Freeport-McMoRan 2008 Annual Report Download - page 105

Notes to Consolidated Financial Statements
2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 103
North America Copper Mines. Until the fourth quarter of 2008,
FCX 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 deferred. The North America copper mines include
open-pit mining, sulfide ore concentrating, leaching and SX/EW
operations. A majority of the copper produced at the North
America copper mines is cast into copper rod by FCX’s Rod &
Refining operations. The North America copper mines division
includes Morenci and Sierrita as reportable segments.
Morenci. The Morenci open-pit mine, located in southeastern
Arizona, primarily produces copper cathodes and copper
concentrates. In addition to copper, the Morenci mine produces a
small amount of molybdenum concentrates as a by-product.
Sierrita. The Sierrita open-pit mine, located in Pima County,
Arizona, primarily produces copper cathodes, copper
concentrates and copper sulfate. In addition to copper, the
Sierrita mine produces molybdenum concentrate as a by-product.
Other Mines. Other mines include FCX’s other operating
southwestern U.S. copper mines – Bagdad, Safford and Tyrone. In
addition to copper, the Bagdad mine produces molybdenum
concentrate as a by-product. Other mines also include FCX’s
southwestern U.S. copper mines that are currently on care-and-
maintenance status, including Miami and Chino.
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. These operations include
open-pit and underground mining, sulfide ore concentrating,
leaching and SX/EW operations. The South America copper mines
division includes Cerro Verde as a reportable segment.
Cerro Verde. The Cerro Verde open-pit copper mine, located
near Arequipa, Peru, produces copper cathodes and copper
concentrates. In addition to copper, the Cerro Verde mine
produces molybdenum concentrate as a by-product. In the first
quarter of 2009, FCX announced plans to temporarily curtail the
molybdenum circuit at Cerro Verde.
Other Mines. Other mines include FCX’s Chilean copper
mines – Candelaria, Ojos del Salado and El Abra – which include
open-pit and underground mining, sulfide ore concentrating,
leaching and SX/EW operations. In addition to copper, the
Candelaria and Ojos del Salado mines produce gold and silver as
by-products.
Indonesia. Indonesia mining includes PT Freeport Indonesia’s
Grasberg minerals district. PT Freeport Indonesia produces
copper concentrates, which contain significant quantities of gold
and silver.
Africa. Africa mining includes the Tenke Fungurume copper
and cobalt mining concessions in the Katanga province of the
DRC. Construction activities are well advanced and initial
production is targeted during the second half of 2009. The initial
project at Tenke Fungurume is based on mining and processing
ore reserves approximating 119 million metric tons with average
ore grades of 2.6 percent copper and 0.35 percent cobalt.
Molybdenum. The Molybdenum segment is an integrated
producer of molybdenum, with mining, sulfide ore concentrating,
roasting and processing facilities that produce high-purity,
molybdenum-based chemicals, molybdenum metal powder and
metallurgical products, which are sold to customers around the
world, and includes the wholly owned Henderson molybdenum
mine in Colorado and related conversion facilities. The Henderson
underground mine produces high-purity, chemical-grade
molybdenum concentrates, which are typically further processed
into value-added molybdenum chemical products. This segment
also includes a sales company that purchases and sells
molybdenum from the Henderson mine as well as from FCX’s
North and South America copper mines that produce
molybdenum as a by-product. In addition, at times this segment
roasts and/or processes material on a toll basis. Toll
arrangements require the tolling customer to deliver appropriate
molybdenum-bearing material to FCX’s facilities for processing
into a product that is returned to the customer, who pays FCX for
processing its material into the specified products.
The Molybdenum segment also includes FCX’s wholly owned
Climax molybdenum mine in Colorado, which has been on
care-and-maintenance status since 1995.
Rod & Refining. The Rod & Refining segment consists of copper
conversion facilities located in North America, and until the
fourth quarter of 2008, included a refinery, four rod mills and a
specialty copper products facility. As a result of the revised
operating plans in the fourth quarter of 2008, one of FCX’s rod
mills was permanently closed. These operations process copper
produced at the North America mines and purchased copper into
copper cathode, rod and custom copper shapes. At times these
operations refine copper and produce copper rod and shapes for
customers on a toll basis. Toll arrangements require the tolling
customer to deliver appropriate copper-bearing material to FCX’s
facilities for processing into a product that is returned to the
customer, who pays FCX for processing its material into the
specified products.
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. PT Freeport Indonesia and the South America copper
mines generally sell a portion of their concentrate and cathode
(South America) production to Atlantic Copper.
Intersegment sales. Intersegment sales between FCX’s
operations are based on similar arms-length transactions with
third parties at the time of the sale. Intersegment sales may not
be reflective of the actual prices ultimately realized because of a