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2007 Annual Report
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 of
the Candelaria and Ojos del Salado
mining complexes, and a 51 percent
interest in El Abra.
Consolidated pro forma copper sales
from these operations totaled 1.4 billion
pounds in 2007, and 1.1 billion pounds
in 2006 at average realized prices of
$3.25 per pound in 2007 and $3.03 per
pound in 2006. The increase in 2007
copper sales reflects higher production
from Cerro Verde resulting from the new
concentrator, which reached design
capacity in mid-2007.
DEVELOPMENT PROJECTS
In mid-2007, the recently expanded
mill at Cerro Verde reached design
capacity of 108,000 metric tons of ore
per day. This expansion enables Cerro
Verde to produce approximately 650
million pounds of copper and 8 million
pounds of molybdenum per year for
the next several years. Additionally,
as part of our initial step in reviewing
expansion opportunities associated with
existing ore bodies, we are pursuing an
incremental expansion at Cerro Verde.
At the end of 2006, a feasibility study
was completed to evaluate development
of a large sulfide mineral deposit
underlying the existing oxide ore pit
at El Abra. This project would extend
the mine life by over 10 years. Initial
production from the sulfide is expected
to begin in 2010, and is expected to
average approximately 325 million
pounds of copper per year beginning
in 2012. The existing facilities at El
Abra would be used in conjunction with
new facilities to process the additional
reserves, minimizing capital spending
requirements. FCX is currently working
with Chilean authorities on finalizing an
environmental impact study associated
with this project. The total capital
investment for the project is expected to
approximate $450 million.
EXPLORATION
Exploration in South America is ongoing
in and around Cerro Verde, Candelaria
and Ojos del Salado.
UNIT NET CASH COSTS
South American pro forma unit net cash
costs, including by-product credits
(primarily gold), averaged $1.02 per
pound for 2007, compared with $0.91 per
pound in 2006. Pro forma unit net cash
costs for our South American operations
were higher in 2007 than the previous
year, primarily reflecting higher costs at
El Abra because of lower copper sales.
In addition, higher pro forma unit net
cash costs reflect the impact of Cerro
Verde’s voluntary contribution programs,
including the liability associated with
local mining fund contributions. These
higher costs were partially offset by
lower overall costs at Cerro Verde
associated with significantly higher
production from the new concentrator.
Assuming an average copper price of
$3.00 per pound and achievement of
current 2008 sales projections, we
estimate that 2008 average unit net
cash costs for South American mines,
including gold and molybdenum
credits, would approximate $1.05 per
pound of copper.
See page 62 for a reconciliation of pro
forma South American 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.
Expanding Horizons
FCX’s South American operations provide a significant portion of our copper
production and are positioned for significant growth through expansions
and optimization.
12
FREEPORT-McMoRan COPPER & GOLD INC.
Operational Overview