Freeport-McMoRan 2011 Annual Report Download - page 80

78 | FREEPORT-McMoRan COPPER & GOLD INC.
FCX has an 85 percent interest in Morenci (refer to “Joint Ventures
— Sumitomo”) and owns 100 percent of the other North America
copper mines. FMC also owns 100 percent of the 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, and El Abra
(51 percent owned), Candelaria (80 percent owned) and Ojos del
Salado (80 percent owned) located in Chile. In addition to copper
and molybdenum, certain FMC mines produce other minerals,
such as gold, silver and rhenium. At December31,2011, FMC
owned an eective 57.75 percent interest in the Tenke Fungurume
minerals district in the DRC (refer to Note 14 for discussion of the
future change in ownership interest). In addition to copper, the
Tenke Fungurume minerals district also produces cobalt hydroxide.
At December31,2011, FMC’s net assets totaled $14.9 billion and
its accumulated decit totaled $13.1 billion. FCX had $109 million
in loans outstanding to FMC at December31,2011.
FCX’s direct ownership in PT Freeport Indonesia totals
81.28 percent. PT Indocopper Investama, an Indonesian company,
owns 9.36 percent of PT Freeport Indonesia and FCX owns
100 percent of PT Indocopper Investama. At December31,2011,
PT Freeport Indonesia’s net assets totaled $3.2 billion and its
retained earnings totaled $3.1 billion. As of December31,2011,
FCX had no loans outstanding to PT Freeport Indonesia.
FCX owns 100 percent of the outstanding Atlantic Copper
common stock. At December31,2011, Atlantic Copper’s net
liabilities totaled $43 million and its accumulated decit totaled
$437 million. FCX had $586 million in loans outstanding to
Atlantic Copper at December31,2011.
FCX owns an 85.71 percent interest in PT Puncakjaya Power
(Puncakjaya Power), the owner of assets supplying power to
PT Freeport Indonesia’s operations, including the 3x65 megawatt
coal-red power facilities. PT Freeport Indonesia purchases power
from Puncakjaya Power under infrastructure asset nancing
arrangements. At December31,2011, FCX did not have any loans
outstanding to Puncakjaya Power, PTFreeport Indonesia had
infrastructure asset nancing obligations payable to Puncakjaya
Power totaling $81 million, and Puncakjaya Power had a receivable
from PT Freeport Indonesia for $106 million, including RioTinto’s
share. FCX consolidates PTFreeport Indonesia and Puncakjaya
Power. FCX’s consolidated balance sheets reect receivables of
$23 million ($3 million in other accounts receivable and $20 million
in long-term receivables) at December31,2011, and $25 million
($2 million in other accounts receivable and $23 million in
long-term receivables) at December31,2010, for Rio Tinto’s share
of Puncakjaya Power’s receivable from PT Freeport Indonesia as
provided for in FCX’s joint venture agreement with Rio Tinto.
Joint Ventures. FCX has the following unincorporated joint
ventures with third parties.
Rio Tinto. FCX and Rio Tinto have established certain
unincorporated joint ventures. Under the joint venture arrangements,
Rio Tinto has a 40 percent interest in PT Freeport Indonesia’s
Contract of Work and the option to participate in 40 percent of any
other future exploration projects in Papua, Indonesia.
Pursuant to the joint venture agreement, Rio Tinto has a 40 percent
interest in certain assets and future production exceeding
specied annual amounts of copper, gold and silver through 2021
in Block A of PT Freeport Indonesia’s Contract of Work, and, aer
2021, a 40 percent interest in all production from Block A. All
of PTFreeport Indonesia’s proven and probable reserves and its
mining operations are located in the Block A area. Operating,
nonexpansion capital and administrative costs are shared
proportionately between PT Freeport Indonesia and Rio Tinto
based on the ratio of (i) the incremental revenues from production
from PT Freeport Indonesia’s most recent expansion completed in
1998 to (ii) total revenues from production from Block A, including
production from PT Freeport Indonesia’s previously existing
reserves. PT Freeport Indonesia will continue to receive 100 percent
of the cash ow from specied annual amounts of copper, gold and
silver through 2021 calculated by reference to its proven and
probable reserves as of December 31, 1994, and 60 percent of all
remaining cash ow. e agreement provides for adjustments to
the specied annual amounts of copper, gold and silver attributable
100 percent to PT Freeport Indonesia upon the occurrence of
certain events that cause an interruption in production to occur,
including events such as the labor disruptions and the temporary
suspension of milling operations at PT Freeport Indonesia from
damage to the concentrate and fuel pipelines that occurred in 2011.
As a result of the labor and pipeline disruptions, the 2011 specied
amounts, before smelter recoveries, attributable 100 percent to
PT Freeport Indonesia were reduced by approximately 228 million
pounds for copper and approximately 224 thousand ounces for
gold, which will be oset by identical increases in future periods.
e payable to Rio Tinto for its share of joint venture cash ows
was $45 million at December31,2011, and $132 million at
December31,2010.
Under the joint venture arrangements, Rio Tinto funded
$100 million in 1996 for approved exploration costs in the areas
covered by Contracts of Work held by FCX subsidiaries. Agreed-
upon exploration costs in the joint venture areas are shared 60 percent
by FCX and 40 percent by Rio Tinto. Since September 2008,
Rio Tinto is no longer participating in exploration joint ventures in
the PT Nabire Bakti Mining and PT Irja Eastern Minerals
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS