Freeport-McMoRan 2005 Annual Report Download - page 5

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To Our Shareholders:
We are pleased to report our 2005 performance, a record year for
our company. The availability of high-grade ore from our Grasberg
mine enabled us to achieve exceptional operating performance
during a period of strong copper and gold prices. We generated
over $1.5 billion in operating cash flows with only $143 million in
capital expenditures, and reduced debt substantially, enabling us
to return significant cash to shareholders.
Our mining team performed admirably during 2005, resulting
in 2005 sales for PT Freeport Indonesia, our Indonesian mining
affiliate, of 1.46 billion pounds of copper and a record 2.8 million
ounces of gold. Realized prices for our primary commodities were
$1.85 per pound of copper, 35 percent higher than 2004, and
$456.27 per ounce of gold, nearly 11 percent higher than 2004. Spot
copper and gold prices on the London Metals Exchange (LME)
were $2.08 per pound and $513 per ounce at the end of 2005 and
have increased further in early 2006.
This strong performance enabled us to provide to the Republic
of Indonesia $1.2 billion attributable to 2005 through taxes,
royalties, dividends and fees. Since 1992, these direct benefits have
totaled $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 200,000 working hours
of 0.13, a 28 percent improvement over 2004 and comparing
favorably to the United States (U.S.) metals mining industry average
of 1.9. The total reportable injury rate also improved to 0.38, a
17 percent improvement over the prior year. The U.S. metals mining
industry average was 3.27.
These accomplishments provide the theme of this year’s Annual
Report, “The Elements of Shareholder Value.”
Perhaps the most critical “Element of Shareholder Value” is
having “The Right Asset.” The Grasberg minerals district is one of the

The “6 South” section of the Grasberg open-
pit mine provided important high-grade
ore that allowed us to achieve strong sales
in 2005.
 | 005 ANNUAL REPORT LETTER TO SHAREHOLDERS