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 Third-Quarter and Nine-Month 2008 Results


HIGHLIGHTS

§ 
Net income applicable to common stock for third-quarter 2008 totaled $523 million, $1.31 per share, compared with $775 million, $1.87 per share, for third-quarter 2007.  Net income applicable to common stock for the first nine months of 2008 totaled $2.6 billion, $6.20 per share, compared with $2.4 billion, $6.58 per share, for the first nine months of 2007.

§ 
Consolidated sales from mines for third-quarter 2008 totaled 1.0 billion pounds of copper, 307 thousand ounces of gold and 19 million pounds of molybdenum, compared with 949 million pounds of copper, 269 thousand ounces of gold and 16 million pounds of molybdenum for third-quarter 2007.

§ 
Consolidated sales from mines are expected to approximate 4.0 billion pounds of copper, 1.2 million ounces of gold and 74 million pounds of molybdenum for the year 2008, including 1.17 billion pounds of copper, 395 thousand ounces of gold and 15 million pounds of molybdenum for fourth-quarter 2008.

§ 
Operating cash flows totaled $1.5 billion for third-quarter 2008 and $3.2 billion for the first nine months of 2008.  The year-to-date operating cash flows are net of $1.5 billion in working capital uses.  Assuming average prices of $2.15 per pound for copper, $800 per ounce for gold and $27 per pound for molybdenum for the fourth quarter of 2008, operating cash flows in 2008 would be in excess of $3.5 billion.  Each $0.20 per pound change in copper prices in the fourth quarter would impact 2008 operating cash flows by approximately $250 million.

§ 
Capital expenditures totaled $766 million for third-quarter 2008 and $1.9 billion for the first nine months of 2008.  Projected 2008 capital expenditures approximate $2.7 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.  Future capital spending plans are being reviewed in response to the impact of recent changes in global economic conditions on commodity prices.

§ 
Total debt approximated $7.2 billion and consolidated cash was $1.2 billion at September 30, 2008.

§ 
During the third quarter of 2008, FCX purchased 6.3 million shares of its common stock for $500 million (average of $79.15 per share).  Approximately 23.7 million shares remain available under the Board authorized open market share purchase program.
 
 
1
PHOENIX, AZ, October 21, 2008 – Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported third-quarter 2008 net income applicable to common stock of $523 million, $1.31 per share, compared with $775 million, $1.87 per share, for the third quarter of 2007.  For the nine months ended September 30, 2008, FCX reported net income of $2.6 billion, $6.20 per share, compared with $2.4 billion, $6.58 per share, in the 2007 period.  The results for the 2007 nine-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, “Our third-quarter results reflect strong operating performance during a period of weakening commodity prices and economic uncertainty.  We are financially strong and well positioned to continue our long range strategy of adding to our mineral reserves and increasing our production capacity.  We will be responsive to current market conditions by reducing costs and capital spending and curtailing high-cost operations if required.  We are positive about the underlying fundamentals of the copper market and the long-term prospects for our business.”
 
 
SUMMARY FINANCIAL AND OPERATING DATA

 
Third Quarter
  
Nine Months
  
 
2008
  
2007
  
2008
  
2007a
  
Financial Data (in millions, except per share amounts)
                
Revenues
$4,616
b,c
$5,066
b,d
$15,729
b,c
$12,755
b,d
Operating income
$1,133
c,e,f
$1,877
d,f
$5,582
c,e,f
$5,403
d,f
Income from continuing operations
                
applicable to common stockg
$523
c,e,f
$763
d,f,h
$2,592
c,e,f,h
$2,311
d,f,h
Net income applicable to common stockg
$523
c,e,f
$775
d,f,h
$2,592
c,e,f,h
$2,355
d,f,h
Diluted net income per share of common stocki:
                
Continuing operations
$1.31
c,e,f
$1.85
d,f,h
$6.20
c,e,f,h
$6.46
d,f,h
Discontinued operations
-
  
0.02
  
-
  
0.12
  
Diluted net income per share of common stock
$1.31
c,e,f
$1.87
d,f,h
$6.20
c,e,f,h
$6.58
d,f,h
Diluted average common shares outstandingi,j
447
  
447
  
449
  
380
  
Operating cash flows
$1,545
k
$2,177
k
$3,169
k
$4,927
k
Capital expenditures
$766
  
$466
  
$1,929
  
$1,138
  
                 
Operating Data – Sales from Mines
                
Copper (millions of recoverable pounds)
                
FCX’s consolidated share
1,016
  
949
  
2,869
  
2,479
  
Average realized price per pound
$3.14
  
$3.53
d
$3.43
  
$3.43
d
                 
Gold (thousands of recoverable ounces)
                
FCX’s consolidated share
307
  
269
  
852
  
2,137
  
Average realized price per ounce
$869
  
$695
  
$897
  
$669
  
                 
Molybdenum (millions of recoverable pounds)
                
FCX’s consolidated share
19
  
16
  
59
  
33
  
Average realized price per pound
$32.11
  
$27.89
  
$31.78
  
$26.22
  
                 
 

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 on page 5).
 
c. 
Includes charges totaling $66 million ($40 million to net income or $0.09 per share) in third-quarter 2008 and $35 million ($21 million to net income or $0.05 per share) for the first nine months of 2008 for unrealized losses on copper derivative contracts entered into with FCX’s U.S. copper rod customers, which will allow FCX to receive market prices in the month of shipment while the customer pays the fixed price they requested.
 
d. 
Includes charges for noncash mark-to-market accounting adjustments on the 2007 copper price protection program totaling $44 million ($26 million to net income or $0.06 per share) and a reduction in average realized copper prices of $0.04 per pound in third-quarter 2007 and $212 million ($129 million to net income or $0.34 per share) and a reduction in average realized copper prices of $0.08 per pound in the first nine 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.
 
e. 
Includes charges for lower of cost or market inventory adjustments totaling $16 million ($11 million to net income or $0.02 per share) for third-quarter 2008 and $22 million ($14 million to net income or $0.03 per share) for the first nine months of 2008 (see discussion on page 5).  Also, includes estimated costs totaling approximately $25 million ($8 million to net income or $0.02 per share) for the first nine months of 2008 for local infrastructure projects in South America.
 
f. 
Includes the impact of purchase accounting fair value adjustments associated with the acquisition of Phelps Dodge totaling $293 million, $263 million to operating income and $30 million to non-operating income and expenses, ($183 million to net income or $0.41 per share) for third-quarter 2008; $449 million, $445 million to operating income and $4 million to non-operating income and expenses, ($279 million to net income or $0.62 per share) for third-quarter 2007; $849 million, $781 million to operating income and $68 million to non-operating income and expenses, ($530 million to net income or $1.18 per share) for the first nine months of 2008 and $1.0 billion, $1.0 billion to operating income and $4 million to non-operating income and expenses, ($642 million to net income or $1.69 per share) for the first nine months of 2007.  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,” on pages XXV and XXVI, which is available on FCX’s web site, “www.fcx.com.”
 
g. 
After preferred dividends.
 
h. 
Includes net losses on early extinguishment of debt totaling $36 million ($31 million to net income or $0.07 per share) for third-quarter 2007, $6 million ($5 million to net income or $0.01 per share) for the first nine months of 2008 and $171 million ($141 million to net income or $0.37 per share) for the first nine months of 2007.  Also includes gains totaling $13 million ($8 million to net income or $0.02 per share) for the first nine months of 2008 on the sale of other assets and gains totaling $47 million ($29 million to net income or $0.06 per share) for third-quarter 2007 and $85 million ($52 million to net income or $0.14 per share) for the first nine months of 2007 on sales of marketable equity securities.
 
i. 
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.
 
j. 
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 September 30, 2008, totaled 378 million.  Assuming conversion of the instruments discussed in Note i above and including dilutive stock options and restricted stock units, total common shares outstanding would approximate 444 million at September 30, 2008.
 
k. 
Includes working capital sources (uses) of $574 million in third-quarter 2008, $717 million in third-quarter 2007, $(1.5) billion in the first nine months of 2008 and $628 million in the first nine months of 2007.
 

 
RECENT EVENTS
 
Economic conditions have weakened dramatically in recent weeks and there is significant uncertainty about the near-term price outlook for FCX’s principal products.  LME copper prices declined from $3.98 per pound at June 30, 2008, to $2.91 per pound at September 30, 2008, and further to $2.21 per pound at October 20, 2008.
 
While FCX views the long-term outlook for its business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy, FCX is responding to the sudden downturn and uncertain near-term outlook.  Operating plans are being revised to target reductions in costs, defer or eliminate capital projects, defer exploration expenditures and potentially curtail production at high-cost operations.
 
3
OPERATIONS
 
Consolidated copper sales of 1,016 million pounds in the third quarter of 2008 were slightly higher than the revised estimates projected as of September 9, 2008, when FCX announced that second-half 2008 results would be impacted by a small scale failure at the Grasberg open pit in Indonesia.  Remediation activities at Grasberg have been substantially completed and FCX regained access in October 2008 to the high-grade material previously restricted.  Third-quarter 2008 consolidated copper sales were seven percent higher than the year-ago period primarily because of higher ore grades at Grasberg.
 
Consolidated gold sales of 307 thousand ounces in third-quarter 2008 were higher than revised estimates of 250 thousand ounces projected as of September 9, 2008.  Consolidated gold sales in the third quarter of 2008 were higher than the year-ago period because of mining in a higher ore grade section of Grasberg.  Consolidated molybdenum sales of 19 million pounds in the third quarter of 2008 approximated previous estimates of 18 million pounds.
 
For the year 2008, FCX projects sales to approximate 4.0 billion pounds of copper, 1.2 million ounces of gold and 74 million pounds of molybdenum, including 1.17 billion pounds of copper, 395 thousand ounces of gold and 15 million pounds of molybdenum in fourth-quarter 2008.
 
Consolidated unit net cash costs were $1.29 per pound in the third quarter of 2008.  Cash costs increased significantly during the last twelve months, principally for energy and sulfuric acid.  Commodity-based input costs are expected to be lower than third-quarter 2008 levels as a result of the recent sharp declines in prices of energy, steel and sulfuric acid.  Assuming average prices of $2.15 per pound for copper, $800 per ounce for gold and $27 per pound for molybdenum for the fourth quarter of 2008, and using recent prices for commodity-based input costs, unit net cash costs would average approximately $1.07 per pound for fourth-quarter 2008 and approximately $1.17 per pound for the year, compared with FCX’s July 22, 2008, estimate of $1.10 per pound.  Projected unit net cash costs for 2008 are higher than the July 2008 estimate primarily because of the impact of lower volumes at Grasberg.

 
Third Quarter
  
Nine Months
  
 
2008
  
2007
  
2008
  
2007a
  
Consolidated Operating Data
                
Copper (millions of recoverable pounds)
                
Production
1,024
  
911
  
2,845
  
2,958
  
Salesb
1,016
  
949
  
2,869
  
2,984
  
Average realized price per pound
$3.14
  
$3.53
c
$3.43
  
$3.32
c
Site production and delivery unit costsd
$1.66
  
$1.31
  
$1.58
  
$1.12
e
Unit net cash costsd
$1.29
  
$1.05
  
$1.21
  
$0.65
e
Gold (thousands of recoverable ounces)
                
Production
300
  
216
  
825
  
2,143
  
Salesb
307
  
269
  
852
  
2,159
  
Average realized price per ounce
$869
  
$695
  
$897
  
$667
  
Molybdenum (millions of recoverable pounds)
                
Production
21
  
18
  
57
  
53
  
Salesb
19
  
16
  
59
  
50
  
Average realized price per pound
$32.11
  
$27.89
  
$31.78
  
$25.12
  
 
a. 
Amounts reflect the combination of FCX’s historical results with Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
 
b. 
Excludes sales of purchased metal.
 
c. 
Includes reduction of $0.04 per pound for third-quarter 2007 and $0.07 per pound for the first nine months of 2007 for mark-to-market accounting adjustments on the 2007 copper price protection program.
 
d. 
Reflects per pound weighted average production and delivery costs and unit net cash costs, net of by-product credits, for all mines.  For reconciliations of actual and pro forma per pound costs by operating division 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.”
 
4
 
e. 
 For comparative purposes, amounts have been presented on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also includes certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007.
 
For the first nine months of 2008, approximately 50 percent of FCX’s mined copper was sold in concentrate, 30 percent as rod (principally from North America 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 some of its cathode sales contracts are provisionally priced at the time of shipment.  The provisional prices are finalized in a contractually specified future period (generally one to four months from the shipment date) primarily based on quoted LME 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 copper price for the period.
 
LME copper prices averaged $3.49 per pound during the third quarter of 2008, compared with FCX’s recorded average price of $3.14 per pound.  The applicable forward copper price at the end of the quarter was $2.89 per pound.  Approximately half of FCX’s consolidated copper sales during the third quarter were provisionally priced at the time of shipment and are subject to final pricing later in 2008 or early 2009.
 
At September 30, 2008, FCX had copper sales of 467 million pounds of copper (net of minority interests) priced at an average of $2.89 per pound, subject to final pricing over the next several months.  Each $0.05 change in the price realized from the September 30, 2008, price would have an approximate $15 million effect on FCX’s 2008 net income.  The LME closing settlement price for copper on October 20, 2008, was $2.21 per pound.  Assuming that the October 17, 2008, quarter-to-date average pricing of $2.48 per pound and average forward prices of $2.18 per pound were applied to the September 30 provisionally priced sales, the weighted-average price for these sales would be approximately $2.23 per pound and would result in a reduction to fourth-quarter 2008 revenues of approximately $400 million and a reduction to fourth-quarter 2008 net income of approximately $200 million.  FCX estimates that each $0.05 change in the copper forward price from the October 17, 2008, price would impact fourth-quarter net income by $13 million.
 
At June 30, 2008, 369 million pounds of copper (net of minority interests) were provisionally priced at $3.88 per pound.  Adjustments to these prior period copper sales decreased consolidated revenues by $282 million ($127 million to net income or $0.28 per share), compared with a decrease of $54 million ($27 million to net income or $0.06 per share) in third-quarter 2007.  Additionally, adjustments to prior year copper sales in the first nine months of 2008 resulted in an increase in consolidated revenues of $268 million ($114 million to net income or $0.25 per share), compared with a decrease of $42 million ($18 million to net income or $0.05 per share) in the first nine months of 2007.
 
