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2011 ANNUAL REPORT | 79
Contract of Work areas in Indonesia. As a result, as long as Rio Tinto
continues not to fund these exploration projects, FCX has the
option to fund 100 percent of future exploration costs in these
areas and Rio Tinto’s interest in these areas will decline over time
in accordance with the joint venture agreement. Rio Tinto has the
option to resume participation in PT Irja Eastern Minerals on a
monthly basis and in PT Nabire Bakti Mining on an annual basis.
Rio Tinto continues to participate in exploration joint ventures in
PT Freeport Indonesia’s Contract of Work areas.
Sumitomo. FCX owns an 85 percent undivided interest in
Morenci via an unincorporated joint venture. e remaining
15 percent is owned by Sumitomo, a jointly owned subsidiary of
Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation.
Each partner takes in kind its share of Morenci’s production. FMC
purchased 67 million pounds of Morenci’s copper cathode from
Sumitomo for $268 million during 2011, 66 million pounds for
$223 million during 2010 and 75 million pounds for $175 million
during 2009. FCX had a receivable from Sumitomo of $12 million
at December31,2011, and $8 million at December31,2010.
Investment in PT Smelting. PT Smelting, an Indonesian company,
operates a smelter and renery in Gresik, Indonesia. During 2006,
PT Smelting completed an expansion of its production capacity
to 275,000 metric tons of copper per year from 250,000 metric tons.
PT Freeport Indonesia owns 25 percent of the outstanding
PT Smelting common stock.
PT Freeport Indonesia’s contract with PT Smelting provides for
the supply of 100 percent of the copper concentrate requirements
necessary for PT Smelting to produce 205,000 metric tons of copper
annually (essentially the smelter’s original design capacity) on a
priority basis. For the rst 15 years of PT Smelting’s commercial
operations, beginning December 1998, PT Freeport Indonesia
agreed that the combined treatment and rening charges would
approximate market rates, but will not fall below specied
minimum rates. e minimum rate, applicable to the period
April27, 2008, to April27, 2014, is determined annually and must
be sucient to cover PT Smelting’s annual cash operating costs (net
of credits and including costs of debt service) for 205,000 metric
tons of copper. e maximum rate is $0.30 per pound. PT Freeport
Indonesia also sells copper concentrate to PT Smelting at market
rates, which are not subject to a minimum or maximum rate, for
quantities in excess of 205,000 metric tons of copper annually.
FCX’s investment in PT Smelting (net of PT Freeport Indonesia’s
share of prots on sales to PT Smelting still in PT Smelting’s
inventory totaling $2 million at December31,2011, and $113 million
at December31,2010) totaled $125 million at December31,2011,
and $11 million at December31,2010. PT Smelting had project-
specic debt, nonrecourse to PT Freeport Indonesia, totaling
$320 million at December31,2011, and $180 million at
December31,2010. PT Freeport Indonesia had a trade receivable
from PT Smelting totaling $116 million at December31,2011,
and $455 million at December31,2010.
NOTE 3. Inventories, Including Long-Term Mill
and Leach Stockpiles
e components of inventories follow:
December 31, 2011 2010
Mining Operations:
a
Raw materials $ 1 $ 1
Finished goods
b
769 704
Atlantic Copper:
Raw materials (concentrates) 260 336
Work-in-process 187 266
Finished goods 9 9
Total product inventories 1,226 1,316
Total materials and supplies, net
c
1,354 1,169
Total inventories $ 2,580 $ 2 , 4 8 5
a. FCX’s mining operations also have work-in-process inventories (i.e., mill and leach
stockpiles), which have been summarized below.
b. Primarily includes 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:
North South
December 31, 2011 America America Indonesia Africa Total
Current:
Mill stockpiles $ 40 $ 11 $ 18 $ — $ 69
Leach stockpiles 963 216 — 41 1,220
Total current mill
and leach stockpiles $ 1,003 $ 227 $ 18 $ 41 $ 1,289
Long-term:
a
Mill stockpiles $ — $ 535 $ — $ — $ 535
Leach stockpiles 718 284 — 149 1,151
Total long-term mill
and leach stockpiles $ 718 $ 819 $ — $ 149 $ 1,686
North South
December 31, 2010 America America Indonesia Africa Total
Current:
Mill stockpiles $ 15 $ 29 $ 24 $ — $ 68
Leach stockpiles 749 98 — 34 881
Total current mill
and leach stockpiles $ 764 $ 127 $ 24 $ 34 $ 949
Long-term:
a
Mill stockpiles $ — $ 470 $ — $ — $ 470
Leach stockpiles 622 250 — 83 955
Total long-term mill
and leach stockpiles $ 622 $ 720 $ — $ 83 $ 1,425
a. Metals in stockpiles not expected to be recovered within the next 12 months.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS