UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2009
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from To
Commission File Number: 1-9916
 
 
Freeport-McMoRan Copper & Gold Inc.
(Exact name of registrant as specified in its charter)

Delaware74-2480931
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization) 
  
One North Central Avenue 
Phoenix, AZ85004-4414
(Address of principal executive offices)(Zip Code)
 
(602) 366-8100
(Registrant's telephone number, including area code)
 
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 ÿo No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       R Yes ÿo No

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.
Large accelerated filer R            Accelerated filer oÿ           Non-accelerated filer o            Smaller reporting company oÿ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ÿ0o Yes R No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       ÿo Yes ÿoNo

On April 30,July 31, 2009, there were issued and outstanding 411,754,522411,795,044 shares of the registrant’s common stock, par value $0.10 per share.

 
 
 

FREFREPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.

TABLE OF CONTENTS

  
 Page
Part I. Financial Information
3
  
Item 1. Financial Statements:
 
  
Condensed Consolidated Balance Sheets (Unaudited)
3
  
Consolidated Statements of Income (Unaudited)
4
  
Consolidated Statements of Cash Flows (Unaudited)
5
  
Consolidated Statement of Equity (Unaudited)
6
  
Notes to Consolidated Financial Statements (Unaudited)
7
  
Report of Independent Registered Public Accounting Firm
1921
  
Item 2. Management's Discussion and Analysis of Financial Condition
 
and Results of Operations
2022
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4961
  
Item 4. Controls and Procedures
4961
  
Part II. Other Information
5061
  
Item 1. Legal Proceedings
5061
  
Item 1A. Risk Factors
5062
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
5063
Item 4. Submission of Matters to a Vote of Security Holders
63
  
Item 6. Exhibits
5063
  
Signature
5164
  
Exhibit Index
E-1
  

2

FREEPORT-McMoRan COPPER & GOLD INC.
PARTPART I.  FINANCIAL INFORMATION

Item 1It.em 1. Financial Statements.

FREEFRPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 March 31, December 31,  June 30, December 31, 
 2009 2008  2009 2008 
 (In Millions)  (In Millions) 
          
ASSETS          
Current assets:          
Cash and cash equivalents $644 $872  $1,319 $872 
Trade accounts receivable 880 374  1,329 374 
Other accounts receivable 830 838  736 838 
Product inventories and materials and supplies, net 2,195 2,192  2,098 2,192 
Mill and leach stockpiles 571 571  585 571 
Other current assets  280  386   269  386 
Total current assets 5,400 5,233  6,336 5,233 
Property, plant, equipment and development costs, net 16,211 16,002  16,092 16,002 
Long-term mill and leach stockpiles 1,147 1,145  1,260 1,145 
Intangible assets, net 359 364  355 364 
Trust assets 139 142  145 142 
Other assets  452  467   436  467 
Total assets $23,708 $23,353  $24,624 $23,353 
          
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts payable and accrued liabilities $1,941 $2,766  $1,820 $2,766 
Accrued income taxes 442 163  589 163 
Current portion of long-term debt and short-term borrowings 389 67 
Current portion of reclamation and environmental liabilities 178 162   191  162 
Current portion of long-term debt and short-term borrowings  87  67 
Total current liabilities 2,648 3,158  2,989 3,158 
Long-term debt, less current portion:          
Senior notes 6,883 6,884  6,542 6,884 
Project financing, equipment loans and other 257 250  292 250 
Revolving credit facility  –  150   –  150 
Total long-term debt, less current portion 7,140 7,284  6,834 7,284 
Deferred income taxes 2,471 2,339  2,632 2,339 
Reclamation and environmental liabilities, less current portion 1,967 1,951  1,978 1,951 
Other liabilities  1,400  1,520   1,360  1,520 
Total liabilities 15,626 16,252  15,793 16,252 
Equity:          
FCX stockholders’ equity:          
5½% Convertible Perpetual Preferred Stock 832 832  832 832 
6¾% Mandatory Convertible Preferred Stock 2,875 2,875  2,875 2,875 
Common stock 53 51  53 51 
Capital in excess of par value 14,760 13,989  14,785 13,989 
Accumulated deficit (8,224) (8,267) (7,636) (8,267)
Accumulated other comprehensive loss (237) (305) (231) (305)
Common stock held in treasury  (3,409)  (3,402)  (3,409)  (3,402)
Total FCX stockholders’ equity 6,650 5,773  7,269 5,773 
Noncontrolling interests in subsidiaries  1,432  1,328 
Noncontrolling interests  1,562  1,328 
Total equity  8,082  7,101   8,831  7,101 
Total liabilities and equity $23,708 $23,353  $24,624 $23,353 
          
 
The accompanying notes are an integral part of these consolidated financial statements.

3

FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

                      
  Three Months Ended Three Months Ended Six Months Ended 
  March 31, June 30, June 30, 
    2009 2008 2009 2008 2009 2008 
    (In Millions, Except Per         
    Share Amounts) (In Millions, Except Per Share Amounts) 
                      
Revenues     $2,602 $5,672 $3,684 $5,441 $6,286 $11,113 
Cost of sales:                    
Production and delivery       1,562 2,721  1,809 2,716  3,371 5,437 
Depreciation, depletion and amortization       232 418  256 462  488 880 
Lower of cost or market inventory adjustments      19  1  –  4  19  5 
Total cost of sales      1,813 3,140  2,065 3,182  3,878 6,322 
Selling, general and administrative expenses      62 84  89 126  151 210 
Exploration and research expenses       30 52  24 80  54 132 
Restructuring and other charges       25  –  (2) –  23  – 
Total costs and expenses      1,930  3,276  2,176  3,388  4,106  6,664 
Operating income      672 2,396  1,508 2,053  2,180 4,449 
Interest expense, net      (131) (165) (158) (140) (289) (305)
Losses on early extinguishment of debt      – (6) – –  – (6)
Gains on sales of assets – 13  – 13 
Other income and expense, net      (14) 2  (3) 9  (17) 11 
Income before income taxes and equity in affiliated companies’       
net earnings      527 2,227 
Income before income taxes and equity in          
affiliated companies’ net earnings 1,347 1,935  1,874 4,162 
Provision for income taxes      (331) (729) (542) (658) (873) (1,387)
Equity in affiliated companies’ net earnings      11  7  7  7  18  14 
Net income      207 1,505  812 1,284  1,019 2,789 
Net income attributable to noncontrolling interests in subsidiaries    (104) (319)
Net income attributable to noncontrolling          
interests (164) (274) (268) (593)
Preferred dividends      (60) (64) (60) (63) (120) (127)
Net income applicable to common stock     $43 $1,122 
Net income attributable to FCX common          
stockholders$588 $947 $631 $2,069 
                    
Net income per share of common stock attributable to FCX common       
stockholders:          
Net income per share attributable to          
FCX common stockholders:          
Basic     $0.11 $2.93 $1.43 $2.47 $1.56 $5.40 
Diluted      $0.11 $2.64 $1.38 $2.25 $1.54 $4.89 
                    
Average common shares outstanding:          
Weighted-average common shares outstanding:          
Basic      400  383  412  384  406  383 
Diluted       401  449  471  450  426  449 
                    
Dividends declared per share of common stock     $– $0.4375 $– $0.4375 $– $0.875 
 
The accompanying notes are an integral part of these consolidated financial statements.

4

FREFREPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 Three Months Ended  Six Months Ended 
 March 31,  June 30, 
 2009 2008  2009 2008 
 (In Millions)  (In Millions) 
          
Cash flow from operating activities:          
Net income $207 $1,505  $1,019 $2,789 
Adjustments to reconcile net income to net cash (used in) provided by     
Adjustments to reconcile net income to net cash provided by     
operating activities:          
Depreciation, depletion and amortization 232 418  488 880 
Lower of cost or market inventory adjustments 19 1  19 5 
Stock-based compensation 33 47  57 92 
Charges for reclamation and environmental liabilities, including accretion 67 41  112 79 
Losses on early extinguishment of debt – 6  – 6 
Deferred income taxes 73 (48) 61 (114)
Gains on sales of assets – (13)
Elimination of profit on PT Freeport Indonesia sales to PT Smelting 37 5 
Increase in long-term mill and leach stockpiles (3) (47) (31) (111)
Changes in other assets and liabilities 71 59 
Amortization of intangible assets/liabilities and other, net 33 48  36 56 
(Increases) decreases in working capital:          
Accounts receivable (455) (950) (803) (921)
Inventories (35) (81) 53 (374)
Other current assets 77 1  105 9 
Accounts payable and accrued liabilities (731) (505) (675) (525)
Accrued income and other taxes 249 216  394 (212)
Settlement of reclamation and environmental liabilities  (24)  (37)  (47)  (86)
Net cash (used in) provided by operating activities  (258)  615 
Net cash provided by operating activities  896  1,624 
          
Cash flow from investing activities:          
Capital expenditures:          
North America copper mines (72) (151) (100) (303)
South America copper mines (74) (63) (111) (166)
Indonesia (55) (115) (128) (223)
Africa (251) (143) (458) (384)
Other (67) (36) (97) (87)
Proceeds from the sale of assets and other, net  3  21   (1)  55 
Net cash used in investing activities  (516)  (487)  (895)  (1,108)
          
Cash flow from financing activities:          
Net proceeds from sale of common stock 740 –  740 – 
Proceeds from debt 101 473 
Proceeds from revolving credit facility and other debt 155 524 
Repayments of revolving credit facility and other debt (225) (118) (285) (384)
Cash dividends paid:          
Common stock – (169) – (337)
Preferred stock (60) (64) (120) (127)
Noncontrolling interests –  (49) (63) (280)
Net payments for stock-based awards (7) (8)
Net (payments for) proceeds from stock-based awards (7) 22 
Excess tax benefit from stock-based awards – 12  – 25 
Contributions from noncontrolling interests 29 – 
Bank fees and other  (3)  –   (3)  63 
Net cash provided by financing activities  546  77 
Net cash provided by (used in) financing activities  446  (494)
          
Net (decrease) increase in cash and cash equivalents (228) 205 
Net increase in cash and cash equivalents 447 22 
Cash and cash equivalents at beginning of year  872  1,626   872  1,626 
Cash and cash equivalents at end of period $644 $1,831  $1,319 $1,648 
 
The accompanying notes are an integral part of these consolidated financial statements.

5

FREFREPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENT OF EQUITY (Unaudited)

 Freeport-McMoRan Copper & Gold Inc. Stockholders’ Equity      FCX Stockholders’ Equity     
 Convertible Perpetual Mandatory Convertible         Common Stock      Convertible Perpetual Mandatory Convertible       Accumu-lated Common Stock       
 Preferred Stock Preferred Stock Common Stock     Accumulated Held in Treasury Noncontrolling    Preferred Stock Preferred Stock Common Stock     Other Held in Treasury Total FCX     
 Number   Number   Number   Capital in Accumu- Other Number   Interests    Number   Number   Number   Capital in Accumu- Compre- Number   Stock- Non-   
 of At Par of At Par of At Par Excess of lated Comprehensive of At in Total  of At Par of At Par of At Par Excess of lated hensive of At holders’ controlling Total 
 Shares Value Shares Value Shares Value Par Value Deficit Loss Shares Cost Subsidiaries Equity  Shares Value Shares Value Shares Value Par Value Deficit Loss Shares Cost Equity Interests Equity 
 (In Millions)  (In Millions) 
                                                        
Balance at December 31, 2008 1 $832 29 $2,875 505 $51 $13,989 $(8,267)$(305) 121 $(3,402)$1,328 $7,101  1 $832 29 $2,875 505 $51 $13,989 $(8,267)$(305) 121 $(3,402)$5,773 $1,328 $7,101 
Sale of common stock – – – – 27 2 738 – – – – – 740  – – – – 27 2 738 – – – – 740 – 740 
Exercised and issued stock-based awards – – – – 1 – – – – – – – –  – – – – 1 – 1 – – – – 1 – 1 
Stock-based compensation costs – – – – – – 33 – – – – – 33 
Stock-based compensation – – – – – – 57 – – – – 57 – 57 
Tender of shares for stock-based awards – – – – – – – – – – (7) – (7) – – – – – – – – – – (7) (7) – (7)
Dividends on preferred stock – – – – – – – (60) – – – – (60) – – – – – – – (120) – – – (120) – (120)
Distributions to noncontrolling interests – – – – – – – – – – – – (63) (63)
Contributions from noncontrolling interests – – – – – – – – – – – – 29 29 
Comprehensive income:                                                        
Net income – – – – – – – 103 – – – 104 207  – – – – – – – 751 – – – 751 268 1,019 
Other comprehensive income,                                                        
net of taxes:                                                        
Unrealized gains on securities – – – – – – – – 1 – – – 1  – – – – – – – – 3 – – 3 – 3 
Translation adjustment – – – – – – – – 1 – – 1 – 1 
Defined benefit plans:                                                        
Net gain during period, net of                           
taxes of $40 million – – – – – – – – 62 – – – 62 
Net gain during period, net                             
of taxes of $39 million – – – – – – – – 61 – – 61 – 61 
Amortization of unrecognized amounts – – – – – – – –  5 – –  –  5  – – – – – – – –  9 – –  9  –  9 
Other comprehensive income – – – – – – – –  68 – –  –  68  – – – – – – – –  74 – –  74  –  74 
Total comprehensive income –  –  –  –  –  –  –  –  –  –  –  –  275  –  –  –  –  –  –  –  –  –  –  –  825  268  1,093 
Balance at March 31, 2009 1 $832  29 $2,875  533 $53 $14,760 $(8,224)$(237) 121 $(3,409)$1,432 $8,082 
Balance at June 30, 2009 1 $832  29 $2,875  533 $53 $14,785 $(7,636)$(231) 121 $(3,409)$7,269 $1,562 $8,831 
                                                        
 
The accompanying notes are an integral part of these consolidated financial statements.

6

FREFREPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.  GENERAL INFORMATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Copper & Gold Inc.’s (FCX) consolidated financial statements and notes contained in its 2008 Annual Report on Form 10-K. The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three-month periodand six-month periods ended March 31,June 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. FCX changed Phelps Dodge Corporation’s (Phelps Dodge) legal name to Freeport-McMoRan Corporation (FMC) in 2008.

2.  RESTRUCTURING AND OTHER CHARGES
During the fourth quarter of 2008, there was a dramatic decline in copper and molybdenum prices. After averaging $3.05 per pound in 2006, $3.23 per pound in 2007 and $3.61 per pound for the first nine months of 2008, London Metal Exchange (LME) spot copper prices declined to a four-year low of $1.26 per pound in December 2008 averaged $1.78 per pound in the fourth quarter of 2008 and closed at $1.32 per pound on December 31, 2008. Additionally, while molybdenum markets have been strong in recent years with prices, averagingwhich averaged approximately $25 per pound in 2006, $30 per pound in 2007 and $33 per pound for the first nine months of 2008, molybdenum prices declined significantly to a four-year low of $8.75 per pound in November 2008, averaged approximately $16 per pound in the fourth quarter of 2008 and closed at $9.50 per pound on December 31, 2008.

While FCX’s long-term strategy of developing its resources to their full potential remains in place, the decline in copper and molybdenum prices in the fourth quarter of 2008 and the deterioration of the economic and credit environment have limited FCX’s ability to invest in growth projects and required FCX to make adjustments to its near-term operating plans. FCX responded to the sudden downturn and uncertain near-term outlook by revising its near-term strategy to protect liquidity while preserving its mineral resources and growth options for the longer term. Accordingly, operating plans were revised in the fourth quarter of 2008 and January 2009 to reflect: (i) curtailment of copper production at higher-cost North America operations and of molybdenum production at the Henderson molybdenum mine; (ii) capital cost reductions; (iii) aggressive cost control, including workforce reductions, reduced equipment purchases that were planned to support expansion projects, a reduction in material and supplies inventory and reductions in exploration, research and administrative costs; and (iv) suspension of FCX’s annual common stock dividend.

Charges recognized in first-quarterthe first six months of 2009 in connection with FCX’s revised operating plans in the fourth quarter of 2008 and January 2009 include restructuring charges of $34$32 million ($31 million to net income applicableattributable to FCX common stockstockholders or $0.07 per diluted share) for contract termination costs, other project cancellation costs, and employee severance and benefit costs;costs, partially offset by pension and postretirement gains of $9 million ($9 million to net income applicableattributable to FCX common stockstockholders or $0.02 per diluted share) for special retirement benefits and curtailments. The restructuring charge reflectscharges reflect workforce reductions (approximately 3,000 employees related to fourth-quarter 2008 revised operating plans and approximately 1,500 employees related to January 2009 revised operating plans) and other charges that reflect an approximate 50 percent total reduction in mining and crushed-leach rates at the Morenci mine in Arizona, an approximate 50 percent reduction in mining and stacking rates at the Safford mine in Arizona, an approximate 50 percent reduction in the mining rate at the Tyrone mine in New Mexico, suspension of mining and milling activities at the Chino mine in New Mexico (with limited residual copper production from leach operations), and an approximate 40 percent reduction in annual production (an approximate 25 percent reduction began in the fourth quarter of 2008) at the Henderson molybdenum mine in Colorado. In addition, the revised operating plans included decisions to defer certain capital projects, including the (i) incremental expansion projects at the Sierrita and Bagdad mines in Arizona, the Cerro Verde mine in Peru and the sulfide project at the El Abra mine in Chile, (ii) the restart of the Miami mine in Arizona and (iii) the restart of the Climax molybdenum mine in Colorado.
 
7

The following table reflects first-quarter 2009 activities associated withsummarizes the liabilities (included in accounts payable and accrued liabilities) incurred in connection with the fourth quarter offourth-quarter 2008 restructuring activities (in millions):

December 31, Additions/   March 31, December 31, Additions/   June 30, 
2008 Adjustments Payments 2009 2008 
Adjustmentsa
 
Paymentsc
 2009 
North America Copper Mines                        
Morenci                        
Employee severance and benefit costs$2 $– $(1)$1 $2 $– $(2)$– 
Contract cancellation and other costs –  5a (5) –  –  5b (5) – 
Other mines                        
Employee severance and benefit costs 12  (2) (7) 3  12  (2) (9) 1 
Contract cancellation and other costs 1  6  (2) 5  1  6  (7) – 
 15  9a (15) 9  15  9b (23) 1 
                        
South America Copper Mines                        
Cerro Verde                        
Contract cancellation and other costs 1  –  (1) –  1  –  (1) – 
Other mines                        
Employee severance and benefit costs 6  –  (3) 3  6  (3) (3) – 
Contract cancellation and other costs –  6  (3) 3  –  3  (3) – 
 7  6  (7) 6  7  –  (7) – 
                        
Africa                        
Employee severance and benefit costs 2  –  –  2  2  –  –  2 
                        
Molybdenum                        
Employee severance and benefit costs 1  1  (2) –  1  1  (2) – 
                        
Rod & Refining                        
Employee severance and benefit costs 4  –  (3) 1  4  –  (3) 1 
                        
Corporate & Other                        
Employee severance and benefit costs 6  –  (5) 1  6  –  (6) – 
Contract cancellation and other costs 3  –  (3) –  3  2  (4) 1 
 9  –  (8) 1  9  2  (10) 1 
                        
Total$38 $16a$(35)$19 $38 $12b$(45)$5 
            
 
a.Includes net reductions of $3 million for employee severance and benefit costs and $1 million for contract cancellation and other costs in second-quarter 2009.
b.  Excludes $3 million for the write off of other current assets in connection with a lease cancellation.
c.  In second-quarter 2009, payments were $10 million ($4 million for employee severance and benefit costs and $6 million for contract cancellation and other costs).

The following table reflects first-quarter 2009 activities associated withsummarizes the liabilities (included in accounts payable and accrued liabilities) incurred in connection with the January 2009 restructuring activities (in millions):

 Additions/   June 30, 
 
Adjustmentsa
 
Paymentsb
 2009 
North America Copper Mines         
Morenci         
Employee severance and benefit costs$13 $(10)$3 
Contract cancellation and other costs 4  (4) – 
Total$17 $(14)$3 
          
 2009   March 31, 
 Additions Payments 2009 
North America Copper Mines         
Morenci         
Employee severance and benefit costs$12 $(2)$10 
Contract cancellation and other costs 3  (1) 2 
Total$15 $(3)$12 
          

3.a.  PENSION AND POSTRETIREMENT BENEFITSIn second-quarter 2009, additions and/or adjustments were $2 million ($1 million for employee severance and benefit costs and $1 million for contract cancellation and other costs).
During the first quarter of 2009, FCX remeasured its plan assets and benefit obligations for the FMC Retirement Plan and the FMC Retiree Medical Plan as a result of employee reductions caused by FCX’s revised operating plans.
b.  In second-quarter 2009, payments were $11 million ($8 million for employee severance and benefit costs and $3 million for contract cancellation and other costs).
 
8

Information as of and for the three months ended March 31, 2009, on the FMC Retirement Plan and the FMC Retiree Medical Plan follows (in millions):

  FMC FMC 
  Retirement Retiree 
  Plan Medical Plan 
Change in benefit obligation:       
Benefit obligation at beginning of period $1,289 $222 
Service cost  6  – 
Interest cost  19  3 
Actuarial gains  (165) (9)
Special retirement benefits and curtailmentsa
  (9) (3)
Benefits paid, net of employee contributions and       
Medicare Part D subsidy (retiree medical plan)  (29) (6)
Benefit obligation at end of period  1,111  207 
        
Change in plan assets:       
Fair value of plan assets at beginning of period  924  – 
Actual return on plan assets  (57) – 
Employer contributions  –  6 
Benefits paid, net of employee contributions  (29) (6)
Fair value of plan assets at end of period  838  – 
        
Funded status $(273)$(207)
        
Discount rate assumption  7.30% 6.90%
a.3.  Resulted from reductions in the workforce caused by the revised mine operating plans (see Note 2 for further discussion).

Following is a reconciliation of the benefit obligation, fair value of plan assets and funded status as of December 31, 2008, for FCX’s pension plans (as reported in FCX’s 2008 Annual Report on Form 10-K) to the FMC Retirement Plan beginning balances shown above (in millions):

    Fair Value   
  Benefit of Plan Funded 
  Obligation Assets Status 
FCX’s pension plans as reported $1,412 $959 $(453)
Less:   FMC plans other than the FMC Retirement Plan,          
and FCX’s SERP, director and excess benefit plans  (123) (35) 88 
FMC Retirement Plan $1,289 $924 $(365)
           
Following is a reconciliation of the benefit obligation, fair value of plan assets and funded status as of December 31, 2008, for FCX’s postretirement medical and life insurance benefit plans (as reported in FCX’s 2008 Annual Report on Form 10-K) to the FMC Retiree Medical Plan beginning balances shown above (in millions):

    Fair Value   
  Benefit of Plan Funded 
  Obligation Assets Status 
FCX’s postretirement medical and life insurance          
benefit plans as reported $257 $– $(257)
Less:   FCX’s medical and life insurance benefit plans          
other than the FMC Retiree Medical Plan  (35) –  35 
FMC Retiree Medical Plan $222 $– $(222)
           
9

The components of net periodic benefit cost for pension and postretirement benefits for the three-month periods ended March 31, 2009 and 2008, follow (in millions):

    Three Months Ended 
    March 31, 
      2009 2008 
Service cost       $9 $9 
Interest cost        27  27 
Expected return on plan assets        (20) (32)
Amortization of prior service cost        –  2 
Amortization of net actuarial loss        8  – 
Curtailments        (4) – 
Special retirement benefits        (5) – 
Net periodic benefit costs       $15 $6 
              
Net periodic benefit costs increased as a result of a decrease in the expected return on plan assets ($12 million) and amortization of actuarial losses ($8 million) primarily in connection with the losses on plan assets, partially offset by gains on special retirement benefits and curtailments ($9 million) resulting from workforce reductions caused by the revised mine operating plans.

4.  EARNINGS PER SHARE
FCX’s basic net income per share of common stock was calculated by dividing net income applicableattributable to common stock by the weighted-average shares of common stock outstanding during the period. The followingFollowing is a reconciliation of net income and weighted-average shares of common stock outstanding for purposes of calculating diluted net income per share for the three monthsthree-month and six-month periods ended March 31,June 30, 2009 and 2008 (in millions, except per share amounts):
                    
   Three Months Ended  Three Months Ended Six Months Ended 
   March 31,  June 30, June 30, 
     2009 2008  2009 2008 2009 2008 
Net income     $207 $1,505  $812 $1,284 $1,019 $2,789 
Net income attributable to noncontrolling interests in          
subsidiaries      (104) (319)
Net income attributable to noncontrolling interests (164) (274) (268) (593)
Preferred dividends      (60) (64)  (60) (63) (120) (127)
Net income applicable to common stock      43 1,122 
Net income attributable to FCX common stockholders 588 947  631 2,069 
Plus income impact of assumed conversion of:                    
6¾% Mandatory Convertible Preferred Stock      – 49  49 48  –a 97 
5½% Convertible Perpetual Preferred Stock      –  15   11  15  23  30 
Diluted net income applicable to common stock     $43 $1,186 
Diluted net income attributable to FCX common          
stockholders $648 $1,010 $654 $2,196 
                    
Weighted-average shares of common stock outstanding:      400 383 
Weighted-average shares of common stock outstanding 412 384  406 383 
Add stock issuable upon conversion, exercise or                    
vesting of:                    
6¾% Mandatory Convertible Preferred Stocka
      –b 39 
6¾% Mandatory Convertible Preferred Stockb
 39 39  –a 39 
5½% Convertible Perpetual Preferred Stock      –b 23  18 23  18 23 
Dilutive stock options      – 2  1 3  1 3 
Restricted stock      1  2   1  1  1  1 
Weighted-average shares of common stock outstanding                    
for purposes of calculating diluted net income per share      401  449   471  450  426  449 
                    
Diluted net income per share of common stock          
attributable to FCX stockholders     $0.11 $2.64 
Diluted net income per share attributable to          
FCX common stockholders $1.38 $2.25 $1.54 $4.89 
          
 
a.Potential income impact of $97 million and additional shares of common stock of approximately 39 million shares for the 6¾% Mandatory Convertible Preferred Stock were excluded for the six months ended June 30, 2009, because they were anti-dilutive.
b.  Preferred stock will automatically convert on May 1, 2010, into between approximately 39 million and 47 million shares of FCX common stock at a conversion rate that will be determined based on FCX’s common stock price. Prior to May 1, 2010, holders may convert at a conversion rate of 1.3654 or approximately 39 million shares.
10
b.  Potential additional shares of common stock ofinto approximately 39 million shares for the 6¾% Mandatory Convertible Preferred Stock and 18 million shares for the 5½% Convertible Perpetual Preferred Stock were excluded for the three months ended March 31, 2009, because they were anti-dilutive.of common stock.

