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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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FORM
10-K
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(Mark
One)
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[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For
the fiscal year ended December 31, 2008
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OR
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[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the transition period from
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to
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Commission
File Number: 1-9916
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Freeport-McMoRan
Copper & Gold Inc.
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(Exact
name of registrant as specified in its
charter)
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Delaware
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74-2480931
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(State
or other jurisdiction of
incorporation
or organization)
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(IRS
Employer Identification No.)
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One
North Central Avenue
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Phoenix,
Arizona
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85004-4414
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(Address
of principal executive offices)
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(Zip
Code)
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(602)
366-8100
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(Registrant's
telephone number, including area
code)
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Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which registered
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Common
Stock, par value $0.10 per share
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New
York Stock Exchange
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7% Convertible
Senior Notes due 2011 of the registrant
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New
York Stock Exchange
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6¾%
Mandatory Convertible Preferred Stock, par value $0.10 per
share
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New
York Stock Exchange
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act R Yes 0
No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. 0 Yes R
No
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90
days. R Yes 0
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. R
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one): R Large
accelerated filer 0 Accelerated
filer 0
Non-accelerated filer 0 Smaller
reporting company
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the
Act).
0 Yes R
No
The
aggregate market value of common stock held by non-affiliates of the registrant
was approximately $11.4 billion on February 17, 2009, and approximately $44.8
billion on June 30, 2008.
Common
stock issued and outstanding was 411,669,247 shares on February 17, 2009, and
383,956,672 shares on June 30, 2008.
DOCUMENTS
INCORPORATED BY REFERENCE
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Portions
of our proxy statement for our 2009 annual meeting of stockholders are
incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of
this report.
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FREEPORT-McMoRan
COPPER & GOLD INC.
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All
of our periodic reports filed with the Securities and Exchange Commission
(SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, are available, free of charge, through our web site, www.fcx.com,
including our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and any amendments to those reports. These reports
and amendments are available through our web site as soon as reasonably
practicable after we electronically file or furnish such material to the
SEC.
References
to “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold Inc.
(FCX) and its consolidated subsidiaries, including, except as otherwise stated,
Phelps Dodge Corporation (Phelps Dodge) and its subsidiaries, which we acquired
on March 19, 2007. References to “Notes” refer to the “Notes to Consolidated
Financial Statements” included herein (see Item 8. “Financial Statements and
Supplementary Data”).
GENERAL
We are a
leading international mining company with headquarters in Phoenix,
Arizona. We are one of the world’s largest copper, gold and molybdenum
mining companies in terms of reserves and production. Our portfolio of assets
includes the Grasberg minerals district in Indonesia, which contains the largest
single recoverable copper reserve and the largest single gold reserve of any
mine in the world based on the latest available reserve data provided by
third-party industry consultants; significant mining operations in North and
South America; and the Tenke Fungurume development project in the Democratic
Republic of Congo (DRC).
As a
mining company, our principal assets are our reserves. At December 31, 2008,
consolidated recoverable proven and probable reserves totaled 102.0 billion
pounds of copper, 40.0 million ounces of gold, 2.48 billion pounds of
molybdenum, 266.6 million ounces of silver and 0.7 billion pounds of cobalt.
Approximately 35 percent of our copper reserves were in Indonesia, approximately
31 percent were in South America, approximately 28 percent were in North America
and approximately six percent were in Africa. Approximately 96 percent of our
gold reserves were in Indonesia, with our remaining gold reserves located in
South America. Our molybdenum reserves are primarily in North America
(approximately 85 percent), with our remaining molybdenum reserves in South
America (refer to “Ore Reserves”).
Our
mining revenues for 2008 include sales of copper (approximately 76 percent),
molybdenum (approximately 14 percent) and gold (approximately seven percent). We
currently have five operating copper mines in North America, four in South
America and the Grasberg minerals district in Indonesia. We also have one
operating primary molybdenum mine in North America. During 2008, approximately
60 percent of our consolidated copper production was from our Grasberg, Morenci
and Cerro Verde mines, and more than half of our mined copper was sold in
concentrate, approximately 27 percent as rod (principally from our North America
operations) and approximately 19 percent as cathodes. For 2008, approximately 55
percent of our consolidated molybdenum production was from the Henderson
molybdenum mine and approximately 45 percent was produced as a by-product
primarily at our North America copper mines. We also produce gold as a
by-product at our copper mines, primarily at the Grasberg minerals district in
Indonesia, which accounted for approximately 90 percent of our consolidated gold
production for 2008. Refer to “Mines” for further discussion of our mining
operations.
Prior to
March 19, 2007, we operated our Grasberg mine in Indonesia and our wholly owned
copper smelting and refining operation at Atlantic Copper in Spain. On March 19,
2007, we acquired Phelps Dodge, a fully integrated producer of copper and
molybdenum with mines in North and South America, and several development
projects, including Tenke Fungurume in the DRC, which we believe is one of the
world’s highest potential copper and cobalt concessions. After
completion of the Phelps Dodge acquisition, our business strategy was focused on
repaying acquisition-related debt, defining the potential of our resources and
developing expansion and growth plans to deliver additional volumes to a growing
marketplace. During 2007, we repaid $10.0 billion in term loans using a
combination of equity proceeds and internally generated cash flows. Because of
the significant reduction in debt and historically high prices for copper,
molybdenum and gold, our financial policy during most of 2008 was designed to
use our cash flow to invest in growth projects with anticipated high rates of
return and to return excess cash flows to shareholders in the form of dividends
and share purchases. In response to the severity of the decline in copper and
molybdenum prices and the deterioration of economic conditions and credit
environment during fourth-quarter 2008, we revised our near-term business
strategy to protect liquidity while preserving our large mineral resources and
growth options for the long term. For additional information, refer to Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”
In North
America, we currently have five operating copper mines – Morenci, Sierrita,
Bagdad and Safford in Arizona, and Tyrone in New Mexico. In addition, the Chino
mine in New Mexico was placed on care-and-maintenance status in December 2008.
All of these operations are wholly owned, except for Morenci, an unincorporated
joint venture, in which we own an 85 percent undivided interest. In addition to
copper, the Morenci, Sierrita and Bagdad mines produce molybdenum as a
by-product.
In South
America, we have four operating copper mines – Cerro Verde in Peru, and
Candelaria, Ojos del Salado and El Abra in Chile. We own a 53.56 percent
interest in Cerro Verde, an 80 percent interest in both Candelaria and Ojos del
Salado and a 51 percent interest in El Abra. In addition to copper, the Cerro
Verde mine produces molybdenum concentrate as a by-product and the Candelaria
and Ojos del Salado mines produce gold and silver as by-products.
In
Indonesia, PT Freeport Indonesia operates the Grasberg minerals district. We
have joint venture agreements with Rio Tinto plc (Rio Tinto), an international
mining company, with respect to a portion of our mining activities in Indonesia,
as described in the “Mines” section. We own 90.64 percent of PT Freeport
Indonesia and the Government of Indonesia owns the remaining 9.36 percent
interest. Our Grasberg minerals district also produces significant quantities of
gold and silver as by-products. PT Freeport Indonesia also owns 25 percent of PT
Smelting, a smelting and refining company in Gresik, Indonesia.
We
produce molybdenum at our wholly owned Henderson molybdenum mine in Colorado,
which is the largest primary producer of molybdenum in the world. Additionally,
we own the Climax molybdenum mine in Colorado which is currently on
care-and-maintenance status.
In
addition to our operating mines, we have several significant mines in
development. In Indonesia, we are developing our underground mines. In Africa,
we hold an effective 57.75 percent interest in the Tenke Fungurume copper and
cobalt concession in the DRC. The Tenke Fungurume mine will produce copper and
cobalt and is expected to commence mining operations in the second half of
2009.
For
information about our operating segments and financial data by geographic area
refer to Note 19 – “Business Segments.”
The
locations of our operating mines and the Tenke Fungurume development project are
shown on the map below.
The
diagram below shows our corporate structure.
COPPER,
MOLYBDENUM AND GOLD
Our mines
primarily produce copper, molybdenum and gold. A brief discussion of the
production and sales of these metals appears below; discussion of markets and
prices for these metals appears in Item 7. “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
Copper
Copper,
in the form of copper cathode, is an internationally traded commodity, and its
prices are determined by the major metals exchanges – New York Mercantile
Exchange (COMEX), the London Metals Exchange (LME) and the Shanghai Futures
Exchange (SHFE). Prices on these exchanges generally reflect the worldwide
balance of copper supply and demand and can be volatile and
cyclical.
Our
copper ores are generally processed either by smelting and refining or by
solution extraction and electrowinning (SX/EW). In the smelting process, ore is
crushed and further treated to produce a copper concentrate with an average
copper content of about 30 percent. Copper concentrate is then smelted
(subjected to extreme heat) to produce copper anodes, which weigh between 800
and 900 pounds and have an average copper content of 99.5 percent. The anodes
are further treated by electrolytic refining to produce copper cathodes, which
weigh between 100 and 350 pounds and have a copper content of 99.99
percent.
In the
SX/EW process, copper is extracted from ore by dissolving it with a weak
sulfuric acid solution. The copper content of the solution is increased in two
additional solution-extraction stages and then the copper-bearing solution
undergoes an electrowinning process to produce cathode that is 99.99 percent
copper.
Our
copper cathodes are used as the raw material input for copper rod, brass mill
products and for other uses. In general, demand for copper reflects the rate of
underlying world economic growth, particularly in industrial production and
construction. According to Brook Hunt, a widely followed independent metals
market consultant, copper’s end-use markets (and their estimated shares of total
consumption) are:
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Construction
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35
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%
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Electrical
applications
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32
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%
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Industrial
machinery
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12
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%
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Transportation
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11
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%
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Consumer
products
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10
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%
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Molybdenum
Molybdenum
is a key alloying element in steel and the raw material for several
chemical-grade products used in catalysts, lubrication, smoke suppression,
corrosion inhibition and pigmentation. Molybdenum as a high-purity metal is also
used in electronics such as flat-panel displays and in super alloys used in
aerospace. First end-user segments for molybdenum include:
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Construction
steel
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35
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%
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Stainless
steel
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25
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%
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Chemicals
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14
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%
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Tool
and high-speed steel
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9
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%
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Cast
iron
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6
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%
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Molybdenum
metal
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6
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%
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Super
alloys
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5
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%
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Molybdenum
is currently not traded on any public exchange. Reference prices for molybdenum
are available in several publications, including Platts Metals Week, Ryan’s Notes and Metal
Bulletin.
Gold
Gold is
used for jewelry, coinage and bullion as well as various industrial and
electronic applications. Gold can be readily sold on numerous markets throughout
the world. Benchmark prices are generally based on London Bullion Market
Association quotations.
PRODUCTS
AND SALES
Copper
Products
We are
one of the world’s leading producers of copper concentrate, cathode and
continuous cast copper rod. For 2008, more than half of our copper was sold in
concentrate, approximately 27 percent as rod (principally from our North America
operations) and approximately 19 percent as cathodes.
Copper
Concentrate. Through 2008, we produced copper concentrate at
eight mines, of which PT Freeport Indonesia is our largest producer. In 2008,
approximately 56 percent of PT Freeport Indonesia’s concentrate was refined at
affiliated smelters, Atlantic Copper and PT Smelting.
Copper
concentrate was also produced at our Morenci, Sierrita and Bagdad mines in
Arizona and our Chino mine in New Mexico, which was generally shipped to our
Miami smelter in Arizona. In South America we produced copper concentrate at our
Cerro Verde mine in Peru and our Candelaria and Ojos del Salado mines in Chile.
In late 2008, we suspended production of concentrates at Chino and plan to
suspend concentrate production at Morenci in first-quarter 2009 in response to
current market conditions.
Copper
Cathode. Through 2008, we produced copper cathode at two
electrolytic refineries and nine mines. Our refineries are located in El Paso,
Texas, and Huelva, Spain. PT Smelting also produces copper cathode. We produced
SX/EW cathode from our Morenci, Sierrita, Bagdad, Chino, Safford, Tyrone and
Miami mines in North America and our Cerro Verde and El Abra mines in South
America. In the second half of 2009 we will begin SX/EW production at our Tenke
Fungurume mine in the DRC.
Continuous
Cast Copper Rod. We manufacture continuous cast copper rod at
our facilities in El Paso, Texas; Norwich, Connecticut and Miami, Arizona. In
late 2008, we permanently closed our Chicago, Illinois, rod mill.
Other
Copper Products. We produce specialty copper products at our
Bayway operations in Elizabeth, New Jersey. These products include specialty
copper alloys in the forms of rod, bar and strip. We manufacture electrode wire
(for use in welding steel cans) at our Norwich, Connecticut and El Paso, Texas,
facilities. We also produce copper sulfate pentahydrate (for use in agricultural
and industrial applications) at our facility in Sierrita, Arizona.
