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FREEPORT-MCMORAN COPPER & GOLD INC.
2007 Annual Report
A World of Opportunities
A World of Assets

Table of contents

  • Page 1
    A World of Assets A World of Opportunities FREEPORT-MCMORAN COPPER & GOLD INC. 2007 Annual Report

  • Page 2
    ... mining operations in the Americas, including the large scale Morenci and Safford minerals districts in North America and the Cerro Verde and El Abra operations in South America; and the potential world-class Tenke Fungurume development project in the Democratic Republic of Congo. Our common stock...

  • Page 3
    ... Operational Overview 18 Financial Performance & Outlook 20 Economic, Social & Environmental Overview 24 Board of Directors & Management 25 Financial & Operating Information 110 Performance Graph 111 Stockholder Information Photos from left: Safford, Arizona; Grasberg, Indonesia; Morenci, Arizona

  • Page 4
    ...Morenci, Arizona Bagdad, Arizona Sierrita, Arizona Miami, Arizona Safford, Arizona Climax, Colorado Henderson, Colorado Chino, New Mexico Tyrone, New Mexico Cerro Verde, Peru Candelaria / Ojos del Salado, Chile El Abra, Chile Tenke Fungurume, Democratic Republic of Congo North America Reserves...

  • Page 5
    ...2007, Freeport-McMoRan Copper & Gold Inc. had estimated consolidated recoverable reserves totaling 93.2 billion pounds of copper, 41.0 million ounces of gold and 2.0 billion pounds of molybdenum. These reserves, which form the core of our "World of Assets," are either part of our existing operations...

  • Page 6
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report # 1 Publicly Traded Copper Producer Grasberg Mine, Indonesia, is one of our world-class mines in a global portfolio of operations and assets on four continents. The Grasberg Minerals District contains the world's largest recoverable reserves of...

  • Page 7
    ... to invest in growth projects and build value for shareholders. TO OUR SHAREHOLDERS: The year 2007 was special for Freeport-McMoRan Copper & Gold Inc. On March 19, 2007, we completed the $26 billion acquisition of Phelps Dodge Corporation, creating the world's largest publicly traded copper company...

  • Page 8
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report NORTH AMERICA Our new Safford mine in Arizona produced its first copper in December 2007, ahead of schedule. In December, we announced plans to restart our Climax mine in Colorado, which is believed to be the largest, highest-grade undeveloped...

  • Page 9
    .... The acquisition of Phelps Dodge Corporation combined two companies with strong core values concerning environmental protection and impact mitigation and the support of local communities where we operate. We have well established Environmental and Social, Employment and Human Rights policies and...

  • Page 10
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Seizing Opportunities in North America Through expansion, optimizing production, and the introduction of new process technology, our North American operations are well positioned for an exciting future. Photo: Morenci open-pit mine in Arizona....

  • Page 11
    ...restart of the Climax mine in Colorado. FCX is the world's largest producer of molybdenum through its wholly owned Henderson molybdenum mine in Colorado and as a by-product at the Sierrita, Bagdad, Chino and Morenci operations in the U.S. and at the Cerro Verde mine in Peru. The Henderson block-cave...

  • Page 12
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Colorado. Climax is believed to be the world's largest, highest-grade and lowest-cost undeveloped molybdenum ore body in the world. The initial project involves the restart of open-pit mining and the construction of new milling facilities. ...

  • Page 13
    ... Optimization Lead the Way Safford Mine, Arizona. The first new copper mine to open in North America in decades commenced operations in 2007. Safford will employ industry-leading technology to optimize production while minimizing environmental impact. Additional exploration opportunities exist in...

  • Page 14
    ...pro forma sales reported in FCX's pro forma consolidated financial results. SOUTH AMERICA OPERATIONS FCX has four operating copper mines in South America - Cerro Verde in Peru and Candelaria, Ojos del Salado and El Abra in Chile. The company owns a 53.56 percent interest in Cerro Verde, 80 percent...

  • Page 15
    Ramping Up Production Cerro Verde Mine, Peru. The recently expanded mill enables the Cerro Verde operation to produce approximately 650 million pounds of copper and 8 million pounds of molybdenum per year for the next several years. Operational Overview 13

  • Page 16
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Copper and Gold for the Long Run Grasberg Mine, Indonesia. The Grasberg Minerals District contains the world's largest recoverable copper and gold reserve in a single mining district, providing assets with a long life in an area with highly ...

