By-Laws or of this Plan, all determinations by the Board and the Committee pursuant to the provisions of this Plan, and all related orders or resolutions of the Board and the Committee, shall be final, conclusive and binding on all persons, including the Company, its stockholders, employees, and directors, and any Eligible Director or holder or beneficiary of any Award.  In the event of any conflict or inconsistency between determinations, orders, resolutions, or other actions of the Committee and the Board taken in connection with this Plan, the action of the Board shall control.

ARTICLE IV

STOCK AND STOCK APPRECIATION RIGHTS

SUBJECT TO THE PLAN

SECTION 1.  The Shares to be issued or delivered upon exercise of Options shall be made available, at the discretion of the Board, either from the authorized but unissued Shares of the Company or from Shares reacquired by the Company, including Shares purchased by the Company in the open market or otherwise obtained; provided, however, that the Company, at the discretion of the Board, may, upon exercise of Options granted under this Plan, cause a Subsidiary to deliver Shares held by such Subsidiary.

SECTION 2. Subject to the provisions of Section 3 of this Article IV, the aggregate number of Shares that may be issued pursuant to Options granted after February 4, 2003 shall not exceed 180,000 and the number of SARs that may be granted under this Plan shall not exceed 1,311,200.

SECTION 3.  In the event of the payment of any dividends payable in Shares, or in the event of any subdivision or combination of the Shares, the number of Shares that may be subject to Awards granted under this Plan, and the number of Shares subject to each Award granted in accordance with Article VII, shall be increased or decreased proportionately, as the case may be, and the number of Shares deliverable upon the exercise thereafter of any Option theretofore granted (whether or not then exercisable) shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase or grant price.  In the event the Company is merged or consolidated into or with another corporation in a transaction in which the Company is not the survivor, or in the event that substantially all of the Company’s assets are sold to another entity not affiliated with the Company, any holde r of an Option, whether or not then exercisable, shall be entitled to receive (unless the Company shall take such alternative action as may be necessary to preserve the economic benefit of the Option for the optionee) on the effective date of any such transaction (the "Option Cancellation Date"), in cancellation of such Option, an amount in cash equal to the Option Cancellation Gain relating thereto, determined as of the Option Cancellation Date.

ARTICLE V

PURCHASE OR GRANT PRICE OF AWARDS

The purchase price per Share under each Option and the grant price of any SAR granted under Section 4 of Article VII shall be 100% of the Fair Market Value of a Share at the time such Award is granted, but in no case shall such price be less than the par value of the Shares subject to such Award.  The grant price of any SAR granted under Section 3 of Article VII shall be determined in the manner described in Section 3 of Article VII.

ARTICLE VI

ELIGIBILITY OF RECIPIENTS

Options and SARs awarded under Section 4 of Article VII will be granted only to individuals who are Eligible Directors at the time of such grant.  SARs awarded under Section 3 of Article VII will be granted only to holders of Pre-Amendment Options as provided in Section 3 of Article VII.

ARTICLE VII

GRANT OF AWARDS

SECTION 1.  Each Option shall constitute a nonqualified stock option that is not intended to qualify under Section 422 of the Code.

SECTION 2.  On each Grant Date, each Eligible Director, as of each such date, shall be granted an Option to purchase 10,000 Shares.  Each Option shall become exercisable with respect to 2,500 Shares on each of the first, second, third and fourth anniversaries of the date of grant and may be exercised by the holder thereof with respect to all or any part of the Shares comprising each installment as such holder may elect at any time after such installment becomes exercisable but no later than the termination date of such Option; provided that each Option shall become exercisable in full upon a Change in Control.

SECTION 3.  Effective as of the Amendment Date, each holder of a Pre-Amendment Option shall receive a number of Stock Appreciation Rights equal to the number of Shares subject to such Pre-Amendment Option as of the Amendment Date multiplied by .6556 (disregarding any fractional Share) and all Tax-Offset Payment Rights shall be immediately canceled.  Except as set forth below, each such SAR shall have the same remaining term and other terms and conditions (whether such terms and conditions are contained in the related Pre-Amendment Option agreement or in this Plan) and shall be exercisable to the same extent as the related Pre-Amendment Option, with such changes and modifications as are necessary to substitute the SARs for the Tax-Offset Payment Rights set forth in such Pre-Amendment Option.  The grant price of each such SAR shall be equal to the purchase price of the related Pre-Amendment Option as of the Amendment Date.

SECTION 4.  On the Grant Date in 2000 and on each subsequent Grant Date, each Eligible Director, as of each such date, shall be granted 6,556 Stock Appreciation Rights relating to 6,556 Shares.  One-fourth, or 1,639, of such Stock Appreciation Rights shall become exercisable on each of the first, second, third and fourth anniversaries of the Grant Date of such Award, and all or any portion of the Stock Appreciation Rights comprising each installment may be exercised by the holder thereof as such holder may elect at any time after such installment becomes exercisable but no later than the termination date of such Stock Appreciation Rights; provided that each Stock Appreciation Right shall become exercisable in full upon a Change in Control.

SECTION 5.  A Stock Appreciation Right granted under any Section of this Article VII shall entitle the holder thereof to receive upon exercise, for each Share to which the SAR relates, an amount in cash equal to the excess, if any, of the Fair Market Value of a Share on the date of exercise of the SAR over the grant price.

ARTICLE VIII

TRANSFERABILITY OF AWARDS

No Awards granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a Participant except:

(a)  by will;

(b)  by the laws of descent and distribution; or

(c)  if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, (i) pursuant to a domestic relations order, as defined in the Code, (ii) to Immediate Family Members, (iii) 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, (iv) 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 (v) 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 (iii), (iv) or (v) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned sole ly by Immediate Family Members.  "Immediate Family Members" shall be defined as the spouse and natural or adopted children or grandchildren of the optionee and their spouses.

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.

ARTICLE IX

EXERCISE OF AWARDS

SECTION 1.  Each Option granted hereunder and each SAR granted after the Amendment Date shall terminate 10 years after the date on which it was granted.  Each SAR granted on the Amendment Date in substitution for a Tax-Offset Payment Right shall terminate on the date that the related Pre-Amendment Option terminates as provided in Section 3 of Article VII.

SECTION 2.  Except in cases provided for in Article X hereof, each Award may be exercised by the holder thereof only while the Participant to whom such Award was granted is an Eligible Director.

SECTION 3.  Each Award shall provide that the Award or any portion thereof may be exercised only during an Election Period.  Each Award shall provide, however, that in the event of a Change in Control, the Election Period exercise requirement is waived.

SECTION 4.  A person electing to exercise an SAR or any portion thereof then exercisable shall give written notice to the Company of such election and the number of SARs such person has elected to exercise.  A person electing to exercise an Option or any portion thereof then exercisable shall give written notice to the Company of such election and of the number of Shares such person has elected to purchase, and shall at the time of purchase tender the full purchase price of such Shares, which tender shall be made in cash or cash equivalent (which may be such person ’s personal check) or in Shares already owned by such person and held for at least six months (which tender may be by actual delivery or by attestation) and which Shares shall be valued for such purpose on the basis of their Fair Market Value on the date of exercise, or in any combination thereof.  The Company shall have no obliga tion to deliver Shares pursuant to the exercise of any Option, in whole or in part, until such payment in full of the purchase price of such Shares is received by the Company.  No optionee, or legal representative, legatee, distributee, or assignee of such optionee shall be or be deemed to be a holder of any Shares subject to such Option or entitled to any rights of a stockholder of the Company in respect of any Shares covered by such Option distributable in connection therewith until such Shares have been paid for in full and have been issued or delivered by the Company.

SECTION 5.  Each Option shall be subject to the requirement that if at any time the Board shall be advised by counsel that the listing, registration or qualification of the Shares subject to such Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the issue or purchase of Shares thereunder, such Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free from any conditions not reasonably acceptable to such counsel for the Board.

SECTION 6.  The Company may establish appropriate procedures to provide for payment or withholding of such income or other taxes as may be required by law to be paid or withheld in connection with the exercise of Awards and to ensure that the Company receives prompt advice concerning the occurrence of any event that may create, or affect the timing or amount of, any obligation to pay or withhold any such taxes or that may make available to the Company any tax deduction resulting from the occurrence of such event.

ARTICLE X

TERMINATION OF SERVICE

AS AN ELIGIBLE DIRECTOR

SECTION 1.  If and when a Participant shall cease to be an Eligible Director for any reason other than death or retirement from the Board, all of the Awards granted to such Participant while serving as an Eligible Director shall be terminated except that any Award, to the extent then exercisable, may be exercised by the holder thereof within three months after such Participant ceases to be an Eligible Director, but not later than the termination date of the Award.

SECTION 2.  If and when a Participant shall cease to be an Eligible Director by reason of the Participant’s retirement from the Board, all of the Awards granted to such Participant while serving as an Eligible Director shall be terminated except that any Award, to the extent then exercisable or exercisable within one year thereafter, may be exercised by the holder thereof within three years after such retirement, but not later than the termination date of the Award.

SECTION 3.  Should a Participant die while serving as an Eligible Director, all the  Awards granted to such Participant shall be terminated, except that any Award to the extent exercisable by the holder thereof at the time of such death, together with the unmatured installment (if any) of such Award that at that time is next scheduled to become exercisable, may be exercised until the third anniversary of the date of such death, but not later than the termination date of the Award, by the holder thereof, the Participant’s estate, or the person designated in the Participant’s last will and testament, as appropriate.

SECTION 4.  Should a Participant die after ceasing to be an Eligible Director, all of the  Awards granted to such Participant shall be terminated, except that any Award, to the extent exercisable by the holder thereof at the time of such death, may be exercised until the third anniversary of the date the Participant ceased to be an Eligible Director, but not later than the termination date of the Award, by the holder thereof, the Participant’s estate, or the person designated in the Participant’s last will and testament, as appropriate.

ARTICLE XI

AMENDMENTS TO PLAN AND AWARDS

The Board may at any time terminate or from time to time amend, modify or suspend this Plan; provided, however, that no such amendment or modification without the approval of the stockholders shall:

(a)  except pursuant to Section 3 of Article IV, increase the maximum number (determined as provided in this Plan) of Shares that may be purchased pursuant to Options, either individually or in aggregate;

(b)  permit the granting of any Option or any SAR under Section 4 of Article VII at a purchase or grant price other than 100% of the Fair Market Value of the Shares at the time such Award is granted, subject to adjustment pursuant to Section 3 of Article IV;

(c)  permit the exercise of an Option unless the full purchase price of the Shares as to which the Option is exercised is paid at the time of exercise;

(d)  extend beyond May 1, 2004 the period during which Awards may be granted;

(e)  modify in any respect the class of individuals who constitute Eligible Directors; or

(f)   materially increase the benefits accruing to participants hereunder.

EX-10

AMENDED AND RESTATED

FREEPORT-McMoRan COPPER & GOLD INC.

1999 STOCK INCENTIVE PLAN

SECTION 1

Purpose.  The purpose of the Freeport-McMoRan Copper & Gold Inc. 1999 Stock Incentive Plan (the “Plan”) is to motivate officers, key employees, consultants and advisers by giving them an opportunity to acquire a proprietary interest in the Company and reward them for the successful future performance of the Company.

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 written or electronic notice of grant, agreement, contract or other instrument or document evidencing any Award, which may, but need not, be required to be executed, acknowledged or accepted 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 t han 30 days following the date 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, 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.

“SAR” shall mean any Stock Appreciation Right.

“SEC” shall mean the Securities and Exchange Commission, including the staff thereof, or any successor thereto.

“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 cancele d, 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 A ward 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 Awards to, or 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.

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)

Grants of Stock Appreciation Rights, Limited Rights and Other Stock-Based Awards not granted in tandem with Options and payable only in cash may relate to no more than 8,000,000 Shares.

(C)

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

(D)

Subject to the other provisions of this Section 5(a), 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 2,500,000 Shares.

(E)

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.

(F)

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.

(G)

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 calendar 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 Share s (or other securities or property) 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 10(c) 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 therefor and the conditions and limitations applicable to the exercise of the Option.  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 p rice 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.

(c)

Payment.  No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company.  Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by applying cash amounts payable by the Company upon the exercise of such Option or other Awards by the holder thereof or by tendering, by either actual delivery of Shares or by attestation, whole Shares owned by such holder (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash, cash equivalents, cash amounts so payable by the Company upon exercises of Awards and the fair market value of any such whole Shares so tendered to the Company, valued (in accordance with procedures established by the Committee) as of th e effective date of such exercise, is at least equal to such option price.

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 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 Apprec iation 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 SAR 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 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 mo re 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.  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 th e 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, except that if vesting of the Shares is subject to the attainment of specified performance goals, a Restricted Period of one year or more is permitted.  The expiration of the Restricted Period shall also occur as provided under 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 Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Freeport-McMoRan Copper & Gold Inc. 1999 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 Section 9(b) and 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.  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, 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 compa nies 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, the value of which is based in whole or in part on the value of Shares, that is not an instrument or Award specified in Sections 6 through 9 of this Plan.  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, restricted stock units or 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 of any such Other Stock-Based Award and may provide that such awards would be payable in whole or in part in cash.   An Other Stock-Based Award may be subject to the attainment of such specified performance goals or targets as the Committee may determine, subject to the provisions of the Plan.  To the extent that an Other Stock-Based Award is intended to qualify as “performance-based compensation” under Section 162(m), it must meet the additional requirements imposed thereby. Except in the case of an Other Stock-Based Award granted in assumption of or in substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the price at which securities may be purchased pursuant to any Other Stock-Based Award granted under this Plan, or the provision, if any, of any such Award that is analogous to the purchase or exercise price, shall not be less than 100% of the fair market value of the securities to which such Award relates on the date of grant.  An Other-Stock Based Award, including an outright grant of Shares, may be made in lieu of the payment of cash compens ation otherwise due to an Eligible Individual.

(b)

Performance-Based Other Stock-Based Awards.  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, 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 relati ve 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)

Amendments to the Plan.  The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement, including for these purposes any approval necessary to qualify Awards as “performance based” compensation under Section 162(m) or any successor provision if such qualification is deemed necessary or advisable by the Committee.  Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary for the Plan to conform with local rules and regulations in any jurisdiction outside the United States.

(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, no Options granted under the Plan shall be repriced 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 shall 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.

(ii)  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 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 having a value equal to the minimum amount required to be withheld.  The value of the Shares withheld shall be based on the fair market value of the Shares on the date as of which the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the “Tax Date”).

(iii)  If permitted by the Committee, a Participant may also satisfy up to his or her total tax liability related to an Award by delivering Shares owned by the Participant, which Shares may be subject to holding period requirements determined by the Committee.  The value of the Shares delivered shall be based on the fair market value of the Shares on the Tax Date.

(iv)  Each Election to have Shares withheld must be made prior to the Tax Date.  If a Participant wishes to deliver Shares in payment of taxes, the Participant must so notify the Company prior to 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 (a) to Immediate Family Members, (b) 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, (c) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owner s, members or beneficiaries, as appropriate, are the members, or (d) 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 (b), (c) or (d) 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 desi gnation of a Designated Beneficiary 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 SEC, 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)

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 May 6, 2009, which is ten years after the date the Plan was approved by the Company’s stockholders; provided, however, that Awards granted prior to such date shall remain in effect until all 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-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 written or electronic notice of grant, agreement, contract or other instrument or document evidencing any Award, which may, but need not, be required to be executed, acknowledged or accepted 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 t han 30 days following the date 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 cancele d, 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 A ward 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 limitat ion 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 Share s (or other securities or property) 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 S hares 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 Compa ny combines, the exercise price 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 c ompensation 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 b e 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 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 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 shall 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.

(ii)  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 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 having a value equal to the minimum amount required to be withheld.  The value of the Shares withheld shall be based on the fair market value of the Shares on the date as of which the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the “Tax Date”).

(iii)  If permitted by the Committee, a Participant may also satisfy up to his or her total tax liability related to an Award by delivering Shares owned by the Participant, which Shares may be subject to holding period requirements determined by the Committee.  The value of the Shares delivered shall be based on the fair market value of the Shares on the Tax Date.

(iv)  Each Election to have Shares withheld must be made prior to the Tax Date.  If a Participant wishes to deliver Shares in payment of taxes, the Participant must so notify the Company prior to 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 owner s, 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 desi gnation of a Designated Beneficiary 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-10

Execution Copy

First Amendment to

Executive Employment Agreement

This First Amendment to Executive Employment Agreement (the “Amendment”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”) and James R. Moffett (the “Executive”) is dated effective December 10, 2003 (the “Amendment Date”).

W I T N E S S E T H

WHEREAS, the Company and the Executive are parties to that certain Executive Employment Agreement dated April 30, 2001 (the “Agreement”); and

WHEREAS, the Company and the Executive desire to amend certain terms of the Agreement.

NOW, THEREFORE, for and in consideration of the continued employment of Executive by the Company and the payment of salary, benefits and other compensation to Executive by the Company, the parties hereto agree as follows:

1.

Article I, Section 1 of the Agreement is hereby amended to remove references to the title Chief Executive Officer and, as amended, shall read in its entirety as follows:

1.

Capacity and Duties of Executive.  The Executive is employed by the Company to render services on behalf of the Company as Chairman of the Board functioning in an executive capacity.  The Executive will perform such duties as are assigned to the individual holding the title or titles held by him from time to time in the Company’s By-laws and such other duties as may be prescribed from time to time by the Company’s Board of Directors (the "Board"), which duties shall be consistent with the position of Chairman of the Board.

2.

Article IV, Section 4(b) of the Agreement is hereby amended to change the formula for calculating the severance payments to the Executive under the Agreement and, as amended, shall read in its entirety as follows:

(b)  Within twenty business days of the Termination Date, the Company will pay to the Executive an amount equal to three times the sum of (i) the Executive’s Base Salary in effect at the Termination Date and (ii) the highest Bonus paid to the Executive for any of the immediately preceding three Fiscal Years;

3.

..

Article VII, Section 1 of the Agreement is hereby amended to extend the term of the Agreement and shall read in its entirety as follows:

1.

Term.  The term of this Agreement will commence on the Agreement Date and will continue through December 31, 2008; provided, however, that commencing on December 31, 2008, and each December 31 thereafter, the term of this Agreement will automatically be extended for one additional year unless not later than April 1 of the current year, the Corporate Personnel Committee has given written notice to the Executive that it does not wish to extend this Agreement.

*       *       *

IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be executed as of the Amendment Date.

Freeport-McMoRan Copper & Gold Inc.

By:  /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

By: /s/ James R. Moffett

James R. Moffett

Signature Page of First Amendment to

Executive Employment Agreement between

Freeport-McMoRan Copper & Gold Inc. and

James R. Moffett

EX-10

Execution Copy

First Amendment to

Executive Employment Agreement

This First Amendment to Executive Employment Agreement (the “Amendment”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”) and Richard C. Adkerson (the “Executive”) is dated effective December 10, 2003 (the “Amendment Date”).

W I T N E S S E T H

WHEREAS, the Company and the Executive are parties to that certain Executive Employment Agreement dated April 30, 2001 (the “Agreement”); and

WHEREAS, the Company and the Executive desire to amend certain terms of the Agreement.

NOW, THEREFORE, for and in consideration of the continued employment of Executive by the Company and the payment of salary, benefits and other compensation to Executive by the Company, the parties hereto agree as follows:

1.

Article I, Section 1of the Agreement is hereby amended to reflect that Executive’s title has changed to President and Chief Executive Officer and, as amended, shall read in its entirety as follows:

1.

Capacity and Duties of Executive.  The Executive is employed by the Company to render services on behalf of the Company as President and Chief Executive Officer.  The Executive will perform such duties as are assigned to the individual holding the title or titles held by him from time to time in the Company’s By-laws and such other duties as may be prescribed from time to time by the Chairman of the Board or the Company’s Board of Directors (the "Board"), which duties shall be consistent with the position of President and Chief Executive Officer.

2.

Article IV, Section 4(b) of the Agreement is hereby amended to change the formula for calculating the severance payments to the Executive under the Agreement and, as amended, shall read in its entirety as follows:

(b)  Within twenty business days of the Termination Date, the Company will pay to the Executive an amount equal to three times the sum of (i) the Executive’s Base Salary in effect at the Termination Date and (ii) the highest Bonus paid to the Executive for any of the immediately preceding three Fiscal Years;

3.

Article VII, Section 1 of the Agreement is hereby amended to extend the term of the Agreement and shall read in its entirety as follows:

1.

Term.  The term of this Agreement will commence on the Agreement Date and will continue through December 31, 2008; provided, however, that commencing on December 31, 2008, and each December 31 thereafter, the term of this Agreement will automatically be extended for one additional year unless not later than April 1 of the current year, the Corporate Personnel Committee has given written notice to the Executive that it does not wish to extend this Agreement.

*       *       *

IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be executed as of the Amendment Date.

Freeport-McMoRan Copper & Gold Inc.

By: /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

By: /s/ Richard C. Adkerson

Richard C. Adkerson

Signature Page of First Amendment to

Executive Employment Agreement between

Freeport-McMoRan Copper & Gold Inc. and

Richard C. Adkerson

EX-10

Execution Copy

First Amendment to

Change of Control Agreement

This First Amendment to Change of Control Agreement (the “Amendment”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”) and James R. Moffett (the “Executive”) is dated effective December 10, 2003 (the “Amendment Date”).

W I T N E S S E T H

WHEREAS, the Company and the Executive are parties to that certain Change of Control Agreement dated April 30, 2001 (the “Agreement”); and

WHEREAS, the Company and the Executive desire to amend certain terms of the Agreement.

NOW, THEREFORE, for and in consideration of the continued employment of Executive by the Company and the payment of salary, benefits and other compensation to Executive by the Company, the parties hereto agree as follows:

1.

The first sentence of Article I, Section 1.1 of the Agreement is hereby amended to redefine the Executive Employment Agreement to reflect its amendment and, as amended, shall read in its entirety as follows:

1.1

Executive Employment Agreement.  Contemporaneous with a Change of Control (defined below), this Agreement supercedes the Executive Employment Agreement dated effective as of April 30, 2001, and subsequently amended on December 10, 2003, between Executive and the Company (the “Employment Agreement”), except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein.  

2.

Article II, Section 2.1(a) of the Agreement is hereby amended to extend the term of the Agreement and, as amended, shall read in its entirety as follows:

(a)  If the Executive continues to serve as an officer of the Company and a Change of Control occurs on or before December 31, 2008, then the Executive’s employment term (the “Employment Term”) shall continue through the later of the third anniversary of the Change of Control or December 31, 2008, subject to any earlier termination of Executive’s status as an officer and employee pursuant to this Agreement.

3.

Article II, Section 2.4(c)(ii) of the Agreement is hereby amended to change the formula for calculating the Executive’s benefits upon termination and, as amended, shall read in its entirety as follows:

(iii)   The Post-Transaction Corporation shall pay to the Executive an amount equal to three times the sum of (A) Executive’s Base Salary in effect at the Termination Date and (B) the highest Bonus paid to the Executive for any of the immediately preceding three Fiscal Years.

*       *       *

IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be executed as of the Amendment Date.

Freeport-McMoRan Copper & Gold Inc.

By: /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

By: /s/ James R. Moffett

James R. Moffett

Signature Page of First Amendment to

Change of Control Agreement between

Freeport-McMoRan Copper & Gold Inc. and

James R. Moffett

EX-10

Execution Copy

First Amendment to

Change of Control Agreement

This First Amendment to Change of Control Agreement (the “Amendment”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”) and Richard C. Adkerson (the “Executive”) is dated effective December 10, 2003 (the “Amendment Date”).

W I T N E S S E T H

WHEREAS, the Company and the Executive are parties to that certain Change of Control Agreement dated April 30, 2001 (the “Agreement”); and

WHEREAS, the Company and the Executive desire to amend certain terms of the Agreement.

NOW, THEREFORE, for and in consideration of the continued employment of Executive by the Company and the payment of salary, benefits and other compensation to Executive by the Company, the parties hereto agree as follows:

1.

The first sentence of Article I, Section 1.1 of the Agreement is hereby amended to redefine the Executive Employment Agreement to reflect its amendment and, as amended, shall read in its entirety as follows:

1.1

Executive Employment Agreement.  Contemporaneous with a Change of Control (defined below), this Agreement supercedes the Executive Employment Agreement dated effective as of April 30, 2001, and subsequently amended on December 10, 2003, between Executive and the Company (the “Employment Agreement”), except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein.  

2.

Article II, Section 2.1(a) of the Agreement is hereby amended to extend the term of the Agreement and, as amended, shall read in its entirety as follows:

(a)  If the Executive continues to serve as an officer of the Company and a Change of Control occurs on or before December 31, 2008, then the Executive’s employment term (the “Employment Term”) shall continue through the later of the third anniversary of the Change of Control or December 31, 2008, subject to any earlier termination of Executive’s status as an officer and employee pursuant to this Agreement.

3.

Article II, Section 2.4(c)(ii) of the Agreement is hereby amended to change the formula for calculating the Executive’s benefits upon termination and, as amended, shall read in its entirety as follows:

(iii)   The Post-Transaction Corporation shall pay to the Executive an amount equal to three times the sum of (A) Executive’s Base Salary in effect at the Termination Date and (B) the highest Bonus paid to the Executive for any of the immediately preceding three Fiscal Years.

*       *       *

IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be executed as of the Amendment Date.

Freeport-McMoRan Copper & Gold Inc.

By: /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

By: /s/ Richard C. Adkerson

Richard C. Adkerson

Signature Page of First Amendment to

Change of Control Agreement between

Freeport-McMoRan Copper & Gold Inc. and

Richard C. Adkerson

EX-10

Change of Control Agreement for Officers

This Change of Control Agreement (“Agreement”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), and Michael J. Arnold (the “Executive”) is dated effective as of February 3, 2004 (the “Agreement Date”).

ARTICLE I
Definitions

1.1

Company.  As used in this Agreement, “Company” means the Company as defined above and any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets of the Company.

1.2

Change of Control.  (a) “Change of Control” means (capitalized terms not otherwise defined will have the meanings ascribed to them in paragraph (b) below):

(i)

the acquisition by any Person together with all Affiliates of such Person, of Beneficial Ownership of the Threshold Percentage or more; provided, however, that for purposes of this Section 1.2(a)(i), the following will not constitute a Change of Control:

(A)

any acquisition (other than a “Business Combination,” as defined below, that constitutes a Change of Control under Section 1.2(a)(iii) hereof) of Common Stock directly from the Company,

(B)

any acquisition of Common Stock by the Company or its subsidiaries,

(C)

any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation or other entity controlled by the Company, or

(D)

any acquisition of Common Stock pursuant to a Business Combination that does not constitute a Change of Control under Section 1.2(a)(iii) hereof; or

(ii)

individuals, excluding the representatives of Rio Tinto (as defined below), who, as of the effective date of this Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual, excluding any representative of Rio Tinto, becoming a director subsequent to the effective date of this Agreement whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board; or

(iii)

the consummation of a reorganization, merger or consolidation (including a merger or consolidation of the Company or any direct or indirect subsidiary of the Company), or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, immediately following such Business Combination:

(A)

the individuals and entities who were the Beneficial Owners of the Company Voting Stock immediately prior to such Business Combination have direct or indirect Beneficial Ownership of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Post-Transaction Corporation, and

(B)

no Person together with all Affiliates of such Person (excluding the Post-Transaction Corporation and any employee benefit plan or related trust of either the Company, the Post-Transaction Corporation or any subsidiary of either corporation) Beneficially Owns 30% or more of the then outstanding shares of common stock of the Post-Transaction Corporation or 30% or more of the combined voting power of the then outstanding voting securities of the Post-Transaction Corporation; provided, that if that certain Agreement dated as of May 2, 1995 by and between the Company and Rio Tinto remains in effect as it may be amended from time to time with respect to the Post-Transaction Corporation, then Rio Tinto and its Affiliates may Beneficially Own any amount less than the number of shares of the Post-Transaction Corporation that could elect a majority of the directors of the Post-Transaction Corporation if all directors were to be elected at a single meeting, and

(C)

at least a majority of the members of the board of directors of the Post-Transaction Corporation were members of the Incumbent Board at the time of the execution of the initial agreement, and of the action of the Board, providing for such Business Combination; or

(iv)

approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(b)

As used in this Section 1.2 and elsewhere in this Agreement, the following terms have the meanings indicated:

(i)

Affiliate:  “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another specified Person.

(ii)

Beneficial Owner:  “Beneficial Owner” (and variants thereof), with respect to a security, means a Person who, directly or indirectly (through any contract, understanding, relationship or otherwise), has or shares (A) the power to vote, or direct the voting of, the security, and/or (B) the power to dispose of, or to direct the disposition of, the security.

(iii)

Company Voting Stock:  “Company Voting Stock” means any capital stock of the Company that is then entitled to vote for the election of directors.

(iv)

Majority Shares:  “Majority Shares” means the number of shares of Company Voting Stock that could elect a majority of the directors of the Company if all directors were to be elected at a single meeting.

(v)

Person:  “Person” means a natural person or entity, and will also mean the group or syndicate created when two or more Persons act as a syndicate or other group (including without limitation a partnership, limited partnership, joint venture or other joint undertaking) for the purpose of acquiring, holding, or disposing of a security, except that “Person” will not include an underwriter temporarily holding a security pursuant to an offering of the security.

(vi)

Post-Transaction Corporation:  Unless a Change of Control includes a Business Combination, “Post-Transaction Corporation” means the Company after the Change of Control.  If a Change of Control includes a Business Combination, “Post-Transaction Corporation” will mean the corporation or other entity resulting from the Business Combination unless, as a result of such Business Combination, an ultimate parent entity controls the Company or all or substantially all of the Company’s assets either directly or indirectly, in which case, “Post-Transaction Corporation” will mean such ultimate parent entity.

(vii)

Threshold Percentage:   (A) As long as that certain Agreement dated as of May 2, 1995, by and between the Company and Rio Tinto Indonesia Limited (“Rio Tinto”) remains in effect as it may be amended from time to time, “Threshold Percentage” means with respect to Rio Tinto and its Affiliates, that percentage of Common Stock that would result in Rio Tinto and its Affiliates having Beneficial Ownership of shares of Company Voting Stock equal to or greater than the Majority Shares; provided that, solely for purposes of such calculation, the shares of Company Voting Stock issuable upon exercise of warrants, options or other rights, or upon conversion or exchange of convertible or exchangeable securities, owned by Rio Tinto and its Affiliates, will be treated as outstanding Company Voting Stock.  (B) With respect to any other P erson and its Affiliates, “Threshold Percentage” means 30% of all then outstanding Common Stock.

(viii)

Common Stock:  “Common Stock” means the Class B common stock, $0.01 par value per share, of the Company.

1.3

Cause.  “Cause” shall mean:

(a)

The Executive’s willful and continued failure to perform substantially the Executive’s duties with the Post-Transaction Corporation or its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties;

(b)

The Executive’s material breach of this Agreement after a written demand is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has materially breached this Agreement; or

(c)

The final conviction of the Executive or an entering of a guilty plea or a plea of no contest by the Executive to a felony.

For purposes of this provision, no act or failure to act, on the part of the Executive, will be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without a reasonable belief that the act or omission was in the best interest of the Post-Transaction Corporation or its Affiliates.  Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board or the advice of counsel to the Post-Transaction Corporation or its Affiliates will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Post-Transaction Corporation or its Affiliates.  The termination of employment of the Executive will not be deemed to be for Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three- quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive has engaged in the conduct described in subparagraph (a), (b) or (c) above, and specifying the particulars of such conduct.

1.4

Good Reason.  “Good Reason” shall mean:

(a)

Any failure of the Post-Transaction Corporation to provide the Executive with the position, authority, duties and responsibilities at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control.  Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Executive’s position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control the Executive holds an equivalent position in the Post-Transaction Corporation or its Affiliates;  

(b)

The assignment to the Executive of any duties inconsistent in any material respect with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.1(b) of this Agreement, or any other action that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied within 10 days after receipt of written notice thereof from the Executive to the Post-Transaction Corporation;

(c)

Any failure by the Post-Transaction Corporation or its Affiliates to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that is remedied within 10 days after receipt of written notice thereof from the Executive to the Post-Transaction Corporation;

(d)

The Post-Transaction Corporation or its Affiliates requiring the Executive to be based at any office or location other than as provided in Section 2.1(b)(ii) hereof or requiring the Executive to travel on business to a substantially greater extent than required immediately prior to the Change of Control; or

(e)

Any failure by the Company to comply with and satisfy Sections 4.1(c) and (d) of this Agreement.

For purposes of this Section 1.4, any determination of “Good Reason” made by the Executive in good faith and based upon his reasonable belief and understanding shall be conclusive.

1.5

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

1.6

Disability.  “Disability” shall mean:

(a)

A disability entitling the Executive to receive benefits under a long-term disability insurance policy maintained by the Post-Transaction Corporation or an Affiliate in effect at the time either because he is totally disabled or partially disabled, as such terms are defined in such policy in effect as of the Agreement Date or as similar terms are defined in any successor policy.

(b)

If there is no long-term disability plan in effect covering the Executive, and if (i) a physical or mental illness renders the Executive incapable of satisfactorily discharging his duties and responsibilities to the Post-Transaction Corporation or an Affiliate for a period of 90 consecutive days, and (ii) such incapacity is certified in writing by a duly qualified physician chosen by the Post-Transaction Corporation or an Affiliate and reasonably acceptable to the Executive or his legal representatives, then the Board will have the power to determine that the Executive has become disabled.  If the Board makes such a determination, the Post-Transaction Corporation or its Affiliate will have the continuing right and option, during the period that such disability continues, and by notice given in the manner provided in this Agreement, to terminate the status of Executive as an officer and employee.  Any such termination will become effective 30 days after such notice of termination is given, unless within such 30-day period, the Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Post-Transaction Corporation or an Affiliate and reasonably acceptable to the Executive or his legal representatives so certifies i n writing) and the Executive in fact resumes such services.

(c)

The “Disability Effective Date” will mean the date on which termination of Executive’s status as an officer and employee becomes effective due to Disability.

1.7

Retirement.  “Retirement” (and variants thereof) for purposes of this Agreement is defined as the Executive’s voluntary termination of his status as an officer and employee at any time after reaching age 60, but shall not include a termination for Good Reason.

1.8

Board.  “Board” shall mean the Board of Directors of the Company, or if after a Change of Control, the Post-Transaction Corporation.

1.9

Termination Date.  “Termination Date” means, if Executive’s status as an officer and employee is terminated (i) by reason of Executive’s death, the date of Executive’s death, (ii) by reason of Disability, the Disability Effective Date, (iii) by the Company other than by reason of death or Disability, the date of delivery of the notice of termination or any later date specified in the notice of termination, which date will not be more than 30 days after the giving of the notice, or (iv) by the Executive other than by reason of death, the date of delivery of the notice of termination or any later date specified in the notice of termination, which date will not be more than 30 days after the giving of the notice.

ARTICLE II
Change of Control Benefit

2.1

Employment Term and Capacity after Change of Control. (a)  If the Executive continues to serve as an officer of the Company and a Change of Control occurs on or before December 31, 2008, then the Executive’s employment term (the “Employment Term”) shall continue through the later of the third anniversary of the Change of Control or December 31, 2008, subject to any earlier termination of Executive’s status as an officer and employee pursuant to this Agreement.

(b)

After a Change of Control and during the Employment Term, (i) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control and (ii) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Change of Control or any office or location less than 35 miles from such location.  Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Executive’s position, authority, duties and responsibilities prior to a Change of Con trol unless after the Change of Control the Executive holds an equivalent position in the Post-Transaction Corporation or an Affiliate.  

2.2

Compensation and Benefits.  During the Employment Term, the Executive shall be entitled to the following compensation and benefits:  

(a)

Salary.  An annual salary (“Base Salary”) at the highest rate in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control, payable to the Executive at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, the intervals in effect at any time after the Change of Control for other most senior executives of the Post-Transaction Corporation and its Affiliates.

(b)

Bonus.  Executive shall be entitled to participate in an annual incentive bonus program applicable to other most senior executives of the Post-Transaction Corporation and its Affiliates but in no event shall such program provide the Executive with incentive opportunities less favorable than the most favorable of those provided by the Company and its Affiliates for the Executive under the Company’s annual cash plan as in effect for Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, those provided generally at any time after the Change of Control to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(c)

Fringe Benefits.  The Executive shall be entitled to fringe benefits (including, but not limited to, automobile allowance, air travel, and reimbursement for club membership dues) in accordance with the most favorable agreements, plans, practices, programs and policies of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(d)

Expenses.  The Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses (including food and lodging) incurred by the Executive in accordance with the most favorable agreements, policies, practices and procedures of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(e)

Incentive, Savings and Retirement Plans.  The Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other most senior executives of the Post-Transaction Corporation and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its Affiliates for the Executive under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control.

(f)

Welfare Benefit Plans.  The Executive and the Executive’s family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Post-Transaction Corporation and its Affiliates (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other most senior executives of the Post-Transaction Corporation and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies and programs of the Company and its Affiliates in effect for the Executive at any time during t he 120-day period immediately preceding the Change of Control.

(g)

Indemnification and Insurance.  The Post-Transaction Corporation shall indemnify the Executive, to the fullest extent permitted by applicable law, for any and all claims brought against him arising out his services during or prior to the Employment Term.  In addition, the Post-Transaction Corporation shall maintain a directors’ and officers’ insurance policy covering the Executive substantially in the form of the policy maintained by the Company and its Affiliates at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(h)

Office and Support Staff.  The Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its Affiliates at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(i)

Vacation.  The Executive shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its Affiliates as in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

2.3

Obligations upon Termination after a Change of Control.  

(a)

Death, Disability or Retirement.  If, after a Change of Control and during the Employment Term, (1) the Executive’s status as an officer and employee is terminated by reason of the Executive’s death, (2) the Post-Transaction Corporation terminates the Executive’s status as an officer and employee by reason of Executive’s Disability, or (3) the Executive Retires and terminates his status as an officer and employee, then, subject to Section 2.3(f):

(i)

The Post-Transaction Corporation or an Affiliate will pay to the Executive or his legal representatives the sum of (A) the amount of the Executive’s Base Salary earned through the Termination Date to the extent not previously paid and (B) any compensation previously deferred by the Executive (together with any accrued interest on earnings thereon) to the extent not previously paid in accordance with the terms of the deferred compensation plans under which such compensation was deferred (the sum of the amounts described in clauses (A) and (B) being hereinafter referred to as the “Accrued Obligations”);

(ii)

The Post-Transaction Corporation or an Affiliate will pay to the Executive or his legal representatives a pro rata bonus in an amount determined by calculating the bonus that the Executive would receive for the fiscal year in which the Termination Date occurs based upon the level of achievement of the applicable performance goals through the end of the fiscal quarter in which the Termination Date occurs, annualized as if such level of performance had continued throughout the entire fiscal year and then multiplying such bonus amount by the fraction obtained by dividing the number of days in the year through the Termination Date by 365 (the “Pro Rata Bonus”);

(iii)

If the Executive Retires, then for a period commencing on the Termination Date and ending on the earlier of (A) the third anniversary of the Termination Date, or (B) the date that the Executive accepts new employment (the “Continuation Period”), the Post-Transaction Corporation or an Affiliate will at its expense maintain and administer for the continued benefit of Executive all insurance and welfare benefit plans in which Executive was entitled to participate as an employee as of the Termination Date, provided that Executive’s continued participation is possible under the general terms and provisions of such plans and all applicable laws.  The coverage and benefits (including deductibles and costs) provided under any such benefit plan in accordance with this paragraph during the Continuation Period will be no less favorable to Executiv e than the most favorable of such coverages and benefits as of the Termination Date.  If Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Post-Transaction Corporation or an Affiliate will provide Executive with compensation or benefits substantially similar or comparable in value to those Executive would otherwise have been entitled to receive under such plans.  At the end of the Continuation Period, the Executive will have the option to have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Post-Transaction Corporation or an Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) at the end of the Continuation Period or earlier cessation of the Post-Transaction Corporation’s obligation under the foregoing pro visions of this paragraph; and

(iv)

The Post-Transaction Corporation or an Affiliate will pay or deliver, as appropriate, all other benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or its Affiliates with respect to services rendered by the Executive prior to the Termination Date.

(b)

Cause.  If, after a Change of Control and during the Employment Term, the Executive’s status as an officer and employee is terminated by the Post-Transaction Corporation or an Affiliate for Cause, the Post-Transaction Corporation or Affiliate will pay to the Executive the Accrued Obligations without further obligation to the Executive other than for obligations by law and obligations for any benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or Affiliate with respect to services rendered by the Executive prior to the Termination Date.

