Freeport-McMoRan 2006 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... (FCX) 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
    ... mine symbolizes a promising future as we embark on an exciting time of growth for our company. TABLE OF CONTENTS 3 7 Letter to Shareholders Operations Overview 15 Economic, Social & Environmental Overview 20 Board of Directors & Management 21 Financial & Operating Information 84 Performance...

  • Page 4
    UNDERLYING PERFORMANCE

  • Page 5
    Our acquisition of Phelps Dodge will transform Freeport-McMoRan Copper & Gold Inc. into a Dynamic Industry Leader with Long-Lived Reserves in Copper, Gold and Molybdenum. TO OUR SHAREHOLDERS: We are pleased to report to you on 2006, which in many ways was a historic year for our Company. Prices for...

  • Page 6
    ...the Government of Indonesia and the Province of Papua. The Grasberg mining complex is considered one of the best mineral deposits in the world - the world's largest James R. Moffett Chairman of the Board Richard C. Adkerson President and Chief Executive Officer payable copper and gold reserve in...

  • Page 7
    ... for our company. We look forward to building upon our success with our Grasberg complex as we pursue new opportunities through our significantly expanded and diversified asset base. March 15, 2007 James R. Moffett Chairman of the Board Richard C. Adkerson President and Chief Executive Officer

  • Page 8
    UNDERLYING ASSETS

  • Page 9
    ...quarter of 2006, PT Freeport Indonesia set a quarterly throughput record at our mill, averaging 246,500 metric tons per day. PRODUCTION For decades the FreeportMcMoRan Copper & Gold and PT Freeport Indonesia team has worked to explore, develop and mine one of the world's truly great copper and gold...

  • Page 10
    ... costs as incurred. 25,000 Treatment charges were also higher because of higher market rates and higher copper prices, and royalties also increased as 00 01 02 03 04 Actual 05 06 a result of prices. Original 1998 Feasibility 8 FREEPORT-McMoRan COPPER & GOLD INC. 2006 Annual Report

  • Page 11
    ... Mill Level Zone deposits, a 387-million-metric-ton complex. Year-end aggregate proven and probable recoverable reserves, net of 2006 production, were 2.8 billion metric tons of ore averaging 1.04 percent copper and 0.90 grams per metric ton gold. PT Freeport Indonesia's exploration efforts in 2007...

  • Page 12
    ... $317 million from the conversions of Freeport-McMoRan Copper & Gold's 7% Convertible Senior Notes due 2011 into common stock and $167 million from the redemption of our Gold-Denominated Preferred Stock, Series II. As of December 31, 2006, total cash was 2006 Financial Transactions in billions of...

  • Page 13
    Net Debt in billions of dollars $3 Freeport-McMoRan Copper & Gold Inc. is focused on creating values for shareholders. In 2006 we used excess cash to reduce debt, pay common stock dividends and purchase stock in the open market. $2 $1 00 06

  • Page 14
    ... of its production capacity from 250,000 metric tons PT Freeport Indonesia Concentrate Sales 2006 Sales: 2.2 million dry metric tons of copper per year to 275,000 metric tons. 27% 50% 23% PT Smelting Atlantic Copper Third Party Smelters 12 FREEPORT-McMoRan COPPER & GOLD INC. 2006 Annual Report

  • Page 15
    ... well as the financial statements in the following pages. If you have any questions or would like additional information about FCX 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...

  • Page 16
    UNDERLYING COMMITMENT

  • Page 17
    Our commitments to economic and social development, environmental responsibility, capacity building and forging mutually beneficial partnerships demonstrate our underlying values. Freeport-McMoRan Copper & Gold Inc. and its mining affiliate, PT Freeport Indonesia, are fully committed to promoting...

  • Page 18
    ...Tinto plc, have committed a portion of our mining revenues to benefit the local community through the Freeport Partnership Fund for Community Development, which is managed by a board of local community leaders. Contributions, Goal Actual 16 FREEPORT-McMoRan COPPER & GOLD INC. 2006 Annual Report

  • Page 19
    ...and a member of our Board of Directors. To measure the effectiveness of our programs and to identify ways to improve them, we engaged the International Center for Corporate Accountability (ICCA) to audit the implementation of our Social, Employment and Human Rights Policy. ICCA publicly released its...

  • Page 20
    ... native species are easily re-established in the highlands and that native species as well as agricultural crops can grow well in the lowlands on soil containing tailings, the finely ground natural rock residue from our milling process. 18 FREEPORT-McMoRan COPPER & GOLD INC. 2006 Annual Report

  • Page 21
    ... information on these issues, please see our, "Working Toward Sustainable Development Report," on our web site (www.fcx.com). For a physical copy, please e-mail us at [email protected], or contact the Communications Department. SAFETY The strong emphasis on safety at PT Freeport Indonesia...

  • Page 22
    ... and community relations and information programs, (b) compliance 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 Richard...

  • Page 23
    ... and Operating Data Management's Discussion and Analysis Report of Independent Registered Public Accounting Firm Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Statements of Income Consolidated Statements of Cash...

  • Page 24
    ...฀ ฀ 542,800฀ $฀ 0.17฀ ฀ 479,200฀ ฀ 217,400฀ ฀ 316,700฀ $฀ 0.25฀ ฀ 546,800฀ ฀ 248,000฀ ฀ 929,700฀ $฀ 0.16฀ ฀ 556,500 ฀ 252,400 ฀ 813,900 $฀ 0.12 22 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 25
    ...read฀this฀data฀in฀conjunction฀with฀management's฀discussion฀and฀analysis฀and฀our฀full฀consolidated฀financial฀ statements฀and฀notes฀thereto฀contained฀in฀this฀annual฀report. a.฀฀ Effective฀January฀1,฀2006,฀we฀adopted฀Emerging฀Issues฀Task...

  • Page 26
    ...฀venture฀agreement฀provides฀for฀adjustments฀to฀the฀ specified฀annual฀metal฀sharing฀amounts฀upon฀the฀occurrence฀ of฀certain฀events฀that฀cause฀an฀extended฀interruption฀in฀ 24 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 27
    ...merger฀agreement฀ whereby฀we฀will฀acquire฀Phelps฀Dodge฀for฀approximately฀฀฀ $25.9฀billion฀in฀cash฀and฀stock,฀based฀on฀FCX's฀closing฀stock฀ price฀on฀November฀17,฀2006,฀creating฀one฀of฀the฀largest฀ publicly฀traded฀copper฀companies...

  • Page 28
    ...because฀ (1)฀the฀determination฀of฀copper฀reserves฀involves฀ uncertainties฀with฀respect฀to฀the฀ultimate฀geology฀of฀our฀ reserves฀and฀the฀assumptions฀used฀in฀determining฀the฀ 26 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 29
    ...2006,฀aggregate฀ proven฀and฀probable฀recoverable฀copper฀reserves฀totaled฀ 54.8฀billion฀pounds฀and฀PT฀Freeport฀Indonesia's฀ estimated฀share฀totaled฀38.8฀billion฀pounds.฀These฀ estimates฀involve฀assumptions฀regarding฀future฀copper฀ and฀gold...

  • Page 30
    ... Atlantic฀Copper฀Operating฀Results"). 28 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report Consolidated..."฀on฀January฀1,฀2006฀(see฀"New฀ Accounting฀Standards"฀and฀Note฀1).฀Our฀parent฀company฀ charges฀PT฀Freeport฀Indonesia฀for฀the฀...

  • Page 31
    ...percentage฀of฀revenues,฀general฀ and฀administrative฀expenses฀were฀2.7฀percent฀in฀2006,฀2.5฀ percent฀in฀2005฀and฀3.8฀percent฀in฀2004. PT฀Freeport฀Indonesia฀maintains฀property฀damage฀and฀ business฀interruption฀insurance฀related฀to฀its...

