EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm

One North Central Avenue ▪ Phoenix, AZ  85004
Financial Contacts:
  
Media Contact:
 
Kathleen L. Quirk
David P. Joint
William L. Collier
 
(602) 366-8016
(504) 582-4203
(504) 582-1750

 
Freeport-McMoRan Copper & Gold Inc.
Reports Second-Quarter and Six-Month 2008 Results


HIGHLIGHTS

§  
Net income applicable to common stock for second-quarter 2008 totaled $947 million, $2.25 per share, compared with $1.1 billion, $2.62 per share, for second-quarter 2007.  Net income applicable to common stock for the first six months of 2008 totaled $2.1 billion, $4.89 per share, compared with $1.6 billion, $4.80 per share, for the first six months of 2007.

§  
Consolidated sales from mines for second-quarter 2008 totaled 942 million pounds of copper, 265 thousand ounces of gold and 20 million pounds of molybdenum, compared with 1.0 billion pounds of copper, 913 thousand ounces of gold and 15 million pounds of molybdenum for second-quarter 2007.  As expected, copper and gold sales volumes were lower than the year-ago quarter because of mine sequencing at the Grasberg mine in Papua, Indonesia.

§  
Consolidated sales from mines are expected to approximate 4.1 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum for the year 2008, including 1.0 billion pounds of copper, 315 thousand ounces of gold and 18 million pounds of molybdenum for third-quarter 2008.  Second-half 2008 copper and gold sales are expected to approximate 2.2 billion pounds and 890 thousand ounces, approximately 400 million pounds and 350 thousand ounces higher than the first half of 2008.

§  
Operating cash flows totaled $1.0 billion, net of working capital uses of $765 million, for second-quarter 2008 and $1.6 billion, net of working capital uses of $2.1 billion, for the first six months of 2008.  Assuming average prices of $3.75 per pound for copper, $900 per ounce for gold and $30 per pound for molybdenum for the remainder of 2008, operating cash flows in 2008 would approximate $6.0 billion, including approximately $4.4 billion for the second half of 2008.  Each $0.20 per pound change in copper prices in the balance of the year would impact 2008 operating cash flows by approximately $300 million.

§  
Capital expenditures totaled $655 million for second-quarter 2008 and $1.2 billion for the first six months of 2008.  Projected 2008 capital expenditures approximate $3.0 billion, including investments in development projects in the Americas and Indonesia, the Tenke Fungurume greenfield project in Africa and the project to restart the Climax molybdenum mine in Colorado.

§  
Total debt approximated $7.4 billion and consolidated cash was $1.6 billion at June 30, 2008.

§  
FCX’s Board of Directors authorized an increase in the common stock dividend from an annual rate of $1.75 per share to $2.00 per share and expanded the open market share purchase program to 30 million shares from the prior authorization of 20 million shares.


 
1
 

PHOENIX, AZ, July 22, 2008 – Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported second-quarter 2008 net income applicable to common stock of $947 million, $2.25 per share, compared with $1.1 billion, $2.62 per share, for the second quarter of 2007.  For the six months ended June 30, 2008, FCX reported net income of $2.1 billion, $4.89 per share, compared with $1.6 billion, $4.80 per share, in the 2007 period.  The results for the 2007 six-month period include the operations of Phelps Dodge beginning March 20, 2007.
 
James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer, said, “We are progressing our efforts to develop our large mineral positions in the Americas, Africa and Indonesia to their full potential.  The results of our efforts are encouraging and we expect success in expanding our reserves and adding to our growth pipeline.  We continue to focus on maximizing current production volumes which is enabling us to generate significant cash flows to invest in attractive organic growth projects and provide cash returns to shareholders.  Today's Board actions to increase our common stock dividend and expand our share purchase program reflect our financial strength and a positive outlook for our business and markets.”
 

 
SUMMARY FINANCIAL AND OPERATING DATA

 
Second Quarter
  
Six Months
  
 
2008
  
2007
  
2008
  
2007a
  
Financial Data (in millions, except per share amounts)
                
Revenues
$5,441
b
$5,443
b, c
$11,113
b
$7,689
b, c
Operating income
$2,053
d
$2,354
c
$4,449
d
$3,526
c
Income from continuing operations
                
applicable to common stocke
$947
d, f, g
$1,076
c, f, g
$2,069
d, f, g
$1,548
c, f, g
Net income applicable to common stocke
$947
d, f, g
$1,104
c, f, g
$2,069
d, f, g
$1,580
c, f, g
Diluted net income per share of common stockh:
                
Continuing operations
$2.25
d, f, g
$2.56
c, f, g
$4.89
d, f, g
$4.71
c, f, g
Discontinued operations
-
  
0.06
  
-
  
0.09
  
Diluted net income per share of common stock
$2.25
d, f, g
$2.62
c, f, g
$4.89
d, f, g
$4.80
c, f, g
Diluted average common shares outstandingh, i
450
  
446
  
449
  
346
  
Operating cash flows
$1,009
j
$2,081
j
$1,624
j
$2,750
j
Capital expenditures
$655
  
$530
  
$1,163
  
$672
  
                 
Operating Data – Sales from Mines
                
Copper (millions of recoverable pounds)
                
FCX’s consolidated share
942
  
1,010
  
1,853
  
1,530
  
Average realized price per pound
$3.85
  
$3.34
c
$3.77
  
$3.32
c
                 
Gold (thousands of recoverable ounces)
                
FCX’s consolidated share
265
  
913
  
545
  
1,869
  
Average realized price per ounce
$912
  
$659
  
$917
  
$660
  
                 
Molybdenum (millions of recoverable pounds)
                
FCX’s consolidated share
20
  
15
  
40
  
17
  
Average realized price per pound
$31.59
  
$24.83
  
$31.63
  
$24.68
  
                 
 
Note: Disclosures of after-tax amounts throughout this release are calculated by reference to the applicable tax rate.

 
2
 

 
a. 
 Includes Phelps Dodge results beginning March 20, 2007.
 
b. 
 Includes impacts of adjustments to provisionally priced concentrate and cathode sales recognized in prior periods (see discussion beginning on page 4).
 
c. 
 Includes charges for noncash mark-to-market accounting adjustments on the 2007 copper price protection program totaling $130 million ($80 million to net income or $0.18 per share) and a reduction in average realized copper prices of $0.13 per pound in second-quarter 2007 and $168 million ($103 million to net income or $0.30 per share) and a reduction in average realized copper prices of $0.11 per pound in the first six months of 2007.  FCX paid $598 million upon settlement of these contracts in January 2008.  FCX does not currently intend to enter into similar hedging programs in the future.
 
d. 
 Includes estimated costs totaling approximately $25 million ($8 million to net income or $0.02 per share) in the 2008 periods for local infrastructure projects in South America.
 
e. 
 After preferred dividends.
 
f. 
 Includes the impact of purchase accounting fair value adjustments associated with the acquisition of Phelps Dodge totaling $262 million ($163 million to net income or $0.36 per share) for second-quarter 2008, $456 million ($284 million to net income or $0.64 per share) for second-quarter 2007, $556 million ($347 million to net income or $0.77 per share) for the first six months of 2008 and $579 million ($363 million to net income or $1.05 per share) for the first six months of 2007.  The 2008 periods include net purchase accounting fair value adjustments related to non-operating income and expenses totaling $22 million ($13 million to net income or $0.03 per share) for second-quarter 2008 and $37 million ($22 million to net income or $0.05 per share) for the first six months of 2008.  For additional information regarding the impacts of these adjustments to production and delivery costs and depreciation, depletion and amortization refer to the supplemental schedule, “Business Segments,” beginning on page XXIV, which is available on FCX’s web site, “www.fcx.com.”
 
g. 
 Includes net losses on early extinguishment of debt totaling $47 million ($35 million to net income or $0.08 per share) for second-quarter 2007, $6 million ($5 million to net income or $0.01 per share) for the first six months of 2008 and $135 million ($110 million to net income or $0.32 per share) for the first six months of 2007.  Also includes gains in the 2008 periods totaling $13 million ($8 million to net income or $0.02 per share) on the sale of other assets and gains in the 2007 periods totaling $38 million ($23 million to net income or $0.05 per share in second-quarter 2007 and $0.07 per share in the first six months of 2007) on the sale of marketable equity securities.
 
h. 
 Reflects assumed conversion of FCX’s 6¾% Mandatory Convertible Preferred Stock, which was issued on March 28, 2007, and 5½% Convertible Perpetual Preferred Stock.  See Note h on page IV.
 
i. 
 On March 19, 2007, FCX issued 136.9 million common shares to acquire Phelps Dodge.  On March 28, 2007, FCX sold 47.15 million common shares.  Common shares outstanding on June 30, 2008, totaled 384 million.  Assuming conversion of the instruments discussed in Note h above and including dilutive stock options and restricted stock units, total common shares outstanding would approximate 450 million at June 30, 2008.
 
j. 
 Includes working capital (uses) sources of $(765) million in second-quarter 2008, $113 million in second-quarter 2007, $(2.1) billion in the first six months of 2008 and $(89) million in the first six months of 2007.
 
 
OPERATIONS
 
Consolidated copper sales of 942 million pounds in the second quarter of 2008 were slightly above previous estimates of 930 million pounds reported on April 23, 2008, because of the timing of shipments.  Second-quarter 2008 production volumes were slightly lower than forecast, principally in North America.  Second-quarter 2008 consolidated copper sales were seven percent lower than the year-ago period when FCX was mining in a higher grade section of Grasberg, partly offset by higher production in North and South America.
 
Consolidated gold sales of 265 thousand ounces in second-quarter 2008 were higher than previous estimates of 225 thousand ounces because of mine sequencing at the Grasberg mine in Indonesia.  As expected, consolidated gold sales in the second quarter of 2008 were significantly lower than the year ago period because of mining in a lower ore grade section of the Grasberg open pit.  Consolidated molybdenum sales of 20 million pounds in the second quarter of 2008 approximated previous estimates of 18 million pounds.
 
For the year 2008, FCX projects sales to approximate 4.1 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum.  Copper sales are expected to be approximately 100 million pounds lower than previous estimates primarily because of delays in achieving full production
 
3
at the new Safford mine and lower than expected production at Morenci.  Efforts are under way to offset these shortfalls.
 
Consolidated unit net cash costs were $1.25 per pound in the second quarter of 2008.  Cash costs have increased significantly in the last twelve months and additional cost escalation was experienced in the second quarter, principally for energy.  The increase in second-quarter 2008 unit net cash costs compared with the year ago period also reflects lower volumes at Grasberg.  The effect of increased input costs is expected to result in higher costs in 2008 than previous estimates.  Assuming average prices of $3.75 per pound for copper, $900 per ounce for gold and $30 per pound for molybdenum for the remainder of 2008, unit net cash costs for the year 2008 would average approximately $1.10 per pound, compared with FCX’s April 23, 2008, estimate of $1.00 per pound.  Because of higher volumes in the second half of 2008, principally from Grasberg, second-half unit net cash costs are expected to be lower than the first-half average.  Unit net cash costs are expected to average approximately $1.06 per pound in the second half of 2008, including approximately $1.24 per pound in third-quarter 2008 and approximately $0.92 per pound in fourth-quarter 2008.
 

 
Second Quarter
  
Six Months
  
 
2008
  
2007
  
2008
  
2007a
  
Consolidated Operating Data
                
Copper (millions of recoverable pounds)
                
Production
941
  
971
  
1,821
  
2,047
  
Salesb
942
  
1,010
  
1,853
  
2,035
  
Average realized price per pound
$3.85
  
$3.34
c
$3.77
  
$3.19
c
Unit net cash costsd
$1.25
  
$0.53
  
$1.16
  
$0.47
  
Gold (thousands of recoverable ounces)
                
Production
250
  
825
  
525
  
1,927
  
Salesb
265
  
913
  
545
  
1,890
  
Average realized price per ounce
$912
  
$659
  
$917
  
$657
  
Molybdenum (millions of recoverable pounds)
                
Production
18
  
18
  
36
  
35
  
Salesb
20
  
15
  
40
  
34
  
Average realized price per pound
$31.59
  
$24.83
  
$31.63
  
$23.83
  
 
a. 
 Amounts are pro forma to reflect the inclusion of Phelps Dodge results prior to the March 19, 2007 acquisition.
 
b. 
 Excludes sales of purchased metal.
 
c. 
 Includes reduction of $0.13 per pound for second-quarter 2007 and $0.09 per pound for the first six months of 2007 for mark-to-market accounting adjustments on the 2007 copper price protection program.
 
d. 
 Reflects weighted average unit net cash costs, net of by-product credits, for all mines.  For reconciliations of actual and pro forma unit net cash costs per pound by geographic region to production and delivery costs applicable to actual or pro forma sales reported in FCX’s consolidated financial statements or pro forma consolidated financial results, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VIII, which is available on FCX’s web site, “www.fcx.com.”

 
For the first six months of 2008, approximately 50 percent of FCX’s copper was sold in concentrate, 30 percent as rod (principally from North American operations) and 20 percent as cathodes.  Under the long-established structure of sales agreements prevalent in the industry, substantially all of FCX’s concentrate sales contracts and most of its cathode sales contracts are provisionally priced at the time of shipment. The provisional prices are finalized in a specified future period (generally one to four months from the shipment date) based on quoted LME or COMEX prices.  The sales subject to final pricing are generally settled in a subsequent month or quarter.  Because a significant portion of FCX’s concentrate and cathode sales in any quarterly period usually remain subject to final pricing, the quarter-end forward price is a major determinant of recorded revenues and the average recorded realized price for copper for the period.

 
4
 
 
LME copper prices averaged $3.83 per pound during the second quarter of 2008, compared with FCX’s recorded prices of $3.85 per pound.  The applicable forward copper price at the end of the quarter was $3.88 per pound.  Approximately half of FCX’s consolidated copper sales during the second quarter were provisionally priced at the time of shipment and are subject to final pricing later in 2008.
 
At June 30, 2008, FCX had copper sales of 369 million pounds of copper (net of minority interests) priced at an average of $3.88 per pound, subject to final pricing over the next several months.  Each $0.05 change in the price realized from the June 30, 2008, price would result in an approximate $11 million effect on FCX’s 2008 net income.  The LME closing spot price for copper on July 21, 2008, was $3.79 per pound.
 
At March 31, 2008, 362 million pounds of copper (net of minority interests) were provisionally priced at $3.82 per pound.  Adjustments to these prior period copper sales increased consolidated revenues by $5 million ($3 million to net income or $0.01 per share), compared with an increase of $188 million ($95 million to net income or $0.21 per share) in second-quarter 2007.  Additionally, adjustments to prior year copper sales in the first six months of 2008 resulted in an increase in consolidated revenues of $267 million ($126 million to net income or $0.28 per share), compared with an increase of $90 million ($43 million to net income or $0.12 per share) in the first six months of 2007.
 
 
North American Mining.  FCX operates seven open-pit copper mining complexes in North America (Morenci, Bagdad, Sierrita, Safford and Miami in Arizona and Chino and Tyrone in New Mexico) and conducts molybdenum mining operations at the Henderson underground mine in Colorado.  By-product molybdenum is primarily produced at Sierrita and Bagdad.  FCX is the world’s largest producer of molybdenum.  FCX is engaged in a project to restart the Climax open-pit molybdenum mine in Colorado.  All of these mining operations are wholly owned, except for Morenci.  FCX records its 85 percent joint venture interest in Morenci using the proportionate consolidation method.  The North American copper mining operations are operated in an integrated fashion and have long-lived reserves with significant additional development potential.