(c)

Termination by Company for Reasons other than Death, Disability or Cause; by Executive for Good Reason.  If, after a Change of Control and during the Employment Term, the Post-Transaction Corporation or an Affiliate terminates the Executive’s status as an officer and employee other than for Cause, death or Disability, or the Executive terminates his status as an officer and employee for Good Reason, then, subject to Section 2.3(f) hereof:

(i)

The Post-Transaction Corporation or an Affiliate will pay to the Executive the Accrued Obligations and the Pro Rata Bonus;

(ii)

The Post-Transaction Corporation or an Affiliate will pay to the Executive an amount equal to three times the sum of (A) the Executive’s Base Salary in effect at the Termination Date and (B) the highest bonus awarded to the Executive during the three fiscal years immediately preceding the Termination Date;

(iii)

For the Continuation Period, the Post-Transaction Corporation or an Affiliate will at its expense maintain and administer for the continued benefit of Executive all insurance and welfare benefit plans in which Executive was entitled to participate as an employee as of the Termination Date; provided that Executive’s continued participation is possible under the general terms and provisions of such plans and all applicable laws.  The coverage and benefits (including deductibles and costs) provided under any such benefit plan in accordance with this paragraph during the Continuation Period will be no less favorable to Executive than the most favorable of such coverages and benefits as of the Termination Date; provided, however, in the event of the Disability of Executive during the Continuation Period, disability benefits will, to the maximum extent possible, not be paid for the Continuation Period but will instead commence immediately following the end of the Continuation Period.  If Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Post-Transaction Corporation or its Affiliate will provide Executive with compensation or benefits substantially similar or comparable in value to those Executive would otherwise have been entitled to receive under such plans.  At the end of the Continuation Period, the Executive will have the option to have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Post-Transaction Corporation or its Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for coverage under COBRA at the end of the Continuation Period or earlier cessation of the Post-Transaction Corporation’s obligation under the foregoing provisions of th is paragraph;

(iv)

All benefits that the Executive is entitled to receive pursuant to benefit plans maintained by the Post-Transaction Corporation or an Affiliate under which benefits are calculated based upon years of service or age will be calculated by treating the Executive as having attained two additional years of age and as having provided two additional years of service as of the Termination Date; and

(v)

The Post-Transaction Corporation or an Affiliate will pay or deliver, as appropriate, all other benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or Affiliate with respect to services rendered by the Executive prior to the Termination Date.

(d)

Resignation from Board of Directors.  If the Executive is a director of the Post-Transaction Corporation or any of its Affiliates and his status as an officer and employee is terminated for any reason other than death, the Executive will, if requested by the Post-Transaction Corporation, immediately resign as a director of the Post-Transaction Corporation and its Affiliates.  If such resignation is not received within 20 business days after the Executive actually receives written notice from the Post-Transaction Corporation requesting the resignation, the Executive will forfeit any right to receive any payments pursuant to this Agreement.

(e)

Nondisclosure and Proprietary Rights.  The rights and obligations of the Company and the Executive contained in Article III hereof will continue to apply notwithstanding a termination following a Change of Control.

(f)

Most Favorable Benefits.  It is the intention of the parties that the terms of this Agreement provide payments and benefits to the Executive that are equivalent or more beneficial to the Executive than are otherwise available to the Executive under the terms of any applicable benefit plan or related compensation agreement.  To that end, the terms of the Agreement shall govern the payments and benefits to which the Executive shall be entitled upon the termination of the Executive’s status as an officer and employee as provided herein, except that if the terms of any applicable benefit plan or related compensation agreement provide more favorable benefits to the Executive than are provided hereunder, the terms of such plan or agreement shall control.

2.4

Excise Tax Provision.

(a)

Notwithstanding any other provisions of this Agreement, if a Change of Control occurs during the original or extended term of this Agreement, in the event that any of the payments or benefits received or to be received by the Executive in connection with the Change of Control or the Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change of Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the payments and benefits under Section 2.3(c) hereof, but excluding any payment to be made pursuant to this Section 2.4, being hereinafter referred to as the “Initial Payments”) will be subject (in whole or in part) to an excise tax imposed by section 4999 of the Code or any similar tax (the “Excise Tax”), the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of (i) any Excise Tax on the Initial Payments, (ii) any federal, state and local income and employment taxes on the Gross-Up Payment, (iii) any Medicare tax on the Gross-Up Payment, and (iv) the Excise Tax on the Gross-Up Payment, shall be equal to the Initial Payments.

(b)

For purposes of determining whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Initial Payments shall be treated as “parachute payments” (within the meaning of the Code) unless, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change of Control, the Company’s independent auditor (the “Auditor”), such payments or benefits (in whole or in part) do not constitute parachute payments, (ii) all “excess parachute payments” within the meaning of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually r endered (within the meaning of the Code) in excess of the “Base Amount” (within the meaning set forth in the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of the Code.  For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the date of termination of the Executive’s employment (or if there is no date of termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 2.4), net of the maximum reduction in federal income taxes which could be ob tained from deduction of such state and local taxes.

(c)

In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within ten business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate prov ided in section 1274(b)(2)(B) of the Code).  In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within ten business days following the time that the amount of such excess is finally determined.  The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments.

(d)

The Gross-Up Payment provided in Section 2.4 shall be made not later than the “Payment Day.”  The Payment Day shall be the tenth business day following the date of termination, or, if the Executive becomes entitled, before the Executive’s employment is terminated, to a Gross-Up Payment under this Section 2.4, then not later than the tenth business day following the date as of which the present value of the Initial Payments is calculated for purposes of determining the amount of such Gross-Up Payment.  Notwithstanding the preceding provisions of this Section 2.4(d), if the amount of the Gross-Up Payment cannot be finally determined on or before the Payment Day, the Company shall pay to the Executive on the Payment Day an estimate, as determined in accordance with Section 2.4(b), of the minimum amount of the Gross-Up Payment to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Payment Day.  In the event that the amount of the estimated Gross-Up Payment so made exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the tenth business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code).  At the time that any Gross-Up Payment is made pursuant to Section 2.4(a) (and at the time that any additional Gross-Up Payment is made pursuant to Section 2.4(c)), the Company shall provide the Executive with a written statement setting forth the manner in which any such payment was calculated and the basis for such calculations includi ng, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinion or advice which is in writing shall be attached to the statement).

2.5

Stock Options; Performance Units; Restricted Stock Units.  The foregoing benefits are intended to be in addition to the value of any options to acquire Common Stock of the Company, the exercisability of which is accelerated pursuant to the terms of any stock option agreement, any related limited rights, any restricted stock units the vesting of which is accelerated pursuant to the terms of the restricted stock unit agreement, the performance units under the long-term performance incentive plans, and any other incentive or similar plan heretofore or hereafter adopted by the Company.

2.6

Legal Fees.  The Company agrees to pay as incurred all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount or timing of any payment pursuant to this Agreement).

ARTICLE III
Nondisclosure and Proprietary Rights

3.1

Confidential Information.  For purposes of this Agreement, the term "Confidential Information" means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its Affiliates, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its Affiliates (other than information known by such persons through a violation of an obligation of confidentiality to the Company), whether produced by the Company and its Affiliates or any of their consultants, agents or independent contractors or by Executive, and whether or not marked confidential , including without limitation information relating to the Company’s or its Affiliates’ products and services, business plans, business acquisitions, processes, product or service research and development ideas, methods or techniques, training methods and materials, and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants’ reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the forego ing.

3.2

Nondisclosure of Confidential Information.  Executive will hold in a fiduciary capacity for the benefit of the Company all Confidential Information obtained by Executive during Executive’s employment (whether prior to or after the Agreement Date) and will use such Confidential Information solely within the scope of his employment with and for the exclusive benefit of the Company.  For a period of five years after the Termination Date, Executive agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto.  In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information, Executive will give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

3.3

Injunctive Relief; Other Remedies.  Executive acknowledges that a breach by Executive of Section 3.2 would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, Executive agrees that, in the event of a breach or threatened breach by Executive of the provisions of Section 3.2, the Company will be entitled to injunctive relief restraining Executive from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law.  Nothing herein, however, will be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of this Agreement by Executive, including without limitation the recov ery of damages and/or costs and expenses, such as reasonable attorneys’ fees, incurred by the Company as a result of any such breach or threatened breach.  In addition to the exercise of the foregoing remedies, the Company will have the right upon the occurrence of any such breach to offset the damages of such breach as determined by the Company, against any unpaid salary, bonus, commissions or reimbursements otherwise owed to Executive.  In particular, Executive acknowledges that the payments provided under Article II are conditioned upon Executive fulfilling the nondisclosure agreements contained in this Article III.  If Executive at any time materially breaches nondisclosure agreements contained in this Article III, then the Company may offset the damages of such breach, as determined solely by the Company, against payments otherwise due to Executive under Article II or, at the Company’s option, suspend payments otherwise due to Executive under Article II during the period of such breach.  Executive acknowledges that any such offset or suspension of payments would be an exercise of the Company’s right to offset or suspend its performance hereunder upon Executive’s breach of this Agreement; such offset or suspension of payments would not constitute, and shall not be characterized as, the imposition of liquidated damages.

3.4

Governing Law of this Article III; Consent to Jurisdiction.  Any dispute regarding the reasonableness of the covenants and agreements set forth in this Article III or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, will be governed by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in which the alleged prohibited disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby consent to the jurisdiction of the state and federal courts sitting in the relevant State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction) for resolution of such dispute, and agree that service of process may be made upon him or it in any legal proceeding relating to this Ar ticle III by any means allowed under the laws of such jurisdiction.

3.5

Executive’s Understanding of this Article.  Executive hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this Article III.  Executive acknowledges that the duration of the covenants contained in Article III are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, and (b) Executive’s level of control over and contact with the business and operations of the Company and its Affiliates in various jurisdictions where same are conducted.  It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and, therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Article III invalid or unenforceable.  

ARTICLE IV
Miscellaneous

4.1

Binding Effect; Successors.

(a)

This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns.

(b)

This Agreement is personal to the Executive and shall not be assignable by the Executive without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution.

(c)

The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Executive.  

(d)

The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Executive.

4.2

Notices.  All notices hereunder must be in writing and, unless otherwise specifically provided herein, will be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt.  All such notices must be addressed as follows:

If to the Company, to:

Freeport-McMoRan Copper & Gold Inc.

1615 Poydras Street

New Orleans, Louisiana  70112

Attention:  Chairman of Corporate Personnel Committee

If to the Executive, to:

Michael J. Arnold

1615 Poydras Street, Room 411

New Orleans, Louisiana 70112

or such other address as to which any party hereto may have notified the other in writing.

4.3

Governing Law.  Except as provided in Article III hereof, this Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws.

4.4

Withholding.  The Executive agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement.

4.5

Amendment, Waiver.  No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties.

4.6

Severability.  If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Executive and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law.  Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent pe rmitted by law.

4.7

Waiver of Breach.  The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof.

4.8

Remedies Not Exclusive.  No remedy specified herein shall be deemed to be such party’s exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation.

4.9

Company’s Reservation of Rights.  Executive acknowledges and understands that the Executive serves at the pleasure of the Board and that the Company has the right at any time to terminate Executive’s status as an employee of the Company or any of its Affiliates, or to change or diminish his status during the Employment Term, subject to the rights of the Executive to claim the benefits conferred by this Agreement.

4.10

Prior Change of Control Agreement.  Effective as of the Agreement Date, this Agreement supersedes any prior change of control or nondisclosure agreement between the Executive and the Company.

4.11

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be executed as of the Agreement Date.

Freeport-McMoRan Copper & Gold Inc.

By: /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

                                                                              /s/ Michael J. Arnold

Michael J. Arnold

Signature Page of Change of Control Agreement

between Freeport-McMoRan Copper & Gold Inc.

and Michael J. Arnold

EX-10

Change of Control Agreement for Officers

This Change of Control Agreement (“Agreement”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), and Mark J. Johnson (the “Executive”) is dated effective as of February 3, 2004 (the “Agreement Date”).

ARTICLE I
Definitions

1.1

Company.  As used in this Agreement, “Company” means the Company as defined above and any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets of the Company.

1.2

Change of Control. (a)  “Change of Control” means (capitalized terms not otherwise defined will have the meanings ascribed to them in paragraph (b) below):

(i)

the acquisition by any Person together with all Affiliates of such Person, of Beneficial Ownership of the Threshold Percentage or more; provided, however, that for purposes of this Section 1.2(a)(i), the following will not constitute a Change of Control:

(A)

any acquisition (other than a “Business Combination,” as defined below, that constitutes a Change of Control under Section 1.2(a)(iii) hereof) of Common Stock directly from the Company,

(B)

any acquisition of Common Stock by the Company or its subsidiaries,

(C)

any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation or other entity controlled by the Company, or

(D)

any acquisition of Common Stock pursuant to a Business Combination that does not constitute a Change of Control under Section 1.2(a)(iii) hereof; or

(ii)

individuals, excluding the representatives of Rio Tinto (as defined below), who, as of the effective date of this Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual, excluding any representative of Rio Tinto, becoming a director subsequent to the effective date of this Agreement whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board; or

(iii)

the consummation of a reorganization, merger or consolidation (including a merger or consolidation of the Company or any direct or indirect subsidiary of the Company), or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, immediately following such Business Combination:

(A)

the individuals and entities who were the Beneficial Owners of the Company Voting Stock immediately prior to such Business Combination have direct or indirect Beneficial Ownership of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Post-Transaction Corporation, and

(B)

no Person together with all Affiliates of such Person (excluding the Post-Transaction Corporation and any employee benefit plan or related trust of either the Company, the Post-Transaction Corporation or any subsidiary of either corporation) Beneficially Owns 30% or more of the then outstanding shares of common stock of the Post-Transaction Corporation or 30% or more of the combined voting power of the then outstanding voting securities of the Post-Transaction Corporation; provided, that if that certain Agreement dated as of May 2, 1995 by and between the Company and Rio Tinto remains in effect as it may be amended from time to time with respect to the Post-Transaction Corporation, then Rio Tinto and its Affiliates may Beneficially Own any amount less than the number of shares of the Post-Transaction Corporation that could elect a majority of the directors of the Post-Transaction Corporation if all directors were to be elected at a single meeting, and

(C)

at least a majority of the members of the board of directors of the Post-Transaction Corporation were members of the Incumbent Board at the time of the execution of the initial agreement, and of the action of the Board, providing for such Business Combination; or

(iv)

approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(b)

As used in this Section 1.2 and elsewhere in this Agreement, the following terms have the meanings indicated:

(i)

Affiliate:  “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another specified Person.

(ii)

Beneficial Owner:  “Beneficial Owner” (and variants thereof), with respect to a security, means a Person who, directly or indirectly (through any contract, understanding, relationship or otherwise), has or shares (A) the power to vote, or direct the voting of, the security, and/or (B) the power to dispose of, or to direct the disposition of, the security.

(iii)

Company Voting Stock:  “Company Voting Stock” means any capital stock of the Company that is then entitled to vote for the election of directors.

(iv)

Majority Shares:  “Majority Shares” means the number of shares of Company Voting Stock that could elect a majority of the directors of the Company if all directors were to be elected at a single meeting.

(v)

Person:  “Person” means a natural person or entity, and will also mean the group or syndicate created when two or more Persons act as a syndicate or other group (including without limitation a partnership, limited partnership, joint venture or other joint undertaking) for the purpose of acquiring, holding, or disposing of a security, except that “Person” will not include an underwriter temporarily holding a security pursuant to an offering of the security.

(vi)

Post-Transaction Corporation:  Unless a Change of Control includes a Business Combination, “Post-Transaction Corporation” means the Company after the Change of Control.  If a Change of Control includes a Business Combination, “Post-Transaction Corporation” will mean the corporation or other entity resulting from the Business Combination unless, as a result of such Business Combination, an ultimate parent entity controls the Company or all or substantially all of the Company’s assets either directly or indirectly, in which case, “Post-Transaction Corporation” will mean such ultimate parent entity.

(vii)

Threshold Percentage: (A)  As long as that certain Agreement dated as of May 2, 1995, by and between the Company and Rio Tinto Indonesia Limited (“Rio Tinto”) remains in effect as it may be amended from time to time, “Threshold Percentage” means with respect to Rio Tinto and its Affiliates, that percentage of Common Stock that would result in Rio Tinto and its Affiliates having Beneficial Ownership of shares of Company Voting Stock equal to or greater than the Majority Shares; provided that, solely for purposes of such calculation, the shares of Company Voting Stock issuable upon exercise of warrants, options or other rights, or upon conversion or exchange of convertible or exchangeable securities, owned by Rio Tinto and its Affiliates, will be treated as outstanding Company Voting Stock.  (B) With respect to any other Person and its Affiliates, “Threshold Percentage” means 30% of all then outstanding Common Stock.

(viii)

Common Stock:  “Common Stock” means the Class B common stock, $0.01 par value per share, of the Company.

1.3

Cause.  “Cause” shall mean:

(a)

The Executive’s willful and continued failure to perform substantially the Executive’s duties with the Post-Transaction Corporation or its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties;

(b)

The Executive’s material breach of this Agreement after a written demand is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has materially breached this Agreement; or

(c)

The final conviction of the Executive or an entering of a guilty plea or a plea of no contest by the Executive to a felony.

For purposes of this provision, no act or failure to act, on the part of the Executive, will be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without a reasonable belief that the act or omission was in the best interest of the Post-Transaction Corporation or its Affiliates.  Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board or the advice of counsel to the Post-Transaction Corporation or its Affiliates will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Post-Transaction Corporation or its Affiliates.  The termination of employment of the Executive will not be deemed to be for Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three- quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive has engaged in the conduct described in subparagraph (a), (b) or (c) above, and specifying the particulars of such conduct.

1.4

Good Reason.  “Good Reason” shall mean:

(a)

Any failure of the Post-Transaction Corporation to provide the Executive with the position, authority, duties and responsibilities at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control.  Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Executive’s position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control the Executive holds an equivalent position in the Post-Transaction Corporation or its Affiliates;  

(b)

The assignment to the Executive of any duties inconsistent in any material respect with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.1(b) of this Agreement, or any other action that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied within 10 days after receipt of written notice thereof from the Executive to the Post-Transaction Corporation;

(c)

Any failure by the Post-Transaction Corporation or its Affiliates to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that is remedied within 10 days after receipt of written notice thereof from the Executive to the Post-Transaction Corporation;

(d)

The Post-Transaction Corporation or its Affiliates requiring the Executive to be based at any office or location other than as provided in Section 2.1(b)(ii) hereof or requiring the Executive to travel on business to a substantially greater extent than required immediately prior to the Change of Control; or

(e)

Any failure by the Company to comply with and satisfy Sections 4.1(c) and (d) of this Agreement.

For purposes of this Section 1.4, any determination of “Good Reason” made by the Executive in good faith and based upon his reasonable belief and understanding shall be conclusive.

1.5

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

1.6

Disability.  “Disability” shall mean:

(a)

A disability entitling the Executive to receive benefits under a long-term disability insurance policy maintained by the Post-Transaction Corporation or an Affiliate in effect at the time either because he is totally disabled or partially disabled, as such terms are defined in such policy in effect as of the Agreement Date or as similar terms are defined in any successor policy.

(b)

If there is no long-term disability plan in effect covering the Executive, and if (i) a physical or mental illness renders the Executive incapable of satisfactorily discharging his duties and responsibilities to the Post-Transaction Corporation or an Affiliate for a period of 90 consecutive days, and (ii) such incapacity is certified in writing by a duly qualified physician chosen by the Post-Transaction Corporation or an Affiliate and reasonably acceptable to the Executive or his legal representatives, then the Board will have the power to determine that the Executive has become disabled.  If the Board makes such a determination, the Post-Transaction Corporation or its Affiliate will have the continuing right and option, during the period that such disability continues, and by notice given in the manner provided in this Agreement, to terminate the status of Executive as an officer and employee.  Any such termination will become effective 30 days after such notice of termination is given, unless within such 30-day period, the Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Post-Transaction Corporation or an Affiliate and reasonably acceptable to the Executive or his legal representatives so certifies i n writing) and the Executive in fact resumes such services.

(c)

The “Disability Effective Date” will mean the date on which termination of Executive’s status as an officer and employee becomes effective due to Disability.

1.7

Retirement.  “Retirement” (and variants thereof) for purposes of this Agreement is defined as the Executive’s voluntary termination of his status as an officer and employee at any time after reaching age 60, but shall not include a termination for Good Reason.

1.8

Board.  “Board” shall mean the Board of Directors of the Company, or if after a Change of Control, the Post-Transaction Corporation.

1.9

Termination Date.  “Termination Date” means, if Executive’s status as an officer and employee is terminated (i) by reason of Executive’s death, the date of Executive’s death, (ii) by reason of Disability, the Disability Effective Date, (iii) by the Company other than by reason of death or Disability, the date of delivery of the notice of termination or any later date specified in the notice of termination, which date will not be more than 30 days after the giving of the notice, or (iv) by the Executive other than by reason of death, the date of delivery of the notice of termination or any later date specified in the notice of termination, which date will not be more than 30 days after the giving of the notice.

ARTICLE II
Change of Control Benefit

2.1

Employment Term and Capacity after Change of Control. (a)  If the Executive continues to serve as an officer of the Company and a Change of Control occurs on or before December 31, 2008, then the Executive’s employment term (the “Employment Term”) shall continue through the later of the third anniversary of the Change of Control or December 31, 2008, subject to any earlier termination of Executive’s status as an officer and employee pursuant to this Agreement.

(b)

After a Change of Control and during the Employment Term, (i) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control and (ii) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Change of Control or any office or location less than 35 miles from such location.  Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Executive’s position, authority, duties and responsibilities prior to a Change of Con trol unless after the Change of Control the Executive holds an equivalent position in the Post-Transaction Corporation or an Affiliate.  

2.2

Compensation and Benefits.  During the Employment Term, the Executive shall be entitled to the following compensation and benefits:  

(a)

Salary.  An annual salary (“Base Salary”) at the highest rate in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control, payable to the Executive at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, the intervals in effect at any time after the Change of Control for other most senior executives of the Post-Transaction Corporation and its Affiliates.

(b)

Bonus.  Executive shall be entitled to participate in an annual incentive bonus program applicable to other most senior executives of the Post-Transaction Corporation and its Affiliates but in no event shall such program provide the Executive with incentive opportunities less favorable than the most favorable of those provided by the Company and its Affiliates for the Executive under the Company’s annual cash plan as in effect for Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, those provided generally at any time after the Change of Control to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(c)

Fringe Benefits.  The Executive shall be entitled to fringe benefits (including, but not limited to, automobile allowance, air travel, and reimbursement for club membership dues) in accordance with the most favorable agreements, plans, practices, programs and policies of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(d)

Expenses.  The Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses (including food and lodging) incurred by the Executive in accordance with the most favorable agreements, policies, practices and procedures of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(e)

Incentive, Savings and Retirement Plans.  The Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other most senior executives of the Post-Transaction Corporation and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its Affiliates for the Executive under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control.

(f)

Welfare Benefit Plans.  The Executive and the Executive’s family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Post-Transaction Corporation and its Affiliates (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other most senior executives of the Post-Transaction Corporation and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies and programs of the Company and its Affiliates in effect for the Executive at any time during t he 120-day period immediately preceding the Change of Control.

(g)

Indemnification and Insurance.  The Post-Transaction Corporation shall indemnify the Executive, to the fullest extent permitted by applicable law, for any and all claims brought against him arising out his services during or prior to the Employment Term.  In addition, the Post-Transaction Corporation shall maintain a directors’ and officers’ insurance policy covering the Executive substantially in the form of the policy maintained by the Company and its Affiliates at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(h)

Office and Support Staff.  The Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its Affiliates at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(i)

Vacation.  The Executive shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its Affiliates as in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

2.3

Obligations upon Termination after a Change of Control.  

(a)

Death, Disability or Retirement.  If, after a Change of Control and during the Employment Term, (1) the Executive’s status as an officer and employee is terminated by reason of the Executive’s death, (2) the Post-Transaction Corporation terminates the Executive’s status as an officer and employee by reason of Executive’s Disability, or (3) the Executive Retires and terminates his status as an officer and employee, then, subject to Section 2.3(f):

(i)

The Post-Transaction Corporation or an Affiliate will pay to the Executive or his legal representatives the sum of (A) the amount of the Executive’s Base Salary earned through the Termination Date to the extent not previously paid and (B) any compensation previously deferred by the Executive (together with any accrued interest on earnings thereon) to the extent not previously paid in accordance with the terms of the deferred compensation plans under which such compensation was deferred (the sum of the amounts described in clauses (A) and (B) being hereinafter referred to as the “Accrued Obligations”);

(ii)

The Post-Transaction Corporation or an Affiliate will pay to the Executive or his legal representatives a pro rata bonus in an amount determined by calculating the bonus that the Executive would receive for the fiscal year in which the Termination Date occurs based upon the level of achievement of the applicable performance goals through the end of the fiscal quarter in which the Termination Date occurs, annualized as if such level of performance had continued throughout the entire fiscal year and then multiplying such bonus amount by the fraction obtained by dividing the number of days in the year through the Termination Date by 365 (the “Pro Rata Bonus”);

(iii)

If the Executive Retires, then for a period commencing on the Termination Date and ending on the earlier of (A) the third anniversary of the Termination Date, or (B) the date that the Executive accepts new employment (the “Continuation Period”), the Post-Transaction Corporation or an Affiliate will at its expense maintain and administer for the continued benefit of Executive all insurance and welfare benefit plans in which Executive was entitled to participate as an employee as of the Termination Date, provided that Executive’s continued participation is possible under the general terms and provisions of such plans and all applicable laws.  The coverage and benefits (including deductibles and costs) provided under any such benefit plan in accordance with this paragraph during the Continuation Period will be no less favorable to Executiv e than the most favorable of such coverages and benefits as of the Termination Date.  If Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Post-Transaction Corporation or an Affiliate will provide Executive with compensation or benefits substantially similar or comparable in value to those Executive would otherwise have been entitled to receive under such plans.  At the end of the Continuation Period, the Executive will have the option to have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Post-Transaction Corporation or an Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) at the end of the Continuation Period or earlier cessation of the Post-Transaction Corporation’s obligation under the foregoing pro visions of this paragraph; and

(iv)

The Post-Transaction Corporation or an Affiliate will pay or deliver, as appropriate, all other benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or its Affiliates with respect to services rendered by the Executive prior to the Termination Date.

(b)

Cause.  If, after a Change of Control and during the Employment Term, the Executive’s status as an officer and employee is terminated by the Post-Transaction Corporation or an Affiliate for Cause, the Post-Transaction Corporation or Affiliate will pay to the Executive the Accrued Obligations without further obligation to the Executive other than for obligations by law and obligations for any benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or Affiliate with respect to services rendered by the Executive prior to the Termination Date.

(c)

Termination by Company for Reasons other than Death, Disability or Cause; by Executive for Good Reason.  If, after a Change of Control and during the Employment Term, the Post-Transaction Corporation or an Affiliate terminates the Executive’s status as an officer and employee other than for Cause, death or Disability, or the Executive terminates his status as an officer and employee for Good Reason, then, subject to Section 2.3(f) hereof:

(i)

The Post-Transaction Corporation or an Affiliate will pay to the Executive the Accrued Obligations and the Pro Rata Bonus;

(ii)

The Post-Transaction Corporation or an Affiliate will pay to the Executive an amount equal to three times the sum of (A) the Executive’s Base Salary in effect at the Termination Date and (B) the highest bonus awarded to the Executive during the three fiscal years immediately preceding the Termination Date;

(iii)

For the Continuation Period, the Post-Transaction Corporation or an Affiliate will at its expense maintain and administer for the continued benefit of Executive all insurance and welfare benefit plans in which Executive was entitled to participate as an employee as of the Termination Date; provided that Executive’s continued participation is possible under the general terms and provisions of such plans and all applicable laws.  The coverage and benefits (including deductibles and costs) provided under any such benefit plan in accordance with this paragraph during the Continuation Period will be no less favorable to Executive than the most favorable of such coverages and benefits as of the Termination Date; provided, however, in the event of the Disability of Executive during the Continuation Period, disability benefits will, to the maximum extent possible, not be paid for the Continuation Period but will instead commence immediately following the end of the Continuation Period.  If Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Post-Transaction Corporation or its Affiliate will provide Executive with compensation or benefits substantially similar or comparable in value to those Executive would otherwise have been entitled to receive under such plans.  At the end of the Continuation Period, the Executive will have the option to have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Post-Transaction Corporation or its Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for coverage under COBRA at the end of the Continuation Period or earlier cessation of the Post-Transaction Corporation’s obligation under the foregoing provisions of th is paragraph;

(iv)

All benefits that the Executive is entitled to receive pursuant to benefit plans maintained by the Post-Transaction Corporation or an Affiliate under which benefits are calculated based upon years of service or age will be calculated by treating the Executive as having attained two additional years of age and as having provided two additional years of service as of the Termination Date; and

(v)

The Post-Transaction Corporation or an Affiliate will pay or deliver, as appropriate, all other benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or Affiliate with respect to services rendered by the Executive prior to the Termination Date.

(d)

Resignation from Board of Directors.  If the Executive is a director of the Post-Transaction Corporation or any of its Affiliates and his status as an officer and employee is terminated for any reason other than death, the Executive will, if requested by the Post-Transaction Corporation, immediately resign as a director of the Post-Transaction Corporation and its Affiliates.  If such resignation is not received within 20 business days after the Executive actually receives written notice from the Post-Transaction Corporation requesting the resignation, the Executive will forfeit any right to receive any payments pursuant to this Agreement.

(e)

Nondisclosure and Proprietary Rights.  The rights and obligations of the Company and the Executive contained in Article III hereof will continue to apply notwithstanding a termination following a Change of Control.

(f)

Most Favorable Benefits.  It is the intention of the parties that the terms of this Agreement provide payments and benefits to the Executive that are equivalent or more beneficial to the Executive than are otherwise available to the Executive under the terms of any applicable benefit plan or related compensation agreement.  To that end, the terms of the Agreement shall govern the payments and benefits to which the Executive shall be entitled upon the termination of the Executive’s status as an officer and employee as provided herein, except that if the terms of any applicable benefit plan or related compensation agreement provide more favorable benefits to the Executive than are provided hereunder, the terms of such plan or agreement shall control.

2.4

Excise Tax Provision.

(a)

Notwithstanding any other provisions of this Agreement, if a Change of Control occurs during the original or extended term of this Agreement, in the event that any of the payments or benefits received or to be received by the Executive in connection with the Change of Control or the Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change of Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the payments and benefits under Section 2.3(c) hereof, but excluding any payment to be made pursuant to this Section 2.4, being hereinafter referred to as the “Initial Payments”) will be subject (in whole or in part) to an excise tax imposed by section 4999 of the Code or any similar tax (the “Excise Tax”), the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of (i) any Excise Tax on the Initial Payments, (ii) any federal, state and local income and employment taxes on the Gross-Up Payment, (iii) any Medicare tax on the Gross-Up Payment, and (iv) the Excise Tax on the Gross-Up Payment, shall be equal to the Initial Payments.

(b)

For purposes of determining whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Initial Payments shall be treated as “parachute payments” (within the meaning of the Code) unless, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change of Control, the Company’s independent auditor (the “Auditor”), such payments or benefits (in whole or in part) do not constitute parachute payments, (ii) all “excess parachute payments” within the meaning of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually r endered (within the meaning of the Code) in excess of the “Base Amount” (within the meaning set forth in the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of the Code.  For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the date of termination of the Executive’s employment (or if there is no date of termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 2.4), net of the maximum reduction in federal income taxes which could be ob tained from deduction of such state and local taxes.

(c)

In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within ten business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate prov ided in section 1274(b)(2)(B) of the Code).  In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within ten business days following the time that the amount of such excess is finally determined.  The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments.

(d)

The Gross-Up Payment provided in Section 2.4 shall be made not later than the “Payment Day.”  The Payment Day shall be the tenth business day following the date of termination, or, if the Executive becomes entitled, before the Executive’s employment is terminated, to a Gross-Up Payment under this Section 2.4, then not later than the tenth business day following the date as of which the present value of the Initial Payments is calculated for purposes of determining the amount of such Gross-Up Payment.  Notwithstanding the preceding provisions of this Section 2.4(d), if the amount of the Gross-Up Payment cannot be finally determined on or before the Payment Day, the Company shall pay to the Executive on the Payment Day an estimate, as determined in accordance with Section 2.4(b), of the minimum amount of the Gross-Up Payment to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Payment Day.  In the event that the amount of the estimated Gross-Up Payment so made exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the tenth business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code).  At the time that any Gross-Up Payment is made pursuant to Section 2.4(a) (and at the time that any additional Gross-Up Payment is made pursuant to Section 2.4(c)), the Company shall provide the Executive with a written statement setting forth the manner in which any such payment was calculated and the basis for such calculations includi ng, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinion or advice which is in writing shall be attached to the statement).

2.5

Stock Options; Performance Units; Restricted Stock Units.  The foregoing benefits are intended to be in addition to the value of any options to acquire Common Stock of the Company, the exercisability of which is accelerated pursuant to the terms of any stock option agreement, any related limited rights, any restricted stock units the vesting of which is accelerated pursuant to the terms of the restricted stock unit agreement, the performance units under the long-term performance incentive plans, and any other incentive or similar plan heretofore or hereafter adopted by the Company.

2.6

Legal Fees.  The Company agrees to pay as incurred all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount or timing of any payment pursuant to this Agreement).

ARTICLE III
Nondisclosure and Proprietary Rights

3.1

Confidential Information.  For purposes of this Agreement, the term "Confidential Information" means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its Affiliates, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its Affiliates (other than information known by such persons through a violation of an obligation of confidentiality to the Company), whether produced by the Company and its Affiliates or any of their consultants, agents or independent contractors or by Executive, and whether or not marked confidential , including without limitation information relating to the Company’s or its Affiliates’ products and services, business plans, business acquisitions, processes, product or service research and development ideas, methods or techniques, training methods and materials, and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants’ reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the forego ing.

3.2

Nondisclosure of Confidential Information.  Executive will hold in a fiduciary capacity for the benefit of the Company all Confidential Information obtained by Executive during Executive’s employment (whether prior to or after the Agreement Date) and will use such Confidential Information solely within the scope of his employment with and for the exclusive benefit of the Company.  For a period of five years after the Termination Date, Executive agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto.  In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information, Executive will give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

3.3

Injunctive Relief; Other Remedies.  Executive acknowledges that a breach by Executive of Section 3.2 would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, Executive agrees that, in the event of a breach or threatened breach by Executive of the provisions of Section 3.2, the Company will be entitled to injunctive relief restraining Executive from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law.  Nothing herein, however, will be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of this Agreement by Executive, including without limitation the recov ery of damages and/or costs and expenses, such as reasonable attorneys’ fees, incurred by the Company as a result of any such breach or threatened breach.  In addition to the exercise of the foregoing remedies, the Company will have the right upon the occurrence of any such breach to offset the damages of such breach as determined by the Company, against any unpaid salary, bonus, commissions or reimbursements otherwise owed to Executive.  In particular, Executive acknowledges that the payments provided under Article II are conditioned upon Executive fulfilling the nondisclosure agreements contained in this Article III.  If Executive at any time materially breaches nondisclosure agreements contained in this Article III, then the Company may offset the damages of such breach, as determined solely by the Company, against payments otherwise due to Executive under Article II or, at the Company’s option, suspend payments otherwise due to Executive under Article II during the period of such breach.  Executive acknowledges that any such offset or suspension of payments would be an exercise of the Company’s right to offset or suspend its performance hereunder upon Executive’s breach of this Agreement; such offset or suspension of payments would not constitute, and shall not be characterized as, the imposition of liquidated damages.

3.4

Governing Law of this Article III; Consent to Jurisdiction.  Any dispute regarding the reasonableness of the covenants and agreements set forth in this Article III or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, will be governed by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in which the alleged prohibited disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby consent to the jurisdiction of the state and federal courts sitting in the relevant State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction) for resolution of such dispute, and agree that service of process may be made upon him or it in any legal proceeding relating to this Ar ticle III by any means allowed under the laws of such jurisdiction.

3.5

Executive’s Understanding of this Article.  Executive hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this Article III.  Executive acknowledges that the duration of the covenants contained in Article III are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, and (b) Executive’s level of control over and contact with the business and operations of the Company and its Affiliates in various jurisdictions where same are conducted.  It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and, therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Article III invalid or unenforceable.  

ARTICLE IV
Miscellaneous

4.1

Binding Effect; Successors.

(a)

This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns.

(b)

This Agreement is personal to the Executive and shall not be assignable by the Executive without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution.

(c)

The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Executive.  

(d)

The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Executive.

4.2

Notices.  All notices hereunder must be in writing and, unless otherwise specifically provided herein, will be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt.  All such notices must be addressed as follows:

If to the Company, to:

Freeport-McMoRan Copper & Gold Inc.

1615 Poydras Street

New Orleans, Louisiana  70112

Attention:  Chairman of Corporate Personnel Committee

If to the Executive, to:

Mark J. Johnson

430 Dummy Line Road

Madisonville, Louisiana 70447

or such other address as to which any party hereto may have notified the other in writing.

4.3

Governing Law.  Except as provided in Article III hereof, this Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws.

4.4

Withholding.  The Executive agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement.

4.5

Amendment, Waiver.  No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties.

4.6

Severability.  If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Executive and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law.  Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent pe rmitted by law.

4.7

Waiver of Breach.  The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof.

4.8

Remedies Not Exclusive.  No remedy specified herein shall be deemed to be such party’s exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation.

4.9

Company’s Reservation of Rights.  Executive acknowledges and understands that the Executive serves at the pleasure of the Board and that the Company has the right at any time to terminate Executive’s status as an employee of the Company or any of its Affiliates, or to change or diminish his status during the Employment Term, subject to the rights of the Executive to claim the benefits conferred by this Agreement.

4.10

Prior Change of Control Agreement.  Effective as of the Agreement Date, this Agreement supersedes any prior change of control or nondisclosure agreement between the Executive and the Company.

4.11

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be executed as of the Agreement Date.

Freeport-McMoRan Copper & Gold Inc.

By: /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

                                                                              /s/ Mark J. Johnson

Mark J. Johnson

Signature Page of Change of Control Agreement

between Freeport-McMoRan Copper & Gold Inc.

and Mark J. Johnson

EX-10

Change of Control Agreement for Officers

This Change of Control Agreement (“Agreement”) between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), and Kathleen L. Quirk (the “Executive”) is dated effective as of February 3, 2004 (the “Agreement Date”).

ARTICLE I
Definitions

1.1

Company.  As used in this Agreement, “Company” means the Company as defined above and any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets of the Company.

1.2

Change of Control. (a)  “Change of Control” means (capitalized terms not otherwise defined will have the meanings ascribed to them in paragraph (b) below):

(i)

the acquisition by any Person together with all Affiliates of such Person, of Beneficial Ownership of the Threshold Percentage or more; provided, however, that for purposes of this Section 1.2(a)(i), the following will not constitute a Change of Control:

(A)

any acquisition (other than a “Business Combination,” as defined below, that constitutes a Change of Control under Section 1.2(a)(iii) hereof) of Common Stock directly from the Company,

(B)

any acquisition of Common Stock by the Company or its subsidiaries,

(C)

any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation or other entity controlled by the Company, or

(D)

any acquisition of Common Stock pursuant to a Business Combination that does not constitute a Change of Control under Section 1.2(a)(iii) hereof; or

(ii)

individuals, excluding the representatives of Rio Tinto (as defined below), who, as of the effective date of this Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual, excluding any representative of Rio Tinto, becoming a director subsequent to the effective date of this Agreement whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board; or

(iii)

the consummation of a reorganization, merger or consolidation (including a merger or consolidation of the Company or any direct or indirect subsidiary of the Company), or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, immediately following such Business Combination:

(A)

the individuals and entities who were the Beneficial Owners of the Company Voting Stock immediately prior to such Business Combination have direct or indirect Beneficial Ownership of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Post-Transaction Corporation, and

(B)

no Person together with all Affiliates of such Person (excluding the Post-Transaction Corporation and any employee benefit plan or related trust of either the Company, the Post-Transaction Corporation or any subsidiary of either corporation) Beneficially Owns 30% or more of the then outstanding shares of common stock of the Post-Transaction Corporation or 30% or more of the combined voting power of the then outstanding voting securities of the Post-Transaction Corporation; provided, that if that certain Agreement dated as of May 2, 1995 by and between the Company and Rio Tinto remains in effect as it may be amended from time to time with respect to the Post-Transaction Corporation, then Rio Tinto and its Affiliates may Beneficially Own any amount less than the number of shares of the Post-Transaction Corporation that could elect a majority of the directors of the Post-Transaction Corporation if all directors were to be elected at a single meeting, and

(C)

at least a majority of the members of the board of directors of the Post-Transaction Corporation were members of the Incumbent Board at the time of the execution of the initial agreement, and of the action of the Board, providing for such Business Combination; or

(iv)

approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(b)

As used in this Section 1.2 and elsewhere in this Agreement, the following terms have the meanings indicated:

(i)

Affiliate:  “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another specified Person.