  • Page 32
    ...฀deferred฀ profits฀to฀be฀recognized฀in฀future฀periods'฀operating฀income฀totaled฀ $190.1฀million,฀$100.8฀million฀to฀net฀income,฀after฀taxes฀and฀minority฀ interest฀sharing. 30 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 33
    ... MINING฀AND฀EXPLORATION฀OPERATIONS A฀summary฀of฀changes฀in฀PT฀Freeport฀Indonesia฀revenues฀ follows฀(in฀millions): ฀ ฀ 2006฀ 2005 PT฀Freeport฀Indonesia฀revenues฀-฀prior฀year฀ ฀ ฀ Price฀realizations: ฀ ฀ Copper Gold฀ ฀ ฀ Sales฀volumes...

  • Page 34
    ...฀redemption฀of฀FCX's฀Gold-Denominated฀Preferred฀Stock,฀Series฀II฀and฀a฀$13.3฀million฀or฀$0.01฀per฀ pound฀loss฀on฀the฀redemption฀of฀FCX's฀Silver-Denominated฀Preferred฀Stock. 32 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 35
    ...฀the฀copper,฀ gold฀and฀silver฀we฀produce฀in฀concentrates,฀(4)฀it฀is฀the฀method฀ used฀to฀compare฀mining฀operations฀in฀certain฀industry฀ publications฀and฀(5)฀it฀is฀the฀method฀used฀by฀our฀management฀ and฀our฀Board฀of฀Directors...

  • Page 36
    ...pounds฀reported฀in฀2004.฀Copper฀price฀realizations฀ of฀$1.85฀per฀pound฀in฀2005฀were฀$0.48฀per฀pound฀higher฀ than฀the฀2004฀realizations฀of฀$1.37฀per฀pound.฀Gold฀sales฀ 34 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 37
    ...฀sales฀reported฀in฀FCX's฀consolidated฀financial฀statements฀refer฀to฀ "Product฀Revenues฀and฀Production฀Costs." e.฀ Includes฀a฀$1.4฀million฀or฀less฀than฀$0.01฀per฀pound฀loss฀on฀the฀redemption฀of฀FCX's฀Silver-Denominated฀Preferred฀Stock...

  • Page 38
    ...฀to฀renegotiation฀in฀2008.฀The฀rate฀was฀$0.23฀per฀ 36 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report Exploration฀and฀Reserves During฀2006,฀PT฀Freeport฀Indonesia฀added฀41.8฀million฀metric฀ tons฀of฀ore฀averaging฀0.66฀percent...

  • Page 39
    ...฀Production฀Costs"฀below. SMELTING฀AND฀REFINING฀OPERATIONS Our฀investment฀in฀smelters฀serves฀an฀important฀role฀in฀our฀ concentrate฀marketing฀strategy.฀PT฀Freeport฀Indonesia฀ generally฀sells฀under฀long-term฀contracts฀approximately฀onehalf฀of...

  • Page 40
    ... tonnage฀from฀PT฀Freeport฀Indonesia฀in฀2005฀resulted฀in฀ higher฀production,฀compared฀with฀2004฀when฀PT฀Freeport฀ Indonesia's฀production฀was฀much฀lower.฀PT฀Smelting฀produced฀ 38 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 41
    ...million฀in฀2006,฀including฀four฀ supplemental฀dividends฀totaling฀$677.7฀million฀($3.50฀per฀ share).฀Our฀current฀regular฀annual฀common฀stock฀dividend,฀ which฀is฀declared฀by฀our฀Board,฀is฀$1.25฀per฀share,฀paid฀at฀a฀ quarterly฀rate...

  • Page 42
    ...฀Gold-Denominated฀Preferred฀Stock,฀Series฀II฀for฀ $236.4฀million; •฀ $12.5฀million฀for฀the฀final฀mandatory฀redemption฀of฀ Silver-Denominated฀Preferred฀Stock฀for฀$25.8฀million; 40 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 43
    ...฀flows฀and฀ financial฀position,฀copper฀and฀gold฀prices฀and฀general฀ economic฀and฀market฀conditions. In฀February฀2003,฀our฀Board฀of฀Directors฀authorized฀the฀ initiation฀of฀an฀annual฀cash฀dividend฀on฀our฀common฀stock฀of฀ $0.36฀per...