Consolidated
  
Second Quarter
  
Six Months
  
North American Mining Operations
  
2008
  
2007
  
2008
  
2007a
  
                   
Copper (millions of recoverable pounds)
                  
Production
  
350
  
335
  
677
  
636
  
Salesb
  
347
  
333
  
686
  
640
  
Average realized price per pound
  
$3.82
  
$3.05
c
$3.66
  
$2.79
c
                   
Molybdenum (millions of recoverable pounds)
                  
Production
  
18
  
18
  
35
  
35
  
Salesd
  
20
  
15
  
40
  
34
  
Average realized price per pound
  
$31.59
  
$24.83
  
$31.63
  
$23.83
  
 
 
a. 
 Amounts are pro forma to reflect the inclusion of Phelps Dodge results prior to the March 19, 2007 acquisition.
 
b.  
Excludes sales of purchased metal.
 
c.  
Amount was $3.44 per pound for second-quarter 2007 and $3.08 per pound for the first six months of 2007 before charges for mark-to-market accounting adjustments on the 2007 copper price protection program.
 
d.  
Excludes sales of purchased metal and includes sales of molybdenum produced at Cerro Verde.
 
 
Consolidated copper sales in North America totaled 347 million pounds in the second quarter of 2008, slightly above the second-quarter 2007 sales resulting from the commencement of production at the recently commissioned Safford mine and higher production at Sierrita, partly offset by lower Morenci production.
 
5
 
In the second quarter of 2008, consolidated molybdenum sales from the Henderson and by-product mines totaled 20 million pounds, five million pounds higher than second-quarter 2007 primarily because of improved market conditions.
 
Approximately 85 percent of FCX’s expected 2008 molybdenum production is committed for sale throughout the world pursuant to annual or quarterly agreements based primarily on prevailing market prices one month prior to the time of sale.  For 2009, 90 percent of sales is expected to be priced at approximate prevailing market prices.  The Metals Week Dealer Oxide closing price for molybdenum on July 21, 2008, was $33.75 per pound.
 
For the year 2008, FCX expects sales from North American operations to approximate 1.4 billion pounds of copper and 75 million pounds of molybdenum, compared with 1.3 billion pounds of copper and 69 million pounds of molybdenum for pro forma year 2007.
 
Unit Net Cash Costs for North American Copper Mines.  The following table summarizes unit net cash costs at the North American copper mines.

 
Second Quarter
  
Six Months
  
 
2008
  
2007
  
2008
  
2007a
  
Per pound of copper:
                        
Site production and delivery, after adjustments
$
1.84
  
$
1.46
  
$
1.74
  
$
1.39
  
By-product credits, primarily molybdenum
  
(0.70
)
  
(0.74
)
  
(0.74
)
  
(0.64
)
Treatment charges
  
0.10
    
0.09
    
0.10
    
0.08
  
Unit net cash costsb
$
1.24
  
$
0.81
  
$
1.10
  
$
0.83
  
                         
 
a. 
 Amounts are pro forma to reflect the inclusion of Phelps Dodge results prior to the March 19, 2007 acquisition.
 
b. 
 For a reconciliation of actual and pro forma unit net cash costs per pound to production and delivery costs applicable to actual or pro forma sales reported in FCX’s consolidated financial statements or pro forma consolidated financial results, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VIII, which is available on FCX’s web site, “www.fcx.com.”
 
North America unit net cash costs were higher in the 2008 periods as compared with the 2007 periods primarily because of increases in energy, labor, sulfuric acid and other input costs, and increases in mining rates and lower grades at Morenci, combined with higher unit costs at Safford as the mine ramps up to full production rates.
 
Assuming an average copper price of $3.75 per pound and an average molybdenum price of $30 per pound for the remainder of 2008 and achievement of current 2008 sales estimates, FCX estimates that its 2008 average unit net cash costs, including molybdenum credits, for its North American copper mines would approximate $1.29 per pound of copper.  Unit net cash costs for 2008 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 2008.
 
Unit Net Cash Costs for Henderson Molybdenum Mine.  Second-quarter 2008 unit net cash costs of $4.96 per pound of molybdenum at the Henderson molybdenum mine were higher, compared with unit net cash costs of $4.38 per pound for second-quarter 2007, primarily because of higher input costs, including labor, maintenance, supplies and energy.  Assuming achievement of current 2008 sales estimates, FCX estimates 2008 average unit net cash costs for its Henderson mine at approximately $5.00 per pound of molybdenum.
 
 
South American Mining.  FCX operates four copper mines in South America – Cerro Verde in Peru and Candelaria, Ojos del Salado and El Abra in Chile.  These operations are consolidated in FCX’s financial statements, with outside ownership reported as minority interests.
 
FCX owns a 53.56 percent interest in Cerro Verde, an open-pit mine producing both electrowon copper cathodes and copper and molybdenum concentrates.  FCX owns 80 percent of the Candelaria and Ojos del Salado mining complexes, which include the Candelaria open-pit and underground mines and the Ojos del Salado underground mines.  These mines use common processing facilities to produce
 
6
copper concentrates.  FCX owns a 51 percent interest in El Abra, an open-pit mine producing electrowon copper cathodes.
 

Consolidated
  
Second Quarter
  
Six Months
  
South American Mining Operations
  
2008
  
2007
  
2008
  
2007a
  
                   
Copper (millions of recoverable pounds)
                  
Production
  
369
  
338
  
722
  
645
  
Sales
  
366
  
343
  
731
  
644
  
Average realized price per pound
  
$3.86
  
$3.54
  
$3.84
  
$3.33
  
                   
Gold (thousands of recoverable ounces)
                  
Production
  
25
  
28
  
51
  
52
  
Sales
  
26
  
28
  
53
  
53
  
Average realized price per ounce
  
$910
  
$674
  
$914
  
$609
  
 
 
a. 
 Amounts are pro forma to reflect the inclusion of Phelps Dodge results prior to the March 19, 2007 acquisition.
 
 
South American copper sales in the second quarter of 2008 were higher than in second-quarter 2007 primarily reflecting higher production from Cerro Verde’s new concentrator.
 
Unit Net Cash Costs.  The following table summarizes unit net cash costs at the South American copper mines.

 
Second Quarter
  
Six Months
  
 
2008
  
2007
  
2008
  
2007a
  
Per pound of copper:
                        
Site production and delivery, after adjustments
$
1.15
  
$
0.82
  
$
1.12
  
$
0.83
  
By-product credits, primarily gold and molybdenum
  
(0.12
)
  
(0.07
)
  
(0.13
)
  
(0.07
)
Treatment charges
  
0.19
    
0.21
    
0.19
    
0.19
  
Unit net cash costsb
$
1.22
  
$
0.96
  
$
1.18
  
$
0.95
  
                         
 
a. 
 Amounts are pro forma to reflect the inclusion of Phelps Dodge results prior to the March 19, 2007 acquisition.
 
b. 
 For a reconciliation of actual and pro forma unit net cash costs per pound to production and delivery costs applicable to actual or pro forma sales reported in FCX’s consolidated financial statements or pro forma consolidated financial results, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VIII, which is available on FCX’s web site, “www.fcx.com.”

 
South America unit net cash costs were higher in the 2008 periods compared with the 2007 periods primarily because of higher energy costs, higher mining rates at Candelaria and higher milling costs at Cerro Verde and Candelaria.  These increases were partly offset by increased production from the recently expanded mill at Cerro Verde and favorable by-product credits.  The 2008 periods’ unit net cash costs also increased because of higher local contributions at Cerro Verde.
 
For the year 2008, FCX expects South American sales of 1.5 billion pounds of copper and 100 thousand ounces of gold, compared with 1.4 billion pounds of copper and 114 thousand ounces of gold for the pro forma year 2007.  In addition, FCX expects to produce three million pounds of molybdenum at Cerro Verde for the year 2008, compared with one million pounds for the pro forma year 2007.  Estimated 2008 molybdenum production is lower than previous estimates because of downtime at the Cerro Verde molybdenum plant as start-up issues continue to be addressed.
 
Assuming achievement of current 2008 sales estimates, FCX estimates that its 2008 average unit net cash costs, including gold and molybdenum credits, for its South American mines would approximate $1.18 per pound of copper.
 
7
Indonesian Mining.  Through its 90.64 percent owned subsidiary PT Freeport Indonesia (PT-FI), FCX operates the world’s largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia.
 

Consolidated
  
Second Quarter
  
Six Months
  
Indonesian Mining Operations
  
2008
  
2007
  
2008
  
2007
  
                   
Copper (millions of recoverable pounds)
                  
Production
  
222
  
298
  
422
  
766
  
Sales
  
229
  
334
  
436
  
751
  
Average realized price per pound
  
$3.88
  
$3.43
  
$3.84
  
$3.40
  
                   
Gold (thousands of recoverable ounces)
                  
Production
  
221
  
795
  
467
  
1,869
  
Sales
  
235
  
880
  
486
  
1,827
  
Average realized price per ounce
  
$912
  
$658
  
$917
  
$659
  
 
Indonesia copper and gold sales in the second quarter of 2008 were significantly lower than in the second quarter of 2007 as a result of the expected mining in a lower ore grade section of the Grasberg open pit.  At the Grasberg mine, the sequencing in mining areas with varying ore grades causes fluctuations in the timing of ore production, resulting in varying quarterly and annual sales of copper and gold.  PT-FI expects to mine in a higher-grade section of the Grasberg open pit in the second half of 2008 compared to the first half of 2008.  Approximately 63 percent of 2008 copper sales and 63 percent of 2008 gold sales are estimated in the second half, with the fourth quarter expected to be the highest of the year.
 
FCX expects Indonesia sales of 1.2 billion pounds of copper and 1.3 million ounces of gold for the year 2008, compared with 1.1 billion pounds of copper and 2.2 million ounces of gold for the year 2007.
 
Unit Net Cash Costs (Credits).  The following table summarizes PT-FI’s unit net cash costs (credits).

 
Second Quarter
  
Six Months
  
 
2008
  
2007
  
2008
  
2007
  
Per pound of copper:
                        
Site production and delivery, after adjustments
$
1.90
  
$
1.14
  
$
1.88
  
$
0.92
  
Gold and silver credits
  
(0.99
)
  
(1.79
)
  
(1.11
)
  
(1.65
)
Treatment charges
  
0.28
    
0.33
    
0.31
    
0.35
  
Royalties
  
0.13
    
0.14
    
0.13
    
0.13
  
Unit net cash costs (credits)a
$
1.32
  
$
(0.18
)
$
1.21
  
$
(0.25
)
                         
 
a. 
 For a reconciliation of unit net cash costs (credits) per pound to production and delivery costs applicable to sales reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VIII, which is available on FCX’s web site, “www.fcx.com.”
 
PT-FI’s unit net cash costs, including gold and silver credits, averaged $1.32 per pound for second-quarter 2008, compared with a net credit of $0.18 per pound for second-quarter 2007.  The higher unit net cash costs in 2008 reflected the significantly lower copper and gold volumes and higher input costs, partly offset by higher gold prices during second-quarter 2008.  Unit site production and delivery costs will vary with fluctuations in production volumes because of the primarily fixed nature of PT-FI’s cost structure.  Because the majority of PT-FI’s costs are fixed, unit costs vary with the volumes sold and the price of gold.
 
Assuming average copper prices of $3.75 per pound and average gold prices of $900 per ounce for the remainder of 2008 and achievement of current 2008 sales estimates, PT-FI estimates that its 2008 unit net cash costs, including gold and silver credits, would approximate $0.80 per pound.  Unit net cash costs for 2008 would change by approximately $0.02 per pound for each $25 per ounce change in the average price of gold for the remainder of 2008.

8
OTHER ITEMS
 
Atlantic Copper, FCX’s wholly owned Spanish smelting unit, reported operating income of $11 million in the second quarter of 2008, compared with an operating loss of $4 million in the 2007 period.  The second quarter of 2007 included a $23 million impact from its 23-day maintenance turnaround completed in June 2007.
 
FCX defers recognizing profits on PT-FI’s and its South American mines sales to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting, PT-FI’s 25 percent-owned Indonesian smelting unit, until final sales to third parties occur.  Changes in these net deferrals resulted in a reduction to FCX’s net income totaling $6 million, $0.01 per share, in the second quarter of 2008, and an addition to FCX’s net income totaling less than $1 million, less than $0.01 per share, in the first six months of 2008.  For the 2007 periods, changes in these net deferrals resulted in an addition to FCX’s net income totaling $7 million, $0.02 per share, in the second quarter and a reduction to net income of $103 million, $0.30 per share, in the first six months.  At June 30, 2008, FCX’s net deferred profits on PT-FI’s and its South American mines concentrate inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income after taxes and minority interest sharing totaled $93 million.
 
DEVELOPMENT and EXPLORATION ACTIVITIES
 
Development Activities.  FCX has significant development activities under way to expand its production volumes, extend its mine lives and develop large-scale underground ore bodies.  Recently completed or current major projects include a major new mining complex at Safford, Arizona; a project to restart open-pit mining at Climax; a sulfide leach project to extend the mine life at El Abra; the development of the large-scale, high-grade underground ore bodies in the Grasberg district and development of the highly prospective Tenke Fungurume project in the Democratic Republic of Congo (DRC).
 
In addition to the projects currently under way, FCX is reviewing its properties to evaluate the potential for expansion opportunities associated with existing ore bodies.  FCX has initiated plans for incremental expansions at the Morenci, Sierrita and Bagdad mines in Arizona and the Cerro Verde mine in Peru.  Based on scoping level estimates, these projects would provide incremental production ramping up to over 200 million pounds of copper per year and 7 million pounds of molybdenum per year by 2011 with preliminary capital costs estimated to approximate $400 million.  Detailed engineering for these projects is under way, which is expected to result in revised capital estimates and potential project scope changes.  In addition, FCX restarted limited mining activities at the Miami copper mine in Arizona as it continues to conduct reclamation activities associated with historical mining operations.  During the approximate five-year mine life, FCX expects to ramp up to full rates of production of approximately 100 million pounds of copper per year by 2010.  Capital investment for this project is expected to approximate $100 million, primarily for mining equipment.
 
FCX has also expanded its exploration activities and plans to incorporate this data into its future development plans.
 
North America.  Construction of a major new copper mine in Safford, Arizona, is complete and copper production is being ramped up to design capacity of 240 million pounds of copper per year.  Copper production at Safford totaled 22 million pounds in first-quarter 2008 and 24 million pounds in second-quarter 2008.  A number of start-up issues are being addressed, principally associated with achieving design capacity of the ore stacking circuit and leach recovery optimization.  The mine will continue to ramp up during the second half of 2008.  The Safford copper mine produces ore from two open-pit mines and includes a solution extraction/electrowinning facility.  Construction commenced in August 2006 and was completed in advance of initial expectations.  The total capital investment for this project approximated $675 million.  FCX will continue to pursue significant additional exploration and development potential in this district, including the Lone Star project, a potentially large mineral resource that is currently being evaluated with a drilling program.
 
9
 
In December 2007, FCX announced plans to proceed with the restart of the Climax molybdenum mine near Leadville, Colorado.  Climax is believed to be the largest, highest grade and lowest cost undeveloped molybdenum ore body in the world.  Major permits were secured in early 2008.  Engineering is in an advanced stage and construction activities commenced in the second quarter of 2008.  Long lead items have been ordered and are on schedule for delivery.  The initial $500 million project involves open-pit mining and the construction of new milling facilities.  After start-up and commissioning in 2010, production is expected to approximate 30 million pounds of molybdenum per year.  The project is designed to enable the consideration of further large-scale expansion of the Climax mine.  FCX is currently evaluating a second phase of the Climax project to expand production rates should market conditions warrant additional production.
 
