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FREEPORT-MCMORA N COPPER & GOLD INC.
2008 Annual Report
Core Assets

Table of contents

  • Page 1
    Core Assets FREEPORT-MCMORAN COPPER & GOLD INC. 2008 Annual Report

  • Page 2
    ... and Bagdad mines in North America and the Cerro Verde, El Abra and Candelaria operations in South America; and the potentially world-class Tenke Fungurume development project in the Democratic Republic of Congo. Our common stock trades on the New York Stock Exchange under the symbol "FCX." Summary...

  • Page 3
    ... district in Papua, Indonesia Major Mine Operations & Development Projects Letter to Shareholders Operational Overview Board of Directors and Management Financial & Operating Information 110 Performance Graph 111 Stockholder Information 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 1

  • Page 4
    ...ozs Mo 71 million lbs* 2008 Sales Cu Au 1.5 billion lbs 0.1 million ozs Tenke Reserves at 12/31/2008 Cu Co 5.9 billion lbs 0.7 billion lbs *Includes sales of molybdenum produced as a by-product at FCX's North and South America copper mines. 2 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 5
    ... 1 Morenci, Arizona Bagdad, Arizona Sierrita, Arizona Safford, Arizona Henderson, Colorado Tyrone, New Mexico Cerro Verde, Peru El Abra, Chile Candelaria / Ojos del Salado, Chile Tenke Fungurume, Democratic Republic of Congo Grasberg, Indonesia Key Locations Copper (Cu) Gold (Au) Molybdenum (Mo...

  • Page 6
    ... (pictured), where we are mining in a high-grade section of the mine at a time of high gold prices. Grasberg is also the world's largest copper mine in terms of recoverable reserves. To Our Shareholders The theme of this year's annual report, "Core Assets," reï¬,ects the strength of our company and...

  • Page 7
    ... of the Grasberg mine is partially offsetting the decline in copper and molybdenum prices. During the fourth quarter of 2008, we acted quickly and decisively to adjust our near-term business strategy to adapt to the changing market conditions. We established and are executing plans to achieve signi...

  • Page 8
    ... the "Core Assets" of our enterprise. Together, we are a strong team working to ensure the future success of our company. Respectfully yours, James R. Moffett Chairman of the Board March 16, 2009 Richard C. Adkerson President and Chief Executive Officer 6 FREEPORT-McMoRan COPPER & GOLD INC. 2008...

  • Page 9
    Operating Flexibility As the world's largest publicly traded producer of copper, our ï¬,exible operations and significant resources in key global minerals districts provide a strong foundation for the future. Photo: The Morenci mine in Arizona 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC....

  • Page 10
    ... America Freeport-McMoRan Copper & Gold Inc. (FCX), the leader in North America copper production, currently operates five open-pit copper mines in the southwestern United States (U.S.), including Morenci, Sierrita, Bagdad and Safford in Arizona and Tyrone in New Mexico. FCX conducts molybdenum...

  • Page 11
    ... items and temporarily curtail the molybdenum circuit at Cerro Verde. For 2009, FCX expects South America sales of 1.4 billion pounds of copper and 100 thousand ounces of gold. South America unit net cash costs, including by-product credits 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 9

  • Page 12
    ..., PT Freeport Indonesia, FCX operates the world's largest single recoverable copper reserve and largest single gold reserve at its Grasberg minerals district in Papua, Indonesia. Sales from the Grasberg minerals district totaled 1.1 billion pounds of copper and 1.2 million ounces of gold in 2008 at...

  • Page 13
    ...Tenke Fungurume project in the Democratic Republic of Congo in the second half of 2009, exploration activities seek to uncover additional high-grade reserves in the highly prospective African copper belt. Photo: Tenke Fungurume processing plant, March 2009 2008 Annual Report FREEPORT-McMoRan COPPER...

  • Page 14
    ... President Director - PT Freeport Indonesia Richard E. Coleman President - Freeport-McMoRan Mining Company Phillip S. Brumit President - Freeport-McMoRan Africa David H. Thornton President - Climax Molybdenum Co. Marketing Javier Targhetta President - Atlantic Copper, S.A. Senior Vice President...