  • Page 44
    ...฀ effectiveness฀of฀PT฀Freeport฀Indonesia's฀environmental฀ management฀practices฀in฀some฀areas฀while฀making฀several฀ suggestions฀for฀improvement฀in฀others.฀We฀are฀working฀with฀ 42 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 45
    ...final฀redemption฀of฀our฀SilverDenominated฀Preferred฀Stock฀was฀in฀August฀2006฀(see฀"Capital฀ Resources฀and฀Liquidity฀-฀Financing฀Activities"). PT฀Freeport฀Indonesia฀receives฀market฀prices฀for฀the฀copper,฀ gold฀and฀silver฀contained฀in฀its...

  • Page 46
    ...฀when฀the฀U.S.฀ dollar฀strengthens฀in฀relation฀to฀those฀foreign฀currencies฀and฀ adversely฀affected฀when฀the฀U.S.฀dollar฀weakens฀in฀relation฀to฀ those฀foreign฀currencies. 44 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 47
    ...of฀FCX฀common฀stock฀on฀the฀date฀of฀grant.฀Effective฀ January฀2007,฀in฀response฀to฀new฀Securities฀and฀... 2006฀ 2005฀ 2004 Production฀and฀delivery฀costs฀ General฀and฀administrative฀expenses฀ Exploration฀expenses฀ ฀ Total฀stock-based...

  • Page 48
    ...impacts฀from฀ redemption฀of฀our฀gold-฀and฀silver-denominated฀preferred฀ stocks,฀are฀reï¬,ected฀as฀credits฀against฀site฀production฀ and฀delivery฀costs฀in฀the฀by-product฀method. 46 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 49
    ...฀charges฀resulting฀from฀the฀increase฀in฀copper฀prices฀since฀December฀31,฀2005. c.฀ Includes฀a฀$69.0฀million฀or฀$0.06฀per฀pound฀loss฀on฀the฀redemption฀of฀FCX's฀Gold-Denominated฀Preferred฀Stock,฀Series฀II฀and฀a฀$13.3฀million฀or...

  • Page 50
    ...฀and฀exploration฀segment฀ Smelting฀and฀refining฀segment฀ Eliminations฀and฀other฀ As฀reported฀in฀FCX's฀consolidated฀financial฀statements฀ ...FCX's฀Silver-Denominated฀Preferred฀Stock. 48 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 51
    ...฀ounce฀for฀gold฀and฀$0.8฀million฀or฀$0.26฀per฀ounce฀for฀silver.฀ c.฀ Includes฀a฀$1.4฀million฀or฀less฀than฀$0.01฀per฀pound฀loss฀on฀the฀redemption฀of฀FCX's฀Silver-Denominated฀Preferred฀Stock. FINANCIAL฀&฀OPERATING฀INFORMATION 49

  • Page 52
    ... (241) 2,045 PT฀Freeport฀Indonesia's฀25%฀equity฀interest Amortization฀of฀excess฀investment฀cost Equity฀in฀PT฀Smelting฀earnings฀reported฀in฀FCX's฀consolidated฀financial฀statements฀ 50 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 53
    ...฀on฀earnings,฀ dividend฀payments,฀liquidity,฀other฀financial฀commitments฀and฀ the฀proposed฀acquisition฀of฀Phelps฀Dodge.฀We฀caution฀you฀that฀ these฀statements฀are฀not฀guarantees฀of฀future฀performance,฀ and฀our฀actual฀results฀may฀differ...