(ii)

Beneficial Owner:  “Beneficial Owner” (and variants thereof), with respect to a security, means a Person who, directly or indirectly (through any contract, understanding, relationship or otherwise), has or shares (A) the power to vote, or direct the voting of, the security, and/or (B) the power to dispose of, or to direct the disposition of, the security.

(iii)

Company Voting Stock:  “Company Voting Stock” means any capital stock of the Company that is then entitled to vote for the election of directors.

(iv)

Majority Shares:  “Majority Shares” means the number of shares of Company Voting Stock that could elect a majority of the directors of the Company if all directors were to be elected at a single meeting.

(v)

Person:  “Person” means a natural person or entity, and will also mean the group or syndicate created when two or more Persons act as a syndicate or other group (including without limitation a partnership, limited partnership, joint venture or other joint undertaking) for the purpose of acquiring, holding, or disposing of a security, except that “Person” will not include an underwriter temporarily holding a security pursuant to an offering of the security.

(vi)

Post-Transaction Corporation:  Unless a Change of Control includes a Business Combination, “Post-Transaction Corporation” means the Company after the Change of Control.  If a Change of Control includes a Business Combination, “Post-Transaction Corporation” will mean the corporation or other entity resulting from the Business Combination unless, as a result of such Business Combination, an ultimate parent entity controls the Company or all or substantially all of the Company’s assets either directly or indirectly, in which case, “Post-Transaction Corporation” will mean such ultimate parent entity.

(vii)

Threshold Percentage: (A)  As long as that certain Agreement dated as of May 2, 1995, by and between the Company and Rio Tinto Indonesia Limited (“Rio Tinto”) remains in effect as it may be amended from time to time, “Threshold Percentage” means with respect to Rio Tinto and its Affiliates, that percentage of Common Stock that would result in Rio Tinto and its Affiliates having Beneficial Ownership of shares of Company Voting Stock equal to or greater than the Majority Shares; provided that, solely for purposes of such calculation, the shares of Company Voting Stock issuable upon exercise of warrants, options or other rights, or upon conversion or exchange of convertible or exchangeable securities, owned by Rio Tinto and its Affiliates, will be treated as outstanding Company Voting Stock.  (B) With respect to any other Person and its Affiliates, “Threshold Percentage” means 30% of all then outstanding Common Stock.

(viii)

Common Stock:  “Common Stock” means the Class B common stock, $0.01 par value per share, of the Company.

1.3

Cause.  “Cause” shall mean:

(a)

The Executive’s willful and continued failure to perform substantially the Executive’s duties with the Post-Transaction Corporation or its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties;

(b)

The Executive’s material breach of this Agreement after a written demand is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has materially breached this Agreement; or

(c)

The final conviction of the Executive or an entering of a guilty plea or a plea of no contest by the Executive to a felony.

For purposes of this provision, no act or failure to act, on the part of the Executive, will be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without a reasonable belief that the act or omission was in the best interest of the Post-Transaction Corporation or its Affiliates.  Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board or the advice of counsel to the Post-Transaction Corporation or its Affiliates will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Post-Transaction Corporation or its Affiliates.  The termination of employment of the Executive will not be deemed to be for Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three- quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive has engaged in the conduct described in subparagraph (a), (b) or (c) above, and specifying the particulars of such conduct.

1.4

Good Reason.  “Good Reason” shall mean:

(a)

Any failure of the Post-Transaction Corporation to provide the Executive with the position, authority, duties and responsibilities at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control.  Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Executive’s position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control the Executive holds an equivalent position in the Post-Transaction Corporation or its Affiliates;  

(b)

The assignment to the Executive of any duties inconsistent in any material respect with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.1(b) of this Agreement, or any other action that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied within 10 days after receipt of written notice thereof from the Executive to the Post-Transaction Corporation;

(c)

Any failure by the Post-Transaction Corporation or its Affiliates to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that is remedied within 10 days after receipt of written notice thereof from the Executive to the Post-Transaction Corporation;

(d)

The Post-Transaction Corporation or its Affiliates requiring the Executive to be based at any office or location other than as provided in Section 2.1(b)(ii) hereof or requiring the Executive to travel on business to a substantially greater extent than required immediately prior to the Change of Control; or

(e)

Any failure by the Company to comply with and satisfy Sections 4.1(c) and (d) of this Agreement.

For purposes of this Section 1.4, any determination of “Good Reason” made by the Executive in good faith and based upon his reasonable belief and understanding shall be conclusive.

1.5

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

1.6

Disability.  “Disability” shall mean:

(a)

A disability entitling the Executive to receive benefits under a long-term disability insurance policy maintained by the Post-Transaction Corporation or an Affiliate in effect at the time either because he is totally disabled or partially disabled, as such terms are defined in such policy in effect as of the Agreement Date or as similar terms are defined in any successor policy.

(b)

If there is no long-term disability plan in effect covering the Executive, and if (i) a physical or mental illness renders the Executive incapable of satisfactorily discharging his duties and responsibilities to the Post-Transaction Corporation or an Affiliate for a period of 90 consecutive days, and (ii) such incapacity is certified in writing by a duly qualified physician chosen by the Post-Transaction Corporation or an Affiliate and reasonably acceptable to the Executive or his legal representatives, then the Board will have the power to determine that the Executive has become disabled.  If the Board makes such a determination, the Post-Transaction Corporation or its Affiliate will have the continuing right and option, during the period that such disability continues, and by notice given in the manner provided in this Agreement, to terminate the status of Executive as an officer and employee.  Any such termination will become effective 30 days after such notice of termination is given, unless within such 30-day period, the Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Post-Transaction Corporation or an Affiliate and reasonably acceptable to the Executive or his legal representatives so certifies i n writing) and the Executive in fact resumes such services.

(c)

The “Disability Effective Date” will mean the date on which termination of Executive’s status as an officer and employee becomes effective due to Disability.

1.7

Retirement.  “Retirement” (and variants thereof) for purposes of this Agreement is defined as the Executive’s voluntary termination of his status as an officer and employee at any time after reaching age 60, but shall not include a termination for Good Reason.

1.8

Board.  “Board” shall mean the Board of Directors of the Company, or if after a Change of Control, the Post-Transaction Corporation.

1.9

Termination Date.  “Termination Date” means, if Executive’s status as an officer and employee is terminated (i) by reason of Executive’s death, the date of Executive’s death, (ii) by reason of Disability, the Disability Effective Date, (iii) by the Company other than by reason of death or Disability, the date of delivery of the notice of termination or any later date specified in the notice of termination, which date will not be more than 30 days after the giving of the notice, or (iv) by the Executive other than by reason of death, the date of delivery of the notice of termination or any later date specified in the notice of termination, which date will not be more than 30 days after the giving of the notice.

ARTICLE II
Change of Control Benefit

2.1

Employment Term and Capacity after Change of Control. (a)  If the Executive continues to serve as an officer of the Company and a Change of Control occurs on or before December 31, 2008, then the Executive’s employment term (the “Employment Term”) shall continue through the later of the third anniversary of the Change of Control or December 31, 2008, subject to any earlier termination of Executive’s status as an officer and employee pursuant to this Agreement.

(b)

After a Change of Control and during the Employment Term, (i) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control and (ii) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Change of Control or any office or location less than 35 miles from such location.  Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Executive’s position, authority, duties and responsibilities prior to a Change of Con trol unless after the Change of Control the Executive holds an equivalent position in the Post-Transaction Corporation or an Affiliate.  

2.2

Compensation and Benefits.  During the Employment Term, the Executive shall be entitled to the following compensation and benefits:  

(a)

Salary.  An annual salary (“Base Salary”) at the highest rate in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control, payable to the Executive at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, the intervals in effect at any time after the Change of Control for other most senior executives of the Post-Transaction Corporation and its Affiliates.

(b)

Bonus.  Executive shall be entitled to participate in an annual incentive bonus program applicable to other most senior executives of the Post-Transaction Corporation and its Affiliates but in no event shall such program provide the Executive with incentive opportunities less favorable than the most favorable of those provided by the Company and its Affiliates for the Executive under the Company’s annual cash plan as in effect for Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, those provided generally at any time after the Change of Control to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(c)

Fringe Benefits.  The Executive shall be entitled to fringe benefits (including, but not limited to, automobile allowance, air travel, and reimbursement for club membership dues) in accordance with the most favorable agreements, plans, practices, programs and policies of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(d)

Expenses.  The Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses (including food and lodging) incurred by the Executive in accordance with the most favorable agreements, policies, practices and procedures of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(e)

Incentive, Savings and Retirement Plans.  The Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other most senior executives of the Post-Transaction Corporation and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its Affiliates for the Executive under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control.

(f)

Welfare Benefit Plans.  The Executive and the Executive’s family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Post-Transaction Corporation and its Affiliates (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other most senior executives of the Post-Transaction Corporation and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies and programs of the Company and its Affiliates in effect for the Executive at any time during t he 120-day period immediately preceding the Change of Control.

(g)

Indemnification and Insurance.  The Post-Transaction Corporation shall indemnify the Executive, to the fullest extent permitted by applicable law, for any and all claims brought against him arising out his services during or prior to the Employment Term.  In addition, the Post-Transaction Corporation shall maintain a directors’ and officers’ insurance policy covering the Executive substantially in the form of the policy maintained by the Company and its Affiliates at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(h)

Office and Support Staff.  The Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its Affiliates at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

(i)

Vacation.  The Executive shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its Affiliates as in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other most senior executives of the Post-Transaction Corporation and its Affiliates.

2.3

Obligations upon Termination after a Change of Control.  

(a)

Death, Disability or Retirement.  If, after a Change of Control and during the Employment Term, (1) the Executive’s status as an officer and employee is terminated by reason of the Executive’s death, (2) the Post-Transaction Corporation terminates the Executive’s status as an officer and employee by reason of Executive’s Disability, or (3) the Executive Retires and terminates his status as an officer and employee, then, subject to Section 2.3(f):

(i)

The Post-Transaction Corporation or an Affiliate will pay to the Executive or his legal representatives the sum of (A) the amount of the Executive’s Base Salary earned through the Termination Date to the extent not previously paid and (B) any compensation previously deferred by the Executive (together with any accrued interest on earnings thereon) to the extent not previously paid in accordance with the terms of the deferred compensation plans under which such compensation was deferred (the sum of the amounts described in clauses (A) and (B) being hereinafter referred to as the “Accrued Obligations”);

(ii)

The Post-Transaction Corporation or an Affiliate will pay to the Executive or his legal representatives a pro rata bonus in an amount determined by calculating the bonus that the Executive would receive for the fiscal year in which the Termination Date occurs based upon the level of achievement of the applicable performance goals through the end of the fiscal quarter in which the Termination Date occurs, annualized as if such level of performance had continued throughout the entire fiscal year and then multiplying such bonus amount by the fraction obtained by dividing the number of days in the year through the Termination Date by 365 (the “Pro Rata Bonus”);

(iii)

If the Executive Retires, then for a period commencing on the Termination Date and ending on the earlier of (A) the third anniversary of the Termination Date, or (B) the date that the Executive accepts new employment (the “Continuation Period”), the Post-Transaction Corporation or an Affiliate will at its expense maintain and administer for the continued benefit of Executive all insurance and welfare benefit plans in which Executive was entitled to participate as an employee as of the Termination Date, provided that Executive’s continued participation is possible under the general terms and provisions of such plans and all applicable laws.  The coverage and benefits (including deductibles and costs) provided under any such benefit plan in accordance with this paragraph during the Continuation Period will be no less favorable to Executiv e than the most favorable of such coverages and benefits as of the Termination Date.  If Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Post-Transaction Corporation or an Affiliate will provide Executive with compensation or benefits substantially similar or comparable in value to those Executive would otherwise have been entitled to receive under such plans.  At the end of the Continuation Period, the Executive will have the option to have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Post-Transaction Corporation or an Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) at the end of the Continuation Period or earlier cessation of the Post-Transaction Corporation’s obligation under the foregoing pro visions of this paragraph; and

(iv)

The Post-Transaction Corporation or an Affiliate will pay or deliver, as appropriate, all other benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or its Affiliates with respect to services rendered by the Executive prior to the Termination Date.

(b)

Cause.  If, after a Change of Control and during the Employment Term, the Executive’s status as an officer and employee is terminated by the Post-Transaction Corporation or an Affiliate for Cause, the Post-Transaction Corporation or Affiliate will pay to the Executive the Accrued Obligations without further obligation to the Executive other than for obligations by law and obligations for any benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or Affiliate with respect to services rendered by the Executive prior to the Termination Date.

(c)

Termination by Company for Reasons other than Death, Disability or Cause; by Executive for Good Reason.  If, after a Change of Control and during the Employment Term, the Post-Transaction Corporation or an Affiliate terminates the Executive’s status as an officer and employee other than for Cause, death or Disability, or the Executive terminates his status as an officer and employee for Good Reason, then, subject to Section 2.3(f) hereof:

(i)

The Post-Transaction Corporation or an Affiliate will pay to the Executive the Accrued Obligations and the Pro Rata Bonus;

(ii)

The Post-Transaction Corporation or an Affiliate will pay to the Executive an amount equal to three times the sum of (A) the Executive’s Base Salary in effect at the Termination Date and (B) the highest bonus awarded to the Executive during the three fiscal years immediately preceding the Termination Date;

(iii)

For the Continuation Period, the Post-Transaction Corporation or an Affiliate will at its expense maintain and administer for the continued benefit of Executive all insurance and welfare benefit plans in which Executive was entitled to participate as an employee as of the Termination Date; provided that Executive’s continued participation is possible under the general terms and provisions of such plans and all applicable laws.  The coverage and benefits (including deductibles and costs) provided under any such benefit plan in accordance with this paragraph during the Continuation Period will be no less favorable to Executive than the most favorable of such coverages and benefits as of the Termination Date; provided, however, in the event of the Disability of Executive during the Continuation Period, disability benefits will, to the maximum extent possible, not be paid for the Continuation Period but will instead commence immediately following the end of the Continuation Period.  If Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Post-Transaction Corporation or its Affiliate will provide Executive with compensation or benefits substantially similar or comparable in value to those Executive would otherwise have been entitled to receive under such plans.  At the end of the Continuation Period, the Executive will have the option to have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Post-Transaction Corporation or its Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for coverage under COBRA at the end of the Continuation Period or earlier cessation of the Post-Transaction Corporation’s obligation under the foregoing provisions of th is paragraph;

(iv)

All benefits that the Executive is entitled to receive pursuant to benefit plans maintained by the Post-Transaction Corporation or an Affiliate under which benefits are calculated based upon years of service or age will be calculated by treating the Executive as having attained two additional years of age and as having provided two additional years of service as of the Termination Date; and

(v)

The Post-Transaction Corporation or an Affiliate will pay or deliver, as appropriate, all other benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the Post-Transaction Corporation or Affiliate with respect to services rendered by the Executive prior to the Termination Date.

(d)

Resignation from Board of Directors.  If the Executive is a director of the Post-Transaction Corporation or any of its Affiliates and his status as an officer and employee is terminated for any reason other than death, the Executive will, if requested by the Post-Transaction Corporation, immediately resign as a director of the Post-Transaction Corporation and its Affiliates.  If such resignation is not received within 20 business days after the Executive actually receives written notice from the Post-Transaction Corporation requesting the resignation, the Executive will forfeit any right to receive any payments pursuant to this Agreement.

(e)

Nondisclosure and Proprietary Rights.  The rights and obligations of the Company and the Executive contained in Article III hereof will continue to apply notwithstanding a termination following a Change of Control.

(f)

Most Favorable Benefits.  It is the intention of the parties that the terms of this Agreement provide payments and benefits to the Executive that are equivalent or more beneficial to the Executive than are otherwise available to the Executive under the terms of any applicable benefit plan or related compensation agreement.  To that end, the terms of the Agreement shall govern the payments and benefits to which the Executive shall be entitled upon the termination of the Executive’s status as an officer and employee as provided herein, except that if the terms of any applicable benefit plan or related compensation agreement provide more favorable benefits to the Executive than are provided hereunder, the terms of such plan or agreement shall control.

2.4

Excise Tax Provision.

(a)

Notwithstanding any other provisions of this Agreement, if a Change of Control occurs during the original or extended term of this Agreement, in the event that any of the payments or benefits received or to be received by the Executive in connection with the Change of Control or the Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change of Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the payments and benefits under Section 2.3(c) hereof, but excluding any payment to be made pursuant to this Section 2.4, being hereinafter referred to as the “Initial Payments”) will be subject (in whole or in part) to an excise tax imposed by section 4999 of the Code or any similar tax (the “Excise Tax”), the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of (i) any Excise Tax on the Initial Payments, (ii) any federal, state and local income and employment taxes on the Gross-Up Payment, (iii) any Medicare tax on the Gross-Up Payment, and (iv) the Excise Tax on the Gross-Up Payment, shall be equal to the Initial Payments.

(b)

For purposes of determining whether any of the Initial Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Initial Payments shall be treated as “parachute payments” (within the meaning of the Code) unless, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change of Control, the Company’s independent auditor (the “Auditor”), such payments or benefits (in whole or in part) do not constitute parachute payments, (ii) all “excess parachute payments” within the meaning of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually r endered (within the meaning of the Code) in excess of the “Base Amount” (within the meaning set forth in the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of the Code.  For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the date of termination of the Executive’s employment (or if there is no date of termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 2.4), net of the maximum reduction in federal income taxes which could be ob tained from deduction of such state and local taxes.

(c)

In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within ten business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate prov ided in section 1274(b)(2)(B) of the Code).  In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within ten business days following the time that the amount of such excess is finally determined.  The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Initial Payments.

(d)

The Gross-Up Payment provided in Section 2.4 shall be made not later than the “Payment Day.”  The Payment Day shall be the tenth business day following the date of termination, or, if the Executive becomes entitled, before the Executive’s employment is terminated, to a Gross-Up Payment under this Section 2.4, then not later than the tenth business day following the date as of which the present value of the Initial Payments is calculated for purposes of determining the amount of such Gross-Up Payment.  Notwithstanding the preceding provisions of this Section 2.4(d), if the amount of the Gross-Up Payment cannot be finally determined on or before the Payment Day, the Company shall pay to the Executive on the Payment Day an estimate, as determined in accordance with Section 2.4(b), of the minimum amount of the Gross-Up Payment to which the Executive is clearly entitled and shall pay the remainder of the Gross-Up Payment (together with interest on the unpaid remainder at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Payment Day.  In the event that the amount of the estimated Gross-Up Payment so made exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the tenth business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code).  At the time that any Gross-Up Payment is made pursuant to Section 2.4(a) (and at the time that any additional Gross-Up Payment is made pursuant to Section 2.4(c)), the Company shall provide the Executive with a written statement setting forth the manner in which any such payment was calculated and the basis for such calculations includi ng, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinion or advice which is in writing shall be attached to the statement).

2.5

Stock Options; Performance Units; Restricted Stock Units.  The foregoing benefits are intended to be in addition to the value of any options to acquire Common Stock of the Company, the exercisability of which is accelerated pursuant to the terms of any stock option agreement, any related limited rights, any restricted stock units the vesting of which is accelerated pursuant to the terms of the restricted stock unit agreement, the performance units under the long-term performance incentive plans, and any other incentive or similar plan heretofore or hereafter adopted by the Company.

2.6

Legal Fees.  The Company agrees to pay as incurred all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount or timing of any payment pursuant to this Agreement).

ARTICLE III
Nondisclosure and Proprietary Rights

3.1

Confidential Information.  For purposes of this Agreement, the term "Confidential Information" means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its Affiliates, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its Affiliates (other than information known by such persons through a violation of an obligation of confidentiality to the Company), whether produced by the Company and its Affiliates or any of their consultants, agents or independent contractors or by Executive, and whether or not marked confidential , including without limitation information relating to the Company’s or its Affiliates’ products and services, business plans, business acquisitions, processes, product or service research and development ideas, methods or techniques, training methods and materials, and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants’ reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the forego ing.

3.2

Nondisclosure of Confidential Information.  Executive will hold in a fiduciary capacity for the benefit of the Company all Confidential Information obtained by Executive during Executive’s employment (whether prior to or after the Agreement Date) and will use such Confidential Information solely within the scope of his employment with and for the exclusive benefit of the Company.  For a period of five years after the Termination Date, Executive agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto.  In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information, Executive will give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

3.3

Injunctive Relief; Other Remedies.  Executive acknowledges that a breach by Executive of Section 3.2 would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, Executive agrees that, in the event of a breach or threatened breach by Executive of the provisions of Section 3.2, the Company will be entitled to injunctive relief restraining Executive from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law.  Nothing herein, however, will be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of this Agreement by Executive, including without limitation the recov ery of damages and/or costs and expenses, such as reasonable attorneys’ fees, incurred by the Company as a result of any such breach or threatened breach.  In addition to the exercise of the foregoing remedies, the Company will have the right upon the occurrence of any such breach to offset the damages of such breach as determined by the Company, against any unpaid salary, bonus, commissions or reimbursements otherwise owed to Executive.  In particular, Executive acknowledges that the payments provided under Article II are conditioned upon Executive fulfilling the nondisclosure agreements contained in this Article III.  If Executive at any time materially breaches nondisclosure agreements contained in this Article III, then the Company may offset the damages of such breach, as determined solely by the Company, against payments otherwise due to Executive under Article II or, at the Company’s option, suspend payments otherwise due to Executive under Article II during the period of such breach.  Executive acknowledges that any such offset or suspension of payments would be an exercise of the Company’s right to offset or suspend its performance hereunder upon Executive’s breach of this Agreement; such offset or suspension of payments would not constitute, and shall not be characterized as, the imposition of liquidated damages.

3.4

Governing Law of this Article III; Consent to Jurisdiction.  Any dispute regarding the reasonableness of the covenants and agreements set forth in this Article III or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, will be governed by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in which the alleged prohibited disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby consent to the jurisdiction of the state and federal courts sitting in the relevant State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction) for resolution of such dispute, and agree that service of process may be made upon him or it in any legal proceeding relating to this Ar ticle III by any means allowed under the laws of such jurisdiction.

3.5

Executive’s Understanding of this Article.  Executive hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this Article III.  Executive acknowledges that the duration of the covenants contained in Article III are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, and (b) Executive’s level of control over and contact with the business and operations of the Company and its Affiliates in various jurisdictions where same are conducted.  It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and, therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Article III invalid or unenforceable.  

ARTICLE IV
Miscellaneous

4.1

Binding Effect; Successors.

(a)

This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns.

(b)

This Agreement is personal to the Executive and shall not be assignable by the Executive without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution.

(c)

The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Executive.  

(d)

The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Executive.

4.2

Notices.  All notices hereunder must be in writing and, unless otherwise specifically provided herein, will be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt.  All such notices must be addressed as follows:

If to the Company, to:

Freeport-McMoRan Copper & Gold Inc.

1615 Poydras Street

New Orleans, Louisiana  70112

Attention:  Chairman of Corporate Personnel Committee

If to the Executive, to:

Kathleen L. Quirk

4816 St. Charles Avenue

New Orleans, Louisiana 70115

or such other address as to which any party hereto may have notified the other in writing.

4.3

Governing Law.  Except as provided in Article III hereof, this Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws.

4.4

Withholding.  The Executive agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement.

4.5

Amendment, Waiver.  No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties.

4.6

Severability.  If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Executive and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law.  Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent pe rmitted by law.

4.7

Waiver of Breach.  The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof.

4.8

Remedies Not Exclusive.  No remedy specified herein shall be deemed to be such party’s exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation.

4.9

Company’s Reservation of Rights.  Executive acknowledges and understands that the Executive serves at the pleasure of the Board and that the Company has the right at any time to terminate Executive’s status as an employee of the Company or any of its Affiliates, or to change or diminish his status during the Employment Term, subject to the rights of the Executive to claim the benefits conferred by this Agreement.

4.10

Prior Change of Control Agreement.  Effective as of the Agreement Date, this Agreement supersedes any prior change of control or nondisclosure agreement between the Executive and the Company.

4.11

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be executed as of the Agreement Date.

Freeport-McMoRan Copper & Gold Inc.

By: /s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

Director and Chairman of the

Corporate Personnel Committee of the

Board of Directors

Executive

                                                                              /s/ Kathleen L. Quirk  

Kathleen L. Quirk

Signature Page of Change of Control Agreement

between Freeport-McMoRan Copper & Gold Inc.

and Kathleen L. Quirk

EX-12

EXHIBIT 12.1

FREEPORT-McMoRan COPPER & GOLD INC.

Computation of Ratio of Earnings

to Fixed Charges:

	Years Ended December 31,
	2003			2002		2001		2000		1999
	(In Thousands)
Income from continuing operations	$	181,660		$	164,654	$	113,025	$	76,987	$	136,467
Add:
Provision for income taxes		338,053			245,518		202,979		159,573		195,653
Cumulative effect of accounting changes, net		15,593			3,049		-		-		-
Equity in PT Smelting (earnings) losses		(5,609	)		4,181		5,137		13,593		10,074
Minority interests’ share of net income		48,469			36,441		42,772		36,680		48,714
Interest expense, net		197,017			171,209		173,595		205,346		194,069
Rental expense factor		1,027			-		-		-		188
Earnings available for fixed charges	$	776,210		$	625,052	$	537,508	$	492,179	$	585,165
Interest expense, net	$	197,017		$	171,209	$	173,595	$	205,346	$	194,069
Capitalized interest		2,994			12,245		9,438		7,216		3,768
Rental expense factor		1,027			-		-		-		188
Fixed charges	$	201,038		$	183,454	$	183,033	$	212,562	$	198,025
Ratio of earnings to fixed charges		3.9x			3.4x		2.9x		2.3x		3.0x

Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends:
	Years Ended December 31,
	2003			2002		2001		2000		1999
	(In Thousands)
Income from continuing operations	$	181,660		$	164,654	$	113,025	$	76,987	$	136,467
Add:
Provision for income taxes		338,053			245,518		202,979		159,573		195,653
Cumulative effect of accounting changes, net		15,593			3,049		-		-		-
Equity in PT Smelting (earnings) losses		(5,609	)		4,181		5,137		13,593		10,074
Minority interests’ share of net income		48,469			36,441		42,772		36,680		48,714
Interest expense, net		197,017			171,209		173,595		205,346		194,069
Rental expense factor		1,027			-		-		-		188
Earnings available for fixed charges	$	776,210		$	625,052	$	537,508	$	492,179	$	585,165
Interest expense, net	$	197,017		$	171,209	$	173,595	$	205,346	$	194,069
Capitalized interest		2,994			12,245		9,438		7,216		3,768
Rental expense factor		1,027			-		-		-		188
Preferred dividends		60,045			69,179		70,563		72,717		68,697
Fixed charges	$	261,083		$	252,633	$	253,596	$	285,279	$	266,722
Ratio of earnings to fixed charges		3.0x			2.5x		2.1x		1.7x		2.2x

(a)

Portion of rent deemed representative of an interest factor.

(b)

For purposes of 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.

(c)

For purposes of this calculation, we assume that our preferred stock dividend requirements were equal to the pre-tax earnings that would be required to cover those dividend requirements.

EX-13

REPORT OF MANAGEMENT

Freeport-McMoRan Copper & Gold Inc. (the Company) is responsible for the preparation of the financial statements and all other information contained in this Annual Report.  The financial statements have been prepared in conformity with accounting principles generally accepted in the United States and include amounts that are based on management's informed judgments and estimates.

The Company maintains a system of internal accounting controls designed to provide reasonable assurance at reasonable costs that assets are safeguarded against loss or unauthorized use, that transactions are executed in accordance with management's authorization and that transactions are recorded and summarized properly.  The system was tested and evaluated on a regular basis through December 31, 2003, by the Company's internal auditors, PricewaterhouseCoopers LLP.  The Company engaged Deloitte & Touche LLP in 2004 to act as its internal auditors. In accordance with auditing standards generally accepted in the United States, the Company's independent auditors, Ernst & Young LLP, have developed an overall understanding of our accounting and financial controls and have conducted other tests as they consider necessary to support their opinion on the financial statements.

The Board of Directors, through its Audit Committee composed solely of non-employee directors, is responsible for overseeing the integrity and reliability of the Company's accounting and financial reporting practices and the effectiveness of its system of internal controls.  Ernst & Young LLP and the Company’s internal auditors meet regularly with, and have access to, this committee, with and without management present, to discuss the results of their audit work.

/s/ Richard C. Adkerson	/s/ Kathleen L. Quirk
Richard C. Adkerson	Kathleen L. Quirk
President and Chief Executive Officer	Senior Vice President, Chief Financial Officer and Treasurer

FREEPORT-McMoRan COPPER & GOLD INC.

SELECTED FINANCIAL AND OPERATING DATA

Years Ended December 31,	2003			2002			2001		2000		1999
FCX CONSOLIDATED FINANCIAL DATA	(Financial Data in Thousands, Except Per Share Amounts)
Revenues	$	2,212,165		$	1,910,462		$	1,838,866	$	1,868,610	$	1,887,328
Operating income		823,308			640,137			542,926		492,293		578,316
Net income before cumulative effect of changes in accounting principles		169,812	a		130,099			76,496		39,500		100,787
Cumulative effect of changes in accounting principles, net		(15,593	)b		(3,049	)c		-		-		-
Net income applicable to common stock		154,219	a		127,050			76,496		39,500		100,787
Pro forma net income, assuming accounting changes are applied retroactively		169,307	a, b		129,635	c		104,847		42,610		105,052
Basic net income per common share		.99	a, b		.88	c		.53		.26		.62
Diluted net income per common share:
Applicable to common stock		.97	a, b		.87	c		.53		.26		.61
Pro forma, assuming accounting changes are applied retroactively		1.06	a, b		.89	c		.72		.28		.64
Dividends paid per common share		.27			-			-		-		-
Basic average shares outstanding		155,805			144,649			143,952		153,997		163,613
Diluted average shares outstanding		159,102			146,418			144,938		154,519		164,567
At December 31:
Cash and restricted cash and investments		498,616			115,782			149,475		7,968		6,698
Property, plant, equipment and development costs, net		3,261,697			3,320,561			3,409,687		3,230,564		3,363,291
Total assets		4,718,366			4,192,193			4,211,929		3,950,741		4,082,916
Long-term debt, including current portion     and short-term borrowings		2,228,330	b		2,038,390			2,338,600		2,190,025		2,148,259
Redeemable preferred stock		-	b		450,003			462,504		475,005		487,507
Stockholders’ equity		775,984			266,826			104,444		37,931		196,880
PT FREEPORT INDONESIA OPERATING DATA, Net of Rio Tinto’s Interest
Copper (recoverable)
Production (000s of pounds)		1,291,600			1,524,200			1,393,400		1,388,100		1,428,100
Production (metric tons)		585,900			691,400			632,000		629,600		647,800
Sales (000s of pounds)		1,295,600			1,522,300			1,399,100		1,393,700		1,441,000
Sales (metric tons)		587,700			690,500			634,600		632,200		653,600
Average realized price per pound		$.82			$.71			$.69		$.82		$.75
Gold (recoverable ounces)
Production		2,463,300			2,296,800			2,634,900		1,899,500		2,379,100
Sales		2,469,800			2,293,200			2,644,800		1,921,400		2,423,900
Average realized price per ounce		$366.60	d		$311.97			$269.24		$276.06		$276.53
Silver (recoverable ounces)
Production		4,112,700			4,121,100			3,771,500		3,542,400		3,444,500
Sales		4,126,700			4,116,100			3,782,600		3,542,300		3,479,600
Average realized price per ounce		$5.15			$4.66			$4.80		$4.98		$5.21
ATLANTIC COPPER OPERATING DATA
Concentrate and scrap treated (metric tons)		964,400			1,016,700			891,100		916,300		949,400
Anodes
Production (000s of pounds)		640,000			657,000			617,300		639,100		647,100
Production (metric tons)		290,300			298,000			280,000		289,900		293,500
Sales (000s of pounds)		97,000			101,200			87,500		80,600		84,300
Sales (metric tons)		44,000			45,900			39,700		36,600		38,200
Cathodes
Production (000s of pounds)		544,700			552,200			518,700		567,900		556,600
Production (metric tons)		247,100			250,500			235,300		257,600		252,500
Sales (including wire rod and wire)
(000s of pounds)		546,800			556,500			549,800		562,300		558,500
(metric tons)		248,000			252,400			249,400		255,100		253,300
Gold sales in anodes and slimes (ounces)		929,700			813,900			831,300		605,700		792,700
Cathode cash production cost per pound before hedginge		$.16			$.12			$.14		$.11		$.13

FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED FINANCIAL AND OPERATING DATA
	2003		2002		2001		2000		1999
PT SMELTING OPERATING DATA, 25% - Owned by PT Freeport Indonesia
Concentrate treated (metric tons)		824,800		719,600		702,900		582,200		436,000
Anodes
Production (000s of pounds)		545,500		465,700		479,400		383,200		279,400
Production (metric tons)		247,400		211,200		217,500		173,800		126,700
Sales (000s of pounds)		64,600		33,000		10,100		33,100		50,300
Sales (metric tons)		29,300		15,000		4,600		15,000		22,800
Cathodes
Production (000s of pounds)		492,400		424,100		468,400		349,200		200,100
Production (metric tons)		223,300		192,400		212,500		158,400		90,800
Sales (000s of pounds)		493,500		424,100		468,800		349,700		193,800
Sales (metric tons)		223,800		192,400		212,600		158,600		87,900
Cathode cash production cost per pounde		$.10		$.14		$.12		$.13		$.12
PT FREEPORT INDONESIA, 100% OPERATING DATA
Ore milled (metric tons per day)		203,000		235,600		237,800		223,500		220,700
Average ore grade
Copper (percent)		1.09		1.14		1.00		1.07		1.12
Gold (grams per metric ton)		1.54		1.24		1.41		1.10		1.37
Gold (ounce per metric ton)		.050		.040		.045		.035		.044
Silver (grams per metric ton)		4.03		3.60		3.20		2.97		2.78
Silver (ounce per metric ton)		.130		.116		.103		.095		.089
Recovery rates (percent)
Copper		89.0		88.5		86.9		88.2		84.6
Gold		87.3		88.4		89.5		84.3		83.7
Silver		61.3		61.3		59.0		60.0		63.4
Copper (recoverable)
Production (000s of pounds)		1,522,900		1,839,000		1,594,200		1,636,700		1,630,700
Production (metric tons)		690,800		834,200		723,100		742,400		739,700
Sales (000s of pounds)		1,527,700		1,836,800		1,600,900		1,643,500		1,647,800
Sales (metric tons)		693,000		833,200		726,200		745,500		747,400
Gold (recoverable ounces)
Production		3,163,900		2,938,800		3,488,100		2,362,600		2,993,100
Sales		3,171,500		2,934,000		3,498,300		2,387,300		3,047,100
Silver (recoverable ounces)
Production		4,978,600		4,922,900		4,264,300		3,833,200		3,781,300
Sales		4,994,000		4,916,000		4,280,400		3,847,700		3,829,400

The selected consolidated financial data shown above is derived from our audited financial statements.  These historical results are not necessarily indicative of results that you can expect for any future period.  You should read this data in conjunction with management’s discussion and analysis and our full financial statements and notes thereto contained in this annual report.

a.

Includes losses on early extinguishment and conversion of debt totaling $34.6 million ($31.9 million to net income or $0.20 per share).

b.

Effective January 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations,” and recorded a $9.1 million ($0.06 per share) cumulative effect gain.  Effective July 1, 2003, we adopted SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” and recorded a $24.7 million ($0.16 per share) cumulative effect charge.  Our mandatorily redeemable preferred stock was classified as debt effective July 1, 2003.  SFAS No. 150 does not allow restatement of prior periods.  See “Management’s Discussion and Analysis” and Note 1 of “Notes to Consolidated Financial Statements.”

c.

Effective January 1, 2002, we changed our methodology used in the determination of depreciation associated with PT Freeport Indonesia’s mining and milling life-of-mine assets.  See “Management’s Discussion and Analysis” and Note 1 of “Notes to Consolidated Financial Statements.”

d.

Amount was $357.61 before hedging gain resulting from redemption of FCX’s Gold-Denominated Preferred Stock.

e.

For a reconciliation of cathode cash production costs per pound to production costs applicable to sales reported in FCX’s consolidated financial statements refer to “Product Revenues and Production Costs” in “Management’s Discussion and Analysis.”

FREEPORT-McMoRan COPPER & GOLD INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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’s share as our joint venture partner.  The results of operations reported and summarized below are not necessarily indicative of future operating results.  The following discussion should be read together with our financial statements and the related notes.

We are one of the world’s largest copper and gold mining and production companies in terms of reserves and production.  We are also one of the lowest cost copper producers in the world, after taking into account credits for related gold and silver production.  Our principal asset is the Grasberg mine, which we discovered in1988.  Grasberg contains the largest single gold reserve and one of the largest copper reserves of any mine in the world.

We operate through our majority-owned subsidiaries, PT Freeport Indonesia and PT Puncakjaya Power, and through PT Irja Eastern Minerals and Atlantic Copper, S.A., our principal wholly owned subsidiaries. We acquired an 85.7 percent ownership in Puncakjaya Power in July 2003.  Puncakjaya Power supplies power to PT Freeport Indonesia’s operations (see Note 2 of “Notes to Consolidated Financial Statements”). Eastern Minerals conducts mineral exploration activities (currently suspended) in Papua, Indonesia.  Atlantic Copper’s operations are in Spain and involve the smelting and refining of copper concentrates and the marketing of refined copper products and precious metals in slimes. PT Freeport Indonesia owns a 25 percent interest in PT Smelting, an Indonesian company which operates a copper smelter and refinery in Gresik, Indonesia.

PT Freeport Indonesia, our principal operating subsidiary, operates under an agreement, called a Contract of Work, with the Government of Indonesia.  The Contract of Work allows us to conduct exploration, mining and production activities in a 24,700-acre area called Block A.  The Contract of Work also allows us to explore for minerals in a 0.5-million-acre area called Block B.  All of our proven and probable mineral reserves and current mining operations are located in Block A.  Eastern Minerals holds an additional Contract of Work originally covering a 2.5-million-acre area.  Under the terms of Eastern Minerals’ Contract of Work, we have already relinquished 1.3 million acres and must relinquish an additional 0.6 million acres soon after we resume exploration activities.  

In addition to the PT Freeport Indonesia and Eastern Minerals exploration acreage, we have the right to conduct other mineral exploration activities in Papua pursuant to a joint venture through PT Nabire Bakti Mining.  Field exploration activities outside of our current mining operations in Block A have been suspended since 2000 because of safety and security issues and uncertainty relating to a possible conflict between our mining and exploration rights in certain forest areas covered by our Contracts of Work and an Indonesian law enacted in 1999 prohibiting open-pit mining in forest preservation areas.

Joint Ventures with Rio Tinto

In 1996, we established joint ventures with Rio Tinto plc, an international mining company with headquarters in London, England.  One joint venture covers PT Freeport Indonesia’s mining operations in Block A and gives Rio Tinto, through 2021, a 40 percent interest in certain assets and in production above specified levels from operations in Block A and, after 2021, a 40 percent interest in all production from Block A.  

Operating, nonexpansion capital and administrative costs are shared proportionately between PT Freeport Indonesia and Rio Tinto based on the ratio of (a) the incremental revenues from production from our most recent expansion completed in 1998 to (b) total revenues from production from Block A, including production from PT Freeport Indonesia’s previously existing reserves.  PT Freeport Indonesia receives 100 percent of the cash flow from specified annual amounts of copper, gold and silver through 2021, calculated by reference to its proven and probable reserves as of December 31, 1994, and 60 percent of all remaining cash flow.

Under our joint venture arrangements, Rio Tinto has a 40 percent interest in PT Freeport Indonesia’s Contract of Work and Eastern Minerals’ Contract of Work.  Rio Tinto also has the option to participate in 40 percent of any of our other future exploration projects in Papua.  Rio Tinto has elected to participate in 40 percent of our interest and cost in the PT Nabire Bakti exploration joint venture covering approximately 0.5 million acres contiguous to Block B and one of Eastern Minerals’ blocks.  Rio Tinto owns approximately 12 percent of our currently outstanding common stock.

