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 September 30, 2010March 31, 2011
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from toTo
Commission File Number: 001-11307-01
 
 
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) 
  
333 North Central Avenue 
Phoenix, AZ85004-441485004-2189
(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  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,website, 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  o No 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 RAccelerated filer o                                                      Non-accelerated filer o               60; Smaller reporting company o

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

On OctoberApril 29, 2010,2011, there were issued and outstanding 470,879,306947,315,321 shares of the registrant’s common stock, par value $0.10 per share.

 
 
 

FFRREEPORT-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
2017
  
Item 2. Management's Discussion and Analysis of Financial Condition
 
and Results of Operations
2118
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
6652
  
Item 4. Controls and Procedures
6652
  
Part II. Other Information
6753
  
Item 1. Legal Proceedings
6753
  
Item 1A. Risk Factors
6753
Item 4. Mine Safety Disclosure53
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
67
Item 5. Other Information
6753
  
Item 6. Exhibits
6853
  
Signature
6954
  
Exhibit Index
E-1
  


FREEPORT-McMoRan COPPER & GOLD INC.

PART I.  FINANCIAL INFORMATION

IIttemem 1. Financial Statements.Statements.

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

  September 30,  December 31, 
  2010  2009 
  (In Millions) 
         
ASSETS        
Current assets:        
Cash and cash equivalents $3,720  $2,656 
Trade accounts receivable  1,860   1,517 
Other accounts receivable  255   286 
Inventories:        
Product  1,127   1,110 
Materials and supplies, net  1,108   1,093 
Mill and leach stockpiles  800   667 
Other current assets  208   104 
Total current assets  9,078   7,433 
Property, plant, equipment and development costs, net  16,461   16,195 
Long-term mill and leach stockpiles  1,395   1,321 
Intangible assets, net  330   347 
Other assets  687   700 
Total assets $27,951  $25,996 
         
LIABILITIES AND EQUITY        
Current liabilities:        
Accounts payable and accrued liabilities $2,404  $2,038 
Accrued income taxes  356   474 
Current portion of reclamation and environmental obligations  193   214 
Dividends payable  143   99 
Current portion of long-term debt and short-term borrowings  98   16 
Rio Tinto share of joint venture cash flows  78   161 
Total current liabilities  3,272   3,002 
Long-term debt, less current portion  4,681   6,330 
Deferred income taxes  2,846   2,503 
Reclamation and environmental obligations, less current portion  2,045   1,981 
Other liabilities  1,386   1,423 
Total liabilities  14,230   15,239 
Equity:        
FCX stockholders’ equity:        
6¾% Mandatory Convertible Preferred Stock  –   2,875 
Common stock  59   55 
Capital in excess of par value  18,662   15,680 
Accumulated deficit  (3,429)  (5,805)
Accumulated other comprehensive loss  (263)  (273)
Common stock held in treasury  (3,433)  (3,413)
Total FCX stockholders’ equity  11,596   9,119 
Noncontrolling interests  2,125   1,638 
Total equity  13,721   10,757 
Total liabilities and equity $27,951  $25,996 
         
The accompanying notes are an integral part of these consolidated financial statements.


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

             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
 2010 2009 2010 2009 
         
 (In Millions, Except Per Share Amounts) 
             
Revenues$5,152 $4,144 $13,379 $10,430 
Cost of sales:            
Production and delivery 2,269  1,715  6,239  5,086 
Depreciation, depletion and amortization 268  252  788  740 
Lower of cost or market inventory adjustments –  –  –  19 
Total cost of sales 2,537  1,967  7,027  5,845 
Selling, general and administrative expenses 81  74  277  225 
Exploration and research expenses 35  19  104  73 
Restructuring and other charges –  –  –  23 
Total costs and expenses 2,653  2,060  7,408  6,166 
Operating income 2,499  2,084  5,971  4,264 
Interest expense, net (103) (162) (370) (451)
Losses on early extinguishment of debt –  (31) (77) (31)
Other income (expense), net (19) (7) 2  (24)
Income before income taxes and equity in            
affiliated companies’ net earnings 2,377  1,884  5,526  3,758 
Provision for income taxes (845) (684) (1,956) (1,557)
Equity in affiliated companies’ net earnings 1  3  10  21 
Net income 1,533  1,203  3,580  2,222 
Net income attributable to noncontrolling interests (355) (224) (793) (492)
Preferred dividends –  (54) (63) (174)
Net income attributable to FCX common            
stockholders$1,178 $925 $2,724 $1,556 
             
Net income per share attributable to            
FCX common stockholders:            
Basic$2.50 $2.23 $6.01 $3.80 
Diluted$2.49 $2.07 $5.88 $3.70 
             
Weighted-average common shares outstanding:            
Basic 471  416  453  409 
Diluted 474  472  474  428 
             
Dividends declared per share of common stock$0.30 $– $0.75 $– 
  March 31,  December 31, 
  2011  2010 
  (In millions) 
ASSETS        
Current assets:        
Cash and cash equivalents $4,090  $3,738 
Restricted cash for early extinguishment of debt  1,168   - 
Trade accounts receivable  1,588   2,132 
Other accounts receivable  311   293 
Inventories:        
Product  1,450   1,409 
Materials and supplies, net  1,199   1,169 
Mill and leach stockpiles  1,060   856 
Other current assets  280   254 
Total current assets  11,146   9,851 
Property, plant, equipment and development costs, net  17,076   16,785 
Long-term mill and leach stockpiles  1,402   1,425 
Intangible assets, net  325   328 
Other assets  1,059   997 
Total assets $31,008  $29,386 
         
LIABILITIES AND EQUITY        
Current liabilities:        
Accounts payable and accrued liabilities $2,318  $2,441 
Current portion of debt  1,170   95 
Accrued income taxes  806   648 
Dividends payable  239   240 
Current portion of reclamation and environmental obligations  201   207 
Rio Tinto share of joint venture cash flows  17   132 
Total current liabilities  4,751   3,763 
Long-term debt, less current portion  3,582   4,660 
Deferred income taxes  3,056   2,873 
Reclamation and environmental obligations, less current portion  2,065   2,071 
Other liabilities  1,463   1,459 
Total liabilities  14,917   14,826 
Equity:        
FCX stockholders’ equity:        
Common stock  107   107 
Capital in excess of par value  18,893   18,751 
Accumulated deficit  (1,328)  (2,590)
Accumulated other comprehensive loss  (318)  (323)
Common stock held in treasury  (3,553)  (3,441)
Total FCX stockholders’ equity  13,801   12,504 
Noncontrolling interests  2,290   2,056 
Total equity  16,091   14,560 
Total liabilities and equity $31,008  $29,386 
         
 
The accompanying notes are an integral part of these consolidated financial statements.


FFRREEPORT-McMoRanEEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSINCOME (Unaudited)

  Nine Months Ended 
  September 30, 
  2010  2009 
  (In Millions) 
         
Cash flow from operating activities:        
Net income $3,580  $2,222 
Adjustments to reconcile net income to net cash provided by        
operating activities:        
Depreciation, depletion and amortization  788   740 
Lower of cost or market inventory adjustments  –   19 
Stock-based compensation  93   75 
Charges for reclamation and environmental obligations, including accretion  117   150 
Payments of reclamation and environmental obligations  (139)  (76)
Losses on early extinguishment of debt  77   31 
Deferred income taxes  252   (32)
Intercompany profit on PT Freeport Indonesia sales to PT Smelting  3   47 
Increase in long-term mill and leach stockpiles  (73)  (68)
Changes in other assets and liabilities  16   136 
Other, net  33   53 
(Increases) decreases in working capital:        
Accounts receivable  (391)  (754)
Inventories, and mill and leach stockpiles  (189)  (176)
Other current assets  (13)  88 
Accounts payable and accrued liabilities  156   (518)
Accrued income and other taxes  (92)  913 
Net cash provided by operating activities  4,218   2,850 
         
Cash flow from investing activities:        
Capital expenditures:        
North America copper mines  (140)  (121)
South America  (283)  (129)
Indonesia  (311)  (186)
Africa  (59)  (577)
Other  (84)  (125)
Proceeds from the sale of assets and other, net  20   (8)
Net cash used in investing activities  (857)  (1,146)
         
Cash flow from financing activities:        
Net proceeds from sale of common stock  –   740 
Proceeds from debt  52   307 
Repayments of debt  (1,678)  (1,066)
Cash dividends and distributions paid:        
Common stock  (272)  – 
Preferred stock  (95)  (181)
Noncontrolling interests  (330)  (149)
Contributions from noncontrolling interests  24   54 
Net payments for stock-based awards  (3)  (9)
Excess tax benefit from stock-based awards  5   2 
Other  –   (5)
Net cash used in financing activities  (2,297)  (307)
         
Net increase in cash and cash equivalents  1,064   1,397 
Cash and cash equivalents at beginning of year  2,656   872 
Cash and cash equivalents at end of period $3,720  $2,269 
        
  Three Months Ended 
  March 31, 
  2011 2010 
  (In millions, except 
  per share amounts) 
    
Revenues $5,709 $4,363 
Cost of sales:       
Production and delivery  2,377  1,918 
Depreciation, depletion and amortization  232  271 
Total cost of sales  2,609  2,189 
Selling, general and administrative expenses  114  95 
Exploration and research expenses  50  31 
Total costs and expenses  2,773  2,315 
Operating income  2,936  2,048 
Interest expense, net  (98) (145)
Losses on early extinguishment of debt  (7) (27)
Other income, net  10  12 
Income before income taxes and equity in       
affiliated companies’ net earnings  2,841  1,888 
Provision for income taxes  (984) (678)
Equity in affiliated companies’ net earnings  4  5 
Net income  1,861  1,215 
Net income attributable to noncontrolling interests  (362) (270)
Preferred dividends  -  (48)
Net income attributable to FCX common       
stockholders $1,499 $897 
        
Net income per share attributable to       
FCX common stockholders:       
Basic $1.58 $1.04 
Diluted $1.57 $1.00 
        
Weighted-average common shares outstanding:       
Basic  946  861 
Diluted  955  947 
        
Dividends declared per share of common stock $0.25 $0.075 
        
 
The accompanying notes are an integral part of these consolidated financial statements.


FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTSTATEMENTS OF EQUITYCASH FLOWS (Unaudited)

  FCX Stockholders’ Equity     
  Mandatory       Accumu-         
  Convertible       lated Common Stock Total     
  Preferred Stock Common Stock     Other Held in Treasury FCX     
  Number   Number   Capital in Accumu- Compre- Number   Stock- Non-   
  of At Par of At Par Excess of lated hensive of At holders’ controlling Total 
  Shares Value Shares Value Par Value Deficit Loss Shares Cost Equity Interests Equity 
  (In Millions) 
                                      
Balance at December 31, 2009  29 $2,875  552 $55 $15,680 $(5,805)$(273) 122 $(3,413)$9,119 $1,638 $10,757 
Conversions of 6¾% Mandatory                                     
Convertible Preferred Stock  (29) (2,875) 39  4  2,871  –  –  –  –  –  –  – 
Conversions of 7% Convertible                                     
Senior Notes  –  –  –  –  1  –  –  –  –  1  –  1 
Exercised and issued stock-based                                     
awards  –  –  2  –  17  –  –  –  –  17  –  17 
Stock-based compensation  –  –  –  –  92  –  –  –  –  92  –  92 
Tax benefit for stock-based awards  –  –  –  –  1  –  –  –  –  1  –  1 
Tender of shares for stock-based                                     
awards  –  –  –  –  –  –  –  –  (20) (20) –  (20)
Dividends on common stock  –  –  –  –  –  (348) –  –  –  (348) –  (348)
Dividends on preferred stock  –  –  –  –  –  (63) –  –  –  (63) –  (63)
Dividends and distributions to                                     
noncontrolling interests  –  –  –  –  –  –  –  –  –  –  (330) (330)
Contributions from noncontrolling                                     
interests  –  –  –  –  –  –  –  –  –  –  24  24 
Comprehensive income:                                     
Net income  –  –  –  –  –  2,787  –  –  –  2,787  793  3,580 
Other comprehensive income,                                     
  net of taxes:                                     
Unrealized losses on securities  –  –  –  –  –  –  (1) –  –  (1) –  (1)
Translation adjustment  –  –  –  –  –  –  1  –  –  1  –  1 
Defined benefit plans:                                     
Amortization of unrecognized                                     
amounts  –  –  –  –  –  –  10  –  –  10  –  10 
Other comprehensive income  –  –  –  –  –  –  10  –  –  10  –  10 
Total comprehensive income  –  –  –  –  –  –  –  –  –  2,797  793  3,590 
Balance at September 30, 2010  – $–  593 $59 $18,662 $(3,429)$(263) 122 $(3,433)$11,596 $2,125 $13,721 
                                      
  Three Months Ended 
  March 31, 
  2011  2010 
  (In millions) 
         
Cash flow from operating activities:        
Net income $1,861  $1,215 
Adjustments to reconcile net income to net cash provided by        
operating activities:        
Depreciation, depletion and amortization  232   271 
Stock-based compensation  43   47 
Charges for reclamation and environmental obligations, including accretion  38   39 
Payments of reclamation and environmental obligations  (52)  (68)
Losses on early extinguishment of debt  7   27 
Deferred income taxes  127   7 
Other, net  (11)  - 
(Increases) decreases in working capital:        
Accounts receivable  511   33 
Inventories  (253)  (113)
Other current assets  (18)  (2)
Accounts payable and accrued liabilities  (264)  (17)
Accrued income and other taxes  138   379 
Net cash provided by operating activities  2,359   1,818 
         
Cash flow from investing activities:        
Capital expenditures:        
North America copper mines  (119)  (19)
South America  (140)  (48)
Indonesia  (125)  (98)
Africa  (11)  (39)
Molybdenum  (71)  (7)
Other  (39)  (20)
Other, net  -   2 
Net cash used in investing activities  (505)  (229)
         
Cash flow from financing activities:        
Proceeds from debt  9   21 
Repayments of debt  (13)  (326)
Restricted cash for early extinguishment of debt  (1,124)  - 
Cash dividends and distributions paid:        
Common stock  (238)  (66)
Preferred stock  -   (49)
Noncontrolling interests  (133)  (75)
Contributions from noncontrolling interests  5   8 
Net payments for stock-based awards  (20)  (10)
Excess tax benefit from stock-based awards  21   4 
Other, net  (9)  - 
Net cash used in financing activities  (1,502)  (493)
         
Net increase in cash and cash equivalents  352   1,096 
Cash and cash equivalents at beginning of year  3,738   2,656 
Cash and cash equivalents at end of period $4,090  $3,752 
         
The accompanying notes are an integral part of these consolidated financial statements.


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

  FCX Stockholders’ Equity     
         Accumu-         
         lated Common Stock       
  Common Stock      Other Held in Treasury Total FCX     
  Number    Capital in Accumu- Compre- Number   Stock- Non-   
  of At Par  Excess of lated hensive of At holders’ controlling Total 
  Shares Value  Par Value Deficit Loss Shares Cost Equity Interests Equity 
                                 
  (In millions) 
Balance at December 31, 2010  1,067 $107  $18,751 $(2,590)$(323) 122 $(3,441)$12,504 $2,056 $14,560 
Exercised and issued stock-based                                
awards  3  -   24  -  -  -  -  24  -  24 
Stock-based compensation  -  -   45  -  -  -  -  45  -  45 
Tax benefit for stock-based awards  -  -   6  -  -  -  -  6  -  6 
Tender of shares for stock-based                                
awards  -  -   67  -  -  1  (112) (45) -  (45)
Dividends on common stock  -  -   -  (237) -  -  -  (237) -  (237)
Dividends and distributions to                                
noncontrolling interests  -  -   -  -  -  -  -  -  (133) (133)
Contributions from noncontrolling                                
interests  -  -   -  -  -  -  -  -  5  5 
Comprehensive income:                                
Net income  -  -   -  1,499  -  -  -  1,499  362  1,861 
Other comprehensive income,                                
net of taxes:                                
Unrealized gains on securities  -  -   -  -  1  -  -  1  -  1 
Translation adjustment  -  -   -  -  1  -  -  1  -  1 
Defined benefit plans:                                
Amortization of unrecognized                                
amounts  -  -   -  -  3  -  -  3  -  3 
Other comprehensive income  -  -   -  -  5  -  -  5  -  5 
Total comprehensive income  -  -   -  -  -  -  -  1,504  362  1,866 
Balance at March 31, 2011  1,070 $107  $18,893 $(1,328)$(318) 123 $(3,553)$13,801 $2,290 $16,091 
                                 
The accompanying notes are an integral part of these consolidated financial statements
FREEPORT-McMoRan
FREEPORT-McMoRan COPPER & GOLD INC.
NOTESNOTES 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 20092010 Annual Report on Form 10-K. The information furnished herein reflects all adjustments whichthat 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 and nine-month periodsperiod ended September 30, 2010,March 31, 2011, are not necessaril ynecessarily indicative of the results that may be expected for the year ending December 31, 2010.2011.

In December 2010, FCX’s Board of Directors declared a two-for-one split of its common stock in the form of a stock dividend on issued and outstanding shares, with the additional shares issued on February 1, 2011, to common shareholders of record at the close of business on January 15, 2011. All references to shares of common stock and per share amounts have been retroactively adjusted to reflect the two-for-one stock split.

2.  EARNINGS PER SHARE
FCX’s basic net income per share of common stock was calculated by dividing net income attributable to common stock by the weighted-average shares of common stock outstanding during the period. Following is a reconciliation of net income and weighted-average shares of common stock outstanding for purposes of calculating diluted net income per share (in millions, except per share amounts):
 
 Three Months Ended Nine Months Ended    Three Months Ended 
 September 30, September 30,    March 31, 
 2010 2009 2010 2009      2011 2010 
Net income $1,533 $1,203 $3,580 $2,222      $1,861 $1,215 
Net income attributable to noncontrolling interests (355) (224) (793) (492)      (362) (270)
Preferred dividends  –  (54) (63) (174)      -  (48)
Net income attributable to FCX common stockholders 1,178 925  2,724 1,556       1,499 897 
Plus income impact of assumed conversion of:          
Plus income impact of assumed conversion of          
6¾% Mandatory Convertible Preferred Stocka
 – 48  63 –b      -  48 
5½% Convertible Perpetual Preferred Stockc
  –  5  –  28 
Diluted net income attributable to FCX common                    
stockholders $1,178 $978 $2,787 $1,584      $1,499 $945 
                    
Weighted-average shares of common stock outstanding 471 416  453 409       946 861 
Add stock issuable upon conversion, exercise or                    
vesting of:                    
6¾% Mandatory Convertible Preferred Stocka
 – 39  17 –b      - 78 
5½% Convertible Perpetual Preferred Stockc
 – 14  – 17 
Dilutive stock options 2 2  3d 1       8b 6b
Restricted stock  1  1  1  1       1  2 
Weighted-average shares of common stock outstanding                    
for purposes of calculating diluted net income per share  474  472  474  428       955  947 
                    
Diluted net income per share attributable to                    
FCX common stockholders $2.49 $2.07 $5.88 $3.70      $1.57 $1.00 
                    
 
a.  All outstanding 6¾% Mandatory Convertible Preferred Stock automatically converted on May 1, 2010, into FCX common stock at a conversion rate of 1.3716 shares of FCX common stock (refer to Note 6 for further discussion).stock.
 
b.  Preferred dividends of $146 million and additional shares of FCX common stock of approximately 39 million shares for the 6¾% Mandatory Convertible Preferred Stock were excluded for the nine months ended September 30, 2009, because they were anti-dilutive.
c.  In September 2009, FCX redeemed the remaining outstanding shares of its 5½% Convertible Perpetual Preferred Stock.
d.  Potential additional shares of FCX common stock ofthat were anti-dilutive totaled approximately onetwo million were anti-dilutive.for first-quarter 2011 and approximately five million for first-quarter 2010.
FCX’s convertible instruments are excluded from the computation of diluted net income per share of common stock when including the assumed conversion of these instruments results in an anti-dilutive effect on earnings per share (see footnote b above).
7

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period also are excluded from the computation of diluted net income per share of common stock. Excluded amounts were approximately nineless than 1 million stock options with a weighted-average exercise price of $75.56$57.86 per option for third-quarter 2010first-quarter 2011 and approximately seven3 million stock options with a weighted-average exercise price of $76.64$44.10 per option for the nine months ended September 30,first-quarter 2010. Stock options for approximately seven million shares with a weighted-average exercise price
7

3.  PENSION AND POSTRETIREMENT BENEFITS
The components of net periodic benefit costs for pension and postretirement benefits follow (in millions):
 
  Three Months Ended Nine Months Ended 
  September 30, September 30, 
  2010 2009 2010 2009 
Service cost $8 $8 $26 $25 
Interest cost  27  28  80  83 
Expected return on plan assets  (23) (19) (70) (59)
Amortization of net actuarial loss  6  7  17  22 
Curtailments  –  –  –  (4)
Special retirement benefits  –  3  –  (2)
Net periodic benefit costs $18 $27 $53 $65 
              
Net periodic benefit costs decreased by $9 million in third-quarter 2010, compared with third-quarter 2009, mainly as a result of an increase in the expected return on plan assets ($4 million) primarily because of the 2009 gains on plan assets as well as the absence of the 2009 special retirement benefits ($3 million).

Net periodic benefit costs decreased by $12 million in the first nine months of 2010, compared with the first nine months of 2009, mainly as a result of an increase in the expected return on plan assets ($11 million), a decrease in the amortization of actuarial losses ($5 million) primarily because of the 2009 gains on plan assets and the absence of the third-quarter 2009 special retirement benefits ($3 million). These decreases were partially offset by the absence of the first-quarter 2009 gains on special retirement benefits and curtailments ($9 million) caused by workforce reductions in connection with the fourth-quarter 2008 and first-quarter 2009 revised mine operating plans.
    Three Months Ended 
    March 31, 
      2011 2010 
Service cost       $10 $10 
Interest cost        27  27 
Expected return on plan assets        (24) (23)
Amortization of net actuarial loss        6  5 
Net periodic benefit costs       $19 $19 
              

4.  INVENTORIES, ANDINCLUDING LONG-TERM MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):
 
 September 30, December 31,  March 31, December 31, 
 2010 2009  2011 2010 
Mining Operations:            
Raw materials $1 $1  $1 $1 
Work-in-process 88  108  71  93 
Finished goodsa
 583  588  778  704 
Atlantic Copper, S.A. (Atlantic Copper):            
Raw materials (concentrates) 275  171  258  336 
Work-in-process 178  227  324  266 
Finished goods  2  15   18  9 
Total product inventories 1,127  1,110  1,450  1,409 
Total materials and supplies, netb
  1,108  1,093   1,199  1,169 
Total inventories $2,235 $2,203 
Total inventories, less current portion of mill and leach stockpiles $2,649 $2,578 
            
a.  Primarily includes molybdenum concentrates, and copper concentrates, anodes, cathodes and rod.
 
b.  Materials and supplies inventory is net of obsolescence reserves totaling $28$25 million at September 30, 2010,March 31, 2011, and $21$26 million at December 31, 2009.2010.
8

A summary of mill and leach stockpiles follows (in millions):
 
 September 30, December 31,  March 31, December 31, 
 2010 2009  2011 2010 
Current:            
Mill stockpiles $46 $46  $29 $35 
Leach stockpiles  754  621   1,031  821 
Total current mill and leach stockpiles $800 $667  $1,060 $856 
            
Long-terma:
      
Long-term:a
      
Mill stockpiles $464 $442  $482 $470 
Leach stockpiles  931  879   920  955 
Total long-term mill and leach stockpiles $1,395 $1,321  $1,402 $1,425 
            
a.  Metals in stockpiles not expected to be recovered within the next 12 months.

FCX recorded charges for lower
8

5.  INCOME TAXES
FCX’s first-quarter 2011 income tax provision for the 2010 periods resulted from taxes on international operations ($772 million for the third quarter and $1.8 billion for the first nine months)846 million) and U.S. operations ($73 million for the third quarter138 million). FCX’s first-quarter 2010 income tax provision resulted from taxes on international operations ($597 million) and $205 million for the first nine months)U.S. operations ($81 million). FCX’s consolidated effective income tax rate wasis a function of the combined effective tax rates for the jurisdictions in which it operates and totaled 35 percent for the first nine months offirst-quarter 2011 and 36 percent for first-quarter 2010.

FCX’s income tax provision for the 2009 periods resulted from taxes on international operations ($660 million for the third quarter and $1.5 billion for the first nine months) and U.S. operations ($24 million for the third quarter and $29 million for the first nine months). During the first nine months of 2009, FCX did not record a benefit for losses generated Variations in the U.S., and those losses could not be usedrelative proportions of jurisdictional income result in fluctuations to offset income generated from international operations. These factors combined with the high proportion of income earned in Indonesia, which was taxed at an effective tax rate of 43 percent, caused FCX’s consolidated effective income tax rate of 41 percent for the first nine months of 2009 to be higher than the U.S. federal statutory rate of 35 percent.rate.

