Freeport-McMoRan 2005 Annual Report Download

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The Elements of
Shareholder Value
FREEPORT-McMoRan COPPER & GOLD INC.
FCX
Freeport-
McMoRan
Au
Gold
Cu
Copper
2005 ANNUAL REPORT
FREEPORT-McMoRan COPPER & GOLD INC.
1615 POYDRAS STREET
NEW ORLEANS, LOUISIANA 70112
WWW.FCX.COM

Table of contents

  • Page 1
    FCX FreeportMcMoRan Cu Copper Au Gold FREEPORT-McMoRan COPPER & GOLD INC. The Elements of Shareholder Value 2005 ANNUAL REPORT

  • Page 2
    ... INC. Freeport-McMoRan Copper & Gold Inc. (FCX) conducts its operations through its subsidiaries, PT Freeport Indonesia, PT Puncakjaya Power, PT Irja Eastern Minerals and Atlantic Copper, S.A. PT Freeport Indonesia's operations in the Indonesian province of Papua include exploration and development...

  • Page 3
    ...deposits of copper and gold. The Right Time Exceptional operating performance at a time when the copper and gold markets shine. The Right Financial Strategy Returning value to shareholders with dividends, share buybacks and debt reduction. A Bright Future Expanding reserves & building infrastructure...

  • Page 4
    ...FREEPORT-McMoRan COPPER & GOLD INC. LETTER TO SHAREHOLDERS Financial Highlights Exceptional operating performance and favorable copper and gold markets enabled us to achieve record results in 2005... share Dividends paid per common share At December 31: Cash, restricted cash and investments Total...

  • Page 5
    ... $3.9 billion, demonstrating that our partnership with the Government of Indonesia continues to be mutually beneficial. Safety is our highest priority. We achieved continued progress in safety performance at PT Freeport Indonesia, with no fatalities during 2005 and a lost time injury rate per 200...

  • Page 6
    ... percent of its copper production and 60 percent of its gold production through continued exploration at the Grasberg complex as we further delineate known ore deposits and explore for new ore. PT Freeport Indonesia's share of proven and probable recoverable reserves at the end of 2005 totaled more...

  • Page 7
    ... million net of $764 million of cash. Our Board has established a policy of a regular dividend that could be maintained under a broad range of copper and gold prices and providing additional cash returns through supplemental dividends and share purchases during periods of high prices. Holders of our...

  • Page 8
     | FREEPORT-McMoRan COPPER & GOLD INC. LETTER TO SHAREHOLDERS James R. Moffett Chairman of the Board (Left) Richard C. Adkerson President and Chief Executive Officer (Right) and debt servicing requirements provide opportunities for significant future returns to shareholders. We have reduced net ...

  • Page 9
    ... | 005 ANNUAL REPORT LETTER TO SHAREHOLDERS The Right Asset Operating one of the world's largest copper and gold mines in a district that holds the largest reserves of both metals is fundamental to our success. Our assets - world-scale operations with long-lived reserves of copper and gold and an...

  • Page 10
    ...02 03 04 05 Leadership PT฀Freeport฀Indonesia's฀Grasberg฀complex฀is฀one฀of฀the฀world's฀ richest฀ore฀bodies.฀Effectively฀managing฀a฀world-class฀operation฀in฀ one฀of฀the฀world's฀most฀remote฀locations฀requires฀a฀highly฀skilled฀ team฀and฀an...

  • Page 11
     | 005 ANNUAL REPORT OPERATIONS OVERVIEW Infrastructure One of the primary advantages from which we derive benefit in the proven rich Grasberg minerals district is an infrastructure system that has been developed during our more than three decades of operations, which provides a framework to ...

  • Page 12
    10 | FREEPORT-McMoRan COPPER & GOLD INC. OPERATIONS OVERVIEW The Right Time Outstanding operating performance and exceptional copper and gold markets led to record financial results in 2005.