Operating Cash Flows and Debt Reductions

Our consolidated operating cash flows for 2003 totaled $572.1 million.  In each of the last five years, we generated in excess of $500 million in consolidated operating cash flows with average prices of $0.76 per pound for copper and $298 per ounce for gold.  During the last several years, we completed a series of steps to improve our balance sheet and debt maturity profile and to enhance our financial flexibility.  Below is a graph showing our debt and cash balances at December 31 of each year shown.  For further information, see “Capital Resources and Liquidity” below.

Outlook

Our copper and gold sales volumes have averaged 1.4 billion pounds of copper and 2.35 million ounces of gold annually over the past five years.  Average annual sales volumes over the next five years are expected to approximate 1.34 billion pounds of copper and 2.2 million ounces of gold.  Based on these estimates, each $0.10 per pound change in copper prices approximates $70 million in annual cash flows and each $25 per ounce change in gold prices approximates $28 million.

Following an October 9, 2003, slippage event and the December 12, 2003, debris flow in a section of the Grasberg open pit, PT Freeport Indonesia has redirected its open-pit operations to accelerate removal of waste material from the south wall to restore safe access to the higher grade ore areas in the pit.  These activities have resulted in reduced production levels.  Ore previously forecast to be mined in 2004 is currently available for mining and will be mined once safe access is assured.  Based on the substantial progress achieved to date, PT Freeport Indonesia expects to return to its key ore areas in the second quarter of 2004.  In the near term, PT Freeport Indonesia’s ore is expected to be limited to its Deep Ore Zone underground mine and low grade material from the open pit.  As a result of the mine sequencing changes at the open pit, a portion of the higher grade ore previously for ecast to be mined in 2004 is expected to be deferred to future periods, with the substantial majority of the deferred ore expected to be mined in 2005.  These mine sequencing changes are not expected to affect long-term mine plans or recoverable ore reserves.

Our 2004 annual sales are expected to approximate 1.0 billion pounds of copper and 1.5 million ounces of gold with a significant portion expected in the second half, and 1.5 billion pounds of copper and 2.9 million ounces of gold in 2005.  Consolidated operating cash flows for 2004 are expected to be adversely affected by the timing of PT Freeport Indonesia’s metal sales and Atlantic Copper’s operating results (see “Smelting and Refining Operations”).  Consolidated operating cash flows in 2005 are expected to benefit from the projected increase in PT Freeport Indonesia’s metal sales.

Copper and Gold Markets

The graph above depicts copper prices and estimated available world copper inventories in weeks of consumption through February 2004.  Copper inventories at the London Metal Exchange (LME) and New York Commodity Exchange (COMEX) have declined sharply in 2003 and have continued to decline in 2004.  The demand outlook for copper improved throughout 2003 with continued strong demand from China and emerging signs of increased manufacturing activity around the world.  Copper prices rose sharply in the fourth quarter of 2003 and early 2004 and are currently $1.35 per pound.  The consensus outlook for copper markets is positive and virtually all industry analysts are forecasting strong future copper prices in the next two years of over $1.00 per pound.  

Gold prices have also increased, with the price moving in an inverse direction to the U.S. dollar. Gold prices rose more than 50 percent from their 2001 lows in tandem with ongoing geo-political strife and terrorist fears, a weak U.S. dollar and large U.S. deficits, and actions by gold producers to reduce hedge positions.  The current view of gold prices expressed by many market analysts is positive.

World metal prices for copper and gold have historically fluctuated widely and are affected by numerous factors beyond our control as described further in our Form 10-K for the year ended December 31, 2003.

CRITICAL ACCOUNTING ESTIMATES

Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States.  The preparation of these statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions or conditions.  The areas requiring the use of management’s estimates are discussed in Note 1 to our consolidated financial statements under the subheading “Use of Estimates.”  Management has reviewed the following discussion of its development and selection of critical accounting estimates with the Audit Co mmittee of our Board of Directors.

Depreciation and Amortization – As discussed in Note 1 of “Notes to Consolidated Financial Statements,” we depreciate our mining and milling assets using the unit-of-production method based on our estimates of our proven and probable recoverable copper reserves.  We have other assets which we depreciate on a straight-line basis over their estimated useful lives.  Our estimates of proven and probable recoverable copper reserves and of the useful lives of our straight-line assets impact our depreciation and amortization expense.  These estimates affect both our “mining and exploration” and “smelting and refining” segments.  

Effective January 1, 2002, we changed our 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 PT Freeport Indonesia's developed and undeveloped reserves were depreciated using the unit-of-production method based on total developed and undeveloped proven and probable recoverable 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 our 2002 results, reduced net income by $3.0 million ($0.02 per share), net of taxes and minority interest shar ing.  

The accounting estimates related to depreciation and amortization are critical accounting estimates because (1) the determination of copper reserves involves uncertainties with respect to the ultimate geology of our reserves and the assumptions used in determining the economic feasibility of mining those reserves, including estimated copper and gold prices and costs of conducting future mining activities and (2) changes in estimated proven and probable recoverable copper reserves and useful asset lives can have a material impact on net income.  We perform annual assessments of our existing assets, including a review of asset costs and depreciable lives, in connection with the review of mine operating and development plans.  When we determine that assigned asset lives do not reflect the expected remaining period of benefit, we make prospective changes to those depreciable lives.  

We made changes to certain asset lives at PT Freeport Indonesia, primarily power generation assets, in 2001.  As disclosed in Note 1 of “Notes to Consolidated Financial Statements,” these changes resulted from a review of recent operating history and current maintenance practices.  The impact of the changes was to decrease depreciation expense for 2001 by $25.6 million, increasing net income by $12.5 million ($0.09 per share).  Also as disclosed in Note 1 of “Notes to Consolidated Financial Statements,” in 2001, we increased our estimates of future development costs related to our undeveloped ore bodies, which increased depreciation expense for 2001 by $39.8 million, decreasing net income by $19.4 million ($0.13 per share).  However, because of the change in our depreciation methodology effective January 1, 2002, discussed above, we no longer include estimates of future development costs in our depreciation calculations.

There are a number of uncertainties inherent in estimating quantities of reserves, including many factors beyond our control.  Ore reserves estimates are based upon engineering evaluations of samplings of drill holes and other openings.  Our estimates of proven and probable recoverable reserves are prepared by our employees and reviewed and verified by independent experts in mining, geology and reserve determination.  As of December 31, 2003, aggregate proven and probable recoverable copper reserves totaled 54.4 billion pounds and PT Freeport Indonesia’s estimated share totaled 39.7 billion pounds.  These estimates involve assumptions regarding future copper and gold prices, the geology of our mines, the mining methods we use and the related costs we incur to develop and mine our reserves.  Changes in these assumptions could result in material adjustments to our reserve estimates which could result in changes to unit-of-production depreciation and amortization expense in future periods, with corresponding adjustments to net income.  If aggregate estimated copper reserves were 10 percent higher or lower at December 31, 2003, we estimate that our annual depreciation expense for 2004 would change by approximately $9 million, changing net income by approximately $4 million.  Although some degree of variability is expected, we believe the extent of our technical data and operating experience – specifically as it relates to our Grasberg open-pit mine, which we have been mining for over 10 years – mitigates the potential for significant changes in reserve estimates, especially as compared with mines that are undeveloped or newly developed.

As discussed in Note 1 of “Notes to Consolidated Financial Statements,” we review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  Changes to our estimates of proven and probable recoverable copper and gold reserves could have an impact on our assessment of asset impairment.  However, we believe it is unlikely that revisions to our estimates of proven and probable recoverable copper and gold reserves would give rise to an impairment of our assets because of the significant size of our reserves in relation to our asset carrying values.

•

Deferred Mining Costs – Mining costs are charged to operations as incurred.  However, because of the configuration and location of the Grasberg ore body and the location and extent of surrounding overburden, the ratio of overburden to ore is much higher in the initial mining of the pit than in later years.  As a result, surface mining costs associated with overburden removal at PT Freeport Indonesia’s open-pit mine that are estimated to relate to future production are initially deferred and subsequently charged to operating costs when the ratio of actual overburden removed to ore mined falls below the estimated average ratio of overburden to ore over the life of the Grasberg open pit.  

The estimated average ratio of overburden to ore over the life of the Grasberg open pit used in our deferred mining costs calculation is a critical accounting estimate because (1) it is susceptible to change from period to period because it requires management to make assumptions about the future mine plan and (2) changes could materially impact net income.  Our mine plan is derived from a model that takes into consideration available geological data and determines the most efficient and cost-effective method of accessing the economic reserves.  Significant assumptions underlying our mine plan include the amount of total overburden and ore we expect to move in a given year and the ultimate configuration of the pit.

In the fourth quarter of 2003, PT Freeport Indonesia changed the ratio to 2.1 to 1 based on a recently completed annual assessment.  PT Freeport Indonesia’s estimated life-of-mine overburden-to-ore ratio averaged 2.0 to 1 in 2003, 1.8 to 1 in 2002 and 1.6 to 1 in 2001.  PT Freeport Indonesia’s geologists and engineers reassess the overburden-to-ore ratio and the remaining life of the Grasberg open pit mine at least annually, and we reflect any changes in our estimates prospectively beginning in the quarter of change.  We expect the estimated life-of-mine overburden-to-ore ratio to average 2.2 to 1 for 2004.  The increases in the ratio over the last several years primarily relate to changes in the cutoff grade at the open pit caused by a reassessment of the optimal milling rate at our mill facilities including a greater proportional contribution to our total ore processed from our underground Deep Ore Zone mine.

If the life-of-mine overburden-to-ore ratio was 2.1 to 1, as in the fourth quarter of 2003, instead of the 1.9 to 1 ratio used through September 30, 2003, we estimate our deferral of mining costs for 2003 would have been $7.3 million lower and net income would have been $3.7 million ($0.02 per share) lower.  In addition, if the ratio was 2.2 to 1, as is expected for 2004, instead of the average ratio used during 2003, we estimate our deferral of mining costs for 2003 would have been $15.9 million lower and net income would have been $8.2 million ($0.05 per share) lower.

•

Reclamation and Closure Costs – Our mining operations involve activities that have a significant effect on the surrounding area.  Our reclamation and closure costs primarily involve treatment of acidic water (also known as acid rock drainage) created by overburden, reclamation and revegetation of a large area in the lowlands of Papua where mill tailings are deposited, reclamation of overburden stockpiles and decommissioning of operating assets.  Through December 31, 2002, we had accrued $29.2 million for estimated closure and reclamation costs on a unit-of-production basis over our total estimated proven and probable recoverable copper reserves.  For a discussion of the assumptions that we make to estimate proven and probable recoverable reserves, see “Depreciation and Amortization” above.  

Effective January 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations” (see “New Accounting Standards”).  SFAS No. 143 requires that we record the fair value of our estimated asset retirement obligations in the period incurred, with the cumulative effect of adopting SFAS 143 as of January 1, 2003, for all existing asset retirement obligations, asset retirement costs and related accumulated depreciation required to be reflected in earnings as a separate line item.  The accounting estimates related to reclamation and closure costs are critical accounting estimates because (1) we will not incur most of these costs for a number of years, requiring us to make estimates over a long period; (2) reclamation and closure laws and regulations could change in the future or circumstances affecting our operations could change, either of which could result in significant changes to our current plans; (3) calculating the fair value of our asset retirement obligations in accordance with SFAS No. 143 requires management to assign probabilities to projected cash flows, to make long-term assumptions about inflation rates, to determine our credit-adjusted, risk-free interest rates and to determine market risk premiums that are appropriate for our operations; and (4) given the magnitude of our estimated reclamation and closure costs, changes in any or all of these estimates could have a material impact on net income.

In 2002, we engaged an independent environmental consulting and auditing firm to assist in estimating PT Freeport Indonesia’s aggregate asset retirement obligations, and worked with other consultants in estimating Atlantic Copper’s and PT Smelting’s asset retirement obligations.  We estimated these obligations using an expected cash flow approach, in which multiple cash flow scenarios were used to reflect a range of possible outcomes.  We 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, we 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 rat e of 9 percent was applied.  The projected cash flows were discounted at our 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.  The inflation rates and discount rates we used to calculate the fair value of PT Freeport Indonesia’s asset retirement obligation are critical factors in the calculation of future value and discounted present value costs.  An increase of one percent in the inflation rates used results in an approximate 17 percent increase in the discounted present value costs.  A decrease of one percent in the discount rates used has a similar effect resulting in an approximate 16 percent increase in the discounted present value costs.  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 ri sk premium was based on market-based 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, we estimated the fair value of our aggregate asset retirement obligations to be $28.5 million.  We recorded the fair value of these obligations and the related additional assets as of January 1, 2003.  The net difference between our 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), $0.06 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, we expect our future depreciation and amortization expense to be lower and our production costs to be higher, with no significant net impact on earnings for the near term.

The effect of adopting SFAS No. 143 was to increase net income by approximately $1 million, $0.01 per share for 2003.  Had we followed SFAS No. 143 during 2002 and 2001, net income would have increased by approximately $0.5 million or less than $0.01 per share in 2002 and by approximately $0.6 million or less than $0.01 per share in 2001.

At December 31, 2003, PT Freeport Indonesia revised its estimates for (1) changes in the projected timing of certain reclamation costs because of the slippage event in the Grasberg open pit; (2) changes in certain cost estimates; and (3) additional asset retirement obligations incurred during 2003.  At December 31, 2003, we estimated PT Freeport Indonesia’s aggregate undiscounted asset retirement obligations to be approximately $130 million and the discounted obligations to be $25.7 million, reflecting a net decrease of $3.7 million from the 2003 changes.  These changes are not expected to have a material impact on future net income.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated revenues include PT Freeport Indonesia’s sale of copper concentrates, which also contain significant quantities of gold and silver, and the sale by Atlantic Copper of copper anodes, cathodes, wire and wire rod, and gold in anodes and slimes.  PT Freeport Indonesia’s intercompany sales to Atlantic Copper are eliminated.  Consolidated revenues were a record $2.2 billion for 2003, compared with $1.9 billion for 2002, reflecting higher copper and gold price realizations and higher gold sales volumes, partly offset by lower copper sales volumes.  Revenues in 2002 benefited from record copper sales volumes and higher copper and gold price realizations, partly offset by lower gold sales volumes when compared with 2001 revenues of $1.84 billion.  

Consolidated production and delivery costs were higher in 2003 at $1,071.3 million compared with $938.5 million for 2002 and $943.4 million for 2001.  The increase in 2003 was primarily because of higher concentrates costs at Atlantic Copper caused by the increase in copper and gold prices during the year.  Consolidated depreciation and amortization expense of $230.8 million for 2003 was lower than the $260.4 million reported in 2002 primarily because a large portion of our depreciation is calculated on a unit-of-production basis and we reported 15 percent lower copper sales volumes at PT Freeport Indonesia.  Depreciation and amortization expense of $260.4 million for 2002 was lower than the $283.9 million reported in 2001 primarily because of a change in our depreciation methodology (see “Critical Accounting Estimates” and Note 1 of “Notes to Consolidated Financial Statements”).

Lower exploration costs for 2003 and 2002, compared with 2001, reflect the continued suspensions of our Contracts of Work outside of Block A.  All approved exploration costs in the joint venture areas with Rio Tinto are generally shared 60 percent by us and 40 percent by Rio Tinto.  The FCX/Rio Tinto joint ventures’ 2004 exploration budgets total approximately $13 million.

Consolidated general and administrative expenses increased to $80.3 million in 2003 from $68.3 million in 2002.  The increase relates to charges for costs associated with stock appreciation rights caused by an increase in our stock price, higher compensation costs and other costs.  Estimated general and administrative expenses for 2004 are expected to approximate the 2003 level.  General and administrative expenses increased by $8.9 million to $68.3 million in 2002 from $59.4 million in 2001.  In 2002, the shareholders approved the conversion of each outstanding share of Class A common stock into one share of Class B common stock, which simplified our capital structure and enhanced trading liquidity of our common stock.  The conversion also created a new measurement date for FCX’s Class A stock options that were converted to Class B stock options.  We are charging the in-the-money value of these stock opti ons ($8.8 million) on the new measurement date to earnings over the remaining vesting period of the options, which extends through January 2006.  The charge to general and administrative expenses totaled $2.3 million in 2003 and $2.3 million, including $0.7 million for transaction costs related to the conversion of our Class A common stock into Class B common stock, in 2002.  Other increases in 2002 included a total of $2.7 million for higher incentive compensation costs and severance costs.  As a percentage of revenues, general and administrative expenses were 3.6 percent in 2003 and 2002 and 3.2 percent in 2001.

Total consolidated interest cost (before capitalization) was $200.0 million in 2003, $183.4 million in 2002 and $183.0 million in 2001.  Interest cost increased in 2003 primarily because of higher average interest rates for our senior notes issued in early 2003 and higher average annual debt levels.  Higher average debt levels in 2002 offset lower average interest rates in 2002 compared with 2001.  Our interest cost is expected to decrease in 2004 to approximately $165 million because of projected lower average annual debt levels compared with 2003. Capitalized interest totaled $3.0 million in 2003, $12.2 million in 2002 and $9.4 million in 2001.  The reduction in capitalized interest reflects the completion of development activities at the Deep Ore Zone underground mine in early 2003.

Other expense includes the impact of translating Atlantic Copper’s net euro-denominated liabilities, primarily its retiree pension obligation, into its U.S. dollar functional currency.  Changes in the U.S.$/euro exchange rate require us to adjust the dollar value of our net euro-denominated liabilities and record the adjustment in earnings.  Exchange rate effects on our net income from euro-denominated liabilities totaled gains (losses) of $(13.6) million in 2003, $(11.9) million in 2002 and $2.4 million in 2001.  The losses in 2003 and 2002 reflect a stronger euro in relation to the U.S. dollar (see “Disclosures About Market Risks”).  Other expense also includes a $5.6 million charge in 2003 related to restructuring our credit facility (see “Capital Resources and Liquidity”) and interest income of $8.9 million in 2003, $4.8 million in 2002 and $3.6 million in 2001.

The provision for income taxes as a percentage of consolidated income before income taxes and minority interests totaled 58 percent for 2003, 55 percent for 2002 and 57 percent for 2001.  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 rate 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 two 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 carryforwards for which we have provided no financial statement benefit.

We receive minimal tax benefit from costs, including interest expense, incurred by our parent company, primarily because our parent company generates no taxable income from U.S. sources.  We also currently receive no tax benefit from losses in our smelting and refining segment (i.e., Atlantic Copper) because those losses cannot be used to offset our mining and exploration segment’s (i.e., PT Freeport Indonesia’s) profits in Indonesia.  Thus, our provision for income taxes as a percentage of our consolidated income before income taxes and minority interests will decrease as PT Freeport Indonesia’s income increases and vice versa absent changes in Atlantic Copper and parent company costs.  Parent company costs consist primarily of interest, depreciation and amortization, and general and administrative expenses.  Although PT Freeport Indonesia reported improved profits in 2003, FCX’s consolidated effecti ve tax rate increased to 58 percent from 55 percent in 2002 because of higher costs at Atlantic Copper and the parent company.  Summaries of the significant components of our calculation of the consolidated provision for income taxes are shown below (in thousands, except percentages).

	Years Ended December 31,
	2003		2002		2001
Mining and exploration segment operating income	$    792,487		$  687,157		$  563,455
Mining and exploration segment interest expense, net	(44,861	)	(71,424	)	(95,238	)
Intercompany operating profit recognized (deferred)	13,828		(28,807	)	11,830
Taxable income	761,454		586,926		480,047
Indonesian corporate income tax rate (35%) plus U.S. alternative minimum tax rate (2%)	37	%	37	%	37	%
Corporate income taxes	281,738		217,163		177,617
Approximate PT Freeport Indonesia net income	479,716		369,763		302,430
Withholding tax on FCX’s equity share	9.064	%	9.064	%	8.586	%
Withholding taxes	43,481		33,515		25,967
Puncakjaya Power taxes and other	12,834		(5,160	)	(605	)
FCX consolidated provision for income taxes	$    338,053		$  245,518		$  202,979
FCX consolidated effective tax rate	58	%	55	%	57	%

The increase in minority interest charges to $48.5 million in 2003 from $36.4 million in 2002 primarily reflects higher net income at PT Freeport Indonesia.  The decrease in minority interest charges to $36.4 million in 2002 from $42.8 million in 2001 reflects our increased ownership in PT Freeport Indonesia (see Note 2 of “Notes to Consolidated Financial Statements”) partly offset by higher net income at PT Freeport Indonesia.

We have two operating segments: “mining and exploration” and “smelting and refining.”  The mining and exploration segment consists of our Indonesian activities including PT Freeport Indonesia’s copper and gold mining operations, Puncakjaya Power’s power generating operations after eliminations with PT Freeport Indonesia and our 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) data by segment follow (in millions):

	Years Ended December 31,
	2003			2002			2001
Mining and exploration	$	792.5	a	$	687.2	a	$	563.5
Smelting and refining		(21.8	)		2.6			(16.0	)
Intercompany eliminations and other		52.6	a		(49.7	)a		(4.6	)
Operating incomeb	$	823.3		$	640.1		$	542.9

a.

Includes charges to the mining and exploration segment for stock option exercises, which are eliminated in consolidation and totaled $69.1 million in 2003 and $6.8 million in 2002.

b.

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 their sales of final products to third parties.  Changes in the amount of these deferred profits impacted operating income by $13.8 million in 2003, $(28.8) million in 2002 and $11.8 million in 2001.  The increase in deferred profits in 2002 was caused mostly by higher copper and gold prices at the end of 2002.  Our consolidated earnings fluctuate depending on the timing and prices of these sales.  At December 31, 2003, our deferred profits, net of taxes and minority interests, to be recognized in future periods’ net income totaled $28.9 million.

MINING AND EXPLORATION OPERATIONS

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

	2003			2002
Revenues – prior year	$	1,519.0		$	1,414.1
Price realizations:
Copper		146.4			24.4
Gold		134.9			98.0
Sales volumes:
Copper		(160.1	)		85.0
Gold		55.1			(94.7	)
Adjustments, primarily for copper           pricing on prior year open sales		0.6			14.5
Treatment charges, royalties and other		48.7			(22.3	)
Revenues – current year	$	1,744.6		$	1,519.0

Gross Profit Per Pound of Copper (cents)

	Years Ended December 31,
	2003		2002		2001
Average realized price	81.9		70.6		69.0
Production costs:
Site production and delivery	47.6	a	36.0	a	38.8	a
Gold and silver credits	(69.8	)	(48.2	)	(51.9	)
Treatment charges	17.9		18.3		18.2
Royalty on metals	2.0		1.6		1.7
Net cash production costs (credits)	(2.3	)	7.7		6.8
Depreciation and amortization	14.7		14.4		18.0
Reclamation, noncash and other	1.2		0.5		0.2
Total production costs	13.6		22.6		25.0
Adjustments, primarily for copper pricing on prior year open sales and gold/silver hedging	2.8		0.9		0.1
Gross profit per pound of copper	71.1		48.9		44.1

a.

Net of deferred mining costs totaling $64.4 million or 5.0 cents per pound in 2003, $30.6 million or 2.0 cents per pound in 2002 and $29.4 million or 2.1 cents per pound in 2001.

Net cash production costs (credits) 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.  For a reconciliation of cash production costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements see “PT Freeport Indonesia Product Revenues and Net Cash Production Costs (Credits)” under “Product Revenues and Production Costs.”

PT Freeport Indonesia Operating Results – 2003 Compared with 2002

PT Freeport Indonesia’s revenues increased by $225.6 million in 2003 from 2002.  Both copper and gold price realizations improved during 2003 with copper approximately 15 percent higher at $0.82 per pound and gold approximately 18 percent higher at $366.60 per ounce.  Gold revenues include a $22.1 million ($8.99 per ounce) hedging gain from redemption of our Gold-Denominated Preferred Stock.  Copper sales volumes declined 15 percent to 1.3 billion pounds in 2003 from 1.5 billion pounds in 2002 because of lower copper ore grades and reduced mill throughput resulting from the fourth quarter slippage and debris flow events.  Gold sales volumes increased 8 percent to 2.5 million ounces in 2003 from 2.3 million ounces in 2002 because of higher gold ore grades partly offset by lower mill throughput.  Treatment charges were $46.6 million lower in 2003 compared with 2002 because of lower copper sales volumes and market treatment rates.  Royalties were higher at $26.5 million for 2003 compared with $24.5 million for 2002 primarily reflecting higher metal prices.  A portion of treatment charges varies with the price of copper, and royalties vary with volumes and prices of copper and gold.

The royalty rate payable by PT Freeport Indonesia under its Contract of Work varies from 1.5 percent of copper net revenue at a copper price of $0.90 or less per pound to 3.5 percent at a copper price of $1.10 or more per pound.  The Contract of Work royalty rate for gold and silver sales is 1.0 percent.  In connection with our fourth concentrator mill expansion completed in 1998, PT Freeport Indonesia agreed to pay the Government of Indonesia voluntary additional royalties (royalties not required by the Contract of Work) to provide further support to the local governments and the people of the Indonesian province of Papua (see Note 1 of “Notes to Consolidated Financial Statements”).  As a result of the recent rise in copper prices, we expect our 2004 royalty costs to increase compared with 2003 royalties of $26.5 million.  If copper prices average $1.10 per pound and gold prices average $400 per ounce, we woul d expect royalties to total approximately $38 million for 2004.  If copper prices average $1.30 per pound and gold prices average $400 per ounce, we would expect royalties to total approximately $45 million.  These estimates assume 2004 sales volumes of 1.0 billion pounds of copper and 1.5 million ounces of gold.

Mill throughput averaged 203,000 metric tons of ore per day in 2003 and 235,600 metric tons of ore per day in 2002.  Below is a summary in metric tons per day of production by mine.

	Years Ended December 31,
	2003	2002	2001
Grasberg open pit	155,700	194,500	211,400
Deep Ore Zone underground mine	40,500	21,800	5,500
Intermediate Ore Zone underground mine	6,800	19,300	20,900
Total mill throughput	203,000	235,600	237,800

The lower mill throughput rate during 2003 primarily reflects the impact of the fourth-quarter 2003 open pit slippage and debris flow events and the subsequent clean-up efforts.  The Grasberg open-pit mine averaged 99,300 metric tons of ore per day in the fourth quarter of 2003 and 191,100 metric tons per day in the fourth quarter of 2002.  At the Deep Ore Zone underground mine, production averaged 42,800 metric tons of ore per day in the fourth quarter of 2003 and 40,500 metric tons of ore per day for 2003, compared with 30,200 metric tons of ore per day in the fourth quarter of 2002 and 21,800 metric tons of ore per day for 2002.  Deep Ore Zone operations continue to perform above design capacity of 35,000 metric tons of ore per day, and studies are ongoing to evaluate additional low-cost expansion options to increase production from the Deep Ore Zone underground operation.  Production from our other underground mine, the Intermediate Ore Zone, averaged 6,800 metric tons of ore per day for 2003 and 19,300 metric tons of ore per day for 2002.  The Intermediate Ore Zone underground mine was depleted during the third quarter of 2003.  During its 10-year life, the Intermediate Ore Zone operation produced almost 30 percent more copper and gold than the initial reserve estimates.

PT Freeport Indonesia reported record-low average unit net cash production costs of a net credit of $(0.02) per pound in 2003, compared with $0.08 per pound in 2002.  Unit site production and delivery costs in 2003 averaged $0.48 per pound of copper, $0.12 per pound higher than the $0.36 in 2002 primarily because of lower copper sales volumes.  Higher mine maintenance costs, stronger Indonesian and Australian currencies and higher energy costs also resulted in higher costs compared with 2002.  In the fourth quarter of 2003, PT Freeport Indonesia changed its life-of-mine overburden-to-ore ratio to 2.1 to 1 from 1.9 to 1, and in the fourth quarter of 2002 the ratio changed to 1.9 to 1 from 1.8 to 1, as discussed above.  The fourth-quarter 2003 change increased 2003 costs by $1.5 million or 0.1 cent per pound.  As of December 31, 2003, deferred mining costs totaled $142.6 million compared with $78.2 million at December 31, 2002.  See “Critical Accounting Estimates” for a discussion of changes in the estimated life-of-mine overburden-to-ore ratio.

Gold credits for 2003 of $0.70 per pound were higher than the gold credits of $0.48 per pound in 2002 primarily because of higher gold sales volumes and prices in 2003.  Gold ore grades for 2003 improved by 24 percent to 1.54 grams per metric ton in 2003 from 1.24 grams per metric ton in 2002. Because of the physical characteristics of the Grasberg ore body, the sequencing of mining results in production of ore of varying grades, more significantly for gold.  Assuming average gold prices of $400 per ounce and copper and gold sales of 1.0 billion pounds and 1.5 million ounces for 2004, and 1.5 billion pounds and 2.9 million ounces for 2005, PT Freeport Indonesia expects its net cash production costs, including gold and silver credits, to average approximately $0.25 per pound in 2004 and a net credit of $(0.12) per pound in 2005.  The weighted average net cash production cost for th e two-year period would approximate less than $0.05 per pound.  Because the majority of PT Freeport Indonesia’s costs are fixed, unit costs vary with the volumes sold and will therefore be higher than the $0.25 per pound projected annual average during the first half of 2004 and lower during the second half.  In addition, treatment charges are expected to be higher in the first half of 2004 than the approximate $0.18 per pound average over the last three years because of the mix of customers.  Net unit cash production costs for 2004 would change approximately $0.03 per pound for each $25 per ounce change in the average price of gold.

As a result of the lower copper production and sales in 2003, PT Freeport Indonesia’s depreciation rate per pound of copper increased to $0.15 for 2003 compared with $0.14 for 2002.  For 2004, PT Freeport Indonesia expects its depreciation rate to increase to approximately $0.16 per pound, primarily because of lower projected copper production and sales.  Because certain assets are depreciated on a straight-line basis, the rate per pound will be higher than the expected 2004 average during the first half of the year and lower during the second half.

PT Freeport Indonesia Operating Results – 2002 Compared with 2001

Record annual copper sales volumes of 1,522.3 million pounds for 2002 were 9 percent higher than the 1,399.1 million pounds in 2001.  Revenues for 2002 also benefited from higher price realizations of $0.71 per pound of copper ($0.69 for 2001) and $312 per ounce for gold ($269 for 2001), partly offset by lower gold sales volumes of 2.3 million ounces in 2002 (2.6 million ounces for 2001).  The improved copper sales volumes reflect the higher-grade copper ore that we began to access late in the second quarter of 2002.  Copper ore grades averaged 1.14 percent for 2002 and 1.00 percent for 2001, and gold ore grades averaged 1.24 grams per metric ton in 2002 and 1.41 grams per metric ton in 2001.  The higher price realizations and copper volumes were the primary reasons for the increase in PT Freeport Indonesia’s 2002 revenues compared with 2001.  Revenues for 2001 totaled $1.4 billion from copper sales of 1.4 bill ion pounds at $0.69 per pound and gold sales of 2.6 million ounces at $269 per ounce.  Treatment charges were $24.0 million higher in 2002 compared with 2001 because of higher copper volumes.  Royalties were essentially unchanged at $24.5 million for 2002 compared with $24.3 million for 2001 reflecting higher copper sales offset by lower gold sales.

Mill throughput from production from PT Freeport Indonesia’s producing mines averaged 235,600 metric tons of ore per day in 2002 and 237,800 metric tons of ore per day in 2001.  PT Freeport Indonesia’s Grasberg open-pit mine averaged 194,500 metric tons of ore per day in 2002 and 211,400 metric tons of ore per day in 2001.  At the Deep Ore Zone underground mine, production averaged 21,800 metric tons of ore per day for 2002, compared with 5,500 metric tons of ore per day for 2001.  Production from the Intermediate Ore Zone averaged 19,300 metric tons of ore per day for 2002 and 20,900 metric tons of ore per day for 2001.

Unit site production and delivery costs in 2002 averaged $0.36 per pound of copper, $0.03 per pound lower than the $0.39 in 2001 primarily because of higher volumes resulting from higher-grade ore mined and higher copper recoveries.  In the fourth quarter of 2002, PT Freeport Indonesia changed its life-of-mine overburden-to-ore ratio to 1.9 to 1 from 1.8 to 1, and in the fourth quarter of 2001 the ratio changed to 1.8 to 1 from 1.6 to 1, as discussed above.  The fourth-quarter 2002 change in the estimated ratio of overburden-to-ore increased 2002 costs by $2.2 million or 0.1 cent per pound.  As of December 31, 2002, deferred mining costs totaled $78.2 million compared with $47.6 million at December 31, 2001.  Gold credits for 2002 of $0.48 per pound were lower than the gold credits of $0.52 per pound in 2001 primarily because of higher copper sales volumes in 2002.  Gold ore grades for 2002 declined by 12 percent fr om 2001.

As discussed above under “Critical Accounting Estimates,” effective January 1, 2002, we changed our methodology used in the determination of depreciation associated with PT Freeport Indonesia’s mining and milling assets.  As a result of the change in methodology and higher copper production and sales in 2002, PT Freeport Indonesia’s depreciation rate per pound of copper declined to $0.14 for 2002 compared with $0.18 for 2001.  

PT Freeport Indonesia Sales Outlook

PT Freeport Indonesia sells its copper concentrates primarily under long-term sales agreements denominated in U.S. dollars, mostly to companies in Asia and Europe and to international trading companies.  In December 2003, PT Freeport Indonesia declared force majeure following the October 9, 2003, slippage in the Grasberg open pit and the subsequent debris flow on December 12, 2003.  As discussed earlier, PT Freeport Indonesia is focusing its near-term efforts on assuring safe access in higher grade ore areas in the pit, resulting in the deferral of certain metal sales previously forecast for 2004.  Net of Rio Tinto’s interest, PT Freeport Indonesia’s share of sales for 2004 is expected to approximate 1.0 billion pounds of copper and 1.5 million ounces of gold.  PT Freeport Indonesia expects its sales for the first quarter of 2004 to approximate 90 million pounds of copper and 90,000 ounces of gold.  Actual sales may vary from these estimates based on the time required to restore safe access to the higher grade ore areas in the Grasberg open-pit mine.

PT Freeport Indonesia has long-term contracts to provide approximately 60 percent of Atlantic Copper’s copper concentrate requirements at market prices and nearly all of PT Smelting’s copper concentrate requirements.  Under the PT Smelting contract, for the first 15 years of PT Smelting’s operations beginning December 1998, the treatment and refining charges on the majority of the concentrate PT Freeport Indonesia provides will not fall below a specified minimum rate.  The current rate is $0.23 per pound, which has been the rate since commencement of PT Smelting’s operations in 1998.  The rate is scheduled to decline to a floor of $0.21 per pound in early 2004.  

Exploration and Reserves

During 2003, additions to the aggregate proven and probable reserves of the Grasberg and other Block A ore bodies totaled approximately 185.5 million metric tons of ore representing increases of 2.6 billion recoverable pounds of copper, 1.0 million recoverable ounces of gold and 16.8 million recoverable ounces of silver.  Approximately 126 million metric tons of the additions relate to additions to the Mill Level Zone ore body, resulting from PT Freeport Indonesia’s 2003 drilling program.  Our aggregate exploration budget for 2004, including Rio Tinto’s share,  is expected to total approximately $13 million with most of the effort focused on drilling below the current Mill Level Zone ore body.  Net of Rio Tinto’s share, PT Freeport Indonesia’s share of proven and probable recoverable reserves as of December 31, 2003, was 39.7 billion pounds of copper, 46.6 million ounces of gold and 116.8 million ounc es of silver.  FCX’s equity interest in proven and probable recoverable reserves as of December 31, 2003, was 36.0 billion pounds of copper, 42.2 million ounces of gold and 105.9 million ounces of silver (see Note 13 of “Notes to Consolidated Financial Statements”).  PT Freeport Indonesia’s share of reserve additions replaced approximately 123 percent of its 2003 copper production, 24 percent of 2003 gold production and 245 percent of 2003 silver production.  Estimated recoverable reserves were assessed using a copper price of $0.85 per pound and a gold price of $270 per ounce.  If we adjusted metal prices used in our reserve estimates to the approximate average London spot prices for the past three years, i.e., copper prices adjusted from $0.85 per pound to $0.74 per pound and gold prices adjusted from $270 per ounce to $315 per ounce, there would be no change in our proven and probable reserves.

Field exploration activities outside of our current mining operations area are in suspension due to safety and security issues and uncertainty relating to a possible conflict between our mining and exploration rights in certain forest areas covered by our Contracts of Work and 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, 2004, for Eastern Minerals.  We are currently seeking a renewal of the Block B suspension and expect to continue to seek suspension renewals for additional one-year periods by written request to the Government of Indonesia for each of the suspended areas if required.  We cannot predict when we will resume our exploration activities in these areas.

SMELTING AND REFINING OPERATIONS

Our investment in smelters (Atlantic Copper and PT Smelting) serves an important role in our concentrate marketing strategy.  PT Freeport Indonesia generally 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 downstream integration, we are assured placement of a significant portion of our concentrate production and operating hedges for treatment and refining charges.  While currently low smelting and refining charges have adversely affected the operating results of Atlantic Copper, these low charges have benefited the operating results of PT Freeport Indonesia’s mining operations.

Atlantic Copper Operating Results

	Years Ended December 31,
(In Millions)	2003			2002		2001
Gross profit (loss)	$	(10.7	)	$	11.2	$	(2.3	)
Add depreciation and amortization expense		28.5			27.7		27.3
Other		4.6			4.5		0.7
Cash margin	$	22.4		$	43.4	$	25.7
Operating income (loss) (in millions)	$	(21.8	)	$	2.6	$	(16.0	)
Concentrate and scrap treated (metric tons)		964,400			1,016,700		891,100
Anode production (000s of pounds)		640,000			657,000		617,300
Treatment rates per pound		$.16			$.17		$.17
Cathode, wire rod and wire sales (000s of pounds)		546,800			556,500		549,800
Cathode cash production cost per pound before hedging		$.16			$.12		$.14
Gold sales in anodes and slimes (ounces)		929,700			813,900		831,300

Atlantic Copper Operating Results – 2003 Compared with 2002

Atlantic Copper’s cash margin was $21.0 million lower at $22.4 million in 2003, compared with $43.4 million in 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 2003 and $0.12 in 2002.  The higher unit costs in 2003 primarily reflect a stronger euro in relation to the U.S. dollar, which added approximately $0.03 per pound to the 2003 costs when compared to the 2002 costs.  Atlantic Copper’s average treatment rates (including price participation), which are what PT Freeport Indonesia and third parties pay Atlantic Copper to smelt and refine concentrates, continued at historically low levels of $0.16 per pound for 2003 and $0.17 per pound for 2002 and 2001.  Excess smelter capacity, combined with limited copper concentrate availability, has caused long-term treatment a nd refining rates to decline since early 1998.  The outlook for treatment rates in the near term continues to remain weak.  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.

Atlantic Copper recorded an operating loss of $21.8 million in 2003, compared with operating income of $2.6 million in 2002.  Atlantic Copper’s operating results also include a $9.6 million gain in 2003 and a $1.2 million charge in 2002 on currency hedging contracts maturing during the year.  A 45-day major maintenance turnaround beginning in March 2004 is expected to adversely affect Atlantic Copper’s costs and volumes resulting in an approximate $32 million increase in 2004 operating costs, most of which will be incurred in the second quarter. Major maintenance turnarounds of this duration typically occur approximately every nine years for Atlantic Copper, with significantly shorter term maintenance turnarounds occurring in the interim.  As part of refinancing its debt in June 2000, Atlantic Copper was required to hedge a portion of its anticipated euro-denominated operating costs.  Atlantic Copper’s len ders agreed to waive the requirements to hedge anticipated euro-denominated operating costs and interest costs through March 2004.  We plan to repay a portion of Atlantic Copper’s debt, and we are considering other strategic business alternatives with regard to Atlantic Copper.  As of December 31, 2003, Atlantic Copper’s debt under nonrecourse financing arrangements totaled $234.9 million.

Atlantic Copper Operating Results – 2002 Compared with 2001

Atlantic Copper’s cash margin was $17.7 million higher at $43.4 million in 2002, compared with $25.7 million in 2001.  For 2002, Atlantic Copper treated 14 percent more concentrate and scrap and produced 6 percent more anodes compared with 2001, setting annual records in 2002.  Atlantic Copper’s scheduled 27-day major maintenance turnaround in April 2001 negatively impacted its cash margin in 2001.  Atlantic Copper’s cathode cash production costs per pound of copper, before currency hedging, averaged $0.12 in 2002 and $0.14 in 2001.  The higher unit costs in 2001 primarily reflect lower throughput and higher maintenance costs associated with the major maintenance turnaround.  Atlantic Copper’s treatment rates averaged $0.17 per pound in 2002 and 2001.

Atlantic Copper recorded operating income of $2.6 million in 2002, compared with an operating loss of $16.0 million in 2001.  In addition to the costs associated with the major maintenance turnaround in 2001, Atlantic Copper recorded net charges to operating results totaling $5.0 million in 2001 primarily for past service costs for an employee benefit plan.  Atlantic Copper’s operating results also include a $1.2 million charge in 2002 and a $3.0 million charge in 2001 on currency hedging contracts maturing during the year.