As part of FCX’s accounting for its March 2007 acquisition of Phelps Dodge, inventories and mill and leach stockpiles were recorded at fair values based on market prices and the outlook at the time for future prices.  Accounting rules require that inventories be recorded at the lower of cost or market values.  FCX recorded charges to operating income for lower of cost or market inventory adjustments as a result of the decline in copper prices and increases in input costs totaling $16 million ($11 million to net income or $0.02 per share) in third-quarter 2008 and $22 million ($14 million to net income or $0.03 per share) in the first nine months of 2008.  Copper prices have declined sharply since September 30, 2008, which may require additional charges to reduce inventory carrying values in future periods.  FCX will also be undertaking a review during fourth-quarter 2008 to assess asset carrying values and goodwill associated with the acquisition of Phelps Dodge.  Charges to net income may be required depending on commodity price levels prevailing at year-end.
 
5
North America Copper Mines.  FCX operates seven open-pit copper mines in North America (Morenci, Bagdad, Sierrita, Safford and Miami in Arizona and Chino and Tyrone in New Mexico).  By-product molybdenum is primarily produced at Sierrita and Bagdad.  All of the North America 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 America copper mining operations have long-lived reserves with significant additional development potential.

Consolidated
  
Third Quarter
  
Nine Months
  
North America Copper Mining Operations
  
2008
  
2007
  
2008
  
2007a
  
                   
Copper (millions of recoverable pounds)
                  
Production
  
374
  
357
  
1,051
  
993
  
Salesb
  
361
  
376
  
1,047
  
1,016
  
Average realized price per pound
  
$3.42
  
$3.37
c
$3.56
  
$3.00
c
                   
Molybdenum (millions of recoverable pounds)d
                  
Production
  
7
  
8
  
22
  
23
  
 
a. 
Amounts reflect the combination of FCX’s historical results with Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
 
b. 
Excludes sales of purchased metal.
 
c. 
Amount was $3.48 per pound for third-quarter 2007 and $3.23 per pound for the first nine months of 2007 before charges for mark-to-market accounting adjustments on the 2007 copper price protection program.
 
d. 
Represents by-product production.  Sales of by-product molybdenum are reflected in the molybdenum segment discussion that begins on page 9.
 
 
Consolidated copper sales in North America totaled 361 million pounds in the third quarter of 2008, slightly lower than third-quarter 2007 sales because of the timing of shipments, partly offset by the commencement of production at the recently commissioned Safford mine.
 
For the year 2008, FCX expects sales from North America copper mines to approximate 1.4 billion pounds of copper, compared with 1.3 billion pounds of copper for year 2007, which includes combined FCX historical results and Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
 
Unit Net Cash Costs.  The following table summarizes unit net cash costs at the North America copper mines.

 
Third Quarter
  
Nine Months
  
 
2008
  
2007
  
2008
  
2007a
  
Per pound of copper:
                        
Site production and delivery, after adjustments
$
2.07
  
$
1.41
  
$
1.86
  
$
1.39
  
By-product credits, primarily molybdenum
  
(0.65
)
  
(0.66
)
  
(0.71
)
  
(0.65
)
Treatment charges
  
0.09
    
0.09
    
0.09
    
0.09
  
Unit net cash costsb
$
1.51
  
$
0.84
  
$
1.24
  
$
0.83
  
                         
 
a. 
For comparative purposes, amounts have been presented on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also include certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007.
 
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, maintenance, labor, sulfuric acid and other input costs,
 
6
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 $2.15 per pound and an average molybdenum price of $27 per pound for the fourth quarter of 2008, achievement of current 2008 sales estimates and using recent prices for commodity-based input costs, FCX estimates that its average unit net cash costs, including molybdenum credits, for its North America copper mines would approximate $1.39 per pound of copper for fourth-quarter 2008 and $1.28 per pound for the year.  Unit net cash costs for 2008 would change by approximately $0.01 per pound for each $2 per pound change in the average price of molybdenum for the fourth quarter of 2008.
 
FCX’s seven operating North America copper mines have varying cost structures because of differences in ore grades and ore characteristics, processing costs, by-products and other factors.  During third-quarter 2008, North America’s unit net cash costs ranged from a net credit of $0.73 per pound at one mine to $2.12 per pound at another operation.  Approximately ten percent of North America’s production had cash costs above $2.00 per pound in third-quarter 2008 and approximately 45 percent had cash costs between $1.90 per pound and $2.00 per pound.  FCX is undertaking a review of its operations, taking into account reduced copper prices and recent declines in commodity-based input costs, to determine whether certain operations should be curtailed.

South America Mines.  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 copper concentrates.  FCX owns a 51 percent interest in El Abra, an open-pit mine producing electrowon copper cathodes.

Consolidated
  
Third Quarter
  
Nine Months
  
South America Mining Operations
  
2008
  
2007
  
2008
  
2007a
  
                   
Copper (millions of recoverable pounds)
                  
Production
  
394
  
377
  
1,116
  
1,022
  
Sales
  
391
  
376
  
1,122
  
1,020
  
Average realized price per pound
  
$3.02
  
$3.63
  
$3.38
  
$3.48
  
                   
Gold (thousands of recoverable ounces)
                  
Production
  
32
  
31
  
83
  
83
  
Sales
  
30
  
31
  
83
  
84
  
Average realized price per ounce
  
$856
  
$704
  
$891
  
$644
  
 
a. 
Amounts reflect the combination of FCX’s historical results with Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
 
South America copper sales in the third quarter of 2008 were higher than in third-quarter 2007 primarily because of the timing of shipments at El Abra, and also reflected higher production from Candelaria and Ojos del Salado primarily resulting from improved milling rates.
 
For the year 2008, FCX expects South America sales of 1.5 billion pounds of copper and 110 thousand ounces of gold, compared with 1.4 billion pounds of copper and 114 thousand ounces of gold for the year 2007, which includes combined FCX historical results and Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 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 year 2007, which includes combined FCX historical results and Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
7
    Unit Net Cash Costs.  The following table summarizes unit net cash costs at the South America copper mines.
 
 
Third Quarter
  
Nine Months
  
 
2008
  
2007
  
2008
  
2007a
  
Per pound of copper:
                        
Site production and delivery, after adjustments
$
1.22
  
$
0.98
  
$
1.15
  
$
0.89
  
By-product credits, primarily gold and molybdenum
  
(0.15
)
  
(0.08
)
  
(0.13
)
  
(0.08
)
Treatment charges
  
0.09
    
0.24
    
0.16
    
0.21
  
Unit net cash costsb
$
1.16
  
$
1.14
  
$
1.18
  
$
1.02
  
                         
 
a. 
For comparative purposes, amounts have been presented on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also include certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007.
 
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 contractor costs and higher mining rates at Candelaria.  These increases were partly offset by increased production and favorable by-product credits.
 
Assuming achievement of current 2008 sales estimates and using recent prices for commodity-based input costs, FCX estimates that its average unit net cash costs, including gold and molybdenum credits, for its South America mines would approximate $1.07 per pound of copper for fourth-quarter 2008 and approximately $1.15 per pound for the year.
 
During third-quarter 2008, unit net cash costs for FCX’s South America copper mines ranged from $0.88 per pound to $1.83 per pound.  Approximately 25 percent of South America’s production had cash costs above $1.80 per pound in third-quarter 2008.  As a result of changing market conditions, FCX is reviewing its South America operations to determine if any changes to capital spending and operating plans are warranted.

Indonesia 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
  
Third Quarter
  
Nine Months
  
Indonesia Mining Operations
  
2008
  
2007
  
2008
  
2007
  
                   
Copper (millions of recoverable pounds)
                  
Production
  
256
  
177
  
678
  
943
  
Sales
  
264
  
197
  
700
  
948
  
Average realized price per pound
  
$2.94
  
$3.63
  
$3.33
  
$3.48
  
                   
Gold (thousands of recoverable ounces)
                  
Production
  
264
  
182
  
731
  
2,051
  
Sales
  
271
  
234
  
757
  
2,061
  
Average realized price per ounce
  
$870
  
$695
  
$897
  
$668
  
 
Indonesia copper and gold sales in the third quarter of 2008 were higher than in the third quarter of 2007 as a result of the expected mining in a higher 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.
 
8
    Third-quarter 2008 results were impacted by restricted access to high-grade material following the small scale failure at the Grasberg open pit in early September 2008.  Remediation activities have been substantially completed and PT-FI regained access to the affected high-grade section in October 2008.  Fourth-quarter 2008 sales are expected to approximate 400 million pounds of copper and 370 thousand ounces of gold.
 
FCX expects Indonesia sales of 1.1 billion pounds of copper and 1.1 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.  Indonesia’s production and sales volumes for copper and gold are expected to be higher in 2009 as PT-FI mines higher grade ore.
 
Unit Net Cash Costs.  The following table summarizes PT-FI’s unit net cash costs.

 
Third Quarter
  
Nine Months
  
 
2008
  
2007
  
2008
  
2007
  
Per pound of copper:
                        
Site production and delivery, after adjustments
$
1.76
  
$
1.76
  
$
1.84
  
$
1.10
  
Gold and silver credits
  
(0.93
)
  
(0.90
)
  
(1.04
)
  
(1.50
)
Treatment charges
  
0.24
    
0.34
    
0.28
    
0.35
  
Royalties
  
0.12
    
0.10
    
0.12
    
0.12
  
Unit net cash costsa
$
1.19
  
$
1.30
  
$
1.20
  
$
0.07
  
                         
 
a. 
For a reconciliation of unit net cash costs 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 $1.19 per pound for third-quarter 2008, compared with $1.30 per pound for third-quarter 2007.  The lower unit net cash costs in 2008 reflected higher copper and gold volumes and higher gold prices, partly offset by higher input costs during third-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.
 
Assuming average copper prices of $2.15 per pound and average gold prices of $800 per ounce for the fourth quarter of 2008, achievement of current 2008 sales estimates and using recent prices for commodity-based input costs, PT-FI estimates that its 2008 unit net cash costs, including gold and silver credits, would approximate $0.76 per pound for the fourth quarter and average $1.04 per pound for the year.  Unit net cash costs for 2008 would change by approximately $0.01 per pound for each $25 per ounce change in the average price of gold for the fourth quarter of 2008.
 
FCX expects PT-FI’s 2009 unit net cash cost to be significantly lower than 2008 levels because of higher gold volumes and reduced commodity-based input costs.
 
Molybdenum.  FCX is the world’s largest producer of molybdenum.  FCX conducts molybdenum mining operations at the Henderson underground mine in Colorado in addition to sales of by-product molybdenum from FCX’s North and South America copper mines.  FCX is engaged in a project to restart the Climax open-pit molybdenum mine in Colorado.  These mining operations are wholly owned.
 

Consolidated
  
Third Quarter
  
Nine Months
  
Molybdenum Mining Operations
  
2008
  
2007
  
2008
  
2007a
  
                   
Molybdenum (millions of recoverable pounds)
                  
Productionb
  
13
  
10
  
33
  
30
  
Salesc
  
19
  
16
  
59
  
50
  
Average realized price per pound
  
$32.11
  
$27.89
  
$31.78
  
$25.12
  
 
a. 
Amounts reflect the combination of FCX’s historical results with Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
 
b. 
Amounts reflect production at Henderson.
 
9
 
c. 
Includes sales of molybdenum produced as a by-product at the North America and South America copper mines.  Excludes sales of purchased metal.
 
In the third quarter of 2008, consolidated molybdenum sales from the Henderson mine and by-product mines totaled 19 million pounds, three million pounds higher than third-quarter 2007.
 
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 are expected to be priced at approximate prevailing market prices.  The Metals Week Dealer Oxide closing price for molybdenum on October 20, 2008, was $27.50 per pound.
 
For the year 2008, FCX expects molybdenum sales from its mines to approximate 74 million pounds, compared with 69 million pounds of molybdenum for year 2007, which includes combined FCX historical results and Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007.
 
Unit Net Cash Costs.  Third-quarter 2008 unit net cash costs of $4.90 per pound of molybdenum at the Henderson molybdenum mine were higher, compared with unit net cash costs of $4.34 per pound for third-quarter 2007, primarily because of higher input costs, including outside services, supplies and energy.  Assuming achievement of current 2008 sales estimates, FCX estimates 2008 average unit net cash costs for its Henderson mine of approximately $5.00 per pound of molybdenum.

OTHER ITEMS
 
FCX defers recognizing profits on PT-FI’s and its South America 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 affiliate, until final sales to third parties occur.  Changes in these net deferrals resulted in additions to FCX’s net income totaling $33 million, $0.07 per share, in both the third quarter of 2008 and the first nine months of 2008.  For the 2007 periods, changes in these net deferrals resulted in an addition to FCX’s net income totaling $91 million, $0.20 per share, in the third quarter and a reduction to net income of $11 million, $0.03 per share, in the first nine months.  At September 30, 2008, FCX’s net deferred profits on PT-FI’s and its South America mines’ concentrate inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income after taxes and minority interests totaled $59 million.

DEVELOPMENT and EXPLORATION ACTIVITIES
 
Development Activities.  FCX is engaged in capital projects to expand its production volumes, extend its mine lives and develop large-scale underground ore bodies.  Recently completed and current major projects under way include a major new mining complex at Safford, Arizona; a project to restart open-pit mining at the Climax molybdenum mine; 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 these projects, FCX has also been reviewing its properties to evaluate potential expansion opportunities associated with existing ore bodies.  In response to the significant change in economic conditions and the recent sharp decline in copper prices, FCX is deferring several expansion projects, including the incremental expansion projects at Sierrita and Bagdad and the planned restart of the Miami mine.  FCX had previously estimated capital costs of $370 million for these projects and production of 180 million pounds of copper and six million pounds of molybdenum per year beginning in 2010.
 