  • Page 17
    ...quarterly and annual sales of copper and gold. PT Freeport Indonesia expects to be mining Several projects in progress in the Grasberg Minerals District aim to increase production and operating efficiencies, and to provide foundations for future development of underground ore deposits. In mid-2007...

  • Page 18
    ...-McMoRan COPPER & GOLD INC. 2007 Annual Report The DOZ mine in the Grasberg Minerals District, one of the world's largest underground mines, continues to expand, while industry-leading training initiatives prepare a skilled local workforce for the future. UNIT NET CASH COSTS PT Freeport Indonesia...

  • Page 19
    ... leading copper/cobalt mining operations. FCX is responsible for funding 70 percent of Tenke Fungurume project development costs and, at our joint venture partner's election, is also responsible for financing our partner's share of project costs that exceed 25 percent of the feasibility study cost...

  • Page 20
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Financial Performance & Outlook We have structured our business to use our significant cash ï¬,ows to invest in attractive development projects, maintain a strong balance sheet and provide returns to shareholders. OPERATING CASH FLOW AND CASH ...

  • Page 21
    ... stock dividends and share purchases. In December 2007, following the achievement of our debt reduction target since the Phelps Dodge acquisition on March 19, 2007, FCX's Board of Directors increased our annual common stock dividend from $1.25 to $1.75 per share and approved a new open-market share...

  • Page 22
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report A World of Commitment As one of the world's major producers of copper, gold and molybdenum, we recognize the importance of providing these essential metals to today's economies. We have an obligation to do so in balance with our corporate and ...

  • Page 23
    ... time of exploration to site closure and remediation. The acquisition of Phelps Dodge Corporation combined not only our businesses, but also our respective commitments to our employees, neighbors, communities and the environment. Through the integration of our companies, we adopted new environmental...

  • Page 24
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Striking a Balance Beyond our formally adopted policies to responsibly manage our environmental impacts, we work toward continuous improvement in our programs, recognizing that our work requires a sense of social and environmental ...

  • Page 25
    ... on these issues, please see our "Working Toward Sustainable Development Report" as well as our report on the Global Reporting Initiative (GRI) sustainability indicators on our web site (www.fcx.com). For a physical copy, please e-mail us at [email protected], or contact the Communications...

  • Page 26
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Board of Directors & Management Board of Directors James R. Moffett, 1992 †Chairman of the Board Freeport-McMoRan Copper & Gold Inc. Richard C. Adkerson, 2006 President and Chief Executive Officer Freeport-McMoRan Copper & Gold Inc. Robert ...

  • Page 27
    FREEPORT-McMoRan COPPER & GOLD 2007 Annual Report Financial & Operating Information Table of Contents 26 Selected Financial and Operating Data 29 Management's Discussion and Analysis 67 Report of Independent Registered Public Accounting Firm 68 Management's Report on Internal Control Over ...

  • Page 28
    ...contained in this annual report. a. Includes the results of Phelps Dodge Corporation (Phelps Dodge) beginning March 20, 2007. b. Includes charges to revenues for mark-to-market accounting adjustments on the 2007 copper price protection program assumed in the acquisition of Phelps Dodge totaling $175...

  • Page 29
    ... Phelps Dodge's pre-acquisition results for comparative purposes only. b. Includes the impact of hedging losses related to copper price protection programs. c. Amount was approximately $606 per ounce before a loss resulting from the redemption of FCX's Gold-Denominated Preferred Stock, Series...

  • Page 30
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Selected Financial and Operating Data Years Ended December 31, 2007a 2006a 2005a 2004a 2003a 100% NORTH AMERICAN MINING OPERATING DATA, Including Joint Venture Interest Solution extraction/electrowinning (SX/EW) operations Leach ore placed in...

  • Page 31
    ... development projects, including Tenke Fungurume in the Democratic Republic of Congo (DRC). In North America, we have six operating copper mines - Morenci, Bagdad, Sierrita and Safford in Arizona and Chino and Tyrone in New Mexico, as well as one operating molybdenum mine - Henderson in Colorado...

  • Page 32
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis values, which were initially recorded based on preliminary estimates, may occur until such values are finalized in first-quarter 2008. In valuing acquired assets and assumed liabilities, fair values were ...