PT Smelting Operating Results

	Years Ended December 31,
(In Millions)	2003		2002			2001
PT Freeport Indonesia sales to PT Smelting	$	510.2	$	391.1		$	374.1
Equity in PT Smelting earnings (losses)		5.6		(4.2	)		(5.1	)
PT Freeport Indonesia profits recognized (deferred)		7.0		(8.4	)		6.2

PT Smelting Operating Results – 2003 Compared with 2002

PT Freeport Indonesia accounts for its 25 percent interest in PT Smelting under the equity method and provides PT Smelting with nearly all of its concentrate requirements (see Note 9 of “Notes to Consolidated Financial Statements”).  PT Smelting treated 824,800 metric tons of concentrate in 2003, 15 percent more than the 719,600 metric tons treated in 2002.  PT Smelting’s copper cathode cash production costs per pound totaled $0.10 in 2003, compared with $0.14 in 2002, reflecting the impact of the 28-day maintenance turnaround in May 2002.  We expect the next scheduled 33-day major maintenance turnaround to occur in the first half of 2004.  Major maintenance turnarounds of this duration typically occur approximately every four years for PT Smelting, with significantly shorter term maintenance turnarounds in the interim.  

 Our revenues include PT Freeport Indonesia’s sales to PT Smelting, but we defer recognizing profits on 25 percent of PT Freeport Indonesia’s sales to PT Smelting that are still in PT Smelting’s inventory at the end of the period.  The effect of changes in these deferred profits was the recognition (deferral) of operating profits totaling $7.0 million in 2003 and $(8.4) million in 2002.

PT Smelting Operating Results – 2002 Compared with 2001

PT Smelting treated 719,600 metric tons of concentrate in 2002, 2 percent more than the 702,900 metric tons treated in 2001.  PT Smelting treated more concentrate in 2002 despite a scheduled maintenance turnaround in the second quarter of 2002.  PT Smelting’s copper cathode cash production costs per pound totaled $0.14 in 2002, compared with $0.12 in 2001, reflecting the impact of the 28-day maintenance turnaround in May 2002.  The effect of changes in the deferred profits on PT Freeport Indonesia’s sales to PT Smelting was the recognition (deferral) of operating profits totaling $(8.4) million in 2002 and $6.2 million in 2001.

CAPITAL RESOURCES AND LIQUIDITY

Operating Activities

Our operating cash flow exceeded $500 million for each of the last five years and totaled $572.1 million in 2003, compared with $512.7 million in 2002.  The net increase in 2003 was primarily because of higher net income.  For 2003, significant uses of cash from operating activities included increases in deferred mining costs and inventories, and payment of income taxes, partly offset by an increase in our accounts payable and accrued liabilities.  For 2002, significant uses included increases in accounts receivable and inventories, partly offset by an increase in accrued income taxes payable.  Operating cash flow totaled $512.7 million in 2002, compared with $509.0 million in 2001.  Working capital, excluding cash, decreased by $22.5 million in 2001 primarily because of the timing of collections of accounts receivable and inventory levels, party offset by the timing of payments to Rio Tinto for its share of joint v enture cash flows.  As discussed earlier, our 2004 net income and operating cash flows are expected to be adversely affected by the timing of PT Freeport Indonesia’s metal sales and Atlantic Copper’s operating results, including the 45-day major maintenance turnaround during the first half of 2004.  Using estimated metals prices of $1 per pound of copper and $400 per ounce of gold, we expect our 2004 consolidated operating cash flows to total approximately $230 million before considering any potential insurance proceeds discussed below.

PT Freeport Indonesia maintains property damage and business interruption insurance related to its operations.  We have notified our insurers that we will be presenting a claim and are in the process of quantifying the extent of our losses from the October 9 and December 12 events.  Any losses covered by insurance would be subject to a substantial deductible and various coverage limits.  No assurance can be provided at this time about the extent to which our losses will be covered by insurance.

Investing Activities

Our total 2003 capital expenditures were $139.2 million compared to $188.0 million in 2002.  The largest individual capital expenditures for 2003 primarily were for expansion of the Deep Ore Zone mine (approximately $22 million) and work on the Grasberg overburden handling system (approximately $21 million). Our total 2002 capital expenditures were slightly higher compared to $167.0 million in 2001.  Capital expenditures in 2002 included costs at the Grasberg open-pit operations totaling approximately $59 million for replacement capital such as new trucks, shovels, and major development costs totaling approximately $69 million for the overburden handling system and the Deep Ore Zone mine.  Capital expenditures included costs for replacement capital and other mining equipment totaling approximately $62 million in 2001, and our share of development costs for the Deep Ore Zone mine totaling approximately $37 million in 2001. &nb sp;

Our capital expenditures for 2004 are expected to total approximately $150 million, including approximately $28 million for long-term development projects.  We expect to fund our 2004 capital expenditures with operating cash flows and available cash.  Capital expenditures are estimated to average approximately $130 million per year over the next five years.

In 2001, we sold $603.8 million of 8 ¼% Convertible Senior Notes due 2006 (see below).  The terms of the notes required that we use $139.8 million of the proceeds to purchase a portfolio of U.S. government securities to secure and pay for the first six semiannual interest payments.  We sold $46.6 million of these restricted investments in 2003 and $47.9 million in 2002 to pay interest.  As discussed below, in August 2003, we privately negotiated the early conversion of 51.5 percent of our 8 ¼% Convertible Senior Notes.  Conversion of these notes allowed us to sell $27.0 million of our restricted investments during 2003.  Also as discussed below, in January 2004 we completed a tender offer and privately negotiated transactions totaling $225.8 million for a portion of our remaining outstanding 8 ¼% Convertible Senior Notes.

In July 2003, we acquired the 85.7 percent ownership interest in PT Puncakjaya Power owned by affiliates of Duke Energy Corporation for $68.1 million cash, net of $9.9 million of cash acquired.  Puncakjaya Power is the owner of assets supplying power to PT Freeport Indonesia’s operations, including the 3x65 megawatt coal-fired power facilities.  PT Freeport Indonesia purchases power from Puncakjaya Power under infrastructure asset financing arrangements.  At December 31, 2003, PT Freeport Indonesia had infrastructure asset financing obligations to Puncakjaya Power totaling $295.5 million.  As a result of this transaction, our consolidated balance sheet no longer reflects PT Freeport Indonesia’s obligation to Puncakjaya Power, but instead reflects the Puncakjaya Power bank debt which totaled $235.5 million and a receivable from Rio Tinto totaling $83.9 million for its share of the obligation to Puncakjaya Power at December 31, 2003.  The transaction is expected to have a net positive prospective effect on consolidated earnings of approximately $12 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 10 ⅛% Senior Notes due 2010.  Interest on the notes is payable semiannually on February 1 and August 1 of each year, beginning August 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 and limitations 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 p ayments as of December 31, 2003, was approximately $525 million.

On February 11, 2003, we sold $575 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 2003.  The notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of our 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 our two note offerings to repay all outstanding amounts under our bank credit facilities. In October 2003, FCX and PT Freeport Indonesia entered into an amended revolving credit facility that provides a commitment of $165 million, which may be increased to $350 million with additional lender commitments, and matures in September 2006.  We recorded charges totaling $5.6 million ($3.7 million to net income or $0.02 per share) in 2003 to accelerate amortization of deferred financing costs related to the prior credit facility.

In February 2003, our Board of Directors authorized the initiation of an annual cash dividend on our common stock of $0.36 per share ($0.09 payable quarterly).  Our Board approved $0.09 per share dividends on our common stock payable May 1, 2003, August 1, 2003, and November 1, 2003.  In October 2003, our Board authorized an increase in the common stock dividend from an annual rate of $0.36 per share to $0.80 per share.  The Board also approved a new open market share purchase program for up to 20 million shares,  which replaced our previous program.  The declaration and payment of dividends is at the discretion of our Board and will depend on our financial results, cash requirements, future prospects and other factors deemed relevant by the Board.  The timing of future purchases of our common stock is dependent upon many factors including the price of our common shares, our cash flow and financial posit ion, and general economic and market conditions.  Two of our senior notes and, in certain circumstances, our credit facility (see Note 5 of “Notes to Consolidated Financial Statements”) contain limitations on restricted payments, including dividends and common stock purchases.

In April 2003, we concluded tender offers to purchase 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 or $0.03 per share) 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 recorded a $1.3 million ($0.9 million to net income or $0.01 per share) charge to losses on extinguishment of debt in the third quarter of 2003.  In October 2003, the holders of $68.9 million of the remaining $73.5 million of outstanding 7.20% Senior Notes elected early repayment in November 2003 as permitted under their terms.  There is currently outsta nding $4.5 million of our 7.20% Senior Notes and $66.5 million of our 7.50% Senior Notes.

In August 2003, we redeemed 6.0 million shares of Gold-Denominated Preferred Stock for $210.5 million and partially redeemed our Silver-Denominated Preferred Stock for $10.8 million.  The mandatory redemptions resulted in a $245.1 million decrease in debt (because mandatorily redeemable preferred stock is now classified as debt, see “New Accounting Standards”) and a hedging gain to revenues of $23.8 million ($12.2 million to net income or $0.08 per share).  Mandatory partial redemptions of our Silver-Denominated Preferred Stock totaled $10.8 million in 2003, $11.7 million in 2002 and $10.4 million in 2001.  Three annual mandatory partial redemptions remain as of December 31, 2003.

In August 2001, we sold $603.8 million of 8 ¼% Convertible Senior Notes due January 2006 for net proceeds of $582.6 million.  The net proceeds, after purchasing the portfolio of U.S. government securities discussed above, were used to repay outstanding amounts under our bank credit facilities. In August 2003, we privately negotiated the early conversion of 51.5 percent of these notes, which resulted in a $311.1 million reduction in debt.  The holders converted their notes into 21.76 million shares of our common stock and received $23.0 million in cash from restricted investments held in escrow for payment of future interest on these notes.  We recorded charges totaling $24.7 million ($24.2 million to net income or $0.15 per share) related to these conversions.  In January 2004, we completed a tender offer and privately negotiated transactions for a portion of the remaining 8 ¼% Convertible Senior Notes, resulti ng in the early conversion of $225.8 million of notes into 15.8 million shares of FCX common stock.  We expect to record an approximate $5 million net charge to net income in the first quarter of 2004 in connection with these transactions.  The remaining $66.8 million of these notes are callable beginning in August 2004, and we intend to call them at this time.

In December 2003, we called for redemption the depositary shares representing our 7% Step-Up Convertible Preferred Stock.  Of the 14.0 million depositary shares outstanding at the time of the call, 13.8 million depositary shares were converted into 11.5 million shares of FCX common stock.  The remaining shares are being redeemed for approximately $7 million cash.

In January 2004, we sold $350 million of 6 ⅞% Senior Notes due 2014.  We expect to use the net proceeds of approximately $344 million from this offering to fund our 2004 debt maturities totaling $154.1 million (see below) and certain Atlantic Copper loans totaling $103.0 million.  

As a result of the transactions discussed above, we had net borrowings of debt, including preferred stock redemptions, of $31.7 million in 2003, and our net cash repayments of debt and redemptions of preferred stock totaled $333.3 million in 2002 and $136.0 million in 2001.  

Debt Maturities.  Below is a summary (in millions) of our total debt maturities and pro forma debt maturities, including mandatorily redeemable preferred stock, based on loan balances as of December 31, 2003, and the December 31, 2003, London A.M. gold fixing price for one ounce of gold ($417.25) and the London silver fixing price for one ounce of silver ($5.97) in the London bullion market (which determine the preferred stock redemption amounts):  

	2004		2005		2006			2007		2008		Thereafter
Infrastructure financings, equipment loans and other	$	10.3	$	18.7	$	35.0		$	18.2	$	15.4	$	16.9
Atlantic Copper facilities		81.1		24.3		24.2			75.2		30.1		-
Puncakjaya Power bank debt		48.5		51.6		37.2			28.0		36.0		34.2
Redeemable preferred stock a		14.2		14.2		193.8			-		-		-
7.50% Senior Notes		-		-		66.5			-		-		-
8 ¼% Convertible Senior Notes b		-		-		292.6			-		-		-
10 ⅛% Senior Notes due 2010		-		-		-			-		-		500.0
7% Convertible Senior Notes due 2011b		-		-		-			-		-		575.0
7.20% Senior Notes due 2026		-		-		-			-		-		4.5
Total debt maturities		154.1		108.8		649.3			121.4		81.5		1,130.6
January 2004 conversions of 8 ¼%     Convertible Senior Notes		-		-		(225.8	)		-		-		-
6 ⅞% Senior Notes due 2014 issued January 2004		-		-		-			-		-		350.0
Pro forma debt maturities	$	154.1	$	108.8	$	423.5		$	121.4	$	81.5	$	1,480.6

a.

In accordance with SFAS No. 150 (see “New Accounting Standards” and Note 1 of “Notes to Consolidated Financial Statements”), our mandatorily redeemable preferred stock is classified as debt effective July 1, 2003 (see “Disclosures about Market Risk”).

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.

Other Contractual Obligations

In addition to our debt and redeemable preferred stock maturities shown above, we have other contractual obligations and commitments which we expect to fund with projected operating cash flows, available credit facilities or future financing transactions, if necessary.  These obligations and commitments include (1) PT Freeport Indonesia’s commitment to provide one percent of its annual revenue through mid-2006 for development of the local people through the Freeport Partnership Fund for Community Development and (2) PT Freeport Indonesia’s commitment to contribute amounts to a cash fund designed to accumulate at least $100 million by the end of our Indonesian mining activities to pay for mine closure and reclamation.  Atlantic Copper has a mostly unfunded contractual obligation denominated in euros to supplement amounts paid to retired employees.  In August 2002, Atlantic Copper complied with Spanish legislation by agreeing to fund 7.2 million euros annually for 15 years, beginning August 2002, to an approved insurance company for an estimated 72 million euro contractual obligation to the retired employees.  Atlantic Copper had $68.0 million recorded as of December 31, 2003, for this obligation and is amortizing the unaccrued balance of approximately $8.8 million over the remaining 13-year funding period.  The scheduled annual payments of 7.2 million euros are not significantly more than the payments Atlantic Copper has made directly to its retired employees over the last several years.  Atlantic Copper has firm contractual commitments with third parties to purchase concentrates at market prices.  We have various noncancelable operating leases and open purchase orders at December 31, 2003.  A summary of these various obligations follows (in millions, except concentrates):

	Total			1 Year or Less		Years 2 - 3		Years 4 - 5		More than 5 Years
PT Freeport Indonesia funding of mine closure and reclamation fund		$22.3	a		$0.9		$1.4		$1.4		$18.6
Atlantic Copper contractual obligation to retired employees		€94.2			€7.2		€14.5		€14.5		€58.0
Atlantic Copper contracts to purchase concentrates at market prices (in thousand metric tons)		1,307.0			468.0		643.0		196.0		-
Aggregate operating leases, including Rio Tinto’s shareb		$22.2			$7.0		$11.8		$2.3		$1.1
Open purchase orders at December 31, 2003		$54.2			$54.2		-		-		-

a.

Funding plus accrued interest are projected to accumulate to $100.0 million by the end of our Indonesian mining activities.

b.

Minimum payments under operating leases have not been reduced by aggregate minimum sublease rentals of $1.1 million due under noncancelable subleases.

Environmental Matters

We believe that we conduct our Indonesian operations pursuant to applicable permits and that we comply in all material respects with applicable Indonesian environmental laws, rules and regulations.  We have had three independent environmental audits conducted by internationally recognized environmental consulting and auditing firms.  Audits were completed in 1996 by Dames & Moore, in 1999 by Montgomery Watson, and in 2002 by SGS International Certification Services Indonesia, a member of the Société Générale de Surveillance group.  The 2002 audit found that the overall approach to practical management of environmental issues at PT Freeport Indonesia is considered to be very sound.  There were no audit findings requiring corrective action.

In connection with obtaining our environmental approvals from the Indonesian government, we committed to performing a one-time environmental risk assessment on the impacts of our tailings management plan.  We completed this extensive environmental risk assessment with more than 90 scientific studies conducted over four years and submitted it to the Indonesian government in December 2002.  We developed the risk assessment study with input from an independent review panel, which included representatives from the Indonesian government, academia and non-governmental organizations.  The risks that we identified during this process were in line with our impact projections of the tailings management program contained in our environmental approval documents.

We will determine our ultimate reclamation and closure activities based on applicable laws and regulations and our assessment of appropriate remedial activities in the circumstances after consultation with governmental authorities, affected local residents and other affected parties.  As of December 31, 2003, we estimated aggregate reclamation and closure obligations on an undiscounted basis to be approximately $130 million for PT Freeport Indonesia, $17 million for Atlantic Copper and $11 million for PT Smelting.  Estimates of the ultimate reclamation and closure costs we will incur in the future involve complex issues requiring integrated assessments over a period of many years and are subject to revision over time, and actual costs may vary from our estimates.  Some reclamation costs will be incurred during mining activities, while most closure costs and the remaining reclamation costs will be incurred at the end of the Gr asberg open-pit mining operations and at the end of all mining activities, which are currently estimated to continue for more than 30 years.

In 1996, we began contributing to a cash fund ($5.0 million balance at December 31, 2003) designed to accumulate at least $100 million by the end of our Indonesian mining activities.  We plan to use this fund, including accrued interest, to pay mine closure and reclamation costs.  Any costs in excess of the $100 million fund would be funded by operational cash flow or other sources.  Future changes in regulations could require us to incur additional costs which would be charged against future operations.  Estimates involving environmental matters are by their nature imprecise and can be expected to be revised over time because of changes in government regulations, operations, technology and inflation.

The cost of complying with environmental laws is a fundamental cost of our business.  We incurred aggregate environmental capital expenditures and other environmental costs totaling $72.1 million in 2003, $62.6 million in 2002 and $78.2 million in 2001, including tailings management levee maintenance and mine reclamation.  In 2004, we expect to incur approximately $11 million of aggregate environmental capital expenditures and $43 million of other environmental costs.  These environmental expenditures are part of our overall 2004 operating budget.

DISCLOSURES ABOUT MARKET RISKS

Commodity Price Risk

Our consolidated revenues include PT Freeport Indonesia’s sale of copper concentrates, which also contain significant quantities of gold and silver, and Atlantic Copper’s sale of copper anodes, cathodes, wire rod, wire and precious metals in slimes.  Our consolidated revenues and net income vary significantly with fluctuations in the market prices of copper and gold and other factors.  A change of $0.10 in the average price per pound of copper would have an approximate $134 million impact on our consolidated revenues and an approximate $70 million impact on our consolidated net income, assuming approximately 1.34 billion pounds of annual PT Freeport Indonesia copper sales.  A change of $25 in the average price per ounce of gold would have an approximate $55 million impact on our consolidated revenues and an approximate $28 million impact on our consolidated net income, assuming approximately 2.2 million ounces of an nual PT Freeport Indonesia gold sales.  

At times, in response to market conditions, we have in the past and may in the future enter into copper and gold price protection contracts for some portion of our expected future mine production to mitigate the risk of adverse price fluctuations.  We currently have no commodity price protection contracts relating to our mine production other than our gold-denominated and silver-denominated preferred stock discussed below.

PT Freeport Indonesia’s concentrate sales agreements, with regard to copper, provide for provisional billings at the time of shipment with final pricing settlement generally based on the average LME price for a specified future period.  Under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” PT Freeport Indonesia’s sales based on a provisional sales price contain an embedded derivative, which we bifurcate from the sale of the concentrates at the current spot LME price.  The embedded derivative, which does not qualify for hedge accounting, is marked-to-market through earnings each period.  At December 31, 2003, we had consolidated embedded derivatives on copper sales totaling 64.6 million pounds recorded at an average price of $1.05 per pound.  We expect final prices on these sales during the first quarter of 2004.  We estimate that a one-cent movement in the average pr ice used for these embedded derivatives will have an approximate $0.3 million impact on our 2004 consolidated net income.

We have outstanding two issues of redeemable preferred stock which have cash dividend and redemption requirements indexed to gold and silver prices.  We account for these securities as a hedge of future production and reflect them as debt on our balance sheets at their original issue value less redemptions. As redemption payments occur, differences between the carrying value and the redemption payment, which is based on commodity prices at the time of redemption, are recorded as an adjustment to revenues (see Notes 1, 5 and 11 of “Notes to Consolidated Financial Statements”).  During 2003, we redeemed all our gold-denominated preferred stock due in August 2003 and made an annual partial redemption of our silver-denominated stock.  We paid $221.3 million to redeem these securities which had a book balance of $245.1 million.  We recorded the $23.8 million gain as revenues.  Future redemption payments denomin ated in ounces and equivalent value in dollars, as well as dollar-equivalent dividend payments, based on the December 31, 2003, London A.M. gold fixing price for one ounce of gold ($417.25) and the London silver fixing price for one ounce of silver ($5.97) in the London bullion market (which determine the preferred stock redemption and dividend amounts), follow (dollars in millions):

	Gold							Silver
	Redemption			Carrying		Dividend		Redemption			Carrying		Dividend
	Ounces	Amount		Value		Amount		Ounces	Amount		Value		Amount
2004	-	$	-	$	-	$	5.8	2,380,000	$	14.2	$	12.5	$	1.6
2005	-		-		-		5.8	2,380,000		14.2		12.5		1.0
2006	430,558		179.6		167.4		1.5	2,380,000		14.2		12.5		0.4
		$	179.6	$	167.4				$	42.6	$	37.5

The fair values of the redeemable preferred stock, based on December 31, 2003, quoted market prices of $43.30 per share for our gold-denominated preferred stock due in 2006 and $9.65 per share for our silver-denominated preferred stock, were $186.4 million for the preferred stock indexed to gold prices and $45.9 million for the preferred stock indexed to silver prices.  

                Atlantic Copper prices its purchases of copper concentrate at approximately the same time as it sells the refined copper, thereby protecting Atlantic Copper from most copper price risk.  Atlantic Copper enters into futures contracts to hedge its price risk whenever its physical purchases and sales pricing periods do not match.  At December 31, 2003, Atlantic Copper had contracts, with a fair value of $(3.4) million, to sell 24.3 million pounds of copper at an average price of $0.93 per pound through February 2004.

Foreign Currency Exchange Risk  

Our operations are in Indonesia and Spain, where our functional currency 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 foreign currencies and adversely affected when the U.S. dollar weakens in relation to these foreign currencies.  

One U.S. dollar was equivalent to 8,437 rupiah at December 31, 2003, 8,940 rupiah at December 31, 2002, and 10,160 rupiah at December 31, 2001.  PT Freeport Indonesia recorded losses to production costs totaling $3.0 million in 2003, $3.5 million in 2002 and $1.2 million in 2001 related to its rupiah-denominated net monetary assets and liabilities.  At December 31, 2003, net liabilities totaled $7.5 million at an exchange rate of 8,437 rupiah to one U.S. dollar.  

Operationally, changes in the U.S dollar/rupiah exchange rate primarily impact PT Freeport Indonesia’s labor costs, which are mostly rupiah denominated.  At estimated annual aggregate rupiah payments of 1.1 trillion and a December 31, 2003, exchange rate of 8,437 rupiah to one U.S. dollar, a one-thousand-rupiah increase in the exchange rate would result in an approximate $14 million decrease in aggregate annual operating costs.  A one-thousand-rupiah decrease in the exchange rate would result in an approximate $18 million increase in aggregate annual operating costs.

PT Freeport Indonesia purchases materials, supplies and services denominated in Australian dollars.  The exchange rate was $0.75 to one Australian dollar at December 31, 2003, $0.56 to one Australian dollar at December 31, 2002, and $0.51 to one Australian dollar at December 31, 2001.  At estimated annual aggregate Australian dollar payments of 200 million and the December 31, 2003, exchange rate of $0.75 to one Australian dollar, a $0.01 increase or decrease in the exchange rate would result in an approximate $2 million change in aggregate annual operating costs.

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.  The last of 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 December 31, 2003.  We recorded net gains (losses) to production costs for PT Freeport Indonesia’s foreign currency contracts totaling $11.0 million in 2002 and $(0.7) million in 2001.  

                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 December 31, 2003, exchange rate of $1.26 per euro, a $0.05 increase or decrease in the exchange rate would result in an approximate $5 million change in annual costs.  

In connection with refinancing its debt in June 2000, Atlantic Copper’s lenders required it to hedge its anticipated euro-denominated operating costs.  The lenders have waived this requirement through March 2004 and Atlantic Copper had no outstanding currency hedging contracts at December 31, 2003.  Atlantic Copper’s operating results reflect gains (losses) on currency hedging contracts totaling $9.6 million in 2003, $(1.2) million in 2002 and $(3.0) million in 2001.  

Atlantic Copper had euro-denominated net monetary liabilities at December 31, 2003, totaling $94.2 million recorded at an exchange rate of $1.26 per euro.  The euro exchange rate was $1.26 per euro at December 31, 2003, $1.05 per euro at December 31, 2002, and $0.88 per euro at December 31, 2001.  Adjustments to Atlantic Copper’s euro-denominated net liabilities to reflect changes in the exchange rate are recorded in other expense and totaled gains (losses) of ($13.6) million in 2003, $(11.9) million in 2002 and $2.4 million in 2001.

Interest Rate Risk  

The table below presents average interest rates for our scheduled maturities of principal for outstanding debt, and notional amounts for interest rate swaps at December 31, 2003, and fair value at December 31, 2003 (dollars in millions).  Long-term debt includes our gold-denominated and silver-denominated preferred stock based on the December 31, 2003, London A.M. gold fixing price for one ounce of gold ($417.25) and the London silver fixing price for one ounce of silver ($5.97) in the London bullion market (which determine the preferred stock redemption amounts).  Atlantic Copper has interest rate swap contracts to fix interest rates on a portion of its variable-rate debt through March 2005.  The costs associated with these contracts are accounted for as an adjustment to interest expense over the terms of the agreements (see Notes 5 and 11 of “Notes to Consolidated Financial Statements”).

	2004			2005			2006			2007			2008			Thereafter			Fair Value
Long-term debt:
Fixed rate	$	-		$	-		$	359.1		$	-		$	-		$	1,079.5		$	2,460.1
Average interest rate		-			-			8.1	%		-			-			8.5	%		8.4	%
Variable rate	$	154.1		$	108.8		$	290.2		$	121.4		$	81.5		$	51.1		$	817.2
Average interest rate		3.5	%		3.5	%		3.4	%		3.5	%		3.7	%		3.6	%		3.5	%
Interest rate swaps:
Amount	$	41.5		$	36.5		$	-		$	-		$	-		$	-		$	(1.6	)
Average interest rate		5.1	%		3.6	%		-			-			-			-			4.8	%

NEW ACCOUNTING STANDARDS

Effective January 1, 2003, we 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 (see “Critical Accounting Estimates”).  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.  

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.  

Effective July 1, 2003, we adopted SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”   On July 1, 2003, we reclassified our mandatorily redeemable preferred stock totaling $450.0 million as debt and reclassified the $26.6 million of original issuance costs from capital in excess of par value of common stock as other assets.  FCX also recorded a $24.7 million cumulative effect adjustment for the amortization of the original issuance costs through July 1, 2003 (see Note 1 of “Notes to Consolidated Financial Statements”).  Effective July 1, 2003, dividend payments on our mandatorily redeemable preferred stock are classified as interest expense.  SFAS No. 150 does not allow prior period financial statements to be restated to reflect the changes in classification.  

Effective December 31, 2003, we adopted SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” which requires additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans.

Effective December 31, 2003, we adopted Financial Accounting Standards Board Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities-an interpretation of ARB No. 51” (FIN 46).  FIN 46 is intended to clarify the application of Accounting Research Bulletin No. 51 “Consolidated Financial Statements” (ARB No. 51), to certain entities in which equity investors do not have characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.  Adoption of FIN 46 did not result in any changes to our consolidated subsidiaries.

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 our anticipated sales volumes, ore grades, general and administrative expenses, unit net cash production costs, operating cash flows, the impact of copper and gold price changes, royalty costs, the impacts of the recent slippage and debris flow in the Grasberg open pit, potential insurance recoveries, capital expenditures, future environmental costs, debt repayments and refinancing, treatment charge rates, depreciation rates, exploration efforts and results, dividend payments and liquidity.  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, Indonesian political risks and other factors described in more detail under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2003.

PRODUCT REVENUES AND PRODUCTION COSTS

PT Freeport Indonesia Product Revenues and Net Cash Production Costs (Credits)

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 our presentation of gross profit per pound of copper 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 presented below along with a reconciliation to amounts reported in our consolidated financial statements.

Year Ended December 31, 2003
	By-Product			Co-Product Method
(In Thousands)	Method			Copper		Gold		Silver		Total
Revenues	$	1,062,042		$	1,062,042	$	884,666	$	19,613	$	1,966,321
Site production and delivery		617,219			333,370		277,693		6,156		617,219
Gold and silver credits		(904,279	)		-		-		-		-
Treatment charges		231,856			125,229		104,314		2,313		231,856
Royalty on metals		26,472			14,298		11,910		264		26,472
Net cash production costs (credits)		(28,732	)		472,897		393,917		8,733		875,547
Depreciation and amortization		190,450			102,865		85,685		1,900		190,450
Reclamation, noncash and other		15,954			8,617		7,178		159		15,954
Total production costs		177,672			584,379		486,780		10,792		1,081,951
Adjustments, primarily for copper pricing on prior period sales and gold/silver hedging		36,587			12,755		22,110		1,722		36,587
Gross profit	$	920,957		$	490,418	$	419,996	$	10,543	$	920,957
Pounds of copper sold (000)		1,295,600			1,295,600
Ounces of gold sold							2,469,800
Ounces of silver sold									4,126,700

Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		81.9			81.9			366.60	5.15
Site production and delivery		47.6			25.7			112.44	1.49
Gold and silver credits		(69.8	)		-			-	-
Treatment charges		17.9			9.7			42.24	0.56
Royalty on metals		2.0			1.1			4.82	0.06
Net cash production costs (credits)		(2.3	)		36.5			159.50	2.11
Depreciation and amortization		14.7			7.9			34.69	0.46
Reclamation, noncash and other		1.2			0.7			2.91	0.04
Total production costs		13.6			45.1			197.10	2.61
Adjustments, primarily for copper pricing on prior period sales and gold/silver hedging		2.8			1.1			0.55	0.01
Gross profit per pound/ounce		71.1			37.9			170.05	2.55
Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	1,966,321		$	617,219		$	190,450
Reclamation, noncash and other per above		N/A			15,954			N/A
Less:  Treatment charges per above		(231,856	)		N/A			N/A
Royalty per above		(26,472	)		N/A			N/A
Reclamation costs incurred		N/A			(1,222	)		N/A
Adjustments, primarily for copper pricing on prior period sales and hedging per above		36,587			N/A			N/A
Mining and exploration segment		1,744,580			631,951			190,450
Smelting and refining segment		910,417			892,681			28,464
Eliminations and other		(442,832	)		(453,306	)		11,889
As reported in consolidated financial statements	$	2,212,165		$	1,071,326		$	230,803

Year Ended December 31, 2002
	By-Product			Co-Product Method
(In Thousands)	Method			Copper			Gold		Silver		Total
Revenues	$	1,077,277		$	1,077,277		$	715,940	$	18,408	$	1,811,625
Site production and delivery		547,753			325,720			216,467		5,566		547,753
Gold and silver credits		(734,348	)		-			-		-		-
Treatment charges		278,504			165,611			110,063		2,830		278,504
Royalty on metals		24,532			14,588			9,695		249		24,532
Net cash production costs		116,441			505,919			336,225		8,645		850,789
Depreciation and amortization		218,716			130,059			86,435		2,222		218,716
Noncash and other		7,117			4,232			2,813		72		7,117
Total production costs		342,274			640,210			425,473		10,939		1,076,622
Adjustments, primarily for copper pricing on prior period sales and silver hedging		10,421			9,591			-		830		10,421
Gross profit	$	745,424		$	446,658		$	290,467	$	8,299	$	745,424
Pounds of copper sold (000)		1,522,300			1,522,300
Ounces of gold sold								2,293,200
Ounces of silver sold										4,116,100
Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		70.6			70.6			311.97		4.66
Site production and delivery		36.0			21.4			94.40		1.35
Gold and silver credits		(48.2	)		-			-		-
Treatment charges		18.3			10.9			48.00		0.69
Royalty on metals		1.6			1.0			4.23		0.06
Net cash production costs		7.7			33.3			146.63		2.10
Depreciation and amortization		14.4			8.5			37.69		0.54
Noncash and other		0.5			0.3			1.23		0.02
Total production costs		22.6			42.1			185.55		2.66
Adjustments, primarily for copper pricing on prior period sales and silver hedging		0.9			0.8			0.24		0.02
Gross profit per pound/ounce		48.9			29.3			126.66		2.02
Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	1,811,625		$	547,753		$	218,716
Noncash and other per above		N/A			7,117			N/A
Less:  Treatment charges per above		(278,504	)		N/A			N/A
Royalty per above		(24,532	)		N/A			N/A
Adjustments, primarily for copper pricing on prior period sales and hedging per above		10,421			N/A			N/A
Mining and exploration segment		1,519,010			554,870			218,716
Smelting and refining segment		768,680			729,789			27,652
Eliminations and other		(377,228	)		(346,197	)		14,078
As reported in consolidated financial statements	$	1,910,462		$	938,462		$	260,446

Year Ended December 31, 2001
	By-Product			Co-Product Method
(In Thousands)	Method			Copper			Gold			Silver			Total
Revenues	$	968,484		$	968,484		$	710,835		$	15,995		$	1,695,314
Site production and delivery		542,699			310,028			227,550			5,121			542,699
Gold and silver credits		(726,830	)		-			-			-			-
Treatment charges		254,485			145,380			106,704			2,401			254,485
Royalty on metals		24,302			13,883			10,190			229			24,302
Net cash production costs		94,656			469,291			344,444			7,751			821,486
Depreciation and amortization		251,835			143,866			105,593			2,376			251,835
Noncash and other		3,159			1,805			1,325			29			3,159
Total production costs		349,650			614,962			451,362			10,156			1,076,480
Adjustments, primarily for copper pricing on prior period sales and silver hedging		(2,413	)		(4,528	)		-			2,115			(2,413	)
Gross profit	$	616,421		$	348,994		$	259,473		$	7,954		$	616,421
Pounds of copper sold (000)		1,399,100			1,399,100
Ounces of gold sold								2,644,800
Ounces of silver sold											3,782,600
Gross profit per pound of copper (cents)/ per ounce of gold and silver ($):
Revenues		69.0			69.0			269.24			4.80
Site production and delivery		38.8			22.2			86.04			1.35
Gold and silver credits		(51.9	)		-			-			-
Treatment charges		18.2			10.4			40.34			0.63
Royalty on metals		1.7			1.0			3.85			0.06
Net cash production costs		6.8			33.6			130.23			2.04
Depreciation and amortization		18.0			10.3			39.92			0.63
Noncash and other		0.2			0.1			0.50			0.01
Total production costs		25.0			44.0			170.65			2.68
Adjustments, primarily for copper pricing on prior period sales and silver hedging		0.1			-			(0.48	)		(0.02	)
Gross profit per pound/ounce		44.1			25.0			98.11			2.10
Reconciliation to Amounts Reported
(In Thousands)	Revenues			Production and Delivery			Depreciation and Amortization
Totals presented above	$	1,695,314		$	542,699		$	251,835
Noncash and other per above		N/A			3,159			N/A
Less:  Treatment charges per above		(254,485	)		N/A			N/A
Royalty per above		(24,302	)		N/A			N/A
Adjustments, primarily for copper pricing on prior period sales and hedging per above		(2,413	)		N/A			N/A
Mining and exploration segment		1,414,114			545,858			251,835
Smelting and refining segment		758,282			738,618			27,262
Eliminations and other		(333,530	)		(341,037	)		4,792
As reported in consolidated financial statements	$	1,838,866		$	943,439		$	283,889

Atlantic Copper Cathode Cash Production Cost Per Pound Of Copper

Atlantic Copper 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 reported in our consolidated financial statements to the production costs used to calculate our cathode cash production cost per pound of copper (in thousands, except per pound amounts):

	Years Ended December 31,
	2003			2002			2001
Smelting and refining segment production costs reported in consolidated financial statements	$	892,681		$	729,789		$	738,618
Less:
Raw material purchase costs		(384,347	)		(330,516	)		(355,241	)
Production costs of wire rod and wire		(66,106	)		(48,953	)		(52,738	)
Production costs of anodes sold		(10,695	)		(9,264	)		(10,522	)
Currency hedging		9,625			(1,168	)		(3,016	)
Other		(3,888	)		(5,211	)		(5,295	)
Credits:
Gold and silver revenues		(326,948	)		(250,766	)		(227,820	)
Acid and other by-product revenues		(20,566	)		(17,256	)		(13,301	)
Production costs used in calculating cathode cash production cost per pound	$	89,756		$	66,655		$	70,685
Pounds of cathode produced		544,700			552,200			518,700
Cathode cash production cost per pound before hedging	$	0.16		$	0.12		$	0.14

PT Smelting Cathode Cash Production Cost Per Pound of Copper

PT Smelting 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 our consolidated financial statements (in thousands, except per pound amounts):

	Years Ended December 31,
	2003			2002			2001
Production costs – PT Smelting (100%)	$	55,787		$	64,108		$	59,943
Add:   Gold and silver refining charges		6,200			4,263			5,724
Less:  Acid and other by-product revenues		(10,665	)		(5,275	)		(7,915	)
Production cost of anodes sold		(3,339	)		(4,148	)		(680	)
Production cost used in calculating cathode cash production cost	$	47,983		$	58,948		$	57,072
Pounds of cathode produced		492,400			424,100			468,400
Cathode cash production cost per pound	$	0.10		$	0.14		$	0.12
Reconciliation To Amounts Reported
Production costs per above	$	(55,787	)	$	(64,108	)	$	(59,943	)
Other costs		(780,530	)		(517,438	)		(599,502	)
Revenue and other income		859,715			565,788			639,862
PT Smelting net income (loss)		23,398			(15,758	)		(19,583	)
PT Freeport Indonesia’s 25% equity interest		5,850			(3,940	)		(4,896	)
Amortization of excess investment cost		(241	)		(241	)		(241	)
Equity in PT Smelting earnings (losses) per  consolidated financial statements	$	5,609		$	(4,181	)	$	(5,137	)

REPORT OF INDEPENDENT AUDITORS

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF

FREEPORT-McMoRan COPPER & GOLD INC.:

We have audited the accompanying consolidated balance sheets of Freeport-McMoRan Copper & Gold Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, cash flows and stockholders' equity for the years then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  The consolidated statements of income, cash flows and stockholders’ equity of Freeport-McMoRan Copper & Gold Inc. for the year ended December 31, 2001, were audited by other auditors who have ceased operations and whose report dated February 8, 2002 (except with respect to the payment of the Nusamba loan discussed in Note 2, as to which the date is February 27, 2002), expressed an unqualified opinion on those statements and include d an explanatory paragraph that disclosed the change in the Company’s method of accounting for derivative instruments and hedging activities discussed in Note 1 to these consolidated financial statements.

We conducted our audits in accordance with auditing standards generally accepted in the United States.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Freeport-McMoRan Copper & Gold Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” and effective July 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  As discussed in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of computing depreciation for PT Freeport Indonesia’s mining and milling life-of-mine assets.

Ernst & Young LLP

New Orleans, Louisiana,

January 28, 2004

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Freeport-McMoRan Copper & Gold Inc.’s Annual Report for the fiscal year ended December 31, 2001.  This audit report has not been reissued by Arthur Andersen LLP in connection with this Annual Report for the fiscal year ended December 31, 2003.

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF

FREEPORT-McMoRan COPPER & GOLD INC.:

We have audited the accompanying balance sheets of Freeport-McMoRan Copper & Gold Inc. (the Company), a Delaware Corporation, as of December 31, 2001 and 2000, and the related statements of income, cash flows and stockholders' equity for each of the three years in the period ended December 31, 2001.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.  

We conducted our audits in accordance with auditing standards generally accepted in the United States.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2001 and 2000 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

As explained in Note 1 to the financial statements, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, as amended,  “Accounting for Derivative Instruments and Hedging Activities.”

Arthur Andersen LLP

New Orleans, Louisiana,

February 8, 2002 (except with respect to the payment

of the Nusamba loan discussed in Note 2, as to which

the date is February 27, 2002)

FREEPORT-McMoRan COPPER & GOLD INC.