  • Page 54
    ...฀of฀the฀Treadway฀ Commission฀and฀our฀report฀dated฀February฀26,฀2007,฀ expressed฀an฀unqualified฀opinion฀thereon. Ernst฀&฀Young฀LLP New฀Orleans,฀Louisiana February฀26,฀2007 52 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 55
    ...ON฀INTERNAL฀CONTROL฀OVER฀FINANCIAL฀REPORTING Freeport-McMoRan฀Copper฀&฀Gold฀Inc.'s฀(the฀Company's)฀ management฀is฀responsible฀for฀establishing฀and฀maintaining฀ adequate฀internal฀control฀over฀financial฀reporting.฀Internal฀ control฀over฀financial...

  • Page 56
    ...฀period฀ended฀December฀31,฀2006฀and฀our฀ report฀dated฀February฀26,฀2007฀expressed฀an฀unqualified฀ opinion฀thereon. Ernst฀&฀Young฀LLP New฀Orleans,฀Louisiana February฀26,฀2007 54 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 57
    ...December฀31,฀ ฀ 2006฀ 2005฀ 2004 (In฀Thousands,฀Except฀Per฀Share฀Amounts) Revenues฀ ฀ Cost฀of฀sales: ฀ Production฀and฀delivery฀ ฀ Depreciation฀and฀amortization฀ ฀ ฀ Total฀cost฀of฀sales฀ Exploration฀expenses฀ General฀and฀administrative...

  • Page 58
    ...288,400฀ The฀accompanying฀Notes฀to฀Consolidated฀Financial฀Statements,฀which฀include฀information฀regarding฀noncash฀transactions,฀are฀an฀integral฀part฀of฀these฀financial฀statements. 56 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 59
    ...,฀less฀current฀portion Accrued฀postretirement฀benefits฀and฀other฀liabilities Deferred฀income฀taxes Minority฀interests Stockholders'฀equity: ฀ Convertible฀perpetual฀preferred฀stock,฀1,100฀shares฀issued฀and฀outstanding Class฀B฀common฀stock,฀par...

  • Page 60
    ...163,649 ฀(2,748,948)฀ $฀2,445,101฀ ฀ (2,595,888)฀ $฀ 1,842,994฀ The฀accompanying฀Notes฀to฀Consolidated฀Financial฀Statements฀are฀an฀integral฀part฀of฀these฀financial฀statements. 58 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 61
    ... SUMMARY฀OF฀SIGNIFICANT฀ACCOUNTING฀POLICIES Basis฀of฀Presentation.฀The฀consolidated฀financial฀statements฀of฀ Freeport-McMoRan฀Copper฀&฀Gold฀Inc.฀(FCX)฀include฀the฀ accounts฀of฀those฀subsidiaries฀where฀FCX฀directly฀or฀indirectly฀ has฀more...

  • Page 62
    ...฀to฀total฀ore฀processed฀from฀the฀ underground฀Deep฀Ore฀Zone฀mine. 60 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report On฀January฀1,฀2006,฀FCX฀adopted฀Emerging฀Issues฀Task฀ Force฀Issue฀No.฀04-6,฀"Accounting฀for฀Stripping...

  • Page 63
    ...฀ net฀income.฀During฀2006,฀2005฀and฀2004,฀the฀maximum฀net฀ price฀adjustment฀to฀revenues฀after฀initial฀recognition฀was฀17฀ percent฀for฀copper฀revenues฀and฀three฀percent฀for฀gold฀revenues. PT฀Freeport฀Indonesia฀pays฀royalties฀under...

  • Page 64
    ...฀the฀fair฀value฀recognition฀ provisions฀of฀SFAS฀No.฀123฀to฀stock-based฀awards฀granted฀ under฀FCX's฀stock-based฀compensation฀plans฀(in฀thousands,฀ except฀per฀share฀amounts): 62 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 65
    NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS ฀ ฀ ฀ 2005฀ 2004 Net฀income฀applicable฀to฀common฀stock,฀as฀reported Add:฀฀฀ Stock-based฀employee฀compensation฀expense฀included฀in฀reported฀net฀income฀for฀stock฀option฀conversions SARs฀and฀...