  • Page 15
    ... Independent Registered Public Accounting Firm Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Balance Sheets Consolidated Statements of Stockholders' Equity Notes to Consolidated Financial Statements 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 13

  • Page 16
    ... Includes charges for lower of cost or market inventory adjustments totaling $782 million ($479 million to net loss or $1.26 per share). f. Includes purchase accounting impacts related to the acquisition of Phelps Dodge totaling $1.1 billion, including $1.0 billion to operating loss and $93 million...

  • Page 17
    ... ore grade (percent): Copper Molybdenum Copper recovery rate (percent) Production (millions of recoverable pounds): Copper Molybdenum (by-product) SOUTH AMERICA COPPER MINES OPERATING DATA Copper (recoverable) Production (millions of pounds) Production (thousands of metric tons) Sales (millions...

  • Page 18
    ... and $1.69 per pound for 2005. e. Amount was $1.75 per pound before charges for hedging losses related to copper price protection programs. f. Includes sales of molybdenum produced as a by-product at our North and South America copper mines. 16 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 19
    ... reserve data provided by third-party industry consultants; significant mining operations in North and South America; and the Tenke Fungurume development project in the Democratic Republic of Congo (DRC). Our mining revenues for 2008 include sales of copper (approximately 76 percent), molybdenum...

  • Page 20
    ... rates at our Henderson molybdenum mine and adjustments to by-product molybdenum production plans at our North and South America copper mines. Consolidated revenues, operating cash ï¬,ows and net income vary significantly with ï¬,uctuations in the market prices of copper, gold and molybdenum, sales...

  • Page 21
    ... and other industrialized countries, the timing of the development of new supplies of copper and production levels of mines and copper smelters. The LME spot copper price closed at $1.41 per pound on January 30, 2009. COPPER, GOLD AND MOLYBDENUM MARKETS The graphs below illustrate the movements in...

  • Page 22
    ... value of our mining operations were derived from current business plans developed using near-term price forecasts reï¬,ective of the current price environment and management's projections for long-term average metal prices and operating costs. Our asset impairment evaluations, including our annual...

  • Page 23
    ... further details of estimated recoverable reserves. These estimates involve assumptions regarding future copper, gold and molybdenum prices, the geology of our mines, the mining methods we use and the related costs we incur to develop and mine our reserves. Changes in these assumptions could result...

  • Page 24
    ... closure plans and any permit conditions imposed by the state of New Mexico. Additionally, PT Freeport Indonesia updated its cost estimates primarily for changes to its plans for the treatment of acidic water, resulting in an increase of $33 million. 22 FREEPORT-McMoRan COPPER & GOLD INC. 2008...

  • Page 25
    ... $1,268 $ - 117 1,334 95 - 36 6 (1) (1) (114) (71) $1,401 $ 1,268 a. Represents accretion of the fair values of environmental obligations assumed in the acquisition of Phelps Dodge, which were determined on a discounted cash flow basis. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 23

  • Page 26
    ...): Years Ended December 31, 2008 2007 2006 North America copper mines South America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations Total FCX revenues Following is a summary of operating (loss) income by...

  • Page 27
    ... shares to acquire Phelps Dodge, and on March 28, 2007, we sold 47 million common shares. Common shares outstanding on December 31, 2008, totaled 384 million. l. Reflects per pound weighted average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines...

  • Page 28
    ... copper sales. On limited past occasions, in response to market conditions, we have entered into copper and gold price protection contracts for a portion of our expected future mine production to mitigate the risk of adverse price ï¬,uctuations. Also, in connection with the Phelps Dodge acquisition...

  • Page 29
    ...future potential reserve additions at Morenci, Sierrita and Bagdad in North America, at Cerro Verde in South America and in the high potential Tenke Fungurume district. The number of drill rigs in operation, which expanded from 26 in March 2007 to approximately 100 in third-quarter 2008, declined to...

  • Page 30
    ... in capitalized interest in 2007 primarily relates to the development projects at Safford and Tenke Fungurume. 28 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report Losses on Early Extinguishment and Conversion of Debt, Net During 2008, we recorded net charges totaling $6 million ($5 million to...

  • Page 31
    ... statutory rate of 35 percent primarily was attributable to (i) withholding taxes related to earnings from Indonesia and South America mining operations, (ii) a U.S. foreign tax credit limitation and (iii) an adjustment associated with the reversal of the Phelps Dodge APB Opinion No. 23, "Accounting...

