Freeport-McMoRan 2010 Annual Report Download - page 79

FREEPORT-McMoRan COPPER & GOLD INC. 2010 Annual Report
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. Inventories, Including Long-Term Mill and
Leach Stockpiles
The components of inventories follow:
December 31, 2010 2009
Mining Operations:
Raw materials
$ 1 $ 1
Work-in-process
93 108
Finished goods
a
704 588
Atlantic Copper:
Raw materials (concentrates)
336 171
Work-in-process
266 227
Finished goods
9 15
Total product inventories
1,409 1,110
Total materials and supplies, net
b
1,169 1,093
Total inventories
$ 2,578 $ 2,203
a. Primarily includes molybdenum concentrates and copper concentrates, anodes, cathodes
and rod.
b. Materials and supplies inventory is net of obsolescence reserves totaling $26 million at
December 31, 2010, and $21 million at December 31, 2009.
A summary of mill and leach stockpiles follows:
North South
December 31, 2010 America America Indonesia Africa Total
Current:
Mill stockpiles
$ — $ 11 $ 24 $ — $ 35
Leach stockpiles 749 72 — — 821
Total current mill
and leach stockpiles
$ 749 $ 83 $ 24 $ — $ 856
Long-term:
a
Mill stockpiles $ — $ 470 $ — $ — $ 470
Leach stockpiles 622 250 — 83 955
Total long-term mill
and leach stockpiles
$ 622 $ 720 $ — $ 83 $ 1,425
North South
December 31, 2009 America America Indonesia Africa Total
Current:
Mill stockpiles $ — $ 7 $ 39 $ — $ 46
Leach stockpiles 547 74 — — 621
Total current mill
and leach stockpiles $ 547 $ 81 $ 39 $ — $ 667
Long-term:
a
Mill stockpiles $ 15 $ 427 $ — $ — $ 442
Leach stockpiles 637 220 — 22 879
Total long-term mill
and leach stockpiles $ 652 $ 647 $ — $ 22 $ 1,321
a. Materials in stockpiles not expected to be recovered within the next 12 months.
FCX recorded charges for lower of cost or market (LCM) molybdenum
inventory adjustments totaling $19 million ($15 million to net income
attributable to FCX common stockholders or $0.02 per diluted share)
during first-quarter 2009 resulting from lower molybdenum prices.
In 2008, FCX recorded charges totaling $782 million ($479 million
to net loss attributable to FCX common stockholders or $0.63 per
diluted share) for LCM inventory adjustments 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 carrying values.
NOTE 4. Property, Plant, Equipment and
Development Costs, Net
The components of net property, plant, equipment and development
costs, along with 2008 impairment charges, follow:
2008
December 31, 2010 2009 Impairments
a
Proven and probable reserves $ 4,503 $ 4,303 $ 10,056
VBPP
1,100 1,297 471
Development and other
3,188 2,983 279
Buildings and infrastructure
2,815 2,703 167
Machinery and equipment
7,523 7,282 938
Mobile equipment
2,365 2,136 393
Construction in progress
1,885 1,084 27
Property, plant, equipment and
development costs
23,379 21,788 12,331
Accumulated depreciation, depletion
and amortization
(6,594) (5,593) (1,583)
Property, plant, equipment and
development costs, net
$ 16,785 $ 16,195 $ 10,748
a. FCX evaluated its long-lived assets for impairment as of December 31, 2008. These
evaluations resulted in the recognition of asset impairment charges to reduce the
carrying value of its property, plant, equipment and development costs (refer to Note 17
for further discussion).
FCX recorded $2.2 billion for VBPP in connection with the Phelps
Dodge acquisition in 2007 and transferred $197 million during
2010, $159 million during 2009 and $383 million prior to 2009 to
proven and probable reserves.
FCX capitalized interest totaling $66 million in 2010, $78 million
in 2009 and $122 million in 2008. Capitalized interest primarily
related to development projects at the Climax and El Abra mines in
2010 and at the Tenke Fungurume mine in 2009 and 2008.
NOTE 5. Goodwill, and Intangible Assets and Liabilities
Goodwill. FCX recorded goodwill in 2007 in connection with the
Phelps Dodge acquisition, which primarily related to the requirement
to recognize a deferred tax liability for the difference between the
assigned values and the tax basis of assets acquired and liabilities
assumed in a business combination. In accordance with accounting
rules, goodwill resulting from a business combination is assigned
to the acquiring entity’s reporting units that are expected to benefit
from the business combination. The allocation of goodwill to
the reporting units, which FCX determined included its individual
mines, was completed in the first quarter of 2008.
As a result of FCX’s annual goodwill impairment testing in the
fourth quarter of 2008, FCX recognized impairment charges totaling
$6.0 billion ($6.0 billion to net loss attributable to FCX common
stockholders or $7.84 per diluted share) to eliminate the full carrying
value of goodwill. FCX’s evaluations were based at that time on
current business plans developed using near-term price forecasts
reflective of the then-current price environment and management’s
projections for long-term average metal prices (refer to Note 17
for further discussion of assumptions used in determining fair value).