Freeport-McMoRan 2011 Annual Report Download

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CONNECTING THE FUTURE®
2011 Annual Report

Table of contents

  • Page 1
    CONNECTING THE FUTURE 2011 Annual Report ®

  • Page 2
    ... gold mine in terms of recoverable reserves; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde and El Abra operations in South America; and the Tenke Fungurume minerals district in the Democratic Republic of Congo...

  • Page 3
    ...Information On the cover: The copper bands in the image were produced at our Bayway Specialty Products Operations in Elizabeth, New Jersey EL AT / EC IV E TR IC VEH I CL ES TE A R N CIE M E D IC A L S DI ST RA RIB UTION Communications LES WIRE SI NF ER EN CE G 2011 ANNUAL REPORT...

  • Page 4
    ... new mines, expanded our longEstimated Incremental Copper from Advanced Stage Projects approximately 975 million lbs 600 Cerro Verde 225 Morenci 150 Tenke Fungurume lived reserve and resource base, and positioned the company for future growth to provide shareholders with continuing benefits...

  • Page 5
    ..., GEOGRAPHICALLY DIVERSE RESERVES OF COPPER, GOLD AND MOLYBDENUM, WE ARE CONNECTING THE FUTURE FOR OUR SHAREHOLDERS, EMPLOYEES AND LOCAL COMMUNITIES. Photo: Cerro Verde Mine, Peru This year's annual report theme, "Connecting the Future," signifies the role of Freeport-McMoRan Copper & Gold Inc. in...

  • Page 6
    ...Advisory Directors for their advice, guidance and support. We look forward to reporting our progress to you throughout the year. Respectfully yours, James R. Moffett Chairman of the Board Richard C. Adkerson President and Chief Executive Officer March 16, 2012 4 | FREEPORT-McMoRan COPPER & GOLD...

  • Page 7
    ... I TA L IO N COPPER HAS BEEN AT THE CENTER OF COMMUNICATIONS BREAKTHROUGHS THROUGHOUT HUMAN EC IN F O R M ATIO NT HIG OL Communications LE S HISTORY, FROM THE TELEPHONE TO HIGHSPEED COMPUTER APPLICATIONS, Infrastructure UTION RIB DI ST TE CLE AN W A R S GY IC LE ER EN IC VEH...

  • Page 8
    ..., Arizona Sierrita, Arizona Bagdad, Arizona Safford, Arizona Miami, Arizona Henderson, Colorado Climax, Colorado Tyrone, New Mexico Chino, New Mexico Copper (Cu) Gold (Au) Molybdenum (Mo) Cobalt (Co) Cerro Verde, Peru El Abra, Chile Candelaria, Chile Ojos del Salado, Chile 6 | FREEPORT-McMoRan...

  • Page 9
    ... + Includes sales of molybdenum produced at FCX's North and South America copper mines. Tenke Fungurume, Democratic Republic of Congo SINCE 2007, WE HAVE ADDED 46 BILLION POUNDS OF COPPER RESERVES AND ARE PURSUING LARGE SCALE EXPANSIONS, WHICH WOULD INCREASE ANNUAL COPPER SALES BY APPROXIMATELY...

  • Page 10
    ... milling operations at PT Freeport Indonesia from damage to the concentrate and fuel pipelines. Lower copper sales volumes from Indonesia in 2011 were partly offset by higher sales volumes in North America. FCX's consolidated molybdenum sales for 2011 totaled 79 million pounds at an average realized...

  • Page 11
    Consolidated Copper Sales in billion lbs 4.0 3.0 2.0 1.0 Consolidated Gold Sales in million ozs 2.0 1.5 1.0 0.5 Consolidated Molybdenum Sales in million lbs 80 60 40 20 2012e 2011 2012e 2011 2012e 2011 Note: e=estimate. THE LONG-TERM FUNDAMENTALS FOR OUR MARKETS, PARTICULARLY FOR COPPER, ...

  • Page 12
    ... production of copper and molybdenum. FCX currently operates seven copper mines in the United States - Morenci, Bagdad, Sierrita, Safford and Miami in Arizona, and Tyrone and Chino in New Mexico. FCX also conducts molybdenum mining operations at the Henderson underground mine in Colorado. Molybdenum...