  • Page 13
    ...฀pressures,฀falling฀ production฀from฀older฀mines,฀limited฀development฀of฀new฀mines฀and฀ actions฀by฀gold฀producers฀to฀reduce฀hedge฀positions. Copper and Gold Prices $600 gold price per ounce $530 $460 $390 $320 00 Copper 01 Gold 02 03 04 $2.25 copper price per...

  • Page 14
    1 | FREEPORT-McMoRan COPPER & GOLD INC. OPERATIONS OVERVIEW The Right Financial Strategy Our strategy is to reduce our debt, enhancing our balance sheet, and to return available cash to shareholders in the form of dividends and share purchases.

  • Page 15
    ... continue to assess opportunities to repay debt in advance of scheduled maturities. Dividends and Share Purchases During 2005, our Board of Directors authorized three supplemental common stock dividends totaling $1.50 per share, and increased our current regular annual common stock dividend to $1.25...

  • Page 16
    1 | FREEPORT-McMoRan COPPER & GOLD INC. OPERATIONS OVERVIEW A Bright Future In 2004, PT Freeport Indonesia commenced the "Common Infrastructure Project," which will provide access to produce our large undeveloped underground ore bodies including the Grasberg Block Cave, Kucing Liar, Mill ...

  • Page 17
    ... or its affiliates, please contact our Investor Relations Department, 1615 Poydras Street, New Orleans, Louisiana 70112, (504) 582-4000; or access our web site, www.fcx.com. The PT Freeport Indonesia exploration team continues to add reserves and resources even as we achieve major production. Since...

  • Page 18
    ... | FREEPORT-McMoRan COPPER & GOLD INC. ECONOMIC, SOCIAL & ENVIRONMENTAL OVERVIEW Economic, Social & Environmental Overview Sustainable Development balances economic, social and environmental issues to meet the needs of the present without compromising the ability of future generations to meet their...

  • Page 19
    1 | 005 ANNUAL REPORT ECONOMIC, SOCIAL & ENVIRONMENTAL OVERVIEW ECONOMIC, SOCIAL & ENVIRONMENTAL OVERVIEW Freeport-McMoRan Copper & Gold Inc. and its mining affiliate, PT Freeport Indonesia, are fully committed to promoting sustainable development for the communities where we operate through our...

  • Page 20
    ... PT Freeport Indonesia Community Liaison Officers support our community development programs by building and maintaining positive relationships with our neighbors in towns and villages across the region. Social Development We are committed through our Social, Employment and Human Rights Policy to...

  • Page 21
    1 | 005 ANNUAL REPORT ECONOMIC, SOCIAL & ENVIRONMENTAL OVERVIEW PT Freeport Indonesia Papuan Employees 3,500 2,800 2,100 1,400 700 98 Goal 99 Actual 00 01 Apprentice 02 03 04 05 Corporate Accountability (ICCA) to audit the implementation of our Social, Employment and Human Rights Policy. ICCA ...

  • Page 22
    ... our full report, "Working Toward Sustainable Development, 2005 Economic, Social and Environmental Report," on our web site (www.fcx.com). For a physical copy, please e-mail us at [email protected], or contact the Communications Department, 1615 Poydras Street, New Orleans, Louisiana 70112...

  • Page 23
    ... ANNUAL REPORT ECONOMIC, SOCIAL & ENVIRONMENTAL OVERVIEW Safety A strong emphasis on safety resulted in continued improvement in safety performance at PT Freeport Indonesia. Safety performance at the Grasberg complex compares favorably to U.S. metals industry peers. PT Freeport Indonesia measures...

  • Page 24
    ... programs relating to the Company's social, employment, and human rights policies, (c) safety and environmental programs and (d) charitable and philanthropic contributions. MANAGEMENT James R. Moffett Chairman of the Board Mark J. Johnson Executive Vice President and Chief Operating Officer...

  • Page 25
    ...of฀the฀company฀entitled฀to฀vote฀ at฀its฀annual฀meeting,฀upon฀written฀request.฀The฀Investor฀Relations฀ Department฀can฀be฀contacted฀as฀follows: Freeport-McMoRan฀Copper฀&฀Gold฀Inc. Investor฀Relations฀Department 1615฀Poydras฀Street New฀Orleans...