FCX’s convertible instruments are excluded from the computation of diluted net income per share of common stock when including the conversion of these instruments results in an anti-dilutive effect on earnings per share (see footnote ba above). The quarterly dilution threshold for the 5½% Convertible Perpetual Preferred Stock is $0.64 per share and for the 6¾% Mandatory Convertible Preferred Stock is $1.24 per share.

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period also are also excluded from the computation of diluted net income per share of common stock. Excluded amounts were approximately nine8 million stock options with a weighted-average exercise price of $67.00$73.00 for first-quartersecond-quarter 2009 and approximately 9 million stock options with a weighted-average exercise price of $69.73 for the six months ended June 30, 2009. No stockStock options of less than 0.2 million shares were excluded for first-quartersecond-quarter 2008 and the six months ended June 30, 2008.
9

4.  PENSION AND POSTRETIREMENT BENEFITS
During the first quarter of 2009, FCX remeasured its plan assets and benefit obligations for the FMC Retirement Plan and the FMC Retiree Medical Plan as a result of employee reductions caused by FCX’s revised operating plans.

The components of net periodic benefit cost for pension and postretirement benefits for the three-month and six-month periods ended June 30, 2009 and 2008, follow (in millions):

  Three Months Ended Six Months Ended 
  June 30, June 30, 
  2009 2008 2009 2008 
Service cost $8 $9 $17 $18 
Interest cost  28  27  55  54 
Expected return on plan assets  (20) (32) (40) (64)
Amortization of prior service cost  –  1  –  3 
Amortization of net actuarial loss  7  1  15  1 
Curtailments  –  –  (4) – 
Special retirement benefits  –  –  (5) – 
Net periodic benefit costs $23 $6 $38 $12 
              
Net periodic benefit costs increased by $17 million in second-quarter 2009 mainly as a result of a decrease in the expected return on plan assets ($12 million) and amortization of actuarial losses ($6 million) primarily in connection with the losses on plan assets.

Net periodic benefit costs increased by $26 million in the first six months of 2009 mainly as a result of a decrease in the expected return on plan assets ($24 million) and amortization of actuarial losses ($14 million) primarily in connection with the losses on plan assets, partially offset by gains on special retirement benefits and curtailments ($9 million) resulting from workforce reductions caused by the revised operating plans.

5.  INVENTORIES, AND MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):

 March 31, December 31,  June 30, December 31, 
 2009 2008  2009 2008 
Mining Operations:            
Raw materials $1 $1  $1 $1 
Work-in-process 145  128  148  128 
Finished goodsa
 700  703  608  703 
Atlantic Copper:      
Atlantic Copper, S.A. (Atlantic Copper):      
Raw materials (concentrates) 134  164  115  164 
Work-in-process 132  71  128  71 
Finished goods  5  1   10  1 
Total product inventories 1,117  1,068  1,010  1,068 
Total materials and supplies, netb
  1,078  1,124   1,088  1,124 
Total inventories $2,195 $2,192  $2,098 $2,192 
      
 
a.  Primarily includes copper concentrates, anodes, cathodes and rod, and molybdenum.
 
b.��  Materials and supplies inventory is net of obsolescence reserves totaling $21$20 million at March 31,June 30, 2009, and $22 million at December 31, 2008.
10

The following summarizes mill and leach stockpiles (in millions):

 March 31, December 31,  June 30, December 31, 
 2009 2008  2009 2008 
Current:            
Mill stockpiles $22 $10  $9 $10 
Leach stockpiles  549  561   576  561 
Total current mill and leach stockpiles $571 $571  $585 $571 
            
Long-terma:
            
Mill stockpiles $333 $340  $409 $340 
Leach stockpiles  814  805   851  805 
Total long-term mill and leach stockpiles $1,147 $1,145  $1,260 $1,145 
      
 
a.  Metals in stockpiles not expected to be recovered within the next 12 months.

FCX recorded charges for lower of cost or market (LCM) molybdenum inventory adjustments of $19 million ($19 million to net income applicableattributable to FCX common stockstockholders or $0.05$0.04 per diluted share) in first-quarterfor the first six months of 2009 resulting from lower molybdenum prices.

11

6.  INCOME TAXES
FCX’s first-quartersecond-quarter 2009 income tax provision resulted from taxes on international operations ($330538 million) and U.S. operations ($14 million). FCX’s income tax provision for the first six months of 2009 resulted from taxes on international operations ($868 million) and U.S. operations ($5 million). FCX’s effective tax rate for 2009 is expected to be highly sensitive to changes in commodity prices and the mix of income between U.S. and international operations. Taxes provided on income generated fromIncome taxes for FCX’s South America and Indonesia operations are recorded at the applicable statutory rates. However, at certain commodity prices, FCX does not record a tax benefit for losses generated in the U.S., and thesethose losses cannot be used to offset income generated from international operations. These factors have causedThe difference between FCX’s consolidated effective income tax rate of 6347 percent to be substantially higher thanfor the first six months of 2009 and the U.S. federal statutory rate of 35 percent.percent primarily was attributable to the high proportion of income earned in Indonesia and from losses that were not benefited in North America.

FCX’s first-quartersecond-quarter 2008 income tax provision resulted from taxes on international operations ($579510 million) and U.S. operations ($150148 million). TheFCX’s income tax provision for the first six months of 2008 resulted from taxes on international operations ($1.1 billion) and U.S. operations ($298 million).The difference between FCX’s consolidated effective income tax rate of approximately 33 percent for first-quarterthe first six months of 2008 and the U.S. federal statutory rate of 35 percent primarily was attributable to a U.S. benefit for percentage depletion, partiallypartly offset by withholding taxes and incremental U.S. income tax accrued on foreign earnings.

7.  INTEREST COSTSFINANCIAL INSTRUMENTS
Capitalized interest totaled $45 million in first-quarter 2009 and $22 million in first-quarter 2008.

8.  DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT
Derivative Financial Instruments.FCX and its subsidiaries dodoes not purchase, hold or sell derivative financial instruments unless there is an existing asset or obligation or if FCX anticipates a future activity that is likely to occur and will result in exposure to market risks. FCX does not enter into any derivative financial instruments for speculative purposes. FCX and its subsidiaries havepurposes, but has entered into derivative financial instruments in limited instances to achieve specific objectives. These objectives principally relate to managing risks associated with commodity price, foreign currency and interest rate risks. The fair values of FCX’s derivative financial instruments are based on widely published market prices.

Summarized below are unrealized gains/lossesgains (losses) on derivative financial instruments that are designated and qualify as fair value hedge transactions under Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, for the three months ended March 31, 2009, along with the unrealized gains (losses) on the related hedged item (firm sales commitments) (in millions):

 Three Months Ended Six Months Ended 
 June 30, 2009 June 30, 2009 
   Hedged   Hedged 
 Derivative Item Derivative Item 
Commodity contracts:            
Copper futures and swap contractsa
$1 $(1)$6 $(6)
             
  Derivative Hedged Item 
Commodity contracts:       
Copper futures and swap contractsa
 $5 $(5)
11
Table of Contents
 
a.  Gains (losses) on derivative financial instruments as well as the offsetting gains (losses) on the hedged items (unrecognized firm commitments)Amounts are recorded in revenues. Additionally, FCX realized gains of $3 million during first-quarter 2009 from matured derivative financial instruments that qualify for hedge accounting.

FCX realized gains of $15 million during second-quarter 2009 and $18 million during the first six months of 2009 from matured derivative financial instruments that qualified for hedge accounting, which are recorded in revenues.
Summarized below are the realized and unrealized gains (losses) recognized in income before income taxes and equity in affiliated companies’ net earnings for derivative financial instruments, including embedded derivatives, which do not qualify foras hedge accountingtransactions under SFAS No. 133, as amended for the three months ended March 31, 2009 (in millions):

Three Months Six Months 
Ended Ended 
June 30, 2009 June 30, 2009 
Commodity contracts:          
Embedded derivatives in provisional sales contractsa
 $313 $283 $596 
Embedded derivatives in provisional purchase contractsb
  1  (2) (1)
Copper forward contractsb
  4 
Copper futures and swap contractsa
  32 
PT Freeport Indonesia’s copper forward contractsa
 (97) (97)
Atlantic Copper’s copper forward contractsb
 –  4 
FMC's copper futures and swap contractsa
 17  49 
      
 
a.  Amounts recorded in revenues.
 
b.  Amounts recorded in cost of sales as production and delivery costs.

12

Summarized below are the fair values of unsettled derivative financial instruments recorded on the consolidated balance sheet at March 31,June 30, 2009 (in millions):

Derivatives designated as hedging instruments under            
SFAS No. 133, as amended            
Commodity contracts:            
Copper futures and swap contracts:      
FMC's copper futures and swap contracts:      
Asset positiona
   $5    $7 
Liability positionb
    (1)
            
Derivatives not designated as hedging instruments under            
SFAS No. 133, as amended            
Commodity contracts:            
Embedded derivatives in provisional sales/purchases contracts:b
      
Embedded derivatives in provisional sales/purchases contracts:c
      
Asset position   $220    $136 
Liability position    (10)    (25)
Copper forward contracts:      
Liability positionc
    (1)
Copper futures and swap contracts:d
      
PT Freeport Indonesia’s copper forward contracts:      
Liability positionb
    (24)
Atlantic Copper’s copper forward contracts:      
Liability positionb
    – 
FMC's copper futures and swap contracts:d
      
Asset positiona
    5     7 
Liability positione
    (25)    (9)
      
 
a.  Amounts recorded in other current assets.
 
b.  Amounts recorded either as a net accounts receivable or a net accounts payable except for Atlantic Copper’s copper purchases, which are recorded to product inventories ($(7) million).
c.  Amounts recorded in accounts payable and accrued liabilities.
 
c.  Amounts recorded either as a net accounts receivable or a net accounts payable.
d.  At March 31,June 30, 2009, FCX had paid $26$4 million to brokers for margin requirements, which is recorded in other current assets.
 
e.  Amounts recorded in accounts payable and accrued liabilities ($238 million) and long-term liabilities ($21 million).

Commodity Contracts.  From time to time, FCX has entered into forward, futures and swap contracts to hedge the market risk associated with fluctuations in the prices of commodities it purchases and sells. Derivative financial instruments used by FCX to manage its risks do not contain credit risk-related contingent provisions. As of March 31, 2009, FCX had no price protection contracts relating to its future mine production. A discussion of FCX’s derivative commodity contracts and programs follows.

12
Fair Value Hedges
 
Copper Futures and Swap Contracts. Some of FCX’sFMC’s U.S. copper rod customers request a fixed market price instead of the New York Mercantile Exchange (COMEX) average price in the month of shipment. FCX hedges this price exposure in a manner that allows it to receive the COMEX average price in the month of shipment while the customers pay the fixed price they requested. FCX accomplishes this by entering into copper futures and swap contracts and then liquidating the copper futures contracts and settling the copper swap contracts during the month of shipment, which generally results in FCX receiving the COMEX average price in the month of shipment. Hedge gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses during the three monthsthree-month and six-month periods ended March 31,June 30, 2009, resulting from hedge ineffectiveness. At March 31,June 30, 2009, FCX held copper futures and swap contracts that qualified for 34hedge accounting for 38 million pounds at an average price of $1.69$2.09 per pound, with maturities through January 2011.

Other Derivative Financial Instruments
DerivativeEmbedded derivatives and derivative financial instruments that do not meet the criteria to qualify under FSAS No. 133, as amended, for hedge accounting are discussed below.

Embedded Derivatives. As described in Note 1 to FCX’s 2008 Annual Report on Form 10-K under “Revenue Recognition,” certain FCX copper concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily based on LME or COMEX prices at the time of shipment as specified in the contract. Similarly, FCX purchases copper and molybdenum under contracts that provide for provisional pricing. FCX applies the normal purchase and sale exception under SFAS No. 133, as amended, to the host sales agreements since the contracts do not allow for net settlement and always result in physical delivery. Under SFAS No. 133, as amended,
13
sales and purchases with a provisional sales price contain an embedded derivative (i.e., the price settlement mechanism that is settled after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale or purchase of the metals contained in the concentrates or cathodes at the then-current LME or COMEX price. Mark-to-marketThe embedded derivatives are marked to market at the period-end forward prices, with price fluctuations recorded through the settlement date are reflected in revenues for sales contracts and in cost of sales as production and delivery costs for purchase contracts. At March 31,June 30, 2009, FCX had embedded derivatives on 407624 million pounds of copper sales (net of noncontrolling interests), with maturities through November 2009, 370 thousand ounces of gold sales (net of noncontrolling interests), with maturities through August 2009, and 57140 million pounds of copper purchases, with maturities through JulyOctober 2009 and 1 million pounds of molybdenum purchases, with maturities through August 2009.

Copper Forward Contracts.In order to reduce short-term price volatility in earnings and cash flows,early April 2009, FCX entered into copper forward sales contracts (not included in the table above) in early April 2009 to lock in prices at an average of $1.86 per pound on 355 million pounds of PT Freeport Indonesia’s provisionally priced copper sales at March 31, 2009. These economic hedge transactions are scheduledintended to finalreduce short-term price from Aprilvolatility in earnings and cash flows. Gains and losses for these economic hedge transactions are recorded in revenues. At June 30, 2009, FCX held copper forward sales contracts on 63 million pounds of provisionally priced sales, with maturities through July 2009. From time to time, FCX may enter into similar transactions to lock in pricing on provisionally priced sales, but FCX does not intend to change its long-standing policy of not hedging future copper production.

Copper Forward Contracts.Atlantic Copper enters into forward copper contracts designed to hedge its copper price risk whenever its physical purchases and sales pricing periods do not match. These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in cost of sales. At March 31,June 30, 2009, Atlantic Copper held forward copper purchase contracts for 83 million pounds at an average price of $1.69$2.26 per pound, with maturities through MayAugust 2009.

Copper Futures and Swap Contracts. In addition to the contracts discussed above that qualify for fair value hedge accounting, that are discussed above, FCX also has similar contracts with its U.S. copper rod customers that do not qualify for hedge accounting because of certain terms in the sales contracts. Gains and losses for these economic hedge transactions are recorded in revenues. At March 31,June 30, 2009, FCX held copper futures and swap contracts for 4925 million pounds at an average price of $2.27$2.36 per pound, with maturities through December 2010.

FromForeign Currency Exchange Contracts.  As a global company, FCX transacts business in many countries and in many currencies. Foreign currency transactions of FCX’s international subsidiaries increase its risks because exchange rates can change between the time agreements are made and the time foreign currency transactions are settled. FCX may hedge or protect its international subsidiaries’ foreign currency transactions from time to time FCX or its subsidiaries may enterby entering into foreign currencyforward exchange contracts to lock in or minimize the effects of fluctuations in exchange ratesrates. FCX had no outstanding foreign currency exchange contracts at June 30, 2009.
13
Interest Rate Swap Contracts.  From time to time, FCX or its subsidiaries may enter into interest rate swaps to manage its exposure to interest rate changes on a portion of its debt. Floating-rate debt exposes FCX to increasing costs from rising interest rates. FCX may enter into interest rate swap contracts to lock in an interest rate considered to be favorable in order to protect against its exposure to variability in future interest payments attributable to increases in interest rates of the designated floating-rate debt. FCX had no outstanding foreign currency exchange contracts or interest rate swapsswap contracts at March 31,June 30, 2009.

Credit Risk.  FCX is exposed to credit loss when financial institutions with which FCX has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses highly rated financial institutions that meet certain requirements. FCX also periodically reviews the creditworthiness of these institutions to ensure that they are maintaining their ratings. FCX does not anticipate that any of the financial institutions it deals with will default on their obligations. As of June 30, 2009, FCX did not have any significant credit exposure associated with derivative transactions.

Other Financial Instruments.  Other financial instruments include cash and cash equivalents, accounts receivable, trust assets, accounts payable and accrued liabilities, and long-term debt. Refer to Note 17 in FCX’s 2008 Annual Report on Form 10-K8 for further discussion.the fair values of these financial instruments.

Fair Value Measurement.Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable and Accrued Liabilities. The financial statement amount is a reasonable estimate of the fair value because of the short maturity of these instruments and generally negligible credit losses.

Trust Assets. The financial statement amount represents the fair value of trust assets, which is based on quoted market prices.

Long-Term Debt. The financial statement amount represents cost except for long-term debt acquired in the Phelps Dodge acquisition, which was recorded at fair value at the acquisition date.

Capitalized interest totaled $14 million in second-quarter 2009, $33 million in second-quarter 2008, $59 million for the first six months of 2009 and $55 million for the first six months of 2008.

8.  FAIR VALUE MEASUREMENT
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements,” which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 does not require any new fair value measurements under U.S. GAAP; rather this statement establishes a common definition of fair value, provides a framework for measuring fair value under U.S. GAAP and expands disclosure requirements about fair value measurements. In February 2008, FASB issued FASB Staff Position (FSP) No. FAS 157-2, which delayed the effective date of SFAS No. 157 for nonfinancial assets or liabilities that are not required or permitted to be measured at fair value on a recurring basis to fiscal years beginning after November 15, 2008, and interim periods within those years. FCX adopted SFAS No. 157 for financial assets and liabilities recognized at fair value on a recurring basis effective January 1, 2008. This partial adoption of SFAS No. 157 did not have a material impact on FCX’s financial reporting and disclosures as its financial assets are measured using quoted market prices, or Level 1 inputs. FCX adopted SFAS No. 157 for nonfinancial assets or liabilities not valued on a recurring basis (at least annually) effective January 1, 2009, with no material impact on its financial reporting and disclosures.

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The three levels of the fair value hierarchy under SFAS No. 157 are described below:
 
Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
Level 2Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means;
 
Level 3Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
 
14
 
The following table sets forth FCX’s financial assets and liabilities measured at fair value on a recurring basis (in millions):

  Fair Value at June 30, 2009 
  Total Level 1 Level 2 Level 3 
Cash equivalents $1,288 $1,288 $– $– 
Trust assets (current and long-term)  209  209  –  – 
Available-for-sale securities  76  76  –  – 
Embedded derivatives in provisional sales/purchases             
contracts  111  111  –  – 
Other derivative financial instruments, net  (20) (20) –  – 
  $1,664 $1,664 $– $– 
              
  Fair Value at March 31, 2009 
  Total Level 1 Level 2 Level 3 
Cash equivalents $612 $612 $– $– 
Trust assets (current and long-term)  230  230  –  – 
Available-for-sale securities  68  68  –  – 
Embedded derivatives in provisional sales/purchases             
contracts  210  210  –  – 
Other derivative financial instruments, net  (16) (16) –  – 
  $1,104 $1,104 $– $– 
              
Valuation Techniques

Cash Equivalents. The fair value of FCX’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. FCX’s cash equivalents are primarily money market securities, time deposits and U.S. treasury securities.

Trust Assets. The fair value of FCX’s trust assets are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. FCX’s trust assets are primarily money market securities and fixed income funds.

Available-for-sale securities. FCX’s available-for-sale securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The fair value of the available-for-sale securities is calculated as the quoted market price of the security multiplied by the quantity of shares held by FCX.

Embedded derivatives in provisional sales/purchases contracts. FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold sales are valued using quoted market prices based on the forward LME or COMEX prices (copper) and the London Bullion Market Association price (gold) and, as such, are classified within Level 1 of the fair value hierarchy.

Other derivative financial instruments. FCX’s other derivative financial instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets (refer to Note 7 for further discussion).

Summarized below are the carrying amount and fair value of FCX’s financial instruments (in millions):
     
 At June 30, 2009 At December 31, 2008 
 Carrying Fair Carrying Fair 
 Amount Value Amount Value 
Cash and cash equivalentsb
$1,319 $1,319 $872 $872 
Accounts receivablea
 2,065  2,065  1,212  1,212 
Trust assetsb (current and long-term)
 209  209  260  260 
Available-for-sale securitiesb
 76  76  84  84 
Derivative assetsb
 150  150  89  89 
Accounts payable and accrued liabilitiesa
 1,820  1,820  2,688  2,688 
Long-term debt (including amounts due            
within one year)c
 (7,223) (7,093) (7,351) (5,889)
Derivative liabilitiesb
 (59) (59) (578) (578)
             
a.  Fair value approximates the carrying amounts because of the short maturity of these instruments.
b.  Recorded at fair value. Quoted market prices are used to determine fair value.
c.  Generally recorded at cost. Fair value of substantially all of FCX’s long-term debt is estimated based on quoted market prices.

9.  NEW ACCOUNTING STANDARDS
Noncontrolling Interests in Consolidated Financial Statements. In December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51,” which clarifies
15
that noncontrolling interests (minority interests) are to be treated as a separate component of equity and any changes in the ownership interest (in which control is retained) are to be accounted for as capital transactions. However, a change in ownership of a consolidated subsidiary that results in a loss of control is considered a significant event that triggers gain or loss recognition, with the establishment of a new fair value basis in any remaining ownership interests. SFAS No. 160 also provides additional disclosure requirements for each reporting period. SFAS No. 160 applies to fiscal years beginning on or after December 15, 2008, with early adoption prohibited. This statement is required to be adopted prospectively, except for the following provisions, which are to be applied retrospectively: (i) the reclassification of noncontrolling interests to equity in the consolidated balance sheets and (ii) the adjustment to consolidated net income to include net income attributable to both the controlling and noncontrolling interests. FCX adopted SFAS No. 160 effective January 1, 2009.2009, and adjusted its December 31, 2008, condensed consolidated balance sheet to reflect noncontrolling interests in the amount of $1,328 million as a component of equity. In addition, FCX revised its consolidated statements of income for the three and six months ended June 30, 2008, to include net income attributable to both the controlling and noncontrolling interests.

Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion. In May 2008, FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),” which changes the accounting treatment for convertible debt securities that the issuer may settle fully or partially in cash. FSP No. APB 14-1 requires bifurcation of convertible debt instruments into a debt component that is initially recorded at fair value and an equity component that represents the difference between the initial proceeds from issuance of the instrument and the fair value allocated to the debt component. The debt component is subsequently accreted (as a component of interest expense) to par value over its expected life. FSP No. APB 14-1 is effective for fiscal years and interim periods beginning after December 15, 2008, and must be retrospectively applied to all prior periods presented, even if an instrument has matured, converted, or otherwise been extinguished as of the FSP’s effective date. FSP No. APB 14-1 did not have an impact on FCX’s financial reporting.

Employers’ Disclosures about Postretirement Benefit Plan Assets. In December 2008, FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” which provides enhanced guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 revises disclosure requirements on pension and postretirement plan assets from those required in the original SFAS No. 132 after the FASB decided disclosures about fair value measurements for postretirement plan assets were not within the scope of SFAS No. 157. The disclosures about plan assets required by FSP FAS 132(R)-1 are effective for fiscal years ending after December 15, 2009, with early application permitted. Upon initial application, disclosures are not required for earlier periods that are presented for comparative purposes. FCX is currently evaluating the impact that the adoption of FSP No. FAS 132(R)-1 will have on its financial disclosures.

Interim Disclosures about Fair Value. In April 2009, FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value,” which requires disclosures by publicly traded companies about the fair value of financial instruments for interim periods as well as in annual financial statements. This FSP is effective for interim reporting periods ending after June 15, 2009, and was adopted by FCX beginning in second-quarter 2009.

Subsequent Events. In May 2009, FASB issued SFAS No. 165. “Subsequent Events,” which requires disclosure of the date through which an entity has evaluated subsequent events and whether that represents the date the financial statements were issued or were available to be issued. SFAS No. 165 sets forth: (i) the period after the balance sheet during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim and fiscal years ending after June 15, 2009, and shall be applied prospectively. FCX adopted SFAS No. 165 effective second-quarter 2009 and evaluated events after June 30, 2009, and through August 7, 2009, which is the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

Amendments to FASB Interpretation No. 46(R). In June 2009, FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R), which is intended to improve financial reporting by enterprises involved with variable interest entities by providing more relevant and reliable information to users of financial statements. SFAS
 
1516
No. 167 is effective for fiscal years beginning after November 15, 2009, and interim periods within those years. Early adoption is prohibited. FCX is currently evaluating the impact, if any, the adoption of SFAS No. 167 will have on its financial reporting and disclosures.
Accounting Standards Codification. In June 2009, FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162,” which replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS No. 168 is effective for interim and annual reporting periods ending after September 15, 2009, except for certain nonpublic nongovernmental entities. FCX does not expect the adoption of SFAS No. 168 to have a material impact on its financial statements.

10.SUBSEQUENT EVENT
In July 2009, FCX announced that it would redeem all of its outstanding 6⅞% Senior Notes due 2014. The notes will be redeemed on August 20, 2009, at a redemption price of 103.438 percent of the principal amount of $340 million, equivalent to $352 million (plus accrued and unpaid interest). FCX expects to record an approximate $14 million charge to net income in third-quarter 2009 in connection with the redemption.

11.  BUSINESS SEGMENTS
FCX has organized its operations into five primary divisions – North America copper mines, South America copper mines, Indonesia mining, Africa mining and Molybdenum operations. Notwithstanding this structure, FCX internally reports information on a mine-by-mine basis. Therefore, in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” FCX concluded that its operating segments include individual mines. Operating segments that meet certain SFAS No. 131 thresholds are reportable segments. In accordance with this guidance, beginning in first-quarter 2009, the Sierrita mine is no longer a reportable segment.

In third-quarter 2008, FCX revised its presentation of the operating divisions to better reflect management’s view of the consolidated FCX operations. Accordingly, FCX has revised its segment disclosures for the three and six months ended March 31,June 30, 2008, to conform with the current period presentation.

Further discussion of the reportable segments included in FCX’s primary operating divisions, as well as FCX’s other reportable segments – Rod & Refining and Atlantic Copper Smelting & Refining – follows.

North America Copper Mines.  FCX has five operating copper mines in North America – Morenci, Sierrita, Bagdad and Safford in Arizona and Tyrone in New Mexico. The North America copper mines include open-pit mining, sulfide ore concentrating, leaching, and solution extraction and electrowinning (SX/EW) operations. A majority of the copper produced at the North America copper mines is cast into copper rod by FCX’s Rod & Refining operations. The North America mines division includes the Morenci copper mine as a reportable segment.