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2003			2002			2001
	(In Thousands, Except Per Share Amounts)
Revenues	$	2,212,165		$	1,910,462		$	1,838,866
Cost of sales:
Production and delivery		1,071,326			938,462			943,439
Depreciation and amortization		230,803			260,446			283,889
Total cost of sales		1,302,129			1,198,908			1,227,328
Exploration expenses		6,449			3,112			9,190
General and administrative expenses		80,279			68,305			59,422
Total costs and expenses		1,388,857			1,270,325			1,295,940
Operating income		823,308			640,137			542,926
Equity in PT Smelting earnings (losses)		5,609			(4,181	)		(5,137	)
Interest expense, net		(197,017	)		(171,209	)		(173,595	)
Losses on early extinguishment and conversion of debt		(34,589	)		-			-
Other expense, net		(13,536	)		(15,085	)		(5,418	)
Income before income taxes and minority interests		583,775			449,662			358,776
Provision for income taxes		(338,053	)		(245,518	)		(202,979	)
Minority interests in net income of consolidated subsidiaries		(48,469	)		(36,441	)		(42,772	)
Net income before cumulative effect of changes in accounting principles		197,253			167,703			113,025
Cumulative effect of changes in accounting principles, net		(15,593	)		(3,049	)		-
Net income		181,660			164,654			113,025
Preferred dividends		(27,441	)		(37,604	)		(36,529	)
Net income applicable to common stock	$	154,219		$	127,050		$	76,496
Net income per share of common stock:
Basic:
Before cumulative effect		$1.09			$.90			$.53
Cumulative effect		(.10	)		(.02	)		-
Net income per share of common stock		$ .99			$.88			$.53
Diluted:
Before cumulative effect		$1.07			$.89			$.53
Cumulative effect		(.10	)		(.02	)		-
Net income per share of common stock		$ .97			$.87			$.53
Average common shares outstanding:
Basic		155,805			144,649			143,952
Diluted		159,102			146,418			144,938
Dividends paid per common share		$.27			$  -			$  -

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2003			2002			2001
	(In Thousands)
Cash flow from operating activities:
Net income	$	181,660		$	164,654		$	113,025
Adjustments to reconcile net income to net cash     provided by operating activities:
Depreciation and amortization		230,803			260,446			283,889
Cumulative effect of changes in accounting principles		15,593			3,049			-
Losses on early extinguishment and conversion of debt		34,589			-			-
Gain on redemption of gold-denominated and silver-denominated preferred stock		(23,832	)		(830	)		(2,115	)
Deferred income taxes		110,653			51,476			67,086
Equity in PT Smelting (earnings) losses		(5,609	)		4,181			5,137
Minority interests' share of net income		48,469			36,441			42,772
Increase in deferred mining costs		(64,400	)		(30,645	)		(29,444	)
Increase in long-term compensation benefits		13,689			2,198			2,132
Amortization of deferred financing costs		16,196			12,029			5,371
Currency translation loss (gain)		13,561			11,892			(2,395	)
Equipment loss caused by pit slippage		8,434			-			-
Elimination (recognition) of profit on PT Freeport   Indonesia sales to PT Smelting		(7,018	)		8,393			(6,177	)
Provision for inventory obsolescence		6,000			6,000			6,000
Other		11,084			1,567			1,207
Decreases (increases) in working capital:
Accounts receivable		8,304			(70,389	)		31,750
Inventories		(30,607	)		(23,793	)		20,844
Prepaid expenses and other		(5,428	)		671			8,355
Accounts payable and accrued liabilities		60,878			(33	)		(5,289	)
Rio Tinto share of joint venture cash flows		(9,806	)		9,894			(37,743	)
Accrued income taxes		(41,141	)		65,531			4,578
Decrease (increase) in working capital		(17,800	)		(18,119	)		22,495
Net cash provided by operating activities		572,072			512,732			508,983
Cash flow from investing activities:
PT Freeport Indonesia capital expenditures		(129,245	)		(182,896	)		(156,373	)
Atlantic Copper capital expenditures		(9,941	)		(5,108	)		(10,599	)
Investment in PT Puncakjaya Power, net of cash acquired		(68,127	)		-			-
Sale (purchase) of restricted investments		73,629			47,938			(139,762	)
Increase in Atlantic Copper restricted cash		-			(11,000	)		-
Investment in PT Smelting		(932	)		-			-
Other		1,798			2,773			5,930
Net cash used in investing activities		(132,818	)		(148,293	)		(300,804	)

 

Cash flow from financing activities:
Proceeds from sale of senior notes		1,046,437			-			582,619
Proceeds from other debt		56,698			295,498			112,953
Repayments of debt		(844,374	)		(617,123	)		(821,218	)
Redemptions of preferred stock		(227,081	)		(11,671	)		(10,386	)
Cash dividends paid:
Common stock		(41,682	)		-			-
Preferred stock		(33,733	)		(37,294	)		(36,612	)
Minority interests		(1,623	)		-			(6,786	)
Proceeds from exercised stock options		68,776			7,777			597
Purchases of FCX common shares		-			-			(3,436	)
Bank credit facilities fees and other		(6,856	)		(1,377	)		(20,743	)
Loans to Nusamba		-			-			(5,548	)
Net cash provided by (used in) financing activities		16,562			(364,190	)		(208,560	)
Net increase (decrease) in cash and cash equivalents		455,816			249			(381	)
Cash and cash equivalents at beginning of year		7,836			7,587			7,968
Cash and cash equivalents at end of year	$	463,652		$	7,836		$	7,587
Interest paid	$	163,513		$	173,728		$	160,128
Income taxes paid	$	268,796		$	128,320		$	139,448

The accompanying Notes to Consolidated Financial Statements, which include information in Notes 1, 2, 5, 6, 10 and 11 regarding noncash transactions, are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2003			2002
	(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	463,652		$	7,836
Restricted cash and investments		34,964			49,809
Accounts receivable:
Customers		164,062			175,497
Other		32,378			15,012
Inventories:
Product		170,925			139,871
Materials and supplies, net		226,102			247,376
Prepaid expenses and other		8,050			2,579
Total current assets		1,100,133			637,980
Property, plant, equipment and development costs, net		3,261,697			3,320,561
Other assets		155,722			52,661
Deferred mining costs		142,635			78,235
Investment in PT Smelting		58,179			44,619
Restricted cash and investments		-			58,137
Total assets	$	4,718,366		$	4,192,193
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	311,948		$	262,310
Current portion of long-term debt and short-term borrowings		152,396			77,112
Accrued interest payable		49,276			29,081
Accrued income taxes		43,134			81,319
Rio Tinto share of joint venture cash flows		39,693			51,297
Unearned customer receipts		35,335			36,754
Total current liabilities		631,782			537,873
Long-term debt, less current portion		2,075,934			1,961,278
Accrued postretirement benefits and other liabilities		161,859			140,016
Deferred income taxes		885,248			706,510
Minority interests		187,559			129,687
Redeemable preferred stock		-			450,003
Stockholders' equity:
Step-up convertible preferred stock		-			349,990
Class B common stock, par value $0.10, 260,001,296 shares     and 220,082,757 shares issued, respectively		26,000			22,008
Capital in excess of par value of common stock		1,468,426			687,828
Retained earnings		646,933			534,447
Accumulated other comprehensive income		8,668			10,963
Common stock held in treasury – 76,634,204 shares and     75,172,774 shares, at cost, respectively		(1,374,043	)		(1,338,410	)
Total stockholders’ equity		775,984			266,826
Total liabilities and stockholders’ equity	$	4,718,366		$	4,192,193

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Years Ended December 31,
	2003			2002			2001
	(In Thousands)
Step-up convertible preferred stock:
Balance at beginning of year representing 13,999,600 shares	$	349,990		$	349,990		$	349,990
Conversions to Class B common stock and redemptions		(349,990	)		-			-
Balance at end of year representing 13,999,600 shares in 2002 and 2001		-			349,990			349,990
Class A common stock:
Balance at beginning of year representing 97,146,428 shares in 2002 and 97,071,944 shares in 2001		-			9,715			9,707
Issued restricted stock representing 140,665 shares in 2002 and 74,484 shares in 2001		-			14			8
Conversion to Class B common stock		-			(9,729	)		-
Balance at end of year representing 97,146,428 shares in 2001		-			-			9,715
Class B common stock:
Balance at beginning of year representing 220,082,757 shares in 2003, 121,744,654 shares in 2002 and 121,687,529 shares in 2001		22,008			12,174			12,169
Step-up convertible preferred stock conversions		1,146			-			-
8 ¼% convertible senior notes conversions		2,176			-			-
Class A common stock conversion		-			9,729			-
Exercised stock options and issued restricted stock representing 6,702,871 shares in 2003, 1,051,010 shares in 2002 and 57,125 shares in 2001		670			105			5
Balance at end of year representing 260,001,296 shares in 2003, 220,082,757 shares in 2002 and 121,744,654 shares in 2001		26,000			22,008			12,174
Capital in excess of par value of common stock:
Balance at beginning of year		687,828			660,329			657,239
Step-up convertible preferred stock conversions		341,885			-			-
8 ¼% convertible senior notes conversions		303,782			-			-
Exercised stock options and other stock option amounts		106,920			14,220			899
Restricted stock grants		1,380			1,250			2,191
Reclass of redeemable preferred stock issuance costs to other assets		26,631			-			-
Tax benefit for stock option exercises		-			12,029			-
Balance at end of year		1,468,426			687,828			660,329
Retained earnings:
Balance at beginning of year		534,447			407,397			330,901

Net income

		181,660			164,654			113,025
Dividends on common stock		(41,733	)		-			-
Dividends on preferred stock		(27,441	)		(37,604	)		(36,529	)
Balance at end of year		646,933			534,447			407,397
Accumulated other comprehensive income (loss):
Balance at beginning of year		10,963			(1,184	)		10,244
Other comprehensive income (loss), net of taxes:
Cumulative effect of change in accounting for derivatives		-			-			(982	)
Change in unrealized derivatives’ fair value		5,195			13,615			(14,920	)
Reclass to earnings of net realized derivatives (gains) losses		(7,490	)		(1,468	)		4,474
Balance at end of year		8,668			10,963			(1,184	)
Common stock held in treasury:
Balance at beginning of year representing 75,172,774 shares in 2003, 74,915,457 shares in 2002 and 74,718,076 shares in 2001		(1,338,410	)		(1,333,977	)		(1,332,319	)
Shares purchased representing 194,000 shares in 2001		-			-			(1,620	)
Tender of 1,461,430 shares in 2003, 257,317 shares in 2002 and 3,381 shares in 2001 to FCX for exercised stock options and restricted stock		(35,633	)		(4,433	)		(38	)
Balance at end of year representing 76,634,204 shares in 2003, 75,172,774 shares in 2002 and 74,915,457 shares in 2001		(1,374,043	)		(1,338,410	)		(1,333,977	)
Total stockholders’ equity	$	775,984		$	266,826		$	104,444

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

FREEPORT-McMoRan COPPER & GOLD INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.  The consolidated financial statements of Freeport-McMoRan Copper & Gold Inc. (FCX) include the accounts of those subsidiaries where FCX directly or indirectly has more than 50 percent of the voting rights and has the right to control significant management decisions.  FCX consolidates its 90.6 percent owned subsidiary PT Freeport Indonesia and its 85.7 percent owned subsidiary PT Puncakjaya Power, as well as its wholly owned subsidiaries, primarily Atlantic Copper, S.A. and PT Irja Eastern Minerals.  FCX’s unincorporated joint ventures with Rio Tinto plc are reflected using the proportionate consolidation method (Note 2).  PT Freeport Indonesia’s 25 percent ownership interest and related investment in PT Smelting is accounted for under the equity method (Note 9).  All significant intercompany transactions have been eliminated.  Certain prior year amounts have been reclassified to conf orm to the 2003 presentation.  Changes in the accounting principles applied during the years presented are discussed below under the captions “Property, Plant, Equipment and Development Costs,” “Reclamation and Closure Costs” and “Derivative Instruments.”

Use of Estimates.  The preparation of FCX’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes.  The more significant areas requiring the use of management estimates include mineral reserve estimation, useful asset lives for depreciation and amortization, the estimated average ratio of overburden to ore over the life of the open-pit mine, allowances for obsolete inventory, reclamation and environmental obligations, postretirement and other employee benefits, deferred taxes and valuation allowances and future cash flows associated with assets.  Actual results could differ from those estimates.

Cash Equivalents, Restricted Cash and Investments.  Highly liquid investments purchased with maturities of three months or less are considered cash equivalents.  Restricted investments include U.S. government securities, plus accrued interest thereon, totaling $24.0 million at December 31, 2003, and $96.9 million at December 31, 2002, pledged as security for scheduled interest payments through July 31, 2004, on FCX’s outstanding 8¼% Convertible Senior Notes (see Note 5).  Restricted cash held in escrow as security on certain Atlantic Copper debt totaled $11.0 million at December 31, 2003 and 2002 (see Note 5).

Accounts Receivable.  Customer accounts receivable include amounts due from PT Smelting totaling $33.5 million at December 31, 2003, and $51.2 million at December 31, 2002.  Other accounts receivable include refundable value-added taxes from the Government of Indonesia totaling $4.7 million at December 31, 2003, and $1.7 million at December 31, 2002.  

Inventories.  Inventories of materials and supplies, as well as salable products, are stated at the lower of cost or market.  PT Freeport Indonesia uses the average cost method for all inventories and Atlantic Copper uses the first-in, first-out (FIFO) cost method for its sales of finished copper products (see Note 3).

Property, Plant, Equipment and Development Costs.  Property, plant, equipment and development costs are carried at cost.  Mineral exploration costs are expensed as incurred, except in the year when proven and probable reserves have been established for a given property, in which case all exploration costs for that property incurred since the beginning of that year are capitalized.  Refer to Note 13 for the definition of proven and probable reserves.  No exploration costs were capitalized during the years presented.  Development costs are capitalized beginning after proven and probable reserves have been established.  Development costs include costs to prepare ore bodies and construct required infrastructure for the production of proven and probable reserves.  Additionally, interest expense allocable to the cost of developing mining properties and to constructing new facilities is capitalized until assets are ready fo r their intended use.  Expenditures for replacements and improvements are capitalized. Costs related to periodic scheduled maintenance (turnarounds) are expensed as incurred.  Depreciation for mining and milling life-of-mine assets is determined using the unit-of-production method based on estimated recoverable proven and probable copper reserves.  Other assets are depreciated on a straight-line basis over estimated useful lives of 15 to 20 years for buildings and 3 to 25 years for machinery and equipment.

In 2001, PT Freeport Indonesia changed the estimated depreciable lives of certain of its assets, primarily its power generation assets, which decreased depreciation expense for 2001 by $25.6 million, $12.5 million to net income ($0.09 per share), and had increased estimates of future development costs related to its undeveloped ore bodies, which increased depreciation expense for 2001 by $39.8 million, $19.4 million to net income ($0.13 per share).  These changes resulted from a review of recent operating history and current maintenance practices, and from PT Freeport Indonesia’s updated comprehensive mine development plan.

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.

Asset Impairment.  FCX reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  An impairment loss is measured as the amount by which asset carrying value exceeds its fair value.  Fair value is generally determined using valuation techniques such as estimated future cash flows.  An impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset.  An impairment loss is measured and recorded based on discounted estimated future cash flows.  Future cash flows for our mining assets, which are considered one asset group, include estimates of recoverable pounds and ounces, metal prices (considering current and historical prices, price trends and related factors), production rates and costs, capital and reclamation costs as appropriate, all ba sed on detailed life-of-mine engineering plans.  Future cash flows for our smelting assets include estimates of treatment and refining rates (considering current and historical prices, price trends and related factors), production rates and costs, capital and reclamation costs as appropriate, all based on operating projections.  Assumptions underlying future cash flow estimates are subject to risks and uncertainties.  No impairment losses were recorded during the periods presented.

Mining Costs.  Mining costs are charged to operations as incurred.  However, because of the configuration and location of the Grasberg open-pit ore body and the location and extent of the related surrounding overburden, the ratio of overburden to ore is much higher in the initial mining of the open pit than in later years.  As a result, surface mining costs associated with overburden removal at PT Freeport Indonesia’s Grasberg open-pit mine that are estimated to relate to future production are initially deferred and subsequently charged to operating costs when the ratio of actual overburden removed to ore mined falls below the estimated average ratio of overburden to ore over the life of the Grasberg open-pit mine.  PT Freeport Indonesia evaluates the recoverability of these deferred mining costs in conjunction with its evaluation of the recoverability of its mining assets as described in FCX’s “Asset Impairment” ; accounting policy.  The Grasberg mine is currently FCX’s only producing open-pit mine.

PT Freeport Indonesia’s geologists and engineers reassess the overburden to ore ratio and the remaining life of its open-pit mine at least annually, and any changes in estimates are reflected prospectively beginning in the quarter of change.  PT Freeport Indonesia’s estimated average ratio of overburden to ore over the life of the mine in its deferred mining costs calculation was 2.0 to 1 in 2003, 1.8 to 1 in 2002 and 1.6 to 1 in 2001.  The ratio changed in the fourth quarter of each of the last three years and the impact of the changes on each year’s results was to decrease net income by $1.5 million ($0.01 per share) in 2003, $1.1 million ($0.01 per share) in 2002 and 1.5 million ($0.01 per share) in 2001.  If the changes in the ratio in the fourth quarter of 2003 had been applied at the beginning of the year, the deferral of mining costs for 2003 would have been an estimated $7.3 million lower and net income would have been $3.7 million ($0.02 per share) lower.  Effective January 1, 2004, the estimated average ratio of overburden to ore over the life of the mine in PT Freeport Indonesia’s deferred mining calculation is expected to be 2.2 to 1.

Reclamation and Closure Costs.  Effective January 1, 2003, FCX adopted Statement of Financial Accounting Standards (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 worked with other consultants 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 ap plied.  The projected 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 market-based 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), $0.06 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. Excluding the cumulative effect adjustment, the net effect of adopting SFAS No. 143 was to i ncrease net income by approximately $1 million, $0.01 per share, in 2003.  

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.  See Note 10 for further discussion about FCX’s asset retirement obligations.

Income Taxes.  FCX accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes.”  Deferred income taxes are provided to reflect the future tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements (see Note 8).  

Pro Forma Net Income.  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 the 2003 changes in accounting principles (SFAS No. 143 and SFAS No. 150) and the 2002 change in depreciation methodology (in thousands, except per share amounts):

	2003		2002		2001
Actual reported results:
Net income applicable to common stock	$	154,219	$	127,050	$	76,496
Basic net income per share of common stock		0.99		0.88		0.53
Diluted net income per share of common stock		0.97		0.87		0.53

Pro forma amounts assuming retroactive application:
Net income applicable to common stock	$	169,307	$	129,635	$	104,847
Basic net income per share of common stock		1.09		0.90		0.73
Diluted net income per share of common stock		1.06		0.89		0.72

Derivative Instruments.  At times FCX and its subsidiaries have entered into derivative contracts to manage certain risks resulting from fluctuations in commodity prices (primarily copper and gold), foreign currency exchange rates and interest rates by creating offsetting market exposures.  FCX accounts for derivatives pursuant to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  SFAS No. 133, as subsequently amended, established accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value.  The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation.  See Note 11 for a summary of FCX’s outstanding derivative instruments at December 31, 2003, and a discussion of FCX’s risk management strategies for those designated as hedges.

Upon adoption of SFAS No. 133 on January 1, 2001, FCX recorded immaterial cumulative gain adjustments totaling $0.8 million to other income and net income to adjust the recorded values of PT Freeport Indonesia’s and Atlantic Copper’s foreign currency forward contracts to fair value and $0.8 million to revenues ($0.4 million to net income) to adjust the embedded derivatives (see “Revenue Recognition”) in PT Freeport Indonesia’s provisionally priced copper sales to fair value, as calculated under SFAS No. 133.  In addition, FCX recorded a cumulative effect net loss adjustment to other comprehensive income totaling $1.0 million for the fair value of Atlantic Copper’s interest rate swaps on January 1, 2001.  FCX elected to continue its historical accounting for its redeemable preferred stock indexed to commodities under the provisions of SFAS No. 133 which allow such instruments issued before January 1, 1 998, to be excluded from those instruments required to be adjusted for changes in their fair values.  Redeemable preferred stock indexed to commodities is treated as a hedge of future production and is carried at its original issue value.  As redemption payments occur, differences between the carrying value and the payment are recorded as an adjustment to revenues (see Note 5).  

Effective July 1, 2003, FCX adopted SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  On July 1, 2003, FCX reclassified its mandatorily redeemable preferred stock totaling $450.0 million as debt and reclassified the $26.6 million of original issuance costs from capital in excess of par value of common stock to other assets.  FCX also recorded a $24.7 million ($0.16 per share) cumulative effect adjustment for the amortization of the original issuance costs through July 1, 2003.  Effective July 1, 2003, dividend payments on FCX’s mandatorily redeemable preferred stock are classified as interest expense.  SFAS No. 150 does not permit prior period financial statements to be restated to reflect the changes in classification.  In addition to the cumulative effect adjustment, adopting SFAS No. 150 decreased net income applicable to common stock by approximately $0.4 million, less than $0.01 per share, in 2003 for amortization after July 1 of original issuance costs.

Revenue Recognition.  PT Freeport Indonesia’s sales of copper concentrates, which also contain significant quantities of gold and silver, are recognized in revenues when the title to the concentrates is transferred to the buyer (which coincides with the transfer of the risk of loss) at the point the concentrates are moved over the vessel’s rail at PT Freeport Indonesia’s port facility.  

Revenues from PT Freeport Indonesia's concentrate sales are recorded based on either 100 percent of a provisional sales price or a final sales price calculated in accordance with the terms specified in the relevant sales contract.  Revenues from concentrate sales are recorded net of royalties, treatment and all refining charges (including price participation, if applicable) and the impact of commodity contracts, including the impact of redemptions of FCX’s mandatorily redeemable preferred stock indexed to commodities (see Notes 5 and 11).  Moreover, because a portion of the metals contained in copper concentrates is unrecoverable as a result of the smelting process, our revenues from concentrate sales are also recorded net of allowances based on the quantity and value of these unrecoverable metals.  These allowances are a negotiated term of our contracts and vary by customer.  Treatment and refining charges represen t payments to smelters and refiners and are either fixed or in certain cases vary with the price of copper.

PT Freeport Indonesia’s concentrate sales agreements, including its sales to Atlantic Copper and PT Smelting, provide for provisional billings based on world metals prices when shipped, primarily using then-current prices on the London Metal Exchange (LME).  Final settlement on the copper portion is generally based on the average LME price for a specified future period, generally three months after the month of arrival at the customer’s facility.  Final delivery to customers in Asia generally takes up to 25 days and to customers in Europe generally takes up to 57 days.

Under SFAS No. 133, PT Freeport Indonesia’s sales based on a provisional sales price contain an embedded derivative which is required to be bifurcated from the host contract.  The host contract is the sale of the metals contained in the concentrates at the current spot LME price.  The embedded derivative, which does not qualify for hedge accounting, is marked-to-market through earnings each period.  At December 31, 2003, FCX had consolidated embedded copper derivatives on 64.6 million pounds recorded at an average price of $1.05 per pound.  All of these derivatives are expected to be finally priced during the first quarter of 2004.  A one-cent movement in the average price used for these derivatives would have an approximate $0.3 million impact on FCX’s 2004 net income.  Gold sales are priced according to individual contract terms, generally the average London Bullion Market Association price for a sp ecified month near the month of shipment.  At December 31, 2003, FCX had consolidated embedded gold derivatives on 19,600 ounces recorded at an average price of $417.25 per ounce.  For 2003, 2002 and 2001, the maximum net price adjustment to revenues after initial recognition was 5 percent for copper revenues and 2 percent for gold revenues.

PT Freeport Indonesia pays royalties under a Contract of Work (see Note 10).  The copper royalty rate payable by PT Freeport Indonesia under its Contract of Work varies from 1.5 percent of copper net revenue at a copper price of $0.90 or less per pound to 3.5 percent at a copper price of $1.10 or more per pound.  The Contract of Work royalty rate for gold and silver sales is 1.0 percent.

A large part of the mineral royalties under Government of Indonesia regulations is designated to the provinces from which the minerals are extracted.  In connection with its fourth concentrator mill expansion completed in 1998, PT Freeport Indonesia agreed to pay the Government of Indonesia voluntary additional royalties (royalties not required by the Contract of Work) to provide further support to the local governments and the people of the Indonesian province of Papua.  The additional royalties are paid on metal from production from PT Freeport Indonesia’s milling facilities above 200,000 metric tons of ore per day.  The additional royalty for copper equals the Contract of Work royalty rate, and for gold and silver equals twice the Contract of Work royalty rates.  Therefore, PT Freeport Indonesia’s royalty rate on copper net revenues from production above 200,000 metric tons of ore per day is double the Contr act of Work royalty rate, and the royalty rates on gold and silver sales from production above 200,000 metric tons of ore per day are triple the Contract of Work royalty rates.  The combined royalties, including the voluntary additional royalties, which became effective January 1, 1999, totaled $26.5 million in 2003, $24.5 million in 2002 and $24.3 million in 2001.

Foreign Currencies.  Transaction gains and losses associated with Atlantic Copper’s euro-denominated and PT Freeport Indonesia’s rupiah-denominated monetary assets and liabilities are included in net income.  Atlantic Copper’s euro-denominated net monetary liabilities totaled $94.2 million at December 31, 2003, based on an exchange rate of $1.26 per euro.  Excluding hedging amounts, net Atlantic Copper foreign currency transaction gains (losses) totaled $(13.6) million in 2003, $(11.9) million in 2002 and $2.4 million in 2001.  PT Freeport Indonesia’s rupiah-denominated net monetary liabilities totaled $7.5 million at December 31, 2003, based on an exchange rate of 8,437 rupiah to one U.S. dollar.  Excluding hedging amounts, net PT Freeport Indonesia foreign currency transaction losses totaled $3.0 million in 2003, $3.5 million in 2002 and $1.2 million in 2001.  

Comprehensive Income.  FCX follows SFAS No. 130, “Reporting Comprehensive Income,” for the reporting and display of comprehensive income (net income plus other comprehensive income, or all other changes in net assets from nonowner sources) and its components.  FCX’s comprehensive income for 2003, 2002 and 2001 follows (in thousands):

	2003				2002			2001
Net income	$	181,660		$	164,654		$	113,025
Other comprehensive income (loss):
Cumulative effect of change in accounting for       derivatives, no tax effect		-			-			(982	)
Change in unrealized derivatives’ fair value, net   of taxes of $3.1 million for 2002 and $1.3 million for 2001		5,195			13,615			(14,920	)
Reclass to earnings, net of taxes of $4.7 million   for 2002 and $(0.3) million for 2001		(7,490	)		(1,468	)		4,474
Total comprehensive income	$	179,365		$	176,801		$	101,597

Effective January 1996, Atlantic Copper changed its functional currency from the peseta (the Spanish currency at the time) to the U.S. dollar.  This change resulted from significant changes in Atlantic Copper’s operations related to a large expansion of its smelting and refining operations financed with U.S. dollar borrowings and the sale of its mining operations that incurred significant peseta operating costs.  Accumulated Other Comprehensive Income reported in the Statements of Stockholders’ Equity before 2001 totaled $10.2 million and consisted solely of the cumulative foreign currency translation adjustment at Atlantic Copper prior to changing its functional currency, for which there is no tax effect.  In accordance with SFAS No. 52, “Foreign Currency Translation,” the currency translation adjustment recorded up through the date of the change in functional currency will only be adjusted in the event o f a full or partial disposition of FCX’s investment in Atlantic Copper.

New Accounting Standard – FIN 46.  Effective December 31, 2003, FCX adopted Financial Accounting Standards Board Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities-an interpretation of ARB No. 51” (FIN 46).  FIN 46 is intended to clarify the application of Accounting Research Bulletin No. 51 “Consolidated Financial Statements” (ARB No. 51), to certain entities in which equity investors do not have characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.  Adoption of FIN 46 did not result in any changes to FCX’s consolidated subsidiaries.

NOTE 2.  OWNERSHIP IN SUBSIDIARIES AND JOINT VENTURES WITH RIO TINTO

Ownership in Subsidiaries.  FCX’s direct ownership in PT Freeport Indonesia totaled 81.3 percent at December 31, 2003 and 2002.  PT Indocopper Investama, an Indonesian company, owns 9.4 percent of PT Freeport Indonesia.  FCX owned 49 percent of PT Indocopper Investama and acquired the remaining 51 percent ownership in PT Indocopper Investama in February 2002, as discussed below, bringing FCX’s total ownership in PT Freeport Indonesia to 90.6 percent.  At December 31, 2003, PT Freeport Indonesia’s net assets totaled $2.0 billion, including $1.8 billion of retained earnings.  As of December 31, 2003, FCX has two outstanding loans to PT Freeport Indonesia totaling $204.9 million.

Substantially all of PT Freeport Indonesia’s assets are located in Indonesia.  Indonesia continues to face political, economic and social uncertainties, including separatist movements and civil and religious strife in a number of provinces.  In particular, several separatist groups are opposing Indonesian rule over the province of Papua, where PT Freeport Indonesia’s mining operations are located, and have sought political independence for the province.  In response to demands for political independence, new Indonesian regional autonomy laws became effective January 1, 2001.  However, the manner in which the new laws will be implemented and the degree of political and economic autonomy that they may bring to individual provinces, including Papua, is uncertain.

On August 31, 2002, three people were killed and 11 others were wounded in an ambush by a group of unidentified assailants.  The assailants shot at several vehicles transporting international contract schoolteachers from PT Freeport Indonesia’s school in Tembagapura, their family members, and other contractors to PT Freeport Indonesia on the road near Tembagapura, the mining town where the majority of PT Freeport Indonesia’s personnel reside.  The identity of the assailants remains uncertain.  Indonesian authorities and the U.S. Federal Bureau of Investigation continue to investigate the incident and PT Freeport Indonesia is cooperating fully with the investigations.  PT Freeport Indonesia’s operations were not interrupted.

In 1997, PT Nusamba Mineral Industri (Nusamba), an Indonesian company and a subsidiary of PT Nusantara Ampera Bakti, acquired from a third party approximately 51 percent of the capital stock of PT Indocopper Investama.  PT Indocopper Investama owns 9.4 percent of PT Freeport Indonesia and 10 percent of Eastern Minerals.  Nusamba paid $61.6 million in cash and financed $253.4 million of the $315.0 million purchase price with a variable-rate commercial loan from a syndicate of commercial banks, including JPMorgan Chase Bank as agent, which was to mature in March 2002.  FCX guaranteed the Nusamba loan for the purpose of continuing minority Indonesian ownership of PT Freeport Indonesia.  FCX also agreed to lend to Nusamba any amounts required to cover any shortfalls between the interest payments due on the commercial loan and dividends received by Nusamba from PT Indocopper Investama.  Through February 2002, FCX loaned Nusamba $68.9 million to cover such shortfalls and charged to expense $7.3 million of this amount because the loans exceeded Nusamba’s initial cash investment.

In discussions early in 2002, Nusamba informed FCX that it did not expect to be able to repay the bank loan or FCX’s loan at maturity, which would obligate FCX to pay the bank loan.  On February 27, 2002, FCX repaid the bank loan as provided for under the terms of its credit facilities and acquired Nusamba’s ownership in PT Indocopper Investama.  For accounting purposes, the transactions were deemed effective as of December 31, 2001.  As a result of FCX’s payment of the Nusamba bank loan, FCX’s ownership interest in PT Freeport Indonesia increased to 90.6 percent from 85.9 percent and FCX’s ownership interest in Eastern Minerals increased to 100 percent from 95 percent.

FCX owns 100 percent of the outstanding Atlantic Copper common stock.  At December 31, 2003, Atlantic Copper’s net liabilities totaled $1.0 million and FCX had no outstanding advances to Atlantic Copper.  Atlantic Copper is not expected to pay dividends in the near future.  Under the terms of its concentrate sales agreements with Atlantic Copper, PT Freeport Indonesia had outstanding trade receivables from Atlantic Copper totaling $173.4 million at December 31, 2003.  FCX made cash contributions to Atlantic Copper totaling $10.0 million in 2003, $25.0 million in 2002 and $7.6 million in 2001. These transactions had no impact on FCX’s consolidated financial statements.

Effective October 1, 2002, FCX acquired the remaining 50 percent ownership of FM Services Company it did not own previously.  FM Services Company provides certain administrative, financial and other services on a cost-reimbursement basis to FCX and provides similar services to two other public companies under management services agreements with fixed fee terms.  The costs billed to FCX and Rio Tinto, which include related overhead, totaled $33.4 million in 2003, $31.1 million in 2002 and $24.3 million in 2001.  Management believes these costs do not differ materially from the costs that would have been incurred had the relevant personnel providing these services been employed directly by FCX.  The amounts FM Services Company billed to the two other public companies totaled $3.6 million during 2003 and $2.6 million during 2002.  Long-term receivables from one of those companies totaled $3.2 million at December 31, 20 03.

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.  PT Freeport Indonesia purchases power from PJP under infrastructure asset financing arrangements.  At December 31, 2003, PT Freeport Indonesia had infrastructure asset financing obligations to PJP totaling $295.5 million and PJP had a receivable from PT Freeport Indonesia for $386.6 million, including Rio Tinto’s share.  As a result of this transaction, FCX is now consolidating PJP and FCX’s consolidated balance sheet no longer reflects PT Freeport Indonesia’s obligation to PJP or PJP’s receivable from PT Freeport Indonesia, but instead reflects the $235.5 million of outstanding PJP bank debt at Dece mber 31, 2003, and an $83.9 million receivable ($10.4 million in other accounts receivable and $73.5 million in other assets) for Rio Tinto’s share of PJP’s receivable as provided for in FCX’s joint venture agreement with Rio Tinto.

Joint Ventures With Rio Tinto. Rio Tinto owns 23.9 million shares of FCX common stock (approximately 13.1 percent of the total outstanding common stock of FCX at December 31, 2003).  In addition, FCX and Rio Tinto have established certain joint ventures.  Under the joint venture arrangements, Rio Tinto has a 40 percent interest in PT Freeport Indonesia’s Contract of Work and Eastern Minerals’ Contract of Work, and the option to participate in 40 percent of any other future exploration projects in Papua.  Under the arrangements, Rio Tinto funded $100 million in 1996 for approved exploration costs in the areas covered by the PT Freeport Indonesia and Eastern Minerals Contracts of Work.  Agreed-upon exploration costs in the joint venture areas are generally shared 60 percent by FCX and 40 percent by Rio Tinto.  

Pursuant to the joint venture agreement, Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver through 2021 in Block A of PT Freeport Indonesia’s Contract of Work, and, after 2021, a 40 percent interest in all production from Block A. Operating, nonexpansion capital and administrative costs are shared proportionately between PT Freeport Indonesia and Rio Tinto based on the ratio of (a) the incremental revenues from production from PT Freeport Indonesia’s most recent expansion completed in 1998 to (b) total revenues from production from Block A, including production from PT Freeport Indonesia’s previously existing reserves.  PT Freeport Indonesia will continue to receive 100 percent of the cash flow from specified annual amounts of copper, gold and silver through 2021 calculated by reference to its proven and probable reserves as of Decemb er 31, 1994, and 60 percent of all remaining cash flow.

NOTE 3.   INVENTORIES

The components of product inventories follow (in thousands):

		December 31,
		2003		2002
PT Freeport Indonesia:	Concentrates – Average Cost	$	2,643	$	5,048
Atlantic Copper:	Concentrates – FIFO		81,668		53,474
	Work in process – FIFO		76,689		74,961
	Finished goods – FIFO		9,925		6,388
Total product inventories		$	170,925	$	139,871

 The average cost method was used to determine the cost of essentially all materials and supplies inventory.  Materials and supplies inventory is net of obsolescence reserves totaling $17.6 million at December 31, 2003, and $15.8 million at December 31, 2002.  

NOTE 4.   PROPERTY, PLANT, EQUIPMENT AND DEVELOPMENT COSTS, NET

The components of net property, plant, equipment and development costs follow (in thousands):

	December 31,
	2003			2002
Exploration, development and other	$	1,445,879		$	1,412,079
Buildings and infrastructure		1,425,223			1,406,909
Machinery and equipment		2,141,878			2,103,055
Mobile equipment		699,038			668,296
Construction in progress		144,160			105,263
Property, plant, equipment and                            development costs		5,856,178			5,695,602
Accumulated depreciation and amortization		(2,594,481	)		(2,375,041	)
Property, plant, equipment and                             development costs, net	$	3,261,697		$	3,320,561

Exploration, development and other include excess costs related to investments in consolidated subsidiaries.  Excess costs consist of $69.5 million related to FCX’s purchase in December 1992 of 49 percent of the capital stock of PT Indocopper Investama, $34.5 million related to PT Freeport Indonesia’s issuance of its shares to FCX in 1993 and 1994 to settle a convertible loan due to FCX and $268.4 million related to FCX’s acquisition of the remaining 51 percent of the capital stock of PT Indocopper Investama in February 2002 (see Note 2).  These costs are amortized using the unit-of-production method based on estimated recoverable proven and probable copper reserves.  Additionally, excess costs include $20.8 million related to FCX’s acquisition of Atlantic Copper in 1993.  These costs are amortized using the straight-line method based on the estimated life of Atlantic Copper’s smelter assets.

NOTE 5.  LONG-TERM DEBT

	December 31,
	2003		2002
	(In Thousands)
Notes Payable:
PJP bank debt, average rate 3.0%	$	235,491	$	-
Atlantic Copper facility, average rate 3.5% in 2003 and 4.3% in 2002		132,972		167,919
Equipment loans and capital leases, average rate 4.2% in 2003 and 5.9% in 2002		110,313		88,426
Atlantic Copper working capital revolver, average rate 3.7% in 2003         and 2.6% in 2002		55,000		55,000
Atlantic Copper deferral loan, average rate 4.0% in 2003 and 5.0% in 2002		30,000		30,000
Other notes payable and short-term borrowings		17,542		7,880
FCX and PT Freeport Indonesia credit facilities, average rate 5.5% in 2002		-		279,000
Infrastructure asset financings, average rate 9.6% in 2003 and 9.2% in 2002		3,485		356,415

Senior Notes:
7% Convertible Senior Notes due 2011		575,000		-
10 ⅛% Senior Notes due 2010		500,000		-
8 ¼% Convertible Senior Notes due 2006		292,604		603,750
7.50% Senior Notes due 2006		66,516		200,000
7.20% Senior Notes due 2026		4,525		250,000
Redeemable Preferred Stock:
Gold-Denominated Preferred Stock, Series II		167,379		-
Silver-Denominated Preferred Stock		37,503		-
Total debt		2,228,330		2,038,390
Less current portion of long-term debt and short-term borrowings		152,396		77,112
Long-term debt, less current portion	$	2,075,934	$	1,961,278

Notes Payable.  As discussed in Note 2, FCX acquired the 85.7 percent ownership interest in PJP owned by affiliates of Duke Energy Corporation in July 2003.  At December 31, 2003, PT Freeport Indonesia had infrastructure asset financing obligations to PJP totaling $295.5 million.  As a result of FCX’s acquisition of PJP, it is now consolidating PJP and FCX’s consolidated balance sheet no longer reflects PT Freeport Indonesia’s infrastructure asset financing obligation to PJP, but instead reflects the $235.5 million of outstanding PJP bank debt at December 31, 2003.  PJP’s bank debt is secured by the power-related assets operated by PJP.

Atlantic Copper has a variable-rate project loan (the Atlantic Copper facility).  As of December 31, 2003, the variable-rate project loan, nonrecourse to FCX, consisted of an $83.0 million term loan being repaid with variable quarterly installments through December 2007 ($2.5 million per quarter in 2004) and a $65.0 million working capital revolver ($50.0 million outstanding at December 31, 2003) that matures December 2007.  The Atlantic Copper facility requires certain hedging arrangements, restricts other borrowings and specifies certain minimum coverage ratios.  Atlantic Copper’s lenders agreed to waive the requirements to hedge a portion of its anticipated euro-denominated operating costs and interest costs through March 2004.  Borrowings under the Atlantic Copper facility are secured by 100 percent of Atlantic Copper’s capital stock, its smelter and refinery assets, and certain receivables and inventory.

FCX and PT Freeport Indonesia have vendor-financed equipment loans secured by certain PT Freeport Indonesia assets.  The FCX loan had a $19.3 million balance at December 31, 2003, and at December 31, 2002.  PT Freeport Indonesia has three equipment loans with this vendor ($43.4 million outstanding at December 31, 2003, and $48.3 million at December 31, 2002) and entered into capital leases with that vendor totaling $26.8 million in 2003 and $20.8 million in 2002 ($47.6 million outstanding at December 31, 2003).  Interest rates on all of the equipment loans and the leases are variable.