  • Page 66
    ...of฀common฀stock ฀ 22,215฀ ฀ 6,993฀ ฀ 1,049฀ ฀ 511฀ ฀ 221,498฀ $฀ 6.63฀ ฀ 21,196฀ ฀ 16,784฀ ฀ 1,741฀ ฀ 479฀ ฀ 220,470฀ $฀ 4.67฀ 2,197 ฀ 454 ฀ 184,923 $฀ 0.85 64 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 67
    ...and฀social฀uncertainties,฀including฀ separatist฀movements฀and฀civil฀and฀religious฀strife฀in฀a฀number฀ of฀provinces. FCX฀owns฀100฀percent฀of฀the฀outstanding฀Atlantic฀Copper฀ common฀stock.฀At฀December฀31,฀2006,฀FCX's฀net฀investment฀ in...

  • Page 68
    ...฀supplies฀inventory.฀Materials฀and฀ supplies฀inventory฀is฀net฀of฀obsolescence฀reserves฀totaling฀ $16.4฀million฀at฀December฀31,฀2006,฀and฀$16.6฀million฀at฀ December฀31,฀2005. 66 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 69
    ...฀Notes฀due฀2011฀ ฀ ฀ 7.20%฀Senior฀Notes฀due฀2026฀ ฀ ฀ 7.50%฀Senior฀Notes฀due฀2006฀ ฀ Redeemable฀Preferred฀Stock: ฀ Gold-Denominated฀Preferred฀Stock,฀Series฀II฀ ฀ ฀ Silver-Denominated฀Preferred฀Stock฀ ฀ Notes฀Payable: ฀ Equipment...

  • Page 70
    ...certain฀other฀FCX฀debt฀maturities.฀Atlantic฀฀฀ Copper฀recorded฀a฀$3.7฀million฀charge฀for฀losses฀on฀early฀ extinguishment฀of฀debt฀for฀repayment฀of฀certain฀of฀its฀debt.฀ 68 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 71
    ...฀the฀options.฀The฀ related฀charge฀to฀general฀and฀administrative฀expenses฀totaled฀ $2.1฀million฀in฀2005฀and฀$2.1฀million฀in฀2004. In฀2003,฀FCX's฀Board฀of฀Directors฀approved฀a฀new฀open฀ market฀share฀purchase฀program฀for฀up฀to฀20...

  • Page 72
    ...new฀grants฀ as฀of฀December฀31,฀2006. FCX฀also฀has฀a฀restricted฀stock฀program฀that฀allows฀FCX฀ senior฀executives฀to฀elect฀to฀receive฀restricted฀stock...฀ $฀ 101,077 $฀ 19,685 70 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 73
    ...฀above,฀FCX฀has฀a฀ restricted฀stock฀program฀that฀allows฀FCX฀senior฀executives฀to฀ elect฀to฀receive฀restricted฀stock฀units฀in฀lieu฀of฀all฀or฀part฀of฀ their฀annual฀cash฀incentive฀compensation.฀The฀annual฀cash฀ incentive฀is...

  • Page 74
    ...฀of฀restricted฀stock฀units฀granted฀to฀ FCX฀senior฀executives฀during฀the฀year฀ended฀December฀31,฀ 2006,฀was฀$21...) ฀ (99,874) ฀ (19,471) ฀ (1,016,497) $฀ (800,310)฀ $฀ (902,386) 72 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 75
    ...฀five-year฀term฀of฀the฀executive฀ officers'฀current฀employment฀agreements.฀FCX฀also฀has฀an฀ unfunded฀pension฀plan฀for฀its฀directors฀and฀an฀excess฀benefits฀ plan฀for฀its฀executives. PT฀Freeport฀Indonesia฀has฀a฀defined฀benefit฀pension...