  • Page 26
    ฀23฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Financial & Operating Information TABLE OF CONTENTS 24฀฀฀Selected฀Financial฀and฀Operating฀Data฀ 26฀฀฀Management's฀Discussion฀and฀Analysis฀ 57 Report฀of฀Independent฀Registered฀...

  • Page 27
    ... and Operating Data ฀24฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Years฀Ended฀December฀31,฀ 2005฀ 2004฀ 2003฀ 2002฀ 2001 (Financial฀Data฀in฀Dollars,฀Except฀Average฀Shares,฀and฀in฀Thousands,฀Except...

  • Page 28
    ...ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Years฀Ended฀December฀31,฀ 2005฀ 2004฀ 2003฀ 2002฀ 2001 PT฀SMELTING฀OPERATING฀DATA,฀25%-Owned฀by฀PT฀Freeport฀Indonesia Concentrate฀treated฀(metric฀tons)฀ ฀ 908,900฀ Anodes ฀ Production...

  • Page 29
    ...Government฀of฀Indonesia.฀The฀Contract฀of฀Work฀ allows฀us฀to฀conduct฀exploration,฀mining฀and฀production฀ activities฀in฀a฀24,700-acre฀area฀called฀Block฀A฀located฀in฀ Papua,฀Indonesia.฀Under฀the฀Contract฀of฀Work,฀PT฀Freeport฀ Indonesia...

  • Page 30
    ...฀from฀Block฀A,฀including฀ production฀from฀PT฀Freeport฀Indonesia's฀previously฀existing฀ reserves.฀PT฀Freeport฀Indonesia฀receives฀100฀percent฀of฀the฀ cash฀flow฀from฀specified฀annual฀amounts฀of฀copper,฀gold฀and฀ silver฀through฀2021...

  • Page 31
    ...฀of฀the฀development฀of฀new฀supplies฀of฀ copper฀and฀production฀levels฀of฀mines฀and฀copper฀smelters We฀consider฀the฀current฀underlying฀supply฀and฀demand฀ conditions฀in฀the฀global฀copper฀markets฀to฀be฀positive฀for฀ our฀company. The...

  • Page 32
    ...฀in฀mining,฀geology฀and฀ reserve฀determination.฀As฀of฀December฀31,฀2005,฀aggregate฀ proven฀and฀probable฀recoverable฀copper฀reserves฀totaled฀ 56.6฀billion฀pounds฀and฀PT฀Freeport฀Indonesia's฀estimated฀ share฀totaled฀40.3฀billion฀pounds...

  • Page 33
    Management's Discussion and Analysis ฀30฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀...production฀in฀future฀periods. ฀ ฀ PT฀Freeport฀Indonesia's฀estimated฀life-of-mine฀ overburden-to-ore฀ratio฀averaged฀2.4฀to฀1฀in฀2005...

  • Page 34
    ...฀for฀taxes฀and฀minority฀interest฀sharing),฀$0.06฀ per฀diluted฀share,฀which฀was฀recognized฀as฀a฀cumulative฀ effect฀adjustment฀for฀a฀change฀in฀accounting฀principle At฀least฀annually,฀PT฀Freeport฀Indonesia฀reviews฀its฀ estimates฀for...

  • Page 35
    ...฀ Copper฀Operating฀Results").฀As฀a฀percentage฀of฀revenues,฀ general฀and฀administrative฀expenses฀were฀2.5฀percent฀in฀2005,฀ 3.8฀percent฀in฀2004฀and฀3.6฀percent฀in฀2003. ฀ PT฀Freeport฀Indonesia฀maintains฀property฀damage฀and฀ business...

  • Page 36
    ...฀Resources฀and฀Liquidity฀-฀ Financing฀Activities"). ฀ PT฀Freeport฀Indonesia's฀Contract฀of฀Work฀provides฀for฀a฀฀฀ 35฀percent฀corporate฀income฀tax฀rate.฀PT฀Indocopper฀ Investama฀pays฀a฀30฀percent฀corporate฀income฀tax฀on฀dividends...

