Freeport-McMoRan 2003 Annual Report Download - page 60

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The average cost method was used to determine
the cost of essentially all materials and supplies
inventory. Materials and supplies inventory is net
of obsolescence reserves totaling $17.6 million
at December 31, 2003, and $15.8 million at
December 31, 2002.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
58 FREEPORT-McMoRan COPPER & GOLD INC. 2003 Annual Report
NOTE 3. INVENTORIES
The components of product inventories follow (in thousands):
December 31, 2003 2002
PT Freeport Indonesia: Concentrates – Average Cost
$2,643
$5,048
Atlantic Copper: Concentrates – FIFO
81,668
53,474
Work in process – FIFO
76,689
74,961
Finished goods – FIFO
9,925
6,388
Total product inventories
$170,925
$139,871
NOTE 4. PROPERTY, PLANT, EQUIPMENT AND
DEVELOPMENT COSTS, NET
The components of net property, plant, equipment
and development costs follow (in thousands):
December 31, 2003 2002
Exploration, development and other
$1,445,879
$1,412,079
Buildings and infrastructure
1,425,223
1,406,909
Machinery and equipment
2,141,878
2,103,055
Mobile equipment
699,038
668,296
Construction in progress
144,160
105,263
Property, plant, equipment and development costs
5,856,178
5,695,602
Accumulated depreciation and amortization
(2,594,481)
(2,375,041)
Property, plant, equipment and development costs, net
$3,261,697
$3,320,561
Exploration, development and other include excess
costs related to investments in consolidated sub-
sidiaries. Excess costs consist of $69.5 million
related to FCX’s purchase in December 1992 of 49
percent of the capital stock of PT Indocopper
Investama, $34.5 million related to PT Freeport
Indonesia’s issuance of its shares to FCX in 1993 and
1994 to settle a convertible loan due to FCX and
$268.4 million related to FCX’s acquisition of the
remaining 51 percent of the capital stock of PT
Indocopper Investama in February 2002 (see Note
2). These costs are amortized using the unit-of-
production method based on estimated recoverable
proven and probable copper reserves. Additionally,
excess costs include $20.8 million related to FCX’s
acquisition of Atlantic Copper in 1993. These
costs are amortized using the straight-line method
based on the estimated life of Atlantic Copper’s
smelter assets.