South America.  FCX is advancing the development of a large sulfide deposit at El Abra that will extend the mine life by over ten years.  Copper production from the sulfides is targeted to begin in 2010 and is expected to average approximately 325 million pounds of copper per year beginning in 2012, replacing depleting oxide production.  Certain of the existing facilities at El Abra will be used to process the additional sulfide reserves.  In March 2008, FCX received approval of its environmental impact study associated with this project.  Total initial capital for the project is estimated to approximate $450 million, the majority of which will be spent between 2008 and 2011.
 
Indonesia.  PT-FI has several projects in progress throughout the Grasberg district, including developing its large-scale underground ore bodies located beneath and adjacent to the Grasberg open pit.  The expansion of the currently producing Deep Ore Zone (DOZ) mine to 50,000 metric tons of ore per day is complete with second-quarter rates averaging 66,000 metric tons per day.  A further expansion of the DOZ mine to 80,000 metric tons per day is under way with completion targeted by 2010.  Other projects include the development of the high-grade Big Gossan mine, expected to ramp up to full production of 7,000 metric tons per day in 2011, and the continued development of the Common Infrastructure project, which will provide access to the Grasberg underground ore body, the Kucing Liar ore body and future development of the mineralized areas below the DOZ mine.
 
Africa.  FCX holds an effective 57.75 percent interest in the Tenke Fungurume copper and cobalt mining concessions in the Katanga province of the DRC.  FCX is the operator of the project.  The initial project at Tenke Fungurume is based on mining and processing ore reserves approximating 100 million metric tons with average ore grades of 2.3 percent copper and 0.3 percent cobalt.  FCX is currently engaged in drilling activities, exploration and metallurgical testing to evaluate the potential of this highly prospective district and expects the ore reserves to increase significantly over time.
 
Approximately $700 million in aggregate project costs have been incurred to date.  Construction activities are being advanced with current activities focused on concrete placement, steel tank erection, structural steel and infrastructure development including shops, warehouses and extensive social and regional infrastructure programs.  All long lead time equipment has been ordered and initial production is targeted during the second half of 2009.  Annual production in the initial years of the project is expected to approximate 250 million pounds of copper and 18 million pounds of cobalt.  FCX expects the results of drilling activities will enable significant future expansion of initial production rates.
 
FCX is responsible for funding 70 percent of the project development costs and is also responsible for financing its partner’s share of certain project overruns.  A capital cost review prepared in April 2008 indicates estimated capital costs of approximately $1.75 billion (approximately $1.9 billion including loans to a third-party government agency for power development).  These estimates include substantial amounts for infrastructure to support a larger scale operation than the initial phase of the project, including the provision of expanded electrical power-generating capacity and improved power reliability for the region.  This regional power infrastructure investment is estimated to approximate $175 million, the majority of which is expected to be funded through a loan to the DRC State power authority.
 
FCX is continuing to develop plans to enhance the economic returns of the project, including expansions of this high potential resource.  The capital cost estimates and timing of start-up will continue to be reviewed and updated as the project development progresses.
 
10
 
Exploration Activities.  FCX is conducting exploration activities near its existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where we currently operate.
 
Drilling activities have been significantly expanded over the last twelve months.  These efforts involve drilling adjacent to existing ore bodies.  The number of drill rigs has been expanded from 26 in March 2007 to 80 currently.  Exploration expenses in 2008 are expected to approximate $240 million.
 
Results to date have been positive, providing opportunities for significant potential reserve additions at Morenci, Bagdad and Sierrita in North America; Cerro Verde in South America and in the high potential Tenke district.  Drilling continues at the Lone Star deposit in the Safford district.
 
In addition, FCX continues to pursue exploration in Indonesia.  FCX’s 2008 exploration efforts in Indonesia include testing extensions of the Deep Grasberg and Kucing Liar mine complex, evaluating the resource below the old Ertsberg pit for potential resumption of open pit mining and evaluating targets in the area between the Ertsberg East and Grasberg mineral systems from the new Common Infrastructure tunnels.  FCX has resumed exploration activities in certain prospective areas in Papua, outside Block A (the Grasberg contract area).
 
FCX will continue to incorporate the results of drilling activities into its mine plans to evaluate potential reserve additions and future expansion opportunities.  Feasibility studies will incorporate various considerations, including recent cost escalation, water and power issues and environmental and regulatory factors.

 
CASH and DEBT
 
At June 30, 2008, FCX had consolidated cash of $1.6 billion and net cash available to the parent company of $0.9 billion as shown below (in billions):
 

 
June 30,
  
 
2008
  
Cash at parent company
$
0.1
a
Cash from international operations
  
1.5
  
Total consolidated cash
  
1.6
  
Less minority interests’ share
  
(0.5
)
Cash, net of minority interests’ share
  
1.1
  
Withholding and other taxes if distributed
  
(0.2
)b
Net cash available to parent company
$
0.9
  
 
a. 
 Includes cash at FCX’s North America mining operations.
 
b. 
 Cash at FCX’s international operations is subject to foreign withholding taxes of up to 22 percent upon repatriation into the U.S.
 
At June 30, 2008, FCX had $7.4 billion in debt.  The following table summarizes FCX’s debt transactions since December 31, 2007 (in billions):
 

Total debt at December 31, 2007
$
7.2
  
Net borrowings under revolving credit facility
  
0.3
  
Other borrowings, net
  
0.1
  
Total debt at March 31, 2008
  
7.6
  
Net repayments under revolving credit facility
  
(0.2
)
Total debt at June 30, 2008
$
7.4
  
 
OUTLOOK
 
FCX’s actual consolidated sales volumes for the first half of 2008 and projected consolidated sales volumes for the year 2008 are shown below:
11
 
   
2008
  
   
First-
  
Full-
  
   
Half
  
Year
  
Consolidated Sales from Mines
  
Actual
  
Estimate
  
Copper (recoverable pounds):
  
(millions)
  
(billions)
  
North America
  
686
  
1.4
  
South America
  
731
  
1.5
  
Indonesia
  
436
  
1.2
  
Total
  
1,853
  
4.1
  
           
Gold (recoverable ounces):
  
(thousands)
  
(millions)
  
Indonesia
  
486
  
1.3
  
Other
  
59
  
0.1
  
Total
  
545
  
1.4
  
           
Molybdenum (recoverable pounds):
  
(millions)
  
(millions)
  
North America
  
40
a
75
a
 
a. 
 Includes sales of molybdenum produced at Cerro Verde.
 
 
Because of mine sequencing at Grasberg and the ramp up of production at Safford, second-half 2008 production is expected to be higher than the first half.  Approximately 55 percent of consolidated copper sales and 62 percent of consolidated gold sales are expected in the second half of the year.  The achievement of FCX’s sales estimates will be dependent on the achievement of targeted mining rates and expansion plans, the successful operation of production facilities, the impact of weather conditions and other factors.
 
Using estimated sales volumes for 2008 and assuming average prices of $3.75 per pound of copper, $900 per ounce of gold and $30 per pound of molybdenum for the remainder of 2008, FCX’s consolidated operating cash flows would approximate $6.0 billion in 2008, including approximately $4.4 billion projected for the second half of 2008.  Each $0.20 per pound change in copper prices in the balance of the year would have an approximately $300 million impact on 2008 operating cash flows.  Using flat pricing assumptions for the remainder of the year, second-half 2008 operating cash flows would be significantly higher than the first half.  FCX’s capital expenditures for 2008 are currently estimated to approximate $3.0 billion.  With a continuation of favorable market conditions, FCX expects to generate cash flows during 2008 significantly greater than its capital expenditures, minority interests distributions, dividends and other cash requirements.
 
 
FINANCIAL POLICY
 
FCX has a long-standing tradition of seeking to build shareholder values through pursuing development projects with high rates of return and returning cash to shareholders through common stock dividends and share purchases.
 
FCX separately announced today that its Board of Directors authorized an increase in its annual common dividend to $2.00 per share from its current level of $1.75 per share, effective with the November 2008 quarterly dividend.  The new common dividend results in an increase in common dividends to approximately $770 million per year from the current total approximating $670 million.  Preferred dividends total approximately $255 million per year.
 
FCX also announced today that its Board of Directors approved an increase in its open market share purchase program to 30 million shares from the prior authorization of 20 million shares.  The timing of future purchases is dependent upon many factors including the company’s operating results, its cash flow and financial position, its future expansion plans, copper prices, the market price of the common shares and general economic and market conditions.
 
12
 
FCX is a leading international mining company with headquarters in Phoenix, Arizona.  FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum.  FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the world’s largest producer of molybdenum.
 
The company’s portfolio of assets includes the Grasberg mining complex, the world’s largest copper and gold mine in terms of recoverable reserves, significant mining operations in the Americas, including the large scale Morenci and Safford minerals districts in North America and the Cerro Verde and El Abra operations in South America, and the potential world-class Tenke Fungurume development project in the Democratic Republic of Congo.  Additional information about FCX is available on FCX’s web site at www.fcx.com.
 

 
 
Cautionary Statement and Regulation G Disclosure: This press release 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 statements regarding projected ore grades and milling rates, projected sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, the impact of copper, gold and molybdenum price changes, the impact of changes in deferred intercompany profits on earnings and timing of dividend payments and open market purchases of FCX common stock.  The declaration and payment of dividends is at the discretion of FCX’s Board of Directors and will depend on FCX’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board.  Accuracy of the forward-looking statements depends on assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments.  FCX cautions readers that it assumes no obligation to update or publicly release any revisions to the forward-looking statements in this press release and, except to the extent required by applicable law, does not intend to update or otherwise revise the forward-looking statements more frequently than quarterly.  Additionally, important factors that might cause future results to differ from these projections include mine sequencing, production rates, industry risks, commodity prices, political risks, weather-related risks, labor relations, currency translation risks and other factors described in FCX's Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission (SEC).
 
This press release also contains certain financial measures such as unit net cash costs (credits) per pound of copper and per pound of molybdenum.  As required by SEC Regulation G, reconciliations of these measures to amounts reported in FCX’s consolidated financial statements or pro forma consolidated financial results are in the supplemental schedule, “Product Revenues and Production Costs,” beginning on page VIII, which is available on FCX’s web site, “www.fcx.com.”
 
A copy of this press release is available on FCX’s web site, “www.fcx.com.”  A conference call with securities analysts about second-quarter 2008 results is scheduled for today at 10:00 a.m. EDT.  The conference call will be broadcast on the Internet along with slides.  Interested parties may listen to the webcast live and view the slides by accessing “www.fcx.com.” A replay of the webcast will be available through Friday, August 15, 2008.
# # #

 
13
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
     
   
Three Months Ended June 30,
COPPER
  
Production
  
Sales
(millions of recoverable pounds)
  
2008
  
2007
  
2008
  
2007
MINED COPPER (FCX’s net interest in %)
                        
North America
                        
Morenci (85%)
  
155
a
  
183
a
  
158
a
  
180
a
Bagdad (100%)
  
54
    
51
    
54
    
47
  
Sierrita (100%)
  
49
    
35
    
46
    
36
  
Chino (100%)
  
47
    
44
    
48
    
45
  
Tyrone (100%)
  
16
    
11
    
15
    
13
  
Miami (100%)
  
4
    
6
    
5
    
5
  
Tohono (100%)
  
1
    
1
    
-
    
1
  
Safford (100%)
  
24
    
-
    
20
    
-
  
Other (100%)
  
-
    
4
    
1
    
6
  
Total North America
  
350
    
335
    
347
    
333
  
                         
South America
                        
Cerro Verde (53.56%)
  
179
    
142
    
181
    
132
  
Candelaria/Ojos del Salado (80%)
  
97
    
108
    
101
    
108
  
El Abra (51%)
  
93
    
88
    
84
    
103
  
Total South America
  
369
    
338
    
366
    
343
  
                         
Indonesia
                        
Grasberg (90.64%)
  
222
b
  
298
b
  
229
b
  
334
b
Consolidated
  
941
    
971
    
942
    
1,010
  
                         
Less minority participants’ share
  
169
    
159
    
167
    
164
  
Net
  
772
    
812
    
775
    
846
  
                         
Consolidated sales from mines
              
942
    
1,010
  
Purchased copper
              
130
    
180
  
Total consolidated sales
              
1,072
    
1,190
  
                         
Average realized price per pound
              
$3.85
    
$3.34
c
                         
GOLD
                        
(thousands of recoverable ounces)
                        
MINED GOLD (FCX’s net interest in %)
                        
North America (100%)
  
4
    
2
    
4
    
5
  
South America (80%)
  
25
    
28
    
26
    
28
  
Indonesia (90.64%)
  
221
b
  
795
b
  
235
b
  
880
b
Consolidated
  
250
    
825
    
265
    
913
  
                         
Less minority participants’ share
  
26
    
80
    
27
    
88
  
Net
  
224
    
745
    
238
    
825
  
                         
Consolidated sales from mines
              
265
    
913
  
Purchased gold
              
1
    
-
  
Total consolidated sales
              
266
    
913
  
                         
Average realized price per ounce
              
$912
    
$659
  
                         
MOLYBDENUM
                        
(millions of recoverable pounds)
                        
MINED MOLYBDENUM (FCX’s net interest in %)
                        
Henderson (100%)
  
11
    
10
    
N/A
    
N/A
  
By-product – North America (100%)
  
7
a
  
8
a
  
N/A
    
N/A
  
By-product – Cerro Verde (53.56%)
  
-
d
  
-
    
N/A
    
N/A
  
Consolidated
  
18
    
18
    
20
    
15
  
                         
Purchased molybdenum
              
2
    
3
  
Total consolidated sales
              
22
    
18
  
                         
Average realized price per pound
              
$31.59
    
$24.83
  
                         
a. Amounts are net of Morenci’s joint venture partner’s 15 percent interest.
b. Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with the terms of the joint venture agreement.
c. Includes reduction of $0.13 per pound for mark-to-market accounting adjustment on copper price protection program.
d. Amount rounds to less than 1 million.
 