Morenci. The Morenci open-pit mine, located in southeastern Arizona, primarily produces copper cathodes. FCX owns an 85 percent undivided interest in Morenci through an unincorporated joint venture. The Morenci mine produced approximately 40 percent of FCX’s North America copper during the first six months of 2009.

Other Mines. Other mines include FCX’s other operating southwestern U.S. copper mines – Sierrita, Bagdad, Safford and Tyrone. In addition to copper, the Sierrita and Bagdad mines produce molybdenum concentrates as a by-product. Other mines also include FCX’s southwestern U.S. copper mines that are currently on care-and-maintenance status.

South America Copper Mines.  FCX has four operating copper mines in South America – Cerro Verde in Peru, and Candelaria, Ojos del Salado and El Abra in Chile. These operations include open-pit and underground mining, sulfide ore concentrating, leaching and SX/EW operations. The South America mines division includes the Cerro Verde copper mine as a reportable segment.

Cerro Verde. The Cerro Verde open-pit copper mine, located near Arequipa, Peru, produces copper cathodes and copper concentrates. In addition to copper, the Cerro Verde mine produces molybdenum concentrates as a by-product. FCX owns a 53.56 percent interest in Cerro Verde. The Cerro Verde mine produced approximately 50 percent of FCX’s South America copper during the first six months of 2009.

17
Other Mines. Other mines include FCX’s Chilean copper mines – Candelaria, Ojos del Salado and El Abra – which include open-pit and underground mining, sulfide ore concentrating, leaching and SX/EW operations. In addition to copper, the Candelaria and Ojos del Salado mines produce gold and silver as by-products. FCX owns an 80 percent interest in both the Candelaria and Ojos del Salado mines, and owns a 51 percent interest in the El Abra mine.

Indonesia.  Indonesia mining includes PT Freeport Indonesia’s Grasberg minerals district. PT Freeport Indonesia produces copper concentrates, which contain significant quantities of gold and silver. FCX owns 90.64 percent of PT Freeport Indonesia, including 9.36 percent owned through PT Indocopper Investama. In 1996, FCX established an unincorporated joint venture with Rio Tinto, which 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. After 2021, Rio Tinto will have a 40 percent interest in all production from Block A.

Africa.  Africa mining includes the Tenke Fungurume copper and cobalt mining concessions in the Katanga province of the Democratic Republic of Congo. Construction progressed during first-quarterThe Tenke Fungurume mine includes open-pit mining, leaching and SX/EW operations. In addition to copper, the Tenke Fungurume mine will produce cobalt hydroxide. Copper production commenced in March 2009 and the first copper cathode was producedsold in late March 2009 assecond-quarter 2009. Commissioning activities for the project entered the commissioning and start-up phase.cobalt circuit began during second-quarter 2009. FCX owns an effective 57.75 percent interest in Tenke Fungurume.
16

Molybdenum.  The Molybdenum segment is an integrated producer of molybdenum, with mining, sulfide ore concentrating, roasting and processing facilities that produce high-purity, molybdenum-based chemicals, molybdenum metal powder and metallurgical products, which are sold to customers around the world, and includes the wholly owned Henderson molybdenum mine in Colorado and related conversion facilities. The Henderson underground mine produces high-purity, chemical-grade molybdenum concentrates, which are typically further processed into value-added molybdenum chemical products. This segment also includes a sales company that purchases and sells molybdenum from the Henderson mine as well as from FCX’s North and South America copper mines that produce molybdenum as a by-product. In addition, at times this segment roasts and/or processes material on a toll basis. Toll arrangements require the tolling customer to deliver appropriate molybdenum-bearing material to FCX’s facilities for processing into a product that is returned to the customer, who pays FCX for processing its material into the specified products. The Molybdenum segment also includes FCX’s wholly owned Climax molybdenum mine in Colorado, which has been on care-and-maintenance status since 1995.

Rod & Refining.  The Rod & Refining segment consists of copper conversion facilities located in North America, and includes a refinery, three rod mills and a specialty copper products facility. These operations process copper produced at the North America mines and purchased copper into copper cathode, rod and custom copper shapes. At times these operations refine copper and produce copper rod and shapes for customers on a toll basis. Toll arrangements require the tolling customer to deliver appropriate copper-bearing material to FCX’s facilities for processing into a product that is returned to the customer, who pays FCX for processing its material into the specified products.

Atlantic Copper Smelting & Refining.  Atlantic Copper, S.A. (Atlantic Copper), FCX’s wholly owned smelting unit in Spain, smelts and refines copper concentrates and markets refined copper and precious metals in slimes. PT Freeport Indonesia and the South America copper mines generally sell a portion of their concentrate and cathode (South America) production to Atlantic Copper.

Intersegment Sales. Intersegment sales between FCX’s operations are based on similar arms-length transactions with third parties at the time of the sale. Intersegment sales may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.

Allocations. FCX allocates certain operating costs, expenses and capital expenditures to the operating divisions and individual segments. However, not all costs and expenses applicable to a mine or operation are allocated. All U.S. federal and state income taxes are recorded and managed at the corporate level, whereas foreign income taxes are recorded and managed at the applicable mine or operation. In addition, most exploration and research activities are managed at the corporate level, and those costs along with some selling, general and administrative costs are not allocated to the operating divisions or segments. Accordingly, the following segment information reflects management determinations that may not be indicative of what the actual financial performance of each operating division or segment would be if it was an independent entity.

1718

Business Segments

(In Millions)(In Millions)North America Copper Mines South America Copper Mines Indonesia Africa           (In Millions)North America Copper Mines South America Copper Mines Indonesia Africa           
                    Atlantic                          Atlantic Corporate,   
                    Copper 
Corporate,
                        Copper Other &   
                    Smelting 
Other &
      Other   Cerro Other       Molyb- Rod & Smelting Elimi- FCX 
Morenci 
Other
Mines
 Total 
Cerro
Verde
 
Other
Mines
 Total Grasberg Tenke 
Molyb-
denum
 
Rod &
Refining
 & Refining 
Elimi-
nations
 
FCX
Total
  Morenci Mines Total Verde Mines Total Grasberg Tenke denum Refining & Refining nations Total 
First-Quarter 2009                           
Three Months Ended June 30, 2009Three Months Ended June 30, 2009                           
Revenues:Revenues:                           Revenues:                           
Unaffiliated customersUnaffiliated customers$21 $23 $44 $246 $338 $584 $920a$– $146 $613 $292 $3 $2,602 Unaffiliated customers$18 $27 $45 $342 $465 $807 $1,430a$57 $186 $741 $415 $3 $3,684 
IntersegmentIntersegment 212 362 574 77 41 118 202 – – 6 – (900)– Intersegment 234 424 658 70 7 77 180 – – 6 – (921)– 
Production and deliveryProduction and delivery 190 363 553 149 218 367 350 16 119 614 293 (750)1,562 Production and delivery 144 317 461 153 213 366 415 92b162 743 419 (849)1,809 
Depreciation, depletion and amortizationDepreciation, depletion and amortization 36 39 75 35 30 65 65 3 9 2 8 5 232 Depreciation, depletion and amortization 34 30 64 40 29 69 78 14 13 2 9 7 256 
LCM inventory adjustments – – – – – – – – 19 – – – 19 
Selling, general and administrative expensesSelling, general and administrative expenses – – – – – – 18 – 4 – 2 38 62 Selling, general and administrative expenses – – – – – – 22 – 3 – 5 59 89 
Exploration and research expensesExploration and research expenses – – – – – – – – – – – 30 30 Exploration and research expenses – – – – – – – – – – – 24 24 
Restructuring and other chargesb
 24 (2)22 – 6 6 – – (1)(2)– – 25 
Restructuring chargesRestructuring charges 2 – 2 – (6)(6)– – – – – 2 (2)
Operating income (loss)Operating income (loss) (17)(15)(32)139 125 264 689 (19)(4)5 (11)(220)672 Operating income (loss) 72 104 176 219 236 455 1,095 (49)8 2 (18)(161)1,508 
                                                       
Interest expense, netInterest expense, net 1 2 3 – 1 1 1 (24)– – 1 149 131 Interest expense, net 1 4 5 – – – – 3 – – 1 149 158 
Provision for (benefit from) income taxesProvision for (benefit from) income taxes – – – 47 37 84 288 (1)– – – (40)331 Provision for (benefit from) income taxes – – – 67 70 137 461 (25)– – – (31)542 
Total assets at March 31, 2009 2,079 4,072 6,151 4,002 2,401 6,403 4,765 3,013 1,755 268 875 478 23,708 
Total assets at June 30, 2009Total assets at June 30, 2009 2,022 4,023 6,045 4,016 2,535 6,551 5,312 3,160 1,750 292 842 672 24,624 
Capital expendituresCapital expenditures 29 43 72 37 37 74 55 251 44 3 6 14 519 Capital expenditures 5 23 28 33 4 37 73 207 16 3 6 5 375 
                                                       
                                                       
First-Quarter 2008                           
Three Months Ended June 30, 2008Three Months Ended June 30, 2008                           
Revenues:Revenues:                           Revenues:                           
Unaffiliated customersUnaffiliated customers$134 $111 $245 $612 $861 $1,473 $887a$– $719 $1,680 $665 $3 $5,672 Unaffiliated customers$123 $106 $229 $645 $639 $1,284 $811a$– $715 $1,675 $724 $3 $5,441 
IntersegmentIntersegment 464 787 1,251 117 17 134 165 – – 8 – (1,558)– Intersegment 502 840 1,342 64 80 144 205 – – 8 – (1,699)– 
Production and deliveryProduction and delivery 279 366 645 162 270 432 399 3 460 1,676 651 (1,545)2,721 Production and delivery 303 416 719 207 255 462 439 9 421 1,677 698 (1,709)2,716 
Depreciation, depletion and amortizationDepreciation, depletion and amortization 81 103 184 43 87 130 45 1 39 2 9 8 418 Depreciation, depletion and amortization 80 107 187 46 81 127 48 1 69 1 9 20 462 
LCM inventory adjustmentsLCM inventory adjustments – 1 1 – – – – – – – – – 1 LCM inventory adjustments – 4 4 – – – – – – – – – 4 
Selling, general and administrative expensesSelling, general and administrative expenses – – – – – – 37 – 6 – 8 33 84 Selling, general and administrative expenses – – – – – – 47 – 5 – 6 68 126 
Exploration and research expensesExploration and research expenses – – – – – – – – – – – 52 52 Exploration and research expenses – – – – – – – – 1 – – 79 80 
Operating income (loss)Operating income (loss) 238 428 666 524 521 1,045 571 (4)214 10 (3)(103)2,396 Operating income (loss) 242 419 661 456 383 839 482 (10)219 5 11 (154)2,053 
                                                       
Interest expense, netInterest expense, net 1 3 4 1 – 1 1 (9)– 1 4 163 165 Interest expense, net – 2 2 1 (2)(1)2 – – 1 2 134 140 
Provision for income taxesProvision for income taxes – – – 173 160 333 239 – – – – 157 729 Provision for income taxes – – – 154 121 275 205 – – – – 178 658 
Goodwill at March 31, 2008 1,912 2,299 4,211 763 366 1,129 – 2 703 – – 3 6,048 
Total assets at March 31, 2008 6,960 11,922 18,882 5,464 4,833 10,297 3,932 1,666 4,179 604 994 1,274 41,828 
Goodwill at June 30, 2008Goodwill at June 30, 2008 1,912 2,299 4,211 763 366 1,129 – 2 703 – – 3 6,048 
Total assets at June 30, 2008Total assets at June 30, 2008 7,029 12,057 19,086 5,247 4,967 10,214 4,066 1,952 4,156 605 1,059 1,210 42,348 
Capital expendituresCapital expenditures 77 74 151 17 46 63 115 143 12 3 5 16 508 Capital expenditures 82 70 152 45 58 103 108 241 32 1 7 11 655 
                           
                                                       
a.Includes PT Freeport Indonesia’s sales to PT Smelting totaling $263 million in first-quarter 2009 and $464 million in first-quarter 2008.Includes PT Freeport Indonesia’s sales to PT Smelting totaling $563 million in second-quarter 2009 and $356 million in second-quarter 2008.
  
b.The following table summarizes restructuring and other charges:Includes charges totaling $49 million associated with Tenke Fungurume’s project start-up costs.
 
Restructuring charges$23 $4 $27 $– $6 $6 $– $– $1 $– $– $– $34 
Special retirement benefits and curtailments 1 (6)(5)– – – – – (2)(2)– – (9)
Restructuring and other charges$24 $(2)$22 $– $6 $6 $– $– $(1)$(2)$– $– $25 
                           
 
1819

Business Segments (Continued)

(In Millions)North America Copper Mines South America Copper Mines Indonesia Africa           
                     Atlantic Corporate,   
                     Copper Other &   
   Other   Cerro Other       Molyb- Rod & Smelting Elimi- FCX 
 Morenci Mines Total Verde Mines Total Grasberg Tenke denum Refining & Refining nations Total 
Six Months Ended June 30, 2009                           
Revenues:                           
Unaffiliated customers$39 $50 $89 $588 $803 $1,391 $2,350a$57 $332 $1,354 $707 $6 $6,286 
Intersegment 446 786 1,232 147 48 195 382 – – 12 – (1,821)– 
Production and delivery 334 680 1,014 302 431 733 765 108b281 1,357 712 (1,599)3,371 
Depreciation, depletion and amortization 70 69 139 75 59 134 143 17 22 4 17 12 488 
LCM inventory adjustments – – – – – – – – 19 – – – 19 
Selling, general and administrative expenses – – – – – – 40 – 7 – 7 97 151 
Exploration and research expenses – – – – – – – – – – – 54 54 
Restructuring and other chargesc
 26 (2)24 – – – – – (1)(2)– 2 23 
Operating income (loss) 55 89 144 358 361 719 1,784 (68)4 7 (29)(381)2,180 
                            
Interest expense, net 2 6 8 – 1 1 1 3 – – 2 274 289 
Provision for (benefit from) income taxes – – – 114 107 221 749 (26)– – – (71)873 
Capital expenditures 34 66 100 70 41 111 128 458 60 6 12 19 894 
                            
                            
Six Months Ended June 30, 2008                           
Revenues:                           
Unaffiliated customers$257 $217 $474 $1,257 $1,500 $2,757 $1,698a$– $1,434 $3,355 $1,389 $6 $11,113 
Intersegment 966 1,627 2,593 181 97 278 370 – – 16 – (3,257)– 
Production and delivery 582 782 1,364 369 525 894 838 12 881 3,353 1,349 (3,254)5,437 
Depreciation, depletion and amortization 161 210 371 89 168 257 93 2 108 3 18 28 880 
LCM inventory adjustments – 5 5 – – – – – – – – – 5 
Selling, general and administrative expenses – – – – – – 84 – 11 – 14 101 210 
Exploration and research expenses – – – – – – – – 1 – – 131 132 
Operating income (loss) 480 847 1,327 980 904 1,884 1,053 (14)433 15 8 (257)4,449 
                            
Interest expense, net 1 5 6 2 (2)– 3 – – 2 6 288 305 
Provision for income taxes – – – 327 281 608 444 – – – – 335 1,387 
Capital expenditures 159 144 303 62 104 166 223 384 44 4 12 27 1,163 
                            
                            
a.Includes PT Freeport Indonesia’s sales to PT Smelting totaling $826 million in the first six months of 2009 and $820 million in the first six months of 2008.
  
b.Includes charges totaling $49 million associated with Tenke Fungurume’s project start-up costs.
  
c.The following table summarizes restructuring and other charges:
  
 Restructuring charges$25 $4 $29 $– $– $– $– $– $1 $– $– $2 $32 
 Special retirement benefits and curtailments 1 (6)(5)– – – – – (2)(2)– – (9)
 Restructuring and other charges$26 $(2)$24 $– $– $– $– $– $(1)$(2)$– $2 $23 
                            
20

REPREORTPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
FREEPORT-McMoRan COPPER & GOLD INC.

We have reviewed the condensed consolidated balance sheet of Freeport-McMoRan Copper & Gold Inc. as of March 31,June 30, 2009, and the related consolidated statements of income for the three- and six-month periods ended June 30, 2009 and 2008, the consolidated statements of cash flows for the three-monthsix-month periods ended March 31,June 30, 2009 and 2008, and the consolidated statement of equity for the three-monthsix-month period ended March 31,June 30, 2009. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Freeport-McMoRan Copper & Gold Inc. as of December 31, 2008, and the related consolidated statements of income,operations, cash flows, and stockholders’ equity for the year then ended (not presented herein), and in our report dated February 18, 2009, we expressed an unqualified opinion on those consolidated financial statements and which report included an explanatory paragraph for the Company’s adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” effective January 1, 2007; and SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R,” effective December 31, 2006. As described in Note 9, on January 1, 2009, Freeport-McMoRan Copper & Gold Inc. adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” on a retrospective basis resulting in revisions of the December 31, 2008, consolidated balance sheet. We have not audited and reported on the revised balance sheet reflecting the adoption of SFAS No. 160.


ERNST & YOUNG LLP


Phoenix, Arizona
May 4,August 7, 2009

1921

ItemItem 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW and OUTLOOK

In Management’s Discussion and Analysis of Financial Condition and Results of Operations, “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.subsidiaries. You should read this discussion in conjunction with our financial statements, the related Management’s“Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations” and the discussion of our “Business and Properties” in our Form 10-K for the year ended December 31, 2008, filed with the U.S. Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results. References to “Notes” are Notes included in our “Notes to Consolidated Financial Statements.” Throughout Management's Discussion and Analysis of Financial Condition and Results of Operations all references to earnings or losses per share are on a diluted basis, unless otherwise noted. FCX changed Phelps Dodge’s legal name to Freeport-McMoRan Corporation (FMC) in 2008; therefore, references to FMC and Phelps Dodge represent the same entity.

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 minerals district in the Democratic Republic of Congo (DRC), which we believe is one of the world’s highest potential copper and cobalt concessions.. We also operate Atlantic Copper, our wholly owned copper smelting and refining operation in Spain. Refer to “Operations” for further discussion.

Our mining revenues for first-quarter 2009 include sales of copper (approximately 71 percent), gold (approximately 17 percent) and molybdenum (approximately 5 percent). We currently have five operating copper mines in North America, four in South America, the Grasberg minerals district in Indonesia, and in late March 2009, the first copper cathode was produced at the Tenke Fungurume minerals district in the DRC as the project entered the commissioning and start-up phase. We also have one operating primary molybdenum mine in North America. During first-quarter 2009, approximately 66 percent of our consolidated copper production was from our Grasberg, Cerro Verde and Morenci mines, and approximately 57 percent of our mined copper was sold in concentrate, approximately 23 percent as rod (principally from our North America operations) and approximately 20 percent as cathodes. We produce gold as a by-product at our copper mines, primarily at the Grasberg minerals district in Indonesia, which accounted for approximately 96 percent of our consolidated gold production in first-quarter 2009. During first-quarter 2009, approximately half of our consolidated molybdenum production was from our Henderson molybdenum mine and half was produced as a by-product primarily at our North America copper mines. Refer to “Operations” for further discussion of our mining operations.

Because of the significant reduction in debt following our March 2007 acquisition of Phelps Dodge 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. However, theThe dramatic declines in copper and molybdenum prices in fourth-quarter 2008 and the deterioration of the economic and credit environment have limited our ability to invest in growth projects and required us to make adjustments to our near-term plans.plans in late 2008 and early 2009 (refer to Note 2 for further discussion). Our near-term strategy has beenis designed to protect liquidity while preserving our large mineral resources and growth options for the longer term. Revisions made to our operating and financial plans in late 2008 and early 2009 include:

·  Curtailment of copper production at higher cost North America operations and of molybdenum production at the Henderson molybdenum mine (refer to “Operations” for further discussion);

·  Capital cost reductions, including deferral of most of our project development activities and also reduced capital spending on the remaining development projects in the Grasberg minerals district and at Tenke Fungurume (refer to “Development Projects” for further discussion);

·  Aggressive cost control, including workforce reductions, reduced equipment purchases that were planned to support expansion projects, a reduction in material and supplies inventory and reductions in exploration, research and administrative costs; and
20
·  The suspension of our annual common stock dividend.

The completion in February 2009 of a public offering of 26.8 million shares of FCX common stock at an average price of $28.00 per share generated total proceeds of $750 million (net proceeds of $740 million after fees and expenses). Refer to “Capital Resources and Liquidity – Financing Activities” for further discussion.

While we view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy, we have responded to the sudden downturn and uncertain near-term outlook andWe will continue to review and adjust our operating strategy as market conditions change.

At March 31,Net income attributable to common stock for second-quarter 2009 we had $644 million in consolidated cash ($445 millionreflected improved copper prices, compared to first-quarter 2009, and strong operating performance; however, as expected, results for the second quarter and first six months of which was available to our parent company). We also had no borrowings and $74 million2009 were below the 2008 periods because of letters of credit issued under our $1.5 billion revolving credit facilities, resulting in availability of approximately $1.4 billion. From time to time we may use the facilities for working capital and short-term funding requirements.

The sharp declines inlower copper and molybdenum prices have significantly impacted our consolidated financial results in first-quarter 2009, compared to first-quarter 2008.prices. Refer to “Consolidated Results” for further discussion of our consolidated financial results for the three monththree-month and six-month periods ended March 31,June 30, 2009 and 2008.

Outlook
Consolidated sales from mines are expected to approximate 3.9 billion pounds of copper, 2.32.4 million ounces of gold and 5056 million pounds of molybdenum for 2009, including 955910 million pounds of copper, 650550 thousand ounces of gold and 1115 million pounds of molybdenum for second-quarterin third-quarter 2009. Achievement of theseThese sales volume estimates isare dependent on the achievement of targeted mining rates, the successful operation of production facilities, the impact of weather conditions and other factors.

Consolidated revenues, operating cash flows and net income vary significantly with fluctuations in the market prices of copper, gold and molybdenum, sales volumes and other factors. Based on the above projected consolidated sales volumes for 2009 and assuming average prices of $2.00$2.25 per pound of copper, $900 per ounce of gold and $8$8.00 per pound of molybdenum for the remainder of 2009, our consolidated operating cash flows wouldare expected to approximate $2.5$3.0 billion in 2009, net of an estimated $0.6$0.5 billion for working capital requirements principally reflecting final settlements with customers in first-quarterearly 2009 of prior year provisionally priced sales. Operating cash flows for the remainder of 2009 would be impacted by approximately $240$200 million for each $0.10 per pound change in copper prices, $75$40 million for each $50 per ounce change in gold prices and $30$20 million for each $1 per pound change in molybdenum prices.

Assuming average prices of $2.00$2.25 per pound of copper, $900 per ounce of gold and $8.00 per pound of molybdenum for the remainder of 2009, and using recent prices for commodity-based input costs, we estimate our consolidated unit net cash costs related to our copper mining operations (after by-product credits) would average approximately $0.70 per pound of copper in 2009, compared with $1.16 per pound of copper in 2008. Estimated consolidated unit net cash costs for 2009 are lower when compared to 2008 primarily because of mining in a higher grade section of the effects ofGrasberg open pit, lower operating rates and reduced energy prices and other commodity-based input costs. Because of the impact of lower projected copper and gold sales volumes from Grasberg in the second half of 2009, consolidated unit net cash costs for the second half of 2009 are expected to
22
be higher than in the first half of 2009. Refer to “Consolidated Results – Production and Delivery Costs” for further discussion of consolidated unit net cash costs.

Capital expenditures are expected to approximate $1.4 billion for the full year 2009, including $0.6 billion for sustaining capital and $0.8 billion for major projects (the Tenke Fungurume and Grasberg underground development projects). For 2008, capital expenditures totaled $2.7 billion, which included approximately $1.6 billion for major projects. Lower projected capital expenditures for 2009 are the result of deferring capital spending for most of our project development activities and reduced spending for sustaining capital. Capital spending plans continue to be reviewed and may be revised based on market conditions.
21

COPPER, GOLD AND MOLYBDENUM MARKETS

The graphs below illustrate the movements in metals prices from January 1993 through AprilJuly 2009. World prices for copper, gold and molybdenum have fluctuated significantly during this period. The London Metal Exchange (LME) spot copper price varied from a low of $0.60 per pound in 2001 to a high of $4.08 per pound in July 2008, the London gold price fluctuated from a low of approximately $250 per ounce in 1999 to a high of $1,011 per ounce in March 2008, and the average weekly Metals Week Molybdenum Dealer Oxide price ranged from $1.87 per pound in January 1993 to a high of $39.25 per pound in June 2005. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in our “Risk Factors” contained in Part I, Item 1A of our Form 10-K for the year ended December 31, 2008.

 
*  Excludes Shanghai stocks, producer, consumer and merchant stocks.

The graph above presents LME spot copper prices and reported stocks of copper at the LME and the New York Mercantile Exchange (COMEX) from January 1993 through AprilJuly 2009. During the period 2003 to 2006, global consumption exceeded production, evidenced by the decline in exchange warehouse inventories. Disruptions associated with strikes and other operational issues, combined with growing demand from China and other emerging economies resulted in low levels of inventory from 2006 through most of 2008. However, slowingSlowing consumption has led to increases in inventory levels with combinedin late 2008 and early 2009; however, China’s increased buying activity has contributed to the recent decline in exchange inventories. Combined LME and COMEX stocks rising tototaled approximately 540320 thousand metric tons at March 31, 2009.June 30, 2009, which represents approximately one week of global consumption.

During first-quarter 2009, LME spot copper prices ranged from $1.38 per pound to $1.85 per pound and averaged $1.56 per pound.
23
Turmoil in the United States (U.S.) financial markets and concerns about the global economy negatively impacted copper prices in fourth-quarter 2008;late 2008 and in early 2009; however, copper prices have improved induring the first half of 2009 becauseas a result of increased Chinese buying activity less bearishand improved prospects of global economic sentimentrecovery. During second-quarter 2009, LME spot copper prices ranged from $1.80 per pound to $2.39 per pound and production and supply issues.averaged $2.12 per pound. While the near-term outlook is uncertain, we believe the underlying fundamentals of the copper business remain positive, supported by supply side constraintslimited supplies from existing mines and the absence of significant new development projects. Future copper prices may continueare expected to be volatile and are expectedlikely to be influenced by demand from China, economic activity in the U.S. and other industrialized countries, the timing of the development of new supplies of copper and production levels of mines and copper smelters. During April 2009, copper prices rose as declines in inventory levels signaled an increase in demand; theThe LME spot copper price closed at $2.05$2.61 per pound on April 30,July 31, 2009.