  • Page 37
    Management's Discussion and Analysis ฀34฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION We฀...฀segment฀includes฀Atlantic฀Copper's฀ operations฀in฀Spain฀and฀PT฀Freeport฀Indonesia's฀equity฀ investment฀in฀PT฀Smelting...

  • Page 38
    ...Freeport฀Indonesia฀is฀also฀proceeding฀with฀plans฀to฀ develop฀Big฀Gossan,฀a฀high-grade฀deposit฀located฀near฀the฀ existing฀milling฀complex.฀Our฀Board฀of฀Directors฀has฀approved฀ this฀project฀and฀aggregate฀capital฀expenditures฀from฀2005...

  • Page 39
    Management's Discussion and Analysis ฀36฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Gross฀Profit฀per฀Pound฀of฀Copper฀(¢)/per฀Ounce฀฀ o f฀Gold...฀of฀PT฀Freeport฀ Indonesia's฀production฀costs,฀primarily฀...

  • Page 40
    Management's Discussion and Analysis ฀37฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION "New฀Accounting฀Standards"฀and฀Note฀1).฀PT฀Freeport฀ Indonesia's฀2005฀overburden-to-ore฀ratio฀averaged฀3.1฀to฀1,฀ compared฀with฀a฀life-of-...

  • Page 41
    Management's Discussion and Analysis ฀38฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION cash฀costs,฀including฀gold... lower฀sales฀volumes.฀PT฀Freeport฀Indonesia฀reported฀lower฀ production฀and฀sales฀in฀2004,฀...

  • Page 42
    ...2003฀period฀ primarily฀because฀of฀higher฀copper฀and฀gold฀prices.฀As฀a฀result฀ of฀the฀lower฀copper฀production฀and฀sales฀in฀2004,฀PT฀Freeport฀ Indonesia's฀depreciation฀rate฀per฀pound฀of฀copper฀increased฀ to฀$0.17฀for฀2004฀compared...

  • Page 43
    ...฀13 PT฀Freeport฀Indonesia's฀share฀of฀reserve฀additions฀replaced฀ approximately฀86฀percent฀of฀its฀2005฀copper฀production 9฀percent฀of฀2005฀gold฀production฀and฀153฀percent฀of฀2005฀ silver฀production.฀Estimated฀recoverable฀reserves฀were...

  • Page 44
    ... Our฀investment฀in฀smelters฀serves฀an฀important฀role฀in฀our฀ concentrate฀marketing฀strategy.฀PT฀Freeport฀Indonesia฀ generally฀sells฀approximately฀one-half฀of฀its฀concentrate฀ production฀to฀its฀affiliated฀smelters,฀Atlantic฀Copper฀and...

  • Page 45
    Management's Discussion and Analysis ฀42฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION ฀ We฀defer฀recognizing฀profits฀on฀PT฀Freeport฀Indonesia's฀ sales฀to฀Atlantic฀Copper฀and฀on฀25฀percent฀of฀PT฀Freeport฀...

  • Page 46
    ...฀March฀15,฀2006.฀Our฀ Board฀of฀Directors฀will฀continue฀to฀review฀our฀dividend฀policy. ฀ We฀purchased฀2.4฀million฀shares฀of฀our฀common฀stock฀for฀ $80.2฀million฀($33.83฀per฀share฀average)฀during฀2005฀and฀ have฀purchased฀a฀total...

  • Page 47
    ...฀ interest฀in฀Puncakjaya฀Power฀owned฀by฀affiliates฀of฀Duke฀ Energy฀Corporation฀for฀$68.1฀million฀cash,฀net฀of฀$9.9฀million฀ of฀cash฀acquired.฀PT฀Freeport฀Indonesia฀purchases฀power฀ from฀Puncakjaya฀Power฀under฀infrastructure฀asset...