North America.  Construction of a major new copper mine in Safford, Arizona, is complete and copper production is being ramped up.  Copper production at Safford totaled 22 million pounds in first-quarter 2008, 24 million pounds in second-quarter 2008 and 43 million pounds in third-quarter 2008.  Design capacity of the ore stacking circuit was reached during third-quarter 2008 and progress is being made on leach recovery optimization.  The Safford copper mine produces ore from two open-pit mines and includes a solution extraction/electrowinning facility.  FCX will continue to pursue additional
 
10
exploration and development potential in this district, including the Lone Star project, a potentially large mineral resource currently being evaluated with a drilling program.
 
FCX is advancing its plan to restart 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.  Engineering and construction are progressing well.  The initial $500 million project involves open-pit mining and the construction of new milling facilities.  After start-up and commissioning during 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.  Further expansions will depend in large part on market conditions.
 
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 has been targeted to begin in 2010 and would be 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.  FCX is currently assessing the potential to defer spending on this project as a result of current market conditions.
 
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 third-quarter rates averaging 60,800 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, currently designed 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.  FCX will seek opportunities to defer capital spending in the Grasberg district where possible.
 
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 analyses and metallurgical testing to evaluate the potential of this highly prospective district and expects its ore reserves to increase significantly over time.
 
Approximately $1.0 billion 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.  The timing of these expansions will be dependent on a number of factors, including general economic and market conditions.
 
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.
11
      FCX is continuing to develop plans to enhance the economic returns of the project, including potential 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.
 
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 approximately 100 currently.  Exploration expenses in 2008 are expected to approximate $275 million.  In response to current market conditions, FCX may reduce exploration expenses in future periods by deferring certain activities.
 
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.  FCX expects 2008 reserve additions to significantly exceed 2008 estimated production.
 
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 depleted 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.

CASH and DEBT
 
At September 30, 2008, FCX had consolidated cash of $1.2 billion and net cash available to the parent company of $0.8 billion as shown below (in billions):
 

 
September 30,
  
 
2008
  
Cash at parent company
$
0.4
a
Cash from international operations
  
0.8
  
Total consolidated cash
  
1.2
  
Less minority interests’ share
  
(0.2
)
Cash, net of minority interests’ share
  
1.0
  
Withholding and other taxes if distributed
  
(0.2
)b
Net cash available to parent company
$
0.8
  
 
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 September 30, 2008, FCX had $7.2 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 facilities
  
0.3
  
Other borrowings, net
  
0.2
  
Net repayments under revolving credit facilities
  
(0.3
)
Other repayments, net
  
(0.2
)
Total debt at September 30, 2008
$
7.2
  
 
At September 30, 2008, FCX had $63 million of letters of credit issued, resulting in total availability of $1.4 billion under its revolving credit facilities that mature in 2012.
 
12
FCX has no significant debt maturities in the near-term as indicated in the table below (in millions).
 

Year
    
2008
$
4
2009
  
46
2010
  
10
Total 2008 -2010
$
60

 
OUTLOOK
 
FCX’s actual consolidated sales volumes for the first nine months of 2008 and projected consolidated sales volumes for the year 2008 are shown below:

   
2008
  
   
First
      
   
Nine Months
  
Full-Year
  
Consolidated Sales from Mines
  
Actual
  
Estimate
  
Copper (recoverable pounds):
  
(billions)
  
(billions)
  
North America
  
1.1
  
1.4
  
South America
  
1.1
  
1.5
  
Indonesia
  
0.7
  
1.1
  
Total
  
2.9
  
4.0
  
           
Gold (recoverable ounces):
  
(millions)
  
(millions)
  
Indonesia
  
0.7
  
1.1
  
Other
  
0.1
  
0.1
  
Total
  
0.8
  
1.2
  
           
Molybdenum (million of recoverable pounds)
  
59
a
74
a
 
a. 
 Includes sales of molybdenum produced as a by-product at the North America and South America copper mines.

 
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 $2.15 per pound of copper, $800 per ounce of gold and $27 per pound of molybdenum for the fourth quarter of 2008, FCX’s consolidated operating cash flows would be in excess of $3.5 billion in 2008.  Each $0.20 per pound change in copper prices in the fourth quarter would impact 2008 operating cash flows by approximately $250 million.  FCX’s capital expenditures for 2008 are currently estimated to approximate $2.7 billion, including $800 million in fourth-quarter 2008.  In response to current economic conditions, FCX is taking steps to reduce capital spending and operating costs.

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 is committed to maintaining a strong balance sheet.
 
FCX’s current annual common dividend is $2.00 per share.  Common dividends currently total approximately $755 million per year and preferred dividends total approximately $255 million per year.  During the third quarter of 2008, FCX purchased 6.3 million shares of its common stock for $500 million, an average of $79.15 per share.  As of October 20, 2008, 23.7 million shares remain available under the Board authorized open market share purchase program.  The timing of future purchases is dependent
 
13
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.  Because of recent financial market turmoil and sharp declines in commodity prices, FCX has not purchased any of its common shares since September 15, 2008, and does not anticipate purchasing shares of its common stock in the near term.  The Board will continue to review FCX’s financial policy on an ongoing basis.
 
 
 
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 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 third-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, November 14, 2008.
 
# # #
14

 
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
     
   
Three Months Ended September 30,
COPPER
  
Production
  
Sales
(millions of recoverable pounds)
  
2008
  
2007
  
2008
  
2007
MINED COPPER (FCX’s net interest in %)
                        
North America
                        
Morenci (85%)
  
163
a
  
187
a
  
160
a
  
202
a
Bagdad (100%)
  
59
    
58
    
57
    
58
  
Sierrita (100%)
  
46
    
41
    
45
    
44
  
Chino (100%)
  
36
    
49
    
42
    
51
  
Safford (100%)
  
43
    
-
    
33
    
-
  
Tyrone (100%)
  
21
    
12
    
19
    
15
  
Miami (100%)
  
5
    
6
    
4
    
6
  
Tohono (100%)
  
-
    
1
    
1
    
-
  
Other (100%)
  
1
    
3
    
-
    
-
  
Total North America
  
374
    
357
    
361
    
376
  
                         
South America
                        
Cerro Verde (53.56%)
  
174
    
171
    
173
    
174
  
Candelaria/Ojos del Salado (80%)
  
128
    
118
    
122
    
118
  
El Abra (51%)
  
92
    
88
    
96
    
84
  
Total South America
  
394
    
377
    
391
    
376
  
                         
Indonesia
                        
Grasberg (90.64%)
  
256
b
  
177
b
  
264
b
  
197
b
Consolidated
  
1,024
    
911
    
1,016
    
949
  
                         
Less minority participants’ share
  
176
    
163
    
176
    
164
  
Net
  
848
    
748
    
840
    
785
  
                         
Consolidated sales from mines
              
1,016
    
949
  
Purchased copper
              
122
    
167
  
Total consolidated sales
              
1,138
    
1,116
  
                         
Average realized price per pound
              
$3.14
    
$3.53
c
                         
GOLD
                        
(thousands of recoverable ounces)
                        
MINED GOLD (FCX’s net interest in %)
                        
North America (100%)
  
4
    
3
    
6
    
4
  
South America (80%)
  
32
    
31
    
30
    
31
  
Indonesia (90.64%)
  
264
b
  
182
b
  
271
b
  
234
b
Consolidated
  
300
    
216
    
307
    
269
  
                         
Less minority participants’ share
  
31
    
24
    
31
    
28
  
Net
  
269
    
192
    
276
    
241
  
                         
Consolidated sales from mines
              
307
    
269
  
Purchased gold
              
-
    
2
  
Total consolidated sales
              
307
    
271
  
                         
Average realized price per ounce
              
$869
    
$695
  
                         
MOLYBDENUM
                        
(millions of recoverable pounds)
                        
MINED MOLYBDENUM (FCX’s net interest in %)
                        
Henderson (100%)
  
13
    
10
    
N/A
    
N/A
  
By-product – North America (100%)
  
7
a
  
8
a
  
N/A
    
N/A
  
By-product – Cerro Verde (53.56%)
  
1
    
-
    
N/A
    
N/A
  
Consolidated
  
21
    
18
    
19
    
16
  
                         
Less minority participants’ share
  
-
d
  
-
    
-
d
  
-
  
Net
  
21
    
18
    
19
    
16
  
                         
Consolidated sales from mines
              
19
    
16
  
Purchased molybdenum
              
2
    
2
  
Total consolidated sales
              
21
    
18
  
                         
Average realized price per pound
              
$32.11
    
$27.89
  
                         
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 $0.04 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)
     
   
Nine Months Ended September 30,
COPPER
  
Production
  
Sales
(millions of recoverable pounds)
  
2008
  
2007a
  
2008
  
2007a
MINED COPPER (FCX’s net interest in %)
                        
North America
                        
Morenci (85%)
  
464
b
  
528
b
  
478
b
  
534
b
Bagdad (100%)
  
165
    
151
    
164
    
151
  
Sierrita (100%)
  
136
    
113
    
132
    
121
  
Chino (100%)
  
127
    
134
    
139
    
137
  
Safford (100%)
  
89
    
-
    
66
    
-
  
Tyrone (100%)
  
52
    
36
    
49
    
40
  
Miami (100%)
  
14
    
15
    
14
    
19
  
Tohono (100%)
  
1
    
3
    
2
    
2
  
Other (100%)
  
3
    
13
    
3
    
12
  
Total North America
  
1,051
    
993
c
  
1,047
    
1,016
c
                         
South America
                        
Cerro Verde (53.56%)
  
519
    
425
    
522
    
419
  
Candelaria/Ojos del Salado (80%)
  
325
    
326
    
326
    
330
  
El Abra (51%)
  
272
    
271
    
274
    
271
  
Total South America
  
1,116
    
1,022
c
  
1,122
    
1,020
c
                         
Indonesia
                        
Grasberg (90.64%)
  
678
d
  
943
d
  
700
d
  
948
d
Consolidated
  
2,845
    
2,958
    
2,869
    
2,984
  
                         
Less minority participants’ share
  
503
    
484
    
507
    
482
  
Net
  
2,342
    
2,474
    
2,362
    
2,502
  
                         
Consolidated sales from mines
              
2,869
    
2,984
  
Purchased copper
              
423
    
524
  
Total consolidated sales
              
3,292
    
3,508
  
                         
Average realized price per pound
              
$3.43
    
$3.32
e
                         
GOLD
                        
(thousands of recoverable ounces)
                        
MINED GOLD (FCX’s net interest in %)
                        
North America (100%)
  
11
    
9
    
12
    
14
  
South America (80%)
  
83
    
83
f
  
83
    
84
f
Indonesia (90.64%)
  
731
d
  
2,051
d
  
757
d
  
2,061
d
Consolidated
  
825
    
2,143
    
852
    
2,159
  
                         
Less minority participants’ share
  
85
    
209
    
87
    
210
  
Net
  
740
    
1,934
    
765
    
1,949
  
                         
Consolidated sales from mines
              
852
    
2,159
  
Purchased gold
              
1
    
6
  
Total consolidated sales
              
853
    
2,165
  
                         
Average realized price per ounce
              
$897
    
$667
  
                         
MOLYBDENUM
                        
(millions of recoverable pounds)
                        
MINED MOLYBDENUM (FCX’s net interest in %)
                        
Henderson (100%)
  
33
    
30
    
N/A
    
N/A
  
By-product – North America (100%)
  
22
b
  
23
b
  
N/A
    
N/A
  
By-product – Cerro Verde (53.56%)
  
2
    
-
    
N/A
    
N/A
  
Consolidated
  
57
    
53
g
  
59
    
50
g
                         
Less minority participants’ share
  
1
    
-
    
1
    
-
  
Net
  
56
    
53
    
58
    
50
  
                         
Consolidated sales from mines
              
59
    
50
  
Purchased molybdenum
              
6
    
7
  
Total consolidated sales
              
65
    
57
  
                         
Average realized price per pound
              
$31.78
    
$25.12
  
                         
a.  The nine-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 America copper production of 258 million pounds and sales of 283 million pounds and South America 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 $0.07 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
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2008
  
2007
  
2008
  
2007 a
  
                   
100% North America Copper Mines Operating Data, Including Joint Venture Interest
              
                   
Solution Extraction/Electrowinning (SX/EW) Operations
                  
Leach ore placed in stockpiles (metric tons per day)
  
1,067,000
  
797,600
  
1,100,300
  
739,800
  
Average copper ore grade (percent)
  
0.23
  
0.21
  
0.22
  
0.25
  
Copper production (millions of recoverable pounds)
  
251
  
246
  
683
  
722
  
                   
Mill Operations
                  
Ore milled (metric tons per day)
  
247,900
  
226,400
  
249,800
  
221,000
  
Average ore grades (percent):
                  
Copper
  
0.40
  
0.36
  
0.40
  
0.34
  
Molybdenum
  
0.02
  
0.03
  
0.02
  
0.02
  
Copper recovery rate (percent)
  
83.5
  
86.4
  
83.1
  
85.4
  
Production (millions of recoverable pounds):
                  
Copper
  
151
  
144
  
450
  
364
  
Molybdenum (by-product)
  
7
  
8
  
22
  
23
  
                   
100% South America Copper Mines Operating Data
                  
                   
SX/EW Operations
                  
Leach ore placed in stockpiles (metric tons per day)
  
273,400
  
285,400
  
279,600
  
288,900
  
Average copper ore grade (percent)
  
0.45
  
0.45
  
0.44
  
0.42
  
Copper production (millions of recoverable pounds)
  
139
  
139
  
418
  
430
  
                   
Mill Operations
                  
Ore milled (metric tons per day)
  
189,800
  
181,400
  
179,300
  
163,700
  
Average ore grades (percent):
                  
Copper
  
0.78
  
0.76
  
0.75
  
0.72
  
Molybdenum
  
0.02
  
0.02
  
0.02
  
0.01
  
Copper recovery rate (percent)
  
87.8
  
88.4
  
89.5
  
87.3
  
Production (millions of recoverable pounds):
                  
Copper
  
255
  
238
  
698
  
592
  
Molybdenum
  
1
  
-
b
2
  
-
b
                   
100% Indonesia Mining Operating Data, Including Joint Venture Interest
              
                   
Ore milled (metric tons per day)
  
193,000
  
198,600
  
185,400
  
213,900
  
                   
Average ore grades:
                  
Copper (percent)
  
0.82
  
0.58
  
0.76
  
0.88
  
Gold (grams per metric ton)
  
0.61
  
0.70
  
0.59
  
1.47
  
                   
Recovery rates (percent):
                  
Copper
  
89.8
  
89.1
  
89.8
  
90.9
  
Gold
  
78.0
  
83.0
  
78.6
  
87.4
  
                   
Production (recoverable):
                  
Copper (millions of pounds)
  
274
  
194
  
725
  
984
  
Gold (thousands of ounces)
  
264
  
327
  
731
  
2,362
  
                   
100% Molybdenum Operating Data
                  
                   
Henderson Molybdenum Mine Operations
                  
Ore milled (metric tons per day)
  
27,800
  
22,300
  
26,500
  
24,000
  
Average molybdenum ore grade (percent)
  
0.25
  
0.25
  
0.23
  
0.23
  
Molybdenum production (millions of recoverable pounds)
  
13
  
10
  
33
  
30
  
                   
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
  
Nine Months Ended
  
 
September 30,
  
September 30,
  
 
2008
  
2007
  
2008
  
2007a
  
 
(In Millions, Except Per Share Amounts)
  
Revenues
$
4,616
b
$
5,066
b
$
15,729
b
$
12,755
b
Cost of sales:
                        
Production and delivery
  
2,874
c
  
2,662
c
  
8,316
c
  
6,105
c
Depreciation, depletion and amortization
  
442
c
  
356
c
  
1,322
c
  
846
c
Total cost of sales
  
3,316
    
3,018
    
9,638
    
6,951
  
Selling, general and administrative expenses
  
90
    
131
    
300
d
  
314
  
Exploration and research expenses
  
77
    
40
    
209
    
87
  
Total costs and expenses
  
3,483
    
3,189
    
10,147
    
7,352
  
Operating income
  
1,133
    
1,877
    
5,582
    
5,403
  
Interest expense, net
  
(139
)e
  
(155
)
  
(444
)e
  
(386
)
Losses on early extinguishment of debt
  
-
    
(36
)
  
(6
)
  
(171
)
Gains on sales of assets
  
-
    
47
f
  
13
f
  
85
f
Other income and expense, net
  
(14
)
  
48
    
(3
)
  
110
  
Income from continuing operations before income taxes, minority interests
                        
 and equity in affiliated companies’ net earnings
  
980
    
1,781
    
5,142
    
5,041
  
Provision for income taxes
  
(240
)
  
(653
)
  
(1,627
)
  
(1,875
)
Minority interests in net income of consolidated subsidiaries
  
(155
)
  
(307
)
  
(748
)
  
(728
)
Equity in affiliated companies’ net earnings
  
2
    
5
    
16
    
17
  
Income from continuing operations
  
587
    
826
    
2,783
    
2,455
  
Income from discontinued operations, net of taxes
  
-
    
12
g
  
-
    
44
g
Net income
  
587
    
838
    
2,783
    
2,499
  
Preferred dividends
  
(64
)
  
(63
)
  
(191
)
  
(144
)
Net income applicable to common stock
$
523
  
$
775
  
$
2,592
  
$
2,355
  
                         
Basic net income per share of common stock:
                        
Continuing operations
$
1.37
  
$
2.00
  
$
6.78
  
$
7.06
  
Discontinued operations
  
-
    
0.03
g
  
-
    
0.13
g
Basic net income per share of common stock
$
1.37
  
$
2.03
  
$
6.78
  
$
7.19
  
                         
Diluted net income per share of common stock:
                        
Continuing operations
$
1.31
  
$
1.85
  
$
6.20
  
$
6.46
  
Discontinued operations
  
-
    
0.02
g
  
-
    
0.12
g
Diluted net income per share of common stock
$
1.31
h
$
1.87
h
$
6.20
h
$
6.58
h
                         
Average common shares outstanding:
                        
Basic
  
382
i
  
382
i
  
383
i
  
327
i
Diluted
  
447
h
  
447
h
  
449
h
  
380
h
                         
Dividends declared per share of common stock
$
0.50
  
$
0.3125
  
$
1.375
  
$
0.9375
  
                         
a. 
Includes Phelps Dodge results beginning March 20, 2007.
b. 
Includes positive (negative) adjustments to prior period copper sales totaling $(282) million in third-quarter 2008, $(54) million in third-quarter 2007, $268 million in the 2008 nine-month period and $(42) million in the 2007 nine-month period.  In addition, charges for mark-to-market accounting adjustments on the 2007 copper price protection program totaled $44 million in third-quarter 2007 and $212 million in the 2007 nine-month period.
c. 
Includes impact of purchase accounting adjustments related to the Phelps Dodge acquisition, which increased production costs by $28 million in third-quarter 2008, $290 million in third-quarter 2007, $112 million in the 2008 nine-month period and $655 million in the 2007 nine-month period, and increased depreciation, depletion and amortization by $238 million in third-quarter 2008, $155 million in third-quarter 2007, $675 million in the 2008 nine-month period and $369 million in the 2007 nine-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 $29 million in third-quarter 2008 and $70 million in the 2008 nine-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 in the 2008 nine-month period and gains on sales of marketable equity securities in 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 $45 million in each of the nine-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 $49 million in third-quarter 2008, $48 million in third-quarter 2007, $146 million in the 2008 nine-month period and $99 million in the 2007 nine-month period.  The assumed conversions result in the inclusion of 63 million common shares in third-quarter 2008, 62 million common shares in third-quarter 2007, 63 million common shares in the 2008 nine-month period and 50 million common shares in the 2007 nine-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)
           
 
September 30,
    
December 31,
  
 
2008
    
2007
  
 
(In Millions)
  
ASSETS
              
Current assets:
              
Cash and cash equivalents
$
1,202
    
$
1,626
  
Trade accounts receivable
  
1,236
      
1,099
  
Other accounts receivable
  
427
      
196
  
Product inventories and materials and supplies, net
  
2,520
      
2,178
  
Mill and leach stockpiles
  
910
      
707
  
Other current assets
  
153
      
97
  
Total current assets
  
6,448
      
5,903
  
Property, plant, equipment and development costs, net
  
26,482
      
25,715
  
Goodwill
  
6,048
      
6,105
  
Long-term mill and leach stockpiles
  
1,260
      
1,106
  
Trust assets
  
549
      
606
  
Intangible assets, net
  
447
      
472
  
Other assets
  
772
      
754
  
Total assets
$
42,006
    
$
40,661
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Accounts payable and accrued liabilities
$
2,739
    
$
2,345
  
Current portion of reclamation and environmental liabilities
  
282
      
263
  
Accrued income taxes
  
261
      
420
  
Dividends payable
  
235
      
212
  
Current portion of long-term debt and short-term borrowings
  
23
      
31
  
Copper price protection program
  
-
      
598
  
Total current liabilities
  
3,540
      
3,869
  
Long-term debt, less current portion:
              
Senior notes
  
6,885
      
6,928
  
Project financing, equipment loans and other
  
301
      
252
  
Total long-term debt, less current portion
  
7,186
      
7,180
  
Deferred income taxes
  
6,757
      
7,300
  
Reclamation and environmental liabilities, less current portion
  
1,974
      
1,733
  
Other liabilities
  
1,093
      
1,106
  
Total liabilities
  
20,550
      
21,188
  
Minority interests in consolidated subsidiaries
  
1,429
      
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
  
13,697
      
13,407
  
Retained earnings
  
5,666
      
3,601
  
Accumulated other comprehensive income
  
41
      
42
  
Common stock held in treasury
  
(3,402
)
    
(2,841
)
Total stockholders’ equity
  
20,027
      
18,234
  
Total liabilities and stockholders’ equity
$
42,006
    
$
40,661
  
               


 
V
 

FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
       
   
Nine Months Ended
  
   
September 30,
  
   
2008
    
2007
  
   
(In Millions)
  
                 
Cash flow from operating activities:
                
Net income
  
$
2,783
    
$
2,499
  
Adjustments to reconcile net income to net cash provided by
                
operating activities:
                
Depreciation, depletion and amortization
    
1,322
      
864
  
Minority interests in net income of consolidated subsidiaries
    
748
      
738
  
Stock-based compensation
    
113
      
115
  
Charges for reclamation and environmental liabilities, including accretion
    
141
      
22
  
Unrealized losses on copper price protection program
    
-
      
212
  
Losses on early extinguishment of debt
    
6
      
171
  
Gain on sale of assets
    
(13
)
    
(85
)
Deferred income taxes
    
(347
)
    
(279
)
Increase in long-term mill and leach stockpiles
    
(154
)
    
(23
)
Increase in other long-term liabilities
    
78
      
64
  
Other, net
    
24
      
1
  
(Increases) decreases in working capital, excluding amounts
                
acquired from Phelps Dodge:
                
Accounts receivable
    
(198
)
    
(299
)
Inventories
    
(558
)
    
358
  
Other current assets
    
(58
)
    
-
  
Accounts payable and accrued liabilities
    
(152
)
    
427
  
Accrued income taxes
    
(424
)
    
215
  
Settlement of reclamation and environmental liabilities
    
(142
)
    
(73
)
Net cash provided by operating activities
    
3,169
      
4,927
  
                 
Cash flow from investing activities:
                
North America capital expenditures
    
(648
)
    
(601
)
South America capital expenditures
    
(229
)
    
(65
)
Indonesia capital expenditures
    
(332
)
    
(273
)
Africa capital expenditures
    
(699
)
    
(151
)
Other capital expenditures
    
(21
)
    
(48
)
Acquisition of Phelps Dodge, net of cash acquired
    
(1
)
    
(13,907
)
Proceeds from the sales of assets and other, net
    
59
      
79
  
Net cash used in investing activities
    
(1,871
)
    
(14,966
)
                 
Cash flow from financing activities:
                
Proceeds from term loans under bank credit facility
    
-
      
12,450
  
Repayments of term loans under bank credit facility
    
-
      
(10,900
)
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 other debt
    
183
      
412
  
Repayments of other debt
    
(198
)
    
(752
)
Purchases of FCX common stock
    
(500
)
    
-
  
Cash dividends paid:
                
Common stock
    
(504
)
    
(301
)
Preferred stock
    
(191
)
    
(112
)
Minority interests
    
(714
)
    
(440
)
Net proceeds from (payments for) exercised stock options
    
22
      
(15
)
Excess tax benefit from exercised stock options
    
25
      
9
  
Bank credit facilities fees and other, net
    
155
      
(250
)
Net cash (used in) provided by financing activities
    
(1,722
)
    
11,600
  
                 
Cash included with assets held for sale
    
-
      
(91
)
Net (decrease) increase in cash and cash equivalents
    
(424
)
    
1,470
  
Cash and cash equivalents at beginning of year
    
1,626
      
907
  
Cash and cash equivalents at end of period
  
$
1,202
    
$
2,377
  
 
 

 
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
  
Nine months ended September 30, 2007
FCX
  
Dodgea
  
Adjustments
  
Consolidated
  
Revenues
$
12,755
  
$
2,294
  
$
90
  
$
15,139
b
Operating income
$
5,403
  
$
793
  
$
(131
)
$
6,065
b,c
Income from continuing operations before
                        
income taxes, minority interests and equity
                        
in affiliated companies’ net earnings
$
5,041
  
$
836
  
$
(271
)
$
5,606
b,c,d,e
Net income from continuing operations
                        
applicable to common stock
$
2,311
  
$
493
  
$
(224
)
$
2,580
b,c,d,e
Diluted net income per share of common
                        
stock from continuing operations
$
6.46
    
N/A
    
N/A
  
$
6.20
b,c,d,e
Diluted weighted-average shares of
                        
common stock outstanding
  
380
    
N/A
    
N/A
    
447
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 nine months ended September 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 $232 million ($142 million to net income or $0.32 per share). Also includes pro forma credits for amortization of acquired intangible liabilities totaling $90 million ($55 million to net income or $0.12 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 $1.4 billion ($831 million to net income of $1.86 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 $469 million ($366 million to net income or $0.82 per share). Also includes accretion on the fair value of environmental liabilities resulting from the acquisition totaling $72 million ($44 million to net income or $0.10 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, lower of cost or market adjustments, 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. In addition, for comparative purposes, FCX has presented the calculation for the North America copper mines, South America copper mines and Henderson molybdenum mine for the nine month period ended September 30, 2007, on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also includes certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007. As the pre-acquisition results represent the results of the North America and South America copper mines and the Molybdenum operations under Phelps Dodge management, such results are not necessarily indicative of what past results would have been under FCX management or future operating results. Presentations under both the by-product and co-product methods are shown together with reconciliations to amounts reported in FCX’s consolidated financial statements and in FCX’s consolidated pro forma financial data for the nine months ended September 30, 2007 (see page VII).


 
VIII
 
 

FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended September 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
1,236
  
$
1,236
  
$
231
  
$
22
  
$
1,489
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
747
    
648
    
105
    
11
    
764
  
By-product creditsa
  
(236
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
32
    
31
    
-
    
1
    
32
  
Net cash costs
  
543
    
679
    
105
    
12
    
796
  
Depreciation, depletion and amortization
  
188
    
167
    
19
    
2
    
188
  
Noncash and nonrecurring costs, net
  
33
c
  
31
c
  
1
    
1
    
33
  
Total costs
  
764
    
877
    
125
    
15
    
1,017
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(83
)
  
(83
)
  
-
    
-
    
(83
)
Idle facility and other non-inventoriable costs
  
(16
)
  
(15
)
  
(1
)
  
-
    
(16
)
Gross profit
$
373
  
$
261
  
$
105
  
$
7
  
$
373
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
361
    
361
                    
Molybdenum (in million pounds)
              
7
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.42
  
$
3.42
  
$
33.47
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
2.07
    
1.79
    
15.30
              
By-product credits
  
(0.65
)
  
-
    
-
              
Treatment charges
  
0.09
    
0.09
    
-
              
Unit net cash costs
  
1.51
    
1.88
    
15.30
              
Depreciation, depletion and amortization
  
0.52
    
0.46
    
2.75
              
Noncash and nonrecurring costs, net
  
0.09
c
  
0.09
c
  
0.14
              
Total unit costs
  
2.12
    
2.43
    
18.19
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.23
)
  
(0.23
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.04
)
  
(0.04
)
  
(0.03
)
            
Gross profit per pound
$
1.03
  
$
0.72
  
$
15.25
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
1,489
  
$
764
  
$
188
              
Net noncash and nonrecurring costs per above
  
N/A
    
33
    
N/A
              
Treatment charges per above
  
N/A
    
32
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales and hedging per above
  
(83
)
  
N/A
    
N/A
              
Eliminations and other
  
(4
)
  
18
    
6
              
North America copper mines
  
1,402
    
847
    
194
              
South America copper mines
  
1,008
    
497
    
123
              
Indonesia mining
  
802
    
470
    
52
              
Molybdenum
  
683
    
417
    
52
              
Rod & Refining
  
1,485
    
1,478
    
2
              
Atlantic Copper Smelting & Refining
  
625
    
611
    
9
              
Corporate, other & eliminations
  
(1,389
)
  
(1,446
)
  
10
              
As reported in FCX’s consolidated financial
                              
statements
$
4,616
  
$
2,874
  
$
442
              
                               
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 product revenues and production costs.
c. Includes charges totaling $16 million ($0.04 per pound) for lower of cost or market inventory adjustments.