6.  DEBT AND EQUITY TRANSACTIONS
FCX entered into a new senior unsecured revolving credit facility on March 30, 2011, which replaced the existing revolving credit facilities that were scheduled to mature on March 19, 2012. During the first nine monthsquarter of 2010,2011, FCX purchased in the open market $218 million of its 8.25% Senior Notes for $237 million and $329 million of its 8.375% Senior Notes for $358 million, which resulted in lossesrecognized a loss on early extinguishment of debt totaling $55$7 million ($486 million to net income attributable to FCX common stockholdersshareholders or $0.10$0.01 per diluted share). associated with the revolving credit facilities that were replaced by the new senior unsecured revolving credit facility. This revolving credit facility is available until March 30, 2016, in an aggregate principal amount of $1.5 billion, with $500 million available to PT Freeport Indonesia. At March 31, 2011, FCX had no borrowings and $43 million of letters of credit issued under the revolving credit facility, resulting in availability of approximately $1.5 billion, of which $957 million could be used for additional letters of credit.

Interest on the revolving credit facility is generally based on the London Interbank Offered Rate (LIBOR) plus 2.00 percent, subject to an increase or decrease in the interest rate margin based on the credit ratings assigned by Standard & Poor’s Rating Services and Moody’s Investors Service to FCX’s senior unsecured debt.

The obligations of FCX and PT Freeport Indonesia under the revolving credit facility are not guaranteed by any subsidiaries and are unsecured; however, FCX may at any time designate any subsidiary (other than PT Freeport Indonesia) as a subsidiary guarantor. The revolving credit facility and FCX’s senior notes contain certain restrictive covenants that vary among the instruments, but include limitations on the incurrence of debt, liens and certain asset sales.

On February 24, 2011, FCX announced its intent to redeem the remaining $1.1 billion of its outstanding 8.25% Senior Notes due 2015. On March 30, 2011, FCX transferred funds totaling $1.2 billion to a restricted cash account to pay the holders of the 8.25% Senior Notes (principal and premium amounts together with accrued and unpaid interest). On April 1, 2010, FCX redeemed all2011, holders of its $1.0 billion of outstanding Senior Floating Rates Notes due 2015 for which holdersthese senior notes received 101104.125 percent of the principal amount together with accrued and unpaid interest. As a result of this redemption, FCX recordedexpects to record a loss on early extinguishment of debt totaling $22$56 million ($1949 million to net income attributable to FCX common stockholders or $0.04 per diluted share) forstockholders) in the first nine monthssecond quarter of 2010.2011.

Consolidated interest expense (before capitalization) totaled $126$123 million in third-quarter 2010, $172first-quarter 2011 and $151 million in third-quarter 2009, $409 million for the first nine months of 2010 and $520 million for the first nine months of 2009.first-quarter 2010. Capitalized interest expense totaled $23$25 million in third-quarter 2010, $10first-quarter 2011 and $6 million in third-quarter 2009, $39 million forfirst-quarter 2010.

On March 31, 2011, FCX declared a quarterly dividend of $0.25 per share, which was paid on May 1, 2011, to common shareholders of record at the first nine monthsclose of 2010 and $69 million for the first nine months of 2009. Lower capitalized interest in the first nine months of 2010 compared to the first nine months of 2009 primarily reflects the completion of development activities for the initial project at FCX’s Tenke Fungurume mine, which commenced initial copper production in March 2009.business on April 15, 2011.

During Aprilthe first quarter of 2010, holdersFCX purchased in the open market $133 million of FCX’s 6¾% Mandatory Convertible Preferred Stock electedits 8.25% Senior Notes for $145 million and $136 million of its 8.375% Senior Notes for $148 million. These open-market purchases resulted in losses on early extinguishment of debt totaling $27 million ($23 million to convert 787,158 preferred shares into 1,079,615 shares ofnet income attributable to FCX common stock (conversion rate equal to 1.3716 shares of FCX common stock)shareholders or $0.02 per diluted share).

On May 1, 2010, the remaining 27,504,512outstanding shares of FCX’s 6¾% Mandatory Convertible Preferred Stock were automatically converted into 37,725,139 shares of FCX common stock (conversion rate equal(refer to 1.3716 shares ofNote 11 in FCX’s 2010 Annual Report on Form 10-K for further discussion).

Total comprehensive income attributable to FCX common stock). For the first nine months of 2010, a total of 28,749,560stockholders totaled $1,504 million in first-quarter 2011 and $948 million in first-quarter 2010.
 
 
9
 
outstanding shares of FCX’s 6¾% Mandatory Convertible Preferred Stock were converted into 39,432,793 shares of FCX common stock (conversion rate equal to 1.3716 shares of FCX common stock).

In April 2010, FCX’s Board of Directors (Board) authorized an increase in the annual cash dividend on its common stock from $0.60 per share to $1.20 per share. On September 29, 2010, FCX declared a quarterly dividend of $0.30 per share, which was paid on November 1, 2010, to common shareholders of record at the close of business on October 15, 2010.

During third-quarter 2009 and the first nine months of 2009, FCX purchased in the open market $99 million of its 8.25% Senior Notes for $107 million and $92 million of its 8.375% Senior Notes for $99 million. Additionally, FCX redeemed $340 million of its 6⅞% Senior Notes for $352 million (plus accrued and unpaid interest). These transactions resulted in losses on early extinguishment of debt totaling $31 million ($28 million to net income attributable to FCX common stockholders or $0.06 per diluted share for third-quarter 2009 and $0.07 per diluted share for the first nine months of 2009).

Total comprehensive income attributable to FCX common stockholders totaled $1,183 million in third-quarter 2010, $986 million in third-quarter 2009, $2,797 million for the first nine months of 2010 and $1,811 million (including a $61 million gain related to the remeasurement of certain defined benefit plans during the first quarter of 2009) for the first nine months of 2009.
7.  FINANCIAL INSTRUMENTS
7.FINANCIAL INSTRUMENTS
FCX does not purchase, hold or sell derivative financial instruments unless there isare risks associated with an existing asset or obligation or if it anticipates a future activity that is likely to occur and will result in exposure to market risks and FCX intends to offset or mitigate such risks. FCX does not enter into any derivative financial instruments for speculative purposes, 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.

A summary of unrealized gains (losses) recognized in income before income taxes and equity in affiliated companies’ net earnings for derivative financial instruments that are designated and qualify as fair value hedge transactions, along with the unrealized (losses) gains on the related hedged item (firm sales commitments) follows (in millions):
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
 2010 2009 2010 2009 
Commodity contracts:            
Freeport-McMoRan Corporation’s (FMC)            
copper futures and swap contractsa
            
Derivative financial instruments$19 $1 $1 $8 
Hedged item (19) (1) (1) (8)
a.  Amounts recorded in revenues.

FCX realized gains, which are recorded in revenues, of $15 million during third-quarter 2010, $18 million during third-quarter 2009, $16 million during the first nine months of 2010 and $36 million during the first nine months of 2009 from matured derivative financial instruments that qualified for hedge accounting.

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A summary of 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 as hedge transactions follows (in millions):
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
 2010 2009 2010 2009 
Commodity contracts:            
Embedded derivatives in provisional sales contractsa
$376 $421 $177 $1,017 
Embedded derivatives in provisional purchase            
contractsb
 –  (4) (1) (5)
PT Freeport Indonesia’s copper forward contractsa
 –  (7) –  (104)
Atlantic Copper’s copper forward contractsb
 (10) –  (8) 4 
FMC’s copper futures and swap contractsa
 1  12  –  61 
a.  Amounts recorded in revenues.
b.  Amounts recorded in cost of sales as production and delivery costs.

A summary of the fair values of unsettled derivative financial instruments recorded on the consolidated balance sheets follows (in millions):
  September 30, December 31, 
  2010 2009 
Derivatives designated as hedging instruments       
Commodity contracts:       
FMC’s copper futures and swap contracts:       
Asset positiona
 $12 $11 
        
Derivatives not designated as hedging instruments       
Commodity contracts:       
Embedded derivatives in provisional sales/purchases contracts:b
       
Asset position $252 $235 
Liability position  (97) (70)
Atlantic Copper’s copper forward contracts:       
Asset positiona
  1  1 
FMC’s copper futures and swap contracts:c
       
Asset positiona
  –  2 
        
a.  Amounts recorded in other current assets.
b.  Amounts recorded either as a net accounts receivable or a net accounts payable.
c.  At September 30, 2010, and December 31, 2009, FCX had received $6 million from brokers associated with margin requirements (recorded in accounts payable and accrued liabilities).
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 September 30, 2010,March 31, 2011, FCX had no price protection contracts relating to its mine production. A discussion of FCX’s derivative commodity contracts and programs follows.

Derivatives Designated as Hedging Instruments – Fair Value Hedges
Copper Futures and Swap Contracts. Some of FMC’sFCX’s U.S. copper rod customers request a fixed market price instead of the New York Mercantile Exchange (COMEX) average copper 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 copper 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 signif icantsignificant gains or losses during the three-month and nine-month periods ended September 30,March 31, 2011 and 2010, and 2009, resulting from hedge ineffectiveness. At September 30, 2010,March 31, 2011, FCX held copper futures and swap contracts that qualified for hedge accounting for 3455 million pounds at an average price of $3.29$4.26 per pound, with maturities through October 2011.December 2012.

A summary of gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, along with the unrealized gains (losses) on the related hedged item (firm sales commitments) follows (in millions):
 
 Three Months Ended March 31, 
 2011 2010 
Copper futures and swap contracts:      
Unrealized gains (losses):      
Derivative financial instruments$(15)$2 
Hedged Item 15  (2)
       
Realized gains:      
Matured derivative financial instruments 12  10 
       
11
Derivatives Not Designated as Hedging Instruments
Embedded derivatives and derivative financial instruments that do not meet the criteria to qualify for hedge accounting are discussed below.

Embedded Derivatives. As described in Note 1 to FCX’s 20092010 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 London Metal Exchange (LME), or COMEX or London Bullion Market Association prices at the time of shipment as specified in the contract. Similarly, FCX purchases copper and molybdenum under contracts that provide for provisional pricing (molybdenum purchases are generally based on an average Metals Week Molybdenum Dealer Oxide price). FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host sales agreement sagreements since the contracts do not allow for net settlement and always result in physical delivery. 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 (copper), London Bullion Market Association price (gold) or the average Metals Week Molybdenum Dealer Oxide price (molybdenum) as defined in the contract. Mark-to-market 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.
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A summary of FCX’s embedded derivatives at September 30, 2010,March 31, 2011, follows:
 
   Average Price      Average Price   
 Open Per Unit Maturities  Open Per Unit Maturities 
 Positions Contract Market Through  Positions Contract Market Through 
Embedded derivatives in provisional                    
sales contracts:                    
Copper (millions of pounds) 622 $3.25 $3.63 February 2011  653 $4.28 $4.27 September 2011 
Gold (thousands of ounces) 230  1,240 1,310 December 2010  194  1,402 1,436 June 2011 
Embedded derivatives in provisional                    
purchase contracts:                    
Copper (millions of pounds) 266  3.27 3.63 December 2010  115  4.33 4.27 May 2011 
Molybdenum (thousands of pounds) 238  14.59 14.69 October 2010  24  15.04 14.69 April 2011 
          

Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, 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 September 30, 2010,March 31, 2011, Atlantic Copper held net forward copper purchasessales contracts for eight7 million pounds at an average price of $3.58$4.35 per pound, with maturities through November 2010.May 2011.

In April 2009, FCX entered into copper forward salesA summary of the realized and unrealized gains (losses) recognized in income before income taxes and equity in affiliated companies’ net earnings for commodity 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 at March 31, 2009, which final priced from April 2009 through July 2009. These economic hedge transactions were intended to reduce short-term price volatility in earnings and cash flows. Gains and losses for these economic hedge transactions were recorded in revenues. FCX has not entered into additional forward sales contracts since April 2009 for its provisionally priced copper sales, but may enter into future transactions to lock in pricing on provisionally priced sales from time to time. However, FCX does not intend to change its long-standing policy of not hedging future copper production.

Copper Futures and Swap Contracts. In addition to the contracts discussed above that qualify for fair value hedge accounting, FCX also has similar contracts with FMC’s 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 economicas hedge transactions, are recorded in revenues. At September 30, 2010, FCX held copper futures and swap contracts for less than 0.5 million pounds at an average price of $2.95 per pound, with maturities through December 2010.including embedded derivatives, follows (in millions):
 Three Months Ended March 31, 
 2011 2010 
Embedded derivatives in provisional sales contractsa
$(44)$131 
Embedded derivatives in provisional purchase contractsb
 -  (2)
Copper forward contractsb
 -  1 
       
a.  Amounts recorded in revenues.
b.  Amounts recorded in cost of sales as production and delivery costs.

Foreign Currency Exchange Contracts.  As a global company, FCX transacts business in many countries and in many currencies. Foreign currency transactions at 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 by entering into forward exchange contracts to lock in or minimize the effects of fluctuations in exchange rates. FCX had no outstanding foreign currency exchange contracts at September 30, 2010.March 31, 2011.

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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 and to achieve a desired proportion of fixed-rate versus floating-rate debt based on current and projected market conditions. 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. In some situations, FCX may enter into fixed-to-floating interest rate swap contracts to protect against changes in the fair value of the underlying fixed-rate debt that result from market interest rate changes and to take advantage of lower interest rates. FCX had no outstanding interest rate swap contracts at September 30, 2010.March 31, 2011.
11
Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled derivative financial instruments recorded on the consolidated balance sheets follows (in millions):
  March 31, December 31, 
  2011 2010 
Derivatives designated as hedging instruments       
Commodity contracts:       
Copper futures and swap contracts:a
       
Asset positionb
 $6 $18 
Liability positionc
  (3) - 
        
Derivatives not designated as hedging instruments       
Commodity contracts:       
Embedded derivatives in provisional sales/purchases contracts:d
       
Asset position $58 $357 
Liability position  (52) (115)
Copper forward contracts:       
Asset positionb
  1  - 
Liability positionc
  -  (10)
        
a.  FCX had paid $7 million at March 31, 2011, and $3 million at December 31, 2010, for margin requirements (recorded in other current assets). In addition, FCX had received $8 million from a broker associated with margin requirements (recorded in accounts payable and accrued liabilities) at December 31, 2010.
b.  Amounts recorded in other current assets.
c.  Amounts recorded in accounts payable and accrued liabilities.
d.  Amounts recorded either as a net accounts receivable or a net accounts payable.

Credit Risk.  FCX is exposed to counterparty riskcredit 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 thisthe 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 credit ratings. FCX does not anticipate that any of the financial institutions it deals with will default on their obligations. At September 30, 2010,As of March 31, 2011, FCX did not have any significant credit exposure associated with derivative transactions.

Other Financial Instruments.  Other financial instruments include cash and cash equivalents, restricted cash for early extinguishment of debt, accounts receivable, trust assets, available-for-sale securities, accounts payable and accrued liabilities, dividends payable, Rio Tinto share of joint venture cash flows and long-term debt. Refer to Note 8 for the fair values of these financial instruments.

Agreement to Invest in McMoRan Exploration Co. (MMR).  In September 2010, FCX entered into an agreement to purchase 500,000 sharesCash and Cash Equivalents, Restricted Cash for Early Extinguishment of MMR’s 5¾% Convertible Perpetual Preferred Stock (the Preferred Stock) for an aggregate purchase priceDebt, Accounts Receivable, Accounts Payable and Accrued Liabilities, Dividends Payable and Rio Tinto Share of $500 million.Joint Venture Cash Flows. The Preferred Stock will initially be convertible into 62.5 shares of MMR common stock per share of Preferred Stock (an aggregate of 31.25 million shares of MMR common stock), or an initial conversion price of $16 per share of MMR common stock. FCX expects to account for this investment under the cost method. Closingfinancial statement amount is a reasonable estimate of the investment is expected by year-end 2010 and is conditioned on the concurrent completion of MMR’s proposed oil and gas property acquisition from Plains Explorations & Production Co mpany, MMR shareholder approvalfair value because of the issuanceshort maturity of the securities to FCXthese instruments and other customary closing conditions.generally negligible credit losses.

Trust Assets and Available-for-Sale Securities. The financial statement amount represents the fair value of trust assets and available-for-sale securities.

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

8.  FAIR VALUE MEASUREMENT
Fair value accounting guidance includes 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 levelsFCX did not have any significant transfers in or out of the fair value hierarchy are described below:Levels 1, 2, or 3 for first-quarter 2011.
 
Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
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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; and
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).

A summary of FCX’s financial assets and liabilities measured at fair value on a recurring basis follows (in millions):
 
 Fair Value at September 30, 2010 
 Total Level 1 Level 2 Level 3 
Assets            
Cash equivalents:            
Money market funds$3,608 $3,608 $– $– 
Time deposits 52  52  –  – 
Total cash equivalents $3,660 $3,660 $– $– 
             
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Fair Value at September 30, 2010  Fair Value at March 31, 2011 
Total Level 1 Level 2 Level 3  Total Level 1 Level 2 Level 3 
Assets         
Cash equivalents:         
Money market funds $3,793 $3,793 $- $- 
Time deposits  208  208  -  - 
Total cash equivalents  4,001  4,001  -  - 
         
Restricted cash for early extinguishment of debt:         
U.S. government treasury funds  1,168  1,168  -  - 
         
Trust assets (current and long-term):                  
U.S. core fixed income fund$43 $– $43 $– 
U.S. core fixed income funds 43 - 43 - 
Government mortgage-backed securities 42 – 42 –  40 - 40 - 
Corporate bonds 23 – 23 –  22 - 22 - 
Asset-backed securities 15 – 15 –  19 - 19 - 
Money market funds 12 12 - - 
Government bonds and notes 12 – 12 –  11 - 11 - 
Money market funds 17 17 – – 
Agency bonds 1  –  1  – 
Municipal bonds  1  -  1  - 
Total trust assets 153  17  136  –   148  12  136  - 
                  
Available-for-sale securities:                  
Time deposits 37 37 – –  23 23 - - 
Equity securities 10 10 - - 
Money market funds 5 5 – –   4  4  -  - 
Equity securities 5  5  –  – 
Total available-for-sale securities 47  47  –  –   37  37  -  - 
                  
Derivatives:                  
Embedded derivatives in provisional sales/purchases          58 58 - - 
contracts 252 252 – – 
Copper futures and swap contracts 12 12 – –  6 6 - - 
Copper forward contracts 1  1  –  –   1  1  -  - 
Total derivatives 265  265  –  –   65  65  -  - 
                  
Total assets$4,125 $3,989 $136 $–  $5,419 $5,283 $136 $- 
                  
Liabilities                  
Derivatives:                  
Embedded derivatives in provisional sales/purchases          $(52)$(52)$- $- 
contracts$(97)$(97)$– $– 
Copper futures and swap contracts  (3) (3) -  - 
Total derivative liabilities $(55)$(55)$- $- 
                  

Valuation Techniques

Money market funds, and time deposits and U.S. government treasury funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

Fixed income securities (government and agency securities, corporate bonds, asset-backed securities and U.S. core fixed income fund)funds) are valued using a bid evaluation or a mid evaluation. A bid evaluation is an estimated price at which a dealer would pay for a security. A mid evaluation is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and as such are classified within Level 1 of the fair value hierarchy.

FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and 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. FCX’s embedded derivatives on provisional molybdenum purchases are valued based on the latest average weekly
13
Metals Week Molybdenum Dealer Oxide prices and, as such, are classified within Level 1 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and forward contracts 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).

The techniques described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measured at the reporting date. There have been no changes in the techniques used at March 31, 2011.
14

The carrying value for certain FCX financial instruments (i.e., accounts receivable, accounts payable and accrued liabilities, dividends payable, and Rio TintoTinto’s share of joint venture cash flows) approximate fair value and, therefore, have been excluded from the table below. A summary of the carrying amount and fair value of FCX’s other financial instruments follows (in millions):
 
At September 30, 2010 At December 31, 2009 At March 31, 2011 At December 31, 2010 
Carrying Fair Carrying Fair Carrying Fair Carrying Fair 
Amount Value Amount Value Amount Value Amount Value 
Cash and cash equivalentsa
$3,720 $3,720 $2,656 $2,656 $4,090 $4,090 $3,738 $3,738 
Derivatives included in accounts receivablea
 251  251  235  235 
Trust assets (current and long-term)a, b
 153  153  146  146 
Restricted cash for early extinguishment of debta
 1,168  1,168  -  - 
McMoRan Exploration Co. investmentb
 496  658  500  623 
Net embedded derivatives included in accounts            
receivable or payablea
 6  6  242  242 
Trust assets (current and long-term)a, c
 148  148  148  148 
Available-for-sale securities (current and                        
long-term)a, b
 47  47  74  74 
Derivative assetsa, c
 13  13  14  14 
long-term)a, c
 37  37  34  34 
Derivative assetsa, d
 7  7  18  18 
Derivatives included in accounts payable and                        
accrued liabilitiesa
 (96) (96) (70) (70) (3) (3) (10) (10)
Long-term debt (including amounts due                        
within one year)d
 (4,779) (5,221) (6,346) (6,735)
within one year)e
 (4,752) (5,114) (4,755) (5,146)
                        
 
a.  Recorded at fair value.
 
b.Recorded at cost and included in other assets. Fair value is based on a bid evaluation, which is an estimated price at which a dealer would pay for a security.
c.  Current portion included in other current assets and long-term portion included in other assets.
 
c.d.  Included in other current assets.
 
d.e.  Recorded at cost except for long-term debt acquired in the Phelps Dodge Corporation acquisition, which was recorded at fair value at the acquisition date. Fair value of substantially all of FCX’s long-term debt is estimated based on quoted market prices.

9.  NEW ACCOUNTING STANDARDSSTANDARD
Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements. In January 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance intended to improve disclosures related to fair value measurements. This guidance requires significant transfers in and out of Level 1 and Level 2 fair value measurements to be disclosed separately along with the reasons for the transfers. Additionally, in the reconciliation for the fair value measurements using significant unobservable inputs (Level 3), separate information about purchases, sales, issuances and settlements must be presented separately (cannot net as one number). This guidance also provides clarification for existing disclosures on (i) level of disaggregation and (ii) inputs and valuation techniques. In addition, this guidance includes conforming amendments for employers’ disclosure of postretirement benefit plan assets. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements. Those disclosures are required for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.

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10.   SUBSEQUENT EVENTS
In October 2010, the government of the DRC announced the conclusion of the review of Tenke Fungurume Mining S.A.R.L.’s (TFM) contracts, and confirmed that TFM’s existing mining contracts are in good standing and acknowledged the rights and benefits granted under those contracts. In connection with the review, TFM made several commitments that have been reflected in amendments to its mining contracts, which were signed by the parties in December 2010. In March 2011, the amendments were approved by a ministerial council, and a Presidential Decree signed by the President and Prime Minister of the DRC was issued in April 2011. After giving effect to the modifications that will be made to TFM’s bylaws to reflect the agreement of the parties, FCX’s effective ownership percentage in the project will be 56.0 percent prospectively, compared to its current ownership interest of 57.75 percent.

On April 20, 2011, FCX’s Board of Directors declared a supplemental common stock dividend of $0.50 per share to be paid on June 1, 2011, to common shareholders of record at the close of business on May 15, 2011.

FCX evaluated events after September 30, 2010,March 31, 2011, and through the date the consolidated 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 consolidated financial statements.

In October 2010, FCX’s Board authorized an increase in the cash dividend on common stock from an annual rate of $1.20 per share to $2.00 per share ($0.50 per share quarterly), with the first quarterly dividend expected to be paid on February 1, 2011.

In October 2010, the government of the Democratic Republic of Congo (DRC) announced the conclusion of the review of Tenke Fungurume’s mining contracts. The conclusion of the review process confirmed that Tenke Fungurume’s existing mining contracts are in good standing and acknowledged the rights and benefits granted under those contracts. Tenke Fungurume’s key fiscal terms, including a 30 percent income tax rate, a 2 percent mining royalty rate and a 1 percent export fee, will continue to apply and are consistent with the rates in the DRC’s current Mining Code. In connection with the review, Tenke Fungurume made several commitments, which it expects to be reflected in amendments to its mining contracts, including (1) an increase in the ownership interest of La Générale des Carrières et des Mines’ (Gécamines), which is wholly owned by the government of the DRC, from 17.5 percent (non-dilutable) to 20.0 percent (non-dilutable), resulting in a decrease of FCX’s effective ownership interest from 57.75 percent to 56.0 percent and Lundin Mining Corporation’s effective ownership interest from 24.75 percent to 24.0 percent; (2) an additional royalty of $1.2 million for each 100,000 metric tons of proven and probable copper reserves above 2.5 million metric tons at the time new reserves are established by
15
FCX; (3) additional payments totaling $30 million to be paid in six equal installments of $5 million upon reaching certain production milestones; (4) conversion of $50 million in intercompany loans to equity; (5) a payment of $5 million for surface area fees and ongoing surface area fees of approximately $0.8 million annually; (6) incorporating clarifying language stating that Tenke Fungurume’s rights and obligations are governed by its Amended and Restated Mining Convention; and (7) expanding Gécamines’ participation in Tenke Fungurume management. FCX has also reiterated its commitment to the use of local services and Congolese employment. In connection with the agreed modifications, the annual interest rate on advances from Tenke Fungurume shareholders would increase from the current rate of LIBOR pl us 2 percent to LIBOR plus 6 percent. Tenke Fungurume’s existing mining contracts will continue in full force and effect until the revised terms noted above are incorporated into those contracts, including the Amended and Restated Mining Convention and Amended and Restated Shareholders’ Agreement, both entered into in 2005.