  • Page 13
    ALREADY THE NORTH AMERICAN METALS INDUSTRY LEADER IN THE PRODUCTION OF COPPER AND MOLYBDENUM, WE ARE INVESTING IN FUTURE GROWTH THROUGH PRODUCTION CAPACITY INCREASES AND EXPLORATION. Photo: Climax Mine, Colorado

  • Page 14
    SOUTH AMERICA OPERATIONS IN CHILE AND PERU ARE POISED FOR CONTINUED GROWTH. THE EL ABRA MINE'S NEWLY COMMISSIONED STACKING AND LEACHING FACILITY IS CONTRIBUTING 300 MILLION POUNDS OF COPPER PRODUCTION PER YEAR. Photo: El Abra Mine, Chile

  • Page 15
    ... Sales in billion lbs 1.50 1.25 1.00 0.75 0.50 0.25 2012e 2011 Note: e=estimate. South America Unit Cash Costs per lb of copper 2011 South America Copper Reserves by Mine 39.1 billion consolidated lbs 77% 12% 11% Cerro Verde Candelaria and Ojos del Salado El Abra Cash Unit Costs Site Production...

  • Page 16
    ...271 per ounce in 2010. Lower copper and gold sales volumes in 2011 primarily reflected the impact of labor-related disruptions and the temporary suspension of milling operations because of damage to the concentrate and fuel pipelines. FCX expects 2012 sales from Indonesia to approximate 930 million...

  • Page 17
    EXPANSION PROJECTS BELOW THE SURFACE IN THE GRASBERG MINERALS DISTRICT ARE DEVELOPING LARGESCALE, HIGH-GRADE UNDERGROUND ORE BODIES THAT WILL BECOME THE WORLD'S LARGEST UNDERGROUND MINE COMPLEX BY 2016. Photo: Grasberg underground development, Indonesia

  • Page 18
    COPPER CATHODE PRODUCTION AT THE TENKE FUNGURUME MINE IN THE DEMOCRATIC REPUBLIC OF CONGO IS ABOVE TARGET AS WE UNDERTAKE A SECOND PHASE OF DEVELOPMENT TO FURTHER INCREASE CAPACITY. Photo: Tenke Fungurume operations, Democratic Republic of Congo

  • Page 19
    OPERATIONAL OVERVIEW Africa FCX operates the Tenke Fungurume (Tenke) copper and cobalt mine in the Katanga province of the Democratic Republic of Congo. The milling facilities at Tenke have been performing above capacity and mining rates have been increased to enable copper production to ramp up to...

  • Page 20
    ...EXPLORATION PROGRAM HAS MADE SIGNIFICANT ADDITIONS TO OUR RESERVE BASE. MUCH OF OUR GLOBAL EXPLORATION EFFORT FOCUSES ON OUR OWN BACKYARD, WHERE WE PROBE THE BOUNDARIES OF OUR EXISTING ORE BODIES. Photo: Core samples, Tenke Fungurume, Democratic Republic of Congo 18 | FREEPORT-McMoRan COPPER & GOLD...

  • Page 21
    ... Reporting Initiative and FCX's 2011 Working Toward Sustainable Development report will be available on FCX's website at www.fcx.com upon completion of third-party assurance. 2011 Community Investment $191 million 52.6 % 13.6 % 9.7 % 9.5 % Community Trust Funds Education and Training Safety, Health...

  • Page 22
    ... President and Chief Executive Officer Freeport-McMoRan Copper & Gold Inc. Robert J. Allison, Jr. (2, 3, 4) Retired Chairman and Chief Executive Officer Anadarko Petroleum Corporation Robert A. Day (1, 3) Chairman of the Board and Chief Executive Officer Trust Company of the West Gerald J. Ford...