  • Page 48
    ... March฀31,฀2005,฀September฀30,฀2005,฀and฀December฀30,฀2005.฀ In฀November฀2005,฀our฀Board฀of฀Directors฀authorized฀an฀ increase฀in฀our฀annual฀common฀stock฀dividend฀to฀$1.25฀per฀ share฀(from฀$1.00฀per฀share).฀The฀dividend฀will฀be...

  • Page 49
    ...million฀(approximately฀ $36.85฀per฀share)฀and฀used฀the฀remainder฀for฀general฀ corporate฀purposes.฀Rio฀Tinto฀no฀longer฀owns฀any฀equity฀ interest฀in฀FCX;฀however,฀it฀is฀still฀PT฀Freeport฀Indonesia's฀ joint฀venture฀partner฀(see฀Note...

  • Page 50
    ...฀include฀PT฀Freeport฀Indonesia's฀commitments฀ to฀provide฀one฀percent฀of฀its฀annual฀revenue฀for฀development฀ of฀the฀local฀people฀in฀our฀area฀of฀operations฀through฀the฀ Freeport฀Partnership฀Fund฀for฀Community฀Development฀and฀ to...

  • Page 51
    Management's Discussion and Analysis ฀48฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION ฀ ฀ ฀ ฀ ฀ Total฀ 1฀Year฀ or฀Less฀ Years฀ 2 - 3฀ Years฀ 4 - 5฀ More฀than 5฀Years PT฀Freeport฀Indonesia฀mine฀...

  • Page 52
    ...fluctuations.฀We฀currently฀ have฀no฀copper฀or฀gold฀price฀protection฀contracts฀relating฀to฀ our฀mine฀production.฀We฀had฀outstanding฀Gold-Denominated฀ and฀Silver-Denominated฀Preferred฀Stock฀with฀dividends฀and฀ redemption฀amounts฀determined฀by...

  • Page 53
    Management's Discussion and Analysis ฀50฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION its฀price฀risk฀whenever฀its฀physical฀purchases฀and฀sales฀pricing฀ periods฀do฀not฀match.฀At฀December฀31,฀2005,฀Atlantic฀...

  • Page 54
    ...'s Discussion and Analysis ฀51฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION NEW฀ACCOUNTING฀STANDARDS Inventor y฀Costs In฀November฀2004,฀the฀Financial฀Accounting฀Standards฀ Board฀(FASB)฀issued฀SFAS฀No.฀151,฀"Inventory฀Costs...

  • Page 55
    Management's Discussion and Analysis ฀52฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION PRODUCT฀REVENUES฀AND฀PRODUCTION฀COSTS PT฀Freeport฀Indonesia฀Product฀Revenues฀and฀Unit฀Net฀ Cash฀Costs All฀amounts฀used฀in฀...

  • Page 56
    Management's Discussion and Analysis ฀53฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION ฀ Year฀Ended฀December฀31,฀2004฀ (In฀Thousands)฀ By-Product฀ Method฀ Copper฀ Co-Product฀Method฀฀ Gold฀ Silver฀ Total Revenues,฀after฀...

  • Page 57
    Management's Discussion and Analysis ฀54฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION ฀ Year฀Ended฀December฀31,฀2003฀ (In฀Thousands)฀ By-Product฀ Method฀ Copper฀ Co-Product฀Method Gold฀ Silver฀ Total Revenues...

  • Page 58
    ...฀for฀measures of฀performance฀determined฀in฀accordance฀with฀generally฀ Years฀Ended฀December฀31,฀ accepted฀accounting฀principles.฀Other฀smelting฀companies฀ present฀this฀measure,฀although฀Atlantic฀Copper's฀measure฀may฀ not฀be฀comparable฀to...

  • Page 59
    Management's Discussion and Analysis ฀56฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Years฀Ended฀December฀31,฀ ฀ 2005฀ 2004฀ 2003 Operating฀costs฀-฀PT฀Smelting฀(100 Add:฀Gold฀and฀silver฀refining฀charges...

  • Page 60
    ...2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION To฀the฀Board฀of฀Directors฀and฀Stockholders฀of฀ Freeport-McMoRan฀Copper฀&฀Gold฀Inc. We฀have฀audited฀the฀accompanying฀consolidated฀balance฀ sheets฀of฀Freeport-McMoRan฀Copper฀&฀Gold...