  • Page 32
    ... North America Copper Mines We currently have five operating copper mines in North America - Morenci, Sierrita, Bagdad and Safford in Arizona, and Tyrone in New Mexico. In addition to copper, the Morenci, Sierrita and Bagdad mines produce molybdenum as a by-product. All of these mining operations...

  • Page 33
    ... Safford as the mine ramped up to full production rates. Our 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 2008, unit net cash costs for the North America copper...

  • Page 34
    ...at our South America copper mines. The revised operating plans principally reï¬,ect the incorporation of reduced input costs and the impacts of South America Copper Mines We have four operating copper mines in South America - Cerro Verde in Peru, and Candelaria, Ojos del Salado and El Abra in Chile...

  • Page 35
    ... of what past results would have been under FCX management or of future operating results. b. Reflects by-product molybdenum production from our Cerro Verde copper mine. Sales of by-product molybdenum are reflected in the Molybdenum segment. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 33

  • Page 36
    ... reduced input costs and currency exchange rates, partly offset by mining lower ore grades in 2009. 34 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report Noncash and nonrecurring costs for 2008 reï¬,ect lower purchase accounting impacts related to increased carrying values of acquired inventory...

  • Page 37
    ...management or of future operating results. Unit net cash costs, after by-product credits, increased to $1.02 per pound of copper in 2007, compared with $0.91 per pound in 2006, primarily reï¬,ecting higher costs at El Abra because of lower copper sales, and also reï¬,ected the impact of Cerro Verde...

  • Page 38
    ...in cost sharing with the joint venture partner. Partly offsetting these increases were lower treatment charges, which vary with the volume of metals sold and the price of copper. Market rates for treatment charges have decreased since 2006 and will vary based on PT Freeport Indonesia's customer mix...

  • Page 39
    ...further discussion of the Tenke Fungurume project. Molybdenum Our Molybdenum operation is an integrated producer of molybdenum, with mining, sulfide ore concentrating, roasting and processing facilities that produce high-purity, molybdenum- 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 37

  • Page 40
    ... curtailed production rate at our Henderson molybdenum mine and adjustments to by-product molybdenum production plans at our North and South America copper mines. We are continuing to closely monitor market conditions and may make further reductions to our molybdenum production and sales plans. For...

  • Page 41
    ... of the Climax molybdenum mine. Current major development projects include underground development in the Grasberg minerals district and the Tenke Fungurume project in the DRC, although we have reduced capital spending on these projects. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 39

  • Page 42
    ... incremental expansion projects at the Sierrita and Bagdad mines and the planned restart of the Miami mine. These projects were previously expected to add production of 180 million pounds of copper and six million pounds of molybdenum per year beginning in 2010. South America Copper Mines El Abra...

  • Page 43
    ... Cerro Verde mine in South America and 1.6 billion pounds at the Tenke Fungurume project in the DRC. These additions reï¬,ect positive results of drilling programs undertaken during 2007 and 2008, and have replaced over 300 percent of our 2008 copper production and 700 percent of our 2008 molybdenum...

  • Page 44
    ... the acquired Phelps Dodge operations and also benefited from higher metal prices. Consolidated revenues, operating cash ï¬,ows and net income vary significantly with ï¬,uctuations in the market prices of copper, gold and molybdenum, sales volumes and other factors. Based on projected consolidated...

  • Page 45
    ... of record at the close of business on January 15, 2009. Cash dividends paid to minority interests totaled $730 million in 2008 and $967 million in 2007, reï¬,ecting dividends paid to the minority interest owners of PT Freeport Indonesia and of our South America copper mines. Cash dividends of...

  • Page 46
    ...2008, follows (in millions): Total 2009 2010 to 2011 2012 to 2013 Thereafter Scheduled interest payment obligationsa Reclamation and environmental obligationsb Take-or-pay contractsc Operating lease obligations Atlantic Copper obligation to insurance companyd PT Freeport Indonesia mine closure...

  • Page 47
    ... million for each $1 per pound change in molybdenum prices. For 2008, more than half of our mined copper was sold in concentrate, approximately 27 percent as rod (principally from our North America operations) and approximately 19 percent as 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 45

  • Page 48
    ... than statements of historical facts, such as those statements regarding anticipated production volumes, sales volumes, unit net cash costs, ore grades, milling rates, commodity prices, development and capital expenditures, mine production 46 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 49
    ...) and Phelps Dodge's 2006 Form 10-K for the year ended December 31, 2006. PRODUCT REVENUES AND PRODUCTION COSTS Unit net cash costs per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on...

  • Page 50
    ... charges per above Revenue adjustments, primarily for pricing on prior period open sales and hedging per above Eliminations and other North America copper mines South America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other...

  • Page 51
    ... America copper mines under FCX management. 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. 2008 Annual Report FREEPORT-McMoRan COPPER...

  • Page 52
    ...at market-based pricing and also include tolling revenues at Sierrita. c. Includes gold and silver product revenues and production costs. d. Refer to Note 18 for summary of unaudited pro forma financial information for year ended December 31, 2007. 50 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual...

  • Page 53
    ...year ended December 31, 2006. As the pre-acquisition data represents the results under Phelps Dodge management, such data is not necessarily indicative of what past results would have been under FCX management or of future operating results. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 51

  • Page 54
    ...charges per above Revenue adjustments, primarily for pricing on prior period open sales per above Purchased metal Eliminations and other South America copper mines North America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other...

  • Page 55
    ...charges per above Revenue adjustments, primarily for pricing on prior period open sales per above Purchased metal Eliminations and other South America copper mines North America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other...

  • Page 56
    ... FCX management or of future operating results. b. Includes molybdenum, gold and silver product revenues and production costs. c. Refer to Note 18 for summary of unaudited pro forma financial information for year ended December 31, 2007. 54 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 57
    ...year ended December 31, 2006. As the pre-acquisition data represents the results under Phelps Dodge management, such data is not necessarily indicative of what past results would have been under FCX management or of future operating results. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 55

  • Page 58
    ...: Royalty per above Revenue adjustments, primarily for pricing on prior period open sales per above Indonesia mining North America copper mines South America copper mines Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX...

  • Page 59
    ...: Royalty per above Revenue adjustments, primarily for pricing on prior period open sales per above Indonesia mining North America copper mines South America copper mines Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX...

  • Page 60
    Management's Discussion and Analysis Co-Product Method Copper Gold Silver Total Year Ended December 31, 2006 (In millions) By-Product Method Revenues, after adjustments shown below Site production and delivery, before net noncash and nonrecurring costs shown below Gold and silver credits ...

  • Page 61
    ...) Revenues Totals presented above Net noncash and nonrecurring costs per above Henderson mine Other molybdenum operations and eliminationsd Molybdenum North America copper mines South America copper mines Indonesia mining Africa mining Rod & Refining Atlantic Copper Smelting & Refining Corporate...

  • Page 62
    ...management or of future operating results. b. Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced as a by-product at our North and South America copper mines. c. Refer to Note 18 for summary of unaudited pro forma financial information...

  • Page 63
    ...Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132R." We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Freeport-McMoRan Copper & Gold Inc.'s internal control over financial...

  • Page 64
    Management's Report on Internal Control Over Financial Reporting Freeport-McMoRan Copper & Gold Inc.'s (the Company's) management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15...

  • Page 65
    ...accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Freeport-McMoRan Copper & Gold Inc. as of December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders' equity and cash ï¬,ows for each...

  • Page 66
    ... Statements of Operations Years Ended December 31, (In Millions, Except Per Share Amounts) 2008 2007 2006 Revenues Cost of sales: Production and delivery Depreciation, depletion and amortization Lower of cost or market inventory adjustments Total cost of sales Selling, general and administrative...

  • Page 67
    ...: North America capital expenditures South America capital expenditures Indonesia capital expenditures Africa capital expenditures Other capital expenditures Acquisition of Phelps Dodge, net of cash acquired Net proceeds from the sale of Phelps Dodge International Corporation Proceeds from sales of...

  • Page 68
    ... reclamation and environmental obligations Current portion of long-term debt and short-term borrowings Dividends payable Copper price protection program Total current liabilities Long-term debt, less current portion: Senior notes Project financing, equipment loans and other Revolving credit facility...

  • Page 69
    ... of 6¾% Mandatory Convertible Preferred Stock Common stock issued to acquire Phelps Dodge Sale of common stock Conversions of 7% Convertible Senior Notes Exercised and issued stock-based awards Stock-based compensation costs Tax benefit for stock-based awards Tender of shares for stock-based awards...

  • Page 70
    ... Note 18). FCX changed Phelps Dodge's legal name to Freeport-McMoRan Corporation in 2008; therefore, references to FMC and Phelps Dodge in these notes represent the same entity. FCX's unincorporated joint ventures with Rio Tinto plc (Rio Tinto) and Sumitomo Metal Mining Arizona, Inc. (Sumitomo) are...

  • Page 71
    ...recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes. Property, Plant, Equipment and Development Costs. Property, plant, equipment and development costs are carried at cost. Mineral exploration costs, as well as drilling and...

  • Page 72
    ... recoverability of long-lived assets and measure the fair value of FCX's mining operations are derived from current business plans developed using near-term price forecasts reï¬,ective of the current price environment and management's projections for long-term average metal prices. Estimates of...

  • Page 73
    ... or by legal construction. These liabilities, which are initially estimated based on discounted cash ï¬,ow estimates, are accreted to full value over time through charges to income. In addition, asset retirement costs (ARCs) are capitalized 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 71

  • Page 74
    ... or the New York Mercantile Exchange (COMEX) prices. FCX receives market prices based on prices in the specified future period, and, under 72 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report five stock-based employee compensation plans and one stockbased director compensation plan. Prior to...

  • Page 75
    ... addition, for other stockbased awards under the plans, compensation costs are recognized based on the fair value on the date of grant for restricted stock units and the intrinsic value on the reporting or exercise date for cash-settled stock appreciation rights (SARs). FCX has elected to recognize...

  • Page 76
    ...be accounted for under the acquisition method, and the new standard makes certain other changes to the accounting for business combinations, of which the most significant are as follows: (i) whether all or a partial interest is acquired, the 74 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 77
    ...near-term outlook by revising its near-term strategy to protect liquidity while preserving its mineral resources and growth options for the longer term. Accordingly, operating plans were revised to reï¬,ect: (i) curtailment of copper production at high-cost North America operations and of molybdenum...

  • Page 78
    ... the Cerro Verde mine in Peru and the sulfide project at the El Abra mine in Chile, (ii) the planned restart of the Miami mine in Arizona and (iii) the suspension of construction activities associated with the restart of the Climax molybdenum mine in Colorado. In the first quarter of 2009, Morenci...

  • Page 79
    ..., Sierrita, Bagdad and Safford located in Arizona, and Tyrone located in New Mexico. FCX has an 85 percent interest in Morenci (see "Joint Ventures - Sumitomo") and owns 100 percent of the other North America mines. At December 31, 2008, operating copper mines in South America were Cerro Verde...

  • Page 80
    ...31, 2008, and a $10 million net payable at December 31, 2007. Investment in PT Smelting. PT Smelting, an Indonesian company, operates a smelter/refinery in Gresik, Indonesia. During 2006, PT Smelting completed an expansion of its production 78 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 81
    ...Phelps Dodge, acquired inventories, including mill and leach stockpiles, were recorded at fair value using near-term price forecasts reï¬,ecting the then-current price environment and management's projections for long-term average metal prices. As a result of the 2008 Annual Report FREEPORT-McMoRan...

  • Page 82
    ... to the Morenci mine. FCX recorded goodwill in connection with the Phelps Dodge acquisition, which primarily related to the requirement to recognize a deferred tax liability for the difference between the assigned values and the tax basis of assets acquired and liabilities assumed in a business...

  • Page 83
    ... the credit ratings assigned by Standard & Poor's Rating Services 2008 2007 Accounts payable Provisionally priced sales adjustmentsa Pension, postretirement, postemployment and other employee benefitsb Accrued interestc Salaries, wages and other compensation Current deferred tax liability Community...