  • Page 23
    ... Public Accounting Firm 67 Report of Independent Registered Public Accounting Firm 68 Consolidated Statements of Income 69 Consolidated Statements of Cash Flows 70 Consolidated Balance Sheets 71 Consolidated Statements of Equity 72 Notes to Consolidated Financial Statements 2011 ANNUAL REPORT | 21

  • Page 24
    ... program assumed in the acquisition of FMC. c. Includes charges totaling $116 million ($50 million to net income attributable to common stock or $0.05 per share) primarily associated with bonuses for new labor agreements and other employee costs at PT Freeport Indonesia, Cerro Verde and El Abra...

  • Page 25
    ... Gold (thousands of recoverable ounces) Production Sales, excluding purchases Average realized price per ounce Molybdenum (millions of recoverable pounds) Production Sales, excluding purchases Average realized price per pound NORTH AMERICA COPPER MINES Operating Data, Net of Joint Venture Interest...

  • Page 26
    ... $3.27 per pound (FCX consolidated) and $3.25 per pound (North America copper mines). c. Results for 2009 represent mining operations that began production in March 2009. d. Includes sales of molybdenum produced at our North and South America copper mines. 24 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 27
    ...gold and molybdenum mining companies in terms of reserves and production. Our portfolio of assets includes the Grasberg minerals district in Indonesia, significant mining operations in North and South America, and the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC...

  • Page 28
    ...Indonesia. Molybdenum sales in 2012 are expected to be similar to 2011, with higher production from primary molybdenum mines, offset by lower production from our North and South America copper mines. The achievement of projected 2012 sales volumes depends on a number of factors, including the timing...

  • Page 29
    ... vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. Based on projected consolidated sales volumes and unit net cash costs for 2012, and assuming average prices of $3.50 per pound...

  • Page 30
    ... recoverable proven and probable copper, gold and molybdenum reserves during 2011 and 2010: Copper (billion pounds) Gold (million ounces) Molybdenum (billion pounds) CRITICAL ACCOUNTING ESTIMATES Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our...

  • Page 31
    ... of the fair value of environmental obligations assumed in the acquisition of Freeport-McMoRan Corporation (FMC, formerly Phelps Dodge Corporation), which were determined on a discounted cash flow basis. Refer to Note 13 for further discussion of environmental obligations. 2011 ANNUAL REPORT | 29

  • Page 32
    ... assets and measure fair value of our mining operations are derived from current business plans, which are developed using near-term price forecasts reflective of the current price Refer to Note 13 for further discussion of reclamation and closure costs. 30 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 33
    ...and Production Costs." Revenues Consolidated revenues totaled $20.9 billion in 2011, compared with $19.0 billion in 2010 and $15.0 billion in 2009, and include the sale of copper concentrates, copper cathodes, copper rod, gold, molybdenum and other metals by our North and South America copper mines...

  • Page 34
    ...31, 2010, provisionally priced gold sales. Purchased Copper and Molybdenum From time to time, we purchase copper cathode to be processed by our Rod & Refining segment when production from our North America copper mines does not meet customer demand. The increases in purchased copper in 2011 and 2010...

  • Page 35
    ... consolidated copper production costs in 2011, and included purchases of approximately 225 million gallons of diesel fuel; 6,475 gigawatt hours of electricity at our North America, South America and Africa copper mining operations (we generate all of our power at our Indonesia mining operation); 650...

  • Page 36
    ... 2012 will vary with commodity price changes and the mix of income from international and U.S. operations. Assuming average prices of $3.50 per pound for copper, $1,600 per ounce for gold, $13 per pound for molybdenum and current sales volume and cost estimates, we estimate our annual consolidated...

  • Page 37
    ...ANALYSIS OPERATIONS North America Copper Mines We currently operate seven copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. All of these mining operations are wholly owned, except for Morenci, an unincorporated joint venture...

  • Page 38
    ...during 2012. Higher projected unit net cash costs in 2012, compared with 2011, primarily reflect higher mining and milling rates and lower by-product credits associated with lower molybdenum grades and prices, partly offset by higher projected copper volumes. 36 | FREEPORT-McMoRan COPPER & GOLD INC...

  • Page 39
    ... to qualify for hedge accounting, revenue adjustments in 2009 reflected unrealized gains on these copper derivative contracts (refer to Note 15 for further discussion). South America Mining We operate four copper mines in South America - Cerro Verde in Peru, and El Abra, Candelaria and Ojos del...