During October 2010, FCX made open-market purchases of $18 million of its 9½% Senior Notes for $26 million. FCX expects to record an approximate $4 million loss on early extinguishment of debt in fourth-quarter 2010 in connection with these open-market purchases.
In October 2010, PT Freeport Indonesia received an assessment for additional tax payments from the Indonesian tax authorities related to various audit exceptions for the year 2005. PT Freeport Indonesia is reviewing the assessment and will work with the Indonesian tax authorities to resolve disputed audit exceptions.
11.  BUSINESS SEGMENTS
FCX has organized its operations into five primary divisions – North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum operations. Notwithstanding this structure, FCX internally reports information on a mine-by-mine basis. Therefore, FCX concluded that its operating segments include individual mines. Operating segments that meet certain thresholds are reportable segments. 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 seven operating copper mines in North America – Morenci, Sierrita, Bagdad, Safford and Miami in Arizona, and Tyrone and Chino 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 copper mines include the Morenci copper mine as a reportable segment.

Morenci. The Morenci open-pit mine, located in southeastern Arizona, produces copper cathodes and copper concentrates. FCX owns an 85 percent undivided interest in Morenci through an unincorporated joint venture. During the first nine months of 2010, the Morenci mine produced 41 percent of FCX’s North America copper.

Other Mines. Other mines include FCX’s other operating southwestern U.S. copper mines – Sierrita, Bagdad, Safford, Miami, Tyrone and Chino. In addition to copper, the Sierrita and Bagdad mines produce molybdenum concentrates as a by-product.

South America.  South America mining includes four operating copper mines – 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. South America mining 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. During the first nine months of 2010, the Cerro Verde mine produced 49 percent of FCX’s South America copper.

Other Mines. Other mines include FCX’s Chilean copper mines – Candelaria, Ojos del Salado and El Abra. 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
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PT Freeport Indonesia, including 9.36 percent owned through PT Indocopper Investama. FCX has established certain unincorporated joint ventures with Rio Tinto, under which Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver.

Africa.  Africa mining includes the Tenke Fungurume copper and cobalt mining concessions in the Katanga province of the DRC. The Tenke Fungurume mine includes open-pit mining, leaching and SX/EW operations. In addition to copper, the Tenke Fungurume mine produces cobalt hydroxide. Copper cathode production commenced in March 2009, and the first copper cathode was sold in second-quarter 2009. FCX owned an effective 57.75 percent interest in Tenke Fungurume at September 30, 2010 (refer to Note 10 for discussion of a proposed change in FCX’s ownership interest).

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. FCX is advancing construction activities at the Climax molybdenum mine and is monitoring market conditions to determine the timing for startup of mining and milling activities.

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 FCX’s 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, 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 sells copper concentrate and the South America copper mines sell copper concentrate and cathode 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.country. 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.
 
 
1715

Business Segments

(In Millions)North America Copper Mines South America 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 
Three Months Ended September 30, 2010                                       
Revenues:                                       
Unaffiliated customers$10 $15 $25 $606 $696 $1,302 $1,458a$307 $293 $1,174 $592 $1 $5,152 
Intersegment 364  601  965  84  79  163  416  –  –  7  3  (1,554) – 
Production and delivery 185  343  528  194  268  462  528  141  199  1,173  590  (1,352) 2,269 
Depreciation, depletion and amortization 33  34  67  42  24  66  72  34  13  2  9  5  268 
Selling, general and administrative expenses –  –  –  –  –  –  25  –  2  –  4  50  81 
Exploration and research expenses –  –  –  –  –  –  –  –  1  –  –  34  35 
Operating income (loss) 156  239  395  454  483  937  1,249  132  78  6  (8) (290) 2,499 
                                        
Interest expense, net 1  2  3  –  –  –  –  2  –  –  2  96  103 
Provision for income taxes –  –  –  147  151  298  499  32  –  –  –  16  845 
Total assets at September 30, 2010 1,919  4,271  6,190  4,308  3,245  7,553  5,712  3,540  1,837  335  1,201  1,583  27,951 
Capital expenditures 13  46  59  32  97  129  116  9  22  2  4  9  350 
                                        
                                        
Three Months Ended September 30, 2009                                       
Revenues:                                       
Unaffiliated customers$18 $25 $43 $386 $546 $932 $1,348a$113 $258 $955 $495 $– $4,144 
Intersegment 299  578  877  83  3  86  308  –  –  8  –  (1,279) – 
Production and delivery 148  303  451  154  225  379  369  89  177  957  493  (1,200) 1,715 
Depreciation, depletion and amortization 36  34  70  37  30  67  64  20  13  2  9  7  252 
Selling, general and administrative expenses –  –  –  –  –  –  24  –  2  –  4  44  74 
Exploration and research expenses –  –  –  –  –  –  –  –  1  –  –  18  19 
Operating income (loss) 133  266  399  278  294  572  1,199  4  65  4  (11) (148) 2,084 
                                        
Interest expense, net 1  3  4  –  –  –  2  5  –  –  1  150  162 
Provision for (benefit from) income taxes –  –  –  85  112  197  508  (3) –  –  –  (18) 684 
Total assets at September 30, 2009 1,977  4,012  5,989  4,259  2,426  6,685  5,446  3,318  1,771  321  1,069  1,106  25,705 
Capital expenditures 8  13  21  13  5  18  58  119  11  2  11  4  244 
                                        
                                        
a.Includes PT Freeport Indonesia’s sales to PT Smelting totaling $603 million in third-quarter 2010 and $514 million in third-quarter 2009. 
   
18
Business Segments (Continued)

(In Millions)(In Millions)North America Copper Mines South America Indonesia Africa           (In Millions)North America Copper Mines South America Indonesia Africa           
                    Atlantic Corporate,                        Atlantic Corporate,   
                    Copper Other &                        Copper Other &   
  Other   Cerro Other       Molyb- Rod & Smelting Elimi- FCX    Other   Cerro Other       Molyb- Rod & Smelting Elimi- FCX 
Morenci Mines Total Verde Mines Total Grasberg Tenke denum Refining & Refining nations Total  Morenci Mines Total Verde Mines Total Grasberg Tenke denum Refining & Refining nations Total 
Nine Months Ended September 30, 2010                                       
Three Months Ended March 31, 2011Three Months Ended March 31, 2011                             
Revenues:Revenues:                                       Revenues:                             
Unaffiliated customersUnaffiliated customers$20 $31 $51 $1,338 $1,646 $2,984 $3,490a$763 $893 $3,363 $1,830 $5 $13,379 Unaffiliated customers$136 $16 $152 $668 $595 $1,263 $1,372a$309 $374 $1,481 $756 $2 $5,709 
IntersegmentIntersegment 1,106  1,931  3,037  275  124  399  770  –  –  20  14  (4,240) – Intersegment 386 810 1,196 60 79 139 358 - - 6 6 (1,705) - 
Production and deliveryProduction and delivery 508  1,021  1,529  513  714  1,227  1,430  347  574  3,361  1,823  (4,052) 6,239 Production and delivery 210 365 575 175 236 411  526 124 240 1,481  763 (1,743) 2,377 
Depreciation, depletion and amortizationDepreciation, depletion and amortization 110  110  220  109  77  186  192  94  38  6  28  24  788 Depreciation, depletion and amortization 28 30 58 34 23 57 57 28 14 2 10 6 232 
Selling, general and administrative expensesSelling, general and administrative expenses –  –  –  –  –  –  77  –  8  –  14  178  277 Selling, general and administrative expenses - 1 1 1 1 2 43 2 4 - 8 54 114 
Exploration and research expensesExploration and research expenses –  –  –  –  –  –  –  –  2  –  –  102  104 Exploration and research expenses -  -  -  -  -  -  -  -  1  -  -  49  50 
Operating income (loss)Operating income (loss) 508  831  1,339  991  979  1,970  2,561  322  271  16  (21) (487) 5,971 Operating income (loss) 284 430 714 518 414 932 1,104 155 115 4 (19) (69) 2,936 
                                                                   
Interest expense, netInterest expense, net 3  8  11  –  –  –  –  4  –  –  7  348  370 Interest expense, net 1 1 2 - - - 1 2 - - 4 89 98 
Provision for income taxesProvision for income taxes –  –  –  320  309  629  1,069  75  –  –  –  183  1,956 Provision for income taxes - - - 163 143 306 507 40 - - - 131 984 
Total assets at March 31, 2011Total assets at March 31, 2011 1,991 4,623 6,614 4,573 3,427 8,000 5,440 3,630 2,068 384 1,437 3,435 31,008 
Capital expendituresCapital expenditures 28  112  140  63  220  283  311  59  34  4  16  30  877 Capital expenditures 29 90 119 24 116 140 125 11 71 3 8 28 505 
                                                                    
                                                                    
Nine Months Ended September 30, 2009                                       
Three Months Ended March 31, 2010Three Months Ended March 31, 2010                             
Revenues:Revenues:                                       Revenues:                             
Unaffiliated customersUnaffiliated customers$57 $75 $132 $974 $1,349 $2,323 $3,698a$170 $590 $2,309 $1,202 $6 $10,430 Unaffiliated customers$9 $15 $24 $458 $497 $955 $1,161a$249 $275 $1,066 $633 $- $4,363 
IntersegmentIntersegment 745  1,364  2,109  230  51  281  690  –  –  20  –  (3,100) – Intersegment 356 674 1,030 83 31 114 298 - - 7 - (1,449) - 
Production and deliveryProduction and delivery 482  983  1,465  456  656  1,112  1,134  197b 458  2,314  1,205  (2,799) 5,086 Production and delivery 146 318 464 171 205 376  475 110 185 1,067  628 (1,387) 1,918 
Depreciation, depletion and amortizationDepreciation, depletion and amortization 106  103  209  112  89  201  207  37  35  6  26  19  740 Depreciation, depletion and amortization 42 40 82 34 27 61 63 30 13 2 10 10 271 
Lower of cost or market inventory adjustments –  –  –  –  –  –  –  –  19  –  –  –  19 
Selling, general and administrative expensesSelling, general and administrative expenses –  –  –  –  –  –  64  –  9  –  11  141  225 Selling, general and administrative expenses - - - - - - 29 - 3 - 6 57 95 
Exploration and research expensesExploration and research expenses –  –  –  –  –  –  –  –  1  –  –  72  73 Exploration and research expenses -  -  -  -  -  -  -  -  1  -  -  30  31 
Restructuring and other charges 26  (2) 24  –  –  –  –  –  (1) (2) –  2  23 
Operating income (loss)Operating income (loss) 188  355  543  636  655  1,291  2,983  (64) 69  11  (40) (529) 4,264 Operating income (loss) 177 331 508 336 296 632 892 109 73 4 (11) (159) 2,048 
                                                                   
Interest expense, netInterest expense, net 3  9  12  –  1  1  3  8  –  –  3  424  451 Interest expense, net 2 3 5 - - - - 2 - - 2 136 145 
Provision for (benefit from) income taxes –  –  –  199  219  418  1,257  (29) –  –  –  (89) 1,557 
Provision for income taxesProvision for income taxes - - - 105 92 197 393 25 - - - 63 678 
Total assets at March 31, 2010Total assets at March 31, 2010 1,897 4,194 6,091 4,294 2,803 7,097 4,896 3,431 1,745 347 1,207 2,299 27,113 
Capital expendituresCapital expenditures 42  79  121  83  46  129  186  577  71  8  23  23  1,138 Capital expenditures 3 16 19 12 36 48 98 39 7 1 9 10 231 
                                                                    
                                                                    
a.Includes PT Freeport Indonesia’s sales to PT Smelting totaling $1.5 billion in the first nine months of 2010 and $1.3 billion in the first nine months of 2009. Includes PT Freeport Indonesia’s sales to PT Smelting totaling $680 million in the first three months of 2011 and $486 million in the first three months of 2010. 
  
b.Includes charges totaling $50 million associated with Tenke Fungurume’s project start-up costs. 
                                       


REPORT 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 September 30, 2010,March 31, 2011, and the related consolidated statements of income for the three- and nine-month periods ended September 30, 2010 and 2009, the consolidated statements of cash flows for the nine-monththree-month periods ended September 30,March 31, 2011 and 2010, and 2009, and the consolidated statement of equity for the nine-monththree-month period ended September 30, 2010.March 31, 2011. 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, 2009,2010, and the related consolidated statements of operations, cash flows, and equity for the year then ended (not presented herein), and in our report dated February 26, 2010,25, 2011, we expressed an unqualified opinion on those consolidated financial statements and which report included an explanatory paragraph for the Company’s adoption of guidance originally issued in FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements (codified in FASB ASC Topic 810, Consolidation) effective J anuary 1, 2009.statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009,2010, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


/s/ ERNST & YOUNG LLP

Phoenix, Arizona
November 5, 2010May 6, 2011


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

OVERVIEW

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. You should read this discussion in conjunction with our financial statements, the related Management’s Discussion and Analysis of Financial Condition and Results of Operations and the discussion of our Business and Properties in our Annual Report on Form 10-K for the year ended December 31, 2009,2010, filed with the United States (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. Th roughoutThroughout 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.noted, and have been retroactively adjusted to reflect the February 1, 2011, two-for-one stock split.

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, significant mining operations in North and South America, and the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC). The Grasberg minerals district 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. We also operate Atlantic Copper, our wholly owned copper smelting and refining unit in Spain.

We have significant reserves and future development opportunities within our portfolio of assets. At December 31, 2009, we had estimated consolidated recoverable proven and probable reserves of 104.2 billion pounds of copper (determined using a long-term average copper price of $1.60 per pound), with potential for greater reserves at higher prices.

We are increasing near-term production at several of our copper mines and are undertaking major projects, including the development of the El Abra sulfide reserves and the massive underground ore bodies at Grasberg. We are also advancing development activities at the Climax molybdenum mine. In addition, studies are under way to evaluate a large-scale concentrator expansion at Cerro Verde, a major mill project at El Abra, various mill projects to process significant sulfide ore in North America and staged expansion options at Tenke. The advancement of these studies is designed to position us to invest in production growth within our existing portfolio of assets. Refer to “Operations” for further discussion of our current operating and development activities.

Our results for the third quarter and first nine months of 2010,first-quarter 2011, compared with the 2009 periods,first-quarter 2010, primarily reflected higher realized copper and gold prices, (referpartly offset by lower copper sales volumes. Refer to “Consolidated Results” for further discussion of our consolidated financial results for the quarterfirst quarters of 2011 and nine-month periods ended September 30, 2010 and 2009).2010.

At September 30, 2010,March 31, 2011, we had $3.7$4.1 billion in consolidated cash and $4.7cash equivalents and $4.8 billion in long-termtotal debt. During October 2010,On April 1, 2011, we made open-market purchasesredeemed the remaining $1.1 billion of $18 million of our 9½%the outstanding 8.25% Senior Notes (refer to Note 6 for $26 million, and our Boardfurther discussion). After taking into account the April 1, 2011, redemption, which was funded with restricted cash, total debt approximated $3.7 billion. We have no significant debt maturities in the near term; however, we may consider additional opportunities to prepay debt in advance of Directors authorized an increase in FCX’s common stock dividend.scheduled maturities. Refer to “Capital Resources and Liquidity”Liquidity – Financing Activities” for further discussion.

In December 2010, our Board of Directors (the Board) authorized a two-for-one common stock split effected on February 1, 2011 (refer to Note 1 for further discussion). All references to our common stock, per share amounts and dividends on common stock herein have been retroactively adjusted to reflect the two-for-one stock split. Refer to “Capital Resources and Liquidity – Financing Activities” for further discussion of common stock dividends.

In December 2010, the Board declared a $0.50 per share supplemental common stock dividend that was paid on December 30, 2010. In April 2011, the Board declared an additional $0.50 per share supplemental common stock dividend to be paid on June 1, 2011, to shareholders of record on May 15, 2011.

In October 2010, we resolved the ongoing contract review withgovernment of the DRC government. Theannounced the conclusion of the review processof Tenke Fungurume Mining S.A.R.L.’s (TFM) contracts, and confirmed that Tenke Fungurume Mining’s (TFM)TFM’s existing mining contracts are in good standing and acknowledged the rights and benefits granted under the existingthose contracts. In connection with the review, TFM has made several commitments which it expects to bethat have been reflected in amendments to its mining contracts. Refercontracts, which were signed by the parties in December 2010 (refer to Note 10 and “Operations – Africa Mining”14 in our Annual Report on Form 10-K for the year ended December 31, 2010, for further discussion.discussion). In March 2011, the amendments were approved by a ministerial council, and a Presidential Decree signed by the President and Prime Minister of the DRC was issued in April 2011. After giving effect to the modifications that will be made to TFM’s bylaws to reflect the agreement of the parties, our effective ownership interest in the project will be 56.0 percent prospectively, compared to our current ownership interest of 57.75 percent.
 

OUTLOOK

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.

Our financial results can vary significantly as a result of fluctuations in the market prices of copper and, to a lesser extent, gold and molybdenum. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Because we cannot control the price of our products, the key measures whichthat management focuses on in operating our business are sales volumes, unit net cash costs and operating cash flow. Discussion of the outlook for each of these measures follows.

Sales Volumes.Consolidated Our projected sales from mines for the year 2010 are expected to approximate 3.85 billion pounds of copper, 1.9 million ounces of gold and 65 million pounds of molybdenum, including 895 million pounds of copper, 585 thousand ounces of gold and 15 million pounds of molybdenum for fourth-quarter 2010. These sales volume estimates are dependentvolumes depend on the achievement of targeted mining rates, the successful operation of production facilities, the impact of weather conditions and other factors. Consolidated sales from mines for the year 2011 are expected to approximate 3.9 billion pounds of copper, 1.6 million ounces of gold and 73 million pounds of molybdenum, including 965 million pounds of copper, 365 thousand ounces of gold and 17 million pounds of molybdenum for second-quarter 2011.

Unit Net Cash Costs. Quarterly unit net cash costs vary with fluctuations in sales volumes. Quarterly unit net cash costs for the remainder of 2011 are expected to be higher than first-quarter 2011 consolidated unit net cash costs of $0.79 per pound. Assuming average prices of $1,300$1,400 per ounce of gold and $15 per pound of molybdenum for fourth-quarter 2010the remainder of 2011, and achievement of current 20102011 sales volumevolumes and cost estimates, we estimate our consolidated unit net cash costs (net of by-product credits) for our copper mining operations - including Africa mining - would average approximately $0.83$1.04 per pound of copper for the year 2010.2011. The impact of price changes on consolidated unit net cash costs in 2010 would approximate $0.008$0.02 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 2010the remainder of 2011, and $0.003$0.02 per pound for each $2 per pound change in the average price of molybdenum for fourth-quarter 2010. Estimated consolidated unit net cash costs in 2010 are higher, compared with consolidate d unit net cash coststhe remainder of $0.55 per pound of copper in 2009, primarily because of lower projected copper and gold sales volumes from Grasberg, combined with increases in input costs.2011. Refer to “Consolidated Results – Production and Delivery Costs” for further discussion of consolidated production and delivery costs.

Operating Cash Flows.Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. Based on the above projected consolidated sales volumes and unit net cash costs for 2010,2011, and assuming average prices of $3.75$4.25 per pound of copper, $1,300$1,400 per ounce of gold and $15 per pound of molybdenum for fourth-quarter 2010,the remainder of 2011, we estimate consolidated operating cash flows wouldwill approximate $6.0$8.3 billion for the year 2010,2011, net of an estimated $0.5 billion$60 million for working capital requirements. In addition to projected working capital requirements, ourOur estimate of operating cash flowflows for the year 2010 is2011 also net ofreflect estimated taxes of $2.8$3.9 billion (refer to “Consolidate d“Consolidated Results – (Provision for) Benefit fromProvision for Income Taxes” for further discussion of our projected annual consolidated effective incomeannual tax rate for the year 2010)2011). The impact of price changes for the remainder of 2011 on operating cash flows in 2010 would approximate $60$125 million for each $0.10$0.05 per pound change in the average price of copper, for fourth-quarter 2010, $10$50 million for each $50 per ounce change in the average price of gold for fourth-quarter 2010 and $8$60 million for each $2 per pound change in the average price of molybdenum for fourth-quarter 2010.molybdenum.
 

COPPER, GOLD AND MOLYBDENUM MARKETS

World prices for copper, gold and molybdenum have fluctuated significantly sincecan fluctuate significantly. During the period from January 2000. The2001 through April 2011, the London Metal Exchange (LME) spot copper price varied from a low of $0.60 per pound in 2001 to a record high of $4.08$4.60 per pound in 2008,February 2011, the London gold price fluctuated from a low of approximately $256 per ounce in 2001 to a new record high of $1,373$1,536 per ounce in October 2010,April 2011, and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $2.19 per pound in 20002001 to a high of $39.25 per pound in 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 Annual Report on Form 10-K for the year ended December 31, 2009.2010.

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

This graph presents LME spot copper prices and reported stocks of copper at the LME and the New York Mercantile Exchange (COMEX) from January 20002001 through October 2010.April 2011. From 2006 through most of 2008, disruptions associated with strikes and other operational issues,limited supplies, combined with growing demand from China and other emerging economies resulted in high copper prices and low levels of inventory. Beginning ininventories. In late 2008, slowing consumption, led to increases in inventory levels; however, China’s increased buying activity contributed to a decline in exchange inventories. After reaching a low in July 2009, inventories grew during the second half of 2009 with combined LME and COMEX stocks ending the year at approximately 592 thousand metric tons. Inventories have since decreased and at September 30, 2010, combined LME and COMEX stocks totaled approximately 451 th ousand metric tons, which represents approximately 9 days of global consumption.

Turmoilturmoil in the U.S. financial markets and concerns about the global economy negatively impactedled to a sharp decline in copper prices, in late 2008, which declined toreached a four-year low of $1.26 per pound in December 2008; however, copper2008. Copper prices have since improved significantly, we believe primarily because ofattributable to a combination of an improved global economic outlook, strong demand from China,emerging markets, recovering demand in the western world and limitations of available supply. During third-quarter 2010,first-quarter 2011, LME spot copper prices ranged from $2.88$4.07 per pound to $3.65a record high of $4.60 per pound and averaged $3.29$4.38 per pound. Combined LME and COMEX inventories have risen somewhat in 2011, compared to year-end 2010 levels, as a result of reduced Chinese imports.

We believe the underlying fundamentals of the copper business remain positive, supported by limited supplies from existing mines and the absence of significant new development projects. Future copper prices are expected to be volatile and are likely 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. The LME spot copper price closed at $3.73$4.25 per pound on October 29, 2010.April 28, 2011.

This graph presents London gold prices from January 20002001 through October 2010.April 2011. Gold prices reached a new record high of $1,373$1,536 per ounce in October 2010,April 2011, supported by investment demand and weakness in the U.S. dollar. During third-quarter 2010,first-quarter 2011, gold prices ranged from approximately $1,157$1,319 per ounce to $1,308$1,447 per ounce and averaged $1,227$1,386 per ounce. London gold prices closed at approximately $1,347$1,536 per ounce on October 29, 2010.April 28, 2011.
 


This graph presents the Metals Week Molybdenum Dealer Oxide weekly average priceprices from January 20002001 through October 2010.April 2011. In late 2008, molybdenum prices declined significantly as a result of the financial market turmoil and a decline in demand; however, molybdenum prices have since improved and,increased, which we believe areis supported by improved economic conditions and increased demand in metallurgicalthe chemical and chemicalsmetallurgical sectors. During third-quarter 2010,first-quarter 2011, the weekly average price of molybdenum ranged from $13.88$16.40 per pound to $16.03$17.88 per pound and averaged $14.98$17.24 per pound. The weekly average Metals Week Molybdenum Dealer Oxide weekly average price was $15.30$17.03 per pound on October 29, 2010.April 28, 2011.


