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2007 Annual Report
10
FREEPORT-McMoRan COPPER & GOLD INC.
Operational Overview
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. Annual production is expected
to approximate 30 million pounds of
molybdenum beginning in 2010 at
estimated cash costs approximating
$3.50 per pound. The project is
designed to enable the consideration
of further large-scale expansion of the
Climax mine. The capital investment
for the initial project is expected to
approximate $500 million.
We have also announced the restart
of copper mining operations at our
Miami mine in Arizona. We expect full
rates of production of approximately 100
million pounds of copper per year by
2010. The estimated capital investment
to restart the Miami copper mine is
approximately $100 million, primarily
for mining equipment.
In addition to the projects currently
under way, we are continuing to review
expansion opportunities associated with
existing ore bodies. As an initial step, we
are pursuing incremental expansions at
the Morenci, Sierrita and Bagdad mines in
Arizona. The estimated capital investment
for these projects is approximately $370
million. Detailed engineering for these
projects is under way.
EXPLORATION
Our exploration efforts in North America
include drilling of the Lone Star deposit
located approximately four miles from
the ore body within the Safford district,
as well as targets in the Morenci
and Bagdad districts, and near the
Henderson molybdenum ore body.
LEADING THROUGH TECHNOLOGY
FCX produces copper cathode at
leaching and SX/EW operations at
Morenci, Bagdad, Sierrita, Tyrone,
Chino and Safford. We are the world’s
leading producer of copper using
the SX/EW process, which is a cost-
effective method for extracting copper
from certain types of ore, and a major
factor in our continuing efforts to
maintain internationally competitive
costs. FCX is committed to
continuous improvement through
operational excellence and innovation.
Leading scientists and experts at our
Process Technology Center in Arizona
are at work developing cost-effective,
environmentally sound and less energy
intensive process improvements.
UNIT NET CASH COSTS
North American pro forma unit net cash
costs, including molybdenum credits,
averaged $0.86 per pound for 2007,
compared with $0.61 per pound in 2006.
Pro forma unit net cash costs at our
North American operations were higher
in 2007 than the previous year because
of higher labor, maintenance, operating
supplies and energy costs and also
reflect higher costs associated with the
ramp up of the Morenci mill operations.
These higher costs were partly offset by
favorable by-product credits as a result
of higher molybdenum prices.
Assuming an average copper price
of $3.00 per pound and an average
molybdenum price of $30 per pound
for 2008 and achievement of current
2008 sales estimates, we estimate that
the 2008 average unit net cash costs
for North American mines, including
molybdenum credits, would approximate
$1.00 per pound of copper.
Henderson’s pro forma unit net cash
costs averaged $4.32 per pound for
2007, compared with $3.71 per pound
in 2006. Henderson’s higher unit net
cash costs per pound of molybdenum
were primarily associated with higher
input costs, including labor, supplies
and service costs, and higher taxes.
These higher costs were partly offset by
lower energy costs resulting from energy
credits received in 2007.
Assuming an average price of $30
per pound of molybdenum for 2008
and achievement of current 2008
sales estimates, we estimate that the
2008 average unit net cash costs for
Henderson would approximate $4.50 per
pound of molybdenum.
See pages 59 through 61 for a
reconciliation of pro forma North
American and Henderson unit net
cash costs per pound to production
and delivery costs applicable to pro
forma sales reported in FCX’s pro forma
consolidated financial results.
Concentrate leach technology at
Morenci is among the numerous
projects commissioned in 2007
to optimize production and enhance
cost savings.