Freeport-McMoRan 2003 Annual Report Download - page 5

and we continue to conduct exploration activities to
supplement our reserves. In 2003, we added to our
proven and probable reserves 1.6 billion pounds of
copper and 600,000 ounces of gold net to PT Freeport
Indonesia’s interest.
Moreover, the value of our metals, copper and gold,
is on the rise. Our 2003 results were achieved with
average price realizations of $0.82 per pound of copper
and $367 per ounce of gold. As we begin 2004, copper
prices have rallied to well over $1 per pound and
gold prices are around $400 per ounce. Many market
analysts predict that in 2004 the demand for copper –
and its price – will continue to be strong, reflecting
substantial consumption growth in China and improving
global economic activity; and that gold prices will
continue to benefit from low interest rates and the
weakness in the U.S. dollar. Because the ore in the
Grasberg complex contains such significant quantities
of both copper and gold, we can generate strong
cash flows even during periods of low commodity
prices, when other mining companies struggle; and
realize even greater benefits when copper and gold
prices are high. The presence of both major metals in
our ore bodies makes us a low-cost leader, no matter
how you look at us – either as a copper producer or
as a gold producer.
Because of the mine sequencing changes we made
for the safety of our workers, a portion of the higher
grade ore previously forecast to be mined during the
second half of 2004 is expected to be deferred to
2005. We currently project 2004 sales of 1.0 billion
pounds of copper and 1.5 million ounces of gold net
to our interest. Ore grades are expected to increase
throughout the year, meaning that a significant portion
of 2004 metal sales will occur in the second half of the
year. This, together with a scheduled 45-day closing of
our Atlantic Copper smelter for maintenance beginning
in March, will adversely impact our financial results in
the first half of 2004. The return to higher-grade ore,
however, is projected to boost 2005 sales to 1.5 billion
pounds of copper and 2.9 million ounces of gold net
to our interest. Average annual sales volumes over
the next five years are expected to approximate 1.34
billion pounds of copper and 2.2 million ounces of gold
net to our interest. These sales levels, combined with
our low-cost operations and the bright outlook for the
prices of our metals, place us in a strong financial
position. Because our capital expenditure requirements
during this period will be relatively low, we anticipate
generating substantial cash flows for debt reduction
and shareholder returns.
In closing, we would like to express our heartfelt
thanks to our employees and management team for
their hard work and commitment, and to our Board
of Directors for their strong support during these
challenging times. Together, we will be able to continue
our history of providing strong financial results and
value for our shareholders.
Respectfully yours,
James R. Moffett Richard C. Adkerson
Chairman of the Board President and
Chief Executive Officer
March 1, 2004
Letter to Shareholders FREEPORT-McMoRan COPPER & GOLD INC. 3
James R. Moffett,
Chairman of the Board (left)
and Richard C. Adkerson,
President and Chief
Executive Officer (right),
at the PT Freeport Indonesia
mining operations
in Papua, Indonesia.