  • Page 84
    ... FCX's corporate credit rating and the ratings on FCX's unsecured debt to BBB- (investment grade). As a result of the upgrade by S&P, the restrictions on incurring debt, making restricted payments and selling assets were suspended. To the 82 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 85
    ... to participate in the FMC U.S. pension plan. to SFAS No. 150, mandatorily redeemable preferred stock is classified as debt. At December 31, 2005, FCX had outstanding 4.3 million depositary shares representing 215,279 shares of its Gold- 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 83

  • Page 86
    ... in 2008 after obtaining final approval from the Internal Revenue Service. In February 2004, FCX established an unfunded Supplemental Executive Retirement Plan (SERP) for its two most senior executive officers. The SERP provides for retirement benefits payable in the form of a joint and...

  • Page 87
    ...ts plans; and FM Services Company's plans), PT Freeport Indonesia and Atlantic Copper plans follows: FCX 2008 2007 PT Freeport Indonesia 2008 2007 Atlantic Copper 2008 2007 Change in benefit obligation: Benefit obligation at beginning of year Acquisition of Phelps Dodge Service cost Interest cost...

  • Page 88
    ... Copper 2008 2007 2006 and many plans require contributions from retirees. The expected cost of providing such postretirement benefits is accrued during the years employees render service. As a result of the acquisition of Phelps Dodge, FCX acquired postretirement obligations with a fair value...

  • Page 89
    ... of year Acquisition of Phelps Dodge Actual return on plans assets Employer contributionsb Benefits paid Transfer of plan assetsc Fair value of plan assets at end of year Funded status Discount rate assumption Balance sheet classification of funded status: Accounts payable and accrued liabilities...

  • Page 90
    ... in operating costs. molybdenum and gold prices; the price of FCX's common stock; and general economic and market conditions. During September 2008, because of the financial turmoil and the decline in copper and molybdenum prices, FCX suspended its purchases of shares under its open-market share...

  • Page 91
    ... sale to purchase 23.9 million shares of FCX common stock owned by Rio Tinto for $882 million (approximately $36.85 per share) and used the remainder for general corporate purposes. Rio Tinto no longer owns an equity interest in FCX; however, it is still PT Freeport Indonesia's joint venture partner...

  • Page 92
    ...executives, the fair value of the restricted stock units was estimated based on projected operating cash ï¬,ows for the year and was charged to expense ratably over the year the cash ï¬,ows were generated. Effective December 2, 2008, the board of directors discontinued this program. FCX also granted...

  • Page 93
    ... compensation cost, including the cash portion resulting from the conversion of restricted stock awards at the acquisition date, related to unvested restricted stock awards expected to be recognized over a weighted-average period of 2.1 years. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC...

  • Page 94
    ... from continuing operations of $1.3 billion that will expire between 2009 and 2018. In addition, FCX had U.S. minimum tax credit carryforwards from continuing operations of $359 million. These credits can be carried forward indefinitely, 92 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 95
    ...are as follows: Jurisdiction Years Under Examination Additional Open Years U.S. Federal Indonesia Peru Chile Arizona New Mexico 2003-2005 2005-2006 2002-2005 2007 - - 2006-2008 2004, 2007-2008 2006-2008 2005-2006, 2008 2003-2008 2003-2008 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 93

  • Page 96
    ... be liable for costs of investigating and, if appropriate, remediating environmental conditions associated with the smelters. At other sites, certain FCX subsidiaries have entered into state voluntary remediation programs to investigate and, 94 FREEPORT-McMoRan COPPER & GOLD INC. 2008 Annual Report

  • Page 97
    ...term annual inflation rate of 2.4 percent, a discount rate based on FCX's estimated credit-adjusted, risk-free interest rate of 7.8 percent and a market-risk premium of 10 percent to reflect what a third party might require to assume these AROs. 2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC...

  • Page 98
    ... operations to submit closure plans for NMED's approval. The closure plans must include measures to assure meeting groundwater quality standards following the closure of discharging facilities and to abate any groundwater or surface water contamination. 96 FREEPORT-McMoRan COPPER & GOLD INC. 2008...

  • Page 99
    .... PT Freeport Indonesia plans to use this fund, including accrued interest, to pay the abovementioned mine closure and reclamation costs. Any costs in excess of the $100 million fund would be funded by operational cash ï¬,ow or other sources. In May 2008, the Indonesian Minister of the Department of...

  • Page 100
    ... to determine the feasibility of an acquisition by the Province of the PT Indocopper Investama shares at fair market value. The copper royalty rate payable by PT Freeport Indonesia under its Contract of Work varies from 1.5 percent of copper net revenue at a copper price of $0.90 or less per...