Atlantic Copper has a variable-rate $55.0 million working capital revolving credit facility ($55.0 million outstanding at December 31, 2003) that is secured by certain shipments of copper concentrate.  Twenty percent of amounts borrowed under the facility are required to be deposited in a restricted cash account.  Restricted cash totaled $11.0 million at December 31, 2003.  This facility matures in March 2004.

Atlantic Copper has $30.0 million outstanding as of December 31, 2003, under a deferral loan with the same security as the Atlantic Copper facility.  Interest is variable and the loan matures January 2008.

 FCX used a portion of the net proceeds from senior note offerings discussed below to repay all its outstanding credit facilities debt in 2003, which totaled $279.0 million at December 31, 2002.  In October 2003, FCX and PT Freeport Indonesia entered into an amended $165 million revolving credit facility, which may be increased up to $350 million with additional lender commitments.  The facility matures in September 2006. The credit facility allows common stock dividends, common stock purchases and investments as long as availability under the facility plus available cash exceeds $200 million or otherwise as long as certain other thresholds are exceeded.  The facility also sets limitations on liens and limitations on transactions with affiliates, and requires that certain financial ratios be maintained.  Security for obligations outstanding under the credit facility includes over 80 percent of PT Freeport Indonesia& #146;s assets, 50.1 percent of the outstanding stock of PT Freeport Indonesia, the outstanding stock of PT Indocopper Investama owned by FCX, and a pledge of PT Freeport Indonesia’s rights under its Contract of Work (see Note 10).  PT Freeport Indonesia and FCX guarantee each other’s obligations under the credit facility.  No amounts are currently outstanding under the facility.  FCX and PT Freeport Indonesia recorded charges to other expense totaling $5.6 million, $3.7 million to net income, in 2003 to accelerate amortization of deferred financing costs related to the prior credit facility.

Senior Notes. In January 2003, FCX sold $500 million of 10 ⅛% Senior Notes due 2010 for net proceeds of $487.3 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 and limitations 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.

In February 2003, FCX sold $575 million of 7% Convertible Senior Notes due 2011 for net proceeds of $559.1 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.

In January 2004, FCX sold $350.0 million of 6 ⅞% Senior Notes due 2014 for net proceeds of approximately $344 million.  Interest on the notes is payable semiannually on February 1 and August 1 of each year beginning August 1, 2004.  FCX may redeem some or all of the notes at its option at a make-whole redemption price prior to February 1, 2009, and afterwards at stated redemption prices.  The indenture governing the notes contains terms similar to the indenture for FCX’s 10 ⅛% Senior Notes, and the notes are unsecured.

In 2001, FCX sold $603.8 million of 8 ¼% Convertible Senior Notes due January 2006 (8 ¼% Notes) for net proceeds of $582.6 million.  Interest on the notes is payable semiannually on January 31 and July 31 of each year.  The 8 ¼% Notes are convertible, at the option of the holder, at a conversion price of $14.30 per share, which is equal to a conversion rate of approximately 69.9301 shares of FCX’s common stock per $1,000 principal amount of notes. A portion of the net proceeds was used to purchase $139.8 million of U.S. government securities ($24.0 million remaining at December 31, 2003), which secure and are being used to pay scheduled interest payments on the notes through July 2004.  The notes are otherwise unsecured. In August 2003, FCX privately negotiated the early conversion of 51.5 percent of its 8 ¼% Notes, which resulted in a $311.1 million reduction in debt, the issuance of 21.76 million sh ares of FCX common stock in accordance with the terms of the notes and the payment of $23.0 million in cash from restricted investments held in escrow for payment of future interest on these notes.  FCX recorded charges totaling $24.7 million ($24.2 million to net income) related to the conversion.  In January 2004, FCX completed a tender offer and privately negotiated transactions for a portion of the remaining 8 ¼% Notes, resulting in the early conversion of $225.8 million of notes into 15.8 million shares of FCX common stock.  FCX expects to record an approximate $5 million net charge to net income in the first quarter of 2004 in connection with these transactions.  After January 2004, $66.8 million of the 8 ¼% Notes remain outstanding and are callable beginning in August 2004.

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 December 31, 2002, notes with a face amount of $234.0 million were tendered for $239.0 million cash.  FCX recorded a charge of $6.6 million ($4.8 million to net income) to losses on 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 recorded a charge to losses on early extinguishment of debt of $1.3 million ($0.9 million to net income).  In October 2003, holders of $68.9 million of 7.20% Senior Notes elected early repayment as permitted under their terms.  At December 31, 2003, FCX had outstanding $66.5 million of its 7.50% Senior Notes and $4.5 million of its 7.20% Senior Notes.

Redeemable Preferred Stock.  As discussed in Note 1, upon adoption of SFAS No. 150 on July 1, 2003, mandatorily redeemable preferred stock totaling $450.0 million was reclassified as debt. On August 1, 2003, FCX redeemed the 6.0 million depositary shares representing its Gold-Denominated Preferred Stock, which traded on the New York Stock Exchange (NYSE) under the symbol “FCX PrB,” for $210.5 million.  The mandatory redemption of the FCX PrB shares reduced total consolidated debt by $232.6 million and resulted in a hedging gain to revenues of $22.1 million in 2003.

FCX has outstanding 4.3 million depositary shares representing 215,279 shares of its Gold-Denominated Preferred Stock, Series II totaling $167.4 million.  Each depositary share has a cumulative quarterly cash dividend equal to the value of 0.0008125 ounce of gold and is mandatorily redeemable in February 2006 for the cash value of 0.1 ounce of gold.  These depositary shares trade on the NYSE under the symbol “FCX PrC.”

FCX has outstanding 4.8 million depositary shares representing 44,625 shares of its Silver-Denominated Preferred Stock totaling $37.5 million at December 31, 2003, and had 59,500 shares totaling $50.0 million at December 31, 2002.  As of December 31, 2003, each depositary share has a cumulative quarterly cash dividend equal to the value of 0.01547 ounce of silver, which will decline by 33 percent after the next scheduled redemption payment.  FCX made five annual mandatory partial redemption payments on the underlying Silver-Denominated Preferred Stock through August 2003.  For each of the partial redemptions, the difference between FCX’s carrying amount of $12.5 million and the actual redemption payments was credited to revenues as a hedging gain.  The gain to revenues totaled $1.7 million in 2003, $0.8 million in 2002 and $2.1 million in 2001.  Three annual redemption payments remain and will vary with the pri ce of silver.  These depositary shares trade on the NYSE under the symbol “FCX PrD.”

Maturities and Capitalized Interest.  Maturities of debt instruments and infrastructure asset financings based on the amounts and terms outstanding at December 31, 2003, totaled $152.4 million in 2004, $107.1 million in 2005, $635.3 million in 2006 (including $292.6 million of 8 ¼% Convertible Senior Notes),  $121.4 million in 2007, $81.5 million in 2008 and $1,130.6 million thereafter. Capitalized interest totaled $3.0 million in 2003, $12.2 million in 2002 and $9.4 million in 2001.

NOTE 6.  STOCKHOLDERS’ EQUITY   

Common Stock.  FCX has 473.6 million authorized shares of capital stock consisting of 423.6 million shares of common stock and 50.0 million shares of preferred stock.  At the 2002 annual shareholder meeting, FCX’s shareholders approved the conversion of each outstanding share of Class A common stock into one share of Class B common stock.  FCX now has only one class of common stock.  The conversion created a new measurement date for FCX’s Class A stock options that were converted to Class B stock options.  Under accounting rules followed by FCX for stock-based compensation, the in-the-money value of these stock options on the new measurement date ($8.8 million) must be charged to earnings over the remaining vesting period of the options, which extends through January 2006.  The related charge to general and administrative expenses totaled $2.3 million in 2003 and $1.6 million in 2002.  

Preferred Stock.  In December 2003, FCX called for redemption the depositary shares representing its Step-Up Convertible Preferred Stock.  Of the 14.0 million depositary shares outstanding at the time of call, 13.8 million depositary shares converted into 11.5 million shares of FCX’s common stock.  The remaining depositary shares outstanding are being redeemed for approximately $7 million in cash.  These depositary shares traded on the NYSE under the symbol “FCX PrA.”

Stock Award Plans.  FCX currently has five stock-based compensation plans.  FCX’s Adjusted Stock Award Plan provided for the issuance of certain stock awards to employees, officers and directors of Freeport-McMoRan Inc. (FTX), the former parent of FCX, in connection with FTX’s distribution of FCX shares to its shareholders in 1995.  Under this plan, FCX made a one-time grant of awards to purchase up to 10.7 million common shares, including stock appreciation rights (SARs), at prices equivalent to the original FTX price at date of grant as adjusted for the proportionate market value of FCX shares at the time of the distribution.  All options granted under this plan expire 10 years from the original FTX date of grant.

FCX’s 1995 Stock Option Plan (the 1995 Plan) provides for the issuance of stock options and other stock-based awards (including SARs) for up to 10.0 million common shares at no less than market value at the time of grant.  FCX’s 1995 Stock Option Plan for Non-Employee Directors (the Director Plan) authorizes FCX to grant options to purchase up to 2.0 million shares and to grant up to 1.3 million SARs.  Options and SARs granted under the Director Plan are exercisable in 25 percent annual increments beginning one year from the date of grant.  

FCX’s 1999 Stock Incentive Plan (the 1999 Plan) provides for the issuance of stock options, restricted stock and other stock-based awards.  The 1999 Plan allows FCX to grant awards for up to 8.0 million common shares to eligible participants.  The 1999 Plan also allows FCX senior executives to elect to receive restricted stock in place of all or part of their cash incentive compensation.  Restricted stock grants vest over three years and are valued on the date of grant at 50 percent above the cash incentive compensation they replace.  FCX granted 0.1 million shares of restricted stock in 2003, 0.1 million shares in 2002 and 0.2 million shares in 2001.  

FCX’s 2003 Stock Incentive Plan (the 2003 Plan) provides for the issuance of stock options, SARs, restricted stock and other stock-based awards for up to 8.0 million common shares to eligible participants.

Awards granted under all of the plans generally expire 10 years after the date of grant.  Awards for 8.0 million shares under the 2003 Plan, 0.3 million shares under the 1999 Plan, 0.1 million shares under the Director Plan and no shares under the 1995 Plan were available for new grants as of December 31, 2003.  A summary of stock options outstanding, including 0.5 million SARs, follows:

	2003				2002				2001
			Weighted				Weighted				Weighted
	Number		Average		Number		Average		Number		Average
	Of		Option		Of		Option		of		Option
	Options		Price		Options		Price		Options		Price
Balance at January 1	15,944,087		$	17.82	15,711,696		$	18.55	15,066,702		$	19.14
Granted	1,315,172			20.09	3,706,313			14.30	1,384,228			11.42
Exercised	(6,625,475	)		15.75	(1,051,010	)		11.18	(57,125	)		10.46
Expired/Forfeited	(306,039	)		19.93	(2,422,912	)		20.00	(682,109	)		17.91
Balance at December 31	10,327,745			19.38	15,944,087			17.82	15,711,696			18.55

In 1998, two FCX executive officers were granted stock options under the 1995 Plan to purchase a total of 2.6 million shares of FCX stock at $19.03 per share.  The options may be exercised at any time through March 2006 and were granted in return for a five-year cap on their cash incentive compensation.  Summary information of stock options outstanding at December 31, 2003, excluding SARs, follows:

	Options Outstanding				Options Exercisable
		Weighted	Weighted			Weighted
	Number	Average	Average		Number	Average
	Of	Remaining	Option		Of	Option
Range of Exercise Prices	Options	Life	Price		Options	Price
$9.09 to $11.31	696,625	7.0 years	$	10.96	183,750	$	10.34
$13.78 to $20.34	7,412,807	8.0 years		16.96	3,514,959		18.39
$26.69 to $35.50	1,683,400	5.6 years		33.50	1,563,400		34.00
	9,792,832				5,262,109

NOTE 7.  STOCK-BASED COMPENSATION AND EARNINGS PER SHARE

Stock-Based Compensation.  As of December 31, 2003, FCX has four stock-based employee compensation plans and one stock-based director compensation plan, which are more fully described in Note 6.  FCX accounts for these 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 price 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 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 u se of a fair value method (in thousands, except per share amounts):

	2003			2002			2001
Net income applicable to common stock, as reported	$	154,219		$	127,050		$	76,496
Add:  Stock-based employee compensation expense included in reported net income for stock option conversions, restricted stock grants and SARs, net of taxes and minority interests		9,512			2,320			494
Deduct:  Total stock-based employee compensation expense determined under fair value-based method for all awards, net of taxes and minority interests		(14,225	)		(8,833	)		(6,528	)
Pro forma net income applicable to common stock	$	149,506		$	120,537		$	70,462
Earnings per share:
Basic – as reported	$	0.99		$	0.88		$	0.53
Basic – pro forma	$	0.96		$	0.83		$	0.49
Diluted – as reported	$	0.97		$	0.87		$	0.53
Diluted – pro forma	$	0.92		$	0.80		$	0.49

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 $10.30 per option in 2003, $7.89 per option in 2002 and $6.30 per option in 2001.  The weighted average assumptions used include a risk-free interest rate of 3.8 percent in 2003, 5.0 percent in 2002 and 5.2 percent in 2001; expected volatility of 47 percent; no annual dividends for grants prior to February 6, 2003, and a $0.36 per share annual dividend for grants after that date; and expected lives of 7 years.  The pro forma effects on net income are not representative of future years because of the potential changes in the factors used in calculating the Black-Scholes valuation and the number and timing of option grants.  No other discounts or restrictions related to vesting or the likelihood of vesting of stock options were applied.

Earnings Per Share.  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 year. 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):

	2003			2002			2001
Net income before preferred dividends and cumulative effect of changes in accounting principles	$	197,253		$	167,703		$	113,025
Preferred dividends		(27,441	)		(37,604	)		(36,529	)
Net income before cumulative effect		169,812			130,099			76,496
Cumulative effect of changes in accounting principles		(15,593	)		(3,049	)		-
Net income applicable to common stock	$	154,219		$	127,050		$	76,496
Weighted average common shares outstanding		155,805			144,649			143,952
Add:  Dilutive stock options (see Note 6)		3,094			1,498			678
Restricted stock (see Note 6)		203			271			308
Weighted average common shares outstanding for    purposes of calculating diluted net income per share		159,102			146,418			144,938
Diluted net income per share of common stock:
Before cumulative effect	$	1.07		$	0.89		$	0.53
Cumulative effect		(.10	)		(0.02	)		-
Net income per share of common stock	$	0.97		$	0.87		$	0.53

Outstanding stock options with exercise prices greater than the average market price of the common stock during the year are excluded from the computation of diluted net income per share of common stock. In addition, our convertible preferred stock (see Note 6) and our convertible senior notes (see Note 5) are excluded for all years presented 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):

	2003	2002	2001
Weighted average outstanding options	1,718	7,878	11,004
Weighted average exercise price	$30.37	$22.73	$21.61
Dividends on convertible preferred stocka	$20,532	$24,499	$24,499
Weighted average shares issuable upon conversiona	11,424	11,690	11,690
Interest on 8 ¼% Convertible Senior Notes, net of taxesb	$39,902	$50,488	$19,903
Weighted average shares issuable upon conversionb	33,992	42,220	17,004
Interest on 7% Convertible Senior Notes, net of taxesc	$36,873	N/A	N/A
Weighted average shares issuable upon conversionc	16,463	N/A	N/A

a.

FCX’s Step-Up Convertible Preferred Stock was redeemed in December 2003 (see Note 6).

b.

51.5 percent of FCX’s 8 ¼% Convertible Senior Notes converted to FCX common stock in August 2003 and approximately 37 percent converted to FCX common stock in January 2004 (see Note 5).

c.

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 5).

NOTE 8.  INCOME TAXES

The components of FCX’s deferred taxes follow (in thousands):

	December 31,
	2003			2002
Deferred tax asset:
Foreign tax credits	$	381,184		$	316,575
U.S. alternative minimum tax credits		84,852			77,095
Atlantic Copper net operating loss carryforwards		98,896			82,814
Intercompany profit elimination		17,592			22,894
Valuation allowance		(564,932	)		(476,484	)
Total deferred tax asset		17,592			22,894

Deferred tax liability:
Property, plant, equipment and development costs		(683,245	)		(597,537	)
Undistributed earnings in PT Freeport Indonesia		(141,246	)		(96,640	)
Deferred mining cost		(49,922	)		(27,382	)
Other		(28,427	)		(7,845	)
Total deferred tax liability		(902,840	)		(729,404	)
Net deferred tax liability	$	(885,248	)	$	(706,510	)

FCX has provided a valuation allowance equal to its tax credit carryforwards ($466.0 million at December 31, 2003, and $393.7 million at December 31, 2002) as these would only be used should FCX be required to pay regular U.S. tax, which is considered unlikely for the foreseeable future and because the foreign tax credits expire after five years.  Atlantic Copper is subject to taxation in Spain and has not generated significant taxable income in recent years.  FCX has provided a valuation allowance equal to the future tax benefits resulting from Atlantic Copper’s net operating losses totaling $282.6 million at December 31, 2003, and $236.6 million at December 31, 2002, which expire through the year 2016.

 PT Freeport Indonesia’s Indonesian income tax returns have been audited through 1998.  FCX’s provision for income taxes consists of the following (in thousands):

	2003		2002			2001
Current income taxes:
Indonesian	$	218,017	$	186,418		$	129,962
United States and other		9,383		7,624			5,931
		227,400		194,042			135,893
Deferred Indonesian taxes		110,653		51,476			67,086
Provision for income taxes per income statements		338,053		245,518			202,979
Tax effect of cumulative effect adjustments		6,306		(2,352	)		-
Total provision for income taxes	$	344,359	$	243,166		$	202,979

Differences between income taxes computed at the contractual Indonesian tax rate and income taxes recorded follow (dollars in thousands):

	2003					2002					2001
	Amount			Percent		Amount			Percent		Amount			Percent
Income taxes computed at the      contractual Indonesian tax rate	$	204,321		35	%	$	157,382		35	%	$	125,572		35	%
Indonesian withholding tax on:
Earnings/dividends		42,632		7			34,955		8			25,652		7
Interest		1,223		-			1,551		-			1,899		1
Increase (decrease) attributable to:
Intercompany interest expense		(4,789	)	(1	)		(8,496	)	(2	)		(6,153	)	(2	)
Parent company costs		61,923		11			45,279		10			32,083		9
U.S. alternative minimum tax		9,300		2			8,200		2			5,800		2
Atlantic Copper net loss		20,488		3			12,093		3			15,075		4
Other, net		2,955		1			(5,446	)	(1	)		3,051		1
Provision for income taxes per    income statements		338,053		58	%		245,518		55	%		202,979		57	%
Tax effect of cumulative effect adjustments		6,306					(2,352	)				-
Total provision for income taxes	$	344,359				$	243,166				$	202,979

NOTE 9.  INVESTMENT IN PT SMELTING AND EMPLOYEE BENEFITS

PT Smelting.  PT Smelting, an Indonesian company, operates a smelter/refinery in Gresik, Indonesia, with a stated production capacity of 200,000 metric tons of copper metal per year.  PT Freeport Indonesia, Mitsubishi Materials Corporation (Mitsubishi Materials), Mitsubishi Corporation (Mitsubishi) and Nippon Mining & Metals Co., Ltd. (Nippon) own 25 percent, 60.5 percent, 9.5 percent and 5 percent, respectively, of the outstanding PT Smelting common stock.  PT Freeport Indonesia provides nearly all of PT Smelting’s copper concentrate requirements.  For the first 15 years of PT Smelting’s commercial operations beginning December 1998, the treatment and refining charges on the majority of the concentrate PT Freeport Indonesia supplies will not fall below a specified minimum rate, currently $0.23 per pound, which has been the rate since the commencement of operations in 1998.  The rate is scheduled to decline to a floor of $0.21 per pound in early 2004.  In December 2003, PT Smelting’s shareholder agreement was amended to eliminate PT Freeport Indonesia’s assignment of its earnings in PT Smelting to support a 13 percent cumulative annual return to Mitsubishi Materials, Mitsubishi and Nippon for the first 20 years of commercial operations.  No amounts were paid under this assignment.  PT Smelting had project-specific debt, nonrecourse to PT Freeport Indonesia, totaling $283.1 million at December 31, 2003, and $314.1 million at December 31, 2002.

Pension Plans.   During 2000, FCX and FM Services Company decided to terminate their defined benefit pension plans covering substantially all U.S. and certain overseas expatriate employees and replace these plans, which have substantially the same provisions, with defined contribution plans, as further discussed below.  All participants’ account balances in the defined benefit plans were fully vested on June 30, 2000, and interest credits continue to accrue under the plans until the assets are finally liquidated.  The final distribution will occur once approved by the Internal Revenue Service and the Pension Benefit Guaranty Corporation.  The plans’ investment portfolios were liquidated and invested in primarily short duration fixed-income securities in the fourth quarter of 2000 to reduce exposure to equity market volatility.

PT Freeport Indonesia has a defined benefit pension plan denominated in Indonesian rupiahs covering substantially all of its Indonesian national employees.  PT Freeport Indonesia funds the plan and invests the assets in accordance with Indonesian pension guidelines.  The pension obligation was valued at an exchange rate of 8,437 rupiah to one U.S. dollar on December 31, 2003, and 8,940 rupiah to one U.S. dollar on December 31, 2002.  Labor laws enacted in 2003, which replace labor laws enacted in 2001, in Indonesia require that companies provide a minimum level of benefits to employees upon employment termination based on the reason for termination and the employee’s years of service.  PT Freeport Indonesia’s pension benefit disclosures for 2003, as shown below, include the impact of this law as a $5.0 million increase in the benefit obligation and a component of unrecognized prior service cost being amortized over an approximate 11-year period.

Atlantic Copper has a contractual obligation denominated in euros to supplement amounts paid to certain retired Spanish national employees.  Amended Spanish legislation required that Atlantic Copper begin funding its contractual obligation to the retired employees through a third party in November 2002.  In August 2002, Atlantic Copper complied with the amended Spanish legislation by agreeing to fund 7.2 million euros annually for 15 years to an approved insurance company for its estimated 72 million euro contractual obligation to the retired employees.  Payments of 7.2 million euros were made in both August 2002 and 2003. The insurance company invests the plan assets in accordance with Spanish regulations and Atlantic Copper has no control over these investments.  Atlantic Copper is amortizing the unrecognized net actuarial loss over the remaining 13-year funding period.  The scheduled annual payments of 7.2 millio n euros are not significantly more than the payments Atlantic Copper has made directly to these retired employees over the last several years.

Information as of December 31, 2003 and 2002 on the FCX (including FM Services Company since FCX acquired the remaining 50 percent ownership in FM Services Company on October 1, 2002), PT Freeport Indonesia and Atlantic Copper plans follows (dollars in thousands):

	FCX  (U.S. and expatriate employees)						PT Freeport Indonesia (Indonesian employees)						Atlantic Copper (Spanish retirees)
	2003			2002			2003			2002			2003			2002
Change in benefit obligation:
Benefit obligation at beginning of year	$	(29,723	)	$	(17,136	)	$	(25,553	)	$	(18,534	)	$	(74,732	)	$	(69,500	)
Acquisition of FM Services Company obligation		-			(13,204	)		-			-			-			-
Service cost		-			-			(3,148	)		(2,041	)		-			-
Interest cost		(1,085	)		(887	)		(3,366	)		(2,166	)		(4,821	)		(4,266	)
Actuarial gains (losses)		-			-			(1,246	)		(1,345	)		(235	)		1,600
Effect of changes in law		-			-			(5,031	)		-			-			-
Foreign exchange loss		-			-			(1,686	)		(2,692	)		(11,595	)		(8,574	)
Benefits paid		1,313			1,504			2,806			1,225			6,294			6,008
Benefit obligation at end of year		(29,495	)		(29,723	)		(37,224	)		(25,553	)		(85,089	)		(74,732	)
Change in plan assets:
Fair value of plan assets at      beginning of year		24,633			12,746			13,861			9,256			6,071			-
Addition of FM Services Company assets		-			12,752			-			-			-			-
Actual return on plan assets		751			639			1,541			1,591			-			-
Employer contributionsa		-			-			3,281			2,643			8,498			12,079
Foreign exchange gain		-			-			1,551			1,596			-			-
Benefits paid		(1,313	)		(1,504	)		(1,698	)		(1,225	)		(6,294	)		(6,008	)
Fair value of plan assets at end of year		24,071			24,633			18,536			13,861			8,275			6,071
Funded status		(5,424	)		(5,090	)		(18,688	)		(11,692	)		(76,814	)		(68,661	)
Unrecognized net actuarial loss		-			-			6,994			5,467			8,801			9,882
Unrecognized prior service cost		-			-			8,601			4,149			-			-
Minimum liability adjustment		-			-			(2,220	)		-			-			-
Accrued benefit cost	$	(5,424	)	$	(5,090	)	$	(5,313	)	$	(2,076	)	$	(68,013	)	$	(58,779	)
Accumulated benefit obligation	$	(29,495	)	$	(29,723	)	$	(23,849	)	$	(15,737	)	$	(85,089	)	$	(74,732	)
Weighted-average assumptions used to    determine benefit obligations (percent):
Discount rate		N/A	b		N/A	b		10.00			11.00			6.77			6.39
Rate of compensation increase		N/A	b		N/A	b		8.00			9.00			-			-
Weighted-average assumptions to    determine net periodic benefit    cost (percent):
Discount rate		N/A	b		N/A	b		10.00			11.00			6.77			6.39
Expected return on plan assets		N/A	b		N/A	b		10.00			12.00			-			-
Rate of compensation increase		N/A	b		N/A	b		8.00			9.00			-			-

a.

Employer contributions for 2004 are expected to approximate 30.4 billion rupiah for the PT Freeport Indonesia plan, 7.2 million euros for the Atlantic Copper plan and none for the FCX plan.

b.

As discussed above, FCX and FM Services Company elected to terminate their defined benefit pension plans and ceased accruing benefits on June 30, 2000.

The components of net periodic benefit cost for FCX’s and, since October 1, 2002, FM Services Company’s pension plans follow (in thousands):

	2003			2002			2001
Interest cost	$	1,085		$	887		$	756
Expected return on plan assets		(751	)		(639	)		(279	)
Net periodic benefit cost	$	334		$	248		$	477

The components of net periodic benefit cost for PT Freeport Indonesia’s and Atlantic Copper’s pension plans follow (in thousands):

	PT Freeport Indonesia									Atlantic Copper
	2003			2002			2001			2003		2002		2001
Service cost	$	3,148		$	2,041		$	1,072		$	-	$	-	$	-
Interest cost		3,366			2,166			1,237			4,821		4,266		4,152
Expected return on plan assets		(1,888	)		(1,217	)		(887	)		-		-		-
Amortization of prior service cost		894			514			237			-		-		-
Amortization of net actuarial loss		478			242			63			1,316		785		780
Net periodic benefit cost	$	5,998		$	3,746		$	1,722		$	6,137	$	5,051	$	4,932

The pension plan weighted-average asset allocation for the FCX (including FM Services Company), PT Freeport Indonesia and Atlantic Copper plans at December 31, 2003 and 2002 follow:

	FCX				PT Freeport Indonesia				Atlantic Copper
	2003		2002		2003		2002		2003		2002
Debt securities	97	%	97	%	5	%	6	%	100	%	100	%
Cash and bank deposits	3		3		95		94		-		-
Total	100	%	100	%	100	%	100	%	100	%	100	%

The FCX and FM Services Company pension plans were terminated in 2000 as discussed above.  Therefore, the entire asset balance of $24.1 million at December 31, 2003, and any unfunded benefits will be paid upon liquidation of the plans after Internal Revenue Service and Pension Benefit Guaranty Corporation approval.  The rupiah benefit payments that are expected to be paid for PT Freeport Indonesia‘s pension plan total 32.2 billion in 2004, 33.8 billion in 2005, 39.0 billion in 2006, 44.7 billion in 2007, 51.8 billion in 2008 and 266.4 billion for 2009 through 2013.  Atlantic Copper’s plan is administered by a third-party insurance company and Atlantic Copper is not provided benefit payment projections.

Other Benefits.  FCX and FM Services Company also provide certain health care and life insurance benefits for retired employees.  FCX and FM Services Company have the right to modify or terminate these benefits.  The initial health care cost trend rate used for the other benefits was 11 percent for 2004, decreasing ratably each year until reaching 5 percent in 2009.  A one-percentage-point increase or decrease in assumed health care cost trend rates would not have a significant impact on total service or interest cost.  Information on the employee health care and life insurance benefits FCX and, since October 1, 2002, FM Services Company provide follows (in thousands):  

	2003			2002
Change in benefit obligation:
Benefit obligation at beginning of year	$	(4,812	)	$	(1,754	)
Acquisition of FM Services Company obligation		-			(3,134	)
Service cost		(127	)		(57	)
Interest cost		(327	)		(152	)
Actuarial gains (losses)		(455	)		22
Plan amendment		(400	)		-
Participant contributions		(192	)		(90	)
Benefits paid		503			353
Benefit obligation at end of year		(5,810	)		(4,812	)

Change in plan assets:
Fair value of plan assets at  beginning of year		-			-
Employer/participant contributions		503			353
Benefits paid		(503	)		(353	)
Fair value of plan assets at end of year		-			-
Funded status		(5,810	)		(4,812	)
Unrecognized net actuarial loss		619			179
Unrecognized prior service cost		(503	)		(631	)
Accrued benefit cost	$	(5,694	)	$	(5,264	)
Discount rate assumption (percent)		6.25			6.75

Expected benefit payments for these plans total $0.4 million in 2004 and 2005, $0.5 million in 2006, 2007 and 2008, and $2.6 million in 2009 through 2013.  The components of net periodic benefit cost for FCX’s and, since October 1, 2002, FM Services Company’s health care and life insurance benefits follow (in thousands):

	2003		2002			2001
Service cost	$	127	$	57		$	71
Interest cost		327		152			105
Amortization of prior service cost		273		(62	)		(42	)
Amortization of net actuarial loss (gain)		14		(33	)		(56	)
Net periodic benefit cost	$	741	$	114		$	78

FCX and FM Services Company have employee savings plans under Section 401(k) of the Internal Revenue Code that generally allow eligible employees to contribute up to 50 percent of their pre-tax compensation, but no more than a specified limit (currently $13,000).  FCX and FM Services Company match 100 percent of the first 5 percent of the employees’ contribution.  As a result of FCX’s and FM Services Company’s decision to terminate their defined benefit pension plans effective July 1, 2000, FCX and FM Services Company fully vested their matching contributions for all active Section 401(k) plan participants on June 30, 2000.  Subsequently, all new plan participants vest 100 percent in FCX’s and FM Services Company’s matching contributions upon three years of service.  

During 2000, FCX and FM Services Company also established additional defined contribution plans for substantially all their employees following their decision to terminate their defined benefit pension plans.  Under these plans, FCX and FM Services Company contribute amounts to individual accounts totaling either 4 percent or 10 percent of each employee’s pay, depending on a combination of each employee’s age and years of service.  The costs charged to operations for FCX’s and, since October 1, 2002, FM Services Company’s employee savings plans and defined contribution plans totaled $2.8 million in 2003, $1.2 million in 2002 and $1.0 million in 2001.  FCX and FM Services Company have other employee benefit plans, certain of which are related to FCX’s performance, which costs are recognized currently in general and administrative expense.  Atlantic Copper adopted a defined contribution employee pl an in 2001 and recorded charges totaling $0.4 million in 2003 and $0.3 million in 2002 for annual service costs and $7.0 million in 2001 for past service costs related to this plan.

NOTE 10.  COMMITMENTS AND CONTINGENCIES  

Grasberg Open-Pit Slippage Event.  On October 9, 2003, a slippage of material occurred in a section of the Grasberg open pit, resulting in eight fatalities.  On December 12, 2003, a debris flow involving a relatively small amount of loose material occurred in the same section of the open pit resulting in only minor property damage.  All material involved in the affected mining areas has been removed.  The events caused PT Freeport Indonesia to alter its short-term mine sequencing plans, which is adversely affecting near-term production.   While PT Freeport Indonesia expects to resume normal production activities in the second quarter of 2004, no assurance can be given that these events will not adversely affect production over the longer term or that similar events will not occur in the future.  

As a result of the fourth quarter 2003 slippage events, PT Freeport Indonesia notified its copper concentrate customers that it was declaring force majeure under the terms of its contracts as it would be unable to satisfy its annual sales and delivery commitments.  Under those contracts, a declaration of force majeure allows PT Freeport Indonesia to cancel, reduce or delay the sale and delivery of concentrates to its customers during the affected period caused by an event of force majeure. No assurance can be given that concentrate customers will not challenge the declaration of force majeure or assert claims for the failure to sell and deliver copper concentrates.

PT Freeport Indonesia maintains property damage and business interruption insurance related to its operations.  PT Freeport Indonesia has notified its insurers that it will be presenting a claim and is in the process of quantifying the extent of its losses from the October 9 and December 12 events.  Any losses covered by insurance would be subject to a substantial deductible and various coverage limits.  No assurance can be provided at this time about the extent to which PT Freeport Indonesia’s losses will be covered by insurance.

Environmental, Reclamation and Mine Closure.  FCX has an environmental policy committing it not only to compliance with federal, state and local environmental statutes and regulations, but also to continuous improvement of its environmental performance at every operational site.  FCX believes that its operations are being conducted pursuant to applicable permits and are in compliance in all material respects with applicable environmental laws, rules and regulations.  FCX incurred aggregate environmental capital expenditures and other environmental costs, including Rio Tinto’s share, totaling $72.1 million in 2003, $62.6 million in 2002 and $78.2 million in 2001.

The ultimate amount of reclamation and closure costs to be incurred at PT Freeport Indonesia’s operations will be determined based on applicable laws and regulations and PT Freeport Indonesia’s assessment of appropriate remedial activities in the circumstances, after consultation with governmental authorities, affected local residents and other affected parties and cannot currently be projected with precision.  Estimates of the ultimate reclamation and closure costs PT Freeport Indonesia will incur in the future involve complex issues requiring integrated assessments over a period of many years and are subject to revision over time as more complete studies are performed.  Some reclamation costs will be incurred during mining activities, while most closure costs and the remaining reclamation costs will be incurred at the end of mining activities, which are currently estimated to continue for more than 30 years.

Effective January 1, 2003, FCX adopted SFAS No. 143 (see Note 1).  At December 2003, PT Freeport Indonesia revised its reclamation and closure estimates for (1) changes in the projected timing of certain reclamation costs because of the slippage in the Grasberg open pit, (2) changes in certain cost estimates and (3) additional asset retirement obligations incurred during 2003.  At December 31, 2003, FCX estimated these aggregate undiscounted obligations to be approximately $130 million for PT Freeport Indonesia, $17 million for Atlantic Copper and $11 million for PT Smelting, and estimated PT Freeport Indonesia’s aggregate discounted asset retirement obligations to be $25.7 million and Atlantic Copper’s to be $0.8 million.  These changes are not expected to have a material impact on future net income. A rollforward of FCX’s consolidated discounted asset retirement obligations follows (in thousands):

	2003
Asset retirement obligation at beginning of year	$	28,485
Liabilities incurred		605
Liabilities settled		(1,222	)
Accretion expense		2,852
Revision for changes in estimates		(4,333	)
Foreign exchange loss		99
Asset retirement obligation at end of year	$	26,486

In 1996, PT Freeport Indonesia began contributing to a cash fund ($5.0 million balance at December 31, 2003) designed to accumulate at least $100 million (including interest) by the end of its Indonesian mining activities.  PT Freeport Indonesia plans to use this fund, including accrued interest, to pay the above-mentioned mine closure and reclamation costs.  Any costs in excess of the $100 million fund would be funded by operational cash flow or other sources.  Future changes in regulations could require FCX to incur additional costs that would be charged against future operations.  Estimates involving environmental matters are by their nature imprecise and can be expected to be revised over time because of changes in government regulations, operations, technology and inflation.  

Contract of Work.  FCX is entitled to mine in Indonesia under the “Contract of Work” between PT Freeport Indonesia and the Government of Indonesia.  The original Contract of Work was entered into in 1967 and was replaced with a new Contract of Work in 1991.  The initial term of the current Contract of Work expires in 2021, but can be extended by PT Freeport Indonesia for two 10-year periods, subject to Indonesian government approval, which cannot be withheld or delayed unreasonably.  Given the importance of contracts of work under the Indonesian legal system and PT Freeport Indonesia’s 30 years of working with the Indonesian government, which included entering into the Contract of Work in 1991 well before the expiration of the 1967 Contract of Work, PT Freeport Indonesia fully expects that the government will approve the extensions as long as it continues to comply with the terms of the Contract of Work.

Social and Economic Development Programs.  FCX has a comprehensive social, employment and human rights policy to ensure that its operations are conducted in a manner respecting basic human rights, the laws and regulations of the host country, and the culture of the people who are indigenous to the areas in which FCX operates.  In 1996, PT Freeport Indonesia established the Freeport Partnership Fund for Community Development, which was previously called the Freeport Fund for Irian Jaya Development, through which PT Freeport Indonesia has made available funding and expertise to support the economic and social development of the area.  PT Freeport Indonesia has committed to provide one percent of its annual revenue for ten years beginning in mid-1996 for the development of the local people through the Freeport Partnership Fund for Community Development.  PT Freeport Indonesia charged $17.4 million in 2003, $15.2 million in 2002 and $1 4.1 million in 2001 to production costs for this commitment.

Long-Term Contracts and Operating Leases.  Atlantic Copper has firm contractual commitments with parties other than PT Freeport Indonesia to purchase concentrate totaling 468,000 metric tons in 2004, 361,000 metric tons in 2005, 282,000 metric tons in 2006 and 196,000 metric tons in 2007 at market prices.

As of December 31, 2003, FCX’s aggregate minimum annual contractual payments, including Rio Tinto’s share, under noncancelable long-term operating leases which extend to 2030 totaled $7.0 million in 2004, $6.3 million in 2005, $5.5 million in 2006, $2.0 million in 2007, $0.3 million in 2008 and $1.1 million thereafter.  Minimum payments under operating leases have not been reduced by aggregate minimum sublease rentals of $1.1 million due under noncancelable subleases.  Total aggregate rental expense under operating leases amounted to $6.6 million in 2003, $2.4 million in 2002 and $1.2 million in 2001.

Share Purchase Program.  In June 2000, FCX’s Board of Directors authorized a 20-million-share increase in FCX’s open market share purchase program, bringing the total shares approved for purchase under this program to 80 million.  From inception of this program in July 1995 through October  2003, FCX has purchased a total of 70.7 million shares for $1.24 billion (an average of $17.53 per share).  In October 2003, FCX’s Board of Directors approved a new open market share purchase program for up to 20 million shares which replaced the previous program.  The timing of future purchases of common stock is dependent upon many factors including the price of FCX’s common shares, its cash flow and financial position, and general economic and market conditions.   As discussed in Note 5, two of FCX’s senior notes and, in certain circumstances, FCX’s credit facility contain limitations on common sto ck purchases.  No purchases have occurred since the first quarter of 2001.

NOTE 11.  FINANCIAL INSTRUMENTS

FCX and its subsidiaries have entered into derivative contracts in limited instances to achieve specific objectives.  Currently, these objectives principally relate to managing risks associated with foreign currency, commodity price and interest rate risks with Atlantic Copper’s smelting operations, where certain derivative contracts are required under financing agreements.  In addition, in response to volatility in the Indonesian rupiah and Australian dollar currencies, FCX has sought to manage certain foreign currency risks with PT Freeport Indonesia’s mining operations.  In the past, FCX has also entered into derivative contracts related to PT Freeport Indonesia’s exposure to copper and gold prices, but activities in this regard since 1997 have been limited to establishing fixed prices for open copper sales under PT Freeport Indonesia’s concentrate sales contracts.  FCX does not enter into derivative contracts for s peculative purposes.  

Summarized below are financial instruments whose carrying amounts are not equal to their fair value and unmatured derivative financial instruments at December 31, 2003 and 2002 (in thousands).  Fair values are based on quoted market prices and other available market information.  

	2003						2002
	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value
Commodity contracts:
Open contracts in asset position	$	-		$	-		$	459		$	459
Open contracts in liability position		(3,374	)		(3,374	)		-			-
Redeemable preferred stocka		-			-			(450,003	)		(371,537	)
Embedded derivatives in concentrate sales contracts		10,611			10,611			(2,225	)		(2,225	)
Foreign exchange contracts:
$U.S./euro		-			-			1,387			1,387
Long-term debta		(2,228,330	)		(3,277,320	)		(2,038,390	)		(2,265,800	)
Interest rate swap contracts		(1,576	)		(1,576	)		(3,151	)		(3,151	)

a.