 
I
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
(continued)
     
   
Six Months Ended June 30,
COPPER
  
Production
  
Sales
(millions of recoverable pounds)
  
2008
  
2007a
  
2008
  
2007a
MINED COPPER (FCX’s net interest in %)
                        
North America
                        
Morenci (85%)
  
301
b
  
341
b
  
318
b
  
332
b
Bagdad (100%)
  
106
    
93
    
107
    
93
  
Sierrita (100%)
  
90
    
72
    
87
    
77
  
Chino (100%)
  
91
    
85
    
97
    
86
  
Tyrone (100%)
  
31
    
24
    
30
    
25
  
Miami (100%)
  
9
    
9
    
10
    
13
  
Tohono (100%)
  
1
    
2
    
1
    
2
  
Safford (100%)
  
46
    
-
    
33
    
-
  
Other (100%)
  
2
    
10
    
3
    
12
  
Total North America
  
677
    
636
c
  
686
    
640
c
                         
South America
                        
Cerro Verde (53.56%)
  
345
    
254
    
349
    
245
  
Candelaria/Ojos del Salado (80%)
  
197
    
208
    
204
    
212
  
El Abra (51%)
  
180
    
183
    
178
    
187
  
Total South America
  
722
    
645
c
  
731
    
644
c
                         
Indonesia
                        
Grasberg (90.64%)
  
422
d
  
766
d
  
436
d
  
751
d
Consolidated
  
1,821
    
2,047
    
1,853
    
2,035
  
                         
Less minority participants’ share
  
327
    
321
    
331
    
318
  
Net
  
1,494
    
1,726
    
1,522
    
1,717
  
                         
Consolidated sales from mines
              
1,853
    
2,035
  
Purchased copper
              
301
    
357
  
Total consolidated sales
              
2,154
    
2,392
  
                         
Average realized price per pound
              
$3.77
    
$3.19
e
                         
GOLD
                        
(thousands of recoverable ounces)
                        
MINED GOLD (FCX’s net interest in %)
                        
North America (100%)
  
7
    
6
    
6
    
10
  
South America (80%)
  
51
    
52
f
  
53
    
53
f
Indonesia (90.64%)
  
467
d
  
1,869
d
  
486
d
  
1,827
d
Consolidated
  
525
    
1,927
    
545
    
1,890
  
                         
Less minority participants’ share
  
54
    
185
    
56
    
182
  
Net
  
471
    
1,742
    
489
    
1,708
  
                         
Consolidated sales from mines
              
545
    
1,890
  
Purchased gold
              
1
    
4
  
Total consolidated sales
              
546
    
1,894
  
                         
Average realized price per ounce
              
$917
    
$657
  
                         
MOLYBDENUM
                        
(millions of recoverable pounds)
                        
MINED MOLYBDENUM (FCX’s net interest in %)
                        
Henderson (100%)
  
20
    
20
    
N/A
    
N/A
  
By-product – North America (100%)
  
15
b
  
15
b
  
N/A
    
N/A
  
By-product – Cerro Verde (53.56%)
  
1
    
-
    
N/A
    
N/A
  
Consolidated
  
36
    
35
g
  
40
    
34
g
                         
Purchased molybdenum
              
4
    
5
  
Total consolidated sales
              
44
    
39
  
                         
Average realized price per pound
              
$31.63
    
$23.83
  
                         
a. The six-month 2007 data includes Phelps Dodge’s pre-acquisition results for comparative purposes only.
b. Amounts are net of Morenci’s joint venture partner’s 15 percent interest.
c. Includes North American copper production of 258 million pounds and sales of 283 million pounds and South American copper production of 259 million pounds and sales of 222 million pounds for Phelps Dodge’s pre-acquisition results.
d. Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with the terms of the joint venture agreement
e. Includes reduction of $0.09 per pound for mark-to-market accounting adjustment on Phelps Dodge’s 2007 copper price protection program.
f. Includes gold production of 21 thousand ounces and sales of 18 thousand ounces for Phelps Dodge’s pre-acquisition results.
g. Includes molybdenum production of 14 million pounds and sales of 17 million pounds for Phelps Dodge’s pre-acquisition results.

 
II
 


FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
(continued)
           
   
Three Months Ended
  
Six Months Ended
  
   
June 30,
  
June 30,
  
   
2008
  
2007
  
2008
  
2007 a
  
                   
100% North American Mining Operating Data, Including Joint Venture Interest
              
                   
Solution Extraction/Electrowinning (SX/EW) Operations
                  
Leach ore placed in stockpiles (metric tons per day)
  
1,099,500
  
743,100
  
1,117,200
  
710,400
  
Average copper ore grade (percent)
  
0.23
  
0.25
  
0.21
  
0.27
  
Copper production (millions of recoverable pounds)
  
215
  
248
  
432
  
476
  
                   
Mill Operations
                  
Ore milled (metric tons per day)
  
257,600
  
227,300
  
250,800
  
218,200
  
Average ore grades (percent):
                  
Copper
  
0.40
  
0.34
  
0.39
  
0.32
  
Molybdenum
  
0.02
  
0.03
  
0.02
  
0.02
  
Copper recovery rate (percent)
  
84.6
  
84.4
  
82.9
  
84.6
  
Production (millions of recoverable pounds):
                  
Copper
  
163
  
119
  
299
  
220
  
Molybdenum (by-product)
  
7
  
8
  
15
  
15
  
                   
Molybdenum Operations (Henderson)
                  
Ore milled (metric tons per day)
  
26,800
  
25,400
  
25,900
  
25,000
  
Average molybdenum ore grade (percent)
  
0.23
  
0.22
  
0.22
  
0.22
  
Molybdenum production (millions of recoverable pounds)
  
11
  
10
  
20
  
20
  
                   
100% South American Mining Operating Data
                  
                   
SX/EW Operations
                  
Leach ore placed in stockpiles (metric tons per day)
  
291,500
  
305,200
  
282,800
  
290,700
  
Average copper ore grade (percent)
  
0.42
  
0.42
  
0.41
  
0.40
  
Copper production (millions of recoverable pounds)
  
144
  
142
  
279
  
291
  
                   
Mill Operations
                  
Ore milled (metric tons per day)
  
177,200
  
168,000
  
173,900
  
154,700
  
Average ore grades (percent):
                  
Copper
  
0.72
  
0.72
  
0.73
  
0.70
  
Molybdenum
  
0.02
  
-
  
0.02
  
-
  
Copper recovery rate (percent)
  
89.7
  
84.1
  
90.2
  
85.3
  
Production (millions of recoverable pounds):
                  
Copper
  
225
  
196
  
443
  
354
  
Molybdenum
  
-
b
-
1
-
             
100% Indonesian Mining Operating Data, Including Joint Venture Interest
        
             
Ore milled (metric tons per day)
  
183,300
  
215,000
  
181,600
  
221,700
  
                   
Average ore grades:
                  
Copper (percent)
  
0.75
  
0.82
  
0.72
  
1.02
  
Gold (grams per metric ton)
  
0.54
  
1.63
  
0.57
  
1.82
  
                   
Recovery rates (percent):
                  
Copper
  
89.8
  
91.8
  
89.7
  
91.3
  
Gold
  
78.9
  
88.6
  
79.0
  
88.1
  
                   
Production (recoverable):
                  
Copper (millions of pounds)
  
237
  
310
  
451
  
790
  
Gold (thousands of ounces)
  
221
  
889
  
467
  
2,035
  
                   
a. Includes Phelps Dodge pre-acquisition results for comparative purposes only.
b. Amount rounds to less than 1 million.


 
III
 


FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
         
 
Three Months Ended
  
Six Months Ended
  
 
June 30,
  
June 30,
  
 
2008
  
2007
  
2008
  
2007a
  
 
(In Millions, Except Per Share Amounts)
  
Revenues
$
5,441
b
$
5,443
b
$
11,113
b
$
7,689
b
Cost of sales:
                        
Production and delivery
  
2,720
c
  
2,540
c
  
5,442
c
  
3,443
c
Depreciation, depletion and amortization
  
462
c
  
374
c
  
880
c
  
490
c
Total cost of sales
  
3,182
    
2,914
    
6,322
    
3,933
  
Selling, general and administrative expenses
  
126
    
135
    
210
d
  
183
  
Exploration and research expenses
  
80
    
40
    
132
    
47
  
Total costs and expenses
  
3,388
    
3,089
    
6,664
    
4,163
  
Operating income
  
2,053
    
2,354
    
4,449
    
3,526
  
Interest expense, net
  
(140
)e
  
(179
)
  
(305
)e
  
(231
)
Losses on early extinguishment of debt
  
-
    
(47
)
  
(6
)
  
(135
)
Gains on sales of assets
  
13
f
  
38
f
  
13
f
  
38
f
Other income, net
  
9
    
38
    
11
    
62
  
Equity in affiliated companies’ net earnings
  
7
    
7
    
14
    
12
  
Income from continuing operations before income taxes and minority interests
  
1,942
    
2,211
    
4,176
    
3,272
  
Provision for income taxes
  
(658
)
  
(764
)
  
(1,387
)
  
(1,222
)
Minority interests in net income of consolidated subsidiaries
  
(274
)
  
(307
)
  
(593
)
  
(421
)
Income from continuing operations
  
1,010
    
1,140
    
2,196
    
1,629
  
Income from discontinued operations, net of taxes
  
-
    
28
g
  
-
    
32
g
Net income
  
1,010
    
1,168
    
2,196
    
1,661
  
Preferred dividends
  
(63
)
  
(64
)
  
(127
)
  
(81
)
Net income applicable to common stock
$
947
  
$
1,104
  
$
2,069
  
$
1,580
  
                         
Basic net income per share of common stock:
                        
Continuing operations
$
2.47
  
$
2.83
  
$
5.40
  
$
5.16
  
Discontinued operations
  
-
    
0.07
g
  
-
    
0.11
g
Basic net income per share of common stock
$
2.47
  
$
2.90
  
$
5.40
  
$
5.27
  
                         
Diluted net income per share of common stock:
                        
Continuing operations
$
2.25
  
$
2.56
  
$
4.89
  
$
4.71
  
Discontinued operations
  
-
    
0.06
g
  
-
    
0.09
g
Diluted net income per share of common stock
$
2.25
h
$
2.62
h
$
4.89
h
$
4.80
h
                         
Average common shares outstanding:
                        
Basic
  
384
i
  
381
i
  
383
i
  
300
i
Diluted
  
450
h
  
446
h
  
449
h
  
346
h
                         
Dividends declared per share of common stock
$
0.4375
  
$
0.3125
  
$
0.875
  
$
0.625
  
                         
a. 
 Includes Phelps Dodge results beginning March 20, 2007.
b. 
 Includes positive adjustments to prior period copper sales totaling $5 million in second-quarter 2008, $188 million in second-quarter 2007, $267 million in the 2008 six-month period and $90 million in the 2007 six-month period.  In addition, charges for mark-to-market accounting adjustments on the 2007 copper price protection program totaled $130 million in second-quarter 2007 and $168 million in the 2007 six-month period.
c.  
Includes impact of purchase accounting adjustments related to the Phelps Dodge acquisition, which increased production costs by $12 million in second-quarter 2008, $269 million in second-quarter 2007, $84 million in the 2008 six-month period and $365 million in the 2007 six-month period, and increased depreciation, depletion and amortization by $230 million in second-quarter 2008, $186 million in second-quarter 2007, $437 million in the 2008 six-month period and $214 million in the 2007 six-month period.
d.  
Includes reductions totaling approximately $40 million to adjust 2007 incentive compensation to actual cash and stock-based compensation awards approved by the Corporate Personnel Committee of FCX’s Board of Directors in January 2008.
e.  
Includes net interest expense of $22 million in second-quarter 2008 and $41 million in the 2008 six-month period primarily associated with accretion on the fair values (discounted cash flow basis) of environmental liabilities assumed in the acquisition of Phelps Dodge.
f.  
Primarily represents gains on sales of other assets for the 2008 periods and gains on sales of marketable equity securities for the 2007 periods.
g. 
 Relates to the operations of Phelps Dodge International Corporation (PDIC), which FCX sold on October 31, 2007.
h.  
Reflects assumed conversion of FCX’s 5½% Convertible Perpetual Preferred Stock, resulting in the exclusion of dividends totaling $15 million in each of the quarters and $30 million in each of the six-month periods. Also includes assumed conversion of FCX’s 6¾% Mandatory Convertible Preferred Stock, of which FCX sold 28.75 million shares on March 28, 2007, reflecting exclusion of dividends totaling $48 million in second-quarter 2008, $49 million in second-quarter 2007, $97 million in the 2008 six-month period and $51 million in the 2007 six-month period.  The assumed conversions result in the inclusion of 62 million common shares in second-quarter 2008, in second-quarter 2007 and in the 2008 six-month period and 44 million common shares in the 2007 six-month period.
i.  
On March 19, 2007, FCX issued 136.9 million shares to acquire Phelps Dodge; and on March 28, 2007, FCX sold 47.15 million common shares in a public offering.


 
IV
 


FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
           
 
June 30,
    
December 31,
  
 
2008
    
2007
  
 
(In Millions)
  
ASSETS
              
Current assets:
              
Cash and cash equivalents
$
1,648
    
$
1,626
  
Trade accounts receivable
  
1,964
      
1,099
  
Other accounts receivable
  
247
      
196
  
Product inventories and materials and supplies, net
  
2,365
      
2,178
  
Mill and leach stockpiles
  
866
      
707
  
Prepaid expenses and other current assets
  
81
      
97
  
Total current assets
  
7,171
      
5,903
  
Property, plant, equipment and development costs, net
  
26,129
      
25,715
  
Goodwill
  
6,048
      
6,105
  
Long-term mill and leach stockpiles
  
1,215
      
1,106
  
Trust assets
  
598
      
606
  
Intangible assets, net
  
448
      
472
  
Other assets and deferred charges
  
739
      
754
  
Total assets
$
42,348
    
$
40,661
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Accounts payable and accrued liabilities
$
2,405
    
$
2,345
  
Accrued income taxes
  
288
      
420
  
Current portion of reclamation and environmental liabilities
  
247
      
263
  
Dividends payable
  
213
      
212
  
Current portion of long-term debt and short-term borrowings
  
31
      
31
  
Copper price protection program
  
-
      
598
  
Total current liabilities
  
3,184
      
3,869
  
Long-term debt, less current portion:
              
Senior notes
  
6,886
      
6,928
  
Project financing, equipment loans and other
  
357
      
252
  
Revolving credit facility
  
90
      
-
  
Total long-term debt, less current portion
  
7,333
      
7,180
  
Deferred income taxes
  
6,986
      
7,300
  
Reclamation and environmental liabilities, less current portion
  
1,937
      
1,733
  
Other liabilities
  
1,120
      
1,106
  
Total liabilities
  
20,560
      
21,188
  
Minority interests in consolidated subsidiaries
  
1,616
      
1,239
  
Stockholders’ equity:
              
5½% Convertible Perpetual Preferred Stock
  
1,100
      
1,100
  
6¾% Mandatory Convertible Preferred Stock
  
2,875
      
2,875
  
Common stock
  
50
      
50
  
Capital in excess of par value
  
13,675
      
13,407
  
Retained earnings
  
5,332
      
3,601
  
Accumulated other comprehensive income
  
42
      
42
  
Common stock held in treasury
  
(2,902
)
    
(2,841
)
Total stockholders’ equity
  
20,172
      
18,234
  
Total liabilities and stockholders’ equity
$
42,348
    
$
40,661
  
               


 
V
 

FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
       
   
Six Months Ended
  
   
June 30,
  
   
2008
    
2007
  
   
(In Millions)
  
                 
Cash flow from operating activities:
                
Net income
  
$
2,196
    
$
1,661
  
Adjustments to reconcile net income to net cash provided by
                
operating activities:
                
Depreciation, depletion and amortization
    
880
      
495
  
Minority interests in net income of consolidated subsidiaries
    
593
      
427
  
Stock-based compensation
    
92
      
80
  
Accretion of reclamation and environmental liabilities
    
75
      
12
  
Unrealized losses on copper price protection program
    
-
      
168
  
Losses on early extinguishment of debt
    
6
      
135
  
Deferred income taxes
    
(114
)
    
(102
)
Increase in long-term mill and leach stockpiles
    
(110
)
    
(101
)
Increase in other long-term liabilities
    
71
      
68
  
Other, net
    
41
      
(4
)
(Increases) decreases in working capital, excluding amounts
                
acquired from Phelps Dodge:
                
Accounts receivable
    
(921
)
    
(557
)
Inventories
    
(371
)
    
298
  
Prepaid expenses and other
    
9
      
16
  
Accounts payable and accrued liabilities
    
(525
)
    
210
  
Accrued income taxes
    
(212
)
    
(20
)
Settlement of reclamation and environmental liabilities
    
(86
)
    