Copper
Sales
North
America. The majority of the copper produced at our North
America copper mines and refined in our El Paso refinery is consumed at our rod
plants in El Paso, Texas; Norwich, Connecticut and Miami, Arizona. The remainder
of our North America copper production is sold in the form of copper cathode or
copper concentrate to third parties. Generally, copper rod and cathode are sold
to wire and cable fabricators and brass mills under
United
States (U.S.) dollar-denominated, annual contracts. Cathode and rod contract
prices are generally based on the prevailing COMEX monthly average spot price
for the month of shipment and include a premium.
South
America. Production from our
South America copper mines is generally sold as copper concentrate or copper
cathode under U.S. dollar-denominated, annual and multi-year contracts. Cerro
Verde sells approximately 70 percent of its production as concentrate and the
rest as cathode. Some of Cerro Verde’s cathode is sold under annual contract
terms to South American customers. A portion of Cerro Verde’s and Candelaria’s
concentrate production is sold at market rates to Atlantic Copper. A majority of
our Ojos del Salado concentrate production is sold to local Chilean smelters. El
Abra’s cathode production is sold primarily under annual or multi-year contracts
to Asian or European rod or brass mill customers, or to merchants. The remainder
of the cathode and concentrate production is primarily sold under long-term
contracts to external customers, largely located in Asia, with the balance sold
on a spot basis.
Our South
America sales are priced based on the LME monthly average spot price. Cathode
sales are generally priced in the month of arrival and generally include a
premium. Substantially all of our concentrate sales are priced in the third
calendar month following the month of arrival at the buyer’s facilities.
Revenues from South America concentrate sales are recorded net of treatment and
refining charges. Treatment and refining charges are fees paid to smelters
and refiners and are generally negotiated annually. Moreover, because a portion
of the metals contained in copper concentrates is unrecoverable from the
smelting process, our revenues from concentrate sales are also recorded net of
allowances based on the quantity and value of these unrecoverable metals. These
allowances are a negotiated term of our contracts and vary by
customer.
Indonesia. PT Freeport Indonesia
sells its production in the form of copper concentrate, which contains
significant quantities of by-product gold and silver, under U.S.
dollar-denominated sales agreements, with more than half of PT Freeport
Indonesia’s production sold to Atlantic Copper and PT Smelting. We sell
substantially all of our budgeted production of copper concentrates under
long-term contracts. In general, our concentrate sales are priced on the basis
of the LME average spot price for the third calendar month following the month
of arrival at the buyer’s facilities.
PT
Freeport Indonesia has a long-term contract to provide Atlantic Copper with
approximately 55 percent of its current concentrate requirements at market
prices.
PT Freeport
Indonesia’s contract with PT Smelting provides for the supply of 100
percent of the copper concentrate requirements necessary to produce 205,000
metric tons of copper annually (essentially the smelter’s original design
capacity) on a priority basis. Refer to “Smelting Facilities” for further
discussion.
We
anticipate that PT Freeport Indonesia will sell approximately 50 percent of its
annual concentrate production to Atlantic Copper and PT Smelting in 2009. A
summary of PT Freeport Indonesia’s aggregate percentage concentrate sales to PT
Smelting, Atlantic Copper and to other parties for the last three years
follows:
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2008
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2007
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2006
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PT
Smelting
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41%
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39%
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27%
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Atlantic
Copper
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15%
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25%
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23%
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Other
parties
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44%
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36%
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50%
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100%
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100%
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100%
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PT
Freeport Indonesia’s sales to PT Smelting represented approximately eight
percent of our consolidated revenues in 2008, 11 percent of our consolidated
revenues in 2007 and approximately 21 percent of our consolidated revenues in
2006. No other customer accounted for more than 10 percent of our consolidated
revenues in any of the three years ended December 31, 2008.
Revenues
from our Indonesia concentrate sales are recorded net of royalties (refer to
“Mines – Indonesia – Contracts of Work”), and treatment and refining charges
(including price participation charges, if applicable, based on the market
prices of metals). Similar to our South America mines, Indonesia
concentrate sales are net of allowances for unrecoverable metals. PT Freeport
Indonesia sells a small amount of copper concentrates in the spot
market.
Europe. Atlantic Copper sells
copper cathode directly to rod and brass mills, primarily located in Europe.
Atlantic
Copper
has occasionally sold copper cathode to merchants. Copper cathode is generally
sold under annual contracts and priced based on the LME average spot price for
the month of arrival.
Molybdenum
Products and Sales
We are
the world’s largest producer of molybdenum and molybdenum-based chemicals. In
addition to production from our Henderson molybdenum mine, we have produced
by-product molybdenum at our Morenci, Sierrita and Bagdad mines in Arizona, our
Chino mine in New Mexico and our Cerro Verde mine in Peru. However, in December
2008 we temporarily curtailed the molybdenum circuit at Morenci, and in 2009 we
plan to temporarily curtail the molybdenum circuits at Chino and Cerro
Verde.
The
majority of our molybdenum concentrates are processed in our own conversion
facilities. Technical-grade oxide is produced from molybdenum concentrates in
Sierrita, Arizona; Fort Madison, Iowa and Rotterdam, the Netherlands.
Ferromolybdenum is produced from technical-grade oxide in Stowmarket, United
Kingdom through a metallothermic reduction process. High-quality molybdenum
concentrates are converted into molybdenum chemicals at Fort Madison, Iowa and
Rotterdam, the Netherlands. Approximately 90 percent of our expected 2009
molybdenum sales are expected to be priced at prevailing market
prices.
Gold
Products and Sales
Gold and
other by-products are primarily sold as a component of our copper concentrate or
in slimes, which are a by-product of the smelting and refining process. Gold
generally is priced at the average London Bullion Market Association price for a
specified month near the month of shipment.
For an
allocation of our consolidated revenues by geographic area, refer to Note 19 –
“Business Segments.”
MINES
Curtailed
Facilities
The
following table summarizes the temporary curtailments announced in late 2008 and
early 2009 in response to current market conditions. For additional information,
refer to Item 7. “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.”
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Facility
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Date
of Announcement
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Announced
Reductions
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Copper
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||||
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North America
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||||
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· Morenci
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December
2008 and
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25
percent reduction in mining and crushed-leach
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January
2009
|
rates
in December 2008 and an additional reduction
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|||
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in
January 2009 for a total 50 percent reduction in
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||||
| mining and crushed-leach rates | ||||
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· Chino
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December
2008
|
Suspension
of mining and milling activities
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· Safford
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December
2008
|
50
percent reduction in mining and stacking rates
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· Tyrone
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December
2008
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50
percent reduction in mining rate
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||
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· Miami
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December
2008
|
Deferral
of restart of the Miami mine
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||
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South America
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||||
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· Candelaria/
|
|
|
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Ojos del
Salado
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January
2009
|
Reduction
in mining rates
|
||
|
Molybdenum
|
||||
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· Henderson
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November
2008
|
25
percent reduction in mining and milling rates
|
||
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· Climax
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November
2008
|
Deferral
of restart of the Climax mine
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||
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· Morenci
|
January
2009
|
Suspension
of molybdenum by-product production
|
||
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· Cerro
Verde
|
January
2009
|
Suspension
of molybdenum by-product
production
|
As a
result of these curtailments, copper production is expected to be reduced by 400
million pounds in 2009 and 800 million pounds in 2010 and molybdenum production
is expected to be reduced by 20 million pounds in 2009 and 40 million pounds in
2010, compared with our previously announced October 2008 estimated production
for
2009 and
2010. Projected copper production is expected to be 3.9 billion
pounds in 2009 and 3.8 billion pounds in 2010. Projected molybdenum
production is expected to be 60 million pounds in both 2009 and 2010. The
affected mine sites will be idling or reducing utilization of a portion of their
equipment fleets in connection with these curtailments.
We are continuing to closely
monitor market conditions and may make further reductions to our production and
sales plans.
Following
are maps and descriptions of our North America (including Molybdenum
operations), South America and Indonesia mining operations and the Tenke
Fungurume development project in Africa.
North
America
In the
U.S., most of the land occupied by our copper and molybdenum mines,
concentrators, SX/EW facilities, smelter, refinery, rod mills, molybdenum
roasters, processing facilities and the Climax technology center is generally
owned by us or is located on unpatented mining claims owned by us. Certain
portions of our Sierrita, Bagdad, Miami, Tyrone, Chino, Cobre and Henderson
operations are located on government-owned land and are operated under a Mine
Plan of Operations or other use permit. The Sierrita operation leases property
adjacent to its mine upon which its electrowinning tank house is located. The
lease expires in May 2009, but we expect to exercise the option to renew for an
additional five years. Various federal and state permits or leases on government
land are held for purposes incidental to mine operations.
Morenci
Morenci,
the largest copper mine in North America, is an open-pit copper mining complex
located in Greenlee County, Arizona, approximately 50 miles northeast of Safford
on U.S. Highway 191. The site is accessible by a paved highway and a
railway spur. We own an 85 percent undivided interest in Morenci, with the
remaining 15 percent owned by affiliates of Sumitomo Corporation. Each partner
takes in kind its share of Morenci’s production. The open-pit mine has been
in continuous operation since 1939 and previously was mined through
underground workings. The Morenci mine is a porphyry copper deposit that has
oxide and secondary sulfide mineralization, and primary sulfide mineralization.
The predominant oxide copper mineral is chrysocolla. Chalcocite is the most
important secondary copper sulfide mineral with chalcopyrite as the dominant
primary copper sulfide.
The
Morenci operation consists of a 49,000 metric ton-per-day concentrator that
produces copper and molybdenum concentrate, an 80,000 metric ton-per-day
crushed-ore leach pad and stacking system, a large low-grade run-of-mine (ROM)
leaching system, four SX plants, and three EW tank houses that produce copper
cathode. Total EW tank house capacity is approximately 916 million pounds of
copper per year. Copper production for 2008 was 737 million pounds, including
our partner’s share. In response to weak market conditions during fourth-quarter
2008 and January 2009, we revised our operating plans to reflect a 50 percent
reduction in the mining and crushed leach rates at Morenci. The available mining
fleet consists of 145 235-metric ton haul trucks loaded by 18 shovels with
bucket sizes ranging from 47 to 55 cubic meters, which are capable of moving
over 1,000,000 metric tons of material per day.
The
concentrate leach, direct-electrowinning facility at Morenci was commissioned in
third-quarter 2007. The concentrate-leach project included the restart of a
mill, which added 115 million pounds of copper production
capacity per year. We plan to temporarily curtail production at this
facility in first-quarter 2009 as part of our revised operating plan.
Morenci
is located in a desert environment with rainfall averaging 13 inches per year.
The highest bench elevation is 1,950 meters above sea level and the ultimate pit
bottom is expected to have an elevation of 900 meters above sea level. The
Morenci operation encompasses approximately 53,944 acres, comprising 47,609
acres of patented mining claims and other fee lands, 5,914 acres of unpatented
mining claims, and 421 acres of land held by state or federal permits, easements
and rights-of-way.
Morenci
receives electrical power from Tucson Electric Power Company, Arizona Public
Service and the Luna Energy facility in Deming, New Mexico (in which we own a
one-third interest). Although we believe the Morenci operation has sufficient
water sources to support currently planned mining operations, we are a party to
litigation that could adversely affect our water rights at Morenci and at
our other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for
information concerning the status of these proceedings.
Sierrita
Sierrita
is an open-pit copper and molybdenum mining complex located in Pima County,
Arizona, approximately 20 miles southwest of Tucson and seven miles west of the
town of Green Valley and Interstate Highway 19. The site is accessible by a
paved highway and by rail. The mine has been in operation since 1959. The
Sierrita mine is a porphyry copper deposit that has oxide and secondary sulfide
mineralization, and primary sulfide mineralization. The predominant oxide copper
minerals are malachite, azurite and chrysocolla. Chalcocite is the most
important secondary copper sulfide mineral, and chalcopyrite and molybdenite are
the dominant primary sulfides.
The
Sierrita operation consists of a 102,000 metric ton-per-day concentrator, two
molybdenum roasters and a rhenium processing facility. The facility produces
copper and molybdenum concentrates. Sierrita also produces copper from a ROM
oxide-leaching system. Cathode copper is plated at the Twin Buttes EW
facility, that has a design capacity of approximately 50 million
pounds of copper per year. In 2004, a copper sulfate crystal plant began
production. The facility has the capacity to produce 40 million pounds of copper
sulfate per year. The molybdenum facility consists of a leaching circuit, two
molybdenum roasters and a packaging facility. The molybdenum facilities process
Sierrita concentrate, concentrate from our other mines and concentrate from
third-party sources. Copper production for 2008 was 188 million pounds and
molybdenum production was 20 million pounds. The available mining fleet has the
capacity to move an average of 200,000 metric tons of material per day
using 24 210- to 235-metric ton haul trucks loaded by five shovels
with bucket sizes ranging from 21 to 47 cubic meters.