  • Page 33
    ... 19 for further details of estimated recoverable reserves. These estimates involve assumptions regarding future copper, gold and molybdenum prices, the geology of our mines, the mining methods we use and the related costs we incur to develop and mine our reserves. Changes in these assumptions could...

  • Page 34
    ... as of December 31, 2007. Projected copper prices represent the most significant assumption used in the discounted cash ï¬,ows analyses to evaluate goodwill for impairment. At the date of acquisition of Phelps Dodge, copper price projections used to value the assets acquired ranged from a near-term...

  • Page 35
    ... Obligations. Our mining, exploration, production and historical operating activities are subject to stringent laws and regulations governing the protection of the environment, and compliance with those At the acquisition date, Phelps Dodge's historical environmental obligations of $385...

  • Page 36
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis studies to evaluate the extent of the environmental damage and the available remedies. Advancement of these studies and consideration of alternative remedies and cost sharing arrangements resulted in our ...

  • Page 37
    ... with Phelps Dodge's operations ($10.9 billion), revenues for 2007 were approximately four percent higher than 2006 reï¬,ecting higher copper and gold prices, partly offset by lower copper sales volumes in 2007. Lower sales volumes occurred primarily because PT Freeport Indonesia mined lower...

  • Page 38
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Approximately two-thirds of our copper is sold in concentrate and cathodes and the remaining one-third is sold primarily as rod (principally from our North America operations). Substantially all of our ...

  • Page 39
    ... fair value adjustments, is expected to approximate $1.9 billion, compared with $1.2 billion for 2007, primarily because of higher projected copper sales volumes for 2008, as well as the incremental amounts associated with a full year of expense for the acquired Phelps Dodge operations. Exploration...

  • Page 40
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Provision for Income Taxes Our 2007 income tax provision from continuing operations resulted from taxes on international operations ($2.2 billion) and U.S. taxes ($215 million). The difference between FCX's ...

  • Page 41
    ... Phelps Dodge beginning March 20, 2007. b. Includes our operating mines at Morenci, Bagdad, Sierrita, Safford, Chino and Tyrone, and also includes our Rod and Refining and Molybdenum operations (refer to Note 18). c. Includes charges for mark-to-market accounting adjustments on the 2007 copper price...

  • Page 42
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis We also plan to increase our annual molybdenum processing capacity by 20 million pounds through the conversion of our copper concentrate leach facility at Bagdad, Arizona, to a molybdenum concentrate leach ...

  • Page 43
    ... pursuant to annual or quarterly agreements based primarily on prevailing market prices one month prior to the time of sale. The molybdenum sales company functions as an agent to purchase and sell molybdenum from the Henderson mine as well as our North American and South American copper mines that...

  • Page 44
    ... of molybdenum for 2006, compared with 2005, primarily reï¬,ected higher input costs, including labor, supplies and service costs and higher taxes. South American Mining We have four operating copper mines in South America - Cerro Verde in Peru, and Candelaria, Ojos del Salado and El Abra in Chile...

  • Page 45
    ... at Cerro Verde. 2006 Compared with 2005 (Pro Forma). During 2006, average realized copper prices for the South American mining operations improved by $1.28 per pound to an average of $3.03 per pound, compared with $1.75 per pound in 2005, which excluded the hedging impact related to El Abra's 2005...

  • Page 46
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Gross Profit per Pound of Copper (Pro Forma) Year Ended December 31, 2007 By-Product Co-Product Method Method Revenues, after adjustments shown below Site production and delivery, before net noncash and ...

  • Page 47
    ... processed at PT Freeport Indonesia's mill facilities from each producing mine. Indonesian Mining Revenues. A summary of changes in PT Freeport Indonesia's revenues follows: 2007 2006 2005 PT Freeport Indonesia revenues - prior year Price realizations: Copper Gold Sales volumes: Copper Gold...

  • Page 48
    ...in 2005, primarily reï¬,ecting higher metal prices partly offset by lower sales volumes. Indonesian Development Projects. During second-quarter 2007, PT Freeport Indonesia completed the expansion of the capacity of the DOZ underground operation to allow a sustained rate of 50,000 metric tons per day...

  • Page 49
    ...delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to "Production Revenues and Production Costs." Revenues, after adjustments shown below Site production and delivery, before net noncash and nonrecurring costs shown below Gold and silver credits Treatment...