  • Page 61
    ... Internal Control Over Financial Reporting ฀58฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Freeport-McMoRan฀Copper฀&฀Gold฀Inc.'s฀(the฀Company's)฀ management฀is฀responsible฀for฀establishing฀and฀maintaining฀ adequate...

  • Page 62
    ... Registered Public Accounting Firm ฀59฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION To฀the฀Board฀of฀Directors฀and฀Stockholders฀of฀ Freeport-McMoRan฀Copper฀&฀Gold฀Inc. We฀have฀audited฀management's฀assessment,฀included฀in฀the...

  • Page 63
    ... of Income ฀60฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Years฀Ended฀December฀31,฀ (In฀Thousands,฀Except฀Per฀Share฀Amounts) 2005฀ 2004฀ 2003 Revenues฀฀ ฀ Cost฀of฀sales: ฀ Production฀and฀delivery...

  • Page 64
    ...฀share฀of฀joint฀venture฀cash฀flows Accrued฀income฀taxes Decrease฀(increase)฀in฀working฀capital Net฀cash฀provided฀by฀operating฀activities Cash฀flow฀from฀investing฀activities: ฀ PT฀Freeport฀Indonesia฀capital฀expenditures฀ ฀ Atlantic฀Copper...

  • Page 65
    Consolidated Balance Sheets ฀62฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION December฀31,฀ (In฀Thousands,฀Except฀Par฀Value) 2005฀ 2004 ASSETS Current฀assets: ฀ Cash฀and฀cash฀equivalents฀ ฀ Restricted฀cash฀ ...

  • Page 66
    ... Equity ฀63฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Years฀Ended฀December฀31,฀ (In฀Thousands) 2005฀ 2004฀ 2003 Convertible฀perpetual฀preferred฀stock: Balance฀at฀beginning฀of฀year฀ Sale฀of฀1,100฀shares฀to฀the฀public...

  • Page 67
    ...฀ Freeport-McMoRan฀Copper฀&฀Gold฀Inc.฀(FCX)฀include฀the฀ accounts฀of฀those฀subsidiaries฀where฀FCX฀directly฀or฀ indirectly฀has฀more฀than฀50฀percent฀of฀the฀voting฀rights฀and฀ has฀the฀right฀to฀control฀significant฀management฀decisions...

  • Page 68
    ...2005฀and฀prior฀years,฀surface฀mining฀costs฀ associated฀with฀overburden฀removal฀at฀PT฀Freeport฀Indonesia's฀ Grasberg฀open-pit฀mine฀that฀were฀estimated฀to฀relate฀to฀ future฀production...mine.฀The฀reserve฀quantities฀used฀to฀develop฀ the฀...

  • Page 69
    ... Financial Statements ฀66฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION and฀$1.5฀million฀($0.01฀per฀share)฀in฀2003.฀The฀increases฀in฀ the฀ratio฀in฀2003฀and฀2004฀primarily฀relate฀to฀changes฀in฀the...

  • Page 70
    ...154.2฀million,฀ $0.99฀per฀basic฀share฀and฀$0.97฀per฀diluted฀share. ฀ Revenue฀Recognition.฀ PT฀Freeport฀Indonesia's฀sales฀of฀ copper฀concentrates,฀which฀also฀contain฀significant฀quantities฀ of฀gold฀and฀silver,฀are฀recognized฀in฀revenues...

  • Page 71
    ...฀provide฀further฀support฀to฀the฀local฀governments฀ and฀the฀people฀of฀the฀Indonesian฀province฀of฀Papua.฀The฀ additional฀royalties฀are฀paid฀on฀metal฀from฀production฀from฀ PT฀Freeport฀Indonesia's฀milling฀facilities฀above฀200,000฀metric...