Sierrita
is located in a desert environment with rainfall averaging 12 inches per year.
The highest bench elevation is 1,350 meters above sea level and the ultimate pit
bottom is expected to be 550 meters above sea level. The Sierrita
operation encompasses approximately 22,890 acres, comprising 14,426 acres of
patented mining claims and other fee lands, 5,870 acres of unpatented mining
claims (includes 3,748 acres overlaying federal minerals on previously counted
fee lands) and 2,194 acres of leased lands.
Sierrita
receives electrical power through long-term contracts with the Tucson Electric
Power Company. Although we believe the Sierrita operation has sufficient water
resources to support currently planned mining operations, we are a party to
litigation that could adversely affect our water rights at Sierrita and at our
other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for
information concerning the status of these proceedings.
Bagdad
Bagdad is
an open-pit copper and molybdenum mining complex located in Yavapai County in
west-central Arizona. It is approximately 60 miles west of Prescott and 100
miles northwest of Phoenix. The property can be reached by Arizona Highway
96, which ends at the town of Bagdad. The closest railroad siding is at
Hillside, Arizona, approximately 24 miles southeast on Arizona Highway 96. The
open-pit mining operation has been ongoing since 1945, and prior mining was
conducted through underground workings. The Bagdad mine is a porphyry copper
deposit that has oxide and secondary sulfide mineralization, and primary sulfide
mineralization. The predominant oxide copper minerals are chrysocolla, malachite
and azurite. Chalcocite is the most important secondary copper sulfide mineral,
and chalcopyrite and molybdenite are the dominant primary sulfides.
The
Bagdad operation consists of a 75,000 metric ton-per-day concentrator that
produces copper and molybdenum concentrates, and an SX/EW plant that produces up
to 25 million pounds per year of copper cathode from solution generated by
low-grade ROM. Copper production for 2008 was 227 million pounds and
molybdenum production was eight million pounds. The available mining fleet has
the capacity to move in excess of 180,000 metric tons of material per day
using 24 235-metric ton haul trucks loaded by five shovels with bucket
sizes ranging from 40 to 56 cubic meters.
In 2002,
Bagdad constructed a high-temperature, concentrate-leaching demonstration plant
designed to recover commercial-grade copper cathode from chalcopyrite
concentrates. The facility is the first of its kind in the world to use
high-temperature, pressure leaching to process chalcopyrite concentrates. In
first-quarter 2009, the conversion of this facility to a molybdenum concentrate
leach facility will be completed and is expected to increase our annual capacity
to upgrade molybdenum sulfide to an oxide by approximately 20 million
pounds.
Bagdad is
located in a desert environment with rainfall averaging 15 inches per year. The
highest bench elevation is 1,200 meters above sea level and the ultimate pit
bottom is expected to be 475 meters above sea level. The Bagdad
operation encompasses approximately 21,743 acres, comprising 21,143 acres of
patented mining claims and other fee lands, and 600 acres of unpatented mining
claims.
Bagdad
receives electrical power from Arizona Public Service Company. Although we
believe the Bagdad operation has sufficient water resources to support currently
planned mining operations, we are a party to litigation that could adversely
affect our water rights at Bagdad and at our other properties in
Arizona. Refer to Item 3. “Legal Proceedings,” for information
concerning the status of these proceedings.
Safford
Safford is
an open-pit copper mining complex located in Graham County, Arizona,
approximately eight miles north of the town of Safford and 170 miles east of
Phoenix. The site is accessible by paved county road off U.S. Highway 70.
Initial production commenced in late 2007 with production ramping up to full
production capacity in the second half of 2008. The Safford mine includes two
copper deposits that have oxide mineralization overlaying primary copper
sulfide mineralization. The predominant oxide copper minerals are chrysocolla
and copper-bearing iron oxides with the predominant copper sulfide material
being chalcopyrite.
The
property is a mine-for-leach project and produces copper cathodes. The operation
consists of two open pits feeding a crushing facility with a capacity of 103,000
metric tons per day of crushed ore. The crushed ore is delivered to a single
leach pad by a series of overland and portable conveyors. Leach solutions feed
an SX/EW facility with a capacity of 240 million pounds of copper per year.
Copper production for 2008 was 133 million pounds. In response to weak market
conditions during fourth-quarter 2008 and January 2009, we revised our operating
plans to reflect a 50 percent reduction in mining and stacking rates at Safford.
The available mining fleet consists of 23 235-metric ton haul trucks loaded
by four shovels with bucket sizes ranging from 31 to 34 cubic meters, which are
capable of moving an average of approximately 285,000 metric tons of material
per day.
Safford
is located in a desert environment with rainfall averaging 10 inches per year.
The highest bench elevation is 1,250 meters above sea level and the
ultimate pit bottom is expected to have an elevation of 750 meters above sea
level. The Safford operation encompasses approximately 24,957 acres, comprising
20,994 acres of patented lands, 3,932 acres of unpatented lands and 31 acres of
land held by federal permit.
The
Safford operation’s electrical power is provided by Morenci Water and Electric
Company, a wholly owned subsidiary of FCX, through the transmission systems of
Southwest Transmission Cooperative, a subsidiary of Arizona Electric Power
Cooperative, Inc., with most of the power sourced from the Luna Energy facility.
Although we believe the Safford operation has sufficient water resources to
support currently planned mining operations, we are a party to litigation that
could adversely impact the water rights at Safford and at our other properties
in Arizona. Refer to Item 3. “Legal Proceedings,” for information concerning the
status of these proceedings.
Tyrone
Tyrone is
an open-pit copper mining complex located in southwestern New Mexico in Grant
County, approximately 10 miles south of Silver City, New Mexico, along State
Highway 90. The site is accessible by paved road. The open-pit mine has been in
operation since 1967. The Tyrone mine is a porphyry copper deposit.
Mineralization is predominantly secondary sulfide consisting of
chalcocite.
Copper
processing facilities consist of an SX/EW operation with a maximum capacity of
168 million pounds of copper cathodes per year. Copper production for 2008 was
76 million pounds. In response to weak market conditions during fourth-quarter
2008 and January 2009, we revised our operating plan to reflect a 50 percent
reduction in the mining rate at Tyrone. The available mining fleet has the
capacity to move an average of 120,000 metric tons of material per day
using 22 190-metric ton haul trucks loaded by three shovels with bucket
sizes ranging from 22 to 54 cubic meters. Historically, ore production has
occurred from numerous open pits throughout the site. Mining is currently
ongoing in a single, large, central open pit.
Tyrone is
located in a desert environment with rainfall averaging 16 inches per year. The
highest bench elevation is 2,000 meters above sea level and the ultimate pit
bottom is expected to have an elevation of 1,500 meters above sea level. The
Tyrone operation encompasses approximately 35,200 acres, comprising 18,755 acres
of patented mining claims and other fee lands, and 16,445 acres of unpatented
mining claims (includes 1,116 acres overlaying federal minerals on previously
counted fee lands).
Tyrone
receives electrical power from the Luna Energy facility and from the open
market. Tyrone also has the ability to self-generate power. We believe the
Tyrone operation has sufficient water resources to support currently
planned mining operations.
Henderson
The
Henderson molybdenum mine is located approximately 42 miles west of Denver,
Colorado, off U.S. Highway 40. Nearby communities include the towns of Empire,
Georgetown and Idaho Springs. The Henderson mill site is located approximately
15 miles west of the mine and is accessible from Colorado State Highway 9. The
Henderson mine and mill are connected by a 10-mile conveyor tunnel under the
Continental Divide and an additional five-mile surface conveyor. The tunnel
portal is located five miles east of the mill. The mine has been in operation
since 1976. The Henderson mine is a porphyry molybdenum deposit with
molybdenite as the primary sulfide mineral.
The
Henderson operation consists of a large block-cave underground mining complex
feeding a 36,000 metric ton-per-day concentrator. Henderson has the capacity to
produce approximately 40 million pounds of molybdenum per year. The majority of
the molybdenum concentrate produced is shipped to our Fort Madison, Iowa,
processing facility. Molybdenum production for 2008 was 40 million pounds. In
response to weak market conditions during fourth-quarter 2008, we revised our
operating plans to reflect an approximate 25 percent reduction in Henderson’s
annual production. The available underground mining equipment fleet consists of
20 nine-metric ton load-haul-dump (LHD) units and eight 36- and 73-metric
ton haul trucks, which feed a gyratory crusher feeding a series of three
overland conveyors to the mill stockpiles.
The
Henderson mine is located in a mountain region with the main access shaft at
3,180 meters above sea level. The main production levels are currently at
elevations of 2,200 and 2,350 meters above sea level. This region experiences
significant snowfall during the winter months.
The
Henderson mine and mill operations encompass approximately 11,878 acres,
comprising 11,843 acres of patented mining claims and other fee lands, and a
35-acre easement with the U.S. Forest Service for the surface portion of the
conveyor corridor.
Henderson
operations receive electrical power through long-term contracts with Xcel Energy
and natural gas through long-term contracts with BP Energy, with Xcel Energy as
the transporter. We believe the Henderson operation has sufficient
water resources to support currently planned mining
operations.
Non-Operating
Mines
In
addition to the currently operating mines described above, we have four
non-operating copper mines in Arizona: Ajo, Bisbee, Miami and Tohono; two in New
Mexico: Chino (with limited residual copper production from leaching operations)
and Cobre; and the Climax molybdenum mine in Colorado, all of which are
currently on care-and-maintenance status. In November 2008, in response to
current market conditions, we announced suspension of construction activities
associated with the restart of the Climax molybdenum mine and placed the Chino
mine on care-and-maintenance status in December 2008. The remainder of these
mines have been on care-and-maintenance status for several years and would
require significant capital investment to return them to operating status.
Several of the Arizona and New Mexico mines continue to produce copper cathode
from stockpiles. Copper production in 2008 from these mines totaled 180 million
pounds.
South
America
At our
operations in South America, mine properties and facilities are controlled
through mining claims or concessions under the general mining laws of the
relevant country. The claims or concessions are owned or controlled by the
operating companies in which we or our subsidiaries have an ownership interest.
Roads, power lines and aqueducts are controlled by easements.
Cerro
Verde
Cerro
Verde is an open-pit copper and molybdenum mining complex located 20 miles
southwest of Arequipa, Peru. The site is accessible by paved highway. We have a
53.56 percent ownership interest in Cerro Verde. The remaining 46.44 percent is
held by SMM Cerro Verde Netherlands B.V. (21.0 percent), Compañia de Minas
Buenaventura S.A.A. (18.5 percent) and other shareholders whose shares are
publicly traded on the Lima Stock Exchange (6.94 percent). The Cerro Verde mine
has been in operation since 1976.
The Cerro
Verde mine is a porphyry copper deposit that has oxide and secondary sulfide
mineralization, and primary sulfide mineralization. The predominant oxide copper
minerals are brochantite, chrysocolla, malachite and copper “pitch.” Chalcocite
and covellite are the most important secondary copper sulfide minerals.
Chalcopyrite and molybdenite are the dominant primary sulfides.
Cerro
Verde’s current operation consists of an open-pit copper mine, concentrator and
SX/EW leaching facilities. Leach copper production is derived from a 39,000
metric ton-per-day crushed leach facility and a ROM leach
system.
This leaching operation has a capacity of approximately 200 million pounds of
copper per year. A 108,000 metric ton-per-day concentrator was completed in late
2006 and began processing of sulfide ore in the fourth quarter of 2006. Copper
production for 2008 was 694 million pounds.
Cerro
Verde has sufficient equipment to move an average of 295,000 metric tons of
material per day using an available fleet of 29 180-metric ton and 230-metric
ton haul trucks loaded by five shovels with bucket sizes ranging in size from 21
to 46 cubic meters.
Approximately
one-third of Cerro Verde’s copper cathode production is sold locally and the
remaining copper cathodes and concentrate production are transported
approximately 70 miles by truck and rail to the Pacific Port of Matarani for
shipment to international markets.
Cerro
Verde is located in a desert environment with rainfall averaging 1.5 inches per
year and is in an active seismic zone. The highest bench elevation is 2,900
meters above sea level and the ultimate pit bottom is expected to be 2,000
meters above sea level. Cerro Verde has a mining concession covering
approximately 157,007 acres plus 24 acres of owned property and 79 acres of
rights-of-way outside the mining concession area.
Cerro
Verde receives electrical power under long-term contracts with Electroperu and
Empresa de Generación Eléctrica de Arequipa. The existing freshwater intake and
supply system on the Rio Chili was expanded for the Cerro Verde concentrator
project. Cerro Verde’s participation in the Pillones Reservoir Project has
secured water rights that we believe will be sufficient to support Cerro
Verde’s currently planned operations. However, rainfall in 2008 was below
normal and the rainy season in 2009, which ends in March, has been below
normal. Reservoir levels are currently about half of the five-year
average for this time of year.