(36
)
Net cash provided by operating activities
    
1,624
      
2,750
  
                 
Cash flow from investing activities:
                
Phelps Dodge capital expenditures
    
(927
)
    
(476
)
PT Freeport Indonesia capital expenditures
    
(224
)
    
(175
)
Other capital expenditures
    
(12
)
    
(21
)
Acquisition of Phelps Dodge, net of cash acquired
    
(1
)
    
(13,906
)
Proceeds from the sales of assets and other, net
    
56
      
90
  
Net cash used in investing activities
    
(1,108
)
    
(14,488
)
                 
Cash flow from financing activities:
                
Proceeds from term loans under bank credit facility
    
-
      
10,000
  
Repayments of term loans under bank credit facility
    
-
      
(7,550
)
Net proceeds from sales of senior notes
    
-
      
5,880
  
Net proceeds from sale of common stock
    
-
      
2,816
  
Net proceeds from sale of 6¾% Mandatory Convertible Preferred Stock
    
-
      
2,803
  
Proceeds from revolving credit facility and other debt
    
524
      
227
  
Repayments of revolving credit facility and other debt
    
(384
)
    
(481
)
Cash dividends paid:
                
Common stock
    
(337
)
    
(182
)
Preferred stock
    
(127
)
    
(30
)
Minority interests
    
(280
)
    
(314
)
Net proceeds from (payments for) exercised stock options
    
22
      
(24
)
Excess tax benefit from exercised stock options
    
25
      
7
  
Bank credit facilities fees and other, net
    
63
      
(243
)
Net cash (used in) provided by financing activities
    
(494
)
    
12,909
  
                 
Net increase in cash and cash equivalents
    
22
      
1,171
  
Cash and cash equivalents at beginning of year
    
1,626
      
907
  
Cash and cash equivalents at end of period
  
$
1,648
    
$
2,078
  


 
VI
 

FREEPORT-McMoRan COPPER & GOLD INC.
PRO FORMA FINANCIAL DATA (Unaudited)

The following pro forma information assumes that FCX acquired Phelps Dodge effective January 1, 2007. The most significant adjustments relate to the purchase accounting impacts on the carrying values of acquired metal inventories (including mill and leach stockpiles) and property, plant and equipment using March 19, 2007, metal prices and assumptions (in millions, except per share data):


 
Historical
          
       
Phelps
  
Pro Forma
  
Pro Forma
  
Six months ended June 30, 2007
FCX
  
Dodgea
  
Adjustments
  
Consolidated
  
Revenues
$
7,689
  
$
2,294
  
$
60
  
$
10,043
b
Operating income
$
3,526
  
$
793
  
$
(356
)
$
3,963
b,c
Income from continuing operations before
                        
income taxes and minority interests
$
3,272
  
$
837
  
$
(472
)
$
3,637
b,c,d,e
Net income from continuing operations
                        
applicable to common stock
$
1,548
  
$
493
  
$
(346
)
$
1,695
b,c,d,e
Diluted net income per share of common
                        
stock from continuing operations
$
4.71
    
N/A
    
N/A
  
$
4.08
b,c,d,e
Diluted weighted-average shares of
                        
common stock outstanding
  
346
    
N/A
    
N/A
    
446
f,g
 
a. 
 Represents the results of Phelps Dodge’s operations from January 1, 2007, through March 19, 2007. Beginning March 20, 2007, the results of Phelps Dodge’s operations are included in FCX’s consolidated financial statements.
 
Additionally, for comparative purposes, the historical Phelps Dodge financial information for the six months ended June 30, 2007, represents results from continuing operations, and therefore, excludes the results of PDIC (i.e., discontinued operations).
 
b. 
 Includes charges to revenues for mark-to-market accounting adjustments on the copper price protection program totaling $188 million ($115 million to net income or $0.26 per share). Also includes pro forma credits for amortization of acquired intangible liabilities totaling $60 million ($37 million to net income or $0.08 per share).
 
c.  Includes charges associated with the impacts of the increases in the carrying values of acquired metal inventories (including mill and leach stockpiles) and property, plant and equipment, and also includes the amortization of intangible assets and liabilities resulting from the acquisition totaling $1.1 billion ($679 million to net income of $1.52 per share).
 
d. 
 Excludes net losses on early extinguishment of debt totaling $88 million ($69 million to net income or $0.15 per share) for financing transactions related to the acquisition of Phelps Dodge.
 
e. 
 Includes interest expense from the debt issued in connection with the acquisition of Phelps Dodge totaling $341 million ($266 million to net income or $0.60 per share). Also includes accretion on the fair value of environmental liabilities resulting from the acquisition totaling $48 million ($29 million to net income or $0.07 per share).
 
f. 
 Reflects assumed conversion of FCX’s 5½% Convertible Perpetual Preferred Stock. Also reflects assumed conversion of FCX’s 6¾ Mandatory Convertible Preferred Stock, which was issued on March 28, 2007.
 
g. 
 On March 19, 2007, FCX issued 136.9 million common shares to acquire Phelps Dodge. On March 28, 2007, FCX sold 47.15 million common shares. These shares are assumed to be outstanding.


 
VII
 

FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS

PRODUCT REVENUES AND UNIT NET CASH COSTS
Unit net cash costs per pound of copper and per pound of molybdenum are measures intended to provide investors with information about the cash-generating capacity of FCX’s mining operations expressed on a basis relating to the primary metal product for the respective operations. FCX uses this measure for the same purpose and for monitoring operating performance by its mining operations. This information differs from measures of performance determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although FCX’s measures may not be comparable to similarly titled measures reported by other companies.

FCX presents gross profit per pound of copper using both a “by-product” method and a “co-product” method. FCX uses the by-product method in its presentation of gross profit per pound of copper because (i) the majority of its revenues are copper revenues, (ii) it mines ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of FCX’s costs to revenues from the copper, gold, molybdenum and other metals it produces, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by FCX’s management and Board of Directors to monitor operations. In the co-product method presentations, costs are allocated to the different products based on their relative revenue values, which will vary to the extent FCX’s metals sales volumes and realized prices change.

In both the by-product and the co-product method calculations, FCX shows adjustments to copper revenues for prior period open sales as separate line items. Because the copper pricing adjustments do not result from current period sales, FCX has reflected these separately from revenues on current period sales. Noncash and nonrecurring costs consist of items such as stock-based compensation costs, write-offs of equipment or unusual charges. They are removed from site production and delivery costs in the calculation of unit net cash costs. As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. FCX included the impacts of purchase accounting fair value adjustments as additional depreciation, depletion and amortization, and noncash and nonrecurring costs. Accordingly, FCX revised the previously reported disclosures for the 2007 periods for its North American copper mining operations, Henderson molybdenum mine and South American mining operations to conform to the current period presentation. Presentations under both methods are shown together with reconciliations to amounts reported in FCX’s consolidated financial statements or pro forma consolidated financial results.


 
VIII
 




FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North American Copper Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended June 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
1,323
  
$
1,323
  
$
234
  
$
20
  
$
1,577
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
636
    
555
    
84
    
8
    
647
  
By-product creditsa
  
(243
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
37
    
35
    
-
    
2
    
37
  
Net cash costs
  
430
    
590
    
84
    
10
    
684
  
Depreciation, depletion and amortization
  
183
    
164
    
18
    
1
    
183
  
Noncash and nonrecurring costs, net
  
20
    
19
    
1
    
-
    
20
  
Total costs
  
633
    
773
    
103
    
11
    
887
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(4
)
  
(4
)
  
-
    
-
    
(4
)
Idle facility and other non-inventoriable costs
  
(14
)
  
(14
)
  
-
    
-
    
(14
)
Gross profit
$
672
  
$
532
  
$
131
  
$
9
  
$
672
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
346
    
346
                    
Molybdenum (in million pounds)
              
7
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.82
  
$
3.82
  
$
32.85
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.84
    
1.60
    
11.70
              
By-product credits
  
(0.70
)
  
-
    
-
              
Treatment charges
  
0.10
    
0.10
    
-
              
Unit net cash costs
  
1.24
    
1.70
    
11.70
              
Depreciation, depletion and amortization
  
0.53
    
0.47
    
2.54
              
Noncash and nonrecurring costs, net
  
0.06
    
0.06
    
0.19
              
Total unit costs
  
1.83
    
2.23
    
14.43
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.01
)
  
(0.01
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.04
)
  
(0.04
)
  
(0.02
)
            
Gross profit per pound
$
1.94
  
$
1.54
  
$
18.40
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
1,577
  
$
647
  
$
183
              
Net noncash and nonrecurring costs per above
  
N/A
    
20
    
N/A
              
Treatment charges per above
  
N/A
    
37
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales and hedging per above
  
(4
)
  
N/A
    
N/A
              
North American copper mines
  
1,573
    
704
    
183
              
Henderson molybdenum operations
  
321
    
53
    
45
              
Other North American mining operations, including
                              
other molybdenum operations and eliminationsc
  
1,251
    
1,206
    
43
              
Total North American mining operations
  
3,145
    
1,963
    
271
              
South American mining operations
  
1,409
    
462
    
127
              
Indonesian mining operations
  
1,016
    
439
    
48
              
Atlantic Copper smelting & refining
  
724
    
698
    
9
              
Corporate, other & eliminations
  
(853
)
  
(842
)
  
7
              
As reported in FCX’s consolidated financial
                              
statements
$
5,441
  
$
2,720
  
$
462
              
                               
a. Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b. Includes gold and silver.
c. Includes amounts associated with the copper and molybdenum sales companies and Rod & Refining, which are included in North American mining operations.

 
IX
 

 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North American Copper Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended June 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
1,126
  
$
1,126
  
$
235
  
$
19
  
$
1,380
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
476
    
397
    
83
    
9
    
489
  
By-product creditsa
  
(241
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
29
    
28
    
-
    
1
    
29
  
Net cash costs
  
264
    
425
    
83
    
10
    
518
  
Depreciation, depletion and amortizationc
  
131
    
109
    
21
    
1
    
131
  
Noncash and nonrecurring costs, netc
  
144
    
132
    
(1
)
  
13
    
144
  
Total costs
  
539
    
666
    
103
    
24
    
793
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(139
)
  
(139
)
  
-
    
-
    
(139
)
Idle facility and other non-inventoriable costs
  
(8
)
  
(8
)
  
-
    
-
    
(8
)
Gross profit
$
440
  
$
313
  
$
132
  
$
(5
)
$
440
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
327
    
327
                    
Molybdenum (in million pounds)
              
8
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.44
  
$
3.44
  
$
28.52
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.46
    
1.21
    
10.04
              
By-product credits
  
(0.74
)
  
-
    
-
              
Treatment charges
  
0.09
    
0.09
    
-
              
Unit net cash costs
  
0.81
    
1.30
    
10.04
              
Depreciation, depletion and amortizationc
  
0.40
    
0.33
    
2.58
              
Noncash and nonrecurring costs, netc
  
0.44
    
0.40
    
(0.12
)
            
Total unit costs
  
1.65
    
2.03
    
12.50
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.43
)
  
(0.43
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.02
)
  
(0.02
)
  
-
              
Gross profit per pound
$
1.34
  
$
0.96
  
$
16.02
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
1,380
  
$
489
  
$
131
              
Net noncash and nonrecurring costs per above
  
N/A
    
144
    
N/A
              
Treatment charges per above
  
N/A
    
29
    
N/A
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging per above
  
(139
)
  
N/A
    
N/A
              
North American copper mines
  
1,241
    
662
    
131
              
Henderson molybdenum operations
  
255
    
45
    
18
              
Other North American mining operations, including
                              
other molybdenum operations and eliminationsd
  
1,187
    
1,397
    
19
              
Total North American mining operations
  
2,683
    
2,104
    
168
              
South American mining operations
  
1,232
    
303
    
136
              
Indonesian mining operations
  
1,762
    
390
    
56
              
Atlantic Copper smelting & refining
  
619
    
608
    
9
              
Corporate, other & eliminations
  
(853
)
  
(865
)
  
5
              
As reported in FCX’s consolidated financial statements
$
5,443
  
$
2,540
  
$
374
              
                               
a. Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b. Includes gold and silver.
c. The estimated fair values of acquired inventory and property, plant and equipment were based on preliminary estimates during 2007, with adjustments made until such values were finalized in first-quarter 2008. Additionally, the inventory impacts on noncash and nonrecurring costs were mostly realized during 2007.
d. Includes amounts associated with the copper and molybdenum sales companies and Rod & Refining, which are included in North American mining operations.

 
X
 



FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North American Copper Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Six Months Ended June 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
2,502
  
$
2,502
  
$
490
  
$
36
  
$
3,028
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1,189
    
1,036
    
160
    
15
    
1,211
  
By-product creditsa
  
(504
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
68
    
66
    
-
    
2
    
68
  
Net cash costs
  
753
    
1,102
    
160
    
17
    
1,279
  
Depreciation, depletion and amortization
  
363
    
323
    
37
    
3
    
363
  
Noncash and nonrecurring costs, net
  
50
    
48
    
2
    
-
    
50
  
Total costs
  
1,166
    
1,473
    
199
    
20
    
1,692
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
38
    
38
    
-
    
-
    
38
  
Idle facility and other non-inventoriable costs
  
(27
)
  
(27
)
  
-
    
-
    
(27
)
Gross profit
$
1,347
  
$
1,040
  
$
291
  
$
16
  
$
1,347
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
683
    
683
                    
Molybdenum (in million pounds)
              
15
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.66
  
$
3.66
  
$
32.80
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.74
    
1.52
    
10.68
              
By-product credits
  
(0.74
)
  
-
    
-
              
Treatment charges
  
0.10
    
0.10
    
-
              
Unit net cash costs
  
1.10
    
1.62
    
10.68
              
Depreciation, depletion and amortization
  
0.53
    
0.47
    
2.50
              
Noncash and nonrecurring costs, net
  
0.08
    
0.07
    
0.15
              
Total unit costs
  
1.71
    
2.16
    
13.33
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
0.06
    
0.06
    
-
              
Idle facility and other non-inventoriable costs
  
(0.04
)
  
(0.04
)
  
(0.02
)
            
Gross profit per pound
$
1.97
  
$
1.52
  
$
19.45
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
3,028
  
$
1,211
  
$
363
              
Net noncash and nonrecurring costs per above
  
N/A
    
50
    
N/A
              
Treatment charges per above
  
N/A
    
68
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales and hedging per above
  
38
    
N/A
    
N/A
              
North American copper mines
  
3,066
    
1,329
    
363
              
Henderson molybdenum operations
  
603
    
102
    
86
              
Other North American mining operations, including
                              
other molybdenum operations and eliminationsc
  
2,749
    
2,670
    
49
              
Total North American mining operations
  
6,418
    
4,101
    
498
              
South American mining operations
  
3,002
    
894
    
257
              
Indonesian mining operations
  
2,068
    
838
    
93
              
Atlantic Copper smelting & refining
  
1,389
    
1,349
    
18
              
Corporate, other & eliminations
  
(1,764
)
  
(1,740
)
  
14
              
As reported in FCX’s consolidated financial
                              
statements
$
11,113
  
$
5,442
  
$
880
              
                               
a. Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b. Includes gold and silver.
c. Includes amounts associated with the copper and molybdenum sales companies and Rod & Refining, which are included in North American mining operations.