  • Page 50
    ... GOLD INC. 2007 Annual Report Management's Discussion and Analysis Year Ended December 31, 2005 By-Product Method Co-Product Method Copper Gold Silver Revenues, after adjustments shown below Site production and delivery, before net noncash and nonrecurring costs shown below Gold and silver credits...

  • Page 51
    ... $80 million ($40 million for Cerro Verde's share, which has been recorded as a current liability in our consolidated balance sheets). During 2006, the Peruvian government announced that all mining companies operating in Peru will make annual contributions to local development funds for a five-year...

  • Page 52
    ... the Cerro Verde, Candelaria and Ojos del Salado deposits. In Africa, we are actively pursuing targets outside of the area of initial development at Tenke Fungurume. The number of drill rigs operating on these and other programs near our mine sites has increased from 26 at the end of March 2007 to...

  • Page 53
    ... operations. CAPITAL RESOURCES AND LIQUIDITY Our operating cash ï¬,ows vary with prices realized from copper, gold and molybdenum sales, our production levels, production costs, cash payments for income taxes and interest, other working capital changes and other factors. Based on current mine plans...

  • Page 54
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Operating Activities We generated operating cash ï¬,ows totaling $6.2 billion for 2007, including $1.1 billion from working capital sources, compared with $1.9 billion for 2006, net of $114 million used for ...

  • Page 55
    ...no shares have been purchased under this program. The timing of future purchases of our common stock is dependent on many factors, including the price of our common shares, our operating results, cash ï¬,ows and financial position, copper, gold and molybdenum prices, and general economic and market...

  • Page 56
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis year. For this reason, no adjustment was required to be made as a result of the quarterly common stock dividend paid on February 1, 2008. Holders may elect to convert at any time prior to May 1, 2010, at a ...

  • Page 57
    ...necessary. These include (i) PT Freeport Indonesia's commitment to provide one percent of its annual revenue for development of the local people in its area of operations through the Freeport Partnership Fund for Community Development, (ii) Cerro Verde's local mining fund contributions equal to 3.75...

  • Page 58
    ..., 2007, the sale of copper, gold, molybdenum and other metals and metal-related products by Phelps Dodge. Consolidated revenues, net income and cash ï¬,ows vary significantly with ï¬,uctuations in the market prices of copper, gold and molybdenum, sales volumes and other factors. Based on projected...

  • Page 59
    ... or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues during a quarter will benefit from higher prices received for contracts priced at current market rates and also from an increase related to the...

  • Page 60
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Chilean pesos to one U.S. dollar, a ten-peso increase or decrease in the exchange rate would result in an approximate $9 million change in aggregate annual operating costs. Based on estimated annual payments...

  • Page 61
    ... sales and hedging per above Purchase accounting impact Eliminations and other As reported in FCX's pro forma consolidated financial results a. Molybdenum by-product credits reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita. b. Includes gold and silver...

  • Page 62
    ... open sales and hedging per above Eliminations and other As reported in Phelps Dodge consolidated financial statements c a. Molybdenum by-product credits reflect volumes produced at market-based pricing, and also includes tolling revenues at Sierrita. b. Includes gold and silver product revenues and...

  • Page 63
    ... Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segment includes profits on sales as they are made to third parties and realizations based on actual contract terms. b. Obtained from the Phelps Dodge Form 10...

  • Page 64
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis South American Mining Product Revenues and Production Costs (Pro Forma) Year Ended December 31, 2007 By-Product Method Co-Product Method Copper Other a Total Revenues, after adjustments shown below Site ...

  • Page 65
    ... adjustments, primarily for pricing on prior period open sales and hedging per above Purchased metal Eliminations and other As reported in Phelps Dodge consolidated financial resultsb a. Includes gold and silver product revenues and production costs. b. Obtained from the Phelps Dodge Form 10-K for...

  • Page 66
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Indonesian Mining Product Revenues and Production Costs Year Ended December 31, 2007 By-Product Method Co-Product Method Copper Gold Silver Total Revenues, after adjustments shown below Site production and ...

  • Page 67
    ... per above Less: Royalty per above Revenue adjustments, primarily for pricing on prior period open sales and hedging per above Total Indonesian mining operations Atlantic Copper smelting & refining Corporation, other & eliminations As reported in FCX's consolidated financial statements $ 4,883...