El
Abra
El Abra
is an open-pit copper mining complex located 47 miles north of Calama in Chile’s
El Loa province, Region II. The site is accessible by paved highway and by rail.
We own a 51 percent interest in El Abra. The remaining 49 percent interest is
held by the state-owned copper enterprise Corporación Nacional del Cobre de
Chile (CODELCO). The mine has been in operation since 1996.
The El
Abra mine is a porphyry copper deposit that has oxide and sulfide
mineralization. The predominant oxide copper minerals are chrysocolla and
pseudomalachite. There are lesser amounts of copper-bearing clays and tenorite.
The predominant primary sulfide copper minerals are bornite and chalcopyrite.
There is a minor amount of secondary sulfide mineralization as
chalcocite.
The El
Abra operation consists of an open-pit copper mine and an SX/EW facility with a
capacity of 500 million pounds of copper cathode per year from a 120,000 metric
ton-per-day crushed leach circuit and a similar-sized, ROM leaching operation.
Copper production for 2008 was 366 million pounds. The mining operation has
sufficient equipment to move an average of 223,000 metric tons per day using an
available fleet of 26 220-metric ton haul trucks loaded by four shovels with
buckets ranging in size from 26 to 41 cubic meters.
We have
the opportunity to develop a large sulfide deposit at El Abra that will extend
the mine life by over 10 years. Copper production from the sulfide deposit is
estimated to average approximately 325 million pounds per
year,
replacing the depleting oxide production. We had previously planned to begin
development of this project in 2009 to reach full production in 2012; however,
in response to current market conditions, we are deferring construction
activities on this project. We will continue to assess the timing of this
project and will be prepared to proceed with construction activities when market
conditions improve. Total initial capital for the project is estimated to
approximate $450 million.
El Abra
is located in a desert environment with rainfall averaging less than one inch
per year and is in an active seismic zone. The highest bench elevation is 4,180
meters above sea level and the ultimate pit bottom is expected
to be 3,410 meters above sea level. El Abra controls a total of
110,268 acres of mining claims covering the ore deposit, stockpiles, process
plant, and water wellfield and pipeline. In addition, El Abra has acquired land
surface rights for the road between the processing plant and the mine, the water
wellfield, power transmission lines and for the water pipeline from the Salar de
Ascotán. Acquisition of additional land surface area required for the future
development of the sulfide project is in process.
El Abra
currently receives electrical power under a contract with Electroandina, which
will expire at the end of 2017. We believe El Abra has sufficient water rights
to support currently planned operations.
Candelaria
and Ojos del Salado
Candelaria. Candelaria
is an open-pit and underground copper mining complex located approximately 12
miles south of Copiapó in northern Chile’s Atacama province, Region III. The
site is accessible by two maintained dirt roads, one coming through the Tierra
Amarilla community and the other off of Route 5 of the International
Pan-American Highway. We have an 80 percent ownership interest in Candelaria.
The remaining 20 percent interest is owned by affiliates of the Sumitomo
Corporation. The open-pit copper mine has been in operation since 1993 and
the underground copper mine has been in operation since 2005.
The
Candelaria mine is an iron oxide, copper/gold deposit. Primary sulfide
mineralization consists of chalcopyrite.
The
Candelaria operation consists of an open-pit copper mine and a 6,000 metric
ton-per-day underground copper mine, which is mined by sublevel stoping,
feeding a 75,000 metric ton-per-day concentrator. On average, open-pit mining
operations move 210,000 metric tons of material per day using an available fleet
of 48 225-metric ton haul trucks loaded by six shovels with bucket sizes ranging
from 13 to 43 cubic meters. Copper concentrates are transported by truck to the
Punta Padrones port facility located in Caldera, approximately 50 miles
northwest of the mine. Copper production for 2008 was 383 million pounds and
gold production was 98,000 ounces. In early 2009, we revised our operating
plan to reduce the mining rate at Candelaria.
Candelaria
is located in a desert environment with rainfall averaging less than one inch
per year and is in an active seismic zone. The highest bench elevation
is 675 meters above sea level and the ultimate pit bottom is expected
to be 30 meters below sea level. The Candelaria property encompasses
approximately 13,390 acres, including approximately 544 acres for the port
facility in Caldera. The remaining property consists of mineral rights owned by
us in which the surface is not owned but controlled by us, which is
consistent with Chilean law.
Candelaria
receives electrical power through long-term contracts with Empresa Eléctrica
Guacolda S.A., a local energy company. Candelaria’s water supply comes from well
fields in the area of Tierra Amarilla and Copiapó that draw water from the
Copiapó River aquifer. Because of rapid depletion of that aquifer in recent
years, ongoing studies are addressing the adequacy of this water supply for
Candelaria’s currently planned operations.
Ojos del
Salado. Ojos del Salado consists of two underground copper
mines (Santos and Alcaparrosa) and a 3,800 metric ton-per-day concentrator. The
operation is located approximately 10 miles east of Copiapó in northern Chile’s
Atacama province, Region III, and is accessible by paved highway. We have an 80
percent ownership interest in Ojos del Salado. The remaining 20 percent interest
is owned by affiliates of the Sumitomo Corporation. The Ojos del Salado
operation began commercial production in 1929.
The Ojos
del Salado mines are iron oxide and copper/gold deposits. Primary sulfide
mineralization consists of chalcopyrite.
The Ojos
del Salado operation has a capacity of 3,800 metric tons per day of ore from the
Santos underground mine and 4,000 metric tons per day from the Alcaparrosa
underground mine. The ore from both mines is mined by sublevel stoping, since
both the ore and enclosing rocks are competent. The broken ore is removed from
the stopes using scoops and loaded into an available fleet of 18 28-metric ton
trucks, which transport the ore to the surface. The ore from the Santos mine is
hauled directly to the Ojos del Salado mill for processing, and the ore from the
Alcaparrosa mine is reloaded into five 54-metric ton trucks and hauled 12 miles
to the Candelaria mill for processing. The Ojos del Salado concentrator has the
capacity to produce over 30 million pounds of copper and 9,000 ounces of gold
per year. Copper production for 2008 was 63 million pounds and gold production
was 16,000 ounces. In early 2009, we revised our operating plan to reduce
the mining rate at Ojos del Salado. Tailings from the Ojos del Salado mill are
pumped to the Candelaria tailings facility for final deposition. The Candelaria
facility has sufficient capacity for the remaining Ojos del Salado tailings in
addition to Candelaria’s tailings.
Ojos del
Salado is located in a desert environment with rainfall averaging less than one
inch per year and is in an active seismic zone. The highest underground level is
at an elevation of 500 meters above sea level, with the lowest underground level
at 150 meters above sea level. The Ojos del Salado mineral rights encompass
approximately 15,815 acres, which includes approximately 6,784 acres of owned
land in and around the Ojos del Salado underground mines and plant site. The
remaining property consists of mineral rights owned by us in which the surface
is not owned but controlled by us, which is consistent with Chilean
law.
Ojos del
Salado receives electrical power through long-term contracts with Empresa
Eléctrica Guacolda S.A. Ojos del Salado’s water supply comes from the Copiapó
River aquifer. Because of rapid depletion of this aquifer in recent years,
ongoing studies are addressing the adequacy of this water supply for Ojos del
Salado’s currently planned operations.
Indonesia
Ownership
PT
Freeport Indonesia is a limited liability company organized under the laws of
the Republic of Indonesia and incorporated in Delaware. We directly own 81.28
percent of PT Freeport Indonesia, 9.36 percent indirectly through our wholly
owned subsidiary, PT Indocopper Investama, and the Government of Indonesia owns
the remaining 9.36 percent.
In July
2004, we received a request from the Indonesian Department of Energy and Mineral
Resources that we offer to sell shares in PT Indocopper Investama to Indonesian
nationals at fair market value. Refer to Note 16 – “Commitments and Guarantees”
for additional discussion.
In 1996,
we established joint ventures with Rio Tinto plc (Rio Tinto), an international
mining company with headquarters in London, England. One joint venture covers PT
Freeport Indonesia’s mining operations in Block A and gives Rio Tinto, through
2021, a 40 percent interest in certain assets and future production exceeding
specified annual amounts of copper, gold and silver in Block A, and, after 2021,
a 40 percent interest in all production from Block A. Operating, nonexpansion
capital and administrative costs are shared proportionately
between
PT Freeport Indonesia and Rio Tinto based on the ratio of (a) the incremental
revenues from production from our expansion completed in 1998 to (b) total
revenues from Block A, including production from PT Freeport Indonesia’s
previously existing reserves. PT Freeport Indonesia receives 100 percent of the
cash flow from specified annual amounts of copper, gold and silver through 2021,
calculated by reference to its proven and probable reserves as of December 31,
1994, and 60 percent of all remaining cash flow. PT Freeport Indonesia records
its joint venture interest using the proportionate consolidation method. Under
the joint venture agreements, virtually all of the 2008 cash flows from PT
Freeport Indonesia's operations were attributed to PT Freeport
Indonesia.
Contracts
of Work
Through a
Contract of Work (COW) with the Government of Indonesia, PT Freeport Indonesia
conducts its current exploration and mining operations in Indonesia.
The COW governs our rights and obligations relating to taxes, exchange
controls, royalties, repatriation and other matters, and was concluded pursuant
to the 1967 Foreign Capital Investment Law, which expresses Indonesia’s foreign
investment policy and provides basic guarantees of remittance rights and
protection against nationalization, a framework for economic incentives and
basic rules regarding other rights and obligations of foreign investors.
Specifically, the COW provides that the Government of Indonesia will not
nationalize or expropriate PT Freeport Indonesia’s mining operations. Any
disputes regarding the provisions of the COW are subject to international
arbitration. We have experienced no disputes requiring arbitration during the 40
years we have operated in Indonesia.
PT
Freeport Indonesia’s COW covers both Block A, which was first included in a 1967
COW that was replaced by a new COW in 1991, and Block B in which we gained
rights in 1991. The initial term of our COW expires in December 2021, but we can
extend it for two 10-year periods subject to Indonesian government approval that
cannot be withheld or delayed unreasonably. The COW allows us to conduct
exploration, mining and production activities in the 24,700-acre Block A area,
located in Papua. All of PT Freeport Indonesia’s proven and probable mineral
reserves and current mining operations are located in Block A. Under the COW, PT
Freeport Indonesia also conducts exploration activities (which had been
suspended, but resumed in 2007) in the approximate 500,000-acre Block B area, in
Papua. We originally had the rights to explore 6.5 million acres in Block B, but
pursuant to the COW we have only retained the rights to approximately 500,000
acres following significant geological assessment.
PT
Freeport Indonesia pays a copper royalty under its COW that varies from 1.5
percent of copper net revenue at a copper price of $0.90 or less per pound to
3.5 percent at a copper price of $1.10 or more per pound. The COW royalty rate
for gold and silver sales is 1.0 percent.
A large
part of the mineral royalties under Government of Indonesia regulations are
designated to the provinces from which the minerals are extracted. In connection
with our fourth concentrator mill expansion completed in 1998, PT Freeport
Indonesia agreed to pay the Government of Indonesia additional royalties
(royalties not required by our COW) to provide further support to the local
governments and the people of the Indonesia province of Papua. The additional
royalties are paid on production exceeding specified annual amounts of copper,
gold and silver expected to be generated when PT Freeport Indonesia’s milling
facilities operate above 200,000 metric tons of ore per day. The additional
royalty for copper equals the COW royalty rate and for gold and silver equals
twice the COW royalty rates. Therefore, PT Freeport Indonesia’s royalty rate on
copper net revenues from production above the agreed levels is double the COW
royalty rate, and royalty rates on gold and silver sales from production above
the agreed levels are triple the COW royalty rates. PT Freeport Indonesia’s
share of the combined royalties, including the additional royalties which became
effective January 1, 1999, totaled $113 million in 2008, $133 million in 2007
and $126 million in 2006.
PT Irja
Eastern Minerals (Eastern Minerals), of which we own 100 percent, conducts
exploration under a separate COW in an area covering approximately 450,000 acres
in Papua.
Under a
joint venture agreement through PT Nabire Bakti Mining, we conduct exploration
activities under a separate COW in an area covering approximately 500,000
acres in five parcels contiguous to PT Freeport Indonesia’s Block B and one of
Eastern Minerals’ blocks.
In 2008,
Indonesia enacted a new mining law, which will operate under a licensing system
as opposed to the COW system that applies to PT Freeport Indonesia and
Eastern Materials. The new law indicates that existing COWs will be honored
but that certain provisions should be adjusted to conform to the new law. It is
not clear
what
adjustments, if any, may be requested by the Government of Indonesia, but we are
committed to continuing to honor and abide by the terms of our COW and the
Government has consistently indicated that it will honor all existing
contracts.