 
XI
 

 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North American Copper Mining Product Revenues and Production Costs and Unit Net Cash Costs (Pro Forma)
         
Six Months Ended June 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
1,938
  
$
1,938
  
$
413
  
$
29
  
$
2,380
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
870
    
745
    
152
    
12
    
909
  
By-product creditsa
  
(403
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
51
    
50
    
-
    
1
    
51
  
Net cash costs
  
518
    
795
    
152
    
13
    
960
  
Depreciation, depletion and amortizationc
  
287
    
239
    
47
    
1
    
287
  
Noncash and nonrecurring costs, netc
  
415
    
358
    
43
    
14
    
415
  
Total costs
  
1,220
    
1,392
    
242
    
28
    
1,662
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(131
)
  
(131
)
  
-
    
-
    
(131
)
Idle facility and other non-inventoriable costs
  
(18
)
  
(18
)
  
-
    
-
    
(18
)
Gross profit
$
569
  
$
397
  
$
171
  
$
1
  
$
569
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
628
    
628
                    
Molybdenum (in million pounds)
              
15
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.08
  
$
3.08
  
$
26.95
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.39
    
1.19
    
9.90
              
By-product credits
  
(0.64
)
  
-
    
-
              
Treatment charges
  
0.08
    
0.08
    
-
              
Unit net cash costs
  
0.83
    
1.27
    
9.90
              
Depreciation, depletion and amortizationc
  
0.45
    
0.38
    
3.06
              
Noncash and nonrecurring costs, netc
  
0.66
    
0.57
    
2.81
              
Total unit costs
  
1.94
    
2.22
    
15.77
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.21
)
  
(0.21
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.02
)
  
(0.02
)
  
-
              
Gross profit per pound
$
0.91
  
$
0.63
  
$
11.18
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
2,380
  
$
909
  
$
287
              
Net noncash and nonrecurring costs per above
  
N/A
    
415
    
N/A
              
Treatment charges per above
  
N/A
    
51
    
N/A
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
                              
per above
  
(131
)
  
N/A
    
N/A
              
Eliminations and other
  
7,794
    
3,651
    
477
              
As reported in FCX’s pro forma consolidated
                              
financial results
$
10,043
  
$
5,026
  
$
764
              
                               
a. Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b. Includes gold and silver.
c. The estimated fair values of acquired inventory and property, plant and equipment were based on preliminary estimates during 2007, with adjustments made until such values were finalized in first-quarter 2008. Additionally, the inventory impacts on noncash and nonrecurring costs were mostly realized during 2007.
                               


 
XII
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Henderson Product Revenues and Production Costs and Unit Net Cash Costs
         
 
Three Months Ended
      
 
June 30,
      
(In Millions)
2008
  
2007
          
                       
Revenues, after adjustments shown below
$
321
  
$
255
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
53
    
45
            
Net cash costs
  
53
    
45
            
Depreciation and amortizationa
  
45
    
18
            
Noncash and nonrecurring costs, net
  
-
    
-
            
Total costs
  
98
    
63
            
Gross profitb
$
223
  
$
192
            
                       
Consolidated molybdenum sales (in million pounds)
  
11
    
10
            
                       
Gross profit per pound of molybdenum:
                      
                       
Revenues, after adjustments shown below
$
30.05
  
$
25.12
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
4.96
    
4.38
            
Unit net cash costs
  
4.96
    
4.38
            
Depreciation and amortizationa
  
4.24
    
1.77
            
Noncash and nonrecurring costs, net
  
0.02
    
0.01
            
Total unit costs
  
9.22
    
6.16
            
Gross profit per pound
$
20.83
  
$
18.96
            
                       
Reconciliation to Amounts Reported
                      
(In Millions)
    
Production
  
Depreciation,
        
     
and
  
Depletion and
        
Three Months Ended June 30, 2008
Revenues
  
Delivery
  
Amortization
        
Totals presented above
$
321
  
$
53
  
$
45
        
Net noncash and nonrecurring costs
  
N/A
    
-
    
N/A
        
Other molybdenum operations and eliminationsc
  
394
    
368
    
24
        
Total Molybdenum operations
  
715
    
421
    
69
        
North American copper mining operations
                        
and eliminations
  
2,430
    
1,542
    
202
        
Total North American mining operations
  
3,145
    
1,963
    
271
        
South American mining operations
  
1,409
    
462
    
127
        
Indonesian mining operations
  
1,016
    
439
    
48
        
Atlantic Copper smelting & refining
  
724
    
698
    
9
        
Corporate, other & eliminations
  
(853
)
  
(842
)
  
7
        
As reported in FCX’s consolidated financial statements
$
5,441
  
$
2,720
  
$
462
        
                         
Three Months Ended June 30, 2007
                        
Totals presented above
$
255
  
$
45
  
$
18
        
Net noncash and nonrecurring costs
  
N/A
    
-
    
N/A
        
Other molybdenum operations and eliminationsc
  
208
    
361
    
4
        
Total Molybdenum operations
  
463
    
406
    
22
        
North American copper mining operations
                        
and eliminations
  
2,220
    
1,698
    
146
        
Total North American mining operations
  
2,683
    
2,104
    
168
        
South American mining operations
  
1,232
    
303
    
136
        
Indonesian mining operations
  
1,762
    
390
    
56
        
Atlantic Copper smelting & refining
  
619
    
608
    
9
        
Corporate, other & eliminations
  
(853
)
  
(865
)
  
5
        
As reported in FCX’s consolidated financial statements
$
5,443
  
$
2,540
  
$
374
        
                         
a. The estimated fair values of acquired property, plant and equipment were based on preliminary estimates during 2007, with adjustments made until such values were finalized in first-quarter 2008.
b. Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segment includes profits on sales as they are made to third parties and realizations based on actual contract terms.  As a result, the actual gross profit realized will differ from the amounts reported in this table.
c. Primarily includes amounts associated with the molybdenum sales company, which is included in Molybdenum operations.
 

 
XIII
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Henderson Product Revenues and Production Costs and Unit Net Cash Costsa
         
 
Six Months Ended
      
 
June 30,
      
(In Millions)
2008
  
2007
          
                       
Revenues, after adjustments shown below
$
603
  
$
463
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
102
    
83
            
Net cash costs
  
102
    
83
            
Depreciation and amortizationb
  
86
    
77
            
Noncash and nonrecurring costs, net
  
1
    
-
            
Total costs
  
189
    
160
            
Gross profitc
$
414
  
$
303
            
                       
Consolidated molybdenum sales (in million pounds)
  
20
    
20
            
                       
Gross profit per pound of molybdenum:
                      
                       
Revenues, after adjustments shown below
$
29.76
  
$
23.70
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
5.06
    
4.27
            
Unit net cash costs
  
5.06
    
4.27
            
Depreciation and amortizationb
  
4.25
    
3.93
            
Noncash and nonrecurring costs, net
  
0.02
    
0.01
            
Total unit costs
  
9.33
    
8.21
            
Gross profit per pound
$
20.43
  
$
15.49
            
                       
Reconciliation to Amounts Reported
                      
(In Millions)
      
Production
  
Depreciation,
      
       
and
  
Depletion and
      
Six Months Ended June 30, 2008
Revenues
  
Delivery
  
Amortization
        
Totals presented above
$
603
  
$
102
  
$
86
        
Net noncash and nonrecurring costs
  
N/A
    
1
    
N/A
        
Other molybdenum operations and eliminationsd
  
831
    
778
    
22
        
Total Molybdenum operations
  
1,434
    
881
    
108
        
North American copper mining operations
                        
and eliminations
  
4,984
    
3,220
    
390
        
Total North American mining operations
  
6,418
    
4,101
    
498
        
South American mining operations
  
3,002
    
894
    
257
        
Indonesian mining operations
  
2,068
    
838
    
93
        
Atlantic Copper smelting & refining
  
1,389
    
1,349
    
18
        
Corporate, other & eliminations
  
(1,764
)
  
(1,740
)
  
14
        
As reported in FCX’s consolidated financial statements
$
11,113
  
$
5,442
  
$
880
        
                         
Six Months Ended June 30, 2007
                        
Totals presented above
$
463
  
$
83
  
$
77
        
Eliminations and other
  
9,580
    
4,943
    
687
        
As reported in FCX’s pro forma consolidated
                        
financial results
$
10,043
  
$
5,026
  
$
764
        
                         
a. Amounts for the six months ended June 30, 2008 are actual results and amounts for the six months ended June 30, 2007 are pro forma to include Phelps Dodge pre-acquisition results.
b. The estimated fair values of acquired property, plant and equipment were based on preliminary estimates during 2007, with adjustments made until such values were finalized in first-quarter 2008.
c. Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segment includes profits on sales as they are made to third parties and realizations based on actual contract terms.  As a result, the actual gross profit realized will differ from the amounts reported in this table.
d. Primarily includes amounts associated with the molybdenum sales company, which is included in Molybdenum operations.

 
XIV
 



FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
 
South American Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended June 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
1,417
  
$
1,417
  
$
46
  
$
1,463
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
423
    
409
    
17
    
426
  
By-product credits
  
(43
)
  
-
    
-
    
-
  
Treatment charges
  
68
    
68
    
-
    
68
  
Net cash costs
  
448
    
477
    
17
    
494
  
Depreciation, depletion and amortization
  
127
    
122
    
5
    
127
  
Noncash and nonrecurring costs, net
  
31
    
31
    
-
    
31
  
Total costs
  
606
    
630
    
22
    
652
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
16
    
16
    
-
    
16
  
Other non-inventoriable costs
  
(10
)
  
(10
)
  
-
    
(10
)
Gross profit
$
817
  
$
793
  
$
24
  
$
817
  
                         
Consolidated copper sales (in million pounds)
  
366
    
366
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.86
  
$
3.86
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
1.15
    
1.11
              
By-product credits
  
(0.12
)
  
-
              
Treatment charges
  
0.19
    
0.19
              
Unit net cash costs
  
1.22
    
1.30
              
Depreciation, depletion and amortization
  
0.34
    
0.33
              
Noncash and nonrecurring costs, net
  
0.09
    
0.09
              
Total unit costs
  
1.65
    
1.72
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.04
    
0.04
              
Other non-inventoriable costs
  
(0.02
)
  
(0.02
)
            
Gross profit per pound
$
2.23
  
$
2.16
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
1,463
  
$
426
  
$
127
        
Net noncash and nonrecurring costs per above
  
N/A
    
31
    
N/A
        
Less: Treatment charges per above
  
(68
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
16
    
N/A
    
N/A
        
Purchased metal
  
91
    
91
    
N/A
        
Eliminations and other
  
(93
)
  
(86
)
  
-
        
Total South American mining operations
  
1,409
    
462
    
127
        
North American mining operations
  
3,145
    
1,963
    
271
        
Indonesian mining operations
  
1,016
    
439
    
48
        
Atlantic Copper smelting & refining
  
724
    
698
    
9
        
Corporate, other & eliminations
  
(853
)
  
(842
)
  
7
        
As reported in FCX’s consolidated financial statements
$
5,441
  
$
2,720
  
$
462
        
                         
a. Includes gold, silver and molybdenum.

 
XV
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
South American Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended June 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
1,210
  
$
1,210
  
$
26
  
$
1,236
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
281
    
276
    
8
    
284
  
By-product credits
  
(23
)
  
-
    
-
    
-
  
Treatment charges
  
70
    
70
    
-
    
70
  
Net cash costs
  
328
    
346
    
8
    
354
  
Depreciation, depletion and amortizationb
  
141
    
138
    
3
    
141
  
Noncash and nonrecurring costs, netb
  
8
    
8
    
-
    
8
  
Total costs
  
477
    
492
    
11
    
503
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
62
    
62
    
-
    
62
  
Other non-inventoriable costs
  
(7
)
  
(7
)
  
-
    
(7
)
Gross profit
$
788
  
$
773
  
$
15
  
$
788
  
                         
Consolidated copper sales (in million pounds)
  
343
    
343
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.54
  
$
3.54
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
0.82
    
0.81
              
By-product credits
  
(0.07
)
  
-
              
Treatment charges
  
0.21
    
0.20
              
Unit net cash costs
  
0.96
    
1.01
              
Depreciation, depletion and amortizationb
  
0.41
    
0.41
              
Noncash and nonrecurring costs, netb
  
0.03
    
0.02
              
Total unit costs
  
1.40
    
1.44
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.18
    
0.18
              
Other non-inventoriable costs
  
(0.02
)
  
(0.02
)
            
Gross profit per pound
$
2.30
  
$
2.26
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
1,236
  
$
284
  
$
141
        
Net noncash and nonrecurring costs per above
  
N/A
    
8
    
N/A
        
Less: Treatment charges per above
  
(70
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
62
    
N/A
    
N/A
        
Purchased metal
  
81
    
81
    
N/A
        
Eliminations and other
  
(77
)
  
(70
)
  
(5
)
      
Total South American mining operations
  
1,232
    
303
    
136
        
North American mining operations
  
2,683
    
2,104
    
168
        
Indonesian mining operations
  
1,762
    
390
    
56
        
Atlantic Copper smelting & refining
  
619
    
608
    
9
        
Corporate, other & eliminations
  
(853
)
  
(865
)
  
5
        
As reported in FCX’s consolidated financial statements
$
5,443
  
$
2,540
  
$
374
        
                         
a. Includes gold and silver.
b. The estimated fair values of acquired inventory and property, plant and equipment were based on preliminary estimates during 2007, with adjustments made until such values were finalized in first-quarter 2008.

 
XVI
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
South American Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Six Months Ended June 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
2,806
  
$
2,806
  
$
105
  
$
2,911
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
818
    
790
    
37
    
827
  
By-product credits
  
(96
)
  
-
    
-
    
-
  
Treatment charges
  
144
    
144
    
-
    
144
  
Net cash costs
  
866
    
934
    
37
    
971
  
Depreciation, depletion and amortization
  
257
    
248
    
9
    
257
  
Noncash and nonrecurring costs, net
  
56
    
56
    
-
    
56
  
Total costs
  
1,179
    
1,238
    
46
    
1,284
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
237
    
237
    
-
    
237
  
Other non-inventoriable costs
  
(19
)
  
(18
)
  
(1
)
  
(19
)
Gross profit
$
1,845
  
$
1,787
  
$
58
  
$
1,845
  
                         
Consolidated copper sales (in million pounds)
  
731
    
731
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.84
  
$
3.84
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
1.12
    
1.08
              
By-product credits
  
(0.13
)
  
-
              
Treatment charges
  
0.19
    
0.19
              
Unit net cash costs
  
1.18
    
1.27
              
Depreciation, depletion and amortization
  
0.35
    
0.34
              
Noncash and nonrecurring costs, net
  
0.08
    
0.08
              
Total unit costs
  
1.61
    
1.69
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.32
    
0.32
              
Other non-inventoriable costs
  
(0.03
)
  
(0.03
)
            
Gross profit per pound
$
2.52
  
$
2.44
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
2,911
  
$
827
  
$
257
        
Net noncash and nonrecurring costs per above
  
N/A
    
56
    
N/A
        
Less: Treatment charges per above
  
(144
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
237
    
N/A
    
N/A
        
Purchased metal
  
165
    
165
    
N/A
        
Eliminations and other
  
(167
)
  
(154
)
  
-
        
Total South American mining operations
  
3,002
    
894
    
257
        
North American mining operations
  
6,418
    
4,101
    
498
        
Indonesian mining operations
  
2,068
    
838
    
93
        
Atlantic Copper smelting & refining
  
1,389
    
1,349
    
18
        
Corporate, other & eliminations
  
(1,764
)
  
(1,740
)
  
14
        
As reported in FCX’s consolidated financial statements
$
11,113
  
$
5,442
  
$
880
        
                         
a. Includes gold, silver and molybdenum.