 
IX
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended September 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
1,307
  
$
1,307
  
$
245
  
$
14
  
$
1,566
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
528
    
459
    
74
    
7
    
540
  
By-product creditsa
  
(247
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
34
    
33
    
-
    
1
    
34
  
Net cash costs
  
315
    
492
    
74
    
8
    
574
  
Depreciation, depletion and amortizationc
  
175
    
155
    
19
    
1
    
175
  
Noncash and nonrecurring costs, netc
  
166
    
161
    
2
    
3
    
166
  
Total costs
  
656
    
808
    
95
    
12
    
915
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(43
)
  
(43
)
  
-
    
-
    
(43
)
Idle facility and other non-inventoriable costs
  
(8
)
  
(9
)
  
-
    
1
    
(8
)
Gross profit
$
600
  
$
447
  
$
150
  
$
3
  
$
600
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
376
    
376
                    
Molybdenum (in million pounds)
              
8
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.48
  
$
3.48
  
$
31.80
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.41
    
1.22
    
9.69
              
By-product credits
  
(0.66
)
  
-
    
-
              
Treatment charges
  
0.09
    
0.09
    
-
              
Unit net cash costs
  
0.84
    
1.31
    
9.69
              
Depreciation, depletion and amortizationc
  
0.46
    
0.41
    
2.46
              
Noncash and nonrecurring costs, netc
  
0.44
    
0.43
    
0.22
              
Total unit costs
  
1.74
    
2.15
    
12.37
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.12
)
  
(0.12
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.02
)
  
(0.02
)
  
-
              
Gross profit per pound
$
1.60
  
$
1.19
  
$
19.43
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
1,566
  
$
540
  
$
175
              
Net noncash and nonrecurring costs per above
  
N/A
    
166
    
N/A
              
Treatment charges per above
  
N/A
    
34
    
N/A
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging per above
  
(43
)
  
N/A
    
N/A
              
Eliminations and other
  
3
    
47
    
3
              
North America copper mines
  
1,526
    
787
    
178
              
South America copper mines
  
1,368
    
455
    
94
              
Indonesia mining
  
837
    
351
    
43
              
Molybdenum
  
519
    
380
    
22
              
Rod & Refining
  
1,736
    
1,726
    
3
              
Atlantic Copper Smelting & Refining
  
688
    
674
    
8
              
Corporate, other & eliminations
  
(1,608
)
  
(1,711
)
  
8
              
As reported in FCX’s consolidated financial statements
$
5,066
  
$
2,662
  
$
356
              
                               
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 product revenues and production costs.
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.
 

 
X
 

 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs
         
Nine Months Ended September 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
a
Other
b
Total
  
                               
Revenues, after adjustments shown below
$
3,721
  
$
3,721
  
$
720
  
$
59
  
$
4,500
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1,936
    
1,684
    
265
    
26
    
1,975
  
By-product creditsa
  
(740
)
  
-
    
-
          
-
  
Treatment charges
  
100
    
97
    
-
    
3
    
100
  
Net cash costs
  
1,296
    
1,781
    
265
    
29
    
2,075
  
Depreciation, depletion and amortization
  
551
    
490
    
56
    
5
    
551
  
Noncash and nonrecurring costs, net
  
83
c
  
79
c
  
3
    
1
    
83
  
Total costs
  
1,930
    
2,350
    
324
    
35
    
2,709
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(28
)
  
(28
)
  
-
    
-
    
(28
)
Idle facility and other non-inventoriable costs
  
(43
)
  
(42
)
  
(1
)
  
-
    
(43
)
Gross profit
$
1,720
  
$
1,301
  
$
395
  
$
24
  
$
1,720
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
1,044
    
1,044
                    
Molybdenum (in million pounds)
              
22
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.56
  
$
3.56
  
$
33.01
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.86
    
1.61
    
12.14
              
By-product credits
  
(0.71
)
  
-
    
-
              
Treatment charges
  
0.09
    
0.09
    
-
              
Unit net cash costs
  
1.24
    
1.70
    
12.14
              
Depreciation, depletion and amortization
  
0.53
    
0.47
    
2.57
              
Noncash and nonrecurring costs, net
  
0.08
c
  
0.08
c
  
0.15
              
Total unit costs
  
1.85
    
2.25
    
14.86
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.03
)
  
(0.03
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.04
)
  
(0.04
)
  
(0.03
)
            
Gross profit per pound
$
1.64
  
$
1.24
  
$
18.12
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
4,500
  
$
1,975
  
$
551
              
Net noncash and nonrecurring costs per above
  
N/A
    
83
    
N/A
              
Treatment charges per above
  
N/A
    
100
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales and hedging per above
  
(28
)
  
N/A
    
N/A
              
Eliminations and other
  
(3
)
  
58
    
14
              
North America copper mines
  
4,469
    
2,216
    
565
              
South America copper mines
  
4,043
    
1,391
    
380
              
Indonesia mining
  
2,870
    
1,308
    
145
              
Molybdenum
  
2,117
    
1,298
    
160
              
Rod & Refining
  
4,856
    
4,831
    
5
              
Atlantic Copper Smelting & Refining
  
2,014
    
1,960
    
27
              
Corporate, other & eliminations
  
(4,640
)
  
(4,688
)
  
40
              
As reported in FCX’s consolidated financial
                              
statements
$
15,729
  
$
8,316
  
$
1,322
              
                               
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 product revenues and production costs.
c. Includes charges totaling $22 million ($0.02 per pound) for lower of cost or market inventory adjustments.

 
XI
 
 

FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
North America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs (Pro Forma)a
         
Nine Months Ended September 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Molybdenum
b
Other
c
Total
  
                               
Revenues, after adjustments shown below
$
3,244
  
$
3,244
  
$
658
  
$
43
  
$
3,945
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1,398
    
1,204
    
226
    
19
    
1,449
  
By-product creditsb
  
(650
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
85
    
83
    
-
    
2
    
85
  
Net cash costs
  
833
    
1,287
    
226
    
21
    
1,534
  
Depreciation, depletion and amortization
  
475
d
  
404
d
  
68
d
  
3
    
475
  
Noncash and nonrecurring costs, net
  
400
e
  
372
e
  
13
e
  
15
    
400
  
Total costs
  
1,708
    
2,063
    
307
    
39
    
2,409
  
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(173
)
  
(173
)
  
-
    
-
    
(173
)
Idle facility and other non-inventoriable costs
  
(26
)
  
(26
)
  
-
    
-
    
(26
)
Gross profit
$
1,337
  
$
982
  
$
351
  
$
4
  
$
1,337
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
1,004
    
1,004
                    
Molybdenum (in million pounds)
              
23
              
                               
Gross profit per pound of copper and molybdenum:
                    
                               
Revenues, after adjustments shown below
$
3.23
  
$
3.23
  
$
28.57
              
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.39
    
1.20
    
9.83
              
By-product creditsb
  
(0.65
)
  
-
    
-
              
Treatment charges
  
0.09
    
0.08
    
-
              
Unit net cash costs
  
0.83
    
1.28
    
9.83
              
Depreciation, depletion and amortization
  
0.47
d
  
0.40
d
  
2.96
d
            
Noncash and nonrecurring costs, net
  
0.39
e
  
0.37
e
  
0.54
e
            
Total unit costs
  
1.69
    
2.05
    
13.33
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
  
(0.17
)
  
(0.17
)
  
-
              
Idle facility and other non-inventoriable costs
  
(0.03
)
  
(0.03
)
  
-
              
Gross profit per pound
$
1.34
  
$
0.98
  
$
15.24
              
                               
Reconciliation to Amounts Reported
                              
           
Depreciation,
              
       
Production
  
Depletion and
              
(In Millions)
Revenues
  
and Delivery
  
Amortization
              
Totals presented above
$
3,945
  
$
1,449
  
$
475
              
Net noncash and nonrecurring costs per above
  
N/A
    
400
    
N/A
              
Treatment charges per above
  
N/A
    
85
    
N/A
              
Revenue adjustments, primarily for pricing
                              
on prior period open sales and hedging
                              
per above
  
(173
)
  
N/A
    
N/A
              
Eliminations and other
  
11,367
    
5,497
    
707
              
As reported in FCX’s pro forma consolidated
                              
financial results
$
15,139
  
$
7,431
  
$
1,182
              
                               
a. For comparative purposes, the nine-month period ended September 30, 2007, has been presented on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also includes certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007 (refer to notes d and e below for further discussion of the pro forma adjustments). As the pre-acquisition results represent the results of the North America copper mines under Phelps Dodge management, such results are not necessarily indicative of what past results would have been under FCX management or of future operating results.
b. Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
c. Includes gold and silver product revenues and production costs.
d. Includes pro forma adjustments of $116 million and $0.11 per pound for copper on a by-product basis, $95 million and $0.09 per pound for copper on a co-product basis and $21 million and $0.90 per pound for molybdenum on a co-product basis associated with the impact of increased carrying values for acquired property, plant and equipment at the North America copper mines.
e. Includes pro forma adjustments of $65 million and $0.06 per pound for copper on a by-product basis, $53 million and $0.05 per pound for copper on a co-product basis and $12 million and $0.50 per pound for molybdenum on a co-product basis associated with the impact of increased carrying values for acquired metal inventories at the North America copper mines.

 
XII
 
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
 
South America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended September 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
1,181
  
$
1,181
  
$
62
  
$
1,243
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
476
    
457
    
28
    
485
  
By-product credits
  
(58
)
  
-
    
-
    
-
  
Treatment charges
  
36
    
36
    
-
    
36
  
Net cash costs
  
454
    
493
    
28
    
521
  
Depreciation, depletion and amortization
  
122
    
117
    
5
    
122
  
Noncash and nonrecurring costs, net
  
13
    
8
    
-
    
8
  
Total costs
  
589
    
618
    
33
    
651
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
(198
)
  
(198
)
  
-
    
(198
)
Other non-inventoriable costs
  
(5
)
  
(4
)
  
(1
)
  
(5
)
Gross profit
$
389
  
$
361
  
$
28
  
$
389
  
                         
Consolidated copper sales (in million pounds)
  
391
    
391
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.02
  
$
3.02
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
1.22
    
1.17
              
By-product credits
  
(0.15
)
  
-
              
Treatment charges
  
0.09
    
0.09
              
Unit net cash costs
  
1.16
    
1.26
              
Depreciation, depletion and amortization
  
0.32
    
0.30
              
Noncash and nonrecurring costs, net
  
0.03
    
0.02
              
Total unit costs
  
1.51
    
1.58
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
(0.51
)
  
(0.51
)
            
Other non-inventoriable costs
  
(0.01
)
  
(0.01
)
            
Gross profit per pound
$
0.99
  
$
0.92
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
1,243
  
$
485
  
$
122
        
Net noncash and nonrecurring costs per above
  
N/A
    
8
    
N/A
        
Less: Treatment charges per above
  
(36
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
(198
)
  
N/A
    
N/A
        
Purchased metal
  
26
    
23
    
N/A
        
Eliminations and other
  
(27
)
  
(19
)
  
1
        
South America copper mines
  
1,008
    
497
    
123
        
North America copper mines
  
1,402
    
847
    
194
        
Indonesia mining
  
802
    
470
    
52
        
Molybdenum
  
683
    
417
    
52
        
Rod & Refining
  
1,485
    
1,478
    
2
        
Atlantic Copper Smelting & Refining
  
625
    
611
    
9
        
Corporate, other & eliminations
  
(1,389
)
  
(1,446
)
  
10
        
As reported in FCX’s consolidated financial statements
$
4,616
  
$
2,874
  
$
442
        
                         
a. Includes gold, silver and molybdenum product revenues and production costs.

 
XIII
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
South America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended September 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
1,361
  
$
1,361
  
$
36
  
$
1,397
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
369
    
359
    
15
    
374
  
By-product credits
  
(31
)
  
-
    
-
    
-
  
Treatment charges
  
90
    
87
    
3
    
90
  
Net cash costs
  
428
    
446
    
18
    
464
  
Depreciation, depletion and amortizationb
  
94
    
91
    
3
    
94
  
Noncash and nonrecurring costs, netb
  
77
    
79
    
(2
)
  
77
  
Total costs
  
599
    
616
    
19
    
635
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
41
    
41
    
-
    
41
  
Other non-inventoriable costs
  
(7
)
  
(7
)
  
-
    
(7
)
Gross profit
$
796
  
$
779
  
$
17
  
$
796
  
                         
Consolidated copper sales (in million pounds)
  
376
    
376
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.63
  
$
3.63
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
0.98
    
0.95
              
By-product credits
  
(0.08
)
  
-
              
Treatment charges
  
0.24
    
0.23
              
Unit net cash costs
  
1.14
    
1.18
              
Depreciation, depletion and amortizationb
  
0.25
    
0.24
              
Noncash and nonrecurring costs, netb
  
0.21
    
0.21
              
Total unit costs
  
1.60
    
1.63
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.10
    
0.10
              
Other non-inventoriable costs
  
(0.02
)
  
(0.02
)
            
Gross profit per pound
$
2.11
  
$
2.08
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
1,397
  
$
374
  
$
94
        
Net noncash and nonrecurring costs per above
  
N/A
    
77
    
N/A
        
Less: Treatment charges per above
  
(90
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
41
    
N/A
    
N/A
        
Purchased metal
  
43
    
43
    
N/A
        
Eliminations and other
  
(23
)
  
(39
)
  
-
        
South America copper mines
  
1,368
    
455
    
94
        
North America copper mines
  
1,526
    
787
    
178
        
Indonesia mining
  
837
    
351
    
43
        
Molybdenum
  
519
    
380
    
22
        
Rod & Refining
  
1,736
    
1,726
    
3
        
Atlantic Copper Smelting & Refining
  
688
    
674
    
8
        
Corporate, other & eliminations
  
(1,608
)
  
(1,711
)
  
8
        
As reported in FCX’s consolidated financial statements
$
5,066
  
$
2,662
  
$
356
        
                         
a. Includes gold and silver product revenues and production costs.
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.