  • Page 40
    ... Cerro Verde and El Abra pursuant to the new labor agreements. Operating Data. Following is summary operating data for the South America mining operations for the years ended December 31. 2011 2010 2009 Copper (millions of recoverable pounds) Production Sales Average realized price per pound $ Gold...

  • Page 41
    ... bonuses paid at Cerro Verde and El Abra pursuant to the new labor agreements. Unit net cash costs (net of by-product credits) for our South America mining operations increased to $1.20 per pound of copper in 2011, compared with $1.15 per pound in 2010, primarily reflecting higher site production...

  • Page 42
    ... eight-day work stoppage in July 2011 and the approximate three-month strike that concluded in December 2011. Additionally, PT Freeport Indonesia's milling operations were temporarily suspended during fourth-quarter 2011 because of damage to concentrate and 40 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 43
    ... of Indonesia to address security issues. Operating Data. Following is summary operating data for our Indonesia mining operations for the years ended December 31. 2011 2010 2009 Operating Data, Net of Joint Venture Interest Copper (millions of recoverable pounds) Production 846 846 Sales Average...

  • Page 44
    ...credits) per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. 2011 2010 By-Product Method Co-Product Method Copper Gold By-Product Method Co-Product Method Copper Gold Revenues, excluding adjustments Site production and delivery, before...

  • Page 45
    ... joint venture arrangements. Partly offsetting higher site production and delivery costs were higher gold and silver credits ($0.06 per pound) associated with higher gold prices. Operating and Development Activities. Our initial investment Africa Mining Africa mining consists of the Tenke copper...

  • Page 46
    MANAGEMENT'S DISCUSSION AND ANALYSIS Operating Data. Following is summary operating data for our Africa mining operations for the years ended December 31. 2011 2010 2009 a Copper (millions of recoverable pounds) Production Sales Average realized price per poundb Cobalt (millions of recoverable ...

  • Page 47
    ... value-added molybdenum chemical products. The Molybdenum operations also include the wholly owned Climax molybdenum mine in Colorado (refer to further discussion below); a sales company that purchases and sells molybdenum from our Henderson mine and from certain of our North and South America mines...

  • Page 48
    ... in Indonesia and South America (our North America copper mines are not significantly affected by changes in treatment and refining charges because these operations are largely integrated with our Miami smelter located in Arizona). In May 2011, Atlantic Copper successfully completed a scheduled 26...

  • Page 49
    ... major projects), primarily associated with underground development activities at Grasberg, the expansion at Tenke Fungurume and the concentrator expansion at Cerro Verde. We are also considering additional investments at several of our sites. Capital spending plans will continue to be reviewed and...

  • Page 50
    ... The timing of future purchases of our common stock is dependent on many factors, including our operating results; cash flows and financial position; copper, gold and molybdenum prices; the price of our common shares; and general economic and market conditions. Dividends. Common stock dividends paid...

  • Page 51
    ...2012 2013 to 2014 2015 to 2016 Thereafter Reclamation and environmental obligations Debt maturities Scheduled interest payment obligationsb Take-or-pay contractsc Operating lease obligations Atlantic Copper obligation to insurance companyd PT Freeport Indonesia mine closure and reclamation funde...

  • Page 52
    ...revenues include the sale of copper concentrates, copper cathodes, copper rod, gold, molybdenum and other metals by our North and South America mines, the sale of copper concentrates (which also contain significant quantities of gold and silver) by our Indonesia mining operations, the sale of copper...

  • Page 53
    ...to revenues from the copper, gold, molybdenum and other metals we produce, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by our management and the Board to monitor operations. In the co-product method presentation below, shared...

  • Page 54
    ... and other North America copper mines South America mining Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated financial statements a. Molybdenum credits and revenues reflect volumes produced...

  • Page 55
    ... and other North America copper mines South America mining Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated financial statements a. Molybdenum credits and revenues reflect volumes produced...

  • Page 56
    ... and other North America copper mines South America mining Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated financial statements a. Molybdenum credits and revenues reflect volumes produced...