Grasberg
Minerals District
PT
Freeport Indonesia operates in the remote highlands of the Sudirman Mountain
Range in the province of Papua, Indonesia, which is on the western half of the
island of New Guinea. We and our predecessors have conducted exploration and
mining operations in Block A since 1967 and have been the only operator of these
operations. We currently have two mines in operation: the Grasberg open pit and
the Deep Ore Zone (DOZ) underground block cave.
Grasberg Open
Pit. We began open-pit
mining of the Grasberg ore body in 1990. Open-pit operations are expected to
continue through 2015, at which time the Grasberg underground mining operations
are scheduled to begin. Production is currently at the 3,295- to
4,285-meter elevation level and totaled 49.0 million metric tons of ore
in 2008 and 57.5 million metric tons of ore in 2007, which provided 67
percent of our 2008 mill feed and 75 percent of our 2007 mill feed. Remaining
mill feed comes from our DOZ mine.
The
current Grasberg equipment fleet consists of over 500 units. At December 31,
2008, the larger mining equipment directly associated with production
included an available fleet of 157 haul trucks with payloads ranging from
approximately 215 metric tons to 330 metric tons and 19 shovels with bucket
sizes ranging from 30 cubic meters to 42 cubic meters, which in 2008 moved an
average of 669,000 metric tons per day.
Grasberg
crushing and conveying systems are integral to the mine and provide the capacity
to transport up to 225,000 metric tons per day of Grasberg ore to the mill and
135,000 metric tons per day of overburden to the overburden stockpiles. The
remaining ore and overburden is moved by haul trucks.
Deep Ore Zone. The DOZ ore body lies
vertically below the now depleted Intermediate Ore Zone. We began production
from the DOZ ore body in 1989 using open stope mining methods, but we suspended
production in 1991 in favor of production from the Grasberg deposit. Production
resumed in September 2000 using the block-cave method. Production is at the
3,110-meter elevation level and totaled 23.1 million metric tons of ore in 2008
and 19.5 million metric tons in 2007.
During
2008, we completed over 16,000 meters of development drifting in support of the
block-cave mining method for the DOZ mine. Further expansion of the DOZ
operation to 80,000 metric tons of ore per day is under way with completion
targeted by 2010. The success of the development of the DOZ mine, one of the
world’s
largest
underground mines, provides confidence in the future development of PT Freeport
Indonesia’s large-scale undeveloped underground ore bodies.
The DOZ
mine fleet consists of over 185 pieces of mobile heavy equipment, which in 2008
moved an average of 63,000 metric tons of ore per day. The primary mining
equipment directly associated with production and development includes an
available fleet of 50 LHD units and 19 haul trucks. Our production LHD units
typically carry approximately 11 metric tons of ore. Using ore passes and
chutes, the LHD units transfer ore into 55-ton capacity haul trucks. The trucks
dump into two gyratory crushers and the ore is then conveyed to the surface
stockpiles.
PT
Freeport Indonesia’s total production for 2008 was 1.1 billion pounds of
copper and 1.2 million ounces of gold.
Our
principal source of power for all our Indonesian operations is a coal-fired
power plant that we built in conjunction with our fourth concentrator mill
expansion. Diesel generators supply peaking and backup electrical power
generating capacity. A combination of naturally occurring mountain streams and
water derived from our underground operations provides water for our operations.
Our Indonesian operations are in an active seismic zone and experience average
annual rainfall of approximately 200 inches.
Description of Ore
Bodies. Our
Indonesia ore bodies are located within and around two main igneous intrusions,
the Grasberg monzodiorite and the Ertsberg diorite. The host rocks of these ore
bodies include both carbonate and clastic rocks that form the ridge crests and
upper flanks of the Sudirman Range, and the igneous rocks of monzonitic to
dioritic composition that intrude them. The igneous-hosted ore bodies (the
Grasberg open pit and block cave, and the DOZ block cave) occur as vein
stockworks and disseminations of copper sulfides, dominated by chalcopyrite and,
to a much lesser extent, bornite. The sedimentary-rock hosted ore bodies occur
as “magnetite-rich, calcium/magnesian skarn” replacements, whose location and
orientation are strongly influenced by major faults and by the chemistry of the
carbonate rocks along the margins of the intrusions.
The
copper mineralization in these skarn deposits is also dominated by chalcopyrite,
but higher bornite concentrations are common. Moreover, gold occurs in
significant concentrations in all of the district’s ore bodies, though rarely
visible to the naked eye. These gold concentrations usually occur as inclusions
within the copper sulfide minerals, though, in some deposits, these
concentrations can also be strongly associated with pyrite.
The
following diagram indicates the relative elevations (in meters) of our
reported ore bodies.
The
following map, which encompasses an area of approximately 42 square
kilometers (approximately 16 square miles), indicates the relative positions and
sizes of our reported ore bodies and their locations.
Africa
We are
developing the initial project at Tenke Fungurume in the DRC. At Tenke
Fungurume, mine properties and facilities are controlled through mining
concessions under general mining laws. The concessions are owned or controlled
by operating companies in which we or our subsidiaries have an ownership
interest.
Tenke
Fungurume
The Tenke
Fungurume deposits are located in the Katanga province of the DRC approximately
110 miles northwest of Lubumbashi. The deposits are accessible by unpaved roads
and by rail. We hold an effective 57.75 percent interest in the concessions
through our interest in Tenke Fungurume Mining, S.A.R.L., a company incorporated
under the laws of the DRC and are the operator of the project. The remaining
ownership interests
are held
by Tenke Mining Corp. (TMC), which is owned by Lundin Mining Corporation (an
effective 24.75 percent) and La Générale des Carrières et des Mines (Gécamines),
which is wholly owned by the Government of the DRC (17.5 percent). We are
responsible for funding 70 percent of project development costs and are also
responsible for financing our partner’s share of certain cost overruns on the
initial project. Gecamines has an undilutable carried interest and is not
responsible for funding any project costs. In accordance with the
terms of the agreement, Gecamines will receive asset transfer payments totaling
$100 million, $70 million of which has already been paid and the remainder of
which will be paid over a period of approximately three years.
The Tenke
Fungurume deposits are sediment-hosted copper and cobalt deposits with oxide,
mixed oxide-sulfide and sulfide mineralization. The dominant oxide minerals are
malachite, pseudomalachite and heterogenite. Important sulfide minerals consist
of bornite, carrollite, chalcocite and chalcopyrite.
Copper
and cobalt will be recovered through an agitation-leach plant capable of
processing 8,000 metric tons of ore per day. Construction activities are well
advanced and initial production is targeted during the second half of
2009 Annual production in the initial years is expected to
approximate 250 million pounds of copper and 18 million pounds of
cobalt. The initial project is based on mining and processing ore
reserves approximating 119 million metric tons with an average grade of 2.6
percent copper and 0.35 percent cobalt. We expect the results of drilling
activities will enable future expansion of initial production rates. The timing
of these expansions will depend on a number of factors, including general
economic and market conditions. The current equipment fleet includes 8
five-cubic meter front-end loaders, 29 45-metric ton haul trucks, surface
miners, production drills, sampling machines and crawler dozers.
Tenke
Fungurume is located in a tropical region; however, temperatures are moderated
by its higher altitudes. Weather in this region is characterized by a dry season
and a wet season, each lasting about six months with average rainfall of 47
inches per year. The highest bench elevation is expected to be 1,480 meters
above sea level and the ultimate pit bottom is expected to be 1,270 meters above
sea level. The Tenke Fungurume deposits are located within four concessions
totaling 394,455 acres.
Tenke
Fungurume has entered into long-term power supply and infrastructure funding
agreements with La Société Nationale d’Electricité (SNEL), the state-owned
electric utility company serving the region. The results of a recent water
exploration program, as well as the regional geological and hydro-geological
conditions, indicate that adequate water is available for the project,
and for hydro-electric generation during the expected life of the
operation.
In
February 2008, the Ministry of Mines, Government of the DRC, sent a letter
seeking comment on proposed material modifications to the mining contracts for
the Tenke Fungurume concession. Refer to Note 16 – “Commitments
and Guarantees” for additional discussion.
During
October 2008, fighting between rebel groups and the national Congolese army
erupted in the DRC and hostilities have continued in the eastern province of
North Kivu, which is more than 1,000 kilometers from our project site and not
easily accessible by road. This conflict has resulted in increased instability
in the DRC. We will continue to monitor the situation while continuing with our
development project.
PRODUCTION
DATA
For
comparative purposes, operating data shown below for the years ended December
31, 2007, 2006, 2005 and 2004, combines our historical data with Phelps Dodge
pre-acquisition data. As the pre-acquisition operating data represent the
results of these operations under Phelps Dodge management, such combined data is
not necessarily indicative of what past results would have been under FCX
management or of future operating results.
|
COPPER
|
Years
Ended December 31,
|
||||||||||||||
|
(millions
of recoverable pounds)
|
2008
|
2007a
|
2006a
|
2005a
|
2004a
|
||||||||||
|
MINED COPPER (FCX’s net
interest in %)
|
|||||||||||||||
|
North America
|
|||||||||||||||
|
Morenci
(85%)b
|
626
|
687
|
693
|
680
|
715
|
||||||||||
|
Bagdad
(100%)
|
227
|
202
|
165
|
201
|
220
|
||||||||||
|
Sierrita
(100%)
|
188
|
150
|
162
|
158
|
155
|
||||||||||
|
Chino
(100%)
|
155
|
190
|
186
|
210
|
183
|
||||||||||
|
Safford
(100%)
|
133
|
1
|
-
|
-
|
-
|
||||||||||
|
Tyrone
(100%)
|
76
|
50
|
64
|
81
|
86
|
||||||||||
|
Miami
(100%)
|
19
|
20
|
19
|
25
|
20
|
||||||||||
|
Tohono
(100%)
|
2
|
3
|
5
|
5
|
-
|
||||||||||
|
Other
(100%)
|
4
|
17
|
11
|
5
|
5
|
||||||||||
|
Total
North America
|
1,430
|
1,320
|
c
|
1,305
|
1,365
|
1,384
|
|||||||||
|
South America
|
|||||||||||||||
|
Cerro
Verde (53.56%)
|
694
|
594
|
222
|
206
|
195
|
||||||||||
|
Candelaria/Ojos
del Salado (80%)
|
446
|
453
|
429
|
421
|
461
|
||||||||||
|
El
Abra (51%)
|
366
|
366
|
482
|
464
|
481
|
||||||||||
|
Total
South America
|
1,506
|
1,413
|
c
|
1,133
|
1,091
|
1,137
|
|||||||||
|
Indonesia
|
|||||||||||||||
|
Grasberg
(90.64%)d
|
1,094
|
1,151
|
1,201
|
1,456
|
997
|
||||||||||
|
Consolidated
|
4,030
|
3,884
|
3,639
|
3,912
|
3,518
|
||||||||||
|
Less
minority participants’ share
|
693
|
653
|
537
|
543
|
512
|
||||||||||
|
Net
|
3,337
|
3,231
|
3,102
|
3,369
|
3,006
|
||||||||||
|
GOLD
|
|||||||||||||||
|
(thousands
of recoverable ounces)
|
|||||||||||||||
|
MINED GOLD (FCX’s net
interest in %)
|
|||||||||||||||
|
North
America (100%)b
|
14
|
15
|
19
|
17
|
13
|
||||||||||
|
South
America (80%)
|
114
|
116
|
e
|
112
|
117
|
122
|
|||||||||
|
Indonesia
(90.64%)d
|
1,163
|
2,198
|
1,732
|
2,789
|
1,456
|
||||||||||
|
Consolidated
|
1,291
|
2,329
|
1,863
|
2,923
|
1,591
|
||||||||||
|
Less
minority participants’ share
|
132
|
229
|
184
|
284
|
160
|
||||||||||
|
Net
|
1,159
|
2,100
|
1,679
|
2,639
|
1,431
|
||||||||||
|
MOLYBDENUM
|
|||||||||||||||
|
(millions
of recoverable pounds)
|
|||||||||||||||
|
MINED MOLYBDENUM (FCX’s
net interest in %)
|
|||||||||||||||
|
Henderson
(100%)
|
40
|
39
|
f
|
37
|
32
|
28
|
|||||||||
|
By-product
– North America (100%)b
|
30
|
30
|
31
|
30
|
29
|
||||||||||
|
By-product
– Cerro Verde (53.56%)
|
3
|
1
|
-
|
-
|
-
|
||||||||||
|
Consolidated
|
73
|
70
|
68
|
62
|
57
|
||||||||||
|
Less
minority participants’ share
|
1
|
-
|
-
|
-
|
-
|
||||||||||
|
Net
|
72
|
70
|
68
|
62
|
57
|
||||||||||
|
a.
|
For
comparative purposes, operating data for the years ended December 31,
2007, 2006, 2005 and 2004, combines our historical data with Phelps Dodge
pre-acquisition data. As the pre-acquisition data represent the results of
these operations under Phelps Dodge management, such combined data is not
necessarily indicative of what past results would have been under FCX
management or of future operating
results.