CONSOLIDATED RESULTS
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Three Months Ended
March 31,
 
2010 2009 2010 2009 2011 2010 
Financial Data (in millions, except per share amounts)
                
Revenuesa
$5,152b$4,144b$13,379b$10,430b
Operating income$2,499b$2,084b$5,971b$4,264b
Net income$1,533 $1,203 $3,580 $2,222 
Net income attributable to noncontrolling interests$355 $224 $793 $492 
Net income attributable to FCX common stockholdersc
$1,178 $925d$2,724d$1,556d
Revenuesa,b
$5,709 $4,363 
Operating incomeb
$2,936 $2,048 
Net income attributable to FCX common stockholders$1,499c$897d
Diluted net income per share attributable to FCX common stockholders$2.49 $2.07d$5.88d$3.70d$1.57c$1.00d,e
Diluted weighted-average common shares outstanding 474 472  474 428  955  947e
                
FCX Mining Operating Data          
Mining Operating Data      
Copper (recoverable)
                
Production (millions of pounds) 1,042 1,015  2,901 3,125  950  929 
Sales, excluding purchases (millions of pounds) 1,081 1,000  2,955 3,122  926  960 
Average realized price per pound$3.50 $2.75 $3.33 $2.35 $4.31 $3.42 
Site production and delivery costs per pounde
$1.38 $1.15 $1.38 $1.08 
Unit net cash costs per pounde
$0.82 $0.50 $0.87 $0.53 
Site production and delivery costs per poundf
$1.61 $1.35 
Unit net cash costs per poundf
$0.79 $0.82 
Gold (recoverable)
                
Production (thousands of ounces) 492 708  1,257 2,105  466  449 
Sales, excluding purchases (thousands of ounces) 497 706  1,273 2,088  480  478 
Average realized price per ounce$1,266 $987 $1,204 $944 $1,399 $1,110 
Molybdenum (recoverable)
                
Production (millions of pounds) 19 15  53 42  20  17 
Sales, excluding purchases (millions of pounds) 17 16  50 42  20  17 
Average realized price per pound$16.06 $13.95 $16.43 $11.93 $18.10 $15.09 

a.  Includes the impact of adjustments to provisionally priced concentrate and cathode sales recognized in the prior periods. Referyears (refer to “Revenues” for further discussion.discussion).
 
b.  Following is a summary of revenues and operating income (loss) by operating division (in millions):

Three Months Ended
September 30, 2010
 
Three Months Ended
September 30, 2009
 
Three Months Ended
March 31, 2011
 
Three Months Ended
March 31, 2010
 
   Operating   Operating    Operating   Operating 
   Income   Income    Income   Income 
 Revenues  (Loss)  Revenues  (Loss)  Revenues  (Loss)  Revenues  (Loss) 
North America copper mines$990 $395 $920 $399 $1,348 $714 $1,054 $508 
South America mining 1,465 937 1,018 572  1,402 932 1,069 632 
Indonesia mining 1,874 1,249 1,656 1,199  1,730 1,104 1,459 892 
Africa mining 307 132 113 4  309 155 249 109 
Molybdenum 293 78 258 65  374 115 275 73 
Rod & Refining 1,181 6 963 4  1,487 4 1,073 4 
Atlantic Copper Smelting & Refining 595 (8) 495 (11) 762 (19) 633 (11)
Corporate, other & eliminations (1,553) (290) (1,279) (148) (1,703) (69) (1,449) (159)
Total$5,152 $2,499 $4,144 $2,084 
Total FCX$5,709 $2,936 $4,363 $2,048 
 
 
Nine Months Ended
September 30, 2010
 
Nine Months Ended
September 30, 2009
 
     Operating     Operating 
     Income     Income 
  Revenues  (Loss)  Revenues  (Loss) 
North America copper mines$3,088 $1,339 $2,241 $543 
South America mining 3,383  1,970  2,604  1,291 
Indonesia mining 4,260  2,561  4,388  2,983 
Africa mining 763  322  170  (64)
Molybdenum 893  271  590  69 
Rod & Refining 3,383  16  2,329  11 
Atlantic Copper Smelting & Refining 1,844  (21) 1,202  (40)
Corporate, other & eliminations (4,235) (487) (3,094) (529)
Total$13,379 $5,971 $10,430 $4,264 
25
our operating divisions and business segments.
 
c.  After net income attributableIncludes losses on early extinguishment of debt totaling $6 million ($0.01 per share) associated with the revolving credit facilities that were replaced in March 2011 (refer to noncontrolling interests in subsidiaries and preferred dividends. During second-quarter 2010, our 6¾% Mandatory Convertible Preferred Stock converted into 39 million shares of our common stock and the final preferred dividend payment was made.Note 6 for further discussion).
 
d.  Includes net losses on early extinguishment of debt totaling $67$23 million ($0.140.02 per share) for the first nine monthsassociated with open-market purchases of 2010,our 8.25% and $28 million for the third quarter and first nine months of 2009 ($0.06 per share for third-quarter 2009 and $0.07 per share for the first nine months of 2009). Refer8.375% Senior Notes (refer to Note 6 for further discussion of these transactions.discussion).
 
e.Amounts have been adjusted to reflect the February 1, 2011, two-for-one stock split.
f.  Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines. The 2009 periods exclude the results of Africa mining as start-up activities were still under way.mines, excluding net noncash and other costs. 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.”
23

Revenues
Consolidated revenues, which totaled $5.7 billion in first-quarter 2011 and $4.4 billion in first-quarter 2010, include the sale of copper concentrates, copper cathodes, copper rod, gold, molybdenum 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,operations, the sale of copper cathodes and cobalt hydroxide by our Africa mining operation,operations, the sale of molybdenum in various forms by our Molybdenum operations, and the sale of copper cathodes, copper anodes, and gold in anodes and slimes by Atlantic Copper.

Following is a summary of changes in our consolidated revenues between periods (in millions):

Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Consolidated revenues – 2009 periods$4,144 $10,430 
Higher sales price realizations from mining operations:      
First-quarter 2010 consolidated revenues$4,363 
Higher price realizations from mining operations:   
Copper 811  2,807  824 
Gold 138  332  139 
Molybdenum 35  223  59 
(Lower) higher sales volumes from mining operations:         
Copper 221  (399) (117)
Gold (206) (769) 2 
Molybdenum 4  95  44 
Cobalt 66  150  28 
Lower net adjustments primarily for prior year provisionally priced sales (22)
Higher purchased copper 115  145  273 
Lower net adjustments for prior period/year provisionally priced sales,      
including PT Freeport Indonesia’s 2009 forward copper sales contracts (35) (54)
Higher Atlantic Copper revenues 100  642  129 
Other, including intercompany eliminations (241) (223) (13)
Consolidated revenues – 2010 periods$5,152 $13,379 
First-quarter 2011 consolidated revenues$5,709 

HigherPrice Realizations
Our consolidated revenues can vary significantly as a result of $5.2 billionfluctuations in third-quarter 2010the market prices of copper and, $13.4 billion for the first nine months of 2010,to a lesser extent, gold and molybdenum. Consolidated revenues in first-quarter 2011 reflected higher price realizations, compared with $4.1 billion in third-quarter 2009 and $10.4 billion for the first nine months of 2009 were primarily because of higher metal price realizations.first-quarter 2010. Realized copper prices increased to an average of $3.50averaged $4.31 per pound in third-quarter 2010 (comparedfirst-quarter 2011, compared with $2.75$3.42 per pound in third-quarter 2009) and $3.33 per pound for the first nine months of 2010 (compared with $2.35 per pound for the first nine months of 2009). Realizedfirst-quarter 2010; realized gold prices increased to an average of $1,266averaged $1,399 per ounce in third-quarter 2010 (comparedfirst-quarter 2011, compared with $987$1,110 per ounce in third-quarter 2009)first-quarter 2010; and $1,204 per ounce for the first nine months of 2010 (compared with $944 per ounce for the first nine months of 2009). Realizedrealized molybdenum prices increased to an ave rage of $16.06averaged $18.10 per pound in third-quarter 2010 (comparedfirst-quarter 2011, compared with $13.95$15.09 per pound in third-quarter 2009) and $16.43 per pound for the first nine months of 2010 (compared with $11.93 per pound for the first nine months of 2009).first-quarter 2010.

Sales Volumes
Consolidated copper sales volumes totaled 1.1 billion926 million pounds of copper, 480 thousand ounces of gold and 20 million pounds of molybdenum in third-quarter 2010 and 3.0 billion pounds for the first nine months of 2010,first-quarter 2011, compared with 1.0 billion960 million pounds of copper, 478 thousand ounces of gold and 17 million pounds of molybdenum in third-quarter 2009 and 3.1 billion pounds for the first nine months of 2009. Higher copper sales volumes for third-quarter 2010 primarily reflected higher copper ore grades and mill throughput at our South America mining operations, higher share of Grasberg volumes in accordance with joint venture arrangements and additional volumes provided by our Tenke mine in Africa, partly offset by lower ore grades at our North America copper mines.first-quarter 2010. Lower copper sales volumes for the first nine monthsin first-quarter 2011 primarily related to timing of 2010 primarily reflected lower ore grades at Grasberg during the first half of 2010shipments in North America and lower volumes at our North and South America copper mines, partly offset by additional volumes provided by our Tenke mine in
26
Africa. Consolidated gold sales volumes decreased to 497 thousand ounces in third-quarter 2010 and 1.3 million ounces for the first nine months of 2010, compared with 706 thousand ounces in third-quarter 2009 and 2.1 million ounces for the first nine months of 2009, as a result of mining in a lower ore-grade section at Grasberg resulting from planned mine sequencing.  ConsolidatedIndonesia. Higher consolidated molybdenum sales volumes increased to 17 million pounds for third-quarter 2010 and 50 million pounds for the first nine months of 2010, compared with 16 million pounds for third-quarter 2009 and 42 million pounds for the first nine months of 2009, reflectingin first-quarter 2011 reflected improved demand in the chemicals sector.chemical and metallurgical sectors. Refer to “Operations” for further discussion.discussion of sales volumes at our operating divisions.

Provisionally Priced Sales
During the first nine months of 2010, approximately 51first-quarter 2011, 57 percent of our mined copper was sold in concentrate, approximately 26 percent as cathodes and approximately 2322 percent as rod from(from our North America operations.operations) and 21 percent as cathodes. Substantially all of our copper concentrate and cathode sales contracts at our copper mining operations provide final copper pricing in a specified future period (generally one to four months from the shipment date) based primarily on quoted LME monthly average spot prices. We receive market prices based on prices in the specified future period, which results in price fluctuations recorded through revenues until the date of settlement. 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 provisional priced concentrate and cathode sales that is adjusted to fair value thr oughthrough 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. Accordingly, in times of rising 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 prices, the opposite occurs.

24
At June 30,December 31, 2010, we had provisionally priced copper sales totaling 417 million pounds of copper at our copper mining operations (net of intercompany sales and noncontrolling interests) recorded at an average of $4.36 per pound. Adjustments to the December 31, 2010, provisionally priced copper sales resulted in a net decrease to consolidated revenues of $10 million ($4 million to net income attributable to FCX common stockholders or less than $0.01 per share) in first-quarter 2011. Adjustments to the December 31, 2009, provisionally priced copper sales resulted in a net decrease of $4 million ($2 million to net income attributable to FCX common stockholders or less than $0.01 per share) in first-quarter 2010.

At March 31, 2011, we had provisionally priced copper sales at our copper mining operations totaling 364464 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.95 per pound. Higher prices during third-quarter 2010 resulted in favorable adjustments to these prior period provisionally priced copper sales and increased consolidated revenues by $191 million ($85 million to net income attributable to FCX common stockholders or $0.18 per share), compared with a net increase of $237 million ($116 million to net income attributable to FCX common stockholders or $0.25 per share) in third-quarter 2009. Additionally, adjustments to prior year provisionally priced copper sales at our copper mining operations resulted in a net decrease to consolidated revenues of $23 million ($9 million to net inc ome attributable to FCX common stockholders or $0.02 per share) for the first nine months of 2010, compared with a net increase of $132 million ($61 million to net income attributable to FCX common stockholders or $0.14 per share) for the first nine months of 2009.

LME spot copper prices averaged $3.29 per pound in third-quarter 2010, compared with our average realized price of $3.50 per pound. At September 30, 2010, we had provisionally priced copper sales at our copper mining operations totaling 390 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.63$4.27 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the September 30, 2010, averageMarch 31, 2011, provisional price for provisionally priced copper salesrecorded would have a net impact on our 20102011 consolidated revenues of approximately $26$31 million ($1315 million to net income attributable to FCX common stockholders). The LME spot copper price closed at $3.73$4.25 per pound on October 29, 2010.April 28, 2011.

In April 2009,Purchased Copper
From time to time we entered into forward sales contracts on certain of PT Freeport Indonesia’s provisionally pricedpurchase copper sales at March 31, 2009, which final pricedcathode to be processed by our Rod & Refining operations when production from April 2009 through July 2009 (referour North America copper mines does not meet customer demand. Accordingly, the increase in purchased copper in first-quarter 2011, compared with first-quarter 2010, resulted from higher customer demand and prices.

Atlantic Copper Revenues
The increase in Atlantic Copper’s revenues in first-quarter 2011, compared with first-quarter 2010, primarily reflected higher copper revenues associated with higher prices. Refer to Note 7“Operations” for further discussion).discussion of Atlantic Copper Smelting & Refining.

Production and Delivery Costs
Consolidated production and delivery costs increased to $2.3totaled $2.4 billion in third-quarter 2010 and $6.2 billion for the first nine months of 2010,first-quarter 2011, compared with $1.7$1.9 billion in third-quarter 2009first-quarter 2010. Higher production and $5.1 billiondelivery costs for the first nine months of 2009,first-quarter 2011 primarily reflectingreflected higher input costs at our mining operations and higher costs of concentrate purchases at Atlantic Copper associated with higher copper prices.

Consolidated unit site production and delivery costs for our copper mining operations averaged $1.38 per pound of copper for both the third quarter and first nine months of 2010, compared with $1.15$1.61 per pound of copper in third-quarter 2009 and $1.08first-quarter 2011, compared with $1.35 per pound of copper for the first nine months of 2009.in first-quarter 2010. Higher site production and delivery costs in the 2010 periodsfirst-quarter 2011 primarily reflected increased input costs, (includingincluding materials, labor and energy). The first nine months of 2010 were also impacted by lower copper sales volumes at Grasberg.energy. Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions, and to
27
“Product “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.

Our copper mining operations require a significant amount of energy, principally diesel, electricity, diesel, coal and natural gas. For the year 2010,2011, we expect energy costs (including Africa mining) to approximate 2022 percent of our consolidated copper production costs, which reflects purchases of approximately 220250 million gallons of diesel fuel; 6,1506,660 gigawatt hours of electricity at our North America, South America and Africa copper mining operations (we generate all of our power at our Indonesia mining operation); 800735 thousand metric tons of coal for our coal power plant in Indonesia; and 1 million MMBTU (million british thermal units) of natural gas at certain of our North America mines. Energy costs for 2009, which excluded Africa mining,2010 approximated 20 percent of our consolidated copper production costs.

Depreciation, Depletion and Amortization
Consolidated depreciation, depletion and amortization expense increased to $268totaled $232 million in third-quarter 2010 and $788 million for the first nine months of 2010,first-quarter 2011, compared with $252$271 million in third-quarter 2009 and $740 million for the first nine months of 2009. Higherfirst-quarter 2010. Lower depreciation, depletion and amortization expense in third-quarter 2010first-quarter 2011 primarily reflected additional expense at our Tenke Fungurume mine and higher expense under the unit-of-production method at our Grasberg mine. Higher depreciation, depletion and amortization for the first nine months of 2010 also reflected additional expense at our Tenke Fungurume mine as well as higher straight-line depreciation expense at our North America copper mines, partly offset by lower expense under the unit-of-productionunits-of-production method at our South America and Grasberg mines.

Loweras a result of Cost or Market (LCM) Inventory Adjustments
Inventories are required to be recorded at the lower of cost or market. In first-quarter 2009, we recognized charges totaling $19 million ($15 million to net income attributable to FCX common stockholders or $0.04 per share) for LCM molybdenum inventory adjustments.copper sales volumes.

Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses increased to $81$114 million in third-quarter 2010 and $277 million for the first nine months of 2010,first-quarter 2011, compared with $74$95 million in third-quarter 2009 and $225 million for the first nine months of 2009,first-quarter 2010, primarily reflecting higher stock-based compensation and other incentive compensation costs. The first nine months of 2010 also included chargescosts associated with relocating our corporate offices.improved operating results.
25

Exploration and Research Expenses
Consolidated exploration and research expenses increased to $35totaled $50 million in third-quarter 2010 and $104 million for the first nine months of 2010,first-quarter 2011, compared with $19$31 million in third-quarter 2009 and $73 million for the first nine months of 2009. Explorationfirst-quarter 2010. We are conducting exploration activities are being conducted near our existing mines with a focus on opportunities to expand reserves that will support the development of additional future production capacity in the large mineral districts where we currently operate. Significantly expanded drilling activities in recent years have been successful in generating reserve additions and in identifying potential additional mineral resources adjacent to existing ore bodies. ResultsFavorable exploration results indicate opportunities for significant future potential reserve additions at Morenci, Sierrita and Bagdad in North America, at Cerro Verde and El Abra in So uthSouth America and in the Tenke Fungurumeminerals district. The drilling data in North America continues to indicate the potential for expanded sulfide production.

For the year 2010,2011, exploration spending isand research expenditures are expected to approximate $120 million.total $285 million, including approximately $225 million for exploration. Exploration activities will continue to focus primarily on the potential for future reserve additions atin our existing mineral districts.

Restructuring and Other Charges
For the first nine months of 2009, we recognized net charges of $23 million ($18 million to net income attributable to FCX common stockholders or $0.04 per share) associated with revised operating plans, including contract termination costs, other project cancellation costs and charges for employee severance and benefits, partially offset by pension and postretirement gains for special retirement benefits and curtailments.

Interest Expense, Net
Consolidated interest expense (before capitalization) decreased to $126totaled $123 million in third-quarter 2010first-quarter 2011 and $409 million for the first nine months of 2010, compared with $172$151 million in third-quarter 2009 and $520 million for the first nine months of 2009,first-quarter 2010. Lower interest expense in first-quarter 2011 primarily reflectingreflected the impact of debt repayments during 2009 and the first half of 2010.

28
Capitalized interest is primarily related to our development projects and totaled $23$25 million in third-quarter 2010, $39 million for the first nine months of 2010, $10first-quarter 2011 and $6 million in third-quarter 2009 and $69 millionfirst-quarter 2010. Refer to “Operations” for the first nine monthsfurther discussion of 2009 associated with ourcurrent development activities.projects.

Losses on Early Extinguishment of Debt
ForDuring first-quarter 2011, we recorded losses on early extinguishment of debt totaling $7 million ($6 million to net income attributable to FCX common stockholders or $0.01 per share) related to the first nine months ofrevolving credit facilities that were replaced in March 2011 by a new senior unsecured revolving credit facility.

During first-quarter 2010, we recorded losses on early extinguishment of debt totaling $77$27 million ($6723 million to net income attributable to FCX common stockholders or $0.14$0.02 per share) associated with the redemption of our Senior Floating Rate Notes and open-market purchases of our 8.25% and 8.375% Senior Notes during the first half of 2010.Notes.

On April 1, 2011, we redeemed the remaining $1.1 billion of our outstanding 8.25% Senior Notes due 2015. In third-quarter 2009,second-quarter 2011, we recorded lossesexpect to record a loss on early extinguishment of debt totaling $31of $56 million ($2849 million to net income attributable to FCX common stockholders or $0.06 per share for third-quarter 2009 and $0.07 per share for the first nine months of 2009) associatedstockholders) in connection with the redemption of our 6⅞% Senior Notes and open-market purchases of our 8.25% and 8.375% Senior Notes.this redemption.

Refer to Note 6 for further discussion of these transactions.

Provision for Income Taxes
Our first-quarter 2011 income tax provision for the 2010 periods resulted from taxes on international operations ($772 million for the third quarter and $1.8 billion for the first nine months)846 million) and U.S. operations ($73 million for the third quarter and $205 million for the first nine months)138 million).  As presented in the table below, our consolidated effectiveOur first-quarter 2010 income tax rate was 35 percent for the first nine months of 2010.

Our income tax provision for the 2009 periods resulted from taxes on international operations ($660 million for the third quarter and $1.5 billion for the first nine months)597 million) and U.S. operations ($24 million for the third quarter and $29 million for the first nine months)81 million). During the first nine months of 2009, we did not record a benefit for losses generated in the U.S., and those losses could not be used to offset income generated from international operations. These factors combined with the high proportion of income earned in Indonesia, which was taxed at an effective tax rate of 43 percent, caused our consolidated effective income tax rate of 41 percent for the first nine months of 2009 to be higher than the U.S. federal statutory rate of 35 percent.

A summary of the approximate amounts in the calculation of our consolidated provision for income taxes for the first nine monthsquarters of 2011 and 2010 and 2009 followsfollow (in millions, except percentages):

 Nine Months Ended Nine Months Ended 
 September 30, 2010 September 30, 2009  
Three Months Ended
March 31, 2011
 
Three Months Ended
March 31, 2010
 
     Income Tax     Income Tax      Income Tax     Income Tax 
 Income Effective (Provision) Income Effective (Provision)    Effective (Provision) Income Effective (Provision) 
 
(Loss)a
 Tax Rate Benefit 
(Loss)a
 Tax Rate Benefit  
Incomea
 Tax Rate Benefit 
(Loss)a
 Tax Rate Benefit 
U.S. $905 23% $(205)$(135) (21)% $(29) $647 21% $(138)$329  25% $(81)
South America 1,926 33% (629) 1,269 33% (418) 914 33% (306) 623 32% (197)
Indonesia 2,569 42% (1,069) 2,952 43% (1,257) 1,161 44% (507) 909 43% (393)
Africa 251 30% (75) (111) 26% 29  104 38% (40) 85 30% (25)
Eliminations and other (125) N/A 43 (217) N/A 74   15 N/A  7  (58) N/A  18 
Annualized rate adjustment b
  N/A N/A  (21) N/A N/A  44 
Consolidated FCX $5,526 
35%c
 $(1,956)$3,758 41% $(1,557) $2,841 
35%b
 $(984)$1,888 
36%b
 $(678)
 
a.  Represents income (loss) by geographic location before income taxes and equity in affiliated companies’ net earnings.
 
b.  In accordance with applicable accounting rules,Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we adjustoperate. Accordingly, variations in the relative proportions of jurisdictional income result in fluctuations to our interim provisionconsolidated effective income tax rate. Assuming average prices of $4.25 per pound for income taxes to equal our estimated annualized tax rate.copper, $1,400 per ounce for gold and $15 per
 
26
c. Our estimated consolidated effective tax ratepound for molybdenum for the year 2010 will vary with commodity price changes and the mixremainder of income from international and U.S. operations. Assuming average prices of $3.75 per pound of copper, $1,300 per ounce of gold and $15 per pound of molybdenum for fourth-quarter 20102011 and current 2010 sales volume and cost estimates, we estimate our annual consolidated effective tax rate will approximate 35 to 36 percent.
 

OPERATIONS

North America Copper Mines
We havecurrently operate seven copper mines in North America – Morenci, Sierrita, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. 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. In addition to copper, theMolybdenum is also produced by Morenci, Bagdad and Sierrita and Bagdad mines produce molybdenum as a by-product. 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. Refer to Note 11 for further discussion of our reportable segment in the North America copper mines division.

Operating and Development Activities. We have restarted the Morenci mill and have commenced a staged ramp up of Morenci’s mining rates. We have also resumed certain project development activities, including initiating restarts of mining at the Miami and Chino mines and construction of a new sulphur burner at Safford.

Morenci Mine Ramp-up and Mill Restart and Mine Ramp-up.Restart. In March 2011, we reached our targeted mining rate of 635,000 metric tons per day after commencing a staged ramp-up at the Morenci mine from the 2009 rate of 450,000 metric tons per day. In addition, in March 2010, we restarted the Morenci mill to process available sulfide material currently being mined. Mill throughput averaged 31,00048,300 metric tons of ore per day during third-quarter 2010in first-quarter 2011 and is expected to increase to approximately 50,000 metric tons per day by 2011. We have also commenced a staged ramp up at the Morenci mine from the 2009 ratesecond half of 450,000 metric tons per day to 635,000 metric tons per day. The mining rate averaged over 480,000 metric tons per day in third-quarter 2010.2011. These activities willare expected to enable Morenci’s annual copper production to increase by approximately 125 million pounds per year beginning in 2011. Further increases

During first-quarter 2011, we also commenced a feasibility study to Morenci’sadd additional mining rate are being evaluated.and milling capacity at Morenci to process additional sulfide ore identified through positive exploratory drilling over the last few years. This project, which would require significant investment, would increase milling rates to approximately 115,000 metric tons per day and target incremental annual copper production of 150 to 200 million pounds within a two to three year time frame. The study is expected to be completed in the second half of 2011.

Miami Restart. In first-quarter 2010, weWe initiated limited mining activities at the Miami mine to improve efficiencies of ongoing reclamation projects associated with historical mining operations at the site. During an approximate five-year mine life, we expect to ramp up production at Miami to approximately 100 million pounds of copper per year by late 2011. We are investing approximately $40 million for this project, which is benefiting from the use of existing mining equipment.2012.

Chino RestartRestart.. In October 2010, we announced that we We are initiating a restart ofrestarting mining and milling activities at the Chino mine, which were suspended in late 2008. The ramp up of mining and milling activities will significantly increase copper production at Chino, which is currently producing small amounts of copper from existing leach stockpiles. PlannedThe start-up is on schedule, with planned mining and milling rates are expected to be achieved by the end of 2013. Annual incrementalIncremental annual copper production ofis expected to be 100 million pounds is expected in 2012 and 2013 and 200 million pounds in 2014. Capital costsCosts for the project associated with equipment and mill refurbishment are expected to approximate $150 million, associated with equipment and mill refurbishment.million.

Safford Sulphur Burner. We are constructing ahave completed construction of the $150 million sulphur burner project at the Safford mine, which will provide a more cost effectivecost-effective source of sulphuric acid used in SX/EW operations and lower transportation costs. This project is expected to be completed in the first half of 2011 at a capital investment of approximately $150 million. Project costs of $57 million have been incurred as of September 30, 2010, of which $29 million was incurred during the first nine months of 2010.

Twin Buttes Acquisition.Buttes. In December 2009, we purchased the Twin Buttes copper mine, which ceased operations in 1994 and is adjacent to our Sierrita mine. The purchase provides significant synergies in the Sierrita minerals district, including the potential for expanded mining activities and access to material that can be used for Sierrita tailings and stockpile reclamation purposes. Studies have commencedWe are conducting drilling on the property and metallurgical studies to incorporate the Twin Buttes resourcessupport a feasibility study expected to commence in our development plans.late 2011.
 