22

The graph above presents London gold prices from January 1993 through AprilJuly 2009. During first-quartersecond-quarter 2009, the environment for gold was positive, but volatile, with gold prices ranging from approximately $810$870 per ounce to $989$982 per ounce and averaging approximately $908$922 per ounce. Growing investment demand economic uncertainty and a weak U.S. dollar are continuing to support gold prices. London gold prices closed at approximately $883$939 per ounce on April 30,July 31, 2009.


24
The graph above presents the Metals Week Molybdenum Dealer Oxide priceprices from January 1993 through AprilJuly 2009. Molybdenum prices have declined significantly from 2008 levels as a result of the financial market turmoil and a decline in demand. During first-quartersecond-quarter 2009, the weekly average price of molybdenum ranged from approximately $8.13$7.83 per pound to approximately $9.50$10.60 per pound and averaged $8.91$9.20 per pound. TheMolybdenum prices have steadily improved over the last several weeks, and the weekly average Metals Week Molybdenum Dealer Oxide price was $8.00$14.00 per pound on April 30,July 31, 2009. The recent increase in molybdenum prices was driven by increased buying activity, slightly improved metallurgical demand in Europe and the continuation of molybdenum production curtailments.
 
2325

CONSOLIDATED RESULTS
   Six Months Ended 
 Second-Quarter June 30, 
 2009 2008 2009 2008 
Financial Data (in millions, except per share amounts)
            
Revenuesa
$3,684b$5,441b$6,286b$11,113b
Operating income$1,508b$2,053b$2,180b$4,449b
Net income$812 $1,284 $1,019 $2,789 
Net income attributable to FCX common stockholdersc
$588 $947 $631 $2,069 
Diluted net income per share of common stock$1.38 $2.25 $1.54 $4.89 
Diluted weighted average common shares outstandingd
 471  450  426  449 
             
Mining Operating Data            
Copper (millions of recoverable pounds)
            
Production 1,069  941  2,110  1,821 
Sales, excluding purchases 1,102  942  2,122  1,853 
Average realized price per pound$2.22 $3.85 $2.03 $3.77 
Site production and delivery costs per pounde
$1.04 $1.59 $1.05 $1.53 
Unit net cash costs per pounde
$0.43 $1.25 $0.54 $1.16 
Gold (thousands of recoverable ounces)
            
Production 802  250  1,397  525 
Sales, excluding purchases 837  265  1,382  545 
Average realized price per ounce$932 $912 $919 $917 
Molybdenum (millions of recoverable pounds)
            
Production 13  18  27  36 
Sales, excluding purchases 16  20  26  40 
Average realized price per pound$10.11 $31.59 $10.65 $31.63 
 First-Quarter 
 2009 2008 
Financial Data (in millions, except per share amounts)
      
Revenues$2,602a,b,c$5,672a,b,c
Operating income$672a,b,c,d,e$2,396a,b,c,e
Net income$207b,c,d,e$1,505b,c,e
Net income applicable to common stockf
$43b,c,d,e$1,122b,c,e
Diluted net income per share of common stock$0.11b,c,d,e$2.64b,c,e
Diluted average common shares outstanding g
 401  449 
       
FCX Mining Operating Data      
Copper (millions of recoverable pounds)
      
Production 1,041  880 
Sales, excluding purchases 1,020  911 
Average realized price per pound$1.72 $3.69 
Site production and delivery costs per poundh
$1.07 $1.47 
Unit net cash costs per poundh
$0.66 $1.06 
Gold (thousands of recoverable ounces)
      
Production 595  275 
Sales, excluding purchases 545  280 
Average realized price per ounce$904 $933 
Molybdenum (millions of recoverable pounds)
      
Production 14  18 
Sales, excluding purchases 10  20 
Average realized price per pound$11.52 $31.67 
a.  Includes the impact of adjustments to provisionally priced concentrate and cathode sales recognized in prior periods. Refer to “Revenues” for further discussion.

a.b.  As discussed in Note 10,11, during 2008 we revised the presentation of our operating divisions to better reflect management’s view of our consolidated operations, and have also reclassified amounts for first-quarterthe second quarter and first six months of 2008 to conform to the current period presentation. Following is a summary of revenues and operating income (loss) by operating division (in millions):

 Second-Quarter 2009 Second-Quarter 2008 
     Operating     Operating 
     Income     Income 
  Revenues  (Loss)  Revenues  (Loss) 
North America copper mines$703 $176 $1,571 $661 
South America copper mines 884  455  1,428  839 
Indonesia mining 1,610  1,095  1,016  482 
Africa mining 57   (49) –  (10)
Molybdenum 186  8  715  219 
Rod & Refining 747  2  1,683  5 
Atlantic Copper Smelting & Refining 415  (18) 724  11 
Corporate, other & eliminations  (918) (161) (1,696) (154)
Total$3,684 $1,508 $5,441 $2,053 
 First-Quarter 2009 First-Quarter 2008 
     Operating     Operating 
     Income     Income 
  Revenues  (Loss)  Revenues  (Loss) 
North America copper mines$618 $(32)$1,496 $666 
South America copper mines 702  264  1,607  1,045 
Indonesia mining 1,122  689  1,052  571 
Africa mining –  (19) –  (4)
Molybdenum 146  (4) 719  214 
Rod & Refining 619  5  1,688  10 
Atlantic Copper Smelting & Refining 292  (11) 665  (3)
Corporate, other & eliminations (897) (220) (1,555) (103)
Total$2,602 $672 $5,672 $2,396 

b.  Includes impacts of adjustments to provisionally priced prior year copper sales. Refer to “Revenues” for further discussion.
 Six Months Ended Six Months Ended 
 June 30, 2009 June 30, 2008 
     Operating     Operating 
     Income     Income 
  Revenues  (Loss)  Revenues  (Loss) 
North America copper mines$1,321 $144 $3,067 $1,327 
South America copper mines 1,586  719  3,035  1,884 
Indonesia mining 2,732  1,784  2,068  1,053 
Africa mining 57  (68) –  (14)
Molybdenum 332  4  1,434  433 
Rod & Refining 1,366  7  3,371  15 
Atlantic Copper Smelting & Refining 707  (29) 1,389  8 
Corporate, other & eliminations (1,815) (381) (3,251) (257)
Total$6,286 $2,180 $11,113 $4,449 
 
c.  Includes unrealized gains on copper derivative contracts entered into in connection with certain of our sales contracts with U.S. copper rod customers totaling $19 million ($19 million toAfter net income applicableattributable to common stock or $0.05 per share) in first-quarter 2009noncontrolling interests and $19 million ($12 million to net income applicable to common stock or $0.03 per share) in first-quarter 2008. These contracts allow us to receive market prices in the month of shipment while the customer pays the fixed price they requested. Refer to Note 8 for further discussion.preferred dividends.
 
d.  First-quarter 2009 includes charges totaling $25 million to operating income ($22 million to net income applicable to common stock or $0.05 per share) for restructuring and other charges associated with our revised operating plans. Refer to Note 2 for further discussion.
 
e.  First-quarter 2009 includes charges of $31 million ($31 million to net income applicable to common stock or $0.08 per share) associated with adjustments to environmental obligations, and $19 million ($19 million to net income applicable to common stock or $0.05 per share) for lower of cost or market (LCM) molybdenum inventory adjustments.
Also includes a reduction in compensation expense attributable to the prior years’ financial results totaling $33 million ($29 million to net income applicable to common stock or $0.07 per share) for first-quarter 2009 and $40 million ($23 million to net income applicable to common stock or $0.05 per share) for first-quarter 2008.
 
f.d.  After net income attributable to noncontrolling interests in subsidiaries and preferred dividends.
g.  ReflectsAs applicable, reflects assumed conversion of our 5½% Convertible Perpetual Preferred Stock and 6¾% Mandatory Convertible Preferred Stock (refer to Note 3). In addition, the 2009 periods include the effect of 26.8 million shares of common stock sold in first-quarter 2008. These securities were not dilutive in first-quarterFebruary 2009.
 
h.e.  Reflects per pound weighted average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines.mines, excluding Africa mining. For reconciliations of the per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Operations – Unit Net Cash Costs” and to “Product Revenues and Production Costs.”

Revenues
Consolidated revenues include the sale of copper rod,concentrates, copper cathodes, copper concentrates,rod, molybdenum, gold and other metals by our North and South America copper mines, the sale of copper concentrates (which also contain significant quantities of gold and silver) by our Indonesia mining operation, the sale of copper cathodes by our Africa mining operation, the sale of molybdenum in various forms by our Molybdenum operations, and the sale of copper anodes,cathodes, copper cathodes,anodes, and gold in anodes and slimes by Atlantic Copper. Consolidated revenues totaled $2.6$3.7 billion in first-quartersecond-quarter 2009 and $6.3 billion for the first six months of 2009, compared with $5.7$5.4 billion in first-quartersecond-quarter 2008 primarily becauseand $11.1 billion for the first six months of the sharp declines in the price of copper.2008. Following is a summary of changes in our consolidated revenues between periods (in millions):

First-quarter 2008 consolidated revenues$5,672 
Price realizations:   
Second Six 
Quarter Months 
Consolidated revenues – 2008 periods$5,441 $11,113 
Higher (lower) price realizations:     
Copper (2,009) (1,797) (3,637)
Gold (16) 17 2 
Molybdenum (198) (335) (533)
Sales volumes:   
Higher (lower) sales volumes:     
Copper 403  616 1,016 
Gold 247  522 768 
Molybdenum (337) (138) (475)
Purchased copper and molybdenum (590)
Adjustments, primarily for copper pricing on prior year open sales (137)
Atlantic Copper revenues (372)
Lower purchased copper and molybdenum (441) (1,031)
Higher (lower) adjustments, for prior period provisionally priced sales     
and for PT Freeport Indonesia’s forward copper sales contracts 31 (231)
Lower Atlantic Copper revenues (309) (682)
Other, net (61) 77  (24)
First-quarter 2009 consolidated revenues$2,602 
Consolidated revenues – 2009 periods$3,684 $6,286 

Lower consolidated revenues in the 2009 periods were primarily caused by lower copper prices. Realized copper prices decreased to an average of $1.72$2.22 per pound in first-quartersecond-quarter 2009 and $2.03 per pound for the first six months of 2009, compared with $3.69$3.85 per pound in first-quarter 2008; realizedsecond-quarter 2008 and $3.77 per pound for the first six months of 2008. Realized gold prices decreasedincreased to an average of $904$932 per ounce in first-quartersecond-quarter 2009 and $919 per ounce for the first six months of 2009, compared with $933$912 per ounce in first-quarter 2008;second-quarter 2008 and realized$917 per ounce for the first six months of 2008. Realized molybdenum prices decreased to an average of $11.52$10.11 per pound in first-quartersecond-quarter 2009 and $10.65 per pound for the first six months of 2009, compared with $31.67$31.59 per pound in first-quartersecond-quarter 2008 and $31.63 per pound for the first six months of 2008.

Consolidated sales volumes in first-quarter 2009 totaled 1.01.1 billion pounds of copper, 545837 thousand ounces of gold and 1016 million pounds of molybdenum in second-quarter 2009 and 2.1 billion pounds of copper, 1.4 million ounces of gold and 26 million pounds of molybdenum for the first six months of 2009, compared with 911942 million pounds of copper, 280265 thousand ounces of gold and 20 million pounds of molybdenum in first-quartersecond-quarter 2008 and 1.9 billion pounds of copper, 545 thousand ounces of gold and 40 million pounds of molybdenum for the first six months of 2008. Higher first-quarter 2009 copperCopper and gold sales volumes were higher in the 2009 periods primarily reflect expected increased production atas a result of mining in a higher grade section of the Grasberg because of higher ore grades. The increase in copper sales volumes wasopen pit, partly offset by lower sales volumes at our North America copper mines as a result of planned curtailed production rates at these operations to reduce production of higher cost volumes.curtailments. Lower molybdenum sales volumes in first-quarterthe 2009 periods reflect the effects of declinescurtailed production in demand, principally in the metallurgical sector.response to lower demand. Refer to “Operations” for further discussion.

During first-quarterthe first half of 2009, approximately 5758 percent of our mined copper was sold in concentrate, approximately 2321 percent as cathodes and approximately 21 percent as rod (principally from our North America operations) and approximately 20 percent as cathodes.. Substantially all of our concentrate sales contracts and some of our cathode sales contracts at our copper mining operations provide final copper
27
pricing in a specified future period (generally one to four months from the shipment date) based primarily on quoted LME prices. We receive market prices based on prices in the specified future period, and the accounting rules applied to these sales result in changes recorded to revenues until the specified future period.that time. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on our provisionalprovisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until the date of final pricing. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing.
25
At December 31, 2008, we hadrising copper prices, our revenues benefit from higher prices received for contracts priced at current market rates and also from an increase related to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper sales of 508 million pounds of copper (net of noncontrolling interests) recorded at an average of $1.39 per pound. Higher prices, during first-quarter 2009 resulted in adjustments to these prior year copper sales and increased consolidated revenues by $128 million ($60 million to net income applicable to common stock or $0.15 per share) in first-quarter 2009, compared with an increase of $263 million ($111 million to net income applicable to common stock or $0.25 per share) in first-quarter 2008.the opposite occurs.

LME spot copper prices averaged $1.56 per pound in first-quarter 2009, compared with our average recorded price of $1.72 per pound. Approximately 70 percent of our first-quarter 2009 consolidated copper sales were provisionally priced at the time of shipment and are subject to final pricing during the remainder of 2009. At March 31, 2009, we had provisionally priced copper sales totalingof 407 million pounds of copper at our copper mining operations (net of noncontrollingintercompany sales and non-controlling interests) recorded at an average of $1.83 per pound, subject to final pricing over the next several months.

pound. In early April 2009, we entered into forward copper sales contracts to lock in prices at an average of $1.86 per pound on 355 million pounds of PT Freeport Indonesia’s provisionally priced copper sales (including intercompany sales) at March 31, 2009, which arewere scheduled to final price from April 2009 through July 2009. From time to time, weAt June 30, 2009, 63 million pounds of copper remained open under these forward copper sales contracts, which final priced in July 2009. We have not entered into additional forward sales contracts since April 2009 for our provisionally priced copper sales, but may enter into future transactions to lock in pricing on provisionally priced sales from time to time to reduce short-term volatility in earnings and cash flows, butflows. However, we do not intend to change our long standinglong-standing policy of not hedging future copper production.

After taking into accountAdjustments to the forward sales contracts on PT Freeport Indonesia’sMarch 31, 2009, provisionally priced copper sales (net of PT Freeport Indonesia’s forward sales contracts) at our copper mining operations resulted in a net increase to consolidated revenues of $43 million ($13 million to net income attributable to FCX common stockholders or $0.03 per share) in second-quarter 2009, compared with $5 million ($1 million to net income attributable to FCX common stockholders or less than $0.01 per share) in second-quarter 2008. Additionally, adjustments to prior year provisionally priced copper sales at our copper mining operations resulted in a net increase to consolidated revenues of $132 million ($62 million to net income attributable to FCX common stockholders or $0.15 per share) for the first six months of 2009, compared with $267 million ($164 million to net income attributable to FCX common stockholders or $0.37 per share) for the first six months of 2008.

LME spot copper prices averaged $2.12 per pound in second-quarter 2009, compared with our average recorded price of $2.22 per pound. Approximately 60 percent of our second-quarter 2009 consolidated copper sales were provisionally priced at the time of shipment and are subject to final pricing during the remainder of 2009. At June 30, 2009, we had provisionally priced copper sales totaling 434 million pounds of copper at our copper mining operations (net of intercompany sales, forward copper sales contracts and non-controlling interests) recorded at an average of $2.25 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the March 31,June 30, 2009, provisional price recorded would have a net impact on our 2009 consolidated revenues of approximately $8$29 million ($414 million to net income applicableattributable to FCX common stock)stockholders). The LME spot copper price closed at $2.05$2.61 per pound on April 30,July 31, 2009.

Production and Delivery Costs
Consolidated production and delivery costs totaled $1.6$1.8 billion in first-quartersecond-quarter 2009 and $3.4 billion for the first six months of 2009, compared with $2.7 billion in first-quartersecond-quarter 2008 and $5.4 billion for the first six months of 2008. Lower production and delivery costs in first-quarterthe 2009 periods primarily reflected the effects of lower operating rates at our North America copper mines and declininglower commodity-based input costs. Energy

Our copper mining operations require a significant amount of energy, principally electricity, diesel, coal and natural gas. In 2009, we expect energy costs are expected to approximate 20 percent of our consolidated copper production costs, in 2009, compared with approximately 25 percent in 2008, and includewhich reflects purchases of approximately 190 million gallons of diesel fuel,fuel; 5,760 gigawatt hours of electricity at our North and South America mines (we generate all of our power at our Indonesia mining operation); 800 thousand metric tons of coal 5,700 gigawatt hours of electricityfor our coal power plant in Indonesia; and 1 million MMBTU (million british thermal units) of natural gas.gas at certain of our North America mines.

ConsolidatedExcluding costs at the Tenke Fungurume mine, consolidated unit net cash costs net(net of by-product credits,credits) related to our copper mining operations totaled $0.66$0.43 per pound of copper in first-quartersecond-quarter 2009 and $0.54 per pound of copper for the first six months of 2009, compared with $1.06$1.25 per pound of copper in first-quartersecond-quarter 2008 and
28
$1.16 per pound of copper for the first six months of 2008. The decrease in unit net cash costs in first-quarterthe 2009 periods reflected higher copper and gold ore grades at Grasberg, the effects of lower operating rates following planned production curtailments at our North America copper mines higher copper ore grades at Grasberg and decreases in energy prices and other commodity-based input costs. We will incorporate Tenke Fungurume in our consolidated unit net cash cost disclosure upon completion of ramp-up activities. Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions, and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements.

Depreciation, Depletion and Amortization
Consolidated depreciation, depletion and amortization expense totaled $232$256 million in first-quartersecond-quarter 2009 and $488 million for the first six months of 2009, compared with $418$462 million in first-quartersecond-quarter 2008 and $880 million for the first six months of 2008. The decrease in depreciation, depletion and amortization expense reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008, partly offset by higher PT Freeport Indonesia expense under the unit-of-production method primarily resulting from higher production at PT Freeport Indonesia in first-quarter 2009.during the 2009 periods.

LCM Inventory Adjustments
Inventories are required to be recorded at the lower of cost or market. As a result of lower molybdenum prices weWe recognized charges of $19 million ($19 million to net income applicableattributable to FCX common stockstockholders or $0.05$0.04 per share) for lower of cost or market (LCM) molybdenum inventory adjustments for the first six months of 2009. In 2008 we also recorded LCM inventory adjustments totaling $4 million ($2 million to net income attributable to FCX common stockholders or $0.01 per share) in first-quarter 2009.second-quarter 2008 and $5 million ($3 million to net income attributable to FCX common stockholders or $0.01 per share) for the first six months of 2008.

Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled $62$89 million in first-quartersecond-quarter 2009 and $151 million for the first six months of 2009, compared with $84$126 million in first-quartersecond-quarter 2008 and $210 million for the first six months of 2008. Lower selling, general and administrative expenses in the 2009 periods primarily reflected loweradministrative cost initiatives and a net decrease in incentive compensation costs because of weaker financial results in 2009 compared with 2008, lower stock-based compensation costs related to a lower FCX common stock price, and changes to certain benefit plans.costs.
26

Exploration and Research Expenses
Consolidated exploration and research expenses totaled $30$24 million in first-quartersecond-quarter 2009 and $54 million for the first six months of 2009, compared with $52$80 million in first-quartersecond-quarter 2008 and $132 million for the first six months of 2008. Exploration activities are being conducted near our existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where we currently operate. Drilling activities were significantly expanded in 2007 and 2008 and were successful in providing significant reserve additions and in identifying potential additional ore adjacent to existing ore bodies. Results indicate opportunities for significant future potential reserve additions at Morenci, Sierrita and Bagdad in North America, at Cerro Verde in South America and in the high potential Tenke Fungurume minerals district.

During 2009, we will focusare focusing on analyzing exploratory data gained through the core drilling previously undertaken.undertaken in addition to conducting new activities. For 2009, exploration expenditures are expected to approximate $75 million.million, compared with $248 million in 2008.

Restructuring and Other Charges
Net restructuring and other charges totaled a net credit of $(2) million (less than $1 million to net income attributable to FCX common stockholders) in second-quarter 2009 and net charges of $25$23 million ($22 million to net income applicableattributable to FCX common stockstockholders or $0.05 per share) for the first six months of 2009. These charges were recognized in first-quarter 2009 associated with our revised operating plans, includingand include contract termination costs, other project cancellation costs and charges for employee severance and benefits, partiallypartly offset by pension and postretirement gains for special retirement benefits and curtailments. Refer to Note 2 for further discussion.

Interest Expense, Net
Consolidated interest expense (before capitalization) totaled $176$172 million in first-quartersecond-quarter 2009 and $187$348 million for the first six months of 2009, compared with $173 million in first-quartersecond-quarter 2008 and $360 million for the first six months of 2008. Capitalized interest totaled $45$14 million in first-quartersecond-quarter 2009 and $59 million for the first six months of 2009, compared with $22$33 million in first-quartersecond-quarter 2008 and $55 million for the first six months of 2008. CapitalizedLower capitalized interest isin second-quarter 2009, compared with second-quarter 2008, primarily relatedrelates to our the
29
Tenke Fungurume development project, for which construction activities associated with the initial development project are substantially complete (refer to “Development Projects” for further discussion), which entered the commissioning and start-up phase in late March 2009. As a result, we expect to recognize significantly less capitalized interest beginning in second-quarter 2009..

Provision for Income Taxes
Our first-quartersecond-quarter 2009 income tax provision resulted from taxes on international operations ($330538 million) and U.S. operations ($14 million). Our income tax provision for the first six months of 2009 resulted from taxes on international operations ($868 million) and U.S. operations ($5 million). Our effective tax rate for 2009 is expected to be highly sensitive to changes in commodity prices and the mix of income between U.S. and international operations. Taxes provided on income generated fromIncome taxes for our South America and Indonesia operations are recorded at the applicable statutory rates. However, at certain commodity prices, we do not record a tax benefit for losses generated in the U.S., and those losses cannot be used to offset income generated from international operations. These factors have causedThe difference between our consolidated effective income tax rate of 6347 percent to be substantially higher thanfor the first six months of 2009 and the U.S. federal statutory rate of 35 percent.percent primarily was attributable to the high proportion of income earned in Indonesia and from losses that were not benefited in North America.

Our first-quartersecond-quarter 2008 income tax provision resulted from taxes on international operations ($579510 million) and U.S. operations ($150148 million). Our income tax provision for the first six months of 2008 resulted from taxes on international operations ($1.1 billion) and U.S. operations ($298 million). The difference between our consolidated effective income tax rate of approximately 33 percent for first-quarterthe first six months of 2008 and the U.S. federal statutory rate of 35 percent primarily was attributable to a U.S. benefit for percentage depletion, partly offset by withholding taxes and incremental U.S. income tax accrued on foreign earnings.

A summary of the approximate amounts in the calculation of our consolidated provision for income taxes for first-quarterthe first six months of 2009 and first-quarter 2008 follows (in millions, except percentages):

 Six Months Ended Six Months Ended 
 First-Quarter 2009 First-Quarter 2008  June 30, 2009 June 30, 2008 
     Income Tax     Income Tax      Income Tax     Income Tax 
 Income Effective Provision Income Effective Provision  Income Effective Provision Income Effective Provision 
 
(Loss)a
 Tax Rate (Benefit) 
(Loss)a
 Tax Rate (Benefit)  
(Loss)a
 Tax Rate (Benefit) 
(Loss)a
 Tax Rate (Benefit) 
U.S. $(288) – $1 $778 19% $150  $(318) (2)% $5 $1,291 23% $298 
South America 253 33% 84 1,024 33% 333  694 32% 221 1,838 33% 608 
Indonesia 689 42% 288 570 42% 239  1,759 43% 749 1,053 42% 444 
Africa (2) 30% (1) - 30% -  (86) 30% (26) – 30% – 
Eliminations and other (125) N/A (41) (145) N/A (3) (175) N/A (56) (20) N/A 19 
Annualized rate adjustmentb
  N/A N/A  –  N/A N/A  10   N/A N/A  (20) N/A N/A  18 
Consolidated FCX $527 
63%c
 $331 $2,227 33% $729  $1,874 
47%c
 $873 $4,162 33% $1,387 
 
a.  Represents income (loss) by geographic location before income taxes and equity in affiliated companies’ net earnings.
27
 
b.  In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our estimated annualized tax rate.
 
c.  Our estimated consolidated effective tax rate for 2009 will vary with commodity price changes and the mix of income from international and U.S. operations. Following is a summary of our estimated annual consolidated effective tax rate using currently projected sales volumes for 2009 and based on various commodity price assumptions for the remainder of 2009:

      Estimated      Estimated
Copper Gold Molybdenum EffectiveCopper Gold Molybdenum Effective
(per pound)  (per ounce)  (per pound) 
Tax Rate(1)
(per pound)  (per ounce)  (per pound) 
Tax Rate(1)
$1.50 $900 $8.00 72%1.75 $900 $8.00 53%
$2.00 $900 $8.00 48%2.25 $900 $8.00 45%
$2.50 $900 $8.00 42%2.75 $900 $8.00 42%
 
(1) Quarterly effective tax rates may vary depending on the mix of income for the quarterly period.

OPERATIONS

North America Copper Mines
We currently have five operating open-pit copper mines in North America – Morenci, Sierrita, Bagdad and Safford in Arizona, and Tyrone in New Mexico. In addition to copper, the Sierrita and Bagdad mines produce molybdenum
30
as a by-product. All of these mining operations are wholly owned, except for Morenci, an unincorporated joint venture, in which we own an 85 percent undivided interest.

The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining operations. The remainder of our North America copper sales is primarily in the form of copper cathode or copper concentrate.

Operating Data. Following is summary operating data for the North America copper mines for the second quarters and first six months of 2009 and 2008.

