Freeport-McMoRan 2005 Annual Report Download - page 58

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Atlantic฀Copper฀Cathode฀Cash฀Unit฀Cost฀฀
Per฀Pound฀Of฀Copper
Atlantic฀Copper฀cathode฀cash฀unit฀cost฀per฀pound฀of฀copper฀฀
is฀a฀measure฀intended฀to฀provide฀investors฀with฀information฀
about฀the฀costs฀it฀incurs฀to฀produce฀cathodes฀at฀its฀smelting฀
operations฀in฀Spain.฀We฀use฀this฀measure฀for฀the฀same฀purpose฀
and฀for฀monitoring฀operating฀performance฀at฀Atlantic฀
Copper’s฀smelting฀operations.฀This฀information฀differs฀from฀
measures฀of฀performance฀determined฀in฀accordance฀with฀
generally฀accepted฀accounting฀principles฀and฀should฀not฀be฀
considered฀in฀isolation฀or฀as฀a฀substitute฀for฀measures฀฀฀฀฀฀฀฀฀฀฀
of฀performance฀determined฀in฀accordance฀with฀generally฀
accepted฀accounting฀principles.฀Other฀smelting฀companies฀
present฀this฀measure,฀although฀Atlantic฀Copper’s฀measure฀may฀
not฀be฀comparable฀to฀similarly฀titled฀measures฀reported฀by฀
other฀companies.฀The฀reconciliation฀below฀presents฀reported฀
production฀costs฀for฀our฀smelting฀and฀refining฀segment฀
(Atlantic฀Copper)฀and฀subtracts฀or฀adds฀components฀of฀those฀
costs฀that฀do฀not฀directly฀relate฀to฀the฀process฀of฀converting฀
copper฀concentrates฀to฀cathodes.฀The฀adjusted฀production฀
costs฀amounts฀are฀used฀to฀calculate฀Atlantic฀Copper’s฀
cathode฀cash฀unit฀cost฀per฀pound฀of฀copper฀(in฀thousands,฀
except฀per฀pound฀amounts):
Management’s Discussion and Analysis
฀55฀|฀2005฀ANNUAL฀REPORT฀฀฀FINANCIAL฀&฀OPERATING฀INFORMATION
PT฀Smelting฀Cathode฀Cash฀Unit฀Cost฀฀
Per฀Pound฀Of฀Copper
PT฀Smelting฀cathode฀cash฀unit฀cost฀per฀pound฀of฀copper฀is฀a฀
measure฀intended฀to฀provide฀investors฀with฀information฀
about฀the฀costs฀it฀incurs฀to฀produce฀cathodes฀at฀its฀smelting฀
operations฀in฀Indonesia.฀We฀use฀this฀measure฀for฀the฀same฀
purpose฀and฀for฀monitoring฀operating฀performance฀at฀฀฀฀฀฀฀฀฀
PT฀Smelting’s฀smelting฀operations.฀This฀information฀differs฀฀฀฀฀฀
from฀measures฀of฀performance฀determined฀in฀accordance฀
with฀generally฀accepted฀accounting฀principles฀and฀should฀฀฀฀฀฀
not฀be฀considered฀in฀isolation฀or฀as฀a฀substitute฀for฀measures฀
of฀performance฀determined฀in฀accordance฀with฀generally฀
accepted฀accounting฀principles.฀Other฀smelting฀companies฀
present฀this฀measure,฀although฀PT฀Smelting’s฀measure฀may฀
not฀be฀comparable฀to฀similarly฀titled฀measures฀reported฀by฀
other฀companies.฀The฀calculation฀below฀presents฀PT฀
Smelting’s฀reported฀operating฀costs฀and฀subtracts฀or฀adds฀
components฀of฀those฀costs฀that฀do฀not฀directly฀relate฀to฀฀฀฀฀฀฀฀฀฀฀
the฀process฀of฀converting฀copper฀concentrates฀to฀cathodes.฀
PT฀Smelting’s฀operating฀costs฀are฀then฀reconciled฀to฀PT฀
Freeport฀Indonesia’s฀equity฀in฀PT฀Smelting฀earnings฀reported฀
in฀our฀consolidated฀financial฀statements฀(in฀thousands,฀
except฀per฀pound฀amounts):
Years฀Ended฀December฀31,฀ ฀ 2005฀ 2004฀ 2003
Smelting฀and฀refining฀segment฀production฀costs฀reported฀in฀FCX’s฀consolidated฀
฀ financial฀statements฀ ฀ ฀ ฀ ฀ $฀1,288,610฀ $฀ 914,452a฀ $฀ 892,681
฀ Less:
฀฀ ฀ Raw฀material฀purchase฀costs฀ ฀ ฀ ฀ ฀ ฀(907,130)฀ ฀(249,689)฀ ฀(384,347)
฀ ฀ Production฀costs฀of฀wire฀rod฀and฀wire฀ ฀ ฀ ฀ ฀ ฀ —b฀ ฀(370,431)฀ ฀ (66,106)
฀ ฀ Production฀costs฀of฀anodes฀sold฀ ฀ ฀ ฀ ฀ ฀ (13,226)฀ ฀ (3,720)฀ ฀ (13,124)
฀ ฀ Currency฀hedging฀ ฀ ฀ ฀ ฀ ฀ —฀ ฀ —฀ ฀ 9,625
฀ ฀ Other฀ ฀ ฀ ฀ ฀ ฀ (958)฀ ฀ (16,771)฀ ฀ (1,459)
฀ Credits:
฀ ฀ Gold฀and฀silver฀revenues฀ ฀ ฀ ฀ ฀ ฀(245,772)฀ ฀(133,960)฀ ฀(326,948)
฀ ฀ Acid฀and฀other฀by-product฀revenues฀ ฀ ฀ ฀ ฀ ฀ (28,446)฀ ฀ (25,068)฀ ฀ (20,566)
Production฀costs฀used฀in฀calculating฀cathode฀cash฀unit฀cost฀per฀pound฀฀ ฀ ฀ $฀ 93,078฀ $฀ 114,813฀ $฀ 89,756
Pounds฀of฀cathode฀produced฀ ฀ ฀ ฀ ฀ ฀ 545,300฀ ฀ 454,700฀ ฀ 544,700
Cathode฀cash฀unit฀cost฀per฀pound฀ ฀ ฀ ฀ ฀ $฀ 0.17฀ $฀ 0.25฀ $฀ 0.16
a.฀ Includes฀$27.5฀million,฀$0.06฀per฀pound,฀for฀costs฀related฀to฀Atlantic฀Copper’s฀major฀maintenance฀turnaround.
b.฀ Atlantic฀Copper฀sold฀its฀wire฀rod฀and฀wire฀assets฀in฀December฀2004.