 
XVII
 




FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
South American Mining Product Revenues and Production Costs and Unit Net Cash Costs (Pro Forma)
         
Six Months Ended June 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
2,141
  
$
2,141
  
$
50
  
$
2,191
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
534
    
518
    
19
    
537
  
By-product credits
  
(47
)
  
-
    
-
    
-
  
Treatment charges
  
125
    
125
    
-
    
125
  
Net cash costs
  
612
    
643
    
19
    
662
  
Depreciation, depletion and amortizationb
  
224
    
219
    
5
    
224
  
Noncash and nonrecurring costs, netb
  
133
    
130
    
3
    
133
  
Total costs
  
969
    
992
    
27
    
1,019
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
16
    
17
    
(1
)
  
16
  
Other non-inventoriable costs
  
(14
)
  
(14
)
  
-
    
(14
)
Gross profit
$
1,174
  
$
1,152
  
$
22
  
$
1,174
  
                         
Consolidated copper sales (in million pounds)
  
644
    
644
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.33
  
$
3.33
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
0.83
    
0.81
              
By-product credits
  
(0.07
)
  
-
              
Treatment charges
  
0.19
    
0.19
              
Unit net cash costs
  
0.95
    
1.00
              
Depreciation, depletion and amortizationb
  
0.35
    
0.34
              
Noncash and nonrecurring costs, netb
  
0.21
    
0.20
              
Total unit costs
  
1.51
    
1.54
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.02
    
0.02
              
Other non-inventoriable costs
  
(0.02
)
  
(0.02
)
            
Gross profit per pound
$
1.82
  
$
1.79
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
2,191
  
$
537
  
$
224
        
Net noncash and nonrecurring costs per above
  
N/A
    
133
    
N/A
        
Less: Treatment charges per above
  
(125
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
16
    
N/A
    
N/A
        
Purchased metal
  
148
    
148
    
N/A
        
Eliminations and other
  
7,813
    
4,208
    
540
        
As reported in FCX’s pro forma consolidated
                        
financial results
$
10,043
  
$
5,026
  
$
764
        
                         
a. Includes gold and silver.
b. The estimated fair values of acquired inventory and property, plant and equipment were based on preliminary estimates during 2007, with adjustments made until such values were finalized in first-quarter 2008. Additionally, the inventory impacts on noncash and nonrecurring costs were mostly realized during 2007.



 
XVIII
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesian Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended June 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
904
  
$
904
  
$
212
  
$
15
  
$
1,131
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
434
    
345
    
83
    
6
    
434
  
Gold and silver credits
  
(227
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
64
    
51
    
13
    
-
    
64
  
Royalty on metals
  
30
    
24
    
5
    
1
    
30
  
Net cash costs
  
301
    
420
    
101
    
7
    
528
  
Depreciation and amortization
  
48
    
38
    
9
    
1
    
48
  
Noncash and nonrecurring costs, net
  
5
    
4
    
1
    
-
    
5
  
Total costs
  
354
    
462
    
111
    
8
    
581
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
(21
)
  
(21
)
  
-
    
-
    
(21
)
PT Smelting intercompany profit
  
-
    
(1
)
  
1
    
-
    
-
  
Gross profit
$
529
  
$
420
  
$
102
  
$
7
  
$
529
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
229
    
229
                    
Gold (in thousand ounces)
              
235
              
Silver (in thousand ounces)
                    
821
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.88
  
$
3.88
  
$
911.84
  
$
17.16
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.90
    
1.51
    
346.42
    
6.53
        
Gold and silver credits
  
(0.99
)
  
-
    
-
    
-
        
Treatment charges
  
0.28
    
0.23
    
51.35
    
0.97
        
Royalty on metals
  
0.13
    
0.11
    
23.96
    
0.45
        
Unit net cash costs
  
1.32
    
1.85
    
421.73
    
7.95
        
Depreciation and amortization
  
0.22
    
0.17
    
37.89
    
0.71
        
Noncash and nonrecurring costs, net
  
0.02
    
0.02
    
3.76
    
0.07
        
Total unit costs
  
1.56
    
2.04
    
463.38
    
8.73
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
(0.01
)
  
(0.01
)
  
(9.80
)
  
(0.16
)
      
PT Smelting intercompany profit
  
-
    
-
    
(0.47
)
  
(0.01
)
      
Gross profit per pound/ounce
$
2.31
  
$
1.83
  
$
438.19
  
$
8.26
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
1,131
  
$
434
  
$
48
              
Net noncash and nonrecurring costs per above
  
N/A
    
5
    
N/A
              
Less:    Treatment charges per above
  
(64
)
  
N/A
    
N/A
              
Royalty per above
  
(30
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
(21
)
  
N/A
    
N/A
              
Total Indonesian mining operations
  
1,016
    
439
    
48
              
North American mining operations
  
3,145
    
1,963
    
271
              
South American mining operations
  
1,409
    
462
    
127
              
Atlantic Copper smelting & refining
  
724
    
698
    
9
              
Corporate, other & eliminations
  
(853
)
  
(842
)
  
7
              
As reported in FCX’s consolidated
                              
financial statements
$
5,441
  
$
2,720
  
$
462
              
                               

 
XIX
 



FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesian Mining Product Revenues and Production Costs and Unit Net Cash Costs (Credits)
         
Three Months Ended June 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
1,169
  
$
1,169
  
$
584
  
$
15
  
$
1,768
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
379
    
251
    
125
    
3
    
379
  
Gold and silver credits
  
(599
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
111
    
73
    
37
    
1
    
111
  
Royalty on metals
  
48
    
32
    
16
    
-
    
48
  
Net cash costs (credits)
  
(61
)
  
356
    
178
    
4
    
538
  
Depreciation and amortization
  
56
    
37
    
18
    
1
    
56
  
Noncash and nonrecurring costs, net
  
11
    
8
    
3
    
-
    
11
  
Total costs
  
6
    
401
    
199
    
5
    
605
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
153
    
153
    
-
    
-
    
153
  
PT Smelting intercompany profit
  
-
    
-
    
-
    
-
    
-
  
Gross profit
$
1,316
  
$
921
  
$
385
  
$
10
  
$
1,316
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
334
    
334
                    
Gold (in thousand ounces)
              
880
              
Silver (in thousand ounces)
                    
1,117
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.43
  
$
3.43
  
$
657.91
  
$
13.10
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.14
    
0.75
    
142.52
    
2.83
        
Gold and silver credits
  
(1.79
)
  
-
    
-
    
-
        
Treatment charges
  
0.33
    
0.22
    
41.75
    
0.83
        
Royalty on metals
  
0.14
    
0.09
    
17.87
    
-
        
Unit net cash costs (credits)
  
(0.18
)
  
1.06
    
202.14
    
3.66
        
Depreciation and amortization
  
0.17
    
0.11
    
20.96
    
0.42
        
Noncash and nonrecurring costs, net
  
0.03
    
0.02
    
4.00
    
0.08
        
Total unit costs
  
0.02
    
1.19
    
227.10
    
4.16
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
0.53
    
0.52
    
6.44
    
(0.27
)
      
PT Smelting intercompany profit
  
-
    
-
    
(0.02
)
  
-
        
Gross profit per pound/ounce
$
3.94
  
$
2.76
  
$
437.23
  
$
8.67
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
1,768
  
$
379
  
$
56
              
Net noncash and nonrecurring costs per above
  
N/A
    
11
    
N/A
              
Less:    Treatment charges per above
  
(111
)
  
N/A
    
N/A
              
Royalty per above
  
(48
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
153
    
N/A
    
N/A
              
Total Indonesian mining operations
  
1,762
    
390
    
56
              
North American mining operations
  
2,683
    
2,104
    
168
              
South American mining operations
  
1,232
    
303
    
136
              
Atlantic Copper smelting & refining
  
619
    
608
    
9
              
Corporate, other & eliminations
  
(853
)
  
(865
)
  
5
              
As reported in FCX’s consolidated
                              
financial statements
$
5,443
  
$
2,540
  
$
374
              
                               


 
XX
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesian Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Six Months Ended June 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
1,691
  
$
1,691
  
$
453
  
$
29
  
$
2,173
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
819
    
637
    
171
    
11
    
819
  
Gold and silver credits
  
(482
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
132
    
103
    
28
    
1
    
132
  
Royalty on metals
  
55
    
43
    
11
    
1
    
55
  
Net cash costs
  
524
    
783
    
210
    
13
    
1,006
  
Depreciation and amortization
  
93
    
72
    
19
    
2
    
93
  
Noncash and nonrecurring costs, net
  
19
    
15
    
4
    
-
    
19
  
Total costs
  
636
    
870
    
233
    
15
    
1,118
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
82
    
82
    
-
    
-
    
82
  
PT Smelting intercompany profit
  
(5
)
  
(4
)
  
(1
)
  
-
    
(5
)
Gross profit
$
1,132
  
$
899
  
$
219
  
$
14
  
$
1,132
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
436
    
436
                    
Gold (in thousand ounces)
              
486
              
Silver (in thousand ounces)
                    
1,601
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.84
  
$
3.84
  
$
917.31
  
$
17.33
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.88
    
1.46
    
351.21
    
6.81
        
Gold and silver credits
  
(1.11
)
  
-
    
-
    
-
        
Treatment charges
  
0.31
    
0.24
    
56.77
    
1.10
        
Royalty on metals
  
0.13
    
0.10
    
23.60
    
0.46
        
Unit net cash costs
  
1.21
    
1.80
    
431.58
    
8.37
        
Depreciation and amortization
  
0.21
    
0.17
    
39.66
    
0.77
        
Noncash and nonrecurring costs, net
  
0.04
    
0.03
    
8.06
    
0.16
        
Total unit costs
  
1.46
    
2.00
    
479.30
    
9.30
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
0.23
    
0.23
    
14.13
    
0.73
        
PT Smelting intercompany profit
  
(0.01
)
  
(0.01
)
  
(2.27
)
  
(0.04
)
      
Gross profit per pound/ounce
$
2.60
  
$
2.06
  
$
449.87
  
$
8.72
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
2,173
  
$
819
  
$
93
              
Net noncash and nonrecurring costs per above
  
N/A
    
19
    
N/A
              
Less:    Treatment charges per above
  
(132
)
  
N/A
    
N/A
              
Royalty per above
  
(55
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
82
    
N/A
    
N/A
              
Total Indonesian mining operations
  
2,068
    
838
    
93
              
North American mining operations
  
6,418
    
4,101
    
498
              
South American mining operations
  
3,002
    
894
    
257
              
Atlantic Copper smelting & refining
  
1,389
    
1,349
    
18
              
Corporate, other & eliminations
  
(1,764
)
  
(1,740
)
  
14
              
As reported in FCX’s consolidated
                              
financial statements
$
11,113
  
$
5,442
  
$
880
              
                               
 
 
XXI
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesian Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Six Months Ended June 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
2,578
  
$
2,578
  
$
1,207
  
$
36
  
$
3,821
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
693
    
468
    
219
    
6
    
693
  
Gold and silver credits
  
(1,243
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
265
    
178
    
84
    
3
    
265
  
Royalty on metals
  
97
    
66
    
30
    
1
    
97
  
Net cash costs
  
(188
)
  
712
    
333
    
10
    
1,055
  
Depreciation and amortization
  
115
    
78
    
36
    
1
    
115
  
Noncash and nonrecurring costs, net
  
20
    
14
    
6
    
-
    
20
  
Total costs
  
(53
)
  
804
    
375
    
11
    
1,190
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
12
    
12
    
-
    
-
    
12
  
PT Smelting intercompany profit
  
(36
)
  
(24
)
  
(11
)
  
(1
)
  
(36
)
Gross profit
$
2,607
  
$
1,762
  
$
821
  
$
24
  
$
2,607
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
751
    
751
                    
Gold (in thousand ounces)
              
1,827
              
Silver (in thousand ounces)
                    
2,694
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.40
  
$
3.40
  
$
659.43
  
$
13.22
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
0.92
    
0.62
    
119.85
    
2.40
        
Gold and silver credits
  
(1.65
)
  
-
    
-
    
-
        
Treatment charges
  
0.35
    
0.24
    
45.73
    
0.92
        
Royalty on metals
  
0.13
    
0.09
    
16.83
    
0.34
        
Unit net cash costs
  
(0.25
)
  
0.95
    
182.41
    
3.66
        
Depreciation and amortization
  
0.15
    
0.10
    
19.88
    
0.40
        
Noncash and nonrecurring costs, net
  
0.03
    
0.02
    
3.37
    
0.07
        
Total unit costs
  
(0.07
)
  
1.07
    
205.66
    
4.13
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
0.05
    
0.05
    
1.38
    
0.02
        
PT Smelting intercompany profit
  
(0.05
)
  
(0.03
)
  
(6.18
)
  
(0.12
)
      
Gross profit per pound/ounce
$
3.47
  
$
2.35
  
$
448.97
  
$
8.99
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
3,821
  
$
693
  
$
115
              
Net noncash and nonrecurring costs per above
  
N/A
    
20
    
N/A
              
Less:    Treatment charges per above
  
(265
)
  
N/A
    
N/A
              
Royalty per above
  
(97
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
12
    
N/A
    
N/A
              
Total Indonesian mining operations
  
3,471
    
713
    
115
              
North American mining operations
  
3,002
    
2,431
    
182
              
South American mining operations
  
1,494
    
419
    
164
              
Atlantic Copper smelting & refining
  
1,073
    
1,035
    
19
              
Corporate, other & eliminations
  
(1,351
)
  
(1,155
)
  
10
              
As reported in FCX’s consolidated
                              
financial statements
$
7,689
  
$
3,443
  
$
490
              
                               

 
XXII
 

FREEPORT-McMoRan COPPER & GOLD INC.
PROVISION FOR INCOME TAXES

PROVISION FOR INCOME TAXES
FCX’s second-quarter 2008 income tax provision from continuing operations resulted from taxes on international operations ($546 million) and U.S. taxes ($112 million).  FCX’s income tax provision for the first six months of 2008 included taxes on international operations ($1.1 billion) and U.S. taxes ($262 million). The difference between FCX’s consolidated effective income tax rate of approximately 33 percent for the first six months of 2008 and the U.S. federal statutory rate of 35 percent was primarily attributable to a U.S. benefit for percentage depletion, partially offset by withholding taxes and incremental U.S. income taxes accrued on foreign earnings.

FCX’s second-quarter 2007 income tax provision from continuing operations resulted from taxes on earnings at international operations ($626 million) and U.S. taxes ($138 million). FCX’s income tax provision for the first six months of 2007 included taxes on international operations ($1.1 billion) and U.S. taxes ($92 million). The difference between FCX’s consolidated effective income tax rate of approximately 37 percent for the first six months of 2007 and the U.S. federal statutory rate of 35 percent was primarily attributable to (1) withholding taxes related to earnings from Indonesian and South American mining operations, (2) income taxes incurred by PT Indocopper Investama, a wholly owned subsidiary of FCX whose only asset is its investment in PT Freeport Indonesia, and (3) a U.S. foreign tax credit limitation, partially offset by a U.S. benefit for percentage depletion.

A summary of the approximate amounts in the calculation of FCX’s consolidated provision for income taxes for the first six months of 2008 and 2007 follows (in millions, except percentages):

   
Six Months Ended
June 30, 2008
  
Six Months Ended
June 30, 2007
  
           
Effective
  
Provision for
          
Effective
  
Provision for
  
   
Incomea
    
Tax Rate
  
Income Tax
  
Incomea
    
Tax Rate
  
Income Tax
  
U.S.
  