  • Page 57
    ... and other costs Revenue adjustments, primarily for pricing on prior period open sales Other non-inventoriable costs Eliminations and other South America mining North America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other...

  • Page 58
    ... and other costs Revenue adjustments, primarily for pricing on prior period open sales Other non-inventoriable costs Eliminations and other South America mining North America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other...

  • Page 59
    ... and other costs Revenue adjustments, primarily for pricing on prior period open sales Other non-inventoriable costs Eliminations and other South America mining North America copper mines Indonesia mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other...

  • Page 60
    ...noncash and other costs Revenue adjustments, primarily for pricing on prior period open sales Indonesia mining North America copper mines South America mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated...

  • Page 61
    ...noncash and other costs Revenue adjustments, primarily for pricing on prior period open sales Indonesia mining North America copper mines South America mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated...

  • Page 62
    ...noncash and other costs Revenue adjustments, primarily for pricing on prior period open sales Indonesia mining North America copper mines South America mining Africa mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated...

  • Page 63
    ... noncash and other costs Revenue adjustments, primarily for pricing on prior period open sales Other non-inventoriable costs Africa mining North America copper mines South America mining Indonesia mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As...

  • Page 64
    ... noncash and other costs Revenue adjustments, primarily for pricing on prior period open sales Other non-inventoriable costs Africa mining North America copper mines South America mining Indonesia mining Molybdenum Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As...

  • Page 65
    ... Net noncash and other costs Henderson mine Other molybdenum operations and eliminationsc Molybdenum North America copper mines South America mining Indonesia mining Africa mining Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated...

  • Page 66
    ... Net noncash and other costs Henderson mine Other molybdenum operations and eliminationsc Molybdenum North America copper mines South America mining Indonesia mining Africa mining Rod & Refining Atlantic Copper Smelting & Refining Corporate, other & eliminations As reported in FCX's consolidated...

  • Page 67
    ... 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(f) or 15d-15(f) under the Securities Exchange...

  • Page 68
    ...the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 2011, and our report dated February 27, 2012 expressed an unqualified opinion thereon. ERNST & YOUNG LLP Phoenix, Arizona February 27, 2012 66 | FREEPORT-McMoRan COPPER...

  • Page 69
    ...December 31, 2011, in conformity with U.S. generally accepted accounting principles. 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 reporting as of December...

  • Page 70
    ..., (In Millions, Except Per Share Amounts) 2011 2010 2009 Revenues Cost of sales: Production and delivery Depreciation, depletion and amortization Total cost of sales Selling, general and administrative expenses Exploration and research expenses Environmental obligations and shutdown costs Total...

  • Page 71
    ... current assets Accounts payable and accrued liabilities Accrued income and other taxes Net cash provided by operating activities Cash flow from investing activities: Capital expenditures: North America copper mines South America Indonesia Africa Molybdenum Other Investment in McMoRan Exploration Co...

  • Page 72
    ...EQUITY Current liabilities: Accounts payable and accrued liabilities Dividends payable Current portion of reclamation and environmental obligations Accrued income taxes Rio Tinto's share of joint venture...,751 (2,590) (323) (3,441) 12,504 2,056 14,560 $ 29,386 70 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 73
    ...Total Equity (In Millions) Balance at January 1, 2009 Conversions and redemptions of 5½% Convertible Perpetual Preferred Stock Sale of common stock Exercised and issued stock-based awards Stock-based compensation Tax benefit for stock-based awards Tender of shares for stock-based awards Dividends...

  • Page 74
    ... rod, copper wire, molybdenum oxide, high-purity molybdenum chemicals and other metallurgical products). Finished goods are valued based on the weighted-average cost of source material plus applicable conversion costs relating to associated process facilities. 72 | FREEPORT-McMoRan COPPER & GOLD...

  • Page 75
    ... level of confidence than that applying to an indicated mineral resource. Exploration potential is the estimated value of potential mineral deposits that FCX has the legal right to access. The value assigned to exploration potential was determined by interpreting the known 2011 ANNUAL REPORT | 73

  • Page 76
    ... fair values (refer to Note 13 for further discussion), environmental obligations are recorded on an undiscounted basis. Where the available information is sufficient to estimate the amount of the obligation, that estimate has been used. Where the information 74 | FREEPORT-McMoRan COPPER & GOLD INC...