|
|
b.
|
Amounts
are net of Morenci’s 15 percent joint venture partner
interest.
|
|
c.
|
Includes
North America copper production of 258 million pounds and South America
copper production of 259 million pounds for Phelps Dodge’s pre-acquisition
results.
|
|
d.
|
Amounts
are net of Grasberg’s joint venture partner’s interest, which varies in
accordance with terms of the joint venture
agreement.
|
|
e.
|
Includes
gold production of 21 thousand ounces for Phelps Dodge’s pre-acquisition
results.
|
|
f.
|
Includes
molybdenum production of 14 million pounds for Phelps Dodge’s
pre-acquisition results.
|
SALES
DATA
For
comparative purposes, operating data shown below for the years ended December
31, 2007, 2006, 2005 and 2004, combines our historical data with Phelps Dodge
pre-acquisition data. As the pre-acquisition operating data represent the
results of these operations under Phelps Dodge management, such combined data is
not necessarily indicative of what past results would have been under FCX
management or of future operating results.
|
Years
Ended December 31,
|
|||||||||||||||
|
COPPER
(millions of recoverable pounds)
|
2008
|
2007a
|
2006a
|
2005a
|
2004a
|
||||||||||
|
MINED COPPER (FCX’s net
interest in %)
|
|||||||||||||||
|
North America
|
|||||||||||||||
|
Morenci
(85%)b
|
646
|
693
|
692
|
680
|
715
|
||||||||||
|
Bagdad
(100%)
|
226
|
200
|
165
|
209
|
224
|
||||||||||
|
Sierrita
(100%)
|
184
|
157
|
161
|
165
|
158
|
||||||||||
|
Chino
(100%)
|
174
|
186
|
186
|
209
|
183
|
||||||||||
|
Safford
(100%)
|
107
|
-
|
-
|
-
|
-
|
||||||||||
|
Tyrone
(100%)
|
71
|
53
|
64
|
81
|
86
|
||||||||||
|
Miami
(100%)
|
20
|
24
|
19
|
29
|
22
|
||||||||||
|
Tohono
(100%)
|
2
|
3
|
5
|
5
|
-
|
||||||||||
|
Other
(100%)
|
4
|
16
|
11
|
5
|
5
|
||||||||||
|
Total
North America
|
1,434
|
1,332
|
c
|
1,303
|
1,383
|
1,393
|
|||||||||
|
South America
|
|||||||||||||||
|
Cerro
Verde (53.56%)
|
701
|
587
|
214
|
205
|
196
|
||||||||||
|
Candelaria/Ojos
del Salado (80%)
|
455
|
447
|
425
|
421
|
467
|
||||||||||
|
El
Abra (51%)
|
365
|
365
|
487
|
467
|
482
|
||||||||||
|
Total
South America
|
1,521
|
1,399
|
c
|
1,126
|
1,093
|
1,145
|
|||||||||
|
Indonesia
|
|||||||||||||||
|
Grasberg
(90.64%)d
|
1,111
|
1,131
|
1,201
|
1,457
|
992
|
||||||||||
|
Consolidated
|
4,066
|
3,862
|
3,630
|
3,933
|
3,530
|
||||||||||
|
Less
minority participants’ share
|
699
|
647
|
535
|
545
|
513
|
||||||||||
|
Net
|
3,367
|
3,215
|
3,095
|
3,388
|
3,017
|
||||||||||
|
Consolidated
sales from mines
|
4,066
|
3,862
|
3,630
|
3,933
|
3,530
|
||||||||||
|
Purchased
copper
|
483
|
650
|
736
|
821
|
866
|
||||||||||
|
Total
consolidated sales
|
4,549
|
4,512
|
4,366
|
4,754
|
4,396
|
||||||||||
|
Average
realized price per pound
|
$2.69
|
$3.22
|
e
|
$2.80
|
e
|
$1.66
|
e
|
$1.33
|
|||||||
|
GOLD (thousands
of recoverable ounces)
|
|||||||||||||||
|
MINED GOLD (FCX’s net
interest in %)
|
|||||||||||||||
|
North
America (100%)b
|
16
|
21
|
19
|
18
|
12
|
||||||||||
|
South
America (80%)
|
116
|
114
|
f
|
111
|
117
|
122
|
|||||||||
|
Indonesia
(90.64%)d
|
1,182
|
2,185
|
1,736
|
2,790
|
1,443
|
||||||||||
|
Consolidated
|
1,314
|
2,320
|
1,866
|
2,925
|
1,577
|
||||||||||
|
Less
minority participants’ share
|
134
|
228
|
185
|
285
|
159
|
||||||||||
|
Net
|
1,180
|
2,092
|
1,681
|
2,640
|
1,418
|
||||||||||
|
Consolidated
sales from mines
|
1,314
|
2,320
|
1,866
|
2,925
|
1,577
|
||||||||||
|
Purchased
gold
|
2
|
6
|
12
|
12
|
20
|
||||||||||
|
Total
consolidated sales
|
1,316
|
2,326
|
1,878
|
2,937
|
1,597
|
||||||||||
|
Average
realized price per ounce
|
$861
|
$682
|
$566
|
g
|
$454
|
$411
|
|||||||||
|
MOLYBDENUM
(millions
of recoverable pounds)
|
|||||||||||||||
|
Consolidated
sales from mines
|
71
|
69
|
h
|
69
|
60
|
63
|
|||||||||
|
Less
minority participants’ share
|
1
|
-
|
-
|
-
|
-
|
||||||||||
|
Net
|
70
|
69
|
69
|
60
|
63
|
||||||||||
|
Consolidated
sales from mines
|
71
|
69
|
69
|
60
|
63
|
||||||||||
|
Purchased
molybdenum
|
8
|
9
|
8
|
13
|
13
|
||||||||||
|
Total
consolidated sales
|
79
|
78
|
77
|
73
|
76
|
||||||||||
|
Average
realized price per pound
|
$30.55
|
$25.87
|
$21.87
|
$25.89
|
$12.71
|
||||||||||
|
a.
|
For
comparative purposes, operating data for the years ended December 31,
2007, 2006, 2005 and 2004, combines our historical data with Phelps Dodge
pre-acquisition data. As the pre-acquisition data represent the results of
these operations under Phelps Dodge management, such combined data is not
necessarily indicative of what past results would have been under FCX
management or of future operating
results.
|
|
b.
|
Amounts
are net of Morenci’s joint venture partner’s 15 percent
interest.
|
|
c.
|
Includes
North America copper sales of 283 million pounds and South America copper
sales of 222 million pounds for Phelps Dodge’s pre-acquisition
results.
|
|
d.
|
Amounts
are net of Grasberg’s joint venture partner’s interest, which varies in
accordance with terms of the joint venture
agreement.
|
|
e.
|
Before
charges for hedging losses related to copper price protection programs,
amounts were $3.27 per pound for 2007, $3.08 per pound for 2006 and $1.76
per pound for 2005.
|
|
f.
|
Includes
gold sales of 18 thousand ounces for Phelps Dodge’s pre-acquisition
results.
|
|
g.
|
Amount
was approximately $606 per ounce before a loss on redemption of our
Gold-Denominated Preferred Stock, Series
II.
|
|
h.
|
Includes
molybdenum sales of 17 million pounds for Phelps Dodge’s pre-acquisition
results.
|
DEVELOPMENT
PROJECTS AND EXPLORATION
We have
several projects and potential opportunities to expand our production volumes,
extend our mine lives and develop large-scale underground ore bodies. In
response to the sharp declines in copper and molybdenum prices and the
deterioration of the economic environment during fourth-quarter 2008, we have
deferred most of our project development activities, including incremental
expansions in North and South America, the planned restart of the Miami mine,
development of the El Abra sulfide project and the restart of the Climax
molybdenum mine, and have also reduced capital spending at Tenke Fungurume and
in Indonesia. For further discussion of our development projects and exploration
activities, refer to Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
In
addition to current development project activities for the Common Infrastructure
project, the Grasberg Block Cave, the Big Gossan underground mine and the DOZ
expansion discussed in Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” we have additional long-term
underground mine development projects in the Grasberg minerals district for
the Deep Mill Level Zone and Kucing Liar ore bodies, which are discussed below
and are based on our latest mine plans and proven and probable reserves as of
December 31, 2008.
The Mill
Level Zone and Deep Mill Level Zone ore bodies are reported as one ore body as
the Deep Mill Level Zone. The Deep Mill Level Zone lies directly below the
DOZ mine at the 2,590-meter elevation. This ore represents the downward
continuation of mineralization in the Ertsberg East Skarn system and neighboring
Ertsberg porphyry. Drilling efforts continue to determine the extent of this ore
body. We expect to mine the Deep Mill Level Zone using a block-cave method near
completion of mining at the DOZ. We expect to complete the feasibility
study on this ore body in the second half of 2009. Pre-feasibility estimates of
aggregate capital costs for the Deep Mill Level Zone are expected to aggregate
$1.3 billion.
The
Kucing Liar ore body lies on the southern flank of and underneath the southern
portion of the Grasberg open pit at the 2,605-meter elevation level. We expect
to mine the Kucing Liar ore body using the block-cave method. Pre-feasibility
studies for the development of the Kucing Liar ore body indicate aggregate
capital costs of approximately $1.4 billion. A feasibility study is expected to
commence during 2009.
Based on
our current estimates, we expect aggregate expenditures for underground mine
development to average approximately $350 million annually during the
next 15 years. In addition, these costs will be shared with Rio Tinto in
accordance with our joint venture agreement.
Considering the long-term nature of these projects, actual costs
could differ materially from these estimates.
In addition to the mine development costs above, our current mine
development plans include approximately $3 billion of capital expenditures at
our processing facilities to optimize the handling of underground ore types once
Grasberg open-pit operations cease. We continue to review our mine
development and processing plans to maximize the value of our reserves.
RESEARCH
Following
our acquisition of Phelps Dodge in March 2007, we conduct research and
development programs relating to technology for exploration for minerals, mining
and recovery of metals from ores, concentrates and solutions, smelting and
refining of copper, metal processing, reclamation and remediation, and product
and engineered
materials
development. Most of our research is conducted at our technology centers in
Safford and Sahuarita, Arizona. Expenditures for research and development
programs, together with contributions to industry and government-supported
research programs, totaled $44 million in 2008 and $33 million in 2007.
Expenditures are expected to be substantially lower in 2009 in connection with
company-wide steps to reduce expenditures in response to lower copper and
molybdenum prices.
SMELTING
FACILITIES
Atlantic Copper, S.A. Atlantic
Copper is our wholly owned copper smelter and refinery located in Huelva, Spain.
Atlantic Copper completed the last expansion of its production capacity in
1997. The design capacity of the smelter is 290,000 metric tons of copper
per year and the refinery currently has a capacity of 260,000 metric tons of
copper per year. We have no present plans to expand Atlantic Copper’s production
capacity. Atlantic Copper’s facilities are located on land concessions from the
Huelva, Spain port authorities. The smelter and refinery concessions expire in
2022, and the office and warehouse concessions expire in 2014.
During
2008, Atlantic Copper treated 1,028,100 metric tons of concentrate and scrap and
produced 259,900
metric tons of copper anodes and 257,100 metric tons of copper cathodes. During
2007, Atlantic Copper treated 952,300 metric tons of concentrate and scrap and
produced 256,100 metric tons of copper anodes and 243,600 metric tons of copper
cathodes. In June 2007, Atlantic Copper completed a scheduled 23-day maintenance
turnaround. Major maintenance turnarounds typically occur approximately every 12
years for Atlantic Copper, with significantly shorter term maintenance
turnarounds occurring in the interim. The next scheduled maintenance activity at
Atlantic Copper is in 2011.
Atlantic
Copper purchased approximately 45 percent of its 2008 concentrate requirements
from PT Freeport Indonesia and approximately 12 percent from our South America
mines at market prices. Atlantic Copper has experienced no significant operating
problems.
We made
no capital contributions to Atlantic Copper from 2005 through 2008; however, we
contributed $202 million to Atlantic Copper in 2004. In addition, we loaned $190
million to Atlantic Copper in 2004 and Atlantic Copper repaid $60 million in
2008. The funds were used to improve Atlantic Copper’s financial structure
during its 2004 major maintenance turnaround and during a period of extremely
low rates for treatment and refining charges. Our net investment in Atlantic
Copper through December 31, 2008, was approximately $138 million.
PT Smelting. PT Freeport Indonesia’s
1991 COW required us to construct or cause to be constructed a smelter in
Indonesia if we and the Indonesian government determined that such a project
would be economically viable. In 1995, following the completion of a feasibility
study, we entered into agreements relating to the formation of PT Smelting, an
Indonesian company, and the construction of the copper smelter in Gresik,
Indonesia. PT Freeport Indonesia, Mitsubishi Materials Corporation
(Mitsubishi Materials), Mitsubishi Corporation (Mitsubishi) and Nippon Mining
& Metals Co., Ltd. (Nippon) own 25 percent, 60.5 percent, 9.5 percent, and 5
percent, respectively, of the outstanding PT Smelting common stock. PT Smelting
owns and operates the smelter and refinery in Gresik, Indonesia.