  • Page 68
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Discussion and Analysis Indonesian Mining Product Revenues and Production Costs Year Ended December 31, 2005 By-Product Method Co-Product Method Copper Gold Silver Total Revenues, after adjustments shown below Site production and ...

  • Page 69
    Report of Independent Registered Public Accounting Firm 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 Inc. as of December 31, 2007 and 2006, and the related consolidated...

  • Page 70
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Management's Report 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 ...

  • Page 71
    ... Accounting Firm TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FREEPORT-MCMORAN COPPER & GOLD INC. We have audited Freeport-McMoRan Copper & Gold Inc.'s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued...

  • Page 72
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Consolidated Statements of Income Years Ended December 31, (In Millions, Except Per Share Amounts) 2007 2006 2005 Revenues Cost of sales: Production and delivery Depreciation, depletion and amortization Total cost of sales Exploration and ...

  • Page 73
    ...bank credit facility Net proceeds from sales of senior notes Net proceeds from sale of common stock Net proceeds from sale of 6 3/4% Mandatory Convertible Preferred Stock Proceeds from other debt Repayments of other debt and redemption of preferred stock Purchases of FCX common shares Cash dividends...

  • Page 74
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Consolidated Balance Sheets December 31, (In Millions, Except Par Values) 2007 2006 ASSETS Current assets: Cash and cash equivalents Trade accounts receivable Other accounts receivable Inventories: Product Materials and supplies, net Mill ...

  • Page 75
    ...Convertible Preferred Stock Common stock issued to acquire Phelps Dodge Sale of common stock Conversion of 7% Convertible Senior Notes Exercised stock options, issued restricted stock and other Stock-based compensation costs Tax benefit for stock option exercises Tender of shares for exercised stock...

  • Page 76
    ... Dodge) and Atlantic Copper, S.A. (Atlantic Copper). FCX acquired Phelps Dodge on March 19, 2007. FCX's results of operations include Phelps Dodge's results beginning March 20, 2007 (see Note 2). FCX's unincorporated joint ventures with Rio Tinto plc (Rio Tinto) and Sumitomo Metal Mining Arizona...

  • Page 77
    ... in property, plant, equipment and development costs is value beyond proven and probable reserves (VBPP) resulting from FCX's acquisition of Phelps Dodge. The concept of VBPP is described in FASB Emerging Issues Task Force (EITF) Issue No. 04-3, "Mining Assets: Impairment and Business Combinations...

  • Page 78
    ... pounds of copper and molybdenum and recoverable ounces of gold, metal prices (considering current and historical prices, price trends and related factors), production rates and costs, capital and reclamation costs as appropriate, all based on current life-of-mine engineering plans. Future cash...

  • Page 79
    ... fair values. Mandatorily redeemable preferred stock indexed to commodities was treated as a hedge of future production and was carried at its original issue value. As redemption payments occurred, differences between the carrying value and the payments were recorded as adjustments to revenues. In...

  • Page 80
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements preferred stock indexed to commodities and the copper collars acquired from Phelps Dodge (see Notes 11 and 17). Moreover, because a portion of the metals contained in copper concentrates is ...

  • Page 81
    ... Pro forma net income applicable to common stock Earnings per share: Basic - as reported Basic - pro forma Diluted - as reported Diluted - pro forma $ 935 Fair value per stock option Risk-free interest rate Expected volatility rate Expected life of options (in years) Assumed annual dividend $ 13.97...

  • Page 82
    ..., with mines in North and South America and processing capabilities for other by-product minerals, such as gold, silver and rhenium, and several development projects, including Tenke Fungurume in the Democratic Republic of Congo (DRC). In the acquisition, each share of Phelps Dodge common stock was...

  • Page 83
    ...for each Phelps Dodge common share Fair value of FCX common stock issued Transaction and change of control costs and related employee benefits Release of FCX deferred tax asset valuation allowances Total purchase price A current summary of the purchase price allocation as of March 19, 2007, follows...

  • Page 84
    ...projects, including Tenke Fungurume in the DRC. At December 31, 2007, Phelps Dodge's major operating copper mines in North America were Morenci, Bagdad, Sierrita and Safford located in Arizona, and Chino and Tyrone located in New Mexico. FCX has an 85 percent interest in Morenci (see "Joint Ventures...

  • Page 85
    ...-upon exploration costs in the joint venture areas are shared 60 percent by FCX and 40 percent by Rio Tinto. Pursuant to the joint venture agreement, Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver through...