    Six Months Ended 
  Second-Quarter June 30, 
  2009 2008 2009 2008 
Operating Data, Net of Joint Venture Interest             
Copper (millions of recoverable pounds)
             
Production  272  350  561  677 
Sales, excluding purchases  281  347  582  686 
Average realized price per pound $2.18 $3.82 $1.88 $3.66 
              
Molybdenum (millions of recoverable pounds)
             
Production (by-product)a
  7  7  13  15 
              
100% Operating Data             
SX/EW operations             
Leach ore placed in stockpiles (metric tons per day)  553,700  1,099,500  611,200  1,117,200 
Average copper ore grade (percent)  0.31  0.23  0.30  0.21 
Copper production (millions of recoverable pounds)  201  215  423  432 
              
Mill operations             
Ore milled (metric tons per day)  170,600  257,600  175,700  250,800 
Average ore grade (percent):             
Copper  0.31  0.40  0.33  0.39 
Molybdenum  0.03  0.02  0.03  0.02 
Copper recovery rate (percent)  84.8  84.6  85.3  82.9 
Production (millions of recoverable pounds):             
Copper  89  163  177  299 
Molybdenum (by-product)  7  7  13  15 
a.  Reflects by-product molybdenum production from the North America copper mines. Sales of by-product molybdenum are reflected in the Molybdenum division.

In response to weak market conditions, we revised operating plans at our North America copper mines were revised at the end of 2008 and in early 2009, which includedincluding an approximate 50 percent reduction in mining and crushed-leach rates at Morenci; an approximate 50 percent reduction in mining and stacking rates at the Safford mine; an approximate 50 percenta reduction in the mining rate at the Tyrone mine; and the suspension of mining and milling activities at the Chino mine (with limited residual copper production from leach operations). Operating plans for the North America copper mines will continue to be reviewed and additional adjustments may be made as market conditions warrant.


28

Operating Data. Following is summary operating data for the North Americacurtailed production rates, copper mines for the first quarters of 2009 and 2008.

  First-Quarter 
  2009 2008 
Operating Data, Net of Joint Venture Interest       
Copper (millions of recoverable pounds)
       
Production  289  327 
Sales, excluding purchases  301  339 
Average realized price per pound $1.59 $3.50 
        
Molybdenum (millions of recoverable pounds)
       
Production (by-product)a
  6  8 
        
100% Operating Data, Including Joint Venture Interest       
SX/EW operations       
Leach ore placed in stockpiles (metric tons per day)  669,200  1,134,900 
Average copper ore grade (percent)  0.30  0.19 
Copper production (millions of recoverable pounds)  222  217 
        
Mill operations       
Ore milled (metric tons per day)  180,800  244,000 
Average ore grade (percent):       
Copper  0.35  0.39 
Molybdenum  0.02  0.02 
Copper recovery rate (percent)  85.2  81.2 
Production (millions of recoverable pounds):       
Copper  88  136 
Molybdenum (by-product)  6  8 
a.  Reflects by-product molybdenum production from the North America copper mines. Sales of by-product molybdenum are reflected in the Molybdenum division.

Copper sales from the North America mines totaled 301decreased to 281 million pounds in first-quartersecond-quarter 2009 and 582 million pounds for the first six months of 2009, compared with 339347 million pounds in first-quartersecond-quarter 2008 and 686 million pounds for the first six months of 2008. TheFor the first six months of 2009, the decrease in copper sales volumes, in first-quarter 2009 primarily reflected planned curtailed production rates to reduce productioncompared with the first six months of higher cost volumes,2008, was partly offset by higher production at the Safford copper mine. Production commenced at Safford in December 2007 and was ramped up to design capacity during 2008 before we revised operating plans to curtail production in fourth-quarter 2008.

For 2009, copper sales volumes from our North America copper mines are expected to approximate 1.1 billion pounds and by-product molybdenum production is expected to approximate 2725 million pounds, compared with 1.4 billion pounds of copper and 30 million pounds of by-product molybdenum production in 2008. Production from the North America copper mines in 2010 is currently expected to decline by approximately an additional 200 millionapproximate 1.0 billion pounds, becausereflecting impacts of impacts ofreduced 2009 mining activities on 2010 leaching operations.

31
Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with generally accepted accounting principles (GAAP) in the U.S. and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

29

Gross Profit per Pound of Copper and Molybdenum

The following tables summarize unit net cash costs and gross profit per pound at the North America copper mines for the second quarters and first quarterssix months of 2009 and 2008. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

 Second-Quarter 2009 Second-Quarter 2008 
 By- Co-Product Method By- Co-Product Method 
 Product    Molyb- Product    Molyb- 
 Method Copper 
denuma
 Method Copper 
denuma
 
Revenues, excluding adjustments shown below$2.18 $2.18 $8.43 $3.82 $3.82 $32.85 
                   
Site production and delivery, before net noncash                  
and nonrecurring costs shown below 1.24  1.13  5.34  1.84  1.60  11.70 
By-product creditsa
 (0.21) –  –  (0.70) –  – 
Treatment charges 0.09  0.08  –  0.10  0.10  – 
Unit net cash costs 1.12  1.21  5.34  1.24  1.70  11.70 
Depreciation, depletion and amortization 0.21  0.21  0.36  0.53  0.47  2.54 
Noncash and nonrecurring costs, net 0.15  0.14  0.04  0.06  0.06  0.19 
Total unit costs 1.48  1.56  5.74  1.83  2.23  14.43 
Revenue adjustments, primarily for hedging 0.06  0.06  –  (0.01) (0.01) – 
Idle facility and other non-inventoriable costs (0.08) (0.08) –  (0.04) (0.04) (0.02)
Gross profit$0.68 $0.60 $2.69 $1.94 $1.54 $18.40 
                   
Copper sales (millions of recoverable pounds) 281  281     346  346    
Molybdenum sales (millions of recoverable pounds)b
       7        7 
Six Months Ended Six Months Ended 
First-Quarter 2009 First-Quarter 2008 June 30, 2009 June 30, 2008 
By- Co-Product Method By- Co-Product Method By- Co-Product Method By- Co-Product Method 
Product   Molyb- Product   Molyb- Product   Molyb- Product   Molyb- 
Method Copper 
denuma
 Method Copper 
denuma
 Method Copper 
denuma
 Method Copper 
denuma
 
Revenues, excluding adjustments shown below$1.59 $1.59 $9.71 $3.50 $3.50 $32.75 $1.88 $1.88 $9.02 $3.66 $3.66 $32.80 
                             
Site production and delivery, before net noncash                             
and nonrecurring costs shown below 1.32 1.26  4.28  1.64 1.43 9.75  1.28 1.19 4.85  1.74 1.52 10.68 
By-product creditsa
 (0.18) –  –  (0.77) – –  (0.19) – –  (0.74) – – 
Treatment charges 0.08  0.08  –  0.09  0.09  –  0.08  0.08  –  0.10  0.10  – 
Unit net cash costs 1.22 1.34  4.28  0.96 1.52 9.75  1.17 1.27 4.85  1.10 1.62 10.68 
Depreciation, depletion and amortization 0.24 0.23  0.21  0.53 0.47 2.47  0.23 0.22 0.29  0.53 0.47 2.50 
Noncash and nonrecurring costs, net 0.15  0.15  0.15  0.09  0.09  0.11  0.15  0.15  0.10  0.08  0.07  0.15 
Total unit costs 1.61 1.72  4.64  1.58 2.08 12.33  1.55 1.64 5.24  1.71 2.16 13.33 
Revenue adjustments, primarily for hedging 0.24 0.24  –  0.13 0.13 –  0.15 0.15 –  0.06 0.06 – 
Idle facility and other non-inventoriable costs (0.13) (0.13) –  (0.04) (0.04)��(0.02) (0.10) (0.11) –  (0.04) (0.04) (0.02)
Gross profit (loss)$0.09 $(0.02)$5.07 $2.01 $1.51 $20.40 
Gross profit$0.38 $0.28 $3.78 $1.97 $1.52 $19.45 
                             
Copper sales (millions of recoverable pounds) 301 301     337 337    582 582    683 683   
Molybdenum sales (millions of recoverable pounds)b
      6      8      13      15 
 
a.  Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
 
b.  Reflects molybdenum produced by the North America copper mines.

Unit net cash costs, after by-product credits, for our North America copper mines increaseddecreased to $1.22$1.12 per pound of copper in first-quartersecond-quarter 2009, compared with $0.96$1.24 per pound of copper in first-quartersecond-quarter 2008 primarily
32
reflecting a net decrease in site production and delivery costs ($0.60 per pound) associated with reduced operating rates at higher cost mines and lower input costs, primarily for energy, partly offset by changes in inventory, which included draw downs of sulphuric acid and other components of inventory with higher average costs. The decrease in site production and delivery costs were partly offset by lower molybdenum credits ($0.49 per pound) primarily resulting from lower molybdenum prices.

Unit net cash costs, after by-product credits, for our North America copper mines increased to $1.17 per pound of copper in the first six months of 2009, compared with $1.10 per pound of copper in the first six months of 2008, primarily reflecting lower molybdenum credits ($0.590.55 per pound decrease)pound) resulting from lower molybdenum prices and volumes, partly offset by a decrease in site production and delivery costs ($0.320.46 per pound decrease, including $0.48 per poundpound) associated with lowerreduced operating rates at higher cost mines and $0.17 per poundlower input costs, primarily for reduced energy, costs, partly offset by increaseschanges in inventory, which included draw downs of $0.25 per pound related to draw downssulphuric acid and other components of inventory with higher average costs).costs.

The decrease in depreciation, depletion and amortization in the second quarter and first six months of 2009, compared with the 2008 periods, reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008.

Our five operating North America copper mines have varying cost structures because of differences in ore grades and ore characteristics, processing costs, by-products and other factors. During first-quarter 2009, the Morenci mine, which accounts for approximately 40 percent of North America’s production, had unit net cash costs of $1.18 per pound. Based on current operating plans and assuming average prices of $2.00$2.25 per pound of copper and $8.00 per pound of molybdenum for the remainder of 2009, we estimate that average unit net cash costs, including molybdenum credits, for our North America copper mines would approximate $1.22$1.19 per pound of copper for the year 2009, compared with $1.33 per pound in 2008. Each $1 per pound change in the molybdenum price during the remainder of 2009 would have an approximate $0.015$0.008 per pound impact on the North America copper mines’ 2009 unit net cash costs.

The decrease in depreciation, depletion and amortization in first-quarter 2009, compared with first-quarter 2008, reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008.

South America Copper Mines
We have four operating copper mines in South America – 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.

The South America copper mines include open-pit and underground mining, sulfide ore concentrating, leaching and SX/EW operations. In addition to copper, the Cerro Verde mine produces molybdenum concentrates as a by-product, and the Candelaria and Ojos del Salado mines produce gold and silver as by-products.by-products, and the Cerro Verde mine produced molybdenum concentrates as a by-product. Production from our South America copper mines is sold as copper concentrate or copper cathode under long-term contracts.

In July 2009, Candelaria and its workers successfully negotiated new four-year agreements effective August 1, 2009, that replaced the existing contracts expiring in fourth-quarter 2009.
 
3033

Operating Data. Following is summary operating data for the South America copper mines for the second quarters and first six months of 2009 and 2008.

    Six Months Ended
  Second-Quarter June 30,
  2009 2008 2009 2008
Copper (millions of recoverable pounds)
            
Production  358  369  706  722
Sales  363  366  713  731
Average realized price per pound $2.22 $3.86 $2.10 $3.84
             
Gold (thousands of recoverable ounces)
            
Production  24  25  47  51
Sales  25  26  48  53
Average realized price per ounce $928 $910 $915 $914
             
Molybdenum (millions of recoverable pounds)
            
Production (by-product)a
  –  –b 1  1
             
SX/EW operations            
Leach ore placed in stockpiles (metric tons per day)  260,200  291,500  255,400  282,800
Average copper ore grade (percent)  0.44  0.42  0.45  0.41
Copper production (millions of recoverable pounds)  141  144  278  279
             
Mill operations            
Ore milled (metric tons per day)  186,300  177,200  184,400  173,900
Average ore grade (percent):            
Copper  0.67  0.72  0.68  0.73
Molybdenum  0.02  0.02  0.02  0.02
Copper recovery rate (percent)  90.2  89.7  89.6  90.2
Production (millions of recoverable pounds):            
Copper  217  225  428  443
Molybdenum  –  –b 1  1
a.  Reflects by-product molybdenum production from our Cerro Verde copper mine. Sales of by-product molybdenum are reflected in the Molybdenum segment.
b.  Rounds to less than one million pounds.

In response to weak market conditions, we revised operating plans at our South America copper mines were revised at the end of 2008 and in early 2009. The revised operating plans for 2009 principally reflect the incorporation of reduced input costs; a significant reduction in capital spending plans, including deferral of the planned incremental expansion project at the Cerro Verde mine and a delay in the sulfide project at El Abra; and reduced spending for discretionary items. In addition, we have temporarily curtailed the molybdenum circuit at Cerro Verde. Operating plans for the South America copper mines will continue to be reviewed and additional adjustments may be made as market conditions warrant.

Operating Data. Following is summary operating data for the South America copper mines for the first quarters of 2009 and 2008.

  First-Quarter 
  2009 2008 
Copper (millions of recoverable pounds)
       
Production  348  353 
Sales  350  365 
Average realized price per pound $1.76 $3.78 
        
Gold (thousands of recoverable ounces)
       
Production  23  26 
Sales  23  27 
Average realized price per ounce $902 $936 
        
Molybdenum (millions of recoverable pounds)
       
Production (by-product)a
  1  1 
        
SX/EW operations       
Leach ore placed in stockpiles (metric tons per day)  250,500  274,100 
Average copper ore grade (percent)  0.45  0.39 
Copper production (millions of recoverable pounds)  137  135 
        
Mill operations       
Ore milled (metric tons per day)  182,400  170,700 
Average copper ore grade (percent):       
Copper  0.68  0.74 
Molybdenum  0.02  0.02 
Copper recovery rate (percent)  88.9  90.6 
Production (millions of recoverable pounds):       
Copper  211  218 
Molybdenum  1  1 
a.  Reflects by-product molybdenum production from our Cerro Verde copper mine. Sales of by-product molybdenum are reflected in the Molybdenum segment.

Copper sales from the South America mines totaled 350363 million pounds in first-quartersecond-quarter 2009 compared with 365and 713 million pounds for the first six months of 2009, which approximated sales of 366 million pounds in first-quartersecond-quarter 2008 and 731 million pounds for the first six months of 2008. Lower sales volumes in first-quarter 2009 primarily reflect the mining of lower ore grades at El Abra and Candelaria.

For 2009, consolidated sales volumes from our South America mines are expected to approximate 1.4 billion pounds of copper and 100 thousand ounces of gold, compared with 1.5 billion pounds of copper and 116 thousand ounces of gold in 2008. Lower copper volumes in 2009, compared with 2008, reflect the impact of previously expected mining of lower ore grades at Candelaria. While the revised operating plans for our South America copper mines do not have a significant effect on 2009 production volumes, they are expected to result in lower 2010 production by approximately 100 million pounds of copper.

Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

3134

Gross Profit per Pound of Copper

The following tables summarize unit net cash costs and gross profit per pound at the South America copper mines for the second quarters and first quarterssix months of 2009 and 2008. The below tables reflect unit net cash costs per pound of copper under the by-product and co-product methods as the South America copper mines also had small amounts of molybdenum, gold and silver sales. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

 Second-Quarter 2009 Second-Quarter 2008 
 By-Product Co-Product By-Product Co-Product 
 Method Method Method Method 
Revenues, excluding adjustments shown below$2.22 $2.22 $3.86 $3.86 
             
Site production and delivery, before net noncash            
and nonrecurring costs shown below 1.00  0.95  1.15  1.11 
By-product credits (0.10) –  (0.12) – 
Treatment charges 0.15  0.15  0.19  0.19 
Unit net cash costs 1.05  1.10  1.22  1.30 
Depreciation, depletion and amortization 0.19  0.19  0.34  0.33 
Noncash and nonrecurring costs, net (0.01) –  0.09  0.09 
Total unit costs 1.23  1.29  1.65  1.72 
Revenue adjustments, primarily for pricing on            
prior period open sales 0.26  0.26  0.04  0.04 
Other non-inventoriable costs (0.02) (0.01) (0.02) (0.02)
Gross profit$1.23 $1.18 $2.23 $2.16 
             
Copper sales (millions of recoverable pounds) 363  363  366  366 
Six Months Ended Six Months Ended 
First-Quarter 2009 First-Quarter 2008 June 30, 2009 June 30, 2008 
By-Product Co-Product By-Product Co-Product By-Product Co-Product By-Product Co-Product 
Method Method Method Method Method Method Method Method 
Revenues, excluding adjustments shown below$1.76 $1.76 $3.78 $3.78 $2.10 $2.10 $3.84 $3.84 
                    
Site production and delivery, before net noncash                    
and nonrecurring costs shown below 1.00 0.92  1.08 1.05  1.00 0.94  1.12 1.08 
By-product credits (0.11) –  (0.14) –  (0.11) –  (0.13) – 
Treatment charges 0.14  0.14  0.21  0.21  0.15  0.14  0.19  0.19 
Unit net cash costs 1.03 1.06  1.15 1.26  1.04 1.08  1.18 1.27 
Depreciation, depletion and amortization 0.18 0.17  0.35 0.34  0.19 0.18  0.35 0.34 
Noncash and nonrecurring costs, net 0.02  0.02  0.07  0.07  –  0.01  0.08  0.08 
Total unit costs 1.23 1.25  1.57 1.67  1.23 1.27  1.61 1.69 
Revenue adjustments, primarily for pricing on                    
prior period open sales 0.25 0.25  0.63 0.63 
Idle facility and other non-inventoriable costs (0.02) (0.02) (0.02) (0.01)
prior year open sales 0.15 0.15  0.32 0.32 
Other non-inventoriable costs (0.03) (0.02) (0.03) (0.03)
Gross profit$0.76 $0.74 $2.82 $2.73 $0.99 $0.96 $2.52 $2.44 
                    
Copper sales (millions of recoverable pounds) 350 350  365 365  713 713  731 731 

Unit net cash costs, after by-product credits, for our South America copper mines decreased to $1.03$1.05 per pound of copper in first-quartersecond-quarter 2009, compared with $1.15$1.22 per pound in first-quartersecond-quarter 2008, primarily reflecting lower site production and delivery costs ($0.080.15 per pound decrease, including $0.15 per poundpound) associated with cost reduction and efficiency efforts and  lower input costs, primarily for lower operating costs reflecting the impacts of revised operating plans and $0.07 per pound for lower energy, costs, partly offset by an increase of $0.12 per pound for draw downs of inventory with higher average costs). In addition,costs.

Unit net cash costs, after by-product credits, for our South America copper mines decreased to $1.04 per pound of copper in the first six months of 2009, compared with $1.18 per pound in the first six months of 2008, primarily reflecting lower site production and delivery costs ($0.12 per pound) associated with cost reduction and efficiency efforts and lower input costs, primarily for energy, partly offset by draw downs of inventory with higher average costs.

The decrease in unit net cash costs for the 2009 periods also reflect lower treatment charges ($0.070.04 per pound decrease) associated withdecrease for the quarter and six month periods), which resulted from lower price participation because of lowera decrease in copper prices contributed to lower unit net cash costs for our South America copper mines.prices.
35
The decrease in depreciation, depletion and amortization in the second quarter and first six months of 2009, compared with the 2008 periods, reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008.

Our South America copper mines have varying cost structures because of differences in ore grades and ore characteristics, processing costs, by-products and other factors. During first-quarter 2009, the Cerro Verde mine, which accounts for almost half of South America’s production had unit net cash costs for of $0.97 per pound. Assuming average prices of $2.00$2.25 per pound of copper for the remainder of 2009 and achievement of current 2009 sales, we estimate that average unit net cash costs, after by-product credits, for our South America copper mines would approximate $1.05$1.11 per pound of copper in 2009, compared with $1.14 per pound in 2008.

The decrease in depreciation, depletion and amortization in first-quarter 2009, compared with first-quarter 2008, reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008.

Indonesia Mining
We own 90.64 percent of PT Freeport Indonesia, including 9.36 percent owned through our wholly owned subsidiary, PT Indocopper Investama. The Government of Indonesia owns the remaining 9.36 percent of PT Freeport Indonesia. PT Freeport Indonesia operates under an agreement, called a Contract of Work, with the Government of Indonesia that allows us to conduct exploration, mining and production activities in a 24,700-acre area called Block A located in Papua, Indonesia. Under the Contract of Work, PT Freeport Indonesia also conducts exploration activities in an approximate 500,000-acre area called Block B in Papua. All of PT Freeport Indonesia’s proven and probable mineral reserves and current mining operations, including the Grasberg minerals district, are located in Block A.

In May 2008, FCX signed a Memorandum of Understanding with the Papua provincial government (the Province) whereby the parties agreed to work cooperatively to determine the feasibility of an acquisition by the Province of the PT Freeport Indonesia produces copper concentrates, which contain significant quantities of gold and silver. Substantially all of PT Freeport Indonesia’s copper concentrates are sold under long-term contracts.Indocopper Investama shares at market value.

We have established certain unincorporated joint ventures with Rio Tinto plc (Rio Tinto), an international mining company with headquarters in London, England. Pursuant to the joint venture agreement, Rio Tinto has a 40
32
percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver through 2021 in Block A of PT Freeport Indonesia’s Contract of Work, and, after 2021, a 40 percent interest in all production from Block A.

PT Freeport Indonesia produces copper concentrates, which contain significant quantities of gold and silver. Substantially all of PT Freeport Indonesia’s copper concentrates are sold under long-term contracts.

As originally reported in January 2006, we received and responded to requests from U.S. governmental authorities related to PT Freeport Indonesia’s support of Indonesian security institutions. In May 2009, we were notified by the SEC that the U.S. government's investigation has been completed and no action has been recommended.

In July 2009, PT Freeport Indonesia and its workers successfully negotiated a new two-year agreement effective October 1, 2009, that will replace the existing contract expiring in October 2009.

Indonesian President Susilo Bambang Yudhoyono won reelection to a second five-year term in generally peaceful elections held on July 8, 2009.

On July 17, 2009, two suicide bombers set off explosions inside of the JW Marriott and Ritz-Carlton hotels in Jakarta, Indonesia, that are reported to have killed nine people and injured 53 others. Two of our Indonesian-based executives were injured in the incident.

On July 8, 2009, a small group of individuals created a disturbance on the road leading to our mining and milling operations at our Grasberg mining complex and vandalized vehicles and small buildings. There were no injuries.

Between July 11, 2009, and July 22, 2009, there were sporadic shooting incidents along the road leading to our mining and milling operations at our Grasberg mining complex. Three people were killed (including one PT Freeport Indonesia employee, a security contractor and an Indonesian policeman) and several people were injured (including four PT Freeport Indonesia employees and contractors). Indonesian authorities have expressed commitments to provide security for PT Indonesia’s personnel and operations and to conduct an investigation to identify and arrest the perpetrators of these acts. Indonesian authorities have taken actions to secure the road and are investigating these incidents. Several suspects have been arrested for their alleged involvement in the shootings. These incidents have not affected our production to-date; however, they have limited the movement of personnel and supplies. Currently, personnel and supplies are being transported on the road in a controlled fashion in a manner that is allowing normal production. Prolonged limitations on access to the road could
36
adversely affect operations at the mine. In response to these events, PT Freeport Indonesia is currently reviewing security plans with the Indonesian authorities.

For additional information related to international risks associated with our Indonesia operations, see Item 1A. “Risk Factors” of Part II. included in this Form 10-Q and in our Form 10-K for the year ended December 31, 2008.

Operating Data. Following is summary operating data for our Indonesia mining operations for the second quarters and first quarterssix months of 2009 and 2008.

   Six Months Ended
 First-Quarter  Second-Quarter June 30,
 2009 2008  2009 2008 2009 2008
Consolidated Operating Data, Net of Joint Venture Interest              
Copper (millions of recoverable pounds)
              
Production 404 200  403 222  807 422
Sales 369 207  432 229  801 436
Average realized price per pound $1.80 $3.82  $2.24 $3.88 $2.06 $3.84
              
Gold (thousands of recoverable ounces)
              
Production 570 246  778 221  1,348 467
Sales 521 251  811 235  1,332 486
Average realized price per ounce $904 $932  $932 $912 $919 $917
              
100% Operating Data, Including Joint Venture Interest     
100% Operating Data         
Ore milled (metric tons per day):              
Grasberg open pita
 165,000 118,600 
Grasberg open pitb
 165,300 117,300  165,200 118,000
Deep Ore Zone (DOZ) underground minea
 72,400 61,200   72,400  66,000  72,400  63,600
Total 237,400 179,800   237,700  183,300  237,600  181,600
Average ore grade:              
Copper (percent) 1.12 0.70  1.10 0.75  1.11 0.72
Gold (grams per metric ton) 1.13 0.61  1.51 0.54  1.32 0.57
Recovery rates (percent):              
Copper 90.7 89.7  90.6 89.8  90.6 89.7
Gold 81.9 79.0  83.6 78.9  82.9 79.0
Production (recoverable):              
Copper (millions of pounds) 456 214  457 237  913 451
Gold (thousands of ounces) 619 246  849 221  1,468 467
 
a.  Amounts represent the approximate average daily throughput processed at PT Freeport Indonesia’s mill facilities from each producing mine.

At the Grasberg mine, the sequencing in mining areas with varying ore grades causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold. PT Freeport Indonesia’s share of sales totaled 369432 million pounds of copper and 521811 thousand ounces of gold in first-quartersecond-quarter 2009 compared with 207and 801 million pounds of copper and 2511.3 million ounces of gold for the first six months of 2009, compared with sales of 229 million pounds of copper and 235 thousand ounces of gold in first-quartersecond-quarter 2008 and 436 million pounds of copper and 486 thousand ounces of gold for the first six months of 2008. Higher copperCopper and gold sales volumes were significantly higher in first-quarterthe 2009 resulted fromperiods as a result of mining in a higher-gradehigher grade section of the Grasberg open pit, which is expected to continue in 2009 and 2010.including accelerated mining of higher grade section that was previously scheduled for future periods.

For 2009, PT Freeport Indonesia’s sales are expected to approximate 1.3 billion pounds of copper and 2.22.3 million ounces of gold, compared with 1.1 billion pounds of copper and 1.2 million ounces of gold in 2008. The increase in our 2009 gold estimates reflects the acceleration of mining in a high-grade section that was previously expected to be mined in future periods. In addition, copper and gold volumes for the second half of 2009 are expected to be lower than the first half of 2009 because of mine sequencing.

Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by
37
other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

33

Gross Profit per Pound of Copper/per Ounce of Gold

The following tables summarize the unit net cash (credits) costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations.operations for the second quarter and first six months of 2009 and 2008. Refer to “Production Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

 Second-Quarter 2009 Second-Quarter 2008 
 By-Product Co-Product Method By-Product Co-Product Method 
 Method Copper Gold Method Copper Gold 
Revenues, after adjustments shown below$2.24 $2.24 $932.32 $3.88 $3.88 $911.84 
                   
Site production and delivery, before net noncash                  
and nonrecurring costs shown below 0.93  0.52  214.22  1.90  1.51  346.42 
Gold and silver credits (1.80) –  –  (0.99) –  – 
Treatment charges 0.22  0.12  50.10  0.28  0.23  51.35 
Royalty on metals 0.12  0.06  26.44  0.13  0.11  23.96 
Unit net cash (credits) costs (0.53) 0.70  290.76  1.32  1.85  421.73 
Depreciation and amortization 0.18  0.10  41.45  0.22  0.17  37.89 
Noncash and nonrecurring costs, net 0.03  0.02  6.66  0.02  0.02  3.76 
Total unit costs (0.32) 0.82  338.87  1.56  2.04  463.38 
Revenue adjustments, primarily for pricing on                  
prior period open sales 0.03  0.03  (4.04) (0.01) (0.01) (9.80)
PT Smelting intercompany profit (0.07) (0.04) (16.23) –  –  (0.47)
Gross profit$2.52 $1.41 $573.18 $2.31 $1.83 $438.19 
                   
Consolidated sales                  
Copper (millions of recoverable pounds) 432  432     229  229    
Gold (thousands of recoverable ounces)       811        235 
Six Months Ended Six Months Ended 
First-Quarter 2009 First-Quarter 2008 June 30, 2009 June 30, 2008 
By-Product Co-Product Method By-Product Co-Product Method By-Product Co-Product Method By-Product Co-Product Method 
Method Copper Gold Method Copper Gold Method Copper Gold Method Copper Gold 
Revenues, after adjustments shown below$1.80 $1.80 $904.18 $3.82 $3.82 $931.71 $2.06 $2.06 $919.28 $3.84 $3.84 $917.31 
                            
Site production and delivery, before net noncash                            
and nonrecurring costs shown below 0.92 0.53 268.28  1.86 1.41 349.08  0.92 0.52 233.90  1.88 1.46 351.21 
Gold and silver credits (1.34) – –  (1.23) – –  (1.58) – –  (1.11) – – 
Treatment charges 0.20 0.11 59.27  0.33 0.25 61.71  0.21 0.12 53.44  0.31 0.24 56.77 
Royalty on metals 0.07  0.04  19.48  0.12  0.09  22.69  0.09  0.05  23.48  0.13  0.10  23.60 
Unit net cash (credits) costs (0.15) 0.68 347.03  1.08 1.75 433.48  (0.36) 0.69 310.82  1.21 1.80 431.58 
Depreciation and amortization 0.18 0.10 51.27  0.22 0.17 40.82  0.18 0.10 45.11  0.21 0.17 39.66 
Noncash and nonrecurring costs, net 0.03  0.02  8.69  0.07  0.05  12.76  0.03  0.02  7.99  0.04  0.03  8.06 
Total unit costs 0.06 0.80 406.99  1.37 1.97 487.06  (0.15) 0.81 363.92  1.46 2.00 479.30 
Revenue adjustments, primarily for pricing on                            
prior period open sales 0.17 0.17 11.85  0.48 0.48 27.32  0.07 0.07 4.12  0.23 0.23 14.13 
PT Smelting intercompany profit (0.01) (0.01) (5.46) (0.02) (0.02) (4.27) (0.05) (0.03) (11.81) (0.01) (0.01) (2.27)
Gross profit$1.90 $1.16 $503.58 $2.91 $2.31 $467.70 $2.23 $1.29 $547.67 $2.60 $2.06 $449.87 
                            
Consolidated sales                            
Copper (millions of recoverable pounds) 369 369    207 207    801 801    436 436   
Gold (thousands of recoverable ounces)     521      251      1,332      486 

Because of the fixed nature of a large portion of PT Freeport Indonesia’s costs, unit costs vary significantly from period to period depending on volumes of copper and gold sold during the period. Unit net cash costs, after gold and silver credits, decreased to a net credit of $0.15$0.53 per pound of copper in first-quartersecond-quarter 2009, compared with $1.08a net cost of $1.32 per pound in first-quartersecond-quarter 2008. This decrease primarily reflected lower site production and delivery costs ($0.97 per pound) associated with higher copper sales volumes and lower energy costs, and higher gold credits ($0.81 per pound) resulting from higher gold sales volumes in second-quarter 2009.
38
Unit net cash costs, after gold and silver credits, for the first six months of 2009 decreased to a net credit of $0.36 per pound of copper, compared with a net cost of $1.21 per pound in the first six months of 2008, primarily reflecting lower site production and delivery costs ($0.940.96 per pound decrease, including $0.70 per poundpound) associated with higher copper sales volumes and $0.19 per pound related to changes in inventory)lower energy costs, and higher gold credits ($0.110.47 per pound increase)pound) resulting from higher gold sales volumes in first-quarterthe first six months of 2009.

The decrease in unit net cash costs for the 2009 periods also reflected lower treatment charges ($0.130.06 per pound decrease)decrease for the quarter and $0.10 per pound decrease for the six month period), which vary with the volume of metals sold and the price of copper, and lower royalties on metals ($0.050.01 per pound decrease)decrease for the quarter and $0.04 per pound decrease for the six month period), which vary with the volume of metals sold and the prices of copper and gold.

Because certain assets are depreciated on a straight-line basis, PT Freeport Indonesia’s unit depreciation rate varies with the level of copper production and sales.

Assuming average copper prices of $2.00$2.25 per pound and average gold prices of $900 per ounce for the remainder of 2009 and achievement of current 2009 sales estimates, we estimate that average unit net cash costs for PT Freeport Indonesia, including gold and silver credits, would approximate a net credit of $0.13$0.15 per pound of copper in 2009, compared with a net cost of $0.96 per pound in 2008. Unit net cash cost for the second half of 2009 are expected to be higher than unit net cash cost for the first half of 2009 because of lower projected sales volumes. Each $50 per ounce change in gold prices during the remainder of 2009 would have an approximate $0.06$0.035 per pound impact on PT Freeport Indonesia’s 2009 unit net cash costs.

Africa Mining
We hold an effective 57.75 percent interest in the Tenke Fungurume (Tenke) copper and cobalt mining concessions in the Katanga province of the DRC and are the operator of the project. Significant progress on the construction of the project was achieved during first-quarter 2009, and the first copper cathode was produced in late March 2009 as the project entered the commissioning and start-up phase. Construction activities for the initial development project are nearing completion,substantially complete and copper production is expectedcommenced in March 2009. Commissioning activities for the cobalt circuit began during second-quarter 2009. Start up issues are being addressed in the copper and cobalt circuits, and we expect production to ramp up to full annual capacity in the second half of 2009. Annual productionProduction in the initial years is expected to approximate 250 million pounds of copper and 18 million pounds of cobalt in the second half of 2009. The initial project at Tenke Fungurume is based on mining and processing ore reserves approximating 119 million metric tons with average ore grades of 2.6 percent copper and 0.35 percent cobalt. Refer to “Development Projects” for further discussion.

The Tenke mine includes open-pit mining, leaching and SX/EW operations. Copper production from the Tenke mine is sold as copper cathode. In addition to copper, the Tenke mine will produce cobalt hydroxide.

We are continuing to work cooperatively with the DRC government to resolve the ongoing contract review. We believe that the contract is fair and equitable, complies with Congolese law and is enforceable without modifications. This review process has not affected the development schedule or current operations.

In July 2009, Tenke entered into a settlement agreement with DRC tax authorities in connection with an administrative audit regarding the payment of fees for work permits and visas for its foreign workers and subcontractors, including short-term workers. Pursuant to the agreement, which covers the period from January 2007 to the date of the settlement, Tenke will pay approximately $16 million in fees and penalties. The procedures associated with obtaining labor and immigration authorizations for short-term workers on a timely basis are not clearly established in the DRC, and Tenke continues to work proactively and cooperatively with the tax authorities to establish approved procedures for doing so consistent with its mining convention and local law.

Shortly after reaching the settlement, Tenke was advised that the Minister of Justice in the DRC authorized an inquiry regarding the alleged misappropriation of public funds in connection with the securing of labor and immigration authorizations and the payment of associated fees for the Tenke project. Press reports indicate that several government officials have been arrested and four Tenke employees have been requested to appear at a hearing to determine their potential involvement. Tenke is cooperating with the government inquiries and conducting its own internal investigation.

Under Congolese law and Tenke’s mining convention, Tenke pays mining royalties to the DRC’s central government public treasury. The law provides that the provincial and local governments are entitled to receive a portion of the mining royalties from the central government. In July 2009, the provincial government requested that its portion of Tenke’s royalties be paid directly to the provincial government and temporarily delayed the processing of Tenke’s export customs requests. We understand that the provincial and central governments are
 
3439
engaged in discussions regarding the provincial government's request to receive its share of royalty payments. Tenke’s shipments of copper have resumed, although future shipments and sales could be impacted pending resolution of this matter.
For additional information related to international risks associated with our Africa operations, see Item 1A. “Risk Factors” of Part II. included in this Form 10-Q and in our Form 10-K for the year ended December 31, 2008.

Operating Data. In second-quarter 2009, Tenke produced 36 million pounds of copper and sold 26 million pounds of copper. For 2009, Tenke’s copper sales are expected to approximate 100 million pounds.

The high grades of copper and cobalt produced at the Tenke mine are expected to result in an attractive cost structure once the operation reaches full capacity. Upon reaching design capacity in the copper and cobalt circuits and assuming an average price of $10 per pound of cobalt, we estimate that unit net cash costs for Tenke would initially approximate less than $0.50 per pound of copper, and each $2 per pound change in the average price of cobalt would change unit net cash costs by approximately $0.12 per pound. We will incorporate Tenke in our consolidated unit net cash cost disclosure upon completion of ramp-up activities.

Molybdenum
Our Molybdenum operation is an integrated producer of molybdenum, with mining, sulfide ore concentrating, roasting and processing facilities that produce high-purity, molybdenum-based chemicals, molybdenum metal powder and metallurgical products, which are sold to customers around the world, and includes the wholly owned Henderson molybdenum mine in Colorado and related conversion facilities. The Henderson underground mine produces high-purity, chemical-grade molybdenum concentrates, which are typically further processed into value-added molybdenum chemical products. The Molybdenum operation also includes the wholly owned Climax molybdenum mine in Colorado, which has been on care-and-maintenance status since 1995; a sales company that purchases and sells molybdenum from our Henderson mine and from our North and South America copper mines that produce molybdenum as a by-product; and related conversion facilities that, at times, roast and/or process material on a toll basis. Toll arrangements require the tolling customer to deliver appropriate molybdenum-bearing material to our facilities for processing into a product that is returned to the customer, who pays us for processing their material into the specified products.

Molybdenum markets have been significantly affected by the downturn in economic conditions, which began in fourth-quarter 2008, and demand for molybdenum, principally in the metallurgical sector, remains very weak. During fourth-quarter 2008, the Henderson molybdenum mine began operating at a curtailed rate, reflecting an approximate 25 percent reduction in annual production. In response to further weakness in market conditions, we have taken additional steps to adjust molybdenum production and further revised Henderson’s operating plans to reflect an approximate 40 percent reduction in Henderson’s annual production, which totaled 40 million pounds in 2008. In addition, we have made adjustments to molybdenum production plans at certain by-product mines, including the suspension of molybdenum processing at our Cerro Verde mine. We are continuing to monitor market conditions and may make further adjustments to our molybdenum production and sales plans.

Operating Data. Following is summary operating data for the Molybdenum operations for the second quarters and first quarterssix months of 2009 and 2008.

   Six Months Ended
 First-Quarter  Second-Quarter June 30,
 2009 2008  2009 2008 2009 2008
Molybdenum (millions of recoverable pounds)
              
Production 7 9  6 11  13 20
Sales, excluding purchasesa
 10 20  16 20  26 40
Average realized price per pound $11.52 $31.67  $10.11 $31.59 $10.65 $31.63
              
Henderson molybdenum mine              
Ore milled (metric tons per day) 15,200 25,000  11,700 26,800  13,400 25,900
Average molybdenum ore grade (percent) 0.25 0.22  0.27 0.23  0.25  0.22
Molybdenum production (millions of recoverable pounds) 7 9  6 11  13 20
 
a.  Includes sales of molybdenum produced as a by-product at our North and South America copper mines.

Molybdenum markets have been significantly affected by the downturn in economic conditions. As a result, during fourth-quarter 2008 the Henderson molybdenum mine began operating at a curtailed rate, and in response to further weakness in market conditions, we took additional steps in early 2009 to further adjust molybdenum production and revised Henderson’s operating plans to reflect an approximate 40 percent reduction in annual production. We also made adjustments to molybdenum production plans at certain by-product mines, including the suspension of molybdenum processing at our Cerro Verde mine. We will continue to review operating plans and adjust operating rates to reflect market conditions.

Molybdenum sales volumes decreased to 1016 million pounds in first-quartersecond-quarter 2009 and 26 million pounds for the first six months of 2009, compared with 20 million pounds in first-quartersecond-quarter 2008 and 40 million pounds for the first six months of 2008 primarily reflecting curtailed production in response to lower demand, principally in the metallurgical sector. demand.

40
For 2009, molybdenum sales volumes are expected to approximate 5056 million pounds, compared with 71 million pounds in 2008. The increase in our molybdenum sales volume estimates for 2009 reflect improved sales to Europe and Asia. For 2009, approximately 8590 percent of our molybdenum sales are expected to be priced at prevailing market prices.

Unit Net Cash Costs. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
 
35

Gross Profit per Pound of Molybdenum

The following tables summarize the unit net cash costs and gross profit per pound at our Henderson molybdenum mine for the second quarters and first quarterssix months of 2009 and 2008. Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

  Six Months Ended
First-Quarter Second-Quarter June 30,
2009 2008 2009 2008 2009 2008
Revenues$10.55 $29.45 $9.86 $30.05 $10.23 $29.76
               
Site production and delivery, before net noncash               
and nonrecurring costs shown below 5.61  5.14  6.00  4.98  5.79  5.06
Unit net cash costs 5.61  5.14  6.00  4.98 5.79 5.06
Depreciation, depletion and amortization 0.93  4.26  1.00  4.24 0.96 4.25
Noncash and nonrecurring costs, net 0.03  0.06  0.06  –  0.04  0.02
Total unit costs 6.57  9.46  7.06  9.22  6.79  9.33
Gross profita
$3.98 $19.99 $2.80 $20.83 $3.44  20.43
               
Molybdenum sales (millions of recoverable pounds)b
 7  9  6  11 13 20
 
a.  Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segment includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.
 
b.  Reflects molybdenum produced by the Henderson molybdenum mine.

Henderson’s unit net cash costs were $5.61$6.00 per pound of molybdenum in first-quartersecond-quarter 2009 and $5.79 per pound for the first six months of 2009, compared with $5.14$4.98 per pound of molybdenum in first-quartersecond-quarter 2008 and $5.06 per pound for the first six months of 2008. The increase in Henderson’s unit net cash costs in the 2009 periods primarily reflects lower molybdenum production.

The decrease in Henderson’s depreciation, depletion and amortization in the 2009 periods reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008.

Assuming achievement of current 2009 sales estimates, we estimate that the 2009 average unit net cash costs for Henderson would approximate $6.00 per pound of molybdenum, compared with $5.36 per pound in 2008.

The decrease in Henderson’s depreciation, depletion and amortization reflects the impact of the long-lived asset impairment charges recognized in fourth-quarter 2008.

Rod & Refining
The Rod & Refining operations consist of copper conversion facilities located in North America, including a refinery, three rod mills and a specialty copper products facility. These operations process copper produced at our North America mines and purchased copper into copper cathode, rod and custom copper shapes. At times these operations refine copper and produce copper rod and shapes for customers on a toll basis. Toll arrangements require the tolling customer to deliver appropriate copper-bearing material to our facilities for processing into a product that is returned to the customer, who pays us for processing their material into the specified products.

Atlantic Copper Smelting & Refining
Atlantic Copper is our wholly owned subsidiary located in Spain. Atlantic Copper’s operations involve the smelting and refining of copper concentrates and the marketing of refined copper and precious metals in slimes. Our investment in smelters serves an important role in our concentrate marketing strategy. PT Freeport Indonesia generally sells, under long-term contracts, approximately one-half of its concentrate production to its affiliated smelters, Atlantic Copper and PT Smelting (PT Freeport Indonesia’s 25-percent owned copper smelter and refinery in Indonesia), and the remainder to other customers. Additionally, certain of our South America mining operations sell a portion of their copper concentrate and cathode inventories to Atlantic Copper. Through downstream integration, we are assured placement of a significant portion of our concentrate production. During
41
the first half of 2009, Atlantic Copper purchased approximately 37 percent of its concentrate requirements from PT Freeport Indonesia and approximately 36 percent from our South America mines.
Smelting and refining charges consist of a base rate and, in certain contracts, price participation based on copper prices. Treatment charges for smelting and refining copper concentrates represent a cost to PT Freeport Indonesia and our South America mining operations and income to Atlantic Copper and PT Smelting. Through downstream integration, we are assured placement of a significant portion of our concentrate production. Smelting and refining charges consist of a base rate and, in certain contracts, price participation based on copper prices. HigherThus, higher treatment and refining charges benefit our smelter operations at Atlantic Copper and adversely affect our mining operations in Indonesia and South America. Our North America copper mines are not significantly affected by changes in treatment and refining charges because these operations are fully integrated with our Miami smelter located in Arizona.

Atlantic Copper has a labor contract covering certain employees, which expiredhad an operating loss of $18 million in December 2007. During Marchsecond-quarter 2009 we successfully negotiated a new four-year labor contract, retroactiveand $29 million for the first six months of 2009, compared to January 1,operating income of $11 million in second-quarter 2009 and $8 million for the first six months of 2008. The decrease in Atlantic Copper’s operating results for the 2009 periods, compared to the 2008 periods, primarily reflects lower sulphuric acid credits related to lower prices.
36

We defer recognizing profits on PT Freeport Indonesia’s and our South America copper mines’ sales to Atlantic Copper and on 25 percent of PT Freeport Indonesia’s sales to PT Smelting (PT Freeport Indonesia’s 25-percent owned copper smelter and refinery in Indonesia) until final sales to third parties occur. Changes in these net deferrals resulted in net reductions to net income applicableattributable to common stock totaling $62$32 million ($0.150.07 per share) in first-quartersecond-quarter 2009 and $95 million ($0.22 per share) for the first six months of 2009, compared with net additionsreductions of $6 million ($0.01 per share) in first-quartersecond-quarter 2008 and additions of less than $1 million for the first six months of 2008. At March 31,June 30, 2009, our net deferred profits on PT Freeport Indonesia’s and the South America copper mines’ inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income after taxes and noncontrolling interests totaled $90$123 million.

Atlantic Copper has a labor contract covering certain employees, which expired in December 2007. During March 2009, we successfully negotiated a new four-year labor contract, retroactive to January 1, 2008.

DEVELOPMENT PROJECTS

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 toHowever, because of the declinesdownturn in copper and molybdenum prices and the weakglobal economic environment,conditions, we have deferred most of our project development activities, including incremental expansion projects at the Sierrita and Bagdad mines in North America and at the Cerro Verde concentrator in South America; the planned restart of the Miami mine; development of the El Abra sulfide project; and the restart of the Climax molybdenum mine.activities. Current major development projects include underground development in the Grasberg minerals district and the Tenke Fungurume project in the DRC, although we have also reduced capital spending on these projects. Capital spending plans continue to be reviewed and may be revised based on market conditions.

Indonesia. We have several projects in progress in the Grasberg minerals district, including developing the large-scale, high-grade underground ore bodies located beneath and adjacent to the Grasberg open pit. Following provides additional discussion of these current projects, including the continued development of the Common Infrastructure project, the Grasberg Block Cave and Big Gossan underground mines and a further expansion of the DOZ underground mine.

·  
Common Infrastructure.Infrastructure and Grasberg Block Cave. In 2004, PT Freeport Indonesia commenced its Common Infrastructure project to provide access to its large undeveloped underground ore bodies located in the Grasberg minerals district through a tunnel system located approximately 400 meters deeper than its existing underground tunnel system. In addition to providing access to our underground ore bodies, the tunnel system will enable PT Freeport Indonesia to conduct future exploration in prospective areas associated with currently identified ore bodies. The tunnel system has reached the Big Gossan terminal and we are proceeding with development of the lower Big Gossan infrastructure. We have also advanced development of the Grasberg spur and as of December 31, 2008, wehave completed the tunneling required to reach the Grasberg underground ore body. During first-quarterthe first six months of 2009, we continued development of the Grasberg Block Cave terminal infrastructure and mine access.
 
·  
Grasberg Block Cave.In 2008, we completed the feasibility study for the development of the Grasberg Block Cave, which accounts for over one-third of our reserves in Indonesia. Production at the Grasberg Block Cave is currently scheduled to commence at the end of mining the Grasberg open pit, which is expected to continue until the end of 2015. The timing of the underground Grasberg Block Cave development will continue to be assessed.

42
Based on the 2008 feasibility study, aggregate mine development capital for the Grasberg Block Cave and associated Common Infrastructure is expected to approximate $3.1 billion to be incurred between 2008 and 2021, with PT Freeport Indonesia’s share totaling approximately $2.8 billion. Aggregate project costs totaling $240 million have been incurred through March 31, 2009, total $222 million.June 30, 2009.
 
·  
Big Gossan. The Big Gossan underground mine is a high-grade deposit located near PT Freeport Indonesia’s existing milling complex. The Big Gossan mine is being developed as an open-stope mine with backfill consisting of mill tailings and cement, an established mining methodology expected to be higher cost than the block-cave method used at the DOZ mine. Production is designed to ramp up to 7,000 metric tons per day by late 2012 (equal to average annual aggregate incremental production of 125 million pounds of copper and 65,000 ounces of gold, with PT Freeport Indonesia receiving 60 percent of these amounts). The totalaggregate capital investment for this project is currently estimated at approximately $480 million, of which $345$354 million has been incurred through March 31,June 30, 2009.
37
 
·  
DOZ Expansion. In mid-2007, PT Freeport Indonesia completed the expansion of the capacity of the DOZ underground operation to allow a sustained rate of 50,000 metric tons per day. PT Freeport Indonesia’s further expansion of the DOZ mine to 80,000 metric tons of ore per day is under way with completion targeted by 2010. The capital cost for this expansion is expected to approximate $100 million, with PT Freeport Indonesia’s 60 percent share totaling approximately $60 million. 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.

Tenke Fungurume. Significant progress on the construction of the project was achieved during first-quarter 2009, and the first copper cathode was produced in late March 2009 as the project entered the commissioning and start-up phase. Construction activities for the initial development project are nearing completionsubstantially complete and copper production commenced in March 2009. Commissioning activities for the cobalt circuit began during second-quarter 2009. Production is expected to ramp up to full annual capacity in the second half of 2009. Annual2009, with 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 average ore grades of 2.6 percent copper and 0.35 percent cobalt. We also continue to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of this highly prospective district. As a result, we expect its ore reserves to increase significantly over time, enabling future expansions of the initial production facilities. The timing of these expansions will depend on a number of factors, including general economic and market conditions.

Approximately $1.6 billion of the budgeted $1.75 billion in aggregate project costs have been incurred through March 31, 2009. We are responsible for funding 70 percent of project development costs and are also responsible for financing our partner’s share of certain project overruns on the initial project. In response to current market conditions, we have deferred spending on certain expenditures not required for the initial project.

The project has been designed and constructed in a world-class fashion, using modern technology and following international standards for environmental management, occupational safety and social responsibility. The facilities include impermeable lined tailing storage and waste-water treatment ponds, and we are making significant investments in infrastructure in the region, including a national road and improvements in power generation and transmission systems. Our social programs continue to expand, including local micro-enterprise businesses, agricultural capacity building initiatives, malaria abatement, potable drinking water wells, new medical facilities and several new schools. The project will continue to provide important benefits to the Congolese through employment and the provision of local services and to the DRC government through substantial tax, royalty and dividend revenues.

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. FCX responded to this letter indicating that its mining contracts were negotiated transparently and approved by the Government of the DRC following extended negotiations, and that FCX believes they are fair and equitable, comply with Congolese law and are enforceable without modifications. We are continuing to work cooperatively with the Government of the DRC to resolve these matters. This review process has not affected the development schedule or production plans associated with the Tenke Fungurume project.payments.

CAPITAL RESOURCES AND LIQUIDITY

Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our production levels, production costs, cash payments for income taxes and interest, other working capital changes and other factors. As a result of weak economic conditions, there is significant uncertainty aboutoperating plans were revised at the near-term price outlook forend of 2008 and in early 2009 to curtail production at higher cost operations, defer or eliminate capital projects and target reductions in costs, including reduced exploration, research and administrative costs. We also suspended our principal products.annual common stock dividend. While we view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy, we have responded to the uncertain near-term outlook and will continue to adjust our operating strategy as market conditions change. Operating plans were revised at the end of 2008 and in early 2009 to curtail production at higher cost operations, defer or eliminate capital projects and target reductions in costs, including reduced exploration, research and administrative costs. We also suspended our annual common stock dividend.

Based on current mine plans and subject to future copper, gold and molybdenum prices, we expect estimated operating cash flows combined with net proceeds fromfor the first-quarterremainder of 2009 equity offering (refer to “Financing Activities” for further discussion) to be greater than our budgeted capital expenditures, scheduledexpected debt maturities,payments, preferred dividends, noncontrolling interest distributions and other cash requirements. From time to time we may use our credit facilities for working capital and short-term funding requirements.
 
3843

Cash and Cash Equivalents
At March 31,June 30, 2009, we had consolidated cash and cash equivalents of $644 million.$1.3 billion. The following table reflects the U.S. and international components of consolidated cash and cash equivalents at March 31,June 30, 2009, and December 31, 2008 (in millions):

March 31, December 31, June 30, December 31, 
2009 2008 2009 2008 
Cash at domestic companiesa
$261 $95 $477 $95 
Cash at international operations 383  777  842  777 
Total consolidated cash and cash equivalents 644 872  1,319  872 
Less: Noncontrolling interests’ share (126) (267) (186) (267)
Cash, net of noncontrolling interests’ share 518 605  1,133  605 
Taxes and other costs if distributed (73) (151)
Less: Taxes and other costs if distributed (118) (151)
Net cash available to FCX parent$445 $454 $1,015 $454 
 
a.  Includes cash at our parent company and North America operations.