Effective July 1, 2003, redeemable preferred stock was classified as debt in accordance with SFAS No. 150 (see Note 5).  

FCX follows SFAS No. 133 and changes in the fair value of unrealized derivative contracts that qualify as hedges are not reported in current earnings, but are included in other comprehensive income (see Note 1).  A recap of gains (losses) charged to earnings for redeemable preferred stock redemptions, derivative contracts and embedded derivatives follows (in millions):

	2003			2002			2001
FCX:
Silver-Denominated preferred stock	$	1.7		$	0.8		$	2.1
Gold-Denominated preferred stock		22.1			-			-
PT Freeport Indonesia:
Foreign currency exchange contracts		-			11.0			(0.7	)
Embedded derivatives in concentrate sales contracts		38.9			1.0			(36.4	)
Atlantic Copper:
Foreign currency exchange contracts		9.6			(1.2	)		(3.0	)
Forward copper contracts		8.0			0.6			4.7
Interest rate contracts		(2.1	)		(3.2	)		(1.1	)

Commodity Contracts.  From time to time, PT Freeport Indonesia has entered into forward and option contracts to hedge the market risk associated with fluctuations in the prices of commodities it sells.  The primary objective of these contracts has been to set a minimum price and the secondary objective is to retain market upside, if available at a reasonable cost.  As of December 31, 2003, FCX had no price protection contracts relating to its mine production.  FCX has outstanding gold-denominated and silver-denominated redeemable preferred stock with dividends and redemption amounts determined by commodity prices.  FCX elected to continue its historical accounting for its redeemable preferred stock indexed to commodities under the provisions of SFAS No. 133 which allow such instruments issued before January 1, 1998, to be excluded from those instruments required to be adjusted for changes in their fair values.  Therefore, FCX’s redeemable preferred stock is recorded at its original issue value less redemptions, totaling $204.9 million at December 31, 2003 (see Note 5).  

Certain of PT Freeport Indonesia’s concentrate sales contracts allow for final pricing in future periods. Under SFAS No. 133, these pricing terms cause a portion of the contracts to be considered embedded derivatives, which must be recorded at fair value.  PT Freeport Indonesia adjusts its revenues for these embedded derivatives to reflect fair value based on forward prices for the final pricing periods on each reporting date.  Changes in the fair value of these embedded derivatives are recorded in current period revenues.

Atlantic Copper enters into forward copper contracts designed to hedge its copper price risk whenever its physical purchases and sales pricing periods do not match.  Although these contracts are intended to hedge against changes in copper prices, they do not qualify for hedge accounting treatment under SFAS No. 133 because Atlantic Copper bases its hedging contracts on its net sales/purchases position, and contracts to hedge a net position do not qualify for hedge accounting under SFAS No. 133.  At December 31, 2003, Atlantic Copper held forward copper sales contracts for 24.3 million pounds at an average price of $0.93 per pound through February 2004.

Foreign Currency Exchange Contracts.  PT Freeport Indonesia and Atlantic Copper enter into foreign currency forward contracts to hedge the market risks of their forecasted costs denominated in a currency other than the U.S. dollar, their functional currency.  The primary objective of these contracts is either to lock in an exchange rate or to minimize the impact of adverse exchange rate changes.  As of December 31, 2003, FCX had no outstanding foreign currency contracts.  Atlantic Copper’s lenders agreed to waive the requirements to hedge anticipated euro-denominated operating costs and interest costs through March 2004.

Debt and Interest Rate Contracts.  Atlantic Copper entered into interest rate swaps to manage exposure to interest rate changes on a portion of its variable-rate debt.  The primary objective of these contracts is to lock in an interest rate considered to be favorable.  Under the terms of its swaps, Atlantic Copper pays an average of 4.8 percent on $41.5 million of financing at December 31, 2003, reducing quarterly through March 2005.  Atlantic Copper will pay an average of 5.1 percent on an average of $39.6 million in 2004 and 3.6 percent on $36.5 million in the first quarter of 2005.  Interest on comparable floating rate debt averaged 4.4 percent in 2003, 1.9 percent in 2002 and 4.5 percent in 2001, resulting in additional interest costs totaling $2.1 million in 2003, $3.2 million in 2002 and $1.1 million in 2001.  Atlantic Copper has designated its interest rate swap contracts as cash flow hedges and no ineffectiveness is expected from these hedges.  As of December 31, 2003, FCX expects to reclass $1.5 million of unrealized losses to 2004 earnings related to its outstanding interest rate swap contracts.  

Atlantic Copper is a party to letters of credit totaling $13.7 million at December 31, 2003.  Fair value of these letters of credit approximates their face value at December 31, 2003.

NOTE 12. SEGMENT INFORMATION   

FCX follows SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance.  FCX has two operating segments:  “mining and exploration” and “smelting and refining.”  The mining and exploration segment consists of FCX’s Indonesian activities including PT Freeport Indonesia’s copper and gold mining operations, PT Puncakjaya Power’s (see Note 2) power generating operations after eliminations with PT Freeport 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 c onsolidated FCX financial statements.

	Mining			Smelting
	and			And			Eliminations			FCX
	Exploration			Refining			and Other			Total
	(In Thousands)
2003
Revenues	$	1,744,580	a	$	910,417		$	(442,832	)	$	2,212,165
Production and delivery		631,951			892,681			(453,306	)b		1,071,326
Depreciation and amortization		190,450			28,464			11,889			230,803
Exploration expenses		6,284			-			165			6,449
General and administrative expenses		123,408	c		11,023			(54,152	)c		80,279
Operating income (loss)	$	792,487		$	(21,751	)	$	52,572		$	823,308
Equity in PT Smelting earnings	$	-		$	5,609		$	-		$	5,609
Interest expense, net	$	44,861		$	16,675		$	135,481		$	197,017
Provision for income taxes	$	273,378		$	-		$	64,675		$	338,053
Capital expenditures	$	129,029		$	9,941		$	216		$	139,186
Total assets	$	3,656,714		$	689,213	d	$	372,439		$	4,718,366

2002
Revenues	$	1,519,010	a	$	768,680		$	(377,228	)	$	1,910,462
Production and delivery		554,870			729,789			(346,197	) b		938,462
Depreciation and amortization		218,716			27,652			14,078			260,446
Exploration expenses		2,965			-			147			3,112
General and administrative expenses		55,302	c		8,675			4,328	c		68,305
Operating income (loss)	$	687,157		$	2,564		$	(49,584	)	$	640,137
Equity in PT Smelting losses	$	-		$	4,181		$	-		$	4,181
Interest expense, net	$	71,424		$	18,436		$	81,349		$	171,209
Provision for income taxes	$	221,527		$	-		$	23,991		$	245,518
Capital expenditures	$	181,092		$	5,108		$	1,804		$	188,004
Total assets	$	3,339,449		$	650,640	d	$	202,104		$	4,192,193

2001
Revenues	$	1,414,114	a	$	758,282		$	(333,530	)	$	1,838,866
Production and delivery		545,858			738,618			(341,037	)b		943,439
Depreciation and amortization		251,835			27,262			4,792			283,889
Exploration expenses		8,496			-			694			9,190
General and administrative expenses		44,470			8,384			6,568			59,422
Operating income (loss)	$	563,455		$	(15,982	)	$	(4,547	)	$	542,926
Equity in PT Smelting losses	$	-		$	5,137		$	-		$	5,137
Interest expense, net	$	95,238		$	25,279		$	53,078		$	173,595
Provision for income taxes	$	170,013		$	-		$	32,966		$	202,979
Capital expenditures	$	154,396		$	10,599		$	1,977		$	166,972
Total assets	$	3,191,053		$	649,422	d	$	371,454		$	4,211,929

a.

Includes PT Freeport Indonesia sales to PT Smelting totaling $510.2 million in 2003, $391.1 million in 2002 and $374.1 million in 2001.

b.

Includes deferrals (recognition) of intercompany profits on 25 percent of PT Freeport Indonesia’s sales to PT Smelting, for which the final sale has not occurred, totaling $(7.0) million in 2003, $8.4 million in 2002 and $(6.2) million in 2001.

c.

Includes charges to the mining and exploration segment for FCX stock option exercises which are eliminated in consolidation and totaled $69.1 million in 2003 and $6.8 million in 2002.

d.

Includes PT Freeport Indonesia’s equity investment in PT Smelting totaling $58.2 million at December 31, 2003, $44.6 million at December 31, 2002, and $57.2 million at December 31, 2001.

Through its operating subsidiaries, FCX markets its products worldwide primarily pursuant to the terms of long-term contracts.  As a percentage of consolidated revenues, revenues under long-term contracts totaled approximately 95 percent in 2003 and 2002 and 91 percent in 2001.  The only customer under long-term contracts with over ten percent of revenues in at least one of the past three years is PT Smelting with 23 percent in 2003 and 20 percent in 2002 and 2001.  

FCX revenues attributable to various countries based on the location of the customer follow (in thousands):

	2003		2002		2001
Indonesia (PT Smelting)	$	510,245	$	391,071	$	374,050
Japan		412,440		342,899		283,577
Spain		372,791		378,817		357,865
Switzerland		130,518		146,062		221,865
United States		45,682		125,793		146,338
Others		740,489		525,820		455,171
Total	$	2,212,165	$	1,910,462	$	1,838,866

FCX revenues attributable to the products it produces follow (in thousands):

	2003			2002			2001
Copper in concentratesa	$	612,443		$	599,358		$	548,821
Gold in concentrates		685,230			546,048			544,694
Silver in concentrates		16,374			14,740			14,207
Refined copper products		576,288			532,769			548,371
Gold and silver in slimes		272,050			209,136			189,142
Royalties		(26,472	)		(24,532	)		(24,302	)
Sulphur and other		76,252			32,943			17,933
	$	2,212,165		$	1,910,462		$	1,838,866

a.  Amounts are net of treatment and refining charges totaling $179.1 million for 2003, $215.8 million for 2002 and $200.3 million for 2001.

NOTE 13.  SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)

Proven and probable reserves were determined by the use of mapping, drilling, sampling, assaying and evaluation methods generally applied in the mining industry, as more fully discussed below.  The term “reserve,” as used in our reserve data presented here, means that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination.  The term “proven reserves” means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or quality are computed from the result of detailed sampling; and (c) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established.  The term “probable reserves” means reserves for which quantity and grade are computed from information similar to that used for proven reserves but the sites for sampling are farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

All of PT Freeport Indonesia’s current aggregate (including Rio Tinto’s share) proven and probable reserves, shown below, are located in Block A of PT Freeport Indonesia’s Contract of Work.  The initial term of the Contract of Work covering Block A expires at the end of 2021.  PT Freeport Indonesia can extend this term for two successive 10-year periods, subject to the approval of the Indonesian government, which cannot be withheld or delayed unreasonably.  PT Freeport Indonesia’s reserve amounts reflect its estimates of the reserves that can be recovered before the end of 2041 (the expiration of the two 10-year extensions).  PT Freeport Indonesia’s current mine plan has been developed and its operations are based on receiving the two 10-year extensions.  As a result, PT Freeport Indonesia does not anticipate the mining of all of its reserves prior to the end of 2021 based on its current min e plan, and there can be no assurance that the Indonesian government will approve the extensions.  Prior to the end of 2021, under its current mine plan PT Freeport Indonesia expects to mine approximately 48 percent of aggregate proven and probable ore, representing approximately 62 percent of its share of recoverable copper reserves and approximately 72 percent of its share of recoverable gold reserves.

			Average Ore Grade Per Metric Ton					Proven and Probable Recoverable Reserves
Year-End	Ore		Copper	Gold		Silver		Copper	Gold	Silver
	(Thousand		(%)	(Grams)	(Ounces)	(Grams)	(Ounces)	(Billions	(Millions	(Millions
	Metric Tons)							of Lbs.)	of Ozs.)	of Ozs.)
1999	2,395,175		1.13	1.05	.034	3.85	.124	49.9	61.6	148.8
2000	2,514,532		1.10	1.04	.033	3.40	.109	50.9	63.7	139.6
2001	2,583,883		1.13	1.05	.034	3.72	.120	52.5	64.5	151.6
2002	2,584,465		1.12	1.02	.033	3.73	.120	53.3	62.6	147.6
2003	2,695,883		1.08	0.98	.032	3.72	.120	54.4	60.4	159.4
By ore body at December 31, 2003:
Developed and producing:
Grasberg open      pit	750,753		1.06	1.25	.040	2.46	.079	14.7	25.4	30.1
Deep Ore      Zone	170,132		0.93	0.63	.020	4.96	.159	2.9	2.6	13.3
Undeveloped:
Grasberg       block cave	874,354		1.04	0.81	.026	2.90	.093	17.2	16.0	46.4
Kucing Liar	498,999		1.31	1.18	.038	5.63	.181	12.4	9.3	38.8
Mill Level       Zone		176,374	0.88	0.74	.024	4.01	.129	2.9	3.1	11.1
Ertsberg Stockwork
Zone		121,714	0.49	0.90	.029	1.65	.053	1.1	2.7	3.2
Big Gossan		32,906	2.81	1.00	.032	16.85	.542	1.7	0.8	8.7
Dom block cave		43,651	1.10	0.31	.010	5.94	.191	0.8	0.3	4.0
Dom open pit		27,000	1.80	0.43	.014	9.60	.309	0.7	0.2	3.8
Total		2,695,883	1.08	0.98	.032	3.72	.120	54.4	60.4	159.4
PT Freeport Indonesia’s share								39.7	46.6	116.8
FCX’s equity sharea								36.0	42.2	105.9

a.  Reflects FCX’s 90.6 percent ownership interest (see Note 2).

Estimated recoverable reserves were assessed using a copper price of $0.85 per pound, a gold price of $270 per ounce and a silver price of $5.00 per ounce.  With respect to the proven and probable reserves presented above, if metal prices were adjusted to the approximate average London spot prices for the past three years, i.e., copper prices adjusted from $0.85 per pound to $0.74 per pound and gold prices adjusted from $270 per ounce to $315 per ounce, there would be no change in proven and probable reserves.

Incremental cash flow attributable to the fourth concentrator mill expansion is shared 60 percent by PT Freeport Indonesia and 40 percent by Rio Tinto (Note 2).  Incremental cash flow consists of amounts generated from production in excess of specified annual amounts based on the December 31, 1994, reserves and mine plan. The incremental revenues from production from the expansion and total revenues from production from Block A, including production from PT Freeport Indonesia’s previously existing operations, share proportionately in operating, nonexpansion capital and administrative costs.  PT Freeport Indonesia receives 100 percent of cash flow from its existing pre-expansion production facilities as specified by the contractual arrangements. PT Freeport Indonesia’s estimated net share of recoverable reserves and FCX’s equity interest in those reserves follow:

	PT Freeport Indonesia			FCXa
Year-End	Copper	Gold	Silver	Copper	Gold	Silver
	(Billions	(Millions	(Millions	(Billions	(Millions	(Millions
	of Lbs.)	of Ozs.)	Of Ozs.)	of Lbs.)	of Ozs.)	of Ozs.)
1999	38.7	49.5	115.3	33.2	42.5	99.0
2000	38.9	50.3	108.5	33.4	43.2	93.2
2001	39.4	50.2	114.5	35.7	45.5	103.8
2002	39.4	48.5	110.9	35.7	44.0	100.5
2003	39.7	46.6	116.8	36.0	42.2	105.9

a.  Reflects FCX’s 85.9 percent ownership interest through 2000 and 90.6 percent ownership interest thereafter (see Note 2).

NOTE 14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

					Net Income (Loss)				Net Income
			Operating		Applicable to				(Loss) Per Share
	Revenues		Income		Common Stock				Basic			Diluted
	(In Thousands, Except Per Share Amounts)
2003
1st Quarter	$	524,596	$	191,326		$	49,245	a	$	.34	a	$	.33	a
2nd Quarter		609,455		241,226			57,372			.39			.37	b
3rd Quarter		631,990		286,278			47,366	c		.30	c		.29	b,c
4th Quarter		446,124		104,478			236			-			-
	$	2,212,165	$	823,308		$	154,219			.99			.97
2002
1st Quarter	$	392,680	$	87,543		$	(4,154	)d	$	(.03	)d	$	(.03	)d
2nd Quarter		407,999		122,410			5,576			.04			.04
3rd Quarter		538,739		206,076			61,537			.42			.39	b
4th Quarter		571,044		224,108			64,091			.44			.41	b
	$	1,910,462	$	640,137		$	127,050			.88			.87

a.

Includes a $9.1 million gain ($0.06 per share) for the cumulative effect of an accounting change associated with the adoption of SFAS No. 143 effective January 1, 2003 (see Note 1).

b.

Includes the diluted effect of the assumed conversion of FCX’s 8 ¼% Convertible Senior Notes.

c.

Includes a $24.7 million charge ($0.15 per share for basic and $0.13 per share for diluted) for the cumulative effect of an accounting change associated with the adoption of SFAS No. 150 effective July 1, 2003 (see Note 1).

d.

Includes a $3.0 million charge ($0.02 per share) for the cumulative effect of an accounting change associated with a change in depreciation methodology (see Note 1).

EX-14

Ethics and Business Conduct Policy

Under the direction of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., it is the policy of the Company that its business activities in the United States and throughout the world are managed and operated in conformity with applicable law and the highest ethical standards.  The Board has also directed that all Personnel employed by or affiliated with the Company comply with this policy at all times.  (References to “the Company” include Freeport-McMoRan Copper & Gold Inc., its direct and indirect subsidiaries and their respective divisions, including PT Freeport Indonesia and Atlantic Copper, S.A.; references to “Personnel” include employees, officers, and directors of the Company; and references to “Personnel affiliated with the Company” include affiliated and unaffiliated service providers).

This Statement of Ethics and Business Conduct Policy summarizes some of the important principles that should afford guidance to Personnel in carrying out their responsibilities.  Both the Board of Directors and the Company’s management are determined to maintain the Company’s reputation for integrity and fairness in business dealings with others and in the communities where its offices and operations are located.  Departures from our standards will not be tolerated.  Individuals who violate the Ethics and Business Conduct Policy are subject to discharge or other appropriate disciplinary action.  All Personnel employed by or affiliated with the Company are therefore expected to be familiar with and to abide by this Policy.  To this end, all appropriate Personnel will be asked to provide an Annual Ethics and Business Conduct Certification.

Most of the standards articulated in the Policy are established by U.S. and other applicable laws.  Violations of these laws can expose the Company and the individuals involved to criminal and civil liability and to other serious consequences.  At the same time, in practice these principles can raise difficult issues in particular situations.  All Personnel are responsible for seeking guidance in the case of any doubt regarding the Policy’s application.  Any inquiries should be directed to the Company’s compliance officer, Dean T. Falgoust at (504) 582-4206.

Conflicts of Interest

It is the Company’s policy that its Personnel must avoid any investments, associations or other relationships that would interfere, or could appear to interfere, with their good judgment concerning the Company’s best interests.  A conflict situation can arise when Personnel take actions or have interests that may make it difficult to perform their work objectively and effectively.  Conflicts of interest also arise when an employee, officer or director, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company.  

If such a situation arises, or an individual is unsure if a situation constitutes a conflict of interest, he or she must immediately report the circumstances of the situation to the Company’s compliance officer.  If the Company’s senior management determines that such circumstances constitute a conflict of interest, they must immediately report such conflict to the Audit Committee.

Corporate Opportunities

No employee, officer or director may:  (1) take for himself or herself personally opportunities that are discovered through the use of Company property, information or position; (2) use Company property, information or position for personal gain; or (3) compete with the Company.  All Personnel owe a duty to the Company to use their best efforts to advance its legitimate interests when the opportunity to do so arises.

Insider Trading

No employee, officer or director may trade in Company securities unless he or she does not possess material nonpublic information.  No employee, officer or director may disclose such information to others, including family members, who might use it for trading or pass it along to others who might trade.  

“Material” information includes any information that would influence a reasonable investor to buy, sell or hold Company stock.  If a person learns or knows of information that would prompt anyone to want to buy or sell stock, chances are the information is material.  Generally, “nonpublic” information is information that has not been disclosed by means of a widely distributed press release.  

The Company will periodically issue more detailed guidance and procedures to certain personnel that are subject to the Company’s window period recommendations with respect to transactions in Company securities.

Outside Business Activities

The Company endeavors to conduct its business operations with the highest degree of proficiency.  To that end, each of the Company’s officers, managers and employees is expected to devote virtually all of his or her business time to the Company’s business and to use his or her best efforts to perform faithfully and efficiently his or her duties to the Company.  Accordingly, each of the Company’s officers, managers and employees is expected to refrain from any outside employment or business activities that interfere with his or her ability to perform services and fulfill the responsibilities that the Company requires of him or her.

All employees will be judged by the same performance standards and will be subject to the Company’s scheduling demands regardless of any outside employment and business activities.  

If the Company determines, in its sole discretion, that an officer, manager, or employee’s outside employment or business activities interfere with his or her ability to perform services and fulfill the responsibilities that the Company requires, the Company may ask the officer, manager, or employee to reduce or even terminate the outside employment or business activities if he or she wishes to remain employed by the Company.

Confidentiality

All information about the Company’s business and its plans that has not been disclosed to the public is a valuable asset that belongs to the Company.  All Personnel employed by and affiliated with the Company should maintain the confidentiality of information entrusted to them by the Company, its business partners, suppliers, customers or others related to the Company’s business.  Such information must not be disclosed to anyone, including friends and family members, except when disclosure is authorized by the Company or legally mandated.  

Trade Secrets and Fair Dealing

All Personnel are prohibited from (1) misappropriating any form of confidential financial, business, or technical information, or any property, from any other person or company, or (2) receiving any such information or property from a person or company with knowledge or reason to know that such information or property is misappropriated or has otherwise been obtained without permission of the owner.  All Personnel should endeavor to deal fairly with the Company’s customers, suppliers, business partners, competitors and other employees.  Additionally, Personnel should not take advantage of any person through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

Protection and Proper Use of Company Assets

All Personnel should protect the Company’s property and assets and ensure their efficient and proper use.  Theft, carelessness and waste can directly impact the Company’s profitability, reputation and success.  All Company property and assets should be used for legitimate business purposes, and personal use of such property and assets without permission is strictly prohibited.

Financial Record Keeping

It is the Company’s policy that all of its books and records must fully and fairly reflect all receipts and expenditures.  No undisclosed or unrecorded funds of the Company shall be established for any purpose.  Attempts to create false or misleading records are forbidden, and no false or misleading entries shall be made in the Company’s books and records for any reason.  This policy covers not only expenses incurred or transactions undertaken by Personnel, but also expenses incurred by third parties (such as co-venturers, consultants, and agents) for which reimbursement is requested.

Improper Payments

No Personnel employed by or affiliated with the Company shall make, offer, promise or authorize any payment or use of any funds, assets or anything of value that is directly or indirectly for the benefit of any individual (including any government official), company or organization in the United States or any foreign country, and which is designed to secure, or is an award for securing in the past, any improper business advantage for the Company or any other person.  This policy applies regardless of whether the payment or use is lawful under the laws of a particular country.  The Company will periodically issue to all appropriate Personnel more detailed guidance and procedures regarding improper payments.  

It is the Company’s policy that no payment, transfer, offer or promise of the Company’s funds, assets, or anything of value shall be made that is not properly authorized, properly accounted for and clearly and accurately identified on the Company’s books.  Furthermore, no payment or transfer of the Company’s funds or assets shall be made or approved with the intention or understanding that any part of such payment or transfer is to be used except as specified in the supporting documents.  Except as approved by authorized management, payments to third parties (other than petty cash) may not be made in cash, nor may they be paid to any account in a country otherwise unrelated to the payee’s business, or to any person other than the authorized payee.

Political Contributions

It is the Company’s policy not to contribute any funds to any candidate for political office, official of a political party, or committee or organization for the election of a particular candidate to any political office (federal, state or local) in the United States or in foreign countries.  Any requests or proposals for contributions to political parties by the Company, in the U.S. or abroad, are not subject to this general policy but raise legal issues.  Accordingly, all such requests or proposals should be submitted to the Company’s compliance officer who will arrange for necessary review and approval by senior management.  This policy does not prevent any Personnel in their individual capacity from rendering services to individual candidates, political committees or political parties where permitted by applicable laws, nor is it intended to discourage voluntary contributions by Personnel to such candidates, committees, or parties (as long as such contributions are rendered in a person’s individual capacity and not on behalf of the Company), including any Company-related political committee.  Also, this policy does not preclude the Company from establishing programs, permitted by applicable laws, under which it may make (1) contributions to any Company-related political committee so as to match, in whole or in part, a contribution voluntarily made to that committee by an eligible employee or other individual, (2) contributions to any state political committee sponsored by an industry or trade association of which the Company or any subsidiary is a member, or (3) other contributions permitted by law and specifically authorized by management.

Business Entertainment and Gifts

It is the Company’s policy that all solicitation of or dealings with suppliers, customers or others doing or seeking to do business with the Company shall be conducted solely on the basis that reflects both the Company’s best business interests and its high ethical standards.  Except in the case of U.S. or foreign government officials, officials of public international organizations, or employees of state-owned companies, the providing of common courtesies, entertainment, modest gifts and occasional meals for potential or actual suppliers, customers or others involved with aspects of the Company’s business in a manner appropriate to the business relationship and associated with business discussions is permitted, provided expenses in this connection are reasonable, authorized and consistent with applicable law.

The provision of business entertainment and gifts to U.S. and foreign government officials and officials of public international organizations, including employees of state-owned companies and private persons acting in an official capacity on behalf of the government, can raise serious issues under U.S. and local laws.  The payment by any Personnel employed by or affiliated with the Company of lavish or excessive gifts and entertainment expenses to or on behalf of such officials is prohibited.  Any gifts or entertainment must be modest, customary and must comport with all applicable U.S. and local laws, and the rules of any relevant organization, and be authorized pursuant to specific Company guidelines or procedures.  Personnel are encouraged to consult with the Company’s compliance officer or his designee with any questions.

Travel and Travel-Related Expenses

Site visits, offsite meetings and other transactions involving the payment or reimbursement by the Company of travel and travel-related expenses (including transportation, lodging, meals and incidental expenses) incurred by U.S. and foreign government officials and officials of public international organizations also can create issues under U.S. and local laws.  Any such expenses paid for or reimbursed must be genuine, reasonable, directly related to the business of the Company, allowed by U.S. or local law and be authorized pursuant to specific Company guidelines or procedures.  Payments for travel not related to a business purpose, including side trips primarily for pleasure, and payments for travel of spouses or other family members, raise issues requiring special attention and must be specifically authorized by the Company’s compliance officer or designee.

Dealings with Third Parties

Under U.S. law, the Company and its Personnel can be held liable for payments of money or anything of value to third parties (such as suppliers, sub-contractors, joint venture partners or agents) if such payments are made with the knowledge or with willful disregard of the likelihood that all or part of the payments will be used to make an improper payment to a foreign government official.  Personnel must be alert to, and must take steps to address, any “red flags” or facts that show a significant probability that such an improper pass-through will occur.  Dealings with relatives or close associates of foreign government officials require special attention.  All Personnel should follow Company procedures for addressing these issues in dealings with third parties, and should refer any questions or concerns to the Company’s compliance officer.

Facilitating Payments

Payments made to foreign government officials to secure routine governmental action (such as processing visas, providing mail delivery, or unloading cargo) do not necessarily violate this policy but may raise legal issues that must be evaluated carefully.  Such payments may be permitted pursuant to specific Company guidelines or procedures or upon specific authorization by the Company’s compliance officer or his designee if they do not involve discretionary action by an official, are customary and necessary, modest in amount, and are properly recorded in the Company’s records.

Acceptance of Payments

It is the Company’s policy that no Personnel employed by or affiliated with the Company shall, directly or indirectly, seek or accept any payments, fees, services or other gratuities (irrespective of size or amount) outside the normal course of such individual’s business duties from any other person, company or organization that does or seeks to do business with the Company.  Gifts of cash or cash equivalents of any amount are strictly prohibited.  The receipt of common courtesies, sales promotion items of small value, modest gifts, occasional meals and reasonable entertainment appropriate to a business relationship and associated with business discussions are regarded as not inconsistent with this Ethics and Business Conduct Policy.

Antitrust Laws

In general, the antitrust laws prohibit competitors (both actual and potential) from making any agreements restricting or limiting competition between themselves.  This prohibition applies whether the agreement is oral or written, explicit or implicit, formal or informal.  Thus, it makes no difference whether competitors enter into an unlawful agreement as a result of a board room meeting or as the result of spontaneous discussions on the golf course or in a restaurant.

Although the most well-known examples of illegal agreements involve price fixing or bid rigging, the antitrust laws prohibit agreements that allocate customers, territories or markets, agreements that regulate the volume of products sold or the terms of their sale, and agreements among purchasers that they will only purchase from sellers on specified terms.  Additionally, in certain circumstances, the antitrust laws prohibit competitors from agreeing to boycott or unreasonably refusing to deal with third parties.

Not only do the antitrust laws prohibit joint activities that restrain trade, they also prohibit companies from unilaterally acting to eliminate competitors through anti-competitive conduct.  Depending on the particular circumstances, the antitrust laws may reach such activities as below-cost pricing, price discrimination, tying the sale of one product with another, unnecessary acquisition of scarce supplies, and conduct that has the effect of unnecessarily raising a competitor’s costs.

Personnel who participate in a violation of the antitrust laws expose themselves and the Company to grave consequences.  Criminal penalties include substantial fines for the Company and imprisonment and fines for the individuals who performed or authorized the illegal activity.  A violation of the antitrust laws also exposes the Company and individual participants to civil lawsuits from the government, injured consumers and injured competitors.  These lawsuits are very costly and may result in fines, punitive damages, injunctions, consent decrees, and other penalties that can adversely affect the Company years into the future.

This discussion has not been an exhaustive statement of antitrust law but rather is designed to alert you to antitrust problems that you may face.  Personnel are encouraged to consult with the Company’s compliance officer or his designee with any questions.

Code of Ethics for Financial Officers

The honesty, integrity and sound judgment of the Chief Executive Officer, Chief Financial Officer, Controller-Financial Reporting (the principal accounting officer) and persons performing similar functions, are fundamental to the reputation and success of the Company.  To the best of their knowledge and ability, the Chief Executive Officer and those officers of the Company performing accounting, financial management or similar functions (“Financial Officers”) must:

*

act with honesty and integrity, avoid actual or apparent conflicts of interest in personal and professional relationships, and fully disclose to the Board of Directors any material transaction or other relationship that reasonably could be expected to give rise to such a conflict,

*

provide colleagues with information that is accurate, complete, objective, relevant, timely and understandable,

*

provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission and other public communications made by the Company,

*

comply with applicable laws, rules and regulations of federal, state, and local governments (both foreign and domestic) and other appropriate private and public regulatory agencies,

*

act at all times, including but not limited to the matters specified herein, in good faith, with due care, competence and diligence, without misrepresenting material facts,

*

proactively promote ethical and honest behavior within the Company, and

*

assure responsible use of and control of all assets, resources and information of the Company.

Any Financial Officer that the Audit Committee of the Board of Directors determines has failed to comply fully with the points listed above will be deemed to have willfully failed to perform his or her duties, and shall be subject to termination for cause or other disciplinary action the Audit Committee of the Board of Directors determines to be appropriate.  

Compliance with Other Laws, Rules and Regulations

The Company expects all Personnel to fully comply with all applicable laws, rules and regulations.  While such laws prescribe a minimum standard of conduct, this Ethics and Business Conduct Policy requires conduct that often exceeds the legal standard.

The Company has additional policies and procedures covering in detail compliance with specific legal requirements, such as the Company’s insider trading policies and the Company’s disclosure policies.  All Personnel are expected to be familiar and comply with these additional policies and procedures.

In the event of a conflict between applicable laws, or a conflict between applicable law and Company policies, Personnel should seek guidance from the compliance officer, and should generally follow the course of conduct that reflects the most stringent standard of behavior.

Administration and Waiver of this Policy

This Ethics and Business Conduct Policy will be administered under the direction of the Audit Committee of the Board of Directors.  Any requests for waivers of this Policy by employees should be submitted in writing to the compliance officer, c/o 1615 Poydras Street, New Orleans, Louisiana 70112.  Any waivers of this Policy for executive officers or directors will only be granted by the Audit Committee of the Board of Directors, must be in writing, and must be promptly disclosed to the Company’s stockholders on the Company’s website.

Reporting of Illegal or Unethical Behavior

If any Personnel employed by or affiliated with the Company observes or knows of possible or actual violations of this Policy, or has any questions about its meaning, intent and/or application, it is that individual’s responsibility to report such situations or pose any questions promptly to his or her  immediate supervisor.  If for any reason a person is not comfortable approaching his or her immediate supervisor, any one of the following avenues are also acceptable means of reporting illegal or unethical behavior:

*

contact the Company’s compliance officer, Dean T. Falgoust, by phone (504-582-4206), e-mail (dean_falgoust@fmi.com), or mail (c/o 1615 Poydras Street, New Orleans, Louisiana 70112)

*

contact Douglas N. Currault II, an attorney with Jones Walker, the law firm that serves as the Company’s outside legal counsel, by phone (504-582-8412), e-mail (dcurrault@joneswalker.com), or mail (c/o Jones Walker, 201 St. Charles Ave., Suite 5100, New Orleans, Louisiana 70170)

*

send a note, with any relevant documents, by mail to Chairman, FCX Audit Committee, c/o P.O. Box 531742, New Orleans, Louisiana 70153, and mark the outside envelope “Confidential.”

All matters will be treated as strictly confidential, and also may be reported on an anonymous basis.  The Company will not allow retaliation in any form for any reports that are made in good faith.

Accounting Complaints

The Company’s policy is to comply with all applicable financial reporting and accounting regulations applicable to the Company.  If any person has any concerns or complaints regarding any questionable accounting or auditing matters of the Company, then he or she is encouraged to submit those concerns or complaints (anonymously, confidentially or otherwise) to the Chairman of the Audit Committee, c/o P.O. Box 531742, New Orleans, Louisiana 70153.

Annual Certification

The Company requires selected Personnel to complete and sign, annually, a certification designed to elicit information as to compliance with the policies and standards summarized above.  After review of these completed certifications, a report is made to the Audit Committee of the Board of Directors of Freeport-McMoRan Copper & Gold Inc.

Violations of any of the foregoing policies and standards can expose the Company and the individuals involved to potential criminal and civil liability and to lawsuits for damages or restitution.  Individuals who violate these policies are subject to discharge or other disciplinary action.

It is recognized that Personnel may have questions regarding the application of this Policy in particular situations.  All Personnel are responsible for seeking guidance in case of any doubt.  For this purpose, inquiries should be directed to the Company’s compliance officer, Dean T. Falgoust.

EX-21

Exhibit 21.1

List of Subsidiaries of

Freeport-McMoRan Copper & Gold Inc.

Entity	Organized	Name Under Which It Does Business
Atlantic Copper, S.A.	Spain	Same
FM Services Company	Delaware	Same
PT Freeport Indonesia	Indonesia and Delaware	Same
PT Irja Eastern Minerals	Indonesia	Same
PT Puncakjaya Power	Indonesia	Same

EX-23

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the following Registration Statements of Freeport-McMoRan Copper & Gold Inc.:

Form S-8 No. 33-63267 (dated October 6, 1995)

Form S-8 No. 33-63269 (dated October 6, 1995)

Form S-8 No. 33-63271 (dated October 6, 1995)

Form S-8 No. 333-85803 (dated August 24, 1999)

Form S-3 No. 333-31584 (dated March 10, 2000)

Form S-3 No. 333-72760 (dated March 12, 2002)

Form S-4 No. 333-104563 (dated April 30, 2003)

Form S-3 No. 333-104564 (dated April 30, 2003)

Form S-8 No. 333-105535 (dated May 23, 2003)

of our report dated January 28, 2004, with respect to the consolidated financial statements of Freeport-McMoRan Copper & Gold Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2003.

/s/ Ernst & Young LLP

New Orleans, Louisiana

March 5, 2004

EX-23

                                                                                                                                                              &n bsp;                      Exhibit 23.2

INDEPENDENT                                                                                                              2700 E. Executive Drive, Suite 140

MINING CONSULTANTS, INC.                                                                                  Tucson, Arizona  85706 USA

                                                                                                                                           Tel: (520) 294-9861  Fax: (520) 294-9865

                                                                                                                                           jmarek@imctucson.com

                                                                                                                                March 8, 2004

Pat Prejean

Assistant Controller - Financial Reporting

Freeport-McMoRan Copper & Gold, Inc.

1615 Poydras Street

New Orleans, LA  70112

Dear Mr. Prejean,

We hereby consent to the incorporation by reference of our reports included herein or incorporated by reference in this Form 10-K for the year ended December 31, 2003, into Freeport-McMoRan Copper & Gold, Inc.'s previously filed Registration Statements on Form S-3 (File Nos. 333-31584, 333-72760, and 333-104564) and on Form S-8 (File Nos. 33-63267, 33-63269,  33-63271, 333-85803, and 333-105535) and on Form S-4 (File No. 333-104563).

                                                                                    INDEPENDENT MINING CONSULTANTS, INC.

Date:  March 8, 2004                                                By:           /s/ John M. Marek                                           

                                                                                    Name:  John M. Marek

                                                                                    Title:    President

EX-24

Freeport-McMoRan Copper & Gold Inc.

Secretary’s Certificate

I, Douglas N. Currault II, Assistant Secretary of Freeport-McMoRan Copper & Gold Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware, do hereby certify that the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting held on December 13, 1988, and that such resolution has not been amended, modified or rescinded and is in full force and effect on the date hereof:

RESOLVED, That any report, registration statement or other form filed on behalf of this corporation pursuant to the Securities Exchange Act of 1934, or any amendment to such report, registration statement or other form, may be signed on behalf of any director or officer of this corporation pursuant to a power of attorney executed by such director or officer.

IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on March 4, 2004.

                  /s/  Douglas N. Currault II

Douglas N. Currault II

Assistant Secretary

Seal

EX-24

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Robert A. Day

Robert A. Day

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Oscar Y. L. Groeneveld

Oscar Y. L. Groeneveld

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ J. Bennett Johnston

J. Bennett Johnston

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003 and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Bobby Lee Lackey

Bobby Lee Lackey

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in her capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, her true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of her, in her name and in her capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Kathleen L. Quirk

Kathleen L. Quirk

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint RICHARD C. ADKERSON, his true and lawful attorney-in-fact with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorney full power and authority to do and perform each and every act and thing whatsoever that said attorney may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and c onfirming all acts and things which said attorney may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ James R. Moffett

James R. Moffett

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT, his true and lawful attorney-in-fact with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorney full power and authority to do and perform each and every act and thing whatsoever that said attorney may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and conf irming all acts and things which said attorney may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Richard C. Adkerson

Richard C. Adkerson

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ B. M. Rankin, Jr.

B. M. Rankin, Jr.

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ J. Taylor Wharton

J. Taylor Wharton

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ C. Donald Whitmire, Jr.

C. Donald Whitmire, Jr.

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ H. Devon Graham, Jr.

H. Devon Graham, Jr.

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ R. Leigh Clifford

R. Leigh Clifford

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Gerald J. Ford

Gerald J. Ford

POWER OF ATTORNEY

BE IT KNOWN:  That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the “Company”), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the other and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 2003, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney.

EXECUTED this 3^rd day of February, 2004.

/s/ Robert J. Allison, Jr.

Robert J. Allison, Jr.

EX-31

Exhibit 31.1

CERTIFICATION

I, Richard C. Adkerson, certify that:

1.

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

2.

Based on my knowledge, this 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 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 report;

4.

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

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of  the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

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

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 9, 2004

/s/ Richard C. Adkerson

Richard C. Adkerson

                      President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, Kathleen L. Quirk, certify that:

1.

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

2.

Based on my knowledge, this 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 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 report;

4.

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

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of  the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

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

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 9, 2004

           /s/ Kathleen L. Quirk

                            Kathleen L. Quirk

Senior Vice President,

Chief Financial Officer and Treasurer

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 Annual Report on Form 10-K of Freeport-McMoRan Copper & Gold Inc. (the “Company”) for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard C. Adkerson, as President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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:  March 9, 2004

/s/ Richard C. Adkerson

                           Richard C. Adkerson

President and Chief Executive Officer

A signed original of this written statement required by Section 906 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 § 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 Annual Report on Form 10-K of Freeport-McMoRan Copper & Gold Inc.(the “Company”) for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Kathleen L. Quirk, as Senior Vice President, Chief Financial Officer and Treasurer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her 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:  March 9, 2004

/s/ Kathleen L. Quirk

                             Kathleen L. Quirk

Senior Vice President,

Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906 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 § 18 of the Securities Exchange Act of 1934, as amended.