 
XIV
 



FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
South America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs
         
Nine Months Ended September 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other
a
Total
  
                         
Revenues, after adjustments shown below
$
3,794
  
$
3,794
  
$
167
  
$
3,961
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
1,294
    
1,247
    
65
    
1,312
  
By-product credits
  
(154
)
  
-
    
-
    
-
  
Treatment charges
  
180
    
180
    
-
    
180
  
Net cash costs
  
1,320
    
1,427
    
65
    
1,492
  
Depreciation, depletion and amortization
  
379
    
365
    
14
    
379
  
Noncash and nonrecurring costs, net
  
69
    
64
    
-
    
64
  
Total costs
  
1,768
    
1,856
    
79
    
1,935
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
232
    
232
    
-
    
232
  
Other non-inventoriable costs
  
(24
)
  
(22
)
  
(2
)
  
(24
)
Gross profit
$
2,234
  
$
2,148
  
$
86
  
$
2,234
  
                         
Consolidated copper sales (in million pounds)
  
1,122
    
1,122
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.38
  
$
3.38
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
1.15
    
1.11
              
By-product credits
  
(0.13
)
  
-
              
Treatment charges
  
0.16
    
0.16
              
Unit net cash costs
  
1.18
    
1.27
              
Depreciation, depletion and amortization
  
0.34
    
0.32
              
Noncash and nonrecurring costs, net
  
0.06
    
0.06
              
Total unit costs
  
1.58
    
1.65
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.21
    
0.21
              
Other non-inventoriable costs
  
(0.02
)
  
(0.03
)
            
Gross profit per pound
$
1.99
  
$
1.91
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
3,961
  
$
1,312
  
$
379
        
Net noncash and nonrecurring costs per above
  
N/A
    
64
    
N/A
        
Less: Treatment charges per above
  
(180
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
232
    
N/A
    
N/A
        
Purchased metal
  
191
    
188
    
N/A
        
Eliminations and other
  
(161
)
  
(173
)
  
1
        
South America copper mines
  
4,043
    
1,391
    
380
        
North America copper mines
  
4,469
    
2,216
    
565
        
Indonesia mining
  
2,870
    
1,308
    
145
        
Molybdenum
  
2,117
    
1,298
    
160
        
Rod & Refining
  
4,856
    
4,831
    
5
        
Atlantic Copper Smelting & Refining
  
2,014
    
1,960
    
27
        
Corporate, other & eliminations
  
(4,640
)
  
(4,688
)
  
40
        
As reported in FCX’s consolidated financial statements
$
15,729
  
$
8,316
  
$
1,322
        
                         
a. Includes gold, silver and molybdenum product revenues and production costs.



 
XV
 




FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
South America Copper Mines Product Revenues and Production Costs and Unit Net Cash Costs (Pro Forma)a
         
Nine Months Ended September 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Other b
  
Total
  
                         
Revenues, after adjustments shown below
$
3,544
  
$
3,544
  
$
86
  
$
3,630
  
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
903
    
877
    
34
    
911
  
By-product credits
  
(78
)
  
-
    
-
    
-
  
Treatment charges
  
215
    
212
    
3
    
215
  
Net cash costs
  
1,040
    
1,089
    
37
    
1,126
  
Depreciation, depletion and amortization
  
347
c
  
338
c
  
9
    
347
  
Noncash and nonrecurring costs, net
  
146
d
  
147
d
  
(1
)
  
146
  
Total costs
  
1,533
    
1,574
    
45
    
1,619
  
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
16
    
17
    
(1
)
  
16
  
Other non-inventoriable costs
  
(21
)
  
(20
)
  
(1
)
  
(21
)
Gross profit
$
2,006
  
$
1,967
  
$
39
  
$
2,006
  
                         
Consolidated copper sales (in million pounds)
  
1,020
    
1,020
              
                         
Gross profit per pound of copper:
              
                         
Revenues, after adjustments shown below
$
3.48
  
$
3.48
              
                         
Site production and delivery, before net noncash
                        
and nonrecurring costs shown below
  
0.89
    
0.86
              
By-product credits
  
(0.08
)
  
-
              
Treatment charges
  
0.21
    
0.21
              
Unit net cash costs
  
1.02
    
1.07
              
Depreciation, depletion and amortization
  
0.34
c
  
0.33
c
            
Noncash and nonrecurring costs, net
  
0.14
d
  
0.14
d
            
Total unit costs
  
1.50
    
1.54
              
Revenue adjustments, primarily for pricing
                        
on prior period open sales
  
0.01
    
0.01
              
Other non-inventoriable costs
  
(0.02
)
  
(0.02
)
            
Gross profit per pound
$
1.97
  
$
1.93
              
                         
Reconciliation to Amounts Reported
                        
           
Depreciation,
        
       
Production
  
Depletion and
        
(In Millions)
Revenues
  
and Delivery
  
Amortization
        
Totals presented above
$
3,630
  
$
911
  
$
347
        
Net noncash and nonrecurring costs per above
  
N/A
    
146
    
N/A
        
Less: Treatment charges per above
  
(215
)
  
N/A
    
N/A
        
Revenue adjustments, primarily for pricing on prior
                        
period open sales per above
  
16
    
N/A
    
N/A
        
Purchased metal
  
191
    
191
    
N/A
        
Eliminations and other
  
11,517
    
6,183
    
835
        
As reported in FCX’s pro forma consolidated
                        
financial results
$
15,139
  
$
7,431
  
$
1,182
        
                         
a. For comparative purposes, the nine-month period ended September 30, 2007, has been presented on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also includes certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007 (refer to notes c and d below for further discussion of the pro forma adjustments). As the pre-acquisition results represent the results of the South America copper mines under Phelps Dodge management, such results are not necessarily indicative of what past results would have been under FCX management or of future operating results.
b. Includes gold and silver product revenues and production costs.
c. Includes pro forma adjustments of $56 million and $0.05 per pound for copper on a by-product basis and $54 million and $0.05 per pound for copper on a co-product basis associated with the impact of increased carrying values for acquired property, plant and equipment at the South America copper mines.
d. Includes pro forma adjustments of $2 million and less than $0.01 per pound for copper on both a by-product and co-product basis associated with the impact of increased carrying values for acquired metal inventories at the South America copper mines



 
XVI
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesia Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Three Months Ended September 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
783
  
$
783
  
$
233
  
$
11
  
$
1,027
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
466
    
355
    
106
    
5
    
466
  
Gold and silver credits
  
(244
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
63
    
48
    
14
    
1
    
63
  
Royalty on metals
  
32
    
24
    
8
    
-
    
32
  
Net cash costs
  
317
    
427
    
128
    
6
    
561
  
Depreciation and amortization
  
52
    
40
    
12
    
-
    
52
  
Noncash and nonrecurring costs, net
  
4
    
3
    
1
    
-
    
4
  
Total costs
  
373
    
470
    
141
    
6
    
617
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
(130
)
  
(130
)
  
-
    
-
    
(130
)
PT Smelting intercompany profit
  
10
    
8
    
2
    
-
    
10
  
Gross profit
$
290
  
$
191
  
$
94
  
$
5
  
$
290
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
264
    
264
                    
Gold (in thousand ounces)
              
271
              
Silver (in thousand ounces)
                    
812
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
2.94
  
$
2.94
  
$
870.08
  
$
14.21
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.76
    
1.34
    
390.55
    
6.18
        
Gold and silver credits
  
(0.93
)
  
-
    
-
    
-
        
Treatment charges
  
0.24
    
0.18
    
52.81
    
0.84
        
Royalty on metals
  
0.12
    
0.09
    
26.30
    
0.42
        
Unit net cash costs
  
1.19
    
1.61
    
469.66
    
7.44
        
Depreciation and amortization
  
0.20
    
0.15
    
44.45
    
0.70
        
Noncash and nonrecurring costs, net
  
0.02
    
0.02
    
3.70
    
0.06
        
Total unit costs
  
1.41
    
1.78
    
517.81
    
8.20
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
(0.47
)
  
(0.47
)
  
(8.72
)
  
(0.57
)
      
PT Smelting intercompany profit
  
0.04
    
0.03
    
8.38
    
0.13
        
Gross profit per pound/ounce
$
1.10
  
$
0.72
  
$
351.93
  
$
5.57
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
1,027
  
$
466
  
$
52
              
Net noncash and nonrecurring costs per above
  
N/A
    
4
    
N/A
              
Less:    Treatment charges per above
  
(63
)
  
N/A
    
N/A
              
Royalty per above
  
(32
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
(130
)
  
N/A
    
N/A
              
Indonesia mining
  
802
    
470
    
52
              
North America copper mines
  
1,402
    
847
    
194
              
South America copper mines
  
1,008
    
497
    
123
              
Molybdenum
  
683
    
417
    
52
              
Rod & Refining
  
1,485
    
1,478
    
2
              
Atlantic Copper Smelting & Refining
  
625
    
611
    
9
              
Corporate, other & eliminations
  
(1,389
)
  
(1,446
)
  
10
              
As reported in FCX’s consolidated
                              
financial statements
$
4,616
  
$
2,874
  
$
442
              
                               

 
XVII
 



FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesia Mining Product Revenues and Production Costs and Unit Net Cash Costs (Credits)
         
Three Months Ended September 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
769
  
$
769
  
$
173
  
$
5
  
$
947
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
347
    
282
    
63
    
2
    
347
  
Gold and silver credits
  
(178
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
67
    
55
    
12
    
-
    
67
  
Royalty on metals
  
20
    
16
    
4
    
-
    
20
  
Net cash costs
  
256
    
353
    
79
    
2
    
434
  
Depreciation and amortization
  
43
    
35
    
8
    
-
    
43
  
Noncash and nonrecurring costs, net
  
4
    
3
    
1
    
-
    
4
  
Total costs
  
303
    
391
    
88
    
2
    
481
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
(23
)
  
(23
)
  
-
    
-
    
(23
)
PT Smelting intercompany profit
  
47
    
38
    
9
    
-
    
47
  
Gross profit
$
490
  
$
393
  
$
94
  
$
3
  
$
490
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
197
    
197
                    
Gold (in thousand ounces)
              
234
              
Silver (in thousand ounces)
                    
427
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.63
  
$
3.63
  
$
694.95
  
$
12.81
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.76
    
1.43
    
270.62
    
4.33
        
Gold and silver credits
  
(0.90
)
  
-
    
-
    
-
        
Treatment charges
  
0.34
    
0.28
    
52.65
    
0.84
        
Royalty on metals
  
0.10
    
0.08
    
15.57
    
-
        
Unit net cash costs
  
1.30
    
1.79
    
338.84
    
5.17
        
Depreciation and amortization
  
0.22
    
0.17
    
33.13
    
0.53
        
Noncash and nonrecurring costs, net
  
0.02
    
0.02
    
3.75
    
0.06
        
Total unit costs
  
1.54
    
1.98
    
375.72
    
5.76
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
0.16
    
0.16
    
43.81
    
(1.24
)
      
PT Smelting intercompany profit
  
0.24
    
0.19
    
36.50
    
0.58
        
Gross profit per pound/ounce
$
2.49
  
$
2.00
  
$
399.54
  
$
6.39
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
947
  
$
347
  
$
43
              
Net noncash and nonrecurring costs per above
  
N/A
    
4
    
N/A
              
Less:    Treatment charges per above
  
(67
)
  
N/A
    
N/A
              
Royalty per above
  
(20
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
(23
)
  
N/A
    
N/A
              
Indonesia mining
  
837
    
351
    
43
              
North America copper mines
  
1,526
    
787
    
178
              
South America copper mines
  
1,368
    
455
    
94
              
Molybdenum
  
519
    
380
    
22
              
Rod & Refining
  
1,736
    
1,726
    
3
              
Atlantic Copper Smelting & Refining
  
688
    
674
    
8
              
Corporate, other & eliminations
  
(1,608
)
  
(1,711
)
  
8
              
As reported in FCX’s consolidated
                              
financial statements
$
5,066
  
$
2,662
  
$
356
              
                               

 
XVIII
 


FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesia Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Nine Months Ended September 30, 2008
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
2,344
  
$
2,344
  
$
686
  
$
40
  
$
3,070
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1,285
    
981
    
287
    
17
    
1,285
  
Gold and silver credits
  
(726
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
195
    
149
    
44
    
2
    
195
  
Royalty on metals
  
87
    
67
    
19
    
1
    
87
  
Net cash costs
  
841
    
1,197
    
350
    
20
    
1,567
  
Depreciation and amortization
  
145
    
110
    
33
    
2
    
145
  
Noncash and nonrecurring costs, net
  
23
    
18
    
5
    
-
    
23
  
Total costs
  
1,009
    
1,325
    
388
    
22
    
1,735
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
82
    
82
    
-
    
-
    
82
  
PT Smelting intercompany profit
  
5
    
4
    
1
    
-
    
5
  
Gross profit
$
1,422
  
$
1,105
  
$
299
  
$
18
  
$
1,422
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
700
    
700
                    
Gold (in thousand ounces)
              
757
              
Silver (in thousand ounces)
                    
2,413
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.33
  
$
3.33
  
$
897.19
  
$
16.13
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.84
    
1.40
    
379.34
    
6.93
        
Gold and silver credits
  
(1.04
)
  