  • Page 86
    ... 31, 2007, Phelps Dodge purchased 87 million pounds of Morenci's copper cathode from Sumitomo for $299 million. FCX had a $10 million net payable to Sumitomo at December 31, 2007. Investment in PT Smelting. PT Smelting, an Indonesian company, operates a smelter/refinery in Gresik, Indonesia. During...

  • Page 87
    ...Phelps Dodge acquisition and transferred $93 million to proven and probable reserves during 2007. FCX's capitalized interest totaled $147 million in 2007, $11 million in 2006 and $4 million in 2005. Capitalized interest in 2007 primarily related to development projects at Safford and Tenke Fungurume...

  • Page 88
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements NOTE 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The following provides additional information regarding accounts payable and accrued liabilities. December 31, 2007 2006 Accounts payable Salaries, ...

  • Page 89
    ... at a make-whole redemption price. In March 2007, in connection with the acquisition of Phelps Dodge, FCX assumed these senior notes with a stated value of $306 million, which was increased by $54 million to reï¬,ect the fair market value of these obligations at the acquisition date. The increase in...

  • Page 90
    ... depositary share had a cumulative quarterly cash dividend equal to the value of 0.0051563 ounce of silver. On August 1, 2006, FCX funded the last of eight scheduled annual redemption payments on its Silver-Denominated Preferred Stock for $26 million, resulting in a $13 million decrease in debt. The...

  • Page 91
    ...substantially all of its Indonesian national employees. PT Freeport Indonesia funds the plan and invests the assets in accordance with Indonesian pension guidelines. The pension obligation was valued at an exchange rate of 9,390 rupiah to one U.S. dollar on December 31, 2007, and 8,989 rupiah to one...

  • Page 92
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements Information as of December 31, 2007 and 2006, on the FCX (including Phelps Dodge's plans as of December 31, 2007; FCX's SERP, director and excess benefits plans; and FM Services Company's plans), PT ...

  • Page 93
    ... December 31, 2007, will be liquidated and any unfunded benefits will be paid after Internal Revenue Service approval. The expected benefit payments for FCX's (including Phelps Dodge's plans, and FCX's SERP, director and excess benefits plans) and PT Freeport Indonesia's pension plans follow. FCX...

  • Page 94
    ...-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements Information for the years ended December 31, 2007 and 2006, on the postretirement benefit plans follows: 2007 2006 Change in benefit obligation: Benefit obligation at beginning of year Acquisition of Phelps...

  • Page 95
    ...The timing of future purchases of FCX's common stock is dependent upon a number of factors including the price of FCX's common shares, FCX's cash ï¬,ow and financial position, copper, molybdenum and gold prices and general economic and market conditions. Preferred Stock. On March 28, 2007, FCX sold...

  • Page 96
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements Plan, 0.3 million shares under the 2004 Plan, 0.1 million shares under the 2003 Plan and less than 6,000 shares under the 1999 Plan available for the grant of new awards. FCX also has a restricted ...

  • Page 97
    ... awards that were issued in connection with the Phelps Dodge acquisition. A summary of outstanding restricted stock awards as of December 31, 2007, and activity during the year ended December 31, 2007, is presented below: Acquisition of Phelps Dodge on March 19, 2007 Vested Forfeited Outstanding...

  • Page 98
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements NOTE 14. INCOME TAXES Geographic sources of income from continuing operations before income taxes and minority interests in consolidated subsidiaries for the years ended December 31, 2007, 2006 and ...

  • Page 99
    ... subject to examination are as follows: Jurisdiction Years Under Examination Additional Open Years U.S. Federal Indonesia Peru Chile Arizona New Mexico 2003-2005 2005, 2006 2003 - - - 2006, 2007 2003, 2004, 2007 2002, 2004-2007 2006-2007 2003-2007 2004-2007 Financial & Operating Information 97

  • Page 100
    FREEPORT-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements NOTE 15. CONTINGENCIES Environmental. FCX incurred aggregate environmental capital expenditures and other environmental costs, including joint venture partners' share, totaling $320 million in 2007, $...

  • Page 101
    ...a. The fair value of AROs assumed in the acquisition of Phelps Dodge was estimated based on projected cash flows, an estimated long-term annual inflation rate of 2.4 percent, a discount rate based on FCX's estimated credit-adjusted, risk-free interest rate of 7.8 percent and a market risk premium of...