Operating Activities
NetWe generated operating cash usedflows totaling $896 million for operating activities totaled $258 million in first-quarterthe first six months of 2009, including $919net of $973 million used for working capital requirements, which primarily related to settlement of final pricing with customers on 2008 provisionally priced copper sales ($573(approximately $600 million). Operating cash flows provided in first-quartergenerated for the first six months of 2008 totaled $615 million,$1.6 billion, net of $1.4$2.1 billion used for working capital requirements, including $598 million to settlesettlement of the 2007 copper price protection program contract. contract ($598 million). Lower operating cash flows for the first six months of 2009 primarily reflected the impact of lower copper prices, partly offset by higher gold sales volumes.

Consolidated revenues, operating cash flows and net income vary significantly with fluctuations in the market prices of copper, gold and molybdenum, sales volumes and other factors.

Refer to “Overview and Outlook” for further discussion of projected 2009 operating cash flows.

Investing Activities
Capital expenditures, including capitalized interest, totaled $519decreased to $894 million in first-quarterfor the first six months of 2009, compared with $508 million in first-quarter 2008. First-quarter 2009 capital expenditures, compared to first-quarter$1.2 billion for the first six months of 2008, include an increase associated with spending on the Tenke Fungurume development project in Africa, partly offset by decreases associated withreflecting the effects of the decision to defer capital spending for most of our project development activities and also reduced spending for sustaining capital.capital, partially offset by an increase in capital spending for the Tenke Fungurume development project for which construction activities are substantially complete. Refer to “Development Projects” for further discussion.

Capital expenditures arespending is expected to approximate $1.3 billion fordecline in the second half of 2009, including $0.6 billion for sustaining capital and $0.7 billion forreflecting the substantial completion of the Tenke Fungurume development projectproject. Refer to “Overview and development projects in Indonesia, compared with $2.7 billion in 2008. Capital spending plans continue to be reviewed and may be revised based on market conditions.Outlook” for further discussion of projected capital expenditures for 2009.

Financing Activities
Total debt approximated $7.2 billion at March 31,June 30, 2009, and $7.4 billion at December 31, 2008. In July 2009, we announced the early redemption of our $340 million in 6⅞% Senior Notes due 2014 (the Notes). The Notes will be redeemed on August 20, 2009, at a redemption price of 103.438 percent of the principal amount, equivalent to $352 million (plus accrued and unpaid interest). Annual interest cost savings will approximate $23 million. We expect to record an approximate $14 million charge to net income in third-quarter 2009 in connection with the redemption. Excluding the Notes being called for redemption, we have no significant debt maturities in the near term; however, we may consider additional opportunities to prepay debt in advance of scheduled maturities.

We have revolving credit facilities available through March 2012, which are composed of a (i) $1.0 billion revolving credit facility available to FCX and (ii) $0.5 billion revolving credit facility available to both FCX and PT Freeport Indonesia. At March 31,June 30, 2009, we had no borrowings and $74$73 million of letters of credit issued under the facilities, resulting in availability of approximately $1.4 billion. The revolving credit facilities contain restrictions on the amount available for dividend payments, purchases of our common stock and certain debt prepayments. However, these restrictions do not apply as long as availability under the revolvers plus domestic cash exceeds $750 million. As of March 31,June 30, 2009, we had availability under the revolvers plus available domestic cash totaling approximately $1.7$1.9 billion.

In April 2008, Standard & Poor’s Rating Services and Fitch Ratings raised our corporate credit rating and the ratings on our unsecured debt to BBB- (investment grade). As a result of the upgrade of our unsecured notes to investment grade, the restricted payment covenants contained in our $6.0 billion in senior notes used to finance
44
the acquisition of Phelps Dodge and in our 6⅞% Senior Notes were suspended. To the extent the rating is downgraded below investment grade, the covenants would again become effective.
39

In February 2009, we completed a public offering of 26.8 million shares of our common stock at an average price of $28.00 per share, which generated gross proceeds of $750 million (net proceeds of $740 million after fees and expenses). Net proceeds were used for general corporate purposes, including the repayment of amounts outstanding under our revolving credit facilities, working capital and capital expenditures. As of March 31,June 30, 2009, we had 412 million common shares outstanding. Assuming conversion of our 5½% Convertible Perpetual Preferred Stock and 6¾% Mandatory Convertible Preferred Stock prior to May 1, 2010, we would have approximately 469 million common shares outstanding; assuming the 6¾% Mandatory Convertible Preferred Stock automatically converts on May 1, 2010, we would have between 469 million and 477 million common shares outstanding (depending on the applicable market price of our common stock).

In February 2008, we purchased, in an open market transaction, $33 million of our 9½% Senior Notes for $46 million.

Because of financial market turmoil and declines in copper and molybdenum prices, in September 2008 we suspended purchases of sharesour common stock under the open-market share purchase program. There are 23.7 million shares remaining under this program. The timing of future purchases of our common stock is dependent on many factors, including our operating results; cash flows and financial position; copper, gold and molybdenum prices; the price of our common shares; and general economic and market conditions.

The declaration and payment of dividends is at the discretion of our Board of Directors (the Board). The amount of our cash dividend on our common stock is dependent upon our financial results, cash requirements, future prospects and other factors deemed relevant by the Board. Because of the deterioration in copper and molybdenum prices and in general economic conditions, in December 2008, the Board suspended the cash dividend on our common stock; accordingly, there were no common dividends paid in first-quarterduring the first six months of 2009, compared to $169with $337 million paid in first-quarterduring the first six months of 2008. The Board will continue to review our financial policy on an ongoing basis.

Preferred stock dividends paid totaled $60$120 million in first-quarterduring the first six months of 2009 and $64$127 million in first-quarterduring the first six months of 2008 representing dividends on our 5½% Convertible Perpetual Preferred Stock and 6¾% Mandatory Convertible Preferred Stock. On March 26,June 25, 2009, FCX declared a regular quarterly dividend of $1.6875 per share on our 6¾% Mandatory Convertible Preferred Stock and a regular quarterly dividend of $13.75 per share on our 5½% Convertible Perpetual Preferred Stock, which were paid on MayAugust 1, 2009, to shareholders of record at the close of business on AprilJuly 15, 2009.

Cash dividends paid to noncontrolling interests totaled less than $1$63 million in first-quarterduring the first six months of 2009 and $49 million in first-quarter 2008, which reflectedreflecting dividends paid to the noncontrolling interest owners of PT Freeport Indonesia, andcompared with $280 million paid during the first six months of 2008 primarily reflecting dividends paid to the noncontrolling interest owners of our South America copper mines.

CONTRACTUAL OBLIGATIONS

There have been no material changes in our contractual obligations since year-end 2008. Refer to Item 7 in our report on Form 10-K for the year ended December 31, 2008, for further information regarding our contractual obligations.

ENVIRONMENTAL AND RECLAMATION MATTERS

Our mining, exploration, production and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. There have been no material changes to our environmental and reclamation obligations since year-end 2008. Refer to Note 15 in our report on Form 10-K for the year ended December 31, 2008, for further information regarding our environmental and reclamation obligations.
NEW ACCOUNTING STANDARDS

Refer to Note 9 for information on new accounting standards.

4045

PRODUCT REVENUES AND PRODUCTION COSTS

Unit net cash costs per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

We present gross profit per pound of copper using both a “by-product” method and a “co-product” method. We use the by-product method in our presentation of gross profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by our management and Board of Directors to monitor operations. In the co-product method presentation below, costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

In both the by-product and the co-product method calculations, we show adjustments to copper revenues for prior period open sales as separate line items. Because the copper pricing adjustments do not result from current period sales, we have reflected these separately from revenues on current period sales. Noncash and nonrecurring costs consist of items such as LCM inventory adjustments, stock-based compensation costs and/or unusual charges. They are removed from site production and delivery costs in the calculation of unit net cash costs. As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. Presentations under both the by-product and co-product methods are shown below together with reconciliations to amounts reported in our consolidated financial statements.
 
4146

North America Copper Mines Product Revenues and Production Costs

Three Months Ended June 30, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments shown below$615 $615 $60 $10 $685 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 350  318  38  6  362 
By-product creditsa
 (58) –  –  –  – 
Treatment charges 25  24  –  1  25 
Net cash costs 317  342  38  7  387 
Depreciation, depletion and amortization 60  57  3  –  60 
Noncash and nonrecurring costs, net 41  41  –  –  41 
Total costs 418  440  41  7  488 
Revenue adjustments, primarily for hedging 19  19  –  –  19 
Idle facility and other non-inventoriable costs (24) (24) –  –  (24)
Gross profit$192 $170 $19 $3 $192 
                
Reconciliation to Amounts Reported               
(In millions)      Depreciation,       
    Production  Depletion and       
 Revenues and Delivery  Amortization       
Totals presented above$685 $362 $60       
Net noncash and nonrecurring costs per above N/A  41  N/A       
Treatment charges per above N/A  25  N/A       
Revenue adjustments, primarily for hedging per above 19  N/A  N/A       
Eliminations and other (1) 33  4       
North America copper mines 703  461  64       
South America copper mines 884  366  69       
Indonesia mining 1,610  415  78       
Africa mining 57  92  14       
Molybdenum 186  162  13       
Rod & Refining 747  743  2       
Atlantic Copper Smelting & Refining 415  419  9       
Corporate, other & eliminations (918) (849) 7       
As reported in FCX’s consolidated financial statements$3,684 $1,809 $256       
a.  Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b.  Includes gold and silver product revenues and production costs.
47

North America Copper Mines Product Revenues and Production Costs (continued)

Three Months Ended June 30, 2008    
 By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments shown below$1,323 $1,323 $234 $20 $1,577 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 636  555  84  8  647 
By-product creditsa
 (243) –  –  –  – 
Treatment charges 37  35  –  2  37 
Net cash costs 430  590  84  10  684 
Depreciation, depletion and amortization 183  164  18  1  183 
Noncash and nonrecurring costs, net 20  19  1  –  20 
Total costs 633  773  103  11  887 
Revenue adjustments, primarily for hedging (4) (4) –  –  (4)
Idle facility and other non-inventoriable costs (14) (14) –  –  (14)
Gross profit$672 $532 $131 $9 $672 
                
Reconciliation to Amounts Reported               
(In millions)      Depreciation,       
    Production  Depletion and       
 Revenues and Delivery  Amortization       
Totals presented above$1,577 $647 $183       
Net noncash and nonrecurring costs per above N/A  20  N/A       
Treatment charges per above N/A  37  N/A       
Revenue adjustments, primarily for hedging per above (4) N/A  N/A       
Eliminations and other (2) 19  4       
North America copper mines 1,571  723c 187       
South America copper mines 1,428  462  127       
Indonesia mining 1,016  439  48       
Africa mining –  9  1       
Molybdenum 715  421  69       
Rod & Refining 1,683  1,677  1       
Atlantic Copper Smelting & Refining 724  698  9       
Corporate, other & eliminations (1,696) (1,709) 20       
As reported in FCX’s consolidated financial statements$5,441 $2,720c$462       
a.  Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
b.  Includes gold and silver product revenues and production costs.
c.  Includes LCM inventory adjustments of $4 million.
48
Table of Contents
Three Months Ended March 31, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments shown below$480 $480 $59 $6 $545 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 396  378  26  2  406 
By-product creditsa
 (55) –  –  –  – 
Treatment charges 25  25  –  –  25 
Net cash costs 366  403  26  2  431 
Depreciation, depletion and amortization 71  69  1  1  71 
Noncash and nonrecurring costs, net 46  45  1  –  46 
Total costs 483  517  28  3  548 
Revenue adjustments, primarily for hedging 69  69  –  –  69 
Idle facility and other non-inventoriable costs (38) (38) –  –  (38)
Gross profit (loss)$28 $(6)$31 $3 $28 
                
Reconciliation to Amounts Reported               
(In millions)      Depreciation,       
    Production  Depletion and       
 Revenues and Delivery  Amortization       
Totals presented above$545 $406 $71       
Net noncash and nonrecurring costs per above N/A  46  N/A       
Treatment charges per above N/A  25  N/A       
Revenue adjustments, primarily for hedging per above 69  N/A  N/A       
Eliminations and other 4  76  4       
North America copper mines 618  553  75       
South America copper mines 702  367  65       
Indonesia mining 1,122  350  65       
Africa mining –  16  3       
Molybdenum 146  138c 9       
Rod & Refining 619  614  2       
Atlantic Copper Smelting & Refining 292  293  8       
Corporate, other & eliminations (897) (750) 5       
As reported in FCX’s consolidated financial statements$2,602 $1,581c$232       
North America Copper Mines Product Revenues and Production Costs (continued)

Six Months Ended June 30, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments shown below$1,095 $1,095 $119 $16 $1,230 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 746  696  64  8  768 
By-product creditsa
 (113) –  –  –  – 
Treatment charges 50  49  –  1  50 
Net cash costs 683  745  64  9  818 
Depreciation, depletion and amortization 131  126  4  1  131 
Noncash and nonrecurring costs, net 87  86  1  –  87 
Total costs 901  957  69  10  1,036 
Revenue adjustments, primarily for hedging 88  88  –  –  88 
Idle facility and other non-inventoriable costs (62) (62) –  –  (62)
Gross profit$220 $164 $50 $6 $220 
                
Reconciliation to Amounts Reported               
(In millions)      Depreciation,       
    Production  Depletion and       
 Revenues and Delivery  Amortization       
Totals presented above$1,230 $768 $131       
Net noncash and nonrecurring costs per above N/A  87  N/A       
Treatment charges per above N/A  50  N/A       
Revenue adjustments, primarily for hedging per above 88  N/A  N/A       
Eliminations and other 3  109  8       
North America copper mines 1,321  1,014  139       
South America copper mines 1,586  733  134       
Indonesia mining 2,732  765  143       
Africa mining 57  108  17       
Molybdenum 332  300c 22       
Rod & Refining 1,366  1,357  4       
Atlantic Copper Smelting & Refining 707  712  17       
Corporate, other & eliminations (1,815) (1,599) 12       
As reported in FCX’s consolidated financial statements$6,286 $3,390c$488       
 
a.  Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
 
b.  Includes gold and silver product revenues and production costs.
 
c.  Includes LCM molybdenum inventory adjustments totaling $19 million.


4249

North America Copper Mines Product Revenues and Production Costs (continued)

Three Months Ended March 31, 2008    
Six Months Ended June 30, 2008    
By-Product Co-Product Method By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments shown below$1,179 $1,179 $256 $16 $1,451 $2,502 $2,502 $490 $36 $3,028 
                      
Site production and delivery, before net noncash                      
and nonrecurring costs shown below 553 481 76 7 564  1,189 1,036 160 15 1,211 
By-product creditsa
 (261) – – – –  (504) – – – – 
Treatment charges 31  31  –  –  31  68  66  –  2  68 
Net cash costs 323 512 76 7 595  753 1,102 160 17 1,279 
Depreciation, depletion and amortization 180 159 19 2 180  363 323 37 3 363 
Noncash and nonrecurring costs, net 30  29  1  –  30  50  48  2  –  50 
Total costs 533 700 96 9 805  1,166 1,473 199 20 1,692 
Revenue adjustments, primarily for hedging 42 42 – – 42  38 38 – – 38 
Idle facility and other non-inventoriable costs (13) (13) –  –  (13) 
    (27
) (27) –  –  (27)
Gross profit$675 $508 $160 $7 $675 $1,347 $1,040 $291 $16 $1,347 
                      
Reconciliation to Amounts Reported                      
(In millions)     Depreciation,          Depreciation,     
   Production Depletion and        Production Depletion and     
Revenues and Delivery  Amortization     Revenues and Delivery  Amortization     
Totals presented above$1,451 $564 $180     $3,028 $1,211 $363     
Net noncash and nonrecurring costs per above N/A 30 N/A      N/A 50 N/A     
Treatment charges per above N/A 31 N/A      N/A 68 N/A     
Revenue adjustments, primarily for hedging per above 42 N/A N/A      38 N/A N/A     
Eliminations and other 3  21  4      1  40  8     
North America copper mines 1,496 646 184      3,067 1,369c 371     
South America copper mines 1,607 432 130      3,035 894 257     
Indonesia mining 1,052 399 45      2,068 838 93     
Africa mining – 3 1      – 12 2     
Molybdenum 719 460 39      1,434 881 108     
Rod & Refining 1,688 1,676 2      3,371 3,353 3     
Atlantic Copper Smelting & Refining 665 651 9      1,389 1,349 18     
Corporate, other & eliminations (1,555) (1,545) 8      (3,251) (3,254) 28     
As reported in FCX’s consolidated financial statements$5,672 $2,722c$418     $11,113 $5,442c$880     
 
a.  Molybdenum by-product credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.
 
b.  Includes gold and silver product revenues and production costs.
 
c.  Includes LCM inventory adjustments of $1$5 million.
 
4350

 
South America Copper Mines Product Revenues and Production Costs

Three Months Ended June 30, 2009        
 By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments shown below$803 $803 $40 $843 
             
Site production and delivery, before net noncash            
nonrecurring costs shown below 364  346  19  365 
By-product credits (39) –  –  – 
Treatment charges 54  54  –  54 
Net cash costs 379  400  19  419 
Depreciation, depletion and amortization 69  67  2  69 
Noncash and nonrecurring costs, net (2) (1) (1) (2)
Total costs 446  466  20  486 
Revenue adjustments, primarily for pricing on prior            
period open sales 95  95  –  95 
Other non-inventoriable costs (8) (5) (3) (8)
Gross profit$444 $427 $17 $444 
             
Reconciliation to Amounts Reported            
(In millions)     Depreciation,    
    Production Depletion and    
 Revenues and Delivery Amortization    
Totals presented above$843 $365 $69    
Net noncash and nonrecurring costs per above N/A  (2) N/A    
Less: Treatment charges per above (54) N/A  N/A    
Revenue adjustments, primarily for pricing on prior            
period open sales per above 95  N/A  N/A    
Eliminations and other –  3  –    
South America copper mines 884  366  69    
North America copper mines 703  461  64    
Indonesia mining 1,610  415  78    
Africa mining 57  92  14    
Molybdenum 186  162  13    
Rod & Refining 747  743  2    
Atlantic Copper Smelting & Refining 415  419  9    
Corporate, other & eliminations (918) (849) 7    
As reported in FCX’s consolidated financial statements$3,684 $1,809 $256    
a.  Includes gold and silver product revenues and production costs.
51

South America Copper Mines Product Revenues and Production Costs (continued)

Three Months Ended June 30, 2008        
 By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments shown below$1,417 $1,417 $46 $1,463 
             
Site production and delivery, before net noncash            
nonrecurring costs shown below 423  409  17  426 
By-product credits (43) –  –  – 
Treatment charges 68  68  –  68 
Net cash costs 448  477  17  494 
Depreciation, depletion and amortization 127  122  5  127 
Noncash and nonrecurring costs, net 31  31  –  31 
Total costs 606  630  22  652 
Revenue adjustments, primarily for pricing on prior            
period open sales 16  16  –  16 
Other non-inventoriable costs (10) (10) –  (10)
Gross profit$817 $793 $24 $817 
             
Reconciliation to Amounts Reported            
(In millions)     Depreciation,    
    Production Depletion and    
 Revenues and Delivery Amortization    
Totals presented above$1,463 $426 $127    
Net noncash and nonrecurring costs per above N/A  31  N/A    
Less: Treatment charges per above (68) N/A  N/A    
Revenue adjustments, primarily for pricing on prior            
period open sales per above 16  N/A  N/A    
Eliminations and other 17  5  –    
South America copper mines 1,428  462  127    
North America copper mines 1,571  723b 187    
Indonesia mining 1,016  439  48    
Africa mining –  9  1    
Molybdenum 715  421  69    
Rod & Refining 1,683  1,677  1    
Atlantic Copper Smelting & Refining 724  698  9    
Corporate, other & eliminations (1,696) (1,709) 20    
As reported in FCX’s consolidated financial statements$5,441 $2,720b$462    
a.  Includes molybdenum, gold and silver product revenues and production costs.
b.  Includes LCM inventory adjustments totaling $4 million.
52
Table of Contents
Three Months Ended March 31, 2009        
 By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments shown below$617 $617 $44 $661 
             
Site production and delivery, before net noncash            
nonrecurring costs shown below 352  323  34  357 
By-product credits (39) –  –  – 
Treatment charges 48  48  –  48 
Net cash costs 361  371  34  405 
Depreciation, depletion and amortization 65  62  3  65 
Noncash and nonrecurring costs, net 5  5  –  5 
Total costs 431  438  37  475 
Revenue adjustments, primarily for pricing on prior            
period open sales 88  88  –  88 
Other non-inventoriable costs (9) (8) (1) (9)
Gross profit$265 $259 $6 $265 
             
Reconciliation to Amounts Reported            
(In millions)     Depreciation,    
    Production Depletion and    
 Revenues and Delivery Amortization    
Totals presented above$661 $357 $65    
Net noncash and nonrecurring costs per above N/A  5  N/A    
Less: Treatment charges per above (48) N/A  N/A    
Revenue adjustments, primarily for pricing on prior            
period open sales per above 88  N/A  N/A    
Eliminations and other 1  5  –    
South America copper mines 702  367  65    
North America copper mines 618  553  75    
Indonesia mining 1,122  350  65    
Africa mining –  16  3    
Molybdenum 146  138b 9    
Rod & Refining 619  614  2    
Atlantic Copper Smelting & Refining 292  293  8    
Corporate, other & eliminations (897) (750) 5    
As reported in FCX’s consolidated financial statements$2,602 $1,581b$232    
South America Copper Mines Product Revenues and Production Costs (continued)

Six Months Ended June 30, 2009        
 By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments shown below$1,497 $1,497 $84 $1,581 
             
Site production and delivery, before net noncash            
nonrecurring costs shown below 716  669  53  722 
By-product credits (78) –  –  – 
Treatment charges 102  102  –  102 
Net cash costs 740  771  53  824 
Depreciation, depletion and amortization 134  129  5  134 
Noncash and nonrecurring costs, net 3  4  (1) 3 
Total costs 877  904  57  961 
Revenue adjustments, primarily for pricing on prior            
period open sales 106  106  –  106 
Other non-inventoriable costs (17) (13) (4) (17)
Gross profit$709 $686 $23 $709 
             
Reconciliation to Amounts Reported            
(In millions)     Depreciation,    
    Production Depletion and    
 Revenues and Delivery Amortization    
Totals presented above$1,581 $722 $134    
Net noncash and nonrecurring costs per above N/A  3  N/A    
Less: Treatment charges per above (102) N/A  N/A    
Revenue adjustments, primarily for pricing on prior            
period open sales per above 106  N/A  N/A    
Eliminations and other 1  8  –    
South America copper mines 1,586  733  134    
North America copper mines 1,321  1,014  139    
Indonesia mining 2,732  765  143    
Africa mining 57  108  17    
Molybdenum 332  300b 22    
Rod & Refining 1,366  1,357  4    
Atlantic Copper Smelting & Refining 707  712  17    
Corporate, other & eliminations (1,815) (1,599) 12    
As reported in FCX’s consolidated financial statements$6,286 $3,390b$488    
 
a.  Includes molybdenum, gold and silver product revenues and production costs.
 
b.  Includes LCM molybdenum inventory adjustments totaling $19 million.
 
4453

South America Copper Mines Product Revenues and Production Costs (continued)

Three Months Ended March 31, 2008        
Six Months Ended June 30, 2008        
By-Product Co-Product Method By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total Method Copper 
Other a
 Total 
Revenues, excluding adjustments shown below$1,380 $1,380 $59 $1,439 $2,806 $2,806 $105 $2,911 
                  
Site production and delivery, before net noncash                  
nonrecurring costs shown below 395 381 20 401  818 790 37 827 
By-product credits (53) – – –  (96) – – – 
Treatment charges 76  76  –  76  144  144  –  144 
Net cash costs 418 457 20 477  866 934 37 971 
Depreciation, depletion and amortization 130 126 4 130  257 248 9 257 
Noncash and nonrecurring costs, net 25  25  –  25  56  56  –  56 
Total costs 573 608 24 632  1,179 1,238 46 1,284 
Revenue adjustments, primarily for pricing on prior                  
period open sales 230 230 – 230  237 237 – 237 
Other non-inventoriable costs (9) (8) (1) (9) (19) (18) (1) (19)
Gross profit$1,028 $994 $34 $1,028 $1,845 $1,787 $58 $1,845 
                  
Reconciliation to Amounts Reported                  
(In millions)     Depreciation,        Depreciation,   
   Production Depletion and      Production Depletion and   
Revenues and Delivery Amortization   Revenues and Delivery Amortization   
Totals presented above$1,439 $401 $130   $2,911 $827 $257   
Net noncash and nonrecurring costs per above N/A 25 N/A    N/A 56 N/A   
Less: Treatment charges per above (76) N/A N/A    (144) N/A N/A   
Revenue adjustments, primarily for pricing on prior                  
period open sales per above 230 N/A N/A    237 N/A N/A   
Eliminations and other 14  6  –    31  11  –   
South America copper mines 1,607 432 130    3,035 894 257   
North America copper mines 1,496 646 184    3,067 1,369b 371   
Indonesia mining 1,052 399 45    2,068 838 93   
Africa mining – 3 1    – 12 2   
Molybdenum 719 460 39    1,434 881 108   
Rod & Refining 1,688 1,676 2    3,371 3,353 3   
Atlantic Copper Smelting & Refining 665 651 9    1,389 1,349 18   
Corporate, other & eliminations (1,555) (1,545) 8    (3,251) (3,254) 28   
As reported in FCX’s consolidated financial statements$5,672 $2,722b$418   $11,113 $5,442b$880   
 
a.  Includes molybdenum, gold and silver product revenues and production costs.
 
b.  Includes LCM inventory adjustments totaling $1$5 million.
 