During
2006, PT Smelting completed an expansion of its production capacity to 275,000
metric tons of copper per year from 250,000 metric tons. PT Freeport Indonesia’s
contract with PT Smelting provides for the supply of 100 percent of the copper
concentrate requirements necessary for PT Smelting to produce 205,000 metric
tons of copper annually (essentially the smelter’s original design capacity) on
a priority basis. For the first 15 years of PT Smelting’s commercial operations,
beginning December 1998, PT Freeport Indonesia agreed that the combined
treatment and refining charges (fees paid to smelters by miners) would
approximate market rates, but will not fall below specified minimum rates. The
minimum rate, applicable to the period April 27, 2008 to April 27, 2014, is to
be determined annually and to be sufficient to cover PT Smelting’s annual cash
operating costs (net of credits and including costs of debt service) for 205,000
metric tons of copper. The maximum rate is $0.30 per pound. The agreement is an
amendment to the long-term contract, which is pending approval from the
Department of Energy and Mineral Resources of the Government of Indonesia. PT
Freeport Indonesia also sells copper concentrate to PT Smelting at market rates,
which are not subject to a minimum or maximum rate, for quantities in excess of
205,000 metric tons of copper annually.
During 2008, PT Smelting treated 978,100 metric tons of concentrate and
produced 261,300 metric tons of copper anodes and 253,400 metric tons of copper
cathodes. During 2007, PT Smelting treated 976,300 metric tons of concentrate
and produced 277,100 metric tons of copper anodes and 256,900 metric tons of
copper
cathodes.
Lower volumes of anodes in 2008, compared to 2007, primarily reflect a 25-day
maintenance turnaround in the second quarter of 2008. Major maintenance
turnarounds typically occur approximately every four years for PT Smelting, with
significantly shorter term maintenance turnarounds in the interim.
Miami
Smelter. We own and operate a smelter at our Miami, Arizona
mining operation. The Miami mine is currently on care-and-maintenance status,
but the smelter continues to process concentrate primarily from our Morenci,
Bagdad and Sierrita mines. The smelter has been in production for over 80 years
and has been upgraded during that period to implement new technologies, to
improve production and to comply with current air quality standards. Concentrate
processed through the smelter totaled approximately 719,000 metric tons in 2008
and 759,000 metric tons in 2007. The Miami smelter completed a 40-day major
maintenance turnaround in February 2009. Major maintenance
turnarounds typically occur approximately every 29 months for Miami, with
significantly shorter term maintenance turnarounds in the interim. Sulfuric acid
is a by-product of smelting concentrates, and the Miami smelter is the most
significant source of sulfuric acid for our domestic leaching
operations.
OTHER
PROPERTIES
Rod & Refining Operations. Our
Rod & Refining operations consist of conversion facilities located in
North America including a refinery in El Paso, Texas; rod mills in El Paso,
Texas, Norwich, Connecticut and Miami, Arizona; and a specialty copper products
facility in Bayway, New Jersey. We refine our anode copper production from
our smelter in Miami, Arizona, along with purchased anodes, at our El Paso
refinery. The El Paso refinery has an annual production capacity of about 900
million pounds of copper cathode, which is sufficient to refine all the copper
anode we produce at Miami. Our El Paso refinery also produces nickel carbonate,
copper telluride, and autoclaved slimes material containing gold, silver,
platinum and palladium.
Molybdenum Conversion Facilities. We
process molybdenum concentrates at our conversion plants in the U.S. and Europe
into such products as technical-grade molybdic oxide, ferromolybdenum, pure
molybdic oxide, ammonium molybdates, molybdenum disulfide and molybdenum metal
powder. We operate molybdenum roasters in Sierrita, Arizona; Fort Madison,
Iowa; and Rotterdam, the Netherlands.
The
conversion facility located at our Sierrita mine consists of two molybdenum
roasters that process molybdenum concentrates produced at our mines and on a
toll basis for third parties. The facility produces molybdenum oxide and related
products.
The Fort
Madison, Iowa, facility consists of two molybdenum roasters, a sulfuric acid
plant, a metallurgical (technical oxide) packaging facility, and a chemical
conversion plant, which includes a wet-chemicals plant, sublimation equipment
and molybdenum disulfide processing and packaging. In the chemical plant,
molybdic oxide is further refined into various high-purity molybdenum chemicals
for a wide range of uses by chemical and catalyst manufacturers. In addition to
metallurgical oxide products, the Fort Madison facility produces ammonium
dimolybdate, pure molybdic oxide, ammonium heptamolybdate, ammonium
octamolybdate, sodium molybdate, sublimed pure molybdic oxide and molybdenum
disulfide.
The
Rotterdam conversion facility consists of a molybdenum roaster, sulfuric acid
plant, metallurgical packaging facility and chemical conversion plant. The plant
produces metallurgical products primarily for third parties. Ammonium
dimolybdate and pure molybdic oxide are produced in the wet-chemicals
plant.
We also
produce ferromolybdenum for worldwide customers at our conversion plant located
in Stowmarket, United Kingdom. The plant is operated both as an internal and
external customer tolling facility.
SOURCES
AND AVAILABILITY OF RAW MATERIALS
Energy
(including electricity, diesel fuel, coal and natural gas), sulfuric acid and
water are the principal raw materials used in our operations. Most of our energy
is obtained from third parties under long-term contracts. For additional
information, refer to Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Sulfuric
acid is used in the SX/EW process and is produced as a by-product of the
smelting process at our smelters. Sulfuric acid needs in excess of the sulfuric
acid produced by our operations are purchased from third parties as
needed.
Our
mining operations require significant quantities of water for mining, ore
processing and related support facilities. Our operations in North and South
America are in areas where water is scarce and competition among users for
continuing access to water is significant. Continuous production at our mines is
dependent on our ability to maintain our water rights and claims and defeat
claims adverse to our current water uses in legal proceedings.
In North
America, under state law, our water rights give us only the right to use public
waters for a statutorily defined beneficial use at a designated location. In
Arizona, we are a participant in two active general stream adjudications in
which for 30 years the State of Arizona has been attempting to quantify and
prioritize surface water claims in two of the state’s largest river systems that
include three of our operating mines (Morenci, Sierrita and Safford) and which
may also affect our Bagdad mine in Arizona. Groundwater is not subject to
adjudication in Arizona, but is subject to the doctrine of reasonable use, which
requires balancing the utility of the use against the gravity of the harm to
others who have rights in the same aquifer; however, wells may be subject to
adjudication to the extent they are found to produce or affect surface water. In
Colorado, our surface water and groundwater rights are subject to adjudication
and we are involved in legal proceedings to resolve disputes regarding priority
of administration of rights, including priority of some of our rights for the
Climax mine. Our surface water and groundwater rights are fully licensed or have
been fully adjudicated in New Mexico.
In South
America, water for our mining operations at Candelaria and Ojos del Salado is
drawn from the Copiapó River aquifer. Because of rapid depletion of this aquifer
in recent years, ongoing studies are addressing the adequacy of this water
supply for our mining operations planned at these sites. Water for our Cerro
Verde processing operations comes from renewable sources through a series of
storage reservoirs. Rainfall in 2008 was below normal and the rainy season in
2009, which ends in March, has thus far been below normal. Reservoirs are
currently about half of the last five-year average for this time of
year.
Although
we believe our mining operations have sufficient water rights, the loss of water
rights for any of our mines, in whole or in part, or shortages of water to which
we have rights, could require us to curtail or shut down mining operations.
Additionally, we have not yet secured adequate water rights to support all of
our potential expansion projects and our inability to secure those rights could
prevent us from pursuing some of those expansion opportunities. See Item 1A.
“Risk Factors.”
COMPETITION
We are
one of the world’s largest copper, gold and molybdenum mining companies in terms
of reserves and production. With respect to copper, which generated
approximately 76 percent of our mining revenues in 2008, the top 10 producers
comprise approximately 55 percent of total worldwide mined copper production. We
currently rank second among those producers at approximately 10 percent of
total worldwide estimated mined copper production. Our competitive position is
based on the quality and grade of our ore bodies and our ability to manage costs
compared with other producers. We have a diverse portfolio of mining operations
with varying ore grades and cost structures. Our costs are driven by the
location, grade and nature of our ore bodies and the input costs, including
energy, labor and equipment. The metals markets are cyclical and our ability to
maintain our competitive position over the long term is based on our
ability to acquire and develop quality deposits, hire and retain a skilled
workforce and to manage our costs.
LABOR
MATTERS
At
December 31, 2008, we employed approximately 29,300 people. Additionally, there
are approximately 10,300 contractor employees working at our Grasberg minerals
district and approximately 400 contractor employees at Atlantic Copper.
Employees represented by unions are listed below, with the approximate number of
employees represented and the expiration date of the applicable union
agreements.
|
Number
of
|
|||
|
Union-
|
|||
|
Number
of
|
Represented
|
||
|
Location
|
Unions
|
Employees
|
Expiration
Date
|
|
PT
Freeport Indonesia – Indonesia
|
1
|
5,650
|
October
2009
|
|
Tenke
Fungurume – DRC
|
2
|
2,525
|
May
2010
|
|
Cerro
Verde – Peru
|
1
|
1,014
|
August
2011
|
|
Candelaria
– Chile
|
2
|
463
|
October
2009
|
|
El
Abra – Chile
|
2
|
566
|
July
2012
|
|
Chino
– New Mexico
|
1
|
231
|
November
2009
|
|
Atlantic
Copper – Spain
|
2
|
179
|
December
2007a
|
|
Stowmarket
– United Kingdom
|
1
|
36
|
May
2011
|
|
Bayway
– New Jersey
|
1
|
53
|
April
2010
|
|
Rotterdam
– The Netherlands
|
2
|
57
|
March
2011
|
|
Aurex
– Chile
|
1
|
32
|
February
2010
|
|
a.
|
The
contract has been provisionally extended and is currently being
renegotiated.
|
FM
Services Company (FM Services), a wholly owned subsidiary of FCX, furnishes
certain executive, administrative, financial, accounting, legal, tax and similar
services to us. As of December 31, 2008, FM Services had 184 employees. FM
Services employees also provide these services to two other publicly traded
companies.
ENVIRONMENTAL
AND RECLAMATION MATTERS
The costs
of complying with environmental laws is a fundamental and substantial cost of
our business. For information about environmental regulation, litigation and
related costs, please see Item 1A. “Risk Factors - Environmental Risks;” Item 3.
“Legal Proceedings;” Note 1 – “Summary of Significant Accounting Policies -
Environmental Expenditures and Asset Retirement Obligations;” and Note
15 – “Contingencies - Environmental and Asset Retirement
Obligations.”
COMMUNITY
AND HUMAN RIGHTS
We have
adopted policies that govern our working relationships with the communities
where we operate that are designed to guide our practices and programs in a
manner that respects basic human rights and the culture of the local people
impacted by our operations. We continue to make significant expenditures on
community development, education, training and cultural programs, which
include:
· comprehensive job training
programs
· basic education programs
· public health programs, including
malaria
control
· agricultural assistance
programs
· small and medium enterprise development
programs
· cultural preservation
programs
·
water and sewage treatment projects
·
clean water access
· charitable donations
In
December 2000, we endorsed the joint U.S. State Department-British Foreign
Office Voluntary Principles on Human Rights and Security (“Voluntary
Principles”). Several major natural resources companies and international human
rights organizations participated in developing the Voluntary Principles and
have endorsed them. We participated in developing these principles and they are
incorporated into our human rights policy.
We
believe that our social and economic development programs are responsive to the
issues raised by the local communities near our areas of operation and should
help us maintain good relations with the surrounding communities and avoid
disruptions of mining operations. Nevertheless, social and political instability
in the area
may
adversely impact our mining operations. See Item 1A. – “Risk
Factors.”
South
America. Cerro Verde has provided a variety of community support
projects over the years. During 2006, as a result of discussions with local
mayors in the Arequipa region, Cerro Verde agreed to contribute to the design
and construction of domestic water and sewage treatment plants for the benefit
of the region. These facilities are being designed in a modular fashion so that
initial installations can be readily expanded in the future. We have
funded approximately 150 million Peruvian nuevo soles (approximately $49
million) as of December 31, 2008 to a designated bank account to be used
for financing Cerro Verde’s share of the construction costs of these
facilities.
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
period when copper prices exceed certain levels that are adjusted annually. The
contribution is equal to 3.75 percent of after-tax profits, of which 2.75
percent is contributed to a local mining fund and 1.00 percent to a regional
mining fund. Cerro Verde’s contributions totaled $28 million in 2008 and $49
million in 2007.