$
1,686
    
27%
  
$
452
  
$
408
    
30%
  
$
122
  
South America
    
1,999
    
33%
    
663
    
1,076
    
35%
    
374
  
Indonesia
    
1,064
    
42%
    
444
    
2,365
    
43%
    
1,021
  
Eliminations and other
    
(17
)
  
N/A
    
19
    
2
    
N/A
    
(1
)
Purchase accounting adjustments
    
(556
)
  
37%
    
(209
)
  
(579
)
  
37%
    
(216
)
Annualized rate adjustmentb
    
N/A
    
N/A
    
18
    
N/A
    
N/A
    
(78
)
Consolidated FCX
  
$
4,176
    
33%
  
$
1,387
  
$
3,272
    
 37%
  
$
1,222
  

a. 
 Represents income from continuing operations before income taxes and minority interests.
b. 
 In accordance with applicable accounting rules, FCX adjusts its interim provision for income taxes to equal its estimated annualized tax rate.


 
XXIII
 

FREEPORT-McMoRan COPPER & GOLD INC.
BUSINESS SEGMENTS

FCX has a regional approach to the management of its mining operations. FCX has organized its mining operations geographically into three primary operating divisions – North American mining, South American mining and Indonesian mining. Notwithstanding this geographic structure, FCX internally reports information on a mine by mine basis. Therefore, in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” FCX concluded that its operating segments include individual mines. Operating segments that meet SFAS No. 131 thresholds are reportable segments. Further discussion of the reportable segments included in FCX’s operating divisions, as well as FCX’s other reportable segment – Atlantic Copper Smelting & Refining, follows.

North American Mining.  North American mining operations are comprised of copper operations from mining through rod production, molybdenum operations from mining through conversion to chemical and metallurgical products, and the marketing and sale of both product lines. The North American mining division includes the Morenci copper mine, Rod & Refining operations and Molybdenum operations as reportable segments. In addition to copper, the Morenci mine produces molybdenum concentrates as a by-product.

Other North American mining operations include FCX’s other operating southwestern U.S. copper mines – Bagdad, Sierrita, Safford, Miami, Chino and Tyrone. In addition to copper, the Bagdad, Sierrita, and Chino mines produce molybdenum, gold and silver, and the Sierrita mine also produces rhenium. Other North American mining operations also include the Miami smelter, which processes FCX’s North America concentrates and provides a significant source of sulfuric acid for the various North American leaching operations, and a sales company, which functions as an agent to purchase and sell copper from the North American mines and the Rod & Refining operations and also purchases and sells any copper not sold by the South American mines to third parties.

South American Mining.  South American mining includes the Cerro Verde copper mine as a reportable segment. Other South American mining operations include FCX’s Chilean copper mines – Candelaria, Ojos del Salado and El Abra.

Indonesian Mining.  Indonesian mining includes PT Freeport Indonesia’s Grasberg copper and gold mining operations and PT Puncakjaya Power’s power-generating operations (after eliminations with PT Freeport Indonesia).

Atlantic Copper Smelting & Refining.  Atlantic Copper, FCX’s wholly owned smelting unit in Spain, smelts and refines copper concentrates and markets refined copper and precious metals in slimes.

Other.  Intersegment sales by the Indonesian and South American mines are based on similar arms-length transactions with third parties at the time of the sale. Intersegment sales by any individual mine may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.

FCX allocates certain operating costs, expenses and capital to the operating divisions and individual segments. However, not all costs and expenses applicable to a mine or operation are allocated. All federal and state income taxes are recorded and managed at the corporate level with the exception of foreign income taxes, which are generally recorded and managed at the applicable mine or operation. Accordingly, the following segment information reflects management determinations that may not be indicative of what the actual financial performance of each operating division or segment would be if it was an independent entity.

 
XXIV
 



FREEPORT-McMoRan COPPER & GOLD INC.
BUSINESS SEGMENTS
(continued)
                         
(In Millions)
North America
  
South America
  
Indonesia
              
               
Other
  
Total
      
Other
  
Total
      
Atlantic
          
               
North
  
North
      
South
  
South
      
Copper
  
Corporate,
      
       
Rod &
  
Molyb-
  
American
  
American
  
Cerro
  
American
  
American
      
Smelting
  
Other &
  
FCX
  
Three Months Ended June 30, 2008
Morenci
  
Refining
  
denum
  
Mining
  
Mining
  
Verde
  
Mining
  
Mining
  
Grasberg
  
& Refining
  
Eliminations
  
Total
  
Revenues:
                                                  
Unaffiliated customers
$
46
  
1,675
  
715
  
708
  
3,144
  
428
  
468
  
896
  
811
a
724
  
(134
)
5,441
  
Intersegment
  
569
  
8
  
-
  
(576
)
1
  
262
  
251
  
513
  
205
  
-
  
(719
)
-
  
Production and deliveryb
  
294
  
1,677
  
421
  
(429
)
1,963
  
206
  
256
  
462
  
439
  
698
  
(842
)
2,720
  
Depreciation, depletion and amortizationb
  
79
  
1
  
69
  
122
  
271
  
46
  
81
  
127
  
48
  
9
  
7
  
462
  
Selling, general and administrative expenses
  
-
  
-
  
5
  
2
  
7
  
-
  
-
  
-
  
47
  
6
  
66
  
126
  
Exploration and research expenses
  
-
  
-
  
1
  
-
  
1
  
-
  
-
  
-
  
-
  
-
  
79
  
80
  
Operating incomeb
$
242
  
5
  
219
  
437
  
903
  
438
  
382
  
820
  
482
  
11
  
(163
)
2,053
  
Interest expense, net
$
-
  
1
  
-
  
9
  
10
  
1
  
(2
)
(1
)
2
  
2
  
127
  
140
  
Provision for income taxes
$
-
  
-
  
-
  
-
  
-
  
154
  
121
  
275
  
205
  
-
  
178
  
658
  
Goodwill at June 30, 2008
$
1,912
  
-
  
703
  
2,299
  
4,914
  
763
  
366
  
1,129
  
-
  
-
  
5
  
6,048
  
Total assets at June 30, 2008
$
7,000
  
605
  
4,156
  
12,907
  
24,668
  
5,247
  
4,967
  
10,214
  
4,066
  
1,059
  
2,341
  
42,348
  
Capital expenditures
$
82
  
1
  
32
  
77
  
192
  
45
  
58
  
103
  
108
  
7
  
245
  
655
  
                                                   
Three Months Ended June 30, 2007
                                                  
Revenues:
                                                  
Unaffiliated customers
$
23
  
1,826
  
463
  
367
  
2,679
  
157
  
572
  
729
  
1,415
a
619
  
1
  
5,443
  
Intersegment
  
519
  
11
  
-
  
(526
)
4
  
298
  
205
  
503
  
347
  
-
  
(854
)
-
  
Production and deliveryb
  
304
  
1,825
  
406
  
(431
)
2,104
  
100
  
203
  
303
  
390
  
608
  
(865
)
2,540
  
Depreciation, depletion and amortizationb
  
69
  
3
  
22
  
74
  
168
  
35
  
101
  
136
  
56
  
9
  
5
  
374
  
Selling, general and administrative expenses
  
-
  
-
  
5
  
2
  
7
  
-
  
-
  
-
  
45
  
6
  
77
  
135
  
Exploration and research expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
40
  
40
  
Operating income (loss)b
$
169
  
9
  
30
  
196
  
404
  
320
  
473
  
793
  
1,271
  
(4
)
(110
)
2,354
  
Interest expense, net
$
-
  
1
  
-
  
-
  
1
  
4
  
(1
)
3
  
3
  
7
  
165
  
179
  
Provision for income taxes
$
-
  
-
  
-
  
-
  
-
  
123
  
156
  
279
  
559
  
-
  
(74
)
764
  
Total assets at June 30, 2007
$
4,737
  
670
  
1,894
  
8,726
  
16,027
  
4,975
  
4,989
  
9,964
  
4,352
  
1,062
  
9,229
c
40,634
  
Capital expenditures
$
60
  
1
  
11
  
228
  
300
  
17
  
17
  
34
  
101
  
14
  
81
  
530
  

a. Includes PT Freeport Indonesia’s sales to PT Smelting totaling $356 million in second-quarter 2008 and $625 million in second-quarter 2007.
b. The following tables summarize the impact of purchase accounting fair value adjustments on operating income (loss) primarily associated with the impacts of the increase in the carrying value of Phelps Dodge’s metals inventories (including mill and leach stockpiles) and property, plant and equipment:
                                                   
Three Months Ended June 30, 2008
                                                  
Revenues
$
-
  
-
  
(3
)
-
  
(3
)
5
  
1
  
6
  
N/A
  
N/A
  
-
  
3
  
Production and delivery
  
(11
)
-
  
2
  
(5
)
(14
)
5
  
(3
)
2
  
N/A
  
N/A
  
-
  
(12
)
Depreciation, depletion and amortization
  
(50
)
-
  
(46
)
(63
)
(159
)
(23
)
(48
)
(71
)
N/A
  
N/A
  
-
  
(230
)
Reduction of operating income
$
(61
)
-
  
(47
)
(68
)
(176
)
(13
)
(50
)
(63
)
N/A
  
N/A
  
-
  
(239
)

Three Months Ended June 30, 2007
                                                  
Production and delivery
$
(68
)
-
  
(67
)
(116
)
(251
)
-
  
(18
)
(18
)
N/A
  
N/A
  
-
  
(269
)
Depreciation, depletion and amortization
  
(60
)
-
  
(10
)
(47
)
(117
)
(15
)
(55
)
(70
)
N/A
  
N/A
  
1
  
(186
)
Reduction of operating income
$
(128
)
-
  
(77
)
(163
)
(368
)
(15
)
(73
)
(88
)
N/A
  
N/A
  
1
  
(455
)
                                                   
c.  Includes preliminary goodwill of $5.0 billion, which had not been allocated to reporting units at June 30, 2007, and also includes assets of $1.4 billion associated with discontinued operations.


 
XXV
 



FREEPORT-McMoRan COPPER & GOLD INC.
BUSINESS SEGMENTS
(continued)
                         
(In Millions)
North America
  
South America
  
Indonesia
              
               
Other
  
Total
      
Other
  
Total
      
Atlantic
          
               
North
  
North
      
South
  
South
      
Copper
  
Corporate,
      
       
Rod &
  
Molyb-
  
American
  
American
  
Cerro
  
American
  
American
      
Smelting
  
Other &
  
FCX
  
Six Months Ended June 30, 2008
Morenci
  
Refining
  
denum
  
Mining
  
Mining
  
Verde
  
Mining
  
Mining
  
Grasberg
  
& Refining
  
Eliminations
  
Total
  
Revenues:
                                                  
Unaffiliated customers
$
96
  
3,355
  
1,434
  
1,531
  
6,416
  
890
  
971
  
1,861
  
1,698
a
1,389
  
(251
)
11,113
  
Intersegment
  
1,110
  
16
  
-
  
(1,124
)
2
  
515
  
626
  
1,141
  
370
  
-
  
(1,513
)
-
  
Production and deliveryb
  
566
  
3,353
  
881
  
(699
)
4,101
  
368
  
526
  
894
  
838
  
1,349
  
(1,740
)
5,442
  
Depreciation, depletion and amortizationb
  
160
  
3
  
108
  
227
  
498
  
89
  
168
  
257
  
93
  
18
  
14
  
880
  
Selling, general and administrative expenses
  
-
  
-
  
11
  
6
  
17
  
-
  
-
  
-
  
84
  
14
  
95
  
210
  
Exploration and research expenses
  
-
  
-
  
1
  
-
  
1
  
-
  
-
  
-
  
-
  
-
  
131
  
132
  
Operating incomeb
$
480
  
15
  
433
  
873
  
1,801
  
948
  
903
  
1,851
  
1,053
  
8
  
(264
)
4,449
  
Interest expense, net
$
1
  
2
  
-
  
19
  
22
  
2
  
(2
)
-
  
3
  
6
  
274
  
305
  
Provision for income taxes
$
-
  
-
  
-
  
-
  
-
  
327
  
281
  
608
  
444
  
-
  
335
  
1,387
  
Capital expenditures
$
159
  
4
  
44
  
160
  
367
  
62
  
104
  
166
  
223
  
12
  
395
  
1,163
  
                                                   
Six Months Ended June 30, 2007
                                                  
Revenues:
                                                  
Unaffiliated customers
$
23
  
2,032
  
515
  
428
  
2,998
  
171
  
698
  
869
  
2,747
a
1,073
  
2
  
7,689
  
Intersegment
  
540
  
13
  
-
  
(549
)
4
  
395
  
230
  
625
  
724
  
-
  
(1,353
)
-
  
Production and deliveryb
  
333
  
2,031
  
458
  
(391
)
2,431
  
144
  
275
  
419
  
713
  
1,035
  
(1,155
)
3,443
  
Depreciation, depletion and amortizationb
  
74
  
3
  
25
  
80
  
182
  
44
  
120
  
164
  
115
  
19
  
10
  
490
  
Selling, general and administrative expenses
  
-
  
-
  
5
  
3
  
8
  
-
  
-
  
-
  
89
  
10
  
76
  
183
  
Exploration and research expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
47
  
47
  
Operating incomeb
$
156
  
11
  
27
  
187
  
381
  
378
  
533
  
911
  
2,554
  
9
  
(329
)
3,526
  
Interest expense, net
$
-
  
1
  
-
  
-
  
1
  
4
  
(1
)
3
  
7
  
14
  
206
  
231
  
Provision for income taxes
$
-
  
-
  
-
  
-
  
-
  
145
  
175
  
320
  
1,021
  
-
  
(119
)
1,222
  
Capital expenditures
$
75
  
2
  
13
  
263
  
353
  
18
  
18
  
36
  
175
  
21
  
87
  
672
  
 
a. Includes PT Freeport Indonesia’s sales to PT Smelting totaling $820 million for the six months ended June 30, 2008, and $1.2 billion for the six months ended June 30, 2007.
b. The following tables summarize the impact of purchase accounting fair value adjustments on operating income primarily associated with the impacts of the increase in the carrying value of Phelps Dodge’s metals inventories (including mill and leach stockpiles) and property, plant and equipment:
                                                   
Six Months Ended June 30, 2008
                                                  
Revenues
$
-
  
-
  
(3
)
-
  
(3
)
5
  
1
  
6
  
N/A
  
N/A
  
-
  
3
  
Production and delivery
  
(29
)
-
  
(12
)
(20
)
(61
)
(4
)
(19
)
(23
)
N/A
  
N/A
  
-
  
(84
)
Depreciation, depletion and amortization
  
(97
)
-
  
(80
)
(118
)
(295
)
(44
)
(97
)
(141
)
N/A
  
N/A
  
(1
)
(437
)
Reduction of operating income
$
(126
)
-
  
(95
)
(138
)
(359
)
(43
)
(115
)
(158
)
N/A
  
N/A
  
(1
)
(518
)

 
Six Months Ended June 30, 2007
                                                  
Production and delivery
$
(84
)
-
  
(80
)
(135
)
(299
)
(20
)
(46
)
(66
)
N/A
  
N/A
  
-
  
(365
)
Depreciation, depletion and amortization
  
(63
)
-
  
(12
)
(48
)
(123
)
(21
)
(70
)
(91
)
N/A
  
N/A
  
-
  
(214
)
Reduction of operating income
$
(147
)
-
  
(92
)
(183
)
(422
)
(41
)
(116
)
(157
)
N/A
  
N/A
  
-
  
(579
)
                                                   

 
 
XXVI