Freeport-McMoRan 2003 Annual Report Download - page 38

36 FREEPORT-McMoRan COPPER & GOLD INC. 2003 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS
Other Contractual Obligations
In addition to our debt and redeemable preferred
stock maturities shown above, we have other contrac-
tual obligations and commitments which we expect to
fund with projected operating cash flows, available
credit facilities or future financing transactions, if nec-
essary. These obligations and commitments include
(1) PT Freeport Indonesia’s commitment to provide
one percent of its annual revenue through mid-2006
for development of the local people through the
Freeport Partnership Fund for Community
Development and (2) PT Freeport Indonesia’s commit-
ment to contribute amounts to a cash fund designed
to accumulate at least $100 million by the end of our
Indonesian mining activities to pay for mine closure
and reclamation. Atlantic Copper has a mostly
unfunded contractual obligation denominated in euros
to supplement amounts paid to retired employees. In
August 2002, Atlantic Copper complied with Spanish
legislation by agreeing to fund 7.2 million euros annu-
ally for 15 years, beginning August 2002, to an
approved insurance company for an estimated 72
million euro contractual obligation to the retired
employees. Atlantic Copper had $68.0 million
recorded as of December 31, 2003, for this obligation
and is amortizing the unaccrued balance of approxi-
mately $8.8 million over the remaining 13-year
funding period. The scheduled annual payments of
7.2 million euros are not significantly more than the
payments Atlantic Copper has made directly to its
retired employees over the last several years. Atlantic
Copper has firm contractual commitments with third
parties to purchase concentrates at market prices.
We have various noncancelable operating leases and
open purchase orders at December 31, 2003.
A summary of these various obligations follows (in
millions, except concentrates):
1 Year YearsYears More than
Total or Less 2 - 3 4 - 5 5 Years
PT Freeport Indonesia funding of mine closure and
reclamation fund $ 22.3
a
$0.9 $ 1.4 $ 1.4 $18.6
Atlantic Copper contractual obligation to retired
employees 94.2 7.2 14.5 14.5 58.0
Atlantic Copper contracts to purchase concentrates at
market prices (in thousand metric tons) 1,307.0 468.0 643.0 196.0 —
Aggregate operating leases, including Rio Tinto’s share
b
$22.2 $ 7.0 $ 11.8 $ 2.3 $ 1.1
Open purchase orders at December 31, 2003 $ 54.2 $ 54.2 — — —
a. Funding plus accrued interest are projected to accumulate to $100.0 million by the end of our Indonesian mining activities.
b. Minimum payments under operating leases have not been reduced by aggregate minimum sublease rentals of $1.1 million due under noncancelable sub-
leases.
Environmental Matters
We believe that we conduct our Indonesian operations
pursuant to applicable permits and that we comply in
all material respects with applicable Indonesian envi-
ronmental laws, rules and regulations. We have had
three independent environmental audits conducted by
internationally recognized environmental consulting
and auditing firms. Audits were completed in 1996 by
Dames & Moore, in 1999 by Montgomery Watson, and
in 2002 by SGS International Certification Services
Indonesia, a member of the Société Générale de
Surveillance group. The 2002 audit found that the
overall approach to practical management of environ-
mental issues at PT Freeport Indonesia is considered
to be very sound. There were no audit findings requir-
ing corrective action.
In connection with obtaining our environmental
approvals from the Indonesian government, we
committed to performing a one-time environmental
risk assessment on the impacts of our tailings
management plan. We completed this extensive
environmental risk assessment with more than 90
scientific studies conducted over four years and
submitted it to the Indonesian government in
December 2002. We developed the risk assessment
study with input from an independent review panel,
which included representatives from the Indonesian
government, academia and non-governmental organi-
zations. The risks that we identified during this
process were in line with our impact projections of
the tailings management program contained in our
environmental approval documents.
We will determine our ultimate reclamation and clo-
sure activities based on applicable laws and regula-
tions and our assessment of appropriate remedial
activities in the circumstances after consultation with
governmental authorities, affected local residents