  • Page 77
    ...related ARC in the period of the disturbance. FCX's AROs consist primarily of costs associated with mine reclamation and closure activities. These activities, which are site specific, generally include costs for earthwork, revegetation, water...'s operations in the Democratic Republic of Congo (DRC), ...

  • Page 78
    ... of these sales use the average price of the previous month quoted by the applicable publication. FCX's remaining molybdenum sales generally have pricing that is either based on a fixed price or adjusts within certain price ranges. PT Freeport Indonesia concentrate sales and Tenke Fungurume Mining...

  • Page 79
    ...the Tenke Fungurume minerals district in the DRC, and copper and molybdenum conversion facilities. At December 31, 2011, FMC's operating copper mines in North America were Morenci, Sierrita, Bagdad, Safford and Miami located in Arizona, and Tyrone and Chino located in New Mexico. 2011 ANNUAL REPORT...

  • Page 80
    ...Henderson molybdenum mine and the Climax molybdenum mine (construction activities are substantially complete with plans to commence production in 2012), which are located in Colorado. At December 31, 2011, operating copper mines in South America were Cerro Verde (53.56 percent owned) located in Peru...

  • Page 81
    ... molybdenum concentrates and copper concentrates, anodes, cathodes and rod. c. Materials and supplies inventory is net of obsolescence reserves totaling $26 million at December 31, 2011 and 2010. A summary of mill and leach stockpiles follows: December 31, 2011 North South America America Indonesia...

  • Page 82
    ... primarily related to the development projects at the Climax, Cerro Verde and Candelaria mines, and in the Grasberg minerals district in Indonesia in 2011; at the Climax and El Abra mines in 2010; and at the Tenke Fungurume mine in 2009. Indefinite-lived water rights Patents and process technology...

  • Page 83
    ... (95) $ 4,660 Accounts payable Salaries, wages and other compensation Pension, postretirement, postemployment and other employee benefitsa Current deferred tax liability Other accrued taxes Accrued interest b Deferred revenue Community development programs Other Total accounts payable and accrued...

  • Page 84
    ... date. The increase in value was amortized over the term of the notes and recorded as a reduction of interest expense. In 2009, FCX purchased in an open-market transaction $24 million of these senior notes for $26 million and recorded losses on early 82 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 85
    ... the FreeportMcMoRan Corporation Defined Benefit Master Trust (Master Trust) includes the periodic development of asset/liability studies to determine expected long-term rates of return and expected risk for various investment portfolios. FCX's retirement plan administration and investment committee...

  • Page 86
    ... accounts funded exclusively by deductions from participant's pay. FCX also has an unfunded pension plan for its directors and an excess benefits plan for its executives, both of which no longer accrue benefits. PT Freeport Indonesia Plan. PT Freeport Indonesia has a defined benefit pension plan...

  • Page 87
    ... 2011 2010 PT Freeport Indonesia 2011 2010 Atlantic Copper 2011 2010 Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Actuarial losses Foreign exchange losses (gains) Benefits paid Benefit obligation at end of year Change in plan assets: Fair value...

  • Page 88
    ... to available cash. Open-ended mutual funds are managed by registered investment companies and are valued at the daily published net asset value of shares/units held. Because redemptions and purchases of shares/units occur at the net asset value without any 86 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 89
    ..., director and excess benefits plans), PT Freeport Indonesia's and Atlantic Copper's pension plans follow: FCX PT Freeport Indonesiaa Atlantic Copperb 2012 2013 2014 2015 2016 2017 through 2021 $ 88 88 90 91 94 515 $ 16 11 11 13 14 123 $ 7 7 7 7 7 36 a. Based on a December 31, 2011, exchange...

  • Page 90
    ... $56 million on December 31, 2011, and $49 million on December 31, 2010. FMC had a defined contribution plan for its eligible employees hired on or after January 1, 2007, which was merged into the FCX savings plan effective January 1, 2009. Subsequent to 88 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 91
    ...36 million in 2010 and $30 million in 2009. FCX has other employee benefit plans, certain of which are related to FCX's financial results, which are recognized in operating costs. NOTE 11. Stockholders' Equity and Stock-Based Compensation Common Stock. FCX's authorized shares of capital stock total...

  • Page 92
    ...that participants will receive the following year's vesting after retirement and provide for accelerated vesting if there is a change in control (as defined in the plans). Therefore, FCX accelerates one year of amortization for retirement-eligible employees. 90 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 93
    ... plan for its executive officers that requires a portion of each executive officer's annual bonus be paid in restricted stock units. The maximum annual incentive award pool is a percentage of FCX's consolidated operating cash flows adjusted for working capital for the preceding year and funding...

  • Page 94
    ...734 20 (10) 239 249 $ 2,983 $ 19 7 2,172 2,198 (70) 79 100 109 $ 2,307 Number of Restricted Stock Units Aggregate Intrinsic Value Balance at January 1 Granted Vested Forfeited Balance at December 31 2,140,914 381,636 (1,257,274) - 1,265,276 1.4 $ 47 92 | FREEPORT-McMoRan COPPER & GOLD INC.

  • Page 95
    ... 2011, the U.S. Treasury Department issued temporary and proposed regulations on the treatment of amounts paid for repair and maintenance costs of fixed assets. These regulations generally apply to tax years beginning on or after January 1, 2012. Transition rules providing procedural guidance...

  • Page 96
    ...at FCX's El Abra and Candelaria mines were stabilized through 2017 at a rate of 4 percent. However, under the legislation, FCX opted to transfer from its stabilized rate to the sliding scale of 4 to 9 percent (depending on a defined operational margin) for the years 2010 through 2012 and will return...

  • Page 97
    ...at fair value on the acquisition date in accordance with business combination accounting guidance. Significant adjustments to these obligations may occur in the future. New environmental obligations will be recorded as described in Note 1 under "Environmental Expenditures." At December 31, 2011, FCX...

  • Page 98
    ... remediation. The two most significant environmental obligations for historical smelter sites relate to Blackwell, Oklahoma, and Bisbee, Arizona. In 2011, FCX increased the environmental obligations for historical smelter sites, which were estimated at fair value when assumed in the FMC acquisition...

  • Page 99
    ... class action was filed against FCX and several of its direct and indirect subsidiaries, including BZC, entitled Coffey, et al., v. Freeport-McMoRan Copper & Gold, Inc., et al., Kay County, Oklahoma District Court, Case No. CJ-2008-68. The suit alleges that the operations of BZC's zinc smelter...

  • Page 100
    ... $151 million, which are legally restricted to fund a portion of its AROs for the Chino, Tyrone and Cobre mines as required by New Mexico regulatory authorities. New Mexico Environmental and Reclamation Programs. FCX's New Mexico operations are regulated under the New Mexico Water Quality Act and...

  • Page 101
    ... pay mine closure and reclamation costs. Any costs in excess of the $100 million fund would be funded by operational cash flow or other sources. In December 2010, the President of Indonesia issued a regulation regarding mine reclamation and closure, which requires a company to provide a mine closure...

  • Page 102
    ... claims. Columbian filed suit in New York state court in April 2010 (Columbian Chemicals Company and Columbian Chemicals Acquisition LLC v. Freeport-McMoRan Corporation f/k/a Phelps Dodge Corporation, County of New York, Supreme Court of the State of New York, Index No. 600999/2010), alleging, among...

  • Page 103
    ... of copper, gold and silver expected to be generated when PT Freeport Indonesia's milling facilities operate above 200,000 metric tons of ore per day. The additional royalty for copper equals the Contract of Work royalty rate, and for gold and silver equals twice the Contract of 2011 ANNUAL REPORT...

  • Page 104
    ... for the Tenke Fungurume concession, including the amount of transfer payments payable to the government, the government's percentage ownership and involvement in the management of the mine, regularization of certain matters under DRC law and the implementation of social plans. In October 2010, the...