  • Page 101
    ... of operations through the Freeport Partnership Fund for Community Development. PT Freeport Indonesia charged $34 million in 2008, $48 million in 2007 and $44 million in 2006 to production costs for this commitment. FCX's Cerro Verde copper mine has provided a variety of community support projects...

  • Page 102
    ... to manage its risks do not contain credit risk-related contingent provisions. As of December 31, 2008 and 2007, FCX had no price protection contracts relating to its mine production. A summary of FCX's derivative contracts and programs follows. Dodge, FCX assumed Phelps Dodge's 2007 copper price...

  • Page 103
    ... 19, 2007, FCX acquired Phelps Dodge, a fully integrated producer of copper and molybdenum, with mines in North and South America and processing capabilities for other by-product minerals, such as gold, silver and rhenium, and several development projects, including Tenke Fungurume in the DRC. In...

  • Page 104
    ...market rate assumptions for contractual obligations; and appropriate discount rates and growth rates. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. At the date of acquisition of Phelps Dodge, copper price projections used to value...

  • Page 105
    ... had seven operating copper mines in North America - Morenci, Sierrita, Bagdad, Safford and Miami in Arizona and Chino and Tyrone in New Mexico. As a result of the revised operating plans, mining and milling activities have been suspended at Chino, and the project to restart the Miami mine has been...

  • Page 106
    ...$ 5,791 $ Refined copper products Copper in concentratesa Molybdenum Gold Otherb Total $ 9,575 3,954 2,408 1,286 573 $ 17,796 $ 8,918 4,541 1,703 1,664 113 $ 16,939 $ 1,865 2,721 - 1,155 50 $ 5,791 Long-lived assetsb: United States Indonesia Peru Democratic Republic of Congo Chile Spain Others...

  • Page 107
    ...31, 2008 Morenci Sierrita Other Mines Total South America Copper Mines Cerro Verde Other Mines Total Indonesia Grasberg Africa Tenke Molybdenum Rod & Refining Atlantic Copper Corporate, Smelting Other & & Refining Eliminations FCX Total Revenues: Unaffiliated customersb Intersegment Production and...

  • Page 108
    ... Financial Statements Business Segments (continued) North America Copper Mines Year Ended December 31, 2007 Morenci Sierrita Other Mines Total South America Copper Mines Cerro Verde Other Mines Total Indonesia Grasberg Africa Tenke Rod & Molybdenum Refining Atlantic Copper Corporate, Smelting Other...

  • Page 109
    ... in mill stockpiles, including FCX's joint venture partner's interest in the Morenci mine. North America South America Indonesia Africa Consolidated basisb Net equity interestc Recoverable Proven and Probable Reservesa at December 31, 2008 Copper Gold Molybdenum (billion pounds) (million ounces...

  • Page 110
    ... By Area at December 31, 2008: North America Developed and producing: Morenci Sierrita Bagdad Safford Tyrone Henderson Chinob Miamib Undeveloped: Climax Cobre South America Developed and producing: Cerro Verde El Abra Candelaria Ojos del Salado Indonesia Developed and producing: Grasberg open pit...

  • Page 111
    ... assets and liabilities resulting from the acquisition of Phelps Dodge; and also includes amounts for non-operating income and expense primarily related to the accretion of the fair values of assumed environmental obligations (determined on a discounted cash flow basis). These impacts total...

  • Page 112
    ... 2004 through 2008. Our comparative peer group is the S&P 500 Materials Index, which closely mirrors the benchmarks of other large metals producers. This comparison assumes $100 invested on December 31, 2003, in (a) Freeport-McMoRan Copper & Gold Inc. common stock, (b) the S&P 500 Stock Index and...

  • Page 113
    ... & Gold Inc. Investor Relations Department One North Central Ave. Phoenix, AZ 85004 Telephone (602) 366-8400 www.fcx.com Transfer Agent Questions about lost certificates, lost or missing dividend checks, or notifications of change of address should be directed to the FreeportMcMoRan Copper & Gold...

  • Page 114
    FREEPORT-MCMORAN COPPER & GOLD INC. One North Central Ave. Phoenix, AZ 85004 602.366.8100 WWW.FCX.COM