  • Page 76
    ...฀Services฀Company฀elected฀to฀terminate฀their฀defined฀benefit฀pension฀plans฀and฀ceased฀accruing฀benefits฀on฀June฀30,฀2000.฀The฀assumptions฀shown฀ only฀relate฀to฀the฀SERP . 74 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 77
    ... 8,446 The฀components฀of฀net฀periodic฀benefit฀cost฀for฀PT฀Freeport฀ Indonesia's฀and฀Atlantic฀Copper's฀pension฀plans฀follow฀(in฀ thousands): ฀ ฀ PT฀Freeport฀Indonesia 2006฀ 2005฀ 2004 Service฀cost฀ Interest฀cost฀ Expected฀return฀on฀plan...

  • Page 78
    ...฀policy฀committing฀it฀not฀only฀to฀compliance฀with฀ federal,฀state฀and฀local฀environmental฀statutes฀and฀regulations,฀ but฀also฀to฀continuous฀improvement฀of฀its฀environmental฀ 76 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 79
    ...the฀government฀will฀approve฀the฀extensions฀as฀long฀as it฀continues฀to฀comply฀with฀the฀terms฀of฀the฀Contract฀of฀Work. Social฀and฀Economic฀Development฀Programs.฀FCX฀has฀a฀ comprehensive฀social,฀employment฀and฀human฀rights฀policy฀ to...

  • Page 80
    ...฀debt฀ 5,346฀ ฀(126,732 680,115)฀ 5,346฀ ฀ (126,732 710,459)฀ $฀ ฀ ฀ 2,209฀ -฀ 38,583฀ $฀ ฀ ฀ 2,209 - 38,583 ฀ 1,762฀ ฀ (1,255,948)฀ ฀ 1,762 ฀ (1,619,522) 78 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 81
    ...2006฀ 2005฀ 2004 FCX: ฀ Silver-Denominated฀Preferred฀Stock฀ ฀ Gold-Denominated฀Preferred฀Stock,฀Series฀II฀ PT฀Freeport฀Indonesia: ฀ Foreign฀currency฀exchange฀contracts฀ ฀ Embedded฀derivatives฀in฀concentrate฀sales฀contracts฀฀ Atlantic฀Copper...

  • Page 82
    ...฀Indonesia's฀equity฀investment฀in฀PT฀Smelting฀totaling฀$34.4฀million฀at฀December฀31,฀2006,฀$33.5฀million฀at฀December฀31,฀2005,฀and฀$47.8฀million฀at฀ December฀31,฀2004. 80 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 83
    ...฀and฀to฀manage฀risk.฀PT฀Freeport฀ Indonesia฀revises฀its฀mine฀plans฀and฀estimates฀of฀proven฀and฀ probable฀mineral฀reserves฀as฀required฀in฀accordance฀with฀the฀ latest฀available฀studies. All฀of฀PT฀Freeport฀Indonesia's฀current฀aggregate...

  • Page 84
    ...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....0 82 FREEPORT-McMoRan฀COPPER฀&฀GOLD฀INC.฀฀2006฀Annual฀Report

  • Page 85
    ...฀STATEMENTS NOTE฀14.฀QUARTERLY฀FINANCIAL฀INFORMATION฀(UNAUDITED) ฀ Revenues Net฀Income฀ ฀฀ Operating Applicable฀to Net฀Income฀Per฀Share฀฀ Income฀฀ Common฀Stock฀ Basic฀฀ Diluted (In฀Thousands,฀Except฀Per฀Share฀Amounts) 2006 1st฀Quarter...

  • Page 86
    ...Mining Corporation, Phelps Dodge Corporation, Southern Copper Corp. and Teck Cominco Ltd. This comparison assumes $100 invested on December 31, 2001 in (a) Freeport-McMoRan Copper & Gold Inc. Class B common stock, (b) the S&P 500 Stock Index, (c) our former peer group and (d) our selected peer group...

  • Page 87
    ..., to any stockholder 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, Louisiana 70112 Telephone (504) 582...

  • Page 88
    FREEPORT-McMoRan COPPER & GOLD INC. 1615 POYDRAS STREET NEW ORLEANS, LOUISIANA 70112 WWW.FCX.COM