  • Page 105
    ... Freeport Indonesia charged $50 million in 2011, $64 million in 2010 and $59 million in 2009 to cost of sales for this commitment. During 2006, the Peruvian government announced that all mining companies operating in Peru would be required to make annual contributions to local development funds for...

  • Page 106
    ... (molybdenum) as defined in the contract. Mark-to-market price fluctuations recorded through the settlement date are reflected in revenues for sales contracts and in cost of sales as production and delivery costs for purchase contracts. A summary of FCX's embedded derivatives at December 31, 2011...

  • Page 107
    ... value hedge accounting, FCX also had similar contracts with some of FMC's U.S. copper rod customers that did not qualify for hedge accounting because of certain terms in the sales contracts prior to 2010. Gains and losses for these economic hedge transactions were recorded in revenues. A summary...

  • Page 108
    ... Liabilities, Dividends Payable and Rio Tinto's Share of Joint Venture Cash Flows. The financial statement amount is a reasonable estimate of the fair value because of the short maturity of these instruments and generally negligible credit losses. Trust Assets and Available-for-Sale Securities. The...

  • Page 109
    ... core fixed income fund Government mortgage-backed securities Corporate bonds Asset-backed securities Money market funds Government bonds and notes Municipal bonds Total trust assets Available-for-sale securities:a Equity securities Money market funds Total available-for-sale securities Derivatives...

  • Page 110
    ..., Bagdad, Safford, Miami, Tyrone and Chino. In addition to copper, certain of these mines (primarily the Sierrita and Bagdad mines) produce molybdenum concentrates. South America. South America mining includes four operating copper mines - Cerro Verde in Peru, and Candelaria, Ojos del Salado and El...

  • Page 111
    ...1,937 986 379 496 566 563 475 1,655 $ 15,040 a. Revenues are attributed to countries based on the location of the customer. December 31, 2011 a 2010 2009 Long-lived assets: United States Indonesia Democratic Republic of Congo Peru Chile Spain Other Total $ 7,899 4,469 3,497 3,265 2,242 257 68...

  • Page 112
    ... Other Mines Total Cerro Verde South America Other Mines Total Indonesia Africa Tenke Rod & Grasberg Fungurume Molybdenum Refining Atlantic Copper Corporate, Smelting Other & & Refining Eliminations FCX Total Year Ended December 31, 2011 Revenues: Unaffiliated customers Intersegment Production and...

  • Page 113
    ... extracted or produced at the time of the reserve determination. Recoverable Proven and Probable Reserves December 31, 2011 Coppera (billion pounds) Gold (million ounces) Molybdenum (billion pounds) North America South America Indonesia Africa Consolidated basisb Net equity interestc 40.6 39.1 31...

  • Page 114
    ...3.43 By Area at December 31, 2011: North America Developed and producing: Morenci Bagdad Safford Sierrita Tyrone Chino Miami Henderson Undeveloped: Climax Cobre South America Developed and producing: Cerro Verde El Abra Candelaria Ojos del Salado Indonesia Developed and producing: Grasberg open pit...

  • Page 115
    ... ($50 million to net income attributable to common stock or $0.05 per share) for the fourth quarter and the year primarily associated with bonuses for new labor agreements and other employee costs at PT Freeport Indonesia, Cerro Verde and El Abra. b. Includes additional taxes of $57 million ($50...

  • Page 116
    .../31/07 12/31/08 12/31/09 12/31/10 12/31/11 December 31, 2006 2007 2008 2009 2010 2011 Freeport-McMoRan Copper & Gold Inc. S&P 500 Stock Index S&P 500 Materials Index *Total return assumes reinvestment of dividends. $100.00 100.00 100.00 $186.84 105.49 122.53 $45.77 66.46 66.59 $ 150...

  • Page 117
    ... vote at its annual meeting, upon written request. The Investor Relations Department can be contacted as follows: Freeport-McMoRan Copper & Gold Inc. Investor Relations Department 333 North Central Avenue Phoenix, Arizona 85004 Telephone (602) 366-8400 www.fcx.com TRANSFER AGENT dividends that were...

  • Page 118
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