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Notes to Consolidated Financial Statements
2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 79
Cash flows from discontinued operations for the year ended
December 31, 2007, have not been separately identified in the
consolidated statements of cash flows.
NOTE 5. INVENTORIES, AND MILL AND LEACH STOCKPILES
The components of inventories follow:
December 31, 2008 2007
Mining Operations:
Raw materials $ 1 $ 1
Work-in-process 128 71
Finished goods
a
703 898
Atlantic Copper:
Raw materials (concentrates) 164 164
Work-in-process 71 220
Finished goods 1 6
Total product inventories 1,068 1,360
Total materials and supplies, net
b
1,124 818
Total inventories $ 2,192 $ 2,178
a. Primarily includes copper concentrates, anodes, cathodes and rod, and molybdenum.
b. Materials and supplies inventory is net of obsolescence reserves totaling $22 million
at December 31, 2008, and $16 million at December 31, 2007.
The following summarizes mill and leach stockpiles as of
December 31, 2008:
North South
America America Africa Total
Current:
Mill stockpiles $ – $ 10 $ – $ 10
Leach stockpiles 489 72 – 561
Total current mill and
leach stockpiles $ 489 $ 82 $ – $ 571
Long-term
a
:
Mill stockpiles $ 2 $ 335 $ 3 $ 340
Leach stockpiles 625 180 – 805
Total long-term mill and
leach stockpiles $ 627 $ 515 $ 3 $ 1,145
a. Materials in stockpiles not expected to be recovered within the next 12 months.
The following summarizes mill and leach stockpiles as of
December 31, 2007:
North South
America America Total
Current:
Mill stockpiles $ – $ 6 $ 6
Leach stockpiles 630 71 701
Total current mill and leach stockpiles $ 630 $ 77 $ 707
Long-term
a
:
Mill stockpiles $ – $ 248 $ 248
Leach stockpiles 685 173 858
Total long-term mill and leach stockpiles $ 685 $ 421 $ 1,106
a. Materials in stockpiles not expected to be recovered within the next 12 months.
In connection with the March 2007 acquisition of Phelps Dodge,
acquired inventories, including mill and leach stockpiles, were
recorded at fair value using near-term price forecasts reflecting
the then-current price environment and management’s
projections for long-term average metal prices. As a result of the
declines in copper and molybdenum prices in the fourth quarter
of 2008 and the impact of higher operating costs on inventory
balances during 2008, FCX recorded charges of $782 million
($479 million to net loss or $1.26 per diluted share) for lower of
cost or market (LCM) inventory adjustments.
NOTE 6. PROPERTY, PLANT, EQUIPMENT AND
DEVELOPMENT COSTS, NET
The components of net property, plant, equipment and
development costs, along with 2008 impairment charges, follow:
December 31, 2008
2008 2007 Impairments
Proven and probable reserves $ 4,052 $ 13,797 $ 10,056
VBPP 1,341 2,103 471
Development and other 2,572 2,516 279
Buildings and infrastructure 2,381 2,300 167
Machinery and equipment 5,713 6,023 938
Mobile equipment 1,801 2,106 393
Construction in progress 2,686 1,197 27
Property, plant, equipment and
development costs 20,546 30,042 12,331
Accumulated depreciation, depletion
and amortization (4,544) (4,327) (1,583)
Property, plant, equipment and
development costs, net $ 16,002 $ 25,715 $ 10,748
FCX recorded $2.2 billion for VBPP in connection with the Phelps
Dodge acquisition in 2007 and transferred $287 million during
2008 and $93 million during 2007 to proven and probable reserves.
FCX’s capitalized interest totaled $122 million in 2008, $147
million in 2007 and $11 million in 2006. Capitalized interest
primarily related to development projects at Tenke Fungurume
in 2008 and Safford and Tenke Fungurume in 2007.
In connection with the decline in copper and molybdenum
prices and the deterioration of the economic environment during
the fourth quarter of 2008, FCX evaluated its long-lived assets for
impairment as of December 31, 2008. FCX’s evaluations were
based on current business plans developed using near-term price
forecasts reflective of the current price environment and
management’s projections for long-term average metal prices.
These evaluations resulted in the recognition of asset impairment
charges of $10.9 billion ($6.6 billion to net loss or $17.34 per
diluted share), consisting of $10,748 million to reduce the
carrying values of property, plant, equipment and development
costs and $119 million to reduce the carrying values of definite-
lived intangible assets (see Note 2 for further discussion).