-
    
-
    
-
        
Treatment charges
  
0.28
    
0.21
    
57.68
    
1.05
        
Royalty on metals
  
0.12
    
0.09
    
25.51
    
0.47
        
Unit net cash costs
  
1.20
    
1.70
    
462.53
    
8.45
        
Depreciation and amortization
  
0.21
    
0.16
    
42.89
    
0.78
        
Noncash and nonrecurring costs, net
  
0.03
    
0.03
    
6.85
    
0.13
        
Total unit costs
  
1.44
    
1.89
    
512.27
    
9.36
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
0.13
    
0.13
    
9.05
    
0.43
        
PT Smelting intercompany profit
  
0.01
    
0.01
    
1.38
    
0.03
        
Gross profit per pound/ounce
$
2.03
  
$
1.58
  
$
395.35
  
$
7.23
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
3,070
  
$
1,285
  
$
145
              
Net noncash and nonrecurring costs per above
  
N/A
    
23
    
N/A
              
Less:    Treatment charges per above
  
(195
)
  
N/A
    
N/A
              
Royalty per above
  
(87
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
82
    
N/A
    
N/A
              
Indonesia mining
  
2,870
    
1,308
    
145
              
North America copper mines
  
4,469
    
2,216
    
565
              
South America copper mines
  
4,043
    
1,391
    
380
              
Molybdenum
  
2,117
    
1,298
    
160
              
Rod & Refining
  
4,856
    
4,831
    
5
              
Atlantic Copper Smelting & Refining
  
2,014
    
1,960
    
27
              
Corporate, other & eliminations
  
(4,640
)
  
(4,688
)
  
40
              
As reported in FCX’s consolidated
                              
financial statements
$
15,729
  
$
8,316
  
$
1,322
              
                               
 
XIX

 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Indonesia Mining Product Revenues and Production Costs and Unit Net Cash Costs
         
Nine Months Ended September 30, 2007
        
 
By-Product
  
Co-Product Method
  
(In Millions)
Method
  
Copper
  
Gold
  
Silver
  
Total
  
                               
Revenues, after adjustments shown below
$
3,325
  
$
3,325
  
$
1,380
  
$
41
  
$
4,746
  
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1,040
    
729
    
302
    
9
    
1,040
  
Gold and silver credits
  
(1,421
)
  
-
    
-
    
-
    
-
  
Treatment charges
  
332
    
232
    
97
    
3
    
332
  
Royalty on metals
  
117
    
82
    
34
    
1
    
117
  
Net cash costs
  
68
    
1,043
    
433
    
13
    
1,489
  
Depreciation and amortization
  
158
    
111
    
46
    
1
    
158
  
Noncash and nonrecurring costs, net
  
24
    
17
    
7
    
-
    
24
  
Total costs
  
250
    
1,171
    
486
    
14
    
1,671
  
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
11
    
11
    
-
    
-
    
11
  
PT Smelting intercompany profit
  
11
    
8
    
3
    
-
    
11
  
Gross profit
$
3,097
  
$
2,173
  
$
897
  
$
27
  
$
3,097
  
                               
Consolidated sales
                              
Copper (in million pounds)
  
948
    
948
                    
Gold (in thousand ounces)
              
2,061
              
Silver (in thousand ounces)
                    
3,121
        
                               
Gross profit per pound of copper/per ounce of gold and silver:
                
                               
Revenues, after adjustments shown below
$
3.48
  
$
3.48
  
$
668.47
  
$
13.04
        
                               
Site production and delivery, before net noncash
                              
and nonrecurring costs shown below
  
1.10
    
0.77
    
146.73
    
2.86
        
Gold and silver credits
  
(1.50
)
  
-
    
-
    
-
        
Treatment charges
  
0.35
    
0.24
    
46.84
    
0.91
        
Royalty on metals
  
0.12
    
0.09
    
16.55
    
0.32
        
Unit net cash costs
  
0.07
    
1.10
    
210.12
    
4.09
        
Depreciation and amortization
  
0.17
    
0.12
    
22.21
    
0.43
        
Noncash and nonrecurring costs, net
  
0.02
    
0.02
    
3.43
    
0.07
        
Total unit costs
  
0.26
    
1.24
    
235.76
    
4.59
        
Revenue adjustments, primarily for pricing on
                              
prior period open sales
  
0.04
    
0.04
    
1.19
    
-
        
PT Smelting intercompany profit
  
0.01
    
0.01
    
1.56
    
0.03
        
Gross profit per pound/ounce
$
3.27
  
$
2.29
  
$
435.46
  
$
8.48
        
                               
Reconciliation to Amounts Reported
                              
     
Production
  
Depreciation,
              
     
and
  
Depletion and
              
(In Millions)
Revenues
  
Delivery
  
Amortization
              
Totals presented above
$
4,746
  
$
1,040
  
$
158
              
Net noncash and nonrecurring costs per above
  
N/A
    
24
    
N/A
              
Less:    Treatment charges per above
  
(332
)
  
N/A
    
N/A
              
Royalty per above
  
(117
)
  
N/A
    
N/A
              
Revenue adjustments, primarily for pricing on
                              
prior period open sales per above
  
11
    
N/A
    
N/A
              
Indonesia mining
  
4,308
    
1,064
    
158
              
North America copper mines
  
2,835
    
1,552
    
328
              
South America copper mines
  
2,869
    
874
    
258
              
Molybdenum
  
1,034
    
838
    
47
              
Rod & Refining
  
3,781
    
3,757
    
6
              
Atlantic Copper Smelting & Refining
  
1,761
    
1,709
    
27
              
Corporate, other & eliminations
  
(3,833
)
  
(3,689
)
  
22
              
As reported in FCX’s consolidated
                              
financial statements
$
12,755
  
$
6,105
  
$
846
              
                               

 
XX
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Henderson Molybdenum Mine Product Revenues and Production Costs and Unit Net Cash Costs
         
 
Three Months Ended
      
 
September 30,
      
(In Millions)
2008
  
2007
          
                       
Revenues, after adjustments shown below
$
394
  
$
278
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
62
    
43
            
Net cash costs
  
62
    
43
            
Depreciation and amortizationa
  
53
    
18
            
Noncash and nonrecurring costs, net
  
5
    
5
            
Total costs
  
120
    
66
            
Gross profitb
$
274
  
$
212
            
                       
Consolidated molybdenum sales (in million pounds)
  
13
    
10
            
                       
Gross profit per pound of molybdenum:
                      
                       
Revenues, after adjustments shown below
$
31.21
  
$
28.22
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
4.90
    
4.34
            
Unit net cash costs
  
4.90
    
4.34
            
Depreciation and amortizationa
  
4.20
    
1.83
            
Noncash and nonrecurring costs, net
  
0.39
    
0.53
            
Total unit costs
  
9.49
    
6.70
            
Gross profit per pound
$
21.72
  
$
21.52
            
                       
Reconciliation to Amounts Reported
                      
(In Millions)
    
Production
  
Depreciation,
        
     
and
  
Depletion and
        
Three Months Ended September 30, 2008
Revenues
  
Delivery
  
Amortization
        
Totals presented above
$
394
  
$
62
  
$
53
        
Net noncash and nonrecurring costs
  
N/A
    
5
    
N/A
        
Henderson mine
  
394
    
67
    
53
        
Other molybdenum operations and eliminationsc
  
289
    
350
    
(1
)
      
Molybdenum
  
683
    
417
    
52
        
North America copper mines
  
1,402
    
847
    
194
        
South America copper mines
  
1,008
    
497
    
123
        
Indonesia mining
  
802
    
470
    
52
        
Rod & Refining
  
1,485
    
1,478
    
2
        
Atlantic Copper Smelting & Refining
  
625
    
611
    
9
        
Corporate, other & eliminations
  
(1,389
)
  
(1,446
)
  
10
        
As reported in FCX’s consolidated financial statements
$
4,616
  
$
2,874
  
$
442
        
                         
Three Months Ended September 30, 2007
                        
Totals presented above
$
278
  
$
43
  
$
18
        
Net noncash and nonrecurring costs
  
N/A
    
5
    
N/A
        
Henderson mine
  
278
    
48
    
18
        
Other molybdenum operations and eliminationsc
  
241
    
332
    
4
        
Molybdenum
  
519
    
380
    
22
        
North America copper mines
  
1,526
    
787
    
178
        
South America copper mines
  
1,368
    
455
    
94
        
Indonesia mining
  
837
    
351
    
43
        
Rod & Refining
  
1,736
    
1,726
    
3
        
Atlantic Copper Smelting & Refining
  
688
    
674
    
8
        
Corporate, other & eliminations
  
(1,608
)
  
(1,711
)
  
8
        
As reported in FCX’s consolidated financial statements
$
5,066
  
$
2,662
  
$
356
        
                         
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.
                         
 
 
 
XXI
 
 
FREEPORT-McMoRan COPPER & GOLD INC.
PRODUCT REVENUES AND PRODUCTION COSTS
(continued)
 
Henderson Molybdenum Mine Product Revenues and Production Costs and Unit Net Cash Costs
         
 
Nine Months Ended
      
 
September 30,
      
(In Millions)
2008
  
2007
          
 
(Actual)
  
(Pro Forma) a
          
                       
Revenues, after adjustments shown below
$
997
  
$
741
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
164
    
123
            
Net cash costs
  
164
    
123
            
Depreciation and amortization
  
139
    
116
b
          
Noncash and nonrecurring costs, net
  
6
    
8
            
Total costs
  
309
    
247
            
Gross profitc
$
688
  
$
494
            
                       
Consolidated molybdenum sales (in million pounds)
  
33
    
30
            
                       
Gross profit per pound of molybdenum:
                      
                       
Revenues, after adjustments shown below
$
30.32
  
$
25.22
            
                       
Site production and delivery, before net noncash
                      
and nonrecurring costs shown below
  
4.99
    
4.20
            
Unit net cash costs
  
4.99
    
4.20
            
Depreciation and amortization
  
4.23
    
3.92
b
          
Noncash and nonrecurring costs, net
  
0.17
    
0.29
            
Total unit costs
  
9.39
    
8.41
            
Gross profit per pound
$
20.93
  
$
16.81
            
                       
Reconciliation to Amounts Reported
                      
(In Millions)
      
Production
  
Depreciation,
      
       
and
  
Depletion and
      
Nine Months Ended September 30, 2008
Revenues
  
Delivery
  
Amortization
        
Totals presented above
$
997
  
$
164
  
$
139
        
Net noncash and nonrecurring costs
  
N/A
    
6
    
N/A
        
Henderson mine
  
997
    
170
    
139
        
Other molybdenum operations and eliminationsd
  
1,120
    
1,128
    
21
        
Molybdenum
  
2,117
    
1,298
    
160
        
North America copper mines
  
4,469
    
2,216
    
565
        
South America copper mines
  
4,043
    
1,391
    
380
        
Indonesia mining
  
2,870
    
1,308
    
145
        
Rod & Refining
  
4,856
    
4,831
    
5
        
Atlantic Copper Smelting & Refining
  
2,014
    
1,960
    
27
        
Corporate, other & eliminations
  
(4,640
)
  
(4,688
)
  
40
        
As reported in FCX’s consolidated financial statements
$
15,729
  
$
8,316
  
$
1,322
        
                         
Nine Months Ended September 30, 2007 (Pro Forma)a
                        
Totals presented above
$
741
  
$
123
  
$
116
        
Net noncash and nonrecurring costs
  
N/A
    
8
    
N/A
        
Eliminations and other
  
14,398
    
7,300
    
1,066
        
As reported in FCX’s pro forma consolidated
                        
financial results
$
15,139
  
$
7,431
  
$
1,182
        
                         
a. For comparative purposes, the nine-month period ended September 30, 2007, has been presented on a pro forma basis, which combines FCX’s historical results with the Phelps Dodge pre-acquisition results for the period January 1, 2007, through March 19, 2007, and also includes certain pro forma adjustments, which assume the acquisition of Phelps Dodge was effective January 1, 2007 (refer to note b below for further discussion of the pro forma adjustments). As the pre-acquisition results represent the results of the Henderson operation under Phelps Dodge management, such results are not necessarily indicative of what past results would have been under FCX management or of future operating results.
b. Includes pro forma adjustments of $68 million ($2.30 per pound) associated with the impact of increased carrying values for acquired property, plant and equipment at the Henderson molybdenum mine.
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.
 

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

PROVISION FOR INCOME TAXES
FCX’s third-quarter 2008 income tax provision from continuing operations resulted from taxes on international operations ($268 million), partly offset by a benefit on U.S. operations ($28 million).  Because of the recent decline in copper prices and changes in PT Freeport Indonesia’s sales projections, FCX’s projected consolidated annual tax rate for 2008 has decreased from approximately 34 percent to approximately 32 percent. FCX’s third-quarter effective tax rate of approximately 24 percent reflects the cumulative impact of this reduced annual tax rate.

FCX’s income tax provision for the first nine months of 2008 included taxes on international operations ($1.4 billion) and U.S. taxes ($234 million). The difference between FCX’s consolidated effective income tax rate of approximately 32 percent for the first nine 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 tax accrued on foreign earnings.

FCX’s third-quarter 2007 income tax provision from continuing operations resulted from taxes on earnings at international operations ($584 million) and U.S. taxes ($69 million). FCX’s income tax provision for the first nine months of 2007 included taxes on international operations ($1.7 billion) and U.S. taxes ($161 million). The difference between FCX’s consolidated effective income tax rate of approximately 37 percent for the first nine months of 2007 and the U.S. federal statutory rate of 35 percent was primarily attributable to withholding taxes related to earnings from Indonesia and South America operations and a U.S. foreign tax credit limitation, partly 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 nine months of 2008 and 2007 follows (in millions, except percentages):

   
Nine Months Ended
September 30, 2008
  
Nine Months Ended
September 30, 2007
  
           
Effective
  
Provision for
          
Effective
  
Provision for
  
   
Incomea
    
Tax Rate
  
Income Tax
  
Incomea
    
Tax Rate
  
Income Tax
  
U.S.
  