 
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Operating Data. Following is summary operating data for the North America copper mines for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009:2010:

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 2010 2009 2010 2009  2011 2010 
Operating Data, Net of Joint Venture Interest               
Copper (millions of recoverable pounds)
               
Production 259 290  786 851  282 264 
Sales, excluding purchases 267 303  847 885  276 291 
Average realized price per pound $3.32 $2.69 $3.28 $2.15  $4.40 $3.32 
               
Molybdenum (millions of recoverable pounds)
               
Productiona
 7 7  18 20  7 6 
               
100% Operating Data               
SX/EW operations               
Leach ore placed in stockpiles (metric tons per day) 653,400 519,200  634,000 580,200  811,700 601,900 
Average copper ore grade (percent) 0.22 0.30  0.24 0.30  0.24 0.24 
Copper production (millions of recoverable pounds) 179 216  563 639  182 202 
               
Mill operations               
Ore milled (metric tons per day) 190,500 166,300  183,000 172,500  213,400 162,900 
Average ore grade (percent):               
Copper 0.32 0.32  0.31 0.33  0.36 0.30 
Molybdenum 0.03 0.03  0.02 0.03  0.03 0.02 
Copper recovery rate (percent) 82.6 86.8  83.0 85.7  81.8 85.7 
Production (millions of recoverable pounds):               
Copper 100 93  280 270  122 80 
Molybdenum 7 7  18 20  7 6 
 
a.  Reflects by-product molybdenum production from thecertain of our North America copper mines. Sales of by-product molybdenum are reflected in the Molybdenum division.

Copper production from our North America copper mines was higher in first-quarter 2011, compared with first-quarter 2010, primarily reflecting increased mining and milling activities at Morenci. However, copper sales volumes from our North America copper mines decreased to 267276 million pounds in third-quarter 2010 and 847 million pounds for the first nine months of 2010,first-quarter 2011, compared with copper sales volumes of 303291 million pounds in third-quarter 2009 and 885 million pounds for the first nine months of 2009,first-quarter 2010, primarily because of anticipated lower ore grades at Safford and lower mill throughput becausetiming of unscheduled crusher maintenance at Bagdad. The first nine months of 2010 were also impacted by lower ore grades and mill maintenance at Sierrita.shipments.

ConsolidatedFor the year 2011, copper sales volumes from our North America copper mines are expected to approximate 1.2 billion pounds, compared with 1.1 billion pounds for the year 2010, compared with 1.2 billion poundsof copper in 2009. As discussed above in “Operating and Development Activities,” we are increasing mining and milling rates at the Morenci mine and restarting2010. The restart of the Miami and Chino mines whichand potential expansion of the Morenci mine are expected to result in higherfurther increase production in future periods. Molybdenum production from our North America copper mines is expected to approximate 34 million pounds for the year 2011.

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 metals mining companies, although our measure may not be comparable to similarly titled measures repor tedreported by other companies.
 
 
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Gross Profit per Pound of Copper and Molybdenum

The following tables summarizetable summarizes unit net cash costs and gross profit per pound of copper and molybdenum at the North America copper mines for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009.2010. 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.

 
Three Months Ended
September 30, 2010
 
Three Months Ended
September 30, 2009
 
 By- Co-Product Method By- Co-Product Method 
 Product   Molyb- Product    Molyb- 
 Method Copper 
denuma
 Method Copper 
denuma
 
Revenues, excluding adjustments$3.32 $3.32 $15.10 $2.69 $2.69 $13.58 
                   
Site production and delivery, before net noncash                  
and other costs shown below 1.62  1.45  8.18  1.22  1.10  6.71 
By-product creditsa
 (0.36) –  –  (0.29) –  – 
Treatment charges 0.10  0.10  –  0.08  0.08  – 
Unit net cash costs 1.36  1.55  8.18  1.01  1.18  6.71 
Depreciation, depletion and amortization 0.24  0.22  0.51  0.22  0.20  0.53 
Noncash and other costs, net 0.11  0.11  (0.12) 0.07  0.07  0.05 
Total unit costs 1.71  1.88  8.57  1.30  1.45  7.29 
Revenue adjustments, primarily for hedging –  –  –  0.02  0.02  – 
Idle facility and other non-inventoriable costs (0.10) (0.10) (0.04) (0.07) (0.07) – 
Gross profit per pound$1.51 $1.34 $6.49 $1.34 $1.19 $6.29 
                   
Copper sales (millions of recoverable pounds) 266  266     302  302    
Molybdenum sales (millions of recoverable pounds)b
       7        7 
Nine Months Ended
September 30, 2010
 
Nine Months Ended
September 30, 2009
 
Three Months Ended
March 31, 2011
 
Three Months Ended
March 31, 2010
 
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$3.28 $3.28 $15.49 $2.15 $2.15 $10.52 $4.40 $4.40 $16.87 $3.32 $3.32 $13.93 
                           
Site production and delivery, before net noncash                           
and other costs shown below 1.46 1.31 8.06 1.26 1.16 5.46  1.75 1.57 7.08  1.31 1.20 7.40 
By-product creditsa
 (0.33) – – (0.23) – –  (0.49) - -  (0.26) - - 
Treatment charges 0.09  0.09  –  0.09  0.09  –  0.11  0.10  -  0.08  0.08  - 
Unit net cash costs 1.22 1.40 8.06 1.12 1.25 5.46  1.37 1.67 7.08  1.13 1.28 7.40 
Depreciation, depletion and amortization 0.24 0.23 0.59 0.22 0.21 0.37  0.20 0.19 0.43  0.27 0.25 0.63 
Noncash and other costs, net 0.13  0.12  (0.01) 0.12  0.12  0.08  0.15  0.15  0.12  0.08  0.08  0.05 
Total unit costs 1.59 1.75 8.64 1.46 1.58 5.91  1.72 2.01 7.63  1.48 1.61 8.08 
Revenue adjustments, primarily for hedging – – – 0.11 0.11 – 
Revenue adjustments - - -  - - - 
Idle facility and other non-inventoriable costs (0.08) (0.08) (0.02) (0.09) (0.09) –  (0.03) (0.03) (0.02) (0.06) (0.06) - 
Gross profit per pound$1.61 $1.45 $6.83 $0.71 $0.59 $4.61 $2.65 $2.36 $9.22 $1.78 $1.65 $5.85 
                           
Copper sales (millions of recoverable pounds) 845 845   885 885    275 275    291 291   
Molybdenum sales (millions of recoverable pounds)b
     18     20      7      6 
 
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.

Higher unitUnit net cash costs (net of by-product credits) for our North America copper mines of $1.36increased to $1.37 per pound of copper in third-quarter 2010 and $1.22 per pound of copper for the first nine months of 2010,first-quarter 2011, compared with $1.01$1.13 per pound of copper in third-quarter 2009 and $1.12 per pound of copper for the first nine months of 2009,first-quarter 2010, primarily reflectedreflecting higher site production and delivery costs ($0.400.44 per pound for the quarter and $0.20 per pound for the nine month period) mostly associated with higher input costs andpound) resulting from increased mining and milling activities at certain mines. Partly offsetting theseand higher input costs, werepartly offset by higher molybdenum credits ($0.070.23 per pound for the quarter and $0.10 per pound for the nine month period)pound) resulting from higher molybdenum volumes and prices.

32
Some of our U.S. copper rod customers request a fixed market price instead ofmining and milling activities at the COMEX average price in the month of shipment. We hedge this price exposure in a manner that allows us to receive market prices in the month of shipment while the customer pays the fixed price they requested. Because these contracts previously did not meet the criteria to qualify for hedge accounting, revenue adjustments in the third quarter and first nine months of 2009 primarily reflect unrealized gains on these copper derivative contracts.Chino mine.

Our 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. Based on current operating plans, and assuming achievement of current 20102011 sales volume and cost estimates and an average price of $15 per pound of molybdenum for fourth-quarter 2010,the remainder of 2011, we estimate that average unit net cash costs (net of by-product credits) for our North America copper mines would approximate $1.25$1.47 per pound of copper for the year 2010,2011, compared with $1.11$1.24 per pound in 2009.2010. Each $2 per pound change in the average price of molybdenum during fourth-quarter 2010the remainder of 2011 would have an approximate $0.01$0.04 per pound impact on the North America copper mines’ 20102011 average unit net cash costs.

South America Mining
We haveoperate four copper mines in South America – Cerro Verde in Peru, and El Abra, Candelaria and Ojos del Salado and El Abra in Chile. We own a 53.56 percent interest in Cerro Verde, a 51 percent interest in El Abra, and an 80 percent interest in both Candelaria and Ojos del Salado and a 51 percent interest in El Abra.Salado.

South America mining includes open-pit and underground mines,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.silver. Production from our South America mines is sold as copper concentrate or copper cathode under long-term contracts. Our South America mines sell a portion of their copper concentrate and cathode inventories to Atlantic Copper, an affiliated smelter. Refer to Note 11 for further discussion of our reportable segment in the South America mining division.

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Operating and Development Activities. The molybdenum circuit at Cerro Verde, which had been temporarily curtailed, resumed operations in September 2009. We have also resumed certain project development activities, including the El Abra sulfide project and the Cerro Verde mill optimization project.

El Abra Sulfide. We are engaged in construction activities associated with the development of a largeDuring first-quarter 2011, we commenced production from El Abra’s newly commissioned stacking and leaching facilities to transition from oxide to sulfide deposit at El Abra to extend its mine life by over 10 years. Construction activities for the initial phase of the project are approximately 55 percent complete, and are expected to be complete in 2011.ores. Production from the sulfide ore, which is projected to ramp up to approximatelyreach design levels in the second half of 2011, would approximate 300 million pounds of copper per year is expected to replaceand substantially replaces the currently depleting oxide copper production beginning in 2011.production. The aggregate capital investment for this project is expected to total $725 million through 2015, of which approximately $565 million is for the initial phase of the project. Aggregate project expected to be complete in 2011. Project costs of $269$422 million have been incurred as of September 30, 2010, of which $19 4March 31, 2011 ($61 million was incurred during the first nine months of 2010.first-quarter 2011).

We are also engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries.

Cerro Verde Expansion. We are completing aDuring fourth-quarter 2010, we completed the $50 million project to increase throughput at the existing Cerro Verde concentrator. This project which is expected to be completed by the end of 2010, is designed to add 30 million pounds of additional copper production per year by increasingincreased mill throughput from 108,000 metric tons of ore per day to 120,000 metric tons of ore per day. The aggregate capital investment for this project is expected to totalday resulting in incremental annual copper production of approximately $50 million.30 million pounds of copper.

In addition, weWe are evaluating the potential forprogressing our evaluation of a large-scale concentrator expansion at Cerro Verde. ReserveSignificant reserve additions in recent years have provided opportunities to significantly expand the existing facility’s capacity. A range of expansion options are beinghave been considered and we are targeting a project to increase mill throughput from 120,000 metric tons per day to 360,000 metric tons per day. Following the relatedcompletion of the feasibility study in second-quarter 2011, we expect to file an environmental impact assessment during the second half of 2011.

Candelaria Water Plant. As part of our overall strategy to supply water to the Candelaria mine, we recently completed construction of a pipeline to bring water from a nearby water treatment facility. In addition, we have started engineering for a desalination plant that will supply all of Candelaria’s longer term water needs. The plant is expected to be completed inby the first halfend of 2011.2012 at a capital investment of $280 million. Project costs of $30 million have been incurred as of March 31, 2011 ($24 million during first-quarter 2011).

Other Matters. As reported in Note 1413 of our reportAnnual Report on Form 10-K for the year ended December 31, 2009,2010, Cerro Verde was notified byhas received assessments from SUNAT, the Peruvian national tax authority, ofin connection with its intent to assessalleged obligations for mining royalties related to the minerals processed by the Cerro Verdeits concentrator, which was added to Cerro Verde’s processing facilities in late 2006. In August 2009, Cerro Verde received a formal assessment approximating $50 million in connection with its alleged obligations for mining royalties and fines forThese assessments relate to the period from October 2006 through December
33
2007. In April 2010, 2007, and for the year 2008. SUNAT has issued a rulingrulings denying Cerro Verde’s protest of the assessment,assessments, and in May 2010 Cerro Verde appealed this decision to the Tax Court. Cerro Verde has also received a formal assessment approximating $40 million in royalties forappealed these decisions to the year 2008, and a request for information for mining royalties covering the year 2009. SUNAT may continue to assess mining royalties annually until this matter is resolved by thePeruvian Tax Court.

Cerro Verde is challenging these royalties because its stability agreement with the Peruvian government exempts from royalties all minerals extracted from its mining concession, irrespective of the method used for processing those minerals. No amounts have been accrued for this contingency. If Cerro Verde is ultimately found responsible for thosethese royalties, it will also be liable for interest, which accrues at rates that range from 67 to 18 percent based on the year accrued and the currency in which the amounts would be payable. At March 31, 2011, the aggregate amount of the assessments, including interest approximated $122 million. This amount will continue to increase at varying interest rates. Cerro Verde has also received a request for information for mining royalties covering the year 2009. SUNAT may continue to assess mining royalties annually until this matter is resolved by the Tax Court.

DuringAs reported in Note 14 of our Annual Report on Form 10-K for the year ended December 31, 2010, during 2006, the Peruvian government announced that all mining companies operating in Peru would be required to make annual contributions to local development funds for a five-year period (covering the years 2006 through 2010) when copper prices exceedexceeded certain levels. Cerro Verde'slevels that were adjusted annually. The contribution iswas equal to 3.75 percent of after-tax profits, totaling $26 million for the first nine months of 2010 and $28totaled $41 million for the year 2009.2010. It is not certain whether the contribution will be extended, abandoned, or replaced by a tax or different mechanism. We will continue to monitor the activity associated with this matter.

In July 2010, the Chilean legislature approved and enacted a temporary increase to the provisional corporate income tax rate for 2011 and 2012. Taxes paid as a result of the increase will be available as a credit against withholding taxes applicable on distributions to non-resident shareholders.  As a result, the increase in the corporate income tax rate did not have an impact on our financial results for the first nine months of 2010, and we do not expect the change in rates to have a significant impact on our financial results in 2011 and 2012.

In October 2010, the Chilean legislature approved an increase in mining royalty taxes to help fund earthquake reconstruction activities, education and health programs. Mining royalty taxes at our Chilean operations are currently stabilized through 2017 at a rate of 4 percent, and totaled $26 million in 2009. However, under the new legislation we have the option to transfer from our stabilized rate to a sliding scale of 5 to 9 percent for the years 2010 through 2012, and would return to the 4 percent rate for the years 2013 through 2017. Beginning in 2018 through 2023, rates would move to a sliding scale of 5 to 14 percent. We are currently evaluating implementation of the proposal, and estimate that, if we elect to participate, th e additional royalty from the increased rates would approximate $15 million for the first nine months of 2010.
 
 
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Operating Data. Following is summary operating data for our South America mining operations for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009:2010:

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 2010 2009 2010 2009  2011 2010 
Copper (millions of recoverable pounds)
               
Production 356 340  1,007 1,046  317 322 
Sales 377 327  995 1,040  312 307 
Average realized price per pound $3.55 $2.79 $3.36 $2.43  $4.31 $3.46 
               
Gold (thousands of recoverable ounces)
               
Production 29 22  68 69  24 19 
Sales 30 20  69 68  24 19 
Average realized price per ounce $1,265 $976 $1,211 $935  $1,394 $1,113 
               
Molybdenum (millions of recoverable pounds)
               
Productiona
 2 –  5 1  3 2 
               
SX/EW operations               
Leach ore placed in stockpiles (metric tons per day) 281,000 251,500  261,500 254,100  262,200 255,800 
Average copper ore grade (percent) 0.39 0.46  0.42 0.45  0.43 0.44 
Copper production (millions of recoverable pounds) 122 142  385 420  90 133 
               
Mill operations               
Ore milled (metric tons per day) 193,800 174,200  187,100 181,000  191,800 180,100 
Average ore grade (percent):b
               
Copper 0.69 0.66  0.64 0.67  0.68 0.62 
Molybdenum 0.02 0.02  0.02 0.02  0.02 0.02 
Copper recovery rate (percent) 90.7 89.0  90.0 89.4  91.4 89.2 
Production (recoverable):               
Copper (millions of pounds) 234 198  622 626  227 189 
Gold (thousands of ounces) 29 22  68 69  24 19 
Molybdenum (millions of pounds) 2 –  5 1  3 2 
 
a.  Reflects by-product molybdenum production from our Cerro Verde copper mine. Sales of by-product molybdenum are reflected in the Molybdenum division.
 
b.  Average ore grades of gold produced at our South America mining operations rounds to less than 0.001 grams per metric ton.

Copper sales volumes from our South America mining operations increased to 377312 million pounds in third-quarter 2010,first-quarter 2011, compared with 327307 million pounds in third-quarter 2009,first-quarter 2010, primarily reflecting higher ore grades and mill throughput at Candelaria and timing of shipmentsincreased mill throughput at Cerro Verde, partly offset by anticipated lower ore grades at El Abra. For the first nine months of 2010, copper sales volumes decreased to 995 million pounds, compared with 1.0 billion pounds for the first nine months of 2009, primarily reflecting anticipated lower ore gradesmining rates at El Abra and timing of shipments at Cerro Verde.as it transitions from oxide to sulfide ores.

Consolidated sales volumes from South America mining are expected to approximate 1.3 billion pounds of copper and 100 thousand ounces of gold for the year 2010,in 2011, compared with 1.41.3 billion pounds of copper and 9093 thousand ounces of gold in 2009. Projected copper sales volumes2010. Molybdenum production from South America mining is expected to approximate 11 million pounds for 2010 are lower than 2009 primarily reflecting anticipated lower ore grades, principally at El Abra in connection with the depletion of the oxide ore resource and the transition to the sulfide deposit.year 2011.

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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

 
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Gross Profit per Pound of Copper

The following tables summarizetable summarizes unit net cash costs and gross profit per pound of copper at the South America mining operations for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009.2010. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations 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.

Three Months Ended
September 30, 2010
 
Three Months Ended
September 30, 2009
 
Three Months Ended
March 31, 2011
 
Three Months Ended
March 31, 2010
 
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$3.55 $3.55 $2.79 $2.79 $4.31 $4.31 $3.46 $3.46 
                    
Site production and delivery, before net noncash                    
and other costs shown below 1.16 1.09  1.14 1.09  1.30 1.20  1.20 1.14 
By-product credits (0.21) –  (0.10) –  (0.36) -  (0.17) - 
Treatment charges 0.18  0.18  0.15  0.15  0.19  0.19  0.15  0.15 
Unit net cash costs 1.13 1.27  1.19 1.24  1.13 1.39  1.18 1.29 
Depreciation, depletion and amortization 0.17 0.17  0.20 0.20  0.18 0.17  0.19 0.19 
Noncash and other costs, net 0.02  0.02  0.01  0.02  0.01  0.01  0.01  0.01 
Total unit costs 1.32 1.46  1.40 1.46  1.32 1.57  1.38 1.49 
Revenue adjustments, primarily for pricing on                    
prior period open sales 0.28 0.28  0.37 0.37  0.03 (0.03) (0.01) (0.01)
Other non-inventoriable costs (0.04) (0.03) (0.03) (0.02) (0.05) (0.04) (0.03) (0.02)
Gross profit per pound$2.47 $2.34 $1.73 $1.68 $2.97 $2.67 $2.04 $1.94 
                    
Copper sales (millions of recoverable pounds) 377 377  327 327  312 312  307 307 

 
Nine Months Ended
September 30, 2010
 
Nine Months Ended
September 30, 2009
 
 By-Product Co-Product By-Product Co-Product 
 Method Method Method Method 
Revenues, excluding adjustments$3.36 $3.36 $2.43 $2.43 
             
Site production and delivery, before net noncash            
and other costs shown below 1.19  1.12  1.05  0.99 
By-product credits (0.19) –  (0.11) – 
Treatment charges 0.15  0.15  0.15  0.14 
Unit net cash costs 1.15  1.27  1.09  1.13 
Depreciation, depletion and amortization 0.19  0.18  0.19  0.19 
Noncash and other costs, net 0.01  0.01  0.01  0.01 
Total unit costs 1.35  1.46  1.29  1.33 
Revenue adjustments, primarily for pricing on            
prior period open sales (0.01) (0.01) 0.11  0.11 
Other non-inventoriable costs (0.03) (0.03) (0.02) (0.02)
Gross profit per pound$1.97 $1.86 $1.23 $1.19 
             
Copper sales (millions of recoverable pounds) 995  995  1,040  1,040 

Lower unitUnit net cash costs (net of by-product credits) for our South America mining operations ofdecreased to $1.13 per pound of copper in third-quarter 2010,first-quarter 2011, compared with $1.19$1.18 per pound in third-quarter 2009,first-quarter 2010, primarily reflectedreflecting higher by-product credits ($0.110.19 per pound) associated with higher gold and molybdenum volumesprices and prices,volumes, partly offset by higher treatment charges ($0.03 per pound) and higher site production and delivery costs ($0.02 per pound). Higher site production and delivery costs in third-quarter 2010 were primarily related to higher input costs and the impact of higher copper prices on profit sharing programs, partly offset by higher sales volumes.

Higher unit net cash costs (net of by-product credits) for our South America mining operations of $1.15 per pound of copper for the first nine months of 2010, compared with $1.09 per pound for the first nine months of 2009, primarily reflected higher site production and delivery costs ($0.140.10 per pound) associated with higher sales volumesinput costs, including materials, energy and the impact ofcurrency exchange rates, partly offset by higher copper prices on profit sharing programs. Partly offsetting higher site production and delivery costs were higher by-product credits ($0.08 per pound) associated with higher molybdenum volumes and prices and higher gold prices.volumes.

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Our South America mines have varying cost structures because of differences in ore grades and ore characteristics, processing costs, by-products and other factors. Assuming achievement of current 2010 sales volume and cost estimates and an average price of $1,400 per ounce of gold for the remainder of 2011 and an average price of $15 per pound of molybdenum for the remainder of 2011, we estimate that average unit net cash costs (net of by-product credits) for our South America mining operations would approximate $1.16$1.19 per pound of copper in 2010,for the year 2011, compared with $1.12$1.15 per pound in 2009.2010.

Indonesia Mining
Indonesia mining includes PT Freeport Indonesia’s Grasberg minerals district. We own 90.64 percent of PT Freeport Indonesia, including 9.36 percent owned through our wholly owned subsidiary, PT Indocopper Investama.

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, of which approximately one-half is sold to 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.

We have established certain unincorporated joint ventures with Rio Tinto plc (Rio Tinto), under which Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver.

Development Activities. We have several projects in progress in the Grasberg minerals district, including development of the large-scale, high-grade underground ore bodies located beneath and adjacent tonearby the Grasberg open pit. Aggregate capital spending on these projects is expected to approximate $350 million for the year 2010 ($275 million net to PT Freeport Indonesia). Over the next severalfive years, aggregate capital spending on these projects is expected to average $500$600 million per year ($400470 million per year net to PT Freeport Indonesia). Considering the long-term nature and large size of these projects, actual costs could differ materially from these estimates.

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The following provides additional information on these projects, including the continued development of the Common Infrastructure project, the Grasberg Block Cave and Big Gossan underground mines a further expansion of the Deep Ore Zone (DOZ) underground mine and development of the Deep Mill Level Zone (DMLZ) ore body.body, that lies below the Deep Ore Zone (DOZ) underground mine, which completed an expansion to 80,000 metric tons of ore per day in first-quarter 2010.

Common 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 development of the lower Big Gossan infrastructure is ongoing. We have also advanced development of the Grasberg spur and have completed the tunneling required to reach the Gra sbergGrasberg underground ore body. Development continues on the Grasberg Block Cave terminal infrastructure and mine access.

In 2008, we completed the feasibility study for the development of theThe Grasberg Block Cave underground mine which accounts for over one-third of our reserves in Indonesia. Production at the Grasberg Block Cave mine is currently scheduled to commence at the end of mining the Grasberg open pit, which is currently expected to continue until mid-2016. The timing of the transition to underground Grasberg Block Cave mine development will continue to be assessed.

Based on the 2008 feasibility study, aggregateAggregate mine development capital for the Grasberg Block Cave mine and associated Common Infrastructure is expected to approximate $3.6$3.7 billion which are expected to be incurred(incurred between 2008 and 2021,2021), with PT Freeport Indonesia’s share totaling approximately $3.4 billion. Aggregate project costs totaling $213$320 million have been incurred through September 30, 2010, of which $96March 31, 2011 ($60 million was incurred during the first nine months of 2010.first-quarter 2011). Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity are expected to approximate 160,000 metric tons of ore per day.

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.methodology. Production, which began in fourth-quarter 2010, is ongoing and designed to ramp up to 7,000 metric tons of ore per day
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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 aggregate capital investment for this project is currently estimated at approximately $535 million, with PT Freeport Indonesia’s share totaling approximately $500 million. Aggregate project costs of $430$458 million have been incurred through September 30, 2010, of which $53March 31, 2011 ($14 million was incurred during the first nine months of 2010.