  • Page 102
    ...-McMoRan COPPER & GOLD INC. 2007 Annual Report Notes to Consolidated Financial Statements The most significant revisions to cash ï¬,ow estimates in 2007 were related to changes at Chino, Tyrone and PT Freeport Indonesia. During 2007, Chino and Tyrone each submitted updated third-party closure...

  • Page 103
    ...and cathode provide for deliveries of specified volumes, at market-based prices, to Atlantic Copper and Phelps Dodge's sales company. Transportation obligations are primarily for Cerro Verde and Candelaria contracted ocean freight rates and for North American natural gas transportation. FCX's future...

  • Page 104
    ... is currently under review, but Cerro Verde's share is expected to approximate $40 million, which is recorded as a current liability. During 2006, the Peruvian government announced that all mining companies operating in Peru will make annual contributions to local development funds for a five-year...

  • Page 105
    ...market upside, if available at a reasonable cost. As of December 31, 2007, FCX had no price protection contracts relating to its mine production. A summary of these derivative contracts and programs follows. As a result of the acquisition of Phelps Dodge, FCX assumed Phelps Dodge's 2007 copper price...

  • Page 106
    ...marketing and sale of both product lines. FCX has six operating copper mines in North America - Morenci, Bagdad, Sierrita, Safford, Chino and Tyrone, and one operating molybdenum mine - Henderson. The North American mining division includes one reportable copper mine (Morenci), and also includes Rod...

  • Page 107
    ...are not considered reportable segments, include FCX's other southwestern U.S. copper mines - Bagdad, Sierrita, Safford, Chino, Tyrone, Miami, Cobre, Bisbee and Tohono. In addition to copper, the Bagdad, Sierrita and Chino mines produce molybdenum, gold and silver, and the Sierrita mine also produces...

  • Page 108
    ... American Mining Total North American Mining Cerro Verde South America Other South American Mining Total South American Mining Indonesia Atlantic Copper Corporate Smelting Other & & Refining Eliminations Morenci Molybdenum Grasberg FCX Total Year Ended December 31, 2007 Revenues: Unaffiliated...

  • Page 109
    ... stockpiles. Recoverable Proven and Probable Reserves at December 31, 2007 Copper Gold Molybdenum (Billions of Lbs.) (Millions of Ozs.) (Billions of Lbs.) United States Peru Indonesia Chile Africa Spain Others Total North America South America Indonesia Africa Consolidated basis a Net equity...

  • Page 110
    ... 0.90 0.20 N/A N/A N/A N/A 0.01 54.4 56.2 56.6 54.8 110.4 60.4 61.0 58.0 54.3 54.1 N/A N/A N/A N/A 2,042 Developed and producing: Morenci Sierrita Bagdad Safford Chino Tyrone Miami Henderson Undeveloped: Climax Cobre South America 2,818 1,062 828 549 164 191 102 122 165 77 0.28 0.26 0.28 0.36...

  • Page 111
    ...per share of common stocke,f,g a. As a result of the sale of PDIC, results for the first and second quarters of 2007 have been restated to remove PDIC from continuing operations. b. Includes charges (credits) to revenues for mark-to-market accounting adjustments for the 2007 copper price protection...

  • Page 112
    ... invested on December 31, 2002 in (a) Freeport-McMoRan Copper & Gold Inc. common stock, (b) the S&P 500 Stock Index, (c) our former peer group and (d) the S&P 500 Materials Index. Last year, our comparative peer group included Barrick Gold Corp., Newmont Mining Corporation, Phelps Dodge Corporation...

  • Page 113
    ... can be contacted as follows: Freeport-McMoRan Copper & Gold Inc. Investor Relations Department One North Central Ave. Phoenix, AZ 85004 Telephone (602) 366-8400 www.fcx.com Common Stock Dividends Below is a summary of the common stock cash dividends paid for the quarterly periods of 2007 and 2006...

  • Page 114
    FREEPORT-McMoRan COPPER & GOLD INC. FREEPORT-MCMORAN COPPER & GOLD INC. One North Central Ave. Phoenix, AZ 85004 (602) 366-8000 www.fcx.com This book has been printed on 100# Opus Dull cover and 100# Opus Dull book, which contain 10% ...