$
2,254
    
24%
  
$
544
  
$
1,076
    
32%
  
$
339
  
South America
    
2,469
    
33%
    
800
    
2,006
    
34%
    
676
  
Indonesia
    
1,324
    
42%
    
558
    
2,947
    
43%
    
1,275
  
Eliminations and other
    
(56
)
  
N/A
    
(15
)
  
40
    
N/A
    
21
  
Purchase accounting adjustments
    
(849
)
  
37%
    
(319
)
  
(1,028
)
  
37%
    
(386
)
Annualized rate adjustmentb
    
N/A
    
N/A
    
59
    
N/A
    
N/A
    
(50
)
Consolidated FCX
  
$
5,142
    
32%
  
$
1,627
  
$
5,041
    
37%
  
$
1,875
  

a. 
 Represents income from continuing operations before income taxes, minority interests and equity in affiliated companies’ earnings.
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 revised the presentation of the operating divisions to better reflect management’s view of the consolidated FCX operations, but did not change its reportable segments. For comparative purposes, FCX has also revised the business segments disclosures for the three-month and nine-month periods ending September 30, 2007, to conform with current period presentation.

FCX has organized its mining operations into four primary operating divisions – North America mines, South America mines, Indonesia mining and Molybdenum. Notwithstanding this 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 primary operating divisions, as well as FCX’s other reportable segments – Rod & Refining and Atlantic Copper Smelting & Refining – follows.

North America Copper Mines.  FCX has seven operating copper mines in North America – Morenci, Bagdad, Sierrita, Safford, Miami, Chino and Tyrone. The North America mines division includes the Morenci copper mine as a reportable segment. In addition to copper, the Morenci mine produces molybdenum concentrates as a by-product. Other North America mines include FCX’s other operating southwestern U.S. copper mines. In addition to copper, the Bagdad, Sierrita and Chino mines produce molybdenum, gold and silver.

South America Copper Mines.  FCX has four operating copper mines in South America – Cerro Verde in Peru, and Candelaria, Ojos del Salado and El Abra in Chile. The South America mines division includes the Cerro Verde copper mine as a reportable segment. In addition to copper, the Cerro Verde mine produces molybdenum. Other South America mines include FCX’s Chilean copper mines. In addition to copper, Candelaria and Ojos del Salado mines produce gold and silver.

Indonesia.  Indonesia mining includes PT Freeport Indonesia’s Grasberg copper and gold mining operations.

Molybdenum. The Molybdenum segment includes the Henderson molybdenum mine in Colorado and related conversion facilities. The Molybdenum segment also includes a sales company that purchases and sells molybdenum from the Henderson mine as well as from the North America and South America copper mines that produce molybdenum as a by-product.

Rod & Refining. The Rod & Refining segment consists of copper conversion facilities, including a refinery, four rod mills and a specialty copper products facility. This segment processes copper produced at FCX’s North America mines and purchased copper into copper anode, cathode, rod and custom copper shapes. At times this segment refines copper and produces copper rod and shapes for customers on a toll basis.

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. Other includes the Miami smelter, which processes FCX’s North America copper concentrates and provides a significant source of sulfuric acid for the North America copper mines; and a sales company, which functions as an agent to purchase metals, primarily copper from the North America and South America mines, and sells to Atlantic Copper and third parties.

Intersegment Sales.  Intersegment sales by the North America, South America and Indonesia 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.

Allocations. 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. In addition, most exploration and research activities are managed at the corporate level, and those costs are not allocated to the operating division or segments. 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)
                                                   
 
North America Copper Mines
  
South America Copper Mines
  
Indonesia
                      
                                       
Atlantic
          
                                       
Copper
  
Corporate,
      
       
Other
      
Cerro
  
Other
          
Molyb-
  
Rod &
  
Smelting
  
Other &
  
FCX
  
Three Months Ended September 30, 2008
Morenci
  
Mines
  
Total
  
Verde
  
Mines
  
Total
  
Grasberg
  
denum
  
Refining
  
& Refining
  
Eliminations
  
Total
  
Revenues:
                                                  
Unaffiliated customers
$
86
  
97
  
183
  
315
  
578
  
893
  
754
a
683
  
1,477
  
625
  
1
  
4,616
  
Intersegment
  
425
  
794
  
1,219
  
94
  
21
  
115
  
48
  
-
  
8
  
-
  
(1,390
)
-
  
Production and deliveryb
  
347
  
500
  
847
  
161
  
336
  
497
  
470
  
417
  
1,478
  
611
  
(1,446
)
2,874
  
Depreciation, depletion and amortizationb
  
81
  
113
  
194
  
42
  
81
  
123
  
52
  
52
  
2
  
9
  
10
  
442
  
Selling, general and administrative expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
20
  
3
  
-
  
4
  
63
  
90
  
Exploration and research expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
77
  
77
  
Operating income (loss)b
$
83
  
278
  
361
  
206
  
182
  
388
  
260
  
211
  
5
  
1
  
(93
)
1,133
  
                                                   
Interest expense, net
$
-
  
3
  
3
  
1
  
4
  
5
  
(1
)
-
  
1
  
3
  
128
  
139
  
Provision for income taxes
$
-
  
-
  
-
  
56
  
53
  
109
  
114
  
-
  
-
  
-
  
17
  
240
  
Goodwill at September 30, 2008
$
1,912
  
2,299
  
4,211
  
763
  
366
  
1,129
  
-
  
703
  
-
  
-
  
5
  
6,048
  
Total assets at September 30, 2008
$
7,130
  
12,222
  
19,352
  
4,933
  
4,350
  
9,283
  
4,121
  
4,181
  
493
  
856
  
3,720
  
42,006
  
Capital expenditures
$
84
  
110
  
194
  
26
  
38
  
64
  
108
  
60
  
2
  
7
  
331
  
766
  
                                                   
Three Months Ended September 30, 2007
                                                  
Revenues:
                                                  
Unaffiliated customers
$
145
  
113
  
258
  
555
  
724
  
1,279
  
570
a
519
  
1,725
  
688
  
27
  
5,066
  
Intersegment
  
544
  
724
  
1,268
  
66
  
23
  
89
  
267
  
-
  
11
  
-
  
(1,635
)
-
  
Production and deliveryb
  
379
  
408
  
787
  
199
  
256
  
455
  
351
  
380
  
1,726
  
674
  
(1,711
)
2,662
  
Depreciation, depletion and amortizationb
  
92
  
86
  
178
  
41
  
53
  
94
  
43
  
22
  
3
  
8
  
8
  
356
  
Selling, general and administrative expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
44
  
5
  
-
  
5
  
77
  
131
  
Exploration and research expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
40
  
40
  
Operating income (loss)b
$
218
  
343
  
561
  
381
  
438
  
819
  
399
  
112
  
7
  
1
  
(22
)
1,877
  
                                                   
Interest expense, net
$
-
  
-
  
-
  
3
  
-
  
3
  
3
  
-
  
1
  
6
  
142
  
155
  
Provision for income taxes
$
-
  
-
  
-
  
121
  
143
  
264
  
254
  
-
  
-
  
-
  
135
  
653
  
Total assets at September 30, 2007
$
4,804
  
8,795
  
13,599
  
4,660
  
4,546
  
9,206
  
3,968
  
1,944
  
640
  
1,104
  
10,928
c
41,389
  
Capital expenditures
$
81
  
153
  
234
  
13
  
16
  
29
  
98
  
8
  
2
  
10
  
85
  
466
  

a. Includes PT Freeport Indonesia’s sales to PT Smelting totaling $376 million in third-quarter 2008 and $353 million in third-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 September 30, 2008
                                                  
Revenues
$
-
  
-
  
-
  
2
  
-
  
2
  
N/A
  
1
  
-
  
N/A
  
-
  
3
  
Production and delivery
  
(4
)
(8
)
(12
)
-
  
(8
)
(8
)
N/A
  
(7
)
-
  
N/A
  
(1
)
(28
)
Depreciation, depletion and amortization
  
(57
)
(69
)
(126
)
(22
)
(53
)
(75
)
N/A
  
(39
)
-
  
N/A
  
2
  
(238
)
Reduction of operating income
$
(61
)
(77
)
(138
)
(20
)
(61
)
(81
)
N/A
  
(45
)
-
  
N/A
  
1
  
(263
)

Three Months Ended September 30, 2007
                                                  
Production and delivery
$
(113
)
(49
)
(162
)
(42
)
(35
)
(77
)
N/A
  
(38
)
-
  
N/A
  
(13
)
(290
)
Depreciation, depletion and amortization
  
(57
)
(48
)
(105
)
(22
)
(18
)
(40
)
N/A
  
(10
)
-
  
N/A
  
-
  
(155
)
Reduction of operating income
$
(170
)
(97
)
(267
)
(64
)
(53
)
(117
)
N/A
  
(48
)
-
  
N/A
  
(13
)
(445
)
                                                   
c.  Includes preliminary goodwill of $4.4 billion, which had not been allocated to reporting units at September 30, 2007, and also includes assets of $1.2 billion associated with
    discontinued operations.


 
XXV
 



FREEPORT-McMoRan COPPER & GOLD INC.
BUSINESS SEGMENTS
(continued)
                                                   
 
North America Copper Mines
  
South America Copper Mines
  
Indonesia
                      
                                       
Atlantic
          
                                       
Copper
  
Corporate,
      
       
Other
      
Cerro
  
Other
          
Molyb-
  
Rod &
  
Smelting
  
Other &
  
FCX
  
Nine Months Ended September 30, 2008
Morenci
  
Mines
  
Total
  
Verde
  
Mines
  
Total
  
Grasberg
  
denum
  
Refining
  
& Refining
  
Eliminations
  
Total
  
Revenues:
                                                  
Unaffiliated customers
$
343
  
314
  
657
  
1,572
  
2,078
  
3,650
  
2,452
a
2,117
  
4,832
  
2,014
  
7
  
15,729
  
Intersegment
  
1,391
  
2,421
  
3,812
  
275
  
118
  
393
  
418
  
-
  
24
  
-
  
(4,647
)
-
  
Production and deliveryb
  
929
  
1,287
  
2,216
  
530
  
861
  
1,391
  
1,308
  
1,298
  
4,831
  
1,960
  
(4,688
)
8,316
  
Depreciation, depletion and amortizationb
  
242
  
323
  
565
  
131
  
249
  
380
  
145
  
160
  
5
  
27
  
40
  
1,322
  
Selling, general and administrative expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
104
  
14
  
-
  
18
  
164
  
300
  
Exploration and research expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
1
  
-
  
-
  
208
  
209
  
Operating income (loss)b
$
563
  
1,125
  
1,688
  
1,186
  
1,086
  
2,272
  
1,313
  
644
  
20
  
9
  
(364
)
5,582
  
                                                   
Interest expense, net
$
2
  
8
  
10
  
2
  
2
  
4
  
2
  
-
  
3
  
9
  
416
  
444
  
Provision for income taxes
$
-
  
-
  
-
  
383
  
334
  
717
  
558
  
-
  
-
  
-
  
352
  
1,627
  
Capital expenditures
$
244
  
254
  
498
  
88
  
141
  
229
  
332
  
104
  
6
  
19
  
741
  
1,929
  
                                                   
Nine Months Ended September 30, 2007
                                                  
Revenues:
                                                  
Unaffiliated customers
$
181
  
141
  
322
  
861
  
1,658
  
2,519
  
3,317
a
1,034
  
3,757
  
1,761
  
45
  
12,755
  
Intersegment
  
1,080
  
1,433
  
2,513
  
333
  
17
  
350
  
991
  
-
  
24
  
-
  
(3,878
)
-
  
Production and deliveryb
  
720
  
832
  
1,552
  
343
  
531
  
874
  
1,064
  
838
  
3,757
  
1,709
  
(3,689
)
6,105
  
Depreciation, depletion and amortizationb
  
166
  
162
  
328
  
85
  
173
  
258
  
158
  
47
  
6
  
27
  
22
  
846
  
Selling, general and administrative expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
133
  
9
  
-
  
15
  
157
  
314
  
Exploration and research expenses
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
1
  
-
  
-
  
86
  
87
  
Operating income (loss)b
$
375
  
580
  
955
  
766
  
971
  
1,737
  
2,953
  
139
  
18
  
10
  
(409
)
5,403
  
                                                   
Interest expense, net
$
-
  
-
  
-
  
7
  
(1
)
6
  
10
  
-
  
3
  
20
  
347
  
386
  
Provision for income taxes
$
-
  
-
  
-
  
266
  
319
  
585
  
1,275
  
-
  
-
  
-
  
15
  
1,875
  
Capital expenditures
$
156
  
413
  
569
  
31
  
34
  
65
  
273
  
21
  
4
  
31
  
175
  
1,138
  
 
a. Includes PT Freeport Indonesia’s sales to PT Smelting totaling $1.2 billion for the nine months ended September 30, 2008, and $1.6 billion for the nine months ended September 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:
                                                   
Nine Months Ended September 30, 2008
                                                  
Revenues
$
-
  
-
  
-
  
8
  
1
  
9
  
N/A
  
(3
)
-
  
N/A
  
-
  
6
  
Production and delivery
  
(33
)
(6
)
(39
)
(5
)
(26
)
(31
)
N/A
  
(18
)
-
  
N/A
  
(24
)
(112
)
Depreciation, depletion and amortization
  
(155
)
(193
)
(348
)
(66
)
(150
)
(216
)
N/A
  
(118
)
-
  
N/A
  
7
  
(675
)
Reduction of operating income
$
(188
)
(199
)
(387
)
(63
)
(175
)
(238
)
N/A
  
(139
)
-
  
N/A
  
(17
)
(781
)

Nine Months Ended September 30, 2007
                                                  
Production and delivery
$
(196
)
(124
)
(320
)
(62
)
(80
)
(142
)
N/A
  
(119
)
-
  
N/A
  
(74
)
(655
)
Depreciation, depletion and amortization
  
(121
)
(95
)
(216
)
(42
)
(89
)
(131
)
N/A
  
(22
)
-
  
N/A
  
-
  
(369
)
Reduction of operating income
$
(317
)
(219
)
(536
)
(104
)
(169
)
(273
)
N/A
  
(141
)
-
  
N/A
  
(74
)
(1,024
)



 
XXVI