  • Page 72
    ...share฀amounts): 2005฀ 2004฀ 2003 Net฀income฀applicable฀to฀common฀stock,฀as฀reported Add:฀฀ ฀ Stock-based฀employee฀compensation฀expense฀included฀in฀reported฀net฀income for฀stock฀option฀conversions,฀stock฀appreciation฀rights...฀annual฀dividend...

  • Page 73
    Notes to Consolidated Financial Statements ฀70฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION ฀ Earnings฀Per฀Share.฀FCX's฀basic฀net฀income฀per฀share฀ of฀common฀stock฀was฀calculated฀by฀dividing฀net฀income฀ ...

  • Page 74
    ...฀loans฀to฀฀฀฀฀฀฀฀ PT฀Freeport฀Indonesia฀totaling฀$179.9฀million. ฀ Substantially฀all฀of฀PT฀Freeport฀Indonesia's฀assets฀are฀ located฀in฀Indonesia.฀Events฀in฀Indonesia฀during฀2005฀mainly฀ centered฀on฀the฀recovery฀effort...

  • Page 75
    ...฀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฀flow฀from฀specified฀annual฀ amounts฀of฀copper,฀gold...

  • Page 76
    ...฀adjustments to฀the฀specified฀annual฀amounts฀of฀copper,฀gold฀and฀silver฀ attributable฀100฀percent฀to฀PT฀Freeport฀Indonesia฀upon the฀occurrence฀of฀certain฀events฀which฀cause฀an฀extended฀ interruption฀in฀production฀to฀occur,฀including...

  • Page 77
    ... ฀74฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Note฀5.฀LONG-TERM฀DEBT December฀31,฀ (In฀Thousands) ฀ 2005฀ 2004 Senior฀Notes:฀฀ ฀ 6฀7/8%฀Senior฀Notes฀due฀2014 7%฀Convertible฀Senior฀Notes฀due...

  • Page 78
    ...Statements ฀75฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION taking฀actions฀to฀limit฀distributions฀from฀certain฀subsidiaries,฀ selling฀assets,฀entering฀into฀certain฀transactions฀with affiliates,฀paying฀cash฀dividends฀on฀common...

  • Page 79
    ....฀The฀related฀charge฀to฀general฀ and฀administrative฀expenses฀totaled฀$2.1฀million฀in฀2005 2.1฀million฀in฀2004฀and฀$2.3฀million฀in฀2003. ฀ In฀2003,฀FCX's฀Board฀of฀Directors฀approved฀a฀new฀open฀ market฀share฀purchase฀program฀for...

  • Page 80
    ...฀per฀share฀supplemental฀dividends฀ on฀March฀31,฀2005,฀September฀30,฀2005฀and฀December฀30,฀ 2005.฀In฀November฀2005,฀FCX's฀Board฀of฀Directors฀authorized฀ an฀increase฀in฀the฀annual฀common฀stock฀dividend฀to฀$1.25฀฀ per฀share฀from...

  • Page 81
    ...FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Summary฀information฀of฀stock฀options฀outstanding at฀December฀31,฀2005...,฀plant,฀equipment฀and฀development฀costs฀ ฀ Undistributed฀earnings฀in฀PT฀Freeport฀Indonesia฀...

  • Page 82
    ...฀expand฀its฀production฀capacity฀ to฀approximately฀270,000฀metric฀tons฀of฀copper฀metal฀per฀฀ year฀by฀the฀middle฀of฀2006.฀PT฀Freeport฀Indonesia,฀Mitsubishi฀ Materials฀Corporation฀(Mitsubishi฀Materials),฀Mitsubishi฀ Corporation฀(Mitsubishi...

  • Page 83
    ...remaining฀11-year฀ funding฀period. ฀ Information฀as฀of฀December฀31,฀2005฀and฀2004,฀on฀the฀ FCX฀(including฀FM฀Services฀Company's฀plan,฀FCX's฀SERP฀and฀ director฀plans),฀PT฀Freeport฀Indonesia฀and฀Atlantic฀Copper฀ plans฀follows฀(dollars...