4554
 
Indonesia Mining Product Revenues and Production Costs

Three Months Ended March 31, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total 
Revenues, after adjustments shown below$665 $665 $477 $17 $1,159 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 339  195  140  4  339 
Gold and silver credits (494) –  –  –  – 
Treatment charges 75  43  31  1  75 
Royalty on metals 25  14  10  1  25 
Net cash (credits) costs (55) 252  181  6  439 
Depreciation and amortization 65  37  27  1  65 
Noncash and nonrecurring costs, net 11  7  4  –  11 
Total costs 21  296  212  7  515 
Revenue adjustments, primarily for pricing on prior               
period open sales 63  63  –  –  63 
PT Smelting intercompany loss (7) (4) (3) –  (7)
Gross profit$700 $428 $262 $10 $700 
                
Reconciliation to Amounts Reported               
(In millions)    Depreciation,       
   Production Depletion and       
 Revenues and Delivery Amortization       
Totals presented above$1,159 $339 $65       
Net noncash and nonrecurring costs per above N/A  11  N/A       
Less: Treatment charges per above (75) N/A  N/A       
Less: Royalty per above (25) N/A  N/A       
Revenue adjustments, primarily for pricing on prior               
period open sales per above 63  N/A  N/A       
Indonesia mining 1,122  350  65       
North America copper mines 618  553  75       
South America copper mines 702  367  65       
Africa mining –  16  3       
Molybdenum 146  138a 9       
Rod & Refining 619  614  2       
Atlantic Copper Smelting & Refining 292  293  8       
Corporate, other & eliminations (897) (750) 5       
As reported in FCX’s consolidated financial statements$2,602 $1,581a$232       
a.  Includes total LCM molybdenum inventory adjustments totaling $19 million.
Three Months Ended June 30, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total 
Revenues, after adjustments shown below$966 $966 $753 $23 $1,742 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 401  223  172  6  401 
Gold and silver credits (776) –  –  –  – 
Treatment charges 94  53  40  1  94 
Royalty on metals 49  28  21  –  49 
Net cash (credits) costs (232) 304  233  7  544 
Depreciation and amortization 78  44  33  1  78 
Noncash and nonrecurring costs, net 14  7  7  –  14 
Total costs (140) 355  273  8  636 
Revenue adjustments, primarily for pricing on prior               
period open sales 11  11  –  –  11 
PT Smelting intercompany loss (30) (17) (12) (1) (30)
Gross profit$1,087 $605 $468 $14 $1,087 
                
Reconciliation to Amounts Reported               
(In millions)    Depreciation,       
   Production Depletion and       
 Revenues and Delivery Amortization       
Totals presented above$1,742 $401 $78       
Net noncash and nonrecurring costs per above N/A  14  N/A       
Less: Treatment charges per above (94) N/A  N/A       
Less: Royalty per above (49) N/A  N/A       
Revenue adjustments, primarily for pricing on prior               
period open sales per above 11  N/A  N/A       
Indonesia mining 1,610  415  78       
North America copper mines 703  461  64       
South America copper mines 884  366  69       
Africa mining 57  92  14       
Molybdenum 186  162  13       
Rod & Refining 747  743  2       
Atlantic Copper Smelting & Refining 415  419  9       
Corporate, other & eliminations (918) (849) 7       
As reported in FCX’s consolidated financial statements$3,684 $1,809 $256       
 
4655

 
Indonesia Mining Product Revenues and Production Costs (continued)

Three Months Ended March 31, 2008    
Three Months Ended June 30, 2008    
By-Product Co-Product Method By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total Method Copper Gold Silver Total 
Revenues, after adjustments shown below$802 $802 $241 $15 $1,058 $896 $896 $212 $15 $1,123 
                      
Site production and delivery, before net noncash                      
and nonrecurring costs shown below 385 292 88 5 385  434 345 83 6 434 
Gold and silver credits (256) – – – –  (227) – – – – 
Treatment charges 68 52 15 1 68  64 51 13 – 64 
Royalty on metals 25  19  6  –  25  30  24  5  1  30 
Net cash costs 222 363 109 6 478  301 420 101 7 528 
Depreciation and amortization 45 34 10 1 45  48 38 9 1 48 
Noncash and nonrecurring costs, net 14  11  3  –  14  5  4  1  –  5 
Total costs 281 408 122 7 537  354 462 111 8 581 
Revenue adjustments, primarily for pricing on prior                      
period open sales 87 87 – – 87  (13) (13) – – (13)
PT Smelting intercompany loss (5) (3) (2) –  (5) –  (1) 1  –  – 
Gross profit$603 $478 $117 $8 $603 $529 $420 $102 $7 $529 
                      
Reconciliation to Amounts Reported                      
(In millions)    Depreciation,         Depreciation,     
  Production Depletion and       Production Depletion and     
Revenues and Delivery Amortization     Revenues and Delivery Amortization     
Totals presented above$1,058 $385 $45     $1,123 $434 $48     
Net noncash and nonrecurring costs per above N/A 14 N/A      N/A 5 N/A     
Less: Treatment charges per above (68) N/A N/A      (64) N/A N/A     
Less: Royalty per above (25) N/A N/A      (30) N/A N/A     
Revenue adjustments, primarily for pricing on prior                      
period open sales per above 87  N/A  N/A      (13) N/A  N/A     
Indonesia mining 1,052 399 45      1,016 439 48     
North America copper mines 1,496 646 184      1,571 723a 187     
South America copper mines 1,607 432 130      1,428 462 127     
Africa mining – 3 1      – 9 1     
Molybdenum 719 460 39      715 421  69     
Rod & Refining 1,688 1,676 2      1,683 1,677 1     
Atlantic Copper Smelting & Refining 665 651 9      724 698 9     
Corporate, other & eliminations (1,555) (1,545) 8      (1,696) (1,709) 20     
As reported in FCX’s consolidated financial statements$5,672 $2,722a$418     $5,441 $2,720a$462     
 
a.  Includes LCM inventory adjustments totaling $1$4 million.

4756
Indonesia Mining Product Revenues and Production Costs (continued)

Six Months Ended June 30, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total 
Revenues, after adjustments shown below$1,650 $1,650 $1,230 $40 $2,920 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 740  418  312  10  740 
Gold and silver credits (1,270) –  –  –  – 
Treatment charges 169  96  71  2  169 
Royalty on metals 74  42  31  1  74 
Net cash (credits) costs (287) 556  414  13  983 
Depreciation and amortization 143  81  60  2  143 
Noncash and nonrecurring costs, net 25  14  11  –  25 
Total costs (119) 651  485  15  1,151 
Revenue adjustments, primarily for pricing on prior               
period open sales 55  55  –  –  55 
PT Smelting intercompany loss (37) (21) (15) (1) (37)
Gross profit$1,787 $1,033 $730 $24 $1,787 
                
Reconciliation to Amounts Reported               
(In millions)    Depreciation,       
   Production Depletion and       
 Revenues and Delivery Amortization       
Totals presented above$2,920 $740 $143       
Net noncash and nonrecurring costs per above N/A  25  N/A       
Less: Treatment charges per above (169) N/A  N/A       
Less: Royalty per above (74) N/A  N/A       
Revenue adjustments, primarily for pricing on prior               
period open sales per above 55  N/A  N/A       
Indonesia mining 2,732  765  143       
North America copper mines 1,321  1,014  139       
South America copper mines 1,586  733  134       
Africa mining 57  108  17       
Molybdenum 332  300a 22       
Rod & Refining 1,366  1,357  4       
Atlantic Copper Smelting & Refining 707  712  17       
Corporate, other & eliminations (1,815) (1,599) 12       
As reported in FCX’s consolidated financial statements$6,286 $3,390a$488       
a.  Includes LCM molybdenum inventory adjustments totaling $19 million.
57
Indonesia Mining Product Revenues and Production Costs (continued)

Six Months Ended June 30, 2008    
 By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total 
Revenues, after adjustments shown below$1,691 $1,691 $453 $29 $2,173 
                
Site production and delivery, before net noncash               
and nonrecurring costs shown below 819  637  171  11  819 
Gold and silver credits (482) –  –  –  – 
Treatment charges 132  103  28  1  132 
Royalty on metals 55  43  11  1  55 
Net cash costs 524  783  210  13  1,006 
Depreciation and amortization 93  72  19  2  93 
Noncash and nonrecurring costs, net 19  15  4  –  19 
Total costs 636  870  233  15  1,118 
Revenue adjustments, primarily for pricing on prior               
period open sales 82  82  –  –  82 
PT Smelting intercompany loss (5) (4) (1) –  (5)
Gross profit$1,132 $899 $219 $14 $1,132 
                
Reconciliation to Amounts Reported               
(In millions)    Depreciation,       
   Production Depletion and       
 Revenues And Delivery Amortization       
Totals presented above$2,173 $819 $93       
Net noncash and nonrecurring costs per above N/A  19  N/A       
Less: Treatment charges per above (132) N/A  N/A       
Less: Royalty per above (55) N/A  N/A       
Revenue adjustments, primarily for pricing on prior               
period open sales per above 82  N/A  N/A       
Indonesia mining 2,068  838  93       
North America copper mines 3,067  1,369a 371       
South America copper mines 3,035  894  257       
Africa mining –  12  2       
Molybdenum 1,434  881  108       
Rod & Refining 3,371  3,353  3       
Atlantic Copper Smelting & Refining 1,389  1,349  18       
Corporate, other & eliminations (3,251) (3,254) 28       
As reported in FCX’s consolidated financial statements$11,113 $5,442a$880       
a.  Includes LCM inventory adjustments totaling $5 million.

58
 
Henderson Molybdenum Mine Product Revenues and Production Costs

 
Three Months Ended
June 30,
 
(In millions)2009 2008 
Revenues$55 $321 
       
Site production and delivery, before net noncash      
and nonrecurring costs shown below 34  53 
Net cash costs 34  53 
Depreciation, depletion and amortization 6  45 
Noncash and nonrecurring costs, net –  – 
Total costs 40  98 
Gross profita
$15 $223 

Three Months Ended March 31,   
(In millions)2009 2008   
Revenues$70 $282   
       
Site production and delivery, before net noncash       
and nonrecurring costs shown below 37  49   
Net cash costs 37 49   
Depreciation, depletion and amortization 6 41   
Noncash and nonrecurring costs, net –  1   
Total costs 43  91   
Gross profita
$27 $191   
       
Reconciliation to Amounts Reported
   Production Depreciation,    Production Depreciation, 
(In millions)   and Depletion and    And Depletion and 
 Revenues Delivery Amortization  Revenues Delivery Amortization 
Three Months Ended March 31, 2009       
Three Months Ended June 30, 2009       
Totals presented above$70 $37 $6 $55 $34 $6 
Net noncash and nonrecurring costs per above N/A  –  N/A  N/A  –  N/A 
Henderson mine 70 37 6  55 34 6 
Other molybdenum operations and eliminationsb
 76  101c 3  131  128  7 
Molybdenum 146 138 9  186 162 13 
North America copper mines 618 553 75  703 461 64 
South America copper mines 702 367 65  884 366 69 
Indonesia mining 1,122 350 65  1,610 415 78 
Africa mining – 16 3  57 92 14 
Rod & Refining 619 614 2  747 743 2 
Atlantic Copper Smelting & Refining 292 293 8  415 419 9 
Corporate, other & eliminations (897) (750) 5  (918) (849) 7 
As reported in FCX’s consolidated financial statements$2,602 $1,581c$232 $3,684 $1,809 $256 
              
Three Months Ended March 31, 2008       
Three Months Ended June 30, 2008       
Totals presented above$282 $49 $41 $321 $53 $45 
Net noncash and nonrecurring costs per above N/A  1  N/A  N/A  –  N/A 
Henderson mine 282 50 41  321 53 45 
Other molybdenum operations and eliminationsb
 437  410  (2) 394  368  24 
Molybdenum 719 460 39  715 421 69 
North America copper mines 1,496 646 184  1,571 723c 187 
South America copper mines 1,607 432 130  1,428 462 127 
Indonesia mining 1,052 399 45  1,016 439 48 
Africa mining – 3 1  – 9 1 
Rod & Refining 1,688 1,676 2  1,683 1,677 1 
Atlantic Copper Smelting & Refining 665 651 9  724 698 9 
Corporate, other & eliminations (1,555) (1,545) 8  (1,696) (1,709) 20 
As reported in FCX’s consolidated financial statements$5,672 $2,722d$418 $5,441 $2,720c$462 
 
a.  
Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segment includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.
 
b.  
Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced as a by-product at our North and South America copper mines.
 
c.  
First-quarter 2009 includesIncludes LCM inventory molybdenum adjustments totaling $19 million.$4 million in second-quarter 2008.
59
Henderson Molybdenum Mine Product Revenues and Production Costs (continued)

 
Six Months Ended
June 30,
 
(In millions)2009 2008 
Revenues$125 $603 
       
Site production and delivery, before net noncash      
and nonrecurring costs shown below 71  102 
Net cash costs 71  102 
Depreciation, depletion and amortization 12  86 
Noncash and nonrecurring costs, net –  1 
Total costs 83  189 
Gross profita
$42 $414 

 
Reconciliation to Amounts Reported
   Production Depreciation, 
(In millions)   And Depletion and 
  Revenues Delivery Amortization 
Six Months Ended June 30, 2009         
Totals presented above$125 $71 $12 
Net noncash and nonrecurring costs per above N/A  –  N/A 
Henderson mine 125  71  12 
Other molybdenum operations and eliminationsb
 207  229c 10 
Molybdenum 332  300  22 
North America copper mines 1,321  1,014  139 
South America copper mines 1,586  733  134 
Indonesia mining 2,732  765  143 
Africa mining 57  108  17 
Rod & Refining 1,366  1,357  4 
Atlantic Copper Smelting & Refining 707  712  17 
Corporate, other & eliminations (1,815) (1,599) 12 
As reported in FCX’s consolidated financial statements$6,286 $3,390c$488 
          
Six Months Ended June 30, 2008         
Totals presented above$603 $102 $86 
Net noncash and nonrecurring costs per above N/A  1  N/A 
Henderson mine 603  103  86 
Other molybdenum operations and eliminationsb
 831  778  22 
Molybdenum 1,434  881  108 
North America copper mines 3,067  1,369d 371 
South America copper mines 3,035  894  257 
Indonesia mining 2,068  838  93 
Africa mining –  12  2 
Rod & Refining 3,371  3,353  3 
Atlantic Copper Smelting & Refining 1,389  1,349  18 
Corporate, other & eliminations (3,251) (3,254) 28 
As reported in FCX’s consolidated financial statements$11,113 $5,442d$880 
a.  Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segment includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.
 
b.  Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced as a by-product at our North and South America copper mines.
c.Includes LCM molybdenum inventory adjustments totaling $19 million for the first six months of 2009.
d.  First-quarter 2008 includesIncludes LCM inventory adjustments totaling $1 million.$5 million for the first six months of 2008.

 
CAUTIONARY STATEMENT

Our discussion and analysis contains forward-looking statements in which we discuss our expectations regarding future performance. Forward-looking statements are all statements other than statements of historical facts, such as those statements regarding anticipated production volumes, sales volumes, unit net cash costs, ore grades, milling rates, commodity prices, development and other capital expenditures, mine production and development plans, environmental liabilities, potential future dividend payments, reserve estimates, projected exploration efforts and results, operating cash flows, the impact of copper, gold and molybdenum price changes, the impact of deferred intercompany profits on earnings, liquidity, other financial commitments and tax rates. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “intends,” “likely,” “will,” “should,” “to be” and any similar expressions and/or statements that are not historical facts, in each case as they relate to us or our management, are intended to identify those assertions as forward-looking statements.

In making any of those statements, the person making them believes that the expectations are based on reasonable assumptions. We caution readers that those statements are not guarantees of future performance, and our actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include commodity prices, mine sequencing, production rates, industry risks, regulatory changes, political risks, the potential effects of the recent violence in Indonesia, weather-related risks, labor relations, environmental risks, litigation results, currency translation risks and other factors described in more detail under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2008.

Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our results of operations or financial condition. Except for our ongoing obligations under the federal securities laws, weWe do not intend to update our forward-looking statements more frequently than quarterly, and undertake no obligation to update or revise any forward-looking statements.

Item 3. 3.  Quantitative and Qualitative Disclosures About Market Risk.

In early April 2009, we entered into forward copper sales contracts to lockThere have been no material changes in prices at an average of $1.86 per pound on 355 million pounds of PT Freeport Indonesia’s provisionally priced copper sales at March 31, 2009, which are scheduled to final price from April 2009 through Julyour market risks during the six months ended June 30, 2009. From time to time, we may enter into future transactions to lock in pricing on provisionally priced sales to reduce short-term volatility in earnings and cash flows, but we do not intend to change our long standing policy of not hedging future copper production.

For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Item 7A of our annual report on Form 10-K for the year ended December 31, 2008. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Overview and Outlook” in Part I, Item 2 of this quarterly report on Form 10-Q; for projected sensitivities of our provisionally priced copper sales to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 2 of this quarterly report on Form 10-Q.

Item 4Ite.m 4.  Controls and Procedures.

(a)  
Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15(d)-15(e)15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on their evaluation, they have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

(b)  
Changes in internal control. There has been no change in our internal control over financial reporting that occurred during the three monthsquarter ended March 31,June 30, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.
There have been no new material legal proceedings and no material changes to the information included in Item 3. Legal Proceedings of Part I of our annual report on Form 10-K for the year ended December 31, 2008, as updated in Item 1. Legal Proceedings of Part II of our Form 10-Q for the quarter ended March 31, 2009.
 

PART II.  OTHER INFORMATION

Item 1. 1A.  Legal Proceedings.Risk Factors.

Environmental Proceedings

Arizona Notice of Violation (NOV) – Sierrita operations.  Information regarding this legal proceeding is incorporated by reference toThe following risk factors included in Item 3. Legal Proceedings1A. Risk Factors of Part I of the FCXour annual report on Form 10-K for the year ended December 31, 2008.2008, have been updated:

Our Tenke Fungurume development project is located in the Democratic Republic of Congo, and our business may be adversely affected by political, economic and social instability in the Democratic Republic of Congo.

In JanuaryJuly 2009, Phelps Dodge Sierrita, Inc. (Sierrita) and the Arizona Department of Environmental Quality (ADEQ)Tenke Fungurume (Tenke) entered into a consent decree relating to two NOVs associatedsettlement agreement with dust emissions from Sierrita’s tailing facility. The consent decree, which obligates Sierrita to pay a $45,000 fine and $60,000 for a supplemental environmental project, was entered by the courtDRC tax authorities in April 2009. It will be terminated afterconnection with an administrative audit regarding the payment of fees for work permits and visas for its foreign workers and subcontractors, including short-term workers. Pursuant to the required sumsagreement, which covers the period from January 2007 to the date of the settlement, Tenke will pay approximately $16 million in fees and filing ofpenalties. The procedures associated with obtaining labor and immigration authorizations for short-term workers on a reporttimely basis are not clearly established in the DRC, and Tenke continues to work proactively and cooperatively with ADEQ.the tax authorities to establish approved procedures for doing so consistent with its mining convention and local law.

New Mexico Environment Department – Chino Mines.  InformationShortly after reaching the settlement, Tenke was advised that the Minister of Justice in the DRC authorized an inquiry regarding this legal proceedingthe alleged misappropriation of public funds in connection with the securing of labor and immigration authorizations and the payment of associated fees for the Tenke project. Press reports indicate that several government officials have been arrested and four Tenke employees have been requested to appear at a hearing to determine their potential involvement. Tenke is incorporated by referencecooperating with the government inquiries and conducting its own internal investigation.

Under Congolese law and Tenke’s mining convention, Tenke pays mining royalties to Item 3. Legal Proceedings of Part Ithe DRC’s central government public treasury. The law provides that the provincial and local governments are entitled to receive a portion of the FCX Form 10-K formining royalties from the year ended December 31, 2008.central government. In July 2009, the provincial government requested that its portion of Tenke’s royalties be paid directly to the provincial government and temporarily delayed the processing of Tenke’s export customs requests. We understand that the provincial and central governments are engaged in discussions regarding the provincial government's request to receive its share of royalty payments. Tenke’s shipments of copper have resumed, although future shipments and sales could be impacted pending resolution of this matter.

In 2007, Chino Mines Co. (Chino) notified New Mexico Environmental Department (NMED)Terrorist attacks throughout the world and the potential for additional future terrorist acts have created economic and political uncertainties that heavy rains led to a release of diluted leach solutions through a storm water outfall to an ephemeral stream on Chino’s property; Chino also identified the interim corrective actions taken as a resultcould materially and adversely affect our business.

On July 17, 2009, two suicide bombers set off explosions inside of the discharge. In AprilJW Marriott and Ritz-Carlton hotels in Jakarta, Indonesia, that are reported to have killed nine people and injured 53 others. Two of our Indonesian-based executives were injured in the incident.

On July 8, 2009, Chinoa small group of individuals created a disturbance on the road leading to our mining and NMED enteredmilling operations at our Grasberg mining complex and vandalized vehicles and small buildings. There were no injuries.

Between July 11, 2009, and July 22, 2009, there were sporadic shooting incidents along the road leading to our mining and milling operations at our Grasberg mining complex. Three people were killed (including one PT Freeport Indonesia employee, a Settlement Agreementsecurity contractor and Stipulated Final Order obligating Chinoan Indonesian policeman) and several people were injured (including four PT Freeport Indonesia employees and contractors). Indonesian authorities have expressed commitments to pay a $276,000 penaltyprovide security for PT Indonesia’s personnel and operations and to implementconduct an investigation to identify and arrest the perpetrators of these acts. Indonesian authorities have taken actions to secure the road and are investigating these incidents. Several suspects have been arrested for their alleged involvement in the shootings. These incidents have not affected our production to-date; however, they have limited the movement of personnel and supplies. Currently, personnel and supplies are being transported on the road in a corrective action plan.controlled fashion in a manner that is allowing normal production. Prolonged limitations on access to the road could adversely affect operations at the mine. In response to these events, PT Freeport Indonesia is currently reviewing security plans with the Indonesian authorities.

Item 1A.  Risk Factors.

There have been no material changes to our risk factors during the three months ended March 31, 2009. For additional information on risk factors, refer to “Risk Factors” included inItem 1A. Risk Factors of Part I Item 1A of our annual report on Form 10-K for the year ended December 31, 2008.

Item 2. 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

(c)  The following table sets forth information with respect to shares of common stock of FCX purchased by FCX during the three months ended March 31,June 30, 2009:

       (c) Total Number of (d) Maximum Number
  (a) Total Number (b) Average Shares Purchased as Part of Shares That May
  of Shares Price Paid of Publicly Announced Yet Be Purchased Under
Period 
Purchaseda
 Per Share 
Plans or Programsb
 
the Plans or Programsb
January 1-31, 2009 935 $27.42 – 23,685,500
February 1-28, 2009 273 $29.00 – 23,685,500
March 1-31, 2009 498 $33.98 – 23,685,500
Total 1,706 $29.59 – 23,685,500
          
       (c) Total Number of (d) Maximum Number
  (a) Total Number (b) Average Shares Purchased as Part of Shares That May
  of Shares Price Paid of Publicly Announced Yet Be Purchased Under
Period 
Purchaseda
 Per Share 
Plans or Programsb
 
the Plans or Programsb
April 1-30, 2009 – $– – 23,685,500
May 1-31, 2009 – $– – 23,685,500
June 1-30, 2009 207 $59.18 – 23,685,500
Total 207 $59.18 – 23,685,500
          
a.  Consists of shares repurchased under FCX’s applicable stock incentive plans, which were repurchased to satisfy tax obligations on restricted stock awards and to cover the cost of option exercises.under FCX’s applicable stock incentive plans.
 
b.  On July 21, 2008, FCX’s Board of Directors approved an increase in FCX’s open-market share purchase program for up to 30 million shares. This program does not have an expiration date.

Item 4. Submission of Matters to a Vote of Security Holders

Our annual meeting of stockholders was held on June 11, 2009 (the “Annual Meeting”). Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. The following matters were submitted to a vote of security holders during our Annual Meeting:

 ForWithheld
1. Election of Directors:  
Richard C. Adkerson334,427,36313,110,334
Robert J. Allison, Jr.298,731,11548,806,582
Robert A. Day338,179,7079,357,990
Gerald J. Ford333,080,54914,457,148
H. Devon Graham, Jr.310,862,87536,674,822
J. Bennett Johnston314,097,58033,440,117
Charles C. Krulak315,186,74532,350,952
Bobby Lee Lackey310,833,92436,703,773
Jon C. Madonna342,582,7274,954,970
Dustan E. McCoy338,899,5998,638,098
Gabrielle K. McDonald314,407,33233,130,365
James R. Moffett332,750,80914,786,888
B.M. Rankin, Jr.314,115,73133,421,966
J. Stapleton Roy314,392,43133,145,266
Stephen H. Siegele342,627,6424,910,055
J. Taylor Wharton314,303,91733,233,780

There were no abstentions with respect to the election of directors.

 
    For    
AgainstAbstentions
2. Ratification of Ernst & Young LLP as independent auditors.345,618,7361,341,161577,800
3. Adoption of the proposed 2009 Annual Incentive Plan.308,854,97736,067,3942,615,326
4. Stockholder proposal for selection of a candidate with environmental expertise to be recommended for election to the Board of Directors.90,130,264181,954,6535,690,483

Item 6.  Exhibits.

The exhibits to this report are listed in the Exhibit Index beginning on Page E-1 hereof.
 

FREFREPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FREEPORT-McMoRan COPPER & GOLD INC.

By:          /s/ Kathleen L. QuirkC. Donald Whitmire Jr.                                                      
Kathleen L. QuirkC. Donald Whitmire Jr.
Executive Vice President
Chief Financial Officer and
TreasurerController – Financial Reporting
(authorized signatory and
Principal FinancialAccounting Officer)

Date:  May 11,August 7, 2009



FRFREEEPORT-McMoRanEPORT-McMoRan COPPER & GOLD INC.
EXHIBIT INDEX
  Filed 
Exhibit with this
Incorporated by Reference
Number
Exhibit Title
Form 10-Q
Form
File No.
Date Filed
3.1Composite Certificate of Incorporation of FCX. 8-A/A001-11307-0101/26/2009
3.2Amended and Restated By-Laws of FCX, as amended through May 1, 2007. 8-K001-11307-0105/04/2007
10.1*
FCX Director Compensation.XFreeport-McMoRan Copper & Gold Inc. 2009 Annual Incentive Plan. 8-K001-11307-0106/17/2009
15.1
Letter from Ernst & Young LLP regarding unaudited interim financial statements.X   
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d – 14(a).X   
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a).X   
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.X   
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350.X   
101.INSXBRL Instance Document.X   
101.SCHXBRL Taxonomy Extension Schema.X   
101.CALXBRL Taxonomy Extension Calculation Linkbase.X   
101.DEFXBRL Taxonomy Extension Definition Linkbase.X   
101.LABXBRL Taxonomy Extension Label Linkbase.X   
101.PREXBRL Taxonomy Extension Presentation Linkbase.X   
101.REFXBRL Taxonomy Extension Reference Linkbase.X   

*  Indicates management contract or compensatory plan or arrangement.

E-1