DOZ Expansion. PT Freeport Indonesia’s further expansion of the DOZ mine to 80,000 metric tons of ore per day was completed in first-quarter 2010. The capital cost for this expansion approximated $100 million, with PT Freeport Indonesia’s 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.2011).

DMLZ. The DMLZ ore body lies below the DOZ mine at the 2,590-meter elevation and represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry. The DMLZ feasibility study was completed in fourth-quarter 2009. We plan to mine the ore body using a block-cave method with production beginning in 2015, near completion of mining at the DOZ. Drilling efforts continue to determine the extent of this ore body. We continue to develop the Common Infrastructure project and tunnels from mill level. In 2009, we completed a portion of the spur to the DMLZ mine and reached the edge of the DMLZ terminal and development continuescontinued on terminal infrastructure and mine access.access in 2010. Aggregate mine development capital costs for the DMLZ are expected to approximate $2.1$2.0 billion (incurred from 2009 to 2020), with PT Freeport Indonesia’s share totaling approximately $1.2 billion, which are expected to be incurred from 2009 to 2020.billion. Aggregate project costs totaling $82$139 million have been incurred through September 30, 2010, including $57March 31, 2011 ($36 million during the first nine months of 2010.first-quarter 2011). Targeted production rates once the DMLZ mining operation reaches full capacity are expected to approximate 80,000 metric tons of ore per day.

Other Matters. InAs reported in Note 13 of our Annual Report on Form 10-K for the year ended December 31, 2010, in October 2010, PT Freeport Indonesia received an assessment for additional tax payments from the Indonesian tax authorities for additional taxes approximating $106 million and interest approximating $52 million related to various audit exceptions for the year 2005. PT Freeport Indonesia has filed objections to these assessments because it believes that it has properly paid taxes for the year 2005 and is reviewing the assessment and will workworking with the Indonesian tax authorities to resolve disputed audit exceptions.this matter.

FromAs reported in Note 13 of our Annual Report on Form 10-K for the year ended December 31, 2010, in December 2009, PT Freeport Indonesia was notified by the Large Taxpayer’s Office of the Government of Indonesia of its view that PT Freeport Indonesia is obligated to pay value added taxes on certain goods imported after the year 2000. The amount of taxes and penalties would be significant. PT Freeport Indonesia believes that, pursuant to the terms of its Contract of Work, it is only required to pay value added taxes on these types of goods imported
33
after December 30, 2009. PT Freeport Indonesia has not received an assessment and is working with the applicable government authorities to resolve this matter.

As reported in “Risk Factors” contained in Part I, Item 1A of our report on Form 10-K for the year ended December 31, 2010, between July 2009 throughand January 2010 there were a series of shooting incidents along the road leading to our mining and milling operations at the Grasberg minerals district.mining complex which resulted in three fatalities and several injuries. In connection with these incidentsearly April 2011, there were threetwo additional shooting incidents that resulted in two fatalities in July 2009, and there have been a number of injuries.two injuries to PT Freeport Indonesia employees. The Indonesian government has responded with additional security forces and expressed a strong commitment to protect the safety of the community and our operations. The investigation of these matters is continuing, and we have taken precautionary measures, including limiting use of the road to secured convoys. Our mining and milling activities have continued uninterrupted; however, prolonged limitations on access to the road could adversely affect operations at the mine. See “Risk Factors” contained in Part I, Item 1A of our Form 10-K for the year ended December 31, 2009, for further discussion of these matters.

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Operating Data. Following is summary operating data for our Indonesia mining operations for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009:2010:

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 2010 2009 2010 2009  2011 2010 
Consolidated Operating Data, Net of Joint Venture Interest          
Operating Data, Net of Joint Venture Interest     
Copper (millions of recoverable pounds)
               
Production 358 331  913 1,138  284 279 
Sales 364 330  919 1,131  278 296 
Average realized price per pound $3.60 $2.77 $3.36 $2.41  $4.26 $3.51 
               
Gold (thousands of recoverable ounces)
               
Production 462 685  1,185 2,033  441 429 
Sales 466 683  1,200 2,015  454 458 
Average realized price per ounce $1,266 $988 $1,204 $944  $1,400 $1,110 
               
100% Operating Data               
Ore milled (metric tons per day):          
Grasberg open pita
 150,400 172,100  150,300 167,500 
DOZ underground minea
 78,500 69,100  78,500 71,300 
Ore milled (metric tons per day):a
     
Grasberg open pit 140,300 155,100 
DOZ underground mine 80,100 78,900 
Big Gossan underground mine 1,800 - 
Total 228,900 241,200  228,800 238,800  222,200 234,000 
Average ore grade:               
Copper (percent) 0.92 0.90  0.84 1.04  0.77 0.78 
Gold (grams per metric ton) 0.92 1.33  0.81 1.32  0.89 0.87 
Recovery rates (percent):               
Copper 89.1 90.7  88.8 90.7  87.3 88.2 
Gold 83.6 84.7  80.6 83.5  82.0 79.0 
Production (recoverable):               
Copper (millions of pounds) 362 385  975 1,298  284 308 
Gold (thousands of ounces) 513 799  1,298 2,267  459 466 
 
a.  Amounts represent the approximate average daily throughput processed at PT Freeport Indonesia’s mill facilities from each producing mine.

Copper sales from our Indonesia mining operations decreased to 278 million pounds of copper in first-quarter 2011, compared with 296 million pounds of copper in first-quarter 2010, primarily because of timing of shipments. Gold sales volumes from our Indonesia mining operations in first-quarter 2011 of 454 thousand ounces approximated first-quarter 2010 volumes of 458 thousand ounces.

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. Anticipated changes in ore grade throughout the year have resulted in significant variability in quarterly volumes during the first nine monthsBecause of 2010. PT Freeport Indonesia’s share ofrecent revisions to Grasberg’s mine plans,  projected sales totaled 364 million pounds of copper and 466 thousand ounces of gold in third-quarter 2010 and 919 million pounds of copper and 1.2 million ounces of goldfrom our Indonesia mining operations for the first nine months of 2010, compared with 330 million pounds of copper and 683 thousand ounces of gold in third-quarter 2009 and2011 are expected to approximate 1.1 billion pounds of copper and 2.01.5 million ounces of gold, for the first nine months of 2009. Higher copper sales volumes in third-quarter 2010, compared with thir d-quarter 2009, reflected higher sharing in accordance with joint venture arrangements; third-quarter 2010 gold sales volumes were lower because of sequencing of mining in the Grasberg open pit.

We expect PT Freeport Indonesia sales to approximate 1.2 billion pounds of copper and 1.8 million ounces of gold for the year 2010, compared with 1.4 billion pounds of copper and 2.5 million ounces of gold in 2009. Lower projected copper and gold sales volumes for 2010 reflect the mining of lower grade material in 2010.

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
34
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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

39

Gross Profit per Pound of Copper/Copper and per Ounce of Gold

The following tables summarizetable summarizes the unit net cash costs (credits) and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009.2010. 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.

 
Three Months Ended
September 30, 2010
 
Three Months Ended
September 30, 2009
 
 By-Product Co-Product Method By-Product Co-Product Method 
 Method Copper Gold Method Copper Gold 
Revenues, excluding adjustments$3.60 $3.60 $1,265.90 $2.77 $2.77 $987.55 
                   
Site production and delivery, before net noncash                  
and other costs shown below 1.43  0.98  343.80  1.10  0.63  224.69 
Gold and silver credits (1.67) –  –  (2.10) –  – 
Treatment charges 0.22  0.15  52.45  0.24  0.13  48.33 
Royalty on metals 0.12  0.08  29.43  0.12  0.07  24.24 
Unit net cash costs (credits) 0.10  1.21  425.68  (0.64) 0.83  297.26 
Depreciation and amortization 0.20  0.14  47.59  0.20  0.11  39.82 
Noncash and other costs, net 0.02  0.01  4.28  0.01  0.01  2.42 
Total unit costs (credits) 0.32  1.36  477.55  (0.43) 0.95  339.50 
Revenue adjustments, primarily for pricing on                  
prior period open sales 0.22  0.22  (9.83) 0.49  0.49  4.80 
PT Smelting intercompany profit (0.09) (0.06) (21.23) (0.02) (0.01) (5.65)
Gross profit per pound/ounce$3.41 $2.40 $757.29 $3.67 $2.30 $647.20 
                   
Copper sales (millions of recoverable pounds) 364  364     330  330    
Gold sales (thousands of recoverable ounces)       466        683 

Nine Months Ended
September 30, 2010
 
Nine Months Ended
September 30, 2009
 
Three Months Ended
March 31, 2011
 
Three Months Ended
March 31, 2010
 
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, excluding adjustments$3.36 $3.36 $1,203.79 $2.41 $2.41 $944.05 $4.26 $4.26 $1,400 $3.51 $3.51 $1,110 
                          
Site production and delivery, before net noncash                          
and other costs shown below 1.52 1.02 367.25 0.98 0.57 222.78  1.84 1.18 386 1.54 1.02 323 
Gold and silver credits (1.63) – – (1.74) – –  (2.34) - - (1.79) - - 
Treatment charges 0.23 0.16 55.96 0.22 0.12 49.92  0.18 0.11 37 0.23 0.15 47 
Royalty on metals 0.12  0.08  28.47  0.10  0.06  22.92  0.16  0.10  34  0.12  0.08  26 
Unit net cash costs (credits) 0.24 1.26 451.68 (0.44) 0.75 295.62 
Unit net cash (credits) costs (0.16) 1.39 457 0.10 1.25 396 
Depreciation and amortization 0.21 0.14 50.40 0.18 0.11 41.81  0.21 0.13 43 0.21 0.14 45 
Noncash and other costs, net 0.03  0.03  8.02  0.03  0.02  5.89  0.05  0.04  12  0.06  0.04  13 
Total unit costs (credits) 0.48 1.43 510.10 (0.23) 0.88 343.32 
Total unit costs 0.10 1.56 512 0.37 1.43 454 
Revenue adjustments, primarily for pricing on                          
prior period open sales (0.01) (0.01) 1.13 0.05 0.05 2.74  (0.03) (0.03) (38) (0.03) (0.03) 2 
PT Smelting intercompany profit –  –  (0.89) (0.04) (0.02) (9.38) 0.17  0.11  36  0.04  0.03  8 
Gross profit per pound/ounce$2.87 $1.92 $693.93 $2.65 $1.56 $594.09 $4.30 $2.78 $886 $3.15 $2.08 $666 
                          
Copper sales (millions of recoverable pounds) 919 919   1,131 1,131    278 278   296 296   
Gold sales (thousands of recoverable ounces)     1,200     2,015      454     458 

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 sales volumes.sold during the period. Unit net cash costs (net of gold and silver credits) for PT Freeport Indonesia averaged $0.10decreased to a net credit of $0.16 per pound of copper in third-quarter 2010 and $0.24 per pound for the first nine months of 2010,first-quarter 2011, compared with a net creditscost of $0.64$0.10 per pound in third-quarter 2009first-quarter 2010, primarily reflecting higher gold and $0.44silver credits ($0.55 per pound for the first nine months of 2009. Higher unit net cash costs in the 2010 periods primarily reflectedpound) mostly related to higher gold prices, partly offset by higher site production and delivery costs ($0.330.30 per pound for the quarterpound) reflecting higher maintenance and $0.54 per pound for the nine-month period) and lower gold credits ($0.43 per pound for the quarter and $0.11 per pound for the nine-month period) as a result of lower gold sales volumes. Higher site productio n and delivery costs in the 2010 periods primarily reflected higherother input costs (including materials, labor and energy), higher support costs and higher cost sharing under joint
40
venture arrangements. These higher costs were partly offset by higher copper sales volumes in the quarterly period and included the impact of lower copper sales volumes for the nine-month period.costs.

Treatment charges vary with the volume of metals sold and the price of copper, and royalties 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 achievement of current 2010 sales volume and cost estimates, and an average gold price of $1,300$1,400 per ounce for fourth-quarter 2010,the remainder of 2011, we estimate that average unit net cash costs for PT Freeport Indonesia (net of gold and silver credits) would approximate $0.05$0.38 per pound of copper in 2010,for the year 2011, compared with a net credit of $0.49$0.04 per pound in 2009.2010. Each $50 per ounce change in the average price of gold during fourth-quarter 2010the remainder of 2011 would have an approximate $0.02$0.06 per pound impact on PT Freeport Indonesia’s 20102011 average unit net cash costs.
35

Africa Mining
Africa mining includes the Tenke copper and cobalt mining concessions in the Katanga province of the DRC. The Tenke mine includes open-pitsurface mining, leaching and SX/EW operations. Copper production from the Tenke mine is sold as copper cathode. In addition to copper, the Tenke mine produces cobalt hydroxide.

In October 2010, the government of the DRC announced the conclusion of the review of Tenke Fungurume’s mining contracts. The conclusion of the review processTFM’s contracts, and confirmed that TFM’s existing mining contracts are in good standing and acknowledged the rights and benefits granted under those contracts. TFM’s key fiscal terms, including a 30 percent income tax rate, a 2 percent mining royalty rate and a 1 percent export fee, will continue to apply and are consistent with the rates in the DRC’s current Mining Code. In connection with the review, TFM made several commitments which it expects to bethat have been reflected in amendments to its mining contracts, including (1) an increase in the ownership interest of La Générale des Carrières et des Mines’ (Gécamines), which is wholly ownedwere signed by the governmentparties in December 2010 (refer to Note 14 in our Annual Report on Form 10-K for the year ended December 31, 2010, for further discussion). In March 2011, the amendments were approved by a ministerial council, and a Presidential Decree signed by the President and Prime Minister of the DRC from 17.5 percent (non-dilutable)was issued in April 2011. After giving effect to 20.0 percent (non-dilutable), resulting in a decreasethe modifications that will be made to TFM’s bylaws to reflect the agreement of the parties, our effective ownership interest from 57.75 percent toin the project will be 56.0 percent and Lundin Mining Corporation’s effectiveprospectively, compared to our current ownership interest from 24.75 percent to 24.0 percent; (2) an additional royalty of $1.2 million for each 100,000 metric tons of proven and probable copper reserves above 2.5 million metric tons at the time new reserves are established by us; (3) additional payments totaling $30 million to be paid in six equal installments of $5 million upon reaching certain production milestones; (4) conversion of $50 million in intercompany loans to equity; (5) a payment of $5 million for surface area fees and ongoing surface area fees of approximately $0.8 million annually; (6) incorporating clarifying language stating that TFM’s rights and obligations are governed by its Amended and Restated Mining Convention; and (7) expanding Gécamines’ participation in TFM management. We have also r eiterated our commitment to the use of local services and Congolese employment. In connection with the modifications, the annual interest rate on advances from TFM shareholders would increase from the current rate of LIBOR plus 2 percent to LIBOR plus 657.75 percent. TFM’s existing mining contracts will continue in full force and effect until the revised terms noted above are incorporated into those contracts, including the Amended and Restated Mining Convention and Amended and Restated Shareholders’ Agreement, both entered into in 2005.

Operating and Development Activities. Construction activitiesPursuant to our agreement with Lundin Mining Corporation, we were responsible for funding 70 percent of the project development costs and 100 percent of certain cost overruns on the initial developmentproject. Of the approximate $2 billion we invested in the initial project, are complete,we have been repaid approximately $500 million as of March 31, 2011.

The milling facilities at Tenke, which were designed to produce at a capacity rate of 8,000 metric tons of ore per day, continue to perform above capacity, with first-quarter 2011 throughput averaging 10,800 metric tons of ore per day. Tenke has also procured additional equipment, which is enabling additional high-grade material to be mined and initialprocessed in 2011. As a result of these enhancements to the mine plan and an expected mill throughput rate of 10,000 metric tons of ore per day, we estimate the average annual copper production commenced in late March 2009, with targeted copper production rates achieved in September 2009. The cobalt and sulphuric acid plants were commissioned in third-quarter 2009. Start-up and quality issues continue to be addressed in the cobalt circuit and corrective actionsat Tenke will be implemented over the next several quarters. Based on the 10-year average of the initial design operations, Tenke expected to produce approximately 250approximate 290 million pounds of copper and 18 million pounds of cobalt per year. However, higher grades of cobalt are expected to result in higher than average annual cobalt production in the initial years.copper.

We continue to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective minerals district at Tenke. These analyses are being incorporated in future plans to evaluate opportunities for expansion. We are completing studies to evaluateplanning a second phase of the project, which would include optimizing the current plant and increasing capacity. A rangeAs part of expansion optionsthe second phase, we are being considered,completing studies to expand the mill rate to 14,000 metric tons per day and weto construct related processing facilities that would target the addition of approximately 150 million pounds of copper per year in an approximate two-year timeframe. We expect production volumes from the project to expand significantly over time. Future expansions are subject to a number of factors, including economic and market conditions and the business and investment climate in the DRC.

41
Other Matters. We are negotiating the labor agreement covering all national Tenke Fungurume employees, which came up for review in May 2010.

Operating Data. Following is summary operating data for our Africa mining operations for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009:2010:

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 2010 2009 2010 
2009a
  
Three Months Ended
March 31,
 
           2011 2010 
Copper (millions of recoverable pounds)
               
Production 69 54  195 90  67 64 
Sales 73 40  194 66  60 66 
Average realized price per poundb
 $3.36 $2.76 $3.22 $2.57 
Average realized price per pounda
 $4.19 $3.26 
                
Cobalt (millions of contained pounds)
               
Production 5 N/Ac 14 N/Ac 6 5 
Sales 6 N/Ac 13 N/Ac 6 3 
Average realized price per pound $11.93 N/Ac$11.51  N/Ac $10.99 $10.94 
                
Ore milled (metric tons per day) 11,800 7,900  10,100 7,100  10,800 9,700 
Average ore grade (percent):               
Copper 3.20 3.66  3.55 3.44  3.42 3.70 
Cobalt 0.39 N/Ac 0.40 N/Ac 0.38 0.46 
Copper recovery rate (percent) 90.5 89.3  91.0 90.5  91.7 91.7 
 
a.Represents results since March 2009.
b.  Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
 
c.  Comparative results for the 2009 periods have not been included as start-up activities were still under way.
Copper sales volumes from the Tenke mine decreased to 60 million pounds of copper in first-quarter 2011, compared with 66 million pounds of copper in first-quarter 2010, primarily because of timing of shipments.

36
Consolidated sales volumes from Tenke are expected to approximate 250285 million pounds of copper and over 20 million pounds of cobalt for the year 2011, compared with 262 million pounds of copper and 20 million pounds of cobalt for the year 2010, compared with 130 million pounds of copper and 3 million pounds of cobalt for 2009.in 2010.

The milling facilities at Tenke, which were designed to produce at a capacity rate of 8,000 metric tons of ore per day, have been performing above capacity in recent months, with third-quarter 2010 mill throughput averaging 11,800 metric tons of ore per day. Additionally, Tenke is procuring additional equipment that will enable additional high-grade material to be mined and processed beginning in 2011. As a result of these enhancements to the mine plan and using an expected mill throughput rate of 10,000 metric tons of ore per day, we estimate the average annual copper production at Tenke will increase to approximately 290 million pounds of copper during 2011.

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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

42

Gross Profit per Pound of Copper/per Pound ofCopper and Cobalt

The following table summarizes the unit net cash costs and gross profit per pound of copper and cobalt at our Africa mining operationoperations for the third quarterfirst quarters of 2011 and first nine months of 2010. Comparative information for the 2009 periods have not been included as start up activities were still under way. 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.

Three Months Ended
September 30, 2010
 
Nine Months Ended
September 30, 2010
 
Three Months Ended
March 31, 2011
 
Three Months Ended
March 31, 2010
 
By-Product Co-Product Method By-Product Co-Product Method By-Product Co-Product Method By-Product Co-Product Method 
Method Copper Cobalt Method Copper Cobalt Method Copper Cobalt Method Copper Cobalt 
Revenues, excluding adjustmentsa
$3.36 $3.36 $11.93 $3.22 $3.22 $11.51 $4.19 $4.19 $10.99 $3.26 $3.26 $10.94 
                          
Site production and delivery, before net noncash                          
and other costs shown below 1.44 1.19 6.05 1.37 1.23 5.88  1.51 1.35 5.45 1.37 1.33 4.69 
Cobalt credits (0.65
)b
 – – (0.54
)b
 – – 
Cobalt creditsb
 (0.75) - - (0.40) - - 
Royalty on metals 0.07  0.06  0.19  0.07  0.06  0.19  0.10  0.07  0.19  0.07  0.06  0.21 
Unit net cash costs 0.86 1.25 6.24 0.90 1.29 6.07  0.86 1.42 5.64 1.04 1.39 4.90 
Depreciation, depletion and amortization 0.46 0.39 0.89 0.49 0.40 1.24 
Depreciation and amortization 0.47 0.40 0.78 0.46 0.36 2.00 
Noncash and other costs, net 0.20  0.16  0.37  0.09  0.07  0.22  0.16  0.13  0.26  0.01  0.02  0.10 
Total unit costs 1.52 1.80 7.50 1.48 1.76 7.53  1.49 1.95 6.68 1.51 1.77 7.00 
Revenue adjustments, primarily for pricing on                          
prior period open sales 0.03 0.03 (0.89) – – 0.28  (0.01) (0.01) 0.39 - - 1.13 
Other non-inventoriable costs (0.04) (0.04) (0.09) (0.08) (0.07) (0.21) (0.05) (0.04) (0.08) (0.09) (0.07) (0.40)
Gross profit per pound$1.83 $1.55 $3.45 $1.66 $1.39 $4.05 $2.64 $2.19 $4.62 $1.66 $1.42 $4.67 
                          
Copper sales (millions of recoverable pounds) 73 73   194 194    60 60   66 66   
Cobalt sales (millions of contained pounds)     6     13      6     3 
 
a.  Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
 
b.  Net of cobalt downstream processing and freight costs.

Unit net cash costs (net of cobalt credits) for Tenke averaged $0.86 per pound of copper in third-quarter 2010 and $0.90for first-quarter 2011, compared with $1.04 per pound of copper for the first nine monthsin first-quarter 2010, primarily reflecting higher cobalt credits ($0.35 per pound) because of 2010.higher cobalt volumes, partly offset by higher site production and delivery costs ($0.14 per pound) mostly associated with increased mining and milling activity and higher input costs.

In July 2010, we updated our cost estimates for Tenke to incorporate changes in sulphuric acid consumption and input costs, transportation costs, and increased government fees and administrative costs associated with the complex nature of the operating environment in the DRC. Assuming achievement of 2010current sales volumes our revisedand cost estimates and an average cobalt price of $12$14 per pound for fourth-quarter 2010,the remainder of 2011, we estimate that average unit net cash costs for Tenke (net of cobalt credits) would approximate $0.93 per pound of copper for the year 2011, compared with $0.90 per pound in 2010. Each $2 per pound change in the average price of cobalt during the remainder of 2011 would have an approximate $0.04$0.06 per pound impact on Tenke’s 2011 average unit net cash costs.

Molybdenum
Our Molybdenum operation isoperations are 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 includesinclude 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-addedvalue-
37
added molybdenum chemical products. The Molybdenum operationoperations also includesinclude the wholly owned Climax molybdenum mine in Colorado, for which has been on care-and-maintenance status since 1995;construction activities in preparation to restart mining activities are ongoing; a sales company that purchases and sells molybdenum from our Henderson mine and from certain of our North and South America copper mines that produce molybdenum as a by-product;molybdenum; and related conversion facilities that, at times, roast and/or process material on a toll basis for third parties.third-parties. 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.

Operating and Development Activities. Molybdenum markets were weakened significantly in late 2008 because of the downturn in global economic conditions, which resulted in the Henderson molybdenum mine operating at reduced rates throughout 2009. Subsequent improved market conditions have resulted in an increase in Henderson’s rates to approximately 90 percent capacity.

43
Construction activities at the Climax molybdenum mine are continuing. Current achievements at Climaxapproximately 60 percent complete. Recent activities include mobilizationcontinuation of key personnelmill equipment assembly, commencement of flotation cell placement and contractors, completionrefurbishment of concrete foundations for various equipment installations and preparation for winter construction activities.the primary crusher. We plan to continue to advance theadvancing construction and will monitor market conditionsconduct mine preparation activities during 2011, with construction expected to determine thebe complete in early 2012. The timing for startupstart up of mining and milling activities. We believe that this project is one of the most attractive primary molybdenum development projects in the world, with large scale production capacity, attractive cash costs and future growth options.activities will be dependent on market conditions. The Climax molybdenum mine would have an initial annual design capacity of 30 million pounds of molybdenum annually, with significant expansion options. Estimated remainingTotal estimated costs for the project approximate $500$700 million, of which $23 millio n wasapproximately $334 million has been incurred through March 31, 2011 ($80 million during first-quarter 2011).

Other Matters. We are negotiating the first nine monthsrenewal of 2010.the labor agreement covering certain employees at Rotterdam, our molybdenum conversion facility in the Netherlands, which expired in March 2011.