  • Page 84
    ...expatriate฀employees)฀ 2005฀ 2004฀ PT฀Freeport฀Indonesia฀ (Indonesian฀employees)฀ 2005฀ 2004฀ Atlantic฀Copper (Spanish฀retirees) 2005฀ 2004 Change฀in฀benefit฀obligation: Benefit฀obligation฀at฀beginning฀of฀year฀ SERP฀and฀director฀plan฀additions...

  • Page 85
    ... ฀82฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION The฀components฀of฀net฀periodic฀benefit฀cost฀for฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ PT฀Freeport฀Indonesia's฀and฀Atlantic฀Copper's฀pension...

  • Page 86
    ...฀in฀general฀and฀administrative฀ expense.฀Atlantic฀Copper฀has฀a฀defined฀contribution฀plan฀and฀ recorded฀charges฀totaling฀$0.4฀million฀in฀2005,฀$0.5฀million฀in฀ 2004฀and฀$0.4฀million฀in฀2003฀for฀annual฀service฀costs฀related฀ to...

  • Page 87
    ...Contract฀of฀Work. ฀ Social฀and฀Economic฀Development฀Programs.฀FCX฀has฀a฀ comprehensive฀social,฀employment฀and฀human฀rights฀policy฀ to฀ensure฀that฀its฀operations฀are฀conducted฀in฀a฀manner฀ respecting฀basic฀human฀rights,฀the฀laws฀and...

  • Page 88
    ...Board฀of฀Directors฀approved฀a฀new฀open฀market฀share฀ purchase฀program฀for฀up฀to฀20฀million฀shares฀which฀replaced฀ the฀previous฀program.฀Through฀February฀24,฀2006,฀under฀ this฀new฀program,฀FCX฀acquired฀2.4฀million฀shares฀in฀2005...

  • Page 89
    ... Statements ฀86฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION ฀ 2005฀ 2004฀ 2003 FCX: ฀ Silver-Denominated฀Preferred฀Stock฀ ฀ ฀ Gold-Denominated฀Preferred฀Stock฀ ฀ PT฀Freeport฀Indonesia: ฀ Foreign฀currency...

  • Page 90
    Notes to Consolidated Financial Statements ฀87฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION companies฀disclose฀segment฀data฀based฀on฀how฀management฀ makes฀decisions฀about฀allocating฀resources฀to฀segments฀ and฀measuring฀their฀...

  • Page 91
    ...฀available฀studies. ฀ All฀of฀PT฀Freeport฀Indonesia's฀current฀aggregate฀(including฀ Rio฀Tinto's฀share)฀proven฀and฀probable฀reserves,฀shown฀below,฀ are฀located฀in฀Block฀A฀of฀PT฀Freeport฀Indonesia's฀Contract฀ of฀Work.฀The฀initial฀term...

  • Page 92
    ... PT฀Freeport฀Indonesia's฀estimated฀net฀share฀of฀recoverable฀ reserves฀and฀FCX's฀90.6฀percent฀equity฀interest฀in฀those฀ reserves฀follow: PT฀Freeport฀Indonesia฀ FCX฀ Copper฀ (Billions฀ of฀Lbs.)฀ ฀฀ Copper฀ (Billions฀ of฀Lbs.)฀ Gold...

  • Page 93
    ... to Consolidated Financial Statements ฀90฀|฀FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION Note฀14.฀QUARTERLY฀FINANCIAL฀INFORMATION฀฀ ( UNAUDITED) ฀ ฀ ฀ (In฀Thousands,฀Except฀Per฀Share฀Amounts Revenues Net฀Income...

  • Page 94
    ...of฀the฀company฀entitled฀to฀vote฀ at฀its฀annual฀meeting,฀upon฀written฀request.฀The฀Investor฀Relations฀ Department฀can฀be฀contacted฀as฀follows: Freeport-McMoRan฀Copper฀&฀Gold฀Inc. Investor฀Relations฀Department 1615฀Poydras฀Street New฀Orleans...

  • Page 95
    FREEPORT-McMoRan COPPER & GOLD INC. 1615 POYDRAS STREET NEW ORLEANS, LOUISIANA 70112 WWW.FCX.COM