Indonesia. In
1996, PT Freeport Indonesia established the Freeport Partnership Fund for
Community Development (formerly the Freeport Fund for Irian Jaya Development),
through which PT Freeport Indonesia has made available funding and technical
assistance to support the economic, health, education and social development of
the area. PT Freeport Indonesia has committed through 2011 to provide one
percent of its annual revenue for the development of the local people in its
area of operation through the Partnership Fund. Our share of contributions to
the Partnership Fund totaled $34 million in 2008, $48 million in 2007 and $44
million in 2006. Our joint venture partner, Rio Tinto, also contributes to this
fund and, including their share, the contributions totaled $35 million in 2008,
$53 million in 2007 and $48 million in 2006.
The
Amungme and Kamoro Community Development Organization (Lembaga Pembangunan Masyarakat
Amungme dan Kamoro or LPMAK) oversees disbursement of the program
funds we contribute to the Partnership Fund. LPMAK is governed by a board of
commissioners and a board of directors, which are comprised of representatives
from the local Amungme and Kamoro tribal communities, government leaders, church
leaders, and one representative of PTFI on each board. The Amungme and Kamoro
people are original inhabitants of the land in our area of
operations.
Security Matters in
Indonesia. Consistent with our COW
in Indonesia and the requirement to protect our employees and property, we have
taken appropriate steps to provide a safe and secure working environment. As
part of its security program, PT Freeport Indonesia maintains its own internal
security department, which performs functions such as protecting company
facilities, monitoring the shipment of company goods through the airport and
terminal, assisting in traffic control and aiding rescue operations. PT Freeport
Indonesia’s civilian security employees (numbering approximately 750) are
unarmed and perform duties consistent with their internal security role. PT
Freeport Indonesia’s share of costs for its internal civilian security
department totaled approximately $22 million for 2008, $17 million for 2007 and
$14 million for 2006. The security department has received human rights training
and each member is required to certify his or her compliance with our human
rights policy.
PT
Freeport Indonesia, and all businesses and residents of Indonesia, rely on the
Government of Indonesia for the maintenance of public order, upholding the rule
of law and the protection of personnel and property. The Grasberg minerals
district has been designated by the Government of Indonesia as one of
Indonesia’s vital national assets. This designation results in the police and to
a lesser extent, the military, playing a significant role in protecting the area
of our operations. The Government of Indonesia is responsible for employing
police and military personnel and directing their operations.
From the
outset of PT Freeport Indonesia’s operations, the government has looked to PT
Freeport Indonesia to provide logistical and infrastructure support and
assistance for these necessary services because of the limited resources of the
Indonesian government and the remote location of and lack of development in
Papua. PT Freeport Indonesia’s financial support for the Indonesian government
security institutions assigned to the operations area represents a prudent
response to its requirements to protect its workforce and property, better
ensuring that personnel are properly fed and lodged, and have the logistical
resources to patrol PT Freeport Indonesia’s roads and secure its operating area.
In addition, provision of such support and oversight is consistent with PT
Freeport Indonesia’s obligations under the COW, reflects our philosophy of
responsible corporate citizenship, and is in keeping with our commitment to
pursue practices that will promote human rights.
PT
Freeport Indonesia’s share of support costs for the government-provided
security, currently involving approximately 1,850 Indonesian government security
personnel located in the general area of our operations, was $8 million for
2008, $9 million for 2007 and $9 million for 2006. This supplemental support
consists of various infrastructure and other costs, such as food, housing, fuel,
travel, vehicle repairs, allowances to cover incidental and administrative
costs, and community assistance programs conducted by the military and police.
PT Freeport Indonesia’s capital costs for associated infrastructure was less
than $1 million for each of the three years ended December 31,
2008.
As
reported in January 2006, we have received and responded to requests from U.S.
governmental authorities related to PT Freeport Indonesia’s support of
Indonesian security institutions. We are cooperating fully with these
requests.
Africa. Tenke
Fungurume has committed to assist the communities living within its concession
in the Katanga province of the DRC. Initiatives that have commenced over the
past two years include the building of two schools and the remodeling of a
third, development of over 30 community water wells, construction of roads,
implementation of a malaria control program, agricultural support programs to
local farmers, and support for the development of local small and medium
enterprises. Additionally, we have committed to contribute a portion of net
sales revenue from production to a community development fund to assist the
local communities with development of local infrastructure and related services,
such as those pertaining to health, education and economic development. This
fund will be a platform to work jointly with the local government and community
to further assist them to fulfill their local development plans, meet basic
community needs and promote good governance.
Similar
to our operations in Indonesia, Tenke Fungurume is required to engage government
security institutions to assist with security matters at its concession
area. In this regard, Tenke Fungurume provides food, housing,
monetary allowances and logistical support as well as direct payments to the
government for the provision of the security assigned to the concession
area.
ORE
RESERVES
Recoverable
proven and probable reserves summarized below and detailed on the following
pages have been calculated as of December 31, 2008, in accordance with Industry
Guide 7 as required by the Securities and Exchange Act of 1934. Proven and
probable reserves may not be comparable to similar information regarding mineral
reserves disclosed in accordance with the guidance of other countries. Proven
and probable reserves were determined by the use of mapping, drilling, sampling,
assaying and evaluation methods generally applied in the mining industry, as
more fully discussed below. The term “reserve,” as used in the reserve data
presented here, means that part of a mineral deposit that can be economically
and legally extracted or produced at the time of the reserve determination. The
term “proven reserves” means reserves for which (1) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; (2) grade
and/or quality are computed from the results of detailed sampling; and (3) the
sites for inspection, sampling and measurements are spaced so closely and the
geologic character is sufficiently defined that size, shape, depth and mineral
content of reserves are well established. The term “probable reserves” means
reserves for which quantity and grade are computed from information similar to
that used for proven reserves but the sites for sampling are farther apart or
are otherwise less adequately spaced. The degree of assurance, although lower
than that for proven reserves, is high enough to assume continuity between
points of observation.
Our
reserve estimates are based on the latest available geological and geotechnical
studies. We conduct ongoing studies of our ore bodies to optimize economic
values and to manage risk. We revise our mine plans and estimates of recoverable
proven and probable mineral reserves as required in accordance with the latest
available studies. Our estimates of recoverable proven and probable reserves are
prepared by and are the responsibility of our employees, and a majority of these
estimates are reviewed and verified by independent experts in mining, geology
and reserve determination. Estimated recoverable proven and probable reserves
were determined using long-term average prices of $1.60 per pound for copper,
$550 per ounce for gold, $8.00 per pound for molybdenum, $12.00 per ounce for
silver and $10.00 per pound for cobalt. The London spot metal prices for the
past three years averaged $3.15 per pound for copper and $724 per ounce for
gold, and molybdenum prices for the past three years averaged approximately $28
per pound.
|
Recoverable
Proven and Probable Reservesa at
December 31, 2008
|
|||||||||||
|
Copper
|
Gold
|
Molybdenum
|
Silver
|
Cobalt
|
|||||||
|
(billion
pounds)
|
(million
ounces)
|
(billion
pounds)
|
(million
ounces)
|
(billion
pounds)
|
|||||||
|
North
America
|
28.3
|
0.2
|
2.08
|
56.7
|
-
|
||||||
|
South
America
|
32.2
|
1.3
|
0.40
|
77.5
|
-
|
||||||
|
Indonesia
|
35.6
|
38.5
|
-
|
132.4
|
-
|
||||||
|
Africa
|
5.9
|
-
|
-
|
-
|
0.7
|
||||||
|
Consolidated
basisb
|
102.0
|
40.0
|
2.48
|
266.6
|
0.7
|
||||||
|
Net
equity interestc
|
82.4
|
36.2
|
2.30
|
223.9
|
0.4
|
||||||
|
a.
|
Recoverable
proven and probable reserves are estimated metal quantities from which we
expect to be paid after application of estimated metallurgical recovery
rates and smelter recovery rates, where applicable. Recoverable reserves
are that part of a mineral deposit that we estimate can be economically
and legally extracted or produced at the time of the reserve
determination. Recoverable reserves include estimated recoverable copper
totaling 2.8 billion pounds in leach stockpiles and 1.1 billion
pounds in mill stockpiles, including our joint venture partner’s interest
in the Morenci mine.
|
|
b.
|
Consolidated
basis reserves represent estimated metal quantities after reduction for
joint venture partner interests at the Morenci mine in North America and
at the Grasberg minerals district in
Indonesia.
|
|
c.
|
Net
equity interest reserves represent estimated consolidated basis metal
quantities further reduced for minority interest
ownership.
|
|
Recoverable Proven and
Probable Reserves
|
||||||||||||||||||||||||||
|
Estimated at December 31,
2008
|
||||||||||||||||||||||||||
|
Proven
Reserves
|
Probable
Reserves
|
|||||||||||||||||||||||||
|
Average
Ore Grade
|
Average
Ore Grade
|
|||||||||||||||||||||||||
|
Processing
|
Million
|
Copper
|
Gold
|
Moly
|
Silver
|
Cobalt
|
Million
|
Copper
|
Gold
|
Moly
|
Silver
|
Cobalt
|
||||||||||||||
|
Method
|
metric
tons
|
%
|
g/t
|
%
|
g/t
|
%
|
metric
tons
|
%
|
g/t
|
%
|
g/t
|
%
|
||||||||||||||
|
North America
|
||||||||||||||||||||||||||
|
Morenci
|
Mill
|
181
|
0.55
|
-
|
0.023
|
-
|
-
|
4
|
0.61
|
-
|
0.023
|
-
|
-
|
|||||||||||||
|
Crushed
leach
|
371
|
0.58
|
-
|
-
|
-
|
-
|
19
|
0.55
|
-
|
-
|
-
|
-
|
||||||||||||||
|
ROM
leach
|
2,133
|
0.20
|
-
|
-
|
-
|
-
|
105
|
0.23
|
-
|
-
|
-
|
-
|
||||||||||||||
|
Sierrita
|
Mill
|
1,325
|
0.26
|
-
|
d
|
0.029
|
1.49
|
-
|
142
|
0.24
|
-
|
d
|
0.024
|
1.35
|
-
|
|||||||||||
|
ROM
leach
|
4
|
0.19
|
-
|
-
|
-
|
-
|
2
|
0.16
|
-
|
-
|
-
|
-
|
||||||||||||||
|
Bagdad
|
Mill
|
591
|
0.36
|
-
|
d
|
0.021
|
1.79
|
-
|
175
|
0.31
|
-
|
d
|
0.019
|
1.51
|
-
|
|||||||||||
|
ROM
leach
|
142
|
0.18
|
-
|
-
|
-
|
-
|
143
|
0.12
|
-
|
-
|
-
|
-
|
||||||||||||||
|
Safford
|
Crushed
leach
|
239
|
0.46
|
-
|
-
|
-
|
-
|
211
|
0.29
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Tyrone
|
ROM
leach
|
289
|
0.30
|
-
|
-
|
-
|
-
|
45
|
0.23
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Henderson
|
Mill
|
141
|
-
|
-
|
0.176
|
-
|
-
|
8
|
-
|
-
|
0.176
|
-
|
-
|
|||||||||||||
|
Chino
|
Mill
|
43
|
0.63
|
0.05
|
0.016
|
0.76
|
-
|
4
|
0.58
|
0.04
|
0.017
|
0.71
|
-
|
|||||||||||||
|
ROM
leach
|
83
|
0.48
|
-
|
-
|
-
|
-
|
13
|
0.34
|
-
|
-
|
-
|
-
|
||||||||||||||
|
Miami
|
ROM
leach
|
74
|
0.44
|
-
|
-
|
-
|
-
|
17
|
0.35
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Climaxa
|
Mill
|
63
|
-
|
-
|
0.201
|
-
|
-
|
102
|
-
|
-
|
0.142
|
-
|
-
|
|||||||||||||
|
Cobrea
|
ROM
leach
|
71
|
0.40
|
-
|
-
|
-
|
-
|
2
|
0.23
|
-
|
-
|
-
|
-
|
|||||||||||||
|
5,750
|
0.29
|
-
|
d
|
0.016
|
0.53
|
992
|
0.23
|
-
|
d
|
0.023
|
0.46
|
-
|
||||||||||||||
|
South America
|
||||||||||||||||||||||||||
|
Cerro
Verde
|
Mill
|
486
|
0.47
|
-
|
0.018
|
2.83
|
-
|
2,249
|
0.34
|
-
|
0.013
|
2.05
|
-
|
|||||||||||||
|
Crushed
leach
|
110
|
0.56
|
-
|
-
|
-
|
-
|
81
|
0.48
|
-
|
-
|
-
|
-
|
||||||||||||||
|
ROM
leach
|
39
|
0.28
|
-
|
-
|
-
|
-
|
58
|
0.35
|
-
|
-
|
-
|
-
|
||||||||||||||
|
El
Abra
|
Crushed
leach
|
477
|
0.56
|
|||||||||||||||||||||||