 
Operating Data. Following is summary operating data for the Molybdenum operations for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009:2010:

Three Months Ended
September 30,
 
Nine Months Ended
September 30,
  First Quarter 
2010 2009 2010 2009  2011 2010 
Molybdenum (millions of recoverable pounds)
               
Productiona
 10 8  30 21  10 9 
Sales, excluding purchasesb
 17 16  50 42  20 17 
Average realized price per pound$16.06 $13.95 $16.43 $11.93  $18.10 $15.09 
               
Henderson molybdenum mine               
Ore milled (metric tons per day) 23,000 17,600  23,000 14,800  23,400 23,200 
Average molybdenum ore grade (percent) 0.25 0.26  0.25 0.26  0.24 0.23 
Molybdenum production (millions of recoverable pounds) 10 8  30 21  10 9 
 
a.  Reflects production at the Henderson molybdenum mine.
 
b.  Includes sales of molybdenum produced as a by-product at our North and South America copper mines.

Molybdenum sales volumes increased to 20 million pounds in first-quarter 2011, compared with 17 million pounds in third-quarterfirst-quarter 2010, and 50 million pounds for the first nine months of 2010, compared with 16 million pounds in third-quarter 2009 and 42 million pounds for the first nine months of 2009,primarily reflecting improved demand in the chemical sector.and metallurgical sectors.

Molybdenum sales volumes are expected to approximate 6573 million pounds for the year 2010, of2011 (of which approximately 3045 million pounds represents by-productmolybdenum production from our North and South America copper mines,mines) compared with 5867 million pounds in 2009, of2010 (of which 2732 million pounds represented by-productmolybdenum production from our North and South America copper mines.mines).

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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
 
 
4438

Gross Profit per Pound of Molybdenum

The following table summarizes the unit net cash costs and gross profit per pound of molybdenum at our Henderson molybdenum mine for the thirdfirst quarters of 2011 and first nine months of 2010 and 2009.2010. 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.

Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Three Months Ended
March 31,
 
2010 
2009a
 2010 
2009a
 2011 2010 
Revenues, excluding adjustments$15.42 $14.12 $15.84 $12.47 $17.37 $14.66 
                  
Site production and delivery, before net noncash                  
and other costs shown below 4.87  4.68  4.67  5.33  5.25  4.48 
Treatment charges and other 1.07  1.07  1.08  1.09  0.88  1.08 
Unit net cash costs 5.94  5.75  5.75  6.42  6.13  5.56 
Depreciation, depletion and amortization 0.83  1.00  0.83  0.98  0.88  0.84 
Noncash and other costs, net 0.03  0.03  0.03  0.04  0.03  0.04 
Total unit costs 6.80  6.78  6.61  7.44  7.04  6.44 
Gross profitb
$8.62 $7.34 $9.23 $5.03 
Gross profita
$10.33 $8.22 
                
Molybdenum sales (millions of recoverable pounds)c
 10  8 30 21 
Molybdenum sales (millions of recoverable pounds)b
 10  9 
 
a.Revenues and costs were adjusted to include freight and downstream conversion costs in net cash costs; gross profit was not affected by these adjustments.
b.  Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segmentdivision 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.
 
c.b.  Reflects molybdenum produced by the Henderson molybdenum mine.

Henderson’s unit net cash costs totaled $5.94were $6.13 per pound of molybdenum in third-quarter 2010 and $5.75 per pound of molybdenum for the first nine months of 2010,first-quarter 2011, compared with $5.75$5.56 per pound of molybdenum in third-quarter 2009first-quarter 2010, primarily reflecting increased input costs, including labor and $6.42 per pound of molybdenum for the first nine months of 2009. Henderson’s unit net cash costs in the 2010 periods were impacted by higher mining costs. However, for the first nine months of 2010, the increases in mining costs were more than offset by the impact of higher molybdenum production from the Henderson mine.materials.

Assuming achievement of current 2010 sales volume and cost estimates, we estimate that the 20102011 average unit net cash costs for Henderson would approximate $6.00$7.25 per pound of molybdenum, compared with $6.52$5.90 per pound in 2009.

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 copper 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.

During April 2010, we successfully negotiated a new three-year labor contract with certain of our employees at Bayway, our specialty copper products facility in New Jersey.2010.

Atlantic Copper Smelting & Refining
Atlantic Copper, our wholly owned subsidiary located in Spain, smelts and refines copper concentrates and markets refined copper and precious metals in slimes. Our Indonesia mining operation sells copper concentrate and our South America mining operations sell copper concentrate and copper cathode to Atlantic Copper. Through downstream integration, we are assured placement of a significant portion of our concentrate production. During the first nine months of 2010,first-quarter 2011, Atlantic Copper purchased approximately 2554 percent of its concentrate
45
requirements from our Indonesia mining operationoperations and approximately 2518 percent from our South America mining operations.

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 our Indonesia and our South America mining operations, and income to Atlantic Copper and PT Smelting.Smelting, our 25 percent owned smelter and refinery in Gresik, Indonesia. Thus, 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.

In April 2011, Atlantic Copper began a 26-day scheduled maintenance shutdown; Atlantic Copper’s last major shutdown was in 2007.

Atlantic Copper had operating losses of $8$19 million in third-quarter 2010first-quarter 2011 and $21 million for the first nine months of 2010, compared with $11 million in third-quarter 2009 and $40 million for the first nine months of 2009. Lowerfirst-quarter 2010. The decline in Atlantic Copper’s operating losses for Atlantic Copper during the 2010 periodsresults in first-quarter 2011 primarily reflectedreflects higher sulphuric acid and gold revenuesoperating costs mainly associated with an acceleration of certain costs related to the April 2011 scheduled shutdown and higher prices.general and administrative expense, partly offset by higher copper recoveries.

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We defer recognizing profits on sales from our Indonesia and South America mining operations to Atlantic Copper and on 25 percent of our Indonesia mining sales to PT Smelting until final sales to third parties occur. Our net deferred profits on our Indonesia and the South America mining operations’ inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income after taxes and noncontrolling interests totaled $93$249 million at June 30, 2010, and $199 million at September 30, 2010.March 31, 2011. Changes in these net deferrals attributable to variability in intercompany volumes resulted in net reductions to net income attributable to FCX common stockholders totaling $38$15 million ($0.080.02 per share) in third-quarter 2010 and net reductions of $66 million ($0.14 per share) for the first nine months of 2010,first-quarter 2011, compared with net reductions of $5$48 million ($0.010.05 per share) in third-quarter 2009 and $8 million ($0.02 per share) for the first nine months of 2009.first-quarter 2010. Quarterly variations in ore grades, the timing of intercompany shipments and changes in prices will result in variability in our net deferred profits and quarterly earnings.

CAPITAL RESOURCES AND LIQUIDITY

Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. As a result of weak economic conditions, we revised our operating plans at the end of 2008 and in early 2009 to protect liquidity while preserving our large mineral resources and growth options for the longer term. However, strongStrong operating performance and improved copper prices since the end of 2008 have enabled us to enhance our financial and liquidity position, reduce debt and reinstate cash dividends to shareholders, while maintaining our future growth opportunities. In addition, we have resumed certain project development activities at our mining operations (refer to “Operations” for further discussion). We view the long-term out lookoutlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy, and will continue to adjust our operating strategy as market conditions change.

Based on current mine plans and subject to future copper, gold and molybdenum prices, we expect estimated  operating cash flows for the near-termyear 2011 to be greater than our budgeted capital expenditures, expected debt payments, dividends, noncontrolling interest distributions and other cash requirements.

Agreement to Invest in McMoRan Exploration Co. (MMR). In September 2010, we entered into an agreement to purchase 500,000 shares of MMR’s 5¾% Convertible Perpetual Preferred Stock (the Preferred Stock) for an aggregate purchase price of $500 million. The Preferred Stock will initially be convertible into 62.5 shares of MMR common stock per share of Preferred Stock (an aggregate of 31.25 million shares of MMR common stock), or an initial conversion price of $16 per share of MMR common stock. We expect to account for this investment under the cost method.

MMR is engaged in exploration, development and production of oil and natural gas in the shallow waters of the Gulf of Mexico Shelf. MMR is currently undertaking a major capital program to fund recent success and additional exploration. Our investment will allow us to participate in MMR’s highly prospective North American exploration and development activities, which have the potential to generate significant value.

Closing of the investment is expected by year-end 2010 and is conditioned on the concurrent completion of MMR’s proposed oil and gas property acquisition from Plains Explorations & Production Company, MMR shareholder
46
approval of the issuance of the securities to FCX and other customary closing conditions. The description of the Preferred Stock purchase and related agreements and information contained in Item 1.01 of our current report on Form 8-K filed with the SEC on September 23, 2010, is incorporated herein by reference.

Cash and Cash Equivalents
At September 30, 2010,March 31, 2011, we had consolidated cash and cash equivalents of $3.7$4.1 billion. The following table reflects the U.S. and international components of consolidated cash and cash equivalents at September 30, 2010,March 31, 2011, and December 31, 20092010 (in billions):

September 30, December 31, March 31, December 31, 
2010 2009 2011 2010 
Cash at domestic companiesa
$1.4 $1.5 $1.9 $1.9 
Cash at international operations 2.3  1.2  2.2  1.8 
Total consolidated cash and cash equivalents 3.7  2.7  4.1b 3.7 
Less: Noncontrolling interests’ share (0.6) (0.3) (0.7) (0.4)
Cash, net of noncontrolling interests’ share 3.1  2.4  3.4  3.3 
Less: Withholding taxes and other (0.2) (0.2) (0.2) (0.2)
Net cash available$2.9 $2.2 
Net cash available to FCX$3.2 $3.1 
 
a.  Includes cash at our parent company and other North America operations.
b.  Excludes restricted cash of $1.2 billion for the April 1, 2011, redemption of our 8.25% Senior Notes (refer to Note 6 for further discussion).

Operating Activities
Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. We generated operating cash flows totaling $4.2$2.4 billion for the first nine months of 2010, net of $529in first-quarter 2011, including $114 million forfrom working capital uses. Operatingsources, compared with operating cash flows generated for the first nine months of 2009 totaled $2.9totaling $1.8 billion net of $447in first-quarter 2010, including $280 million forfrom working capital uses (which included approximately $600 million related to settlement of final pricing with customers on 2008 provisionally priced copper sales).sources. Higher operating cash flows for the first nine months of 2010,first-quarter 2011, compared with the first nine months of 2009,first-quarter 2010, primarily reflected higher copper prices.and gold price realizations.

Refer to “Outlook” for further discussion of projected operating cash flows for 2010.the year 2011.

Investing Activities
Capital expenditures, including capitalized interest, decreasedincreased to $877$505 million for the first nine months of 2010,in first-quarter 2011, compared with $1.1 billion for the first nine months of 2009,$231 million in first-quarter 2010, primarily reflecting the effects of lowerhigher capital spending for the Tenke development project, for which construction activities were substantially complete by mid-2009. Partly offsetting lower spending at Tenke was higher spending associated with undergroundour development projects, at Grasberg andincluding increased spending for construction on the Climax molybdenum mine, the sulfide ore project at El Abra.Abra and the underground development projects at Grasberg.

Capital expenditures for the year 20102011 are expected to approximate $1.6$2.5 billion including $0.7(including $1.3 billion for major projects,projects), which primarily associated with the sulfide ore project at El Abra,includes underground development activities at Grasberg, construction activities at the
40
Climax molybdenum mine and a new sulphur burner facilitycompletion of the initial phase of the sulfide ore project at Safford. For 2009, capital expenditures totaled $1.6 billion, which included $0.8 billion for major projects.El Abra. We have resumed certain project development activitiesare also considering additional investments at several of our mining operationssites. Capital spending plans will continue to be reviewed and a number of studies are ongoing, which are expectedadjusted in response to resultchanges in increased capital spending programs.market conditions and other factors. Refer to “Operations” for further discussion.

Financing Activities
Debt and Equity Transactions. At September 30, 2010, totalTotal debt approximated $4.8 billion at March 31, 2011, and December 31, 2010. On April 1, 2011, we had 471redeemed the remaining $1.1 billion of our outstanding 8.25% Senior Notes due 2015. In second-quarter 2011, we expect to record a loss on early extinguishment of debt of $56 million ($49 million to net income attributable to FCX common shares outstanding.stockholders) in connection with this redemption (refer to Note 6 for further discussion).

Since JanuaryDuring first-quarter 2010, we had open-market purchases of $269 million of our 8.25% and 8.375% Senior Notes for $293 million (refer to Note 6 for further discussion).

After taking into account the April 1, 2009,2011, redemption of our 8.25% Senior Notes, we have repaid approximately $2.6$3.7 billion, inor approximately 50 percent of our outstanding debt, since January 1, 2009, resulting in estimated annual interest savings of $163approximately $260 million based on current interest rates.

We have no significant debt maturities in the near term; however, we may consider opportunities to prepay debt in advance of scheduled maturities.

During October 2010, we made open-market purchases of $18 million of our 9½% Senior Notes for $26 million. We expect to record an approximate $4 million loss on early extinguishment of debthave $3.0 billion in fourth-quarter 2010 in connection with these open-market purchases.

On April 1, 2010, we redeemed all of our $1 billion of outstanding Senior Floating Rate Notes due 2015 for which holders received 101 percent of the principal amount together with accrued and unpaid interest. In addition, during the first nine months of 2010, we made open-market purchases of $547 million of our 8.25% Senior Notes and 8.375% Senior Notes at a cost of $595 million (refer to Note 6 for further discussion). Our 8.25% Senior Notesthat are
47
redeemable in whole or in part, at our option, at make-whole redemption prices prior to April 1, 2011,2012, and afterwards at stated redemption prices.

In August 2009,On March 30, 2011, we redeemed $340entered into a new senior revolving credit facility, which replaced the revolving credit facilities that were scheduled to expire on March 19, 2012. This revolving credit facility is available until March 30, 2016, in an aggregate principal amount of $1.5 billion, with $500 million available to PT Freeport Indonesia. At March 31, 2011, we had no borrowings and $43 million in letters of our 6⅞% Senior Notescredit issued under the revolving credit facility, resulting in availability of approximately $1.5 billion (of which $957 million could be used for $352 million (plus accrued and unpaid interest). In addition, during September 2009, we purchased in the open market $99 millionadditional letters of our 8.25% Senior Notes for $107 million and $92 million of our 8.375% Senior Notes for $99 million.credit). Refer to Note 6 for further discussion.

We have revolving credit facilities available through March 2012, which are composed of a (i) $1.0 billionThe revolving credit facility available to FCX and (ii) $0.5 billion revolving credit facility available to both FCX and PT Freeport Indonesia. At September 30, 2010, we had no borrowings and $42 million of letters of credit issued under the facilities resulting in availability of approximately $1.5 billion ($958 million of which could be used for additional letters of credit). 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. At September 30, 2010, we had availability under the revolvers plus available domestic cash (as defined by the revolving credit facility) totaling approximately $3.9 billion.

In addition, the indenture governing certain of our senior notes contains restrictionscontain certain restrictive covenants that vary among the instruments, but include limitations on incurringthe incurrence of debt, making restricted paymentsliens and selling assets. As a result of the investment grade ratings on our unsecured notes these covenants are currently suspended. However, to the extent the rating is downgraded below investment grade, the covenants would again become effective.certain asset sales.

In February 2009, we completed a public offering of 26.8We have an open-market share purchase program for up to 30 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), which were used for general corporate purposes.

shares. We made no purchases under our open-market share purchasethis program during 20092010 or for the first nine monthsquarter of 2010.2011. There are 23.7 million shares remaining under this program. Theprogram, and 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.

Cash Dividends. Common stock dividends paid totaled $238 million in first-quarter 2011, compared with $66 million in first-quarter 2010. After being suspended in late 2008, the Board reinstated a cash dividend on our common stock in October 2009 at an annual rate of $0.30 per share ($0.075 per share quarterly). In April 2010, the Board authorized an increase in the annual cash dividend to an annual rate of $0.60 per share ($0.15 per share quarterly) and in October 2010, the Board authorized another increase in the cash dividend to an annual rate of $1.00 per share ($0.25 per share quarterly). On March 31, 2011, the Board declared a regular quarterly dividend of $0.25 per share, which was paid on May 1, 2011, to common shareholders of record at the close of business on April 15, 2011.

In April 2011, the Board also declared a supplemental common stock dividend of $0.50 per share to be paid on June 1, 2011, to shareholders of record as of May 15, 2011.  The supplemental dividend represents an addition to the regular quarterly common stock dividend of $0.25 per share.  Based on approximately 947 million shares outstanding at March 31, 2011, the supplemental dividend payment will approximate $474 million.

The declaration and payment of dividends is at the discretion of our Board of Directors (the Board).the Board. The amount of our cash dividenddividends 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 for the first nine months of 2009. In October 2009, the Board reinstated an annual cash dividend on our common stock of $0.60 per share ($0.15 per share quarterly), and in April 2010, authorized an increase in the annual cash dividend on common stock to $1.20 per shar e ($0.30 per share quarterly). For the first nine months of 2010, common stock dividends paid totaled $272 million. On September 29, 2010, the Board declared a quarterly dividend of $0.30 per share, which was paid on November 1, 2010, to common shareholders of record at the close of business on October 15, 2010. In October 2010, the Board authorized an increase in the annual cash dividend on our common stock to $2.00 per share ($0.50 per share quarterly), with the first quarterly dividend expected to be paid on February 1, 2011. The Board will continue to review our financial policy on an ongoing basis.

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Preferred stock dividends paid totaled $95$49 million for the first nine months ofin first-quarter 2010 representing dividends on our 6¾% Mandatory Convertible Preferred Stock, and $181 million for the first nine months of 2009 representing dividends on our 5½% Convertible Perpetual Preferred Stock and 6¾% Mandatory Convertible Preferred Stock. During second-quarter 2010, our 6¾% Mandatory Convertible Preferred Stock automatically converted into 3978.9 million shares of our common stock (refer to Note 6 for further discussion). In September 2009, we redeemed our 5½% Convertible Perpetual Preferred Stock in exchange for 18 million shares of our common stock. As a result of thesethis transactions we no longer have requirements to pay preferred stock dividends.

Cash dividends paid to noncontrolling interests totaled $330$133 million for the first nine months ofin first-quarter 2011 and $75 million in first-quarter 2010, which reflectedreflecting dividends paid to the noncontrolling interest owners of PT Freeport Indonesia and theour South America mining operations. Cash dividends paid to noncontrolling interest totaled $149 million for the first nine months of 2009, which primarily reflected dividends paid to the noncontrolling interest owners of PT Freeport Indonesia.

mines.
48

CONTRACTUAL OBLIGATIONS

There have been no material changes in our contractual obligations since year-end 2009.2010. Refer to Item 7 in our reportAnnual Report on Form 10-K for the year ended December 31, 2009,2010, 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 2009.2010. Refer to Note 1413 in our reportAnnual Report on Form 10-K for the year ended December 31, 2009,2010, for further information regarding our environmental and reclamation obligations.
 
NEW ACCOUNTING STANDARDS

We do not expect the impact of recently issued accounting standards to have a significant impact on our future financial statements and disclosures.

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 metals mining companies, although our measuremeasures may not be comparable to similarly titled measures reported by other companies.

We present gross profit per pound of copper in the following tables 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, cobalt and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum, cobalt 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 the Board to monitor operations. In the co-product method presentation below, shared 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.

We show revenue adjustments 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 other costs consist of items such as stock-based compensation costs, LCM inventory adjustments, write-offs of equipment 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. Following are presentations under both the by-product and co-product methods together with reconciliations to amounts reported in our consolidated financial statements.
 
 
4942

North America Copper Mines Product Revenues and Production Costs

Three Months Ended September 30, 2010    
Three Months Ended March 31, 2011    
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper 
Molybdenuma
 
Otherb
 Total 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments$881 $881 $96 $13 $990 $1,211 $1,211 $124 $21 $1,356 
                      
Site production and delivery, before net noncash                      
and other costs shown below 429 384 52 7 443  481 432 52 8 492 
By-product creditsa
 (95) – – – –  (134) - - - - 
Treatment charges 27  26  –  1  27  29  28  -  1  29 
Net cash costs 361 410 52 8 470  376 460 52 9 521 
Depreciation, depletion and amortization 63 59 3 1 63  56 52 3 1 56 
Noncash and other costs, net 30  31  (1) –  30  41  40  1  -  41 
Total costs 454 500 54 9 563  473 552 56 10 618 
Revenue adjustments, primarily for hedging – – – – – 
Revenue adjustments 1 1 - - 1 
Idle facility and other non-inventoriable costs (26) (25) (1) –  (26) (11) (11) -  -  (11)
Gross profit$401 $356 $41 $4 $401 $728 $649 $68 $11 $728 
                      
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$990 $443 $63     $1,356 $492 $56     
Treatment charges per above N/A 29 N/A     
Net noncash and other costs per above N/A 30 N/A      N/A 41 N/A     
Treatment charges per above N/A 27 N/A     
Revenue adjustments, primarily for hedging per above – N/A N/A     
Revenue adjustments per above 1 N/A N/A     
Idle facility and other non-inventoriable costs per above N/A 26 N/A      N/A 11 N/A     
Eliminations and other –  2  4      (9) 2  2     
North America copper mines 990 528 67      1,348 575 58     
South America mining 1,465 462 66      1,402 411 57     
Indonesia mining 1,874 528 72      1,730 526 57     
Africa mining 307 141 34      309 124 28     
Molybdenum 293 199 13      374 240 14     
Rod & Refining 1,181 1,173 2      1,487 1,481 2     
Atlantic Copper Smelting & Refining 595 590 9      762 763 10     
Corporate, other & eliminations (1,553) (1,352) 5      (1,703) (1,743) 6     
As reported in FCX’s consolidated financial statements$5,152 $2,269 $268     $5,709 $2,377 $232     
 
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.
 
 
5043

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

Three Months Ended September 30, 2009    
Three Months Ended March 31, 2010    
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper 
Molybdenuma
 
Otherb
 Total 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments$813 $813 $87 $13 $913 $965 $965 $77 $12 $1,054 
                      
Site production and delivery, before net noncash                      
and other costs shown below 370 331 43 7 381  381 349 41 5 395 
By-product creditsa
 (89) – – – –  (75) - - - - 
Treatment charges 24  24  –  –  24  22  21  -  1  22 
Net cash costs 305 355 43 7 405  328 370 41 6 417 
Depreciation, depletion and amortization 66 62 3 1 66  78 74 4 - 78 
Noncash and other costs, net 20  19  1  –  20  24  24  -  -  24 
Total costs 391 436 47 8 491  430 468 45 6 519 
Revenue adjustments, primarily for hedging 6 6 – – 6 
Revenue adjustments (1) (1) - - (1)
Idle facility and other non-inventoriable costs (22) (22) –  –  (22) (18) (18) -  -  (18)
Gross profit$406 $361 $40 $5 $406 $516 $478 $32 $6 $516 
                      
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$913 $381 $66     $1,054 $395 $78     
Treatment charges per above N/A 22 N/A     
Net noncash and other costs per above N/A 20 N/A      N/A 24 N/A     
Treatment charges per above N/A 24 N/A     
Revenue adjustments, primarily for hedging per above 6 N/A N/A     
Revenue adjustments per above (1) N/A N/A     
Idle facility and other non-inventoriable costs per above N/A 22 N/A      N/A 18 N/A     
Eliminations and other 1  4  4      1  5  4     
North America copper mines 920 451 70      1,054 464 82     
South America mining 1,018 379 67      1,069 376 61     
Indonesia mining 1,656 369 64      1,459 475 63     
Africa mining 113 89 20      249 110 30     
Molybdenum 258 177 13      275 185 13     
Rod & Refining 963 957 2      1,073 1,067 2     
Atlantic Copper Smelting & Refining 495 493 9      633 628 10     
Corporate, other & eliminations (1,279) (1,200) 7      (1,449) (1,387) 10     
As reported in FCX’s consolidated financial statements$4,144 $1,715 $252     $4,363 $1,918 $271     
 
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.
 
