Freeport-McMoRan 2005 Annual Report Download - page 7

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year at $2.08 per pound, a 46 percent increase from the price at
the beginning of the year. While prices are likely to be volatile,
supply/demand fundamentals are positive and the global copper
market remains tight. The market environment for gold improved
throughout the year with growing investment demand, inflationary
pressures, a weak U.S. dollar and ongoing geopolitical tensions. The
London spot gold price ranged from $411–$538 per ounce during
2005 and the price was $513 per ounce at the end of the year,
approximately 20 percent higher than at the start of the year.
“The Right Financial Strategy” reflects our objective to deliver
value to shareholders. We have a long-established tradition of
returning substantial cash to shareholders through dividends and
share purchases. We are executing a financial policy of maintaining
a strong balance sheet and financial flexibility, while providing
significant cash returns to shareholders. During 2005, we completed
financial transactions totaling $1.2 billion, including approximately
$700 million in debt reduction and approximately $500 million
in common stock dividends and share purchases. Total debt at
December 31, 2005, approximated $1.26 billion, $492 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 common shares received dividends totaling $2.50 per
share in 2005, including a regular dividend of $1.00 per share and
three supplemental dividends totaling $1.50 per share. Our Board
authorized an increase in the annual regular dividend to $1.25 per
share starting in 2006 and authorized an additional $0.50 per share
supplemental dividend payable March 31, 2006. We purchased 2.4
million shares of common stock for $80 million ($33.83 per share
average) during 2005 and 14.2 million shares are available for
purchase under our Board-authorized program.
During 2005, our Grasberg operations involved mining sections
with extraordinary grades that were available to us following the
successful remedial activities we completed during 2004. Our grade
during 2006 will be strong, but lower than 2005 with sales estimated
to approximate 1.3 billion pounds of copper and 1.7 million ounces
of gold. Our cash flows will depend on future copper and gold
prices. At the currently strong commodity prices, we would generate
significant future cash flows. Our low level of capital expenditures
$3.5 Billion In Shareholder
Returns Since 1988
Dividends ($2.0 billion)
Share Purchases ($1.5 billion)
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5 | 005 ANNUAL REPORT LETTER TO SHAREHOLDERS