 
51

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

Nine Months Ended September 30, 2010    
 By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments$2,771 $2,771 $277 $44 $3,092 
                
Site production and delivery, before net noncash               
and other costs shown below 1,231  1,109  144  21  1,274 
By-product creditsa
 (278) –  –  –  – 
Treatment charges 75  73  –  2  75 
Net cash costs 1,028  1,182  144  23  1,349 
Depreciation, depletion and amortization 207  195  10  2  207 
Noncash and other costs, net 107  107  –  –  107 
Total costs 1,342  1,484  154  25  1,663 
Revenue adjustments, primarily for hedging (2) (2) –  –  (2)
Idle facility and other non-inventoriable costs (65) (64) (1) –  (65)
Gross profit$1,362 $1,221 $122 $19 $1,362 
                
Reconciliation to Amounts Reported               
(In millions)      Depreciation,       
    Production  Depletion and       
 Revenues and Delivery  Amortization       
Totals presented above$3,092 $1,274 $207       
Net noncash and other costs per above N/A  107  N/A       
Treatment charges per above N/A  75  N/A       
Revenue adjustments, primarily for hedging per above (2) N/A  N/A       
Idle facility and other non-inventoriable costs per above N/A  65  N/A       
Eliminations and other (2) 8  13       
North America copper mines 3,088  1,529  220       
South America mining 3,383  1,227  186       
Indonesia mining 4,260  1,430  192       
Africa mining 763  347  94       
Molybdenum 893  574  38       
Rod & Refining 3,383  3,361  6       
Atlantic Copper Smelting & Refining 1,844  1,823  28       
Corporate, other & eliminations (4,235) (4,052) 24       
As reported in FCX’s consolidated financial statements$13,379 $6,239 $788       
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.
52

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

Nine Months Ended September 30, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper 
Molybdenuma
 
Otherb
 Total 
Revenues, excluding adjustments$1,908 $1,908 $206 $29 $2,143 
                
Site production and delivery, before net noncash               
and other costs shown below 1,116  1,027  107  15  1,149 
By-product creditsa
 (202) –  –  –  – 
Treatment charges 74  73  –  1  74 
Net cash costs 988  1,100  107  16  1,223 
Depreciation, depletion and amortization 197  188  7  2  197 
Noncash and other costs, net 107  105  2  –  107 
Total costs 1,292  1,393  116  18  1,527 
Revenue adjustments, primarily for hedging 94  94  –  –  94 
Idle facility and other non-inventoriable costs (84) (84) –  –  (84)
Gross profit$626 $525 $90 $11 $626 
                
Reconciliation to Amounts Reported               
(In millions)      Depreciation,       
    Production  Depletion and       
 Revenues and Delivery  Amortization       
Totals presented above$2,143 $1,149 $197       
Net noncash and other costs per above N/A  107  N/A       
Treatment charges per above N/A  74  N/A       
Revenue adjustments, primarily for hedging per above 94  N/A  N/A       
Idle facility and other non-inventoriable costs per above N/A  84  N/A       
Eliminations and other 4  51  12       
North America copper mines 2,241  1,465  209       
South America mining 2,604  1,112  201       
Indonesia mining 4,388  1,134  207       
Africa mining 170  197  37       
Molybdenum 590  477c 35       
Rod & Refining 2,329  2,314  6       
Atlantic Copper Smelting & Refining 1,202  1,205  26       
Corporate, other & eliminations (3,094) (2,799) 19       
As reported in FCX’s consolidated financial statements$10,430 $5,105c$740       
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.
5344
 
South America Mining Product Revenues and Production Costs

Three Months Ended September 30, 2010        
Three Months Ended March 31, 2011        
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper 
Other a
 Total 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments$1,341 $1,341 $85 $1,426 $1,345 $1,345 $119 $1,464 
                  
Site production and delivery, before net noncash                  
and other costs shown below 439 413 30 443  406 375 37 412 
By-product credits (81) – – –  (113) - - - 
Treatment charges 68  68  –  68  59  59  -  59 
Net cash costs 426 481 30 511  352 434 37 471 
Depreciation, depletion and amortization 65 62 3 65  57 53 4 57 
Noncash and other costs, net 7  7  –  7  5  5  -  5 
Total costs 498 550 33 583  414 492 41 533 
Revenue adjustments, primarily for pricing on prior                  
period open sales 106 106 – 106  11 (8) 19 11 
Other non-inventoriable costs (16) (15) (1) (16) (14) (13) (1) (14)
Gross profit$933 $882 $51 $933 $928 $832 $96 $928 
                  
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$1,426 $443 $65   $1,464 $412 $57   
Treatment charges per above (59) N/A N/A   
Net noncash and other costs per above N/A 7 N/A    N/A 5 N/A   
Treatment charges per above (68) N/A N/A   
Revenue adjustments, primarily for pricing on prior                  
period open sales per above 106 N/A N/A    11 N/A N/A   
Other non-inventoriable costs per above N/A 16 N/A    N/A 14 N/A   
Eliminations and other 1  (4) 1    (14) (20) -   
South America mining 1,465 462 66    1,402 411 57   
North America copper mines 990 528 67    1,348 575 58   
Indonesia mining 1,874 528 72    1,730 526 57   
Africa mining 307 141 34    309 124 28   
Molybdenum 293 199 13    374 240 14   
Rod & Refining 1,181 1,173 2    1,487 1,481 2   
Atlantic Copper Smelting & Refining 595 590 9    762 763 10   
Corporate, other & eliminations (1,553) (1,352) 5    (1,703) (1,743) 6   
As reported in FCX’s consolidated financial statements$5,152 $2,269 $268   $5,709 $2,377 $232   
 
a.  Includes molybdenum, gold silver and molybdenumsilver product revenues and production costs.
 
 
5445

South America Mining Product Revenues and Production Costs (continued)

Three Months Ended September 30, 2009        
Three Months Ended March 31, 2010        
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper 
Other a
 Total 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments$912 $912 $33 $945 $1,061 $1,061 $56 $1,117 
                  
Site production and delivery, before net noncash                  
and other costs shown below 372 357 15 372  367 348 23 371 
By-product credits (33) – – –  (51) - - - 
Treatment charges 50  50  –  50  47  47  -  47 
Net cash costs 389 407 15 422  363 395 23 418 
Depreciation, depletion and amortization 67 65 2 67  60 58 3 61 
Noncash and other costs, net 4  4  –  4  2  2  -  2 
Total costs 460 476 17 493  425 455 26 481 
Revenue adjustments, primarily for pricing on prior                  
period open sales 123 123 – 123  (2) (2) - (2)
Other non-inventoriable costs (8) (8) –  (8) (8) (7) (1) (8)
Gross profit$567 $551 $16 $567 $626 $597 $29 $626 
                  
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$945 $372 $67   $1,117 $371 $61   
Treatment charges per above (47) N/A N/A   
Net noncash and other costs per above N/A 4 N/A    N/A 2 N/A   
Treatment charges per above (50) N/A N/A   
Revenue adjustments, primarily for pricing on prior                  
period open sales per above 123 N/A N/A    (2) N/A N/A   
Other non-inventoriable costs per above N/A 8 N/A    N/A 8 N/A   
Eliminations and other –  (5) –    1  (5) -   
South America mining 1,018 379 67    1,069 376 61   
North America copper mines 920 451 70    1,054 464 82   
Indonesia mining 1,656 369 64    1,459 475 63   
Africa mining 113 89 20    249 110 30   
Molybdenum 258 177 13    275 185 13   
Rod & Refining 963 957 2    1,073 1,067 2   
Atlantic Copper Smelting & Refining 495 493 9    633 628 10   
Corporate, other & eliminations (1,279) (1,200) 7    (1,449) (1,387) 10   
As reported in FCX’s consolidated financial statements$4,144 $1,715 $252   $4,363 $1,918 $271   
 
a.  Includes molybdenum, gold silver and molybdenumsilver product revenues and production costs.

 
55
South America Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2010        
 By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments$3,343 $3,343 $201 $3,544 
             
Site production and delivery, before net noncash            
and other costs shown below 1,185  1,118  79  1,197 
By-product credits (189) –  –  – 
Treatment charges 148  148  –  148 
Net cash costs 1,144  1,266  79  1,345 
Depreciation, depletion and amortization 184  176  8  184 
Noncash and other costs, net 14  13  1  14 
Total costs 1,342  1,455  88  1,543 
Revenue adjustments, primarily for pricing on prior            
period open sales (15) (15) –  (15)
Other non-inventoriable costs (30) (27) (3) (30)
Gross profit$1,956 $1,846 $110 $1,956 
             
Reconciliation to Amounts Reported            
(In millions)     Depreciation,    
    Production Depletion and    
 Revenues and Delivery Amortization    
Totals presented above$3,544 $1,197 $184    
Net noncash and other costs per above N/A  14  N/A    
Treatment charges per above (148) N/A  N/A    
Revenue adjustments, primarily for pricing on prior            
period open sales per above (15) N/A  N/A    
Other non-inventoriable costs per above N/A  30  N/A    
Eliminations and other 2  (14) 2    
South America mining 3,383  1,227  186    
North America copper mines 3,088  1,529  220    
Indonesia mining 4,260  1,430  192    
Africa mining 763  347  94    
Molybdenum 893  574  38    
Rod & Refining 3,383  3,361  6    
Atlantic Copper Smelting & Refining 1,844  1,823  28    
Corporate, other & eliminations (4,235) (4,052) 24    
As reported in FCX’s consolidated financial statements$13,379 $6,239 $788    
a.  Includes gold, silver and molybdenum product revenues and production costs.
56

South America Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2009        
 By-Product Co-Product Method 
(In millions)Method Copper 
Other a
 Total 
Revenues, excluding adjustments$2,530 $2,530 $117 $2,647 
             
Site production and delivery, before net noncash            
and other costs shown below 1,088  1,026  68  1,094 
By-product credits (111) –  –  – 
Treatment charges 152  152  –  152 
Net cash costs 1,129  1,178  68  1,246 
Depreciation, depletion and amortization 201  194  7  201 
Noncash and other costs, net 7  8  (1) 7 
Total costs 1,337  1,380  74  1,454 
Revenue adjustments, primarily for pricing on prior            
period open sales 108  108  –  108 
Other non-inventoriable costs (25) (21) (4) (25)
Gross profit$1,276 $1,237 $39 $1,276 
             
Reconciliation to Amounts Reported            
(In millions)     Depreciation,    
    Production Depletion and    
 Revenues and Delivery Amortization    
Totals presented above$2,647 $1,094 $201    
Net noncash and other costs per above N/A  7  N/A    
Treatment charges per above (152) N/A  N/A    
Revenue adjustments, primarily for pricing on prior            
period open sales per above 108  N/A  N/A    
Other non-inventoriable costs per above N/A  25  N/A    
Eliminations and other 1  (14) –    
South America mining 2,604  1,112  201    
North America copper mines 2,241  1,465  209    
Indonesia mining 4,388  1,134  207    
Africa mining 170  197  37    
Molybdenum 590  477b 35    
Rod & Refining 2,329  2,314  6    
Atlantic Copper Smelting & Refining 1,202  1,205  26    
Corporate, other & eliminations (3,094) (2,799) 19    
As reported in FCX’s consolidated financial statements$10,430 $5,105b$740    
a.  Includes gold, silver and molybdenum product revenues and production costs.
b.  Includes LCM molybdenum inventory adjustments totaling $19 million.
5746
 
Indonesia Mining Product Revenues and Production Costs

Three Months Ended September 30, 2010    
Three Months Ended March 31, 2011    
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper Gold Silver Total 
(In millions)Method Copper Gold Silver Total 
Revenues, excluding adjustments$1,310 $1,310 $590 $22 $1,922 $1,184 $1,184 $636 $32 $1,852 
                      
Site production and delivery, before net noncash                      
and other costs shown below 522 356 160 6 522  511 327 175 9 511 
Gold and silver credits (609) – – – –  (650) - - - - 
Treatment charges 79 54 24 1 79  49 31 17 1 49 
Royalty on metals 45  31  14  –  45  45  29  16  -  45 
Net cash costs 37 441 198 7 646 
Net cash (credits) costs (45) 387 208 10 605 
Depreciation and amortization 72 49 22 1 72  57 36 20 1 57 
Noncash and other costs, net 6  4  2  –  6  15  10  4  1  15 
Total costs 115 494 222 8 724  27 433 232 12 677 
Revenue adjustments, primarily for pricing on prior                      
period open sales 79 79 (5) 2 76  (10) (10) (17) (1) (28)
PT Smelting intercompany profit (33) (22) (10) (1) (33)
PT Smelting intercompany loss 48  31  16  1  48 
Gross profit$1,241 $873 $353 $15 $1,241 $1,195 $772 $403 $20 $1,195 
                      
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$1,922 $522 $72     $1,852 $511 $57     
Net noncash and other costs per above N/A 6 N/A     
Treatment charges per above (79) N/A N/A      (49) N/A N/A     
Royalty on metals per above (45) N/A N/A      (45) N/A N/A     
Net noncash and other costs per above N/A 15 N/A     
Revenue adjustments, primarily for pricing on prior                      
period open sales per above 76  N/A  N/A      (28) N/A  N/A     
Indonesia mining 1,874 528 72      1,730 526 57     
North America copper mines 990 528 67      1,348 575 58     
South America mining 1,465 462 66      1,402 411 57     
Africa mining 307 141 34      309 124 28     
Molybdenum 293 199 13      374 240 14     
Rod & Refining 1,181 1,173 2      1,487 1,481 2     
Atlantic Copper Smelting & Refining 595 590 9      762 763 10     
Corporate, other & eliminations (1,553) (1,352) 5      (1,703) (1,743) 6     
As reported in FCX’s consolidated financial statements$5,152 $2,269 $268     $5,709 $2,377 $232     
 
 
5847
 
Indonesia Mining Product Revenues and Production Costs (continued)

Three Months Ended September 30, 2009    
Three Months Ended March 31, 2010    
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper Gold Silver Total 
(In millions)Method Copper Gold Silver Total 
Revenues, excluding adjustments$917 $917 $675 $17 $1,609 $1,039 $1,039 $508 $22 $1,569 
                      
Site production and delivery, before net noncash                      
and other costs shown below 365 208 153 4 365  456 302 148 6 456 
Gold and silver credits (695) – – – –  (530) - - - - 
Treatment charges 79 45 33 1 79  67 44 21 2 67 
Royalty on metals 39  22  17  –  39  36  24  12  -  36 
Net cash (credits) costs (212) 275 203 5 483 
Net cash costs 29 370 181 8 559 
Depreciation and amortization 64 37 27 – 64  63 42 21 - 63 
Noncash and other costs, net 4  2  2  –  4  19  13  6  -  19 
Total (credits) costs (144) 314 232 5 551 
Total costs 111 425 208 8 641 
Revenue adjustments, primarily for pricing on prior                      
period open sales 162 162 3 – 165  (7) (7) 1 (1) (7)
PT Smelting intercompany profit (10) (5) (4) (1) (10)
PT Smelting intercompany loss 12  8  4  -  12 
Gross profit$1,213 $760 $442 $11 $1,213 $933 $615 $305 $13 $933 
                      
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$1,609 $365 $64     $1,569 $456 $63     
Net noncash and other costs per above N/A 4 N/A     
Treatment charges per above (79) N/A N/A      (67) N/A N/A     
Royalty on metals per above (39) N/A N/A      (36) N/A N/A     
Net noncash and other costs per above N/A 19 N/A     
Revenue adjustments, primarily for pricing on prior                      
period open sales per above 165  N/A  N/A      (7) N/A  N/A     
Indonesia mining 1,656 369 64      1,459 475 63     
North America copper mines 920 451 70      1,054 464 82     
South America mining 1,018 379 67      1,069 376 61     
Africa mining 113 89 20      249 110 30     
Molybdenum 258 177 13      275 185 13     
Rod & Refining 963 957 2      1,073 1,067 2     
Atlantic Copper Smelting & Refining 495 493 9      633 628 10     
Corporate, other & eliminations (1,279) (1,200) 7      (1,449) (1,387) 10     
As reported in FCX’s consolidated financial statements$4,144 $1,715 $252     $4,363 $1,918 $271     
 
 
59
Indonesia Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2010    
 By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total 
Revenues, excluding adjustments$3,085 $3,085 $1,445 $59 $4,589 
                
Site production and delivery, before net noncash               
and other costs shown below 1,400  941  441  18  1,400 
Gold and silver credits (1,505) –  –  –  – 
Treatment charges 213  144  67  2  213 
Royalty on metals 109  73  34  2  109 
Net cash costs 217  1,158  542  22  1,722 
Depreciation and amortization 192  129  60  3  192 
Noncash and other costs, net 30  20  10  –  30 
Total costs 439  1,307  612  25  1,944 
Revenue adjustments, primarily for pricing on prior               
period open sales (8) (8) 1  –  (7)
PT Smelting intercompany profit (4) (3) (1) –  (4)
Gross profit$2,634 $1,767 $833 $34 $2,634 
                
Reconciliation to Amounts Reported               
(In millions)    Depreciation,       
   Production Depletion and       
 Revenues and Delivery Amortization       
Totals presented above$4,589 $1,400 $192       
Net noncash and other costs per above N/A  30  N/A       
Treatment charges per above (213) N/A  N/A       
Royalty on metals per above (109) N/A  N/A       
Revenue adjustments, primarily for pricing on prior               
period open sales per above (7) N/A  N/A       
Indonesia mining 4,260  1,430  192       
North America copper mines 3,088  1,529  220       
South America mining 3,383  1,227  186       
Africa mining 763  347  94       
Molybdenum 893  574  38       
Rod & Refining 3,383  3,361  6       
Atlantic Copper Smelting & Refining 1,844  1,823  28       
Corporate, other & eliminations (4,235) (4,052) 24       
As reported in FCX’s consolidated financial statements$13,379 $6,239 $788       
60
Indonesia Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2009    
 By-Product Co-Product Method 
(In millions)Method Copper Gold Silver Total 
Revenues, excluding adjustments$2,730 $2,730 $1,902 $56 $4,688 
                
Site production and delivery, before net noncash               
and other costs shown below 1,105  642  449  14  1,105 
Gold and silver credits (1,965) –  –  –  – 
Treatment charges 248  144  101  3  248 
Royalty on metals 113  66  46  1  113 
Net cash (credits) costs (499) 852  596  18  1,466 
Depreciation and amortization 207  121  84  2  207 
Noncash and other costs, net 29  17  12  –  29 
Total (credits) costs (263) 990  692  20  1,702 
Revenue adjustments, primarily for pricing on prior               
period open sales 54  54  6  1  61 
PT Smelting intercompany profit (47) (27) (19) (1) (47)
Gross profit$3,000 $1,767 $1,197 $36 $3,000 
                
Reconciliation to Amounts Reported               
(In millions)    Depreciation,       
   Production Depletion and       
 Revenues and Delivery Amortization       
Totals presented above$4,688 $1,105 $207       
Net noncash and other costs per above N/A  29  N/A       
Treatment charges per above (248) N/A  N/A       
Royalty on metals per above (113) N/A  N/A       
Revenue adjustments, primarily for pricing on prior               
period open sales per above 61  N/A  N/A       
Indonesia mining 4,388  1,134  207       
North America copper mines 2,241  1,465  209       
South America mining 2,604  1,112  201       
Africa mining 170  197  37       
Molybdenum 590  477a 35       
Rod & Refining 2,329  2,314  6       
Atlantic Copper Smelting & Refining 1,202  1,205  26       
Corporate, other & eliminations (3,094) (2,799) 19       
As reported in FCX’s consolidated financial statements$10,430 $5,105a$740       
a.  Includes LCM molybdenum inventory adjustments totaling $19 million.

6148
 
Africa Mining Product Revenues and Production Costs

Three Months Ended September 30, 2010        
Three Months Ended March 31, 2011        
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper Cobalt Total 
(In millions)Method Copper Cobalt Total 
Revenues, excluding adjustmentsa
$244 $244 $72 $316 $249 $249 $64 $313 
                  
Site production and delivery, before net noncash                  
and other costs shown below 104 87 36 123  90 80 32 112 
Cobalt credits (48
)b
 – – – 
Cobalt creditsb
 (45) - - - 
Royalty on metals 6  5  1  6  6  5  1  6 
Net cash costs 62 92 37 129  51 85 33 118 
Depreciation, depletion and amortization 34 28 6 34  28 23 5 28 
Noncash and other costs, net 14  12  2  14  9  8  1  9 
Total costs 110 132 45 177  88 116 39 155 
Revenue adjustments, primarily for pricing on prior                  
period open sales 2 2 (5) (3) (1) (1) 3 2 
Other non-inventoriable costs (3) (2) (1) (3) (3) (2) (1) (3)
Gross profit$133 $112 $21 $133 $157 $130 $27 $157 
                  
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$316 $123 $34   $313 $112 $28   
Royalty on metals per above (6) N/A N/A   
Net noncash and other costs per above N/A 14 N/A    N/A 9 N/A   
Royalty on metals per above (6) N/A N/A   
Revenue adjustments, primarily for pricing on prior                  
period open sales per above (3) N/A N/A    2 N/A N/A   
Other non-inventoriable costs per above N/A 3 N/A    N/A  3  N/A   
Eliminations and other –  1  –   
Africa mining 307 141 34    309 124 28   
North America copper mines 990 528 67    1,348 575 58   
South America mining 1,465 462 66    1,402 411 57   
Indonesia mining 1,874 528 72    1,730 526 57   
Molybdenum 293 199 13    374 240 14   
Rod & Refining 1,181 1,173 2    1,487 1,481 2   
Atlantic Copper Smelting & Refining 595 590 9    762 763 10   
Corporate, other & eliminations (1,553) (1,352) 5    (1,703) (1,743) 6   
As reported in FCX’s consolidated financial statements$5,152 $2,269 $268   $5,709 $2,377 $232   
 
a.  Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
 
b.  Net of cobalt downstream processing and freight costs.

 
6249
 
Africa Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2010        
Three Months Ended March 31, 2010        
(In millions)By-Product Co-Product Method 
By-Product Co-Product Method Method Copper Cobalt Total 
(In millions)Method Copper Cobalt Total 
Revenues, excluding adjustmentsa
$623 $623 $150 $773 $214 $214 $35 $249 
                  
Site production and delivery, before net noncash                  
and other costs shown below 264 238 76 314  90 87 16 103 
Cobalt credits (104
)b
 – – – 
Cobalt creditsb
 (26) - - - 
Royalty on metals 14  11  3  14  5  5  -  5 
Net cash costs 174 249 79 328  69 92 16 108 
Depreciation, depletion and amortization 94 78 16 94  30 23 7 30 
Noncash and other costs, net 18  15  3  18  1  1  -  1 
Total costs 286 342 98 440  100 116 23 139 
Revenue adjustments, primarily for pricing on prior                  
period open sales – – 4 4  - - 4 4 
Other non-inventoriable costs (15) (12) (3) (15) (6) (5) (1) (6)
Gross profit$322 $269 $53 $322 $108 $93 $15 $108 
                  
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$773 $314 $94   $249 $103 $30   
Royalty on metals per above (5) N/A N/A   
Net noncash and other costs per above N/A 18 N/A    N/A 1 N/A   
Royalty on metals per above (14) N/A N/A   
Revenue adjustments, primarily for pricing on prior                  
period open sales per above 4 N/A N/A    4 N/A N/A   
Other non-inventoriable costs per above N/A  15  N/A    N/A 6 N/A   
Eliminations and other 1  -  -   
Africa mining 763 347 94    249 110 30   
North America copper mines 3,088 1,529 220    1,054 464 82   
South America mining 3,383 1,227 186    1,069 376 61   
Indonesia mining 4,260 1,430 192    1,459 475 63   
Molybdenum 893 574 38    275 185 13   
Rod & Refining 3,383 3,361 6    1,073 1,067 2   
Atlantic Copper Smelting & Refining 1,844 1,823 28    633 628 10   
Corporate, other & eliminations (4,235) (4,052) 24    (1,449) (1,387) 10   
As reported in FCX’s consolidated financial statements$13,379 $6,239 $788   $4,363 $1,918 $271   
 
a.  Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
 
b.  Net of cobalt downstream processing and freight costs.

 
6350
 
Henderson Molybdenum Mine Product Revenues and Production Costs


Three Months Ended September 30,    Three Months Ended March 31,   
(In millions)2010 
2009a
    2011 2010   
Revenues, excluding adjustments$162 $119    $172 $139   
                
Site production and delivery, before net noncash                
and other costs shown below 51  40     52 42   
Treatment charges and other 12  8     9  10   
Net cash costs 63  48     61 52   
Depreciation, depletion and amortization 9  8     9 8   
Noncash and other costs, net –  1     -  1   
Total costs 72  57     70  61   
Gross profitb
$90 $62    
Gross profita
$102 $78   
                
Reconciliation to Amounts Reported
   Production Depreciation,    Production Depreciation, 
(In millions)   and Depletion and 
 Revenues Delivery Amortization    and Depletion and 
Three Months Ended September 30, 2010         
 Revenues Delivery Amortization 
Three Months Ended March 31, 2011       
Totals presented above$162 $51 $9 $172 $52 $9 
Treatment charges and other per above (12) N/A  N/A  (9) N/A N/A 
Net noncash and other costs per above N/A  –  N/A  N/A  -  N/A 
Henderson mine 150  51  9  163 52 9 
Other molybdenum operations and eliminationsc
 143  148  4 
Other molybdenum operations and eliminationsb
 211  188  5 
Molybdenum 293  199  13  374 240 14 
North America copper mines 990  528  67  1,348 575 58 
South America mining 1,465  462  66  1,402 411 57 
Indonesia mining 1,874  528  72  1,730 526 57 
Africa mining 307  141  34  309 124 28 
Rod & Refining 1,181  1,173  2  1,487 1,481 2 
Atlantic Copper Smelting & Refining 595  590  9  762 763 10 
Corporate, other & eliminations (1,553) (1,352) 5  (1,703) (1,743) 6 
As reported in FCX’s consolidated financial statements$5,152 $2,269 $268 $5,709 $2,377 $232 
                
Three Months Ended September 30, 2009         
Three Months Ended March 31, 2010       
Totals presented above$119 $40 $8 $139 $42 $8 
Treatment charges and other per above (8) N/A  N/A  (10) N/A N/A 
Net noncash and other costs per above N/A  1  N/A  N/A  1  N/A 
Henderson mine 111  41  8  129 43 8 
Other molybdenum operations and eliminationsc
 147  136  5 
Other molybdenum operations and eliminationsb
 146  142  5 
Molybdenum 258  177  13  275 185 13 
North America copper mines 920  451  70  1,054 464 82 
South America mining 1,018  379  67  1,069 376 61 
Indonesia mining 1,656  369  64  1,459 475 63 
Africa mining 113  89  20  249 110 30 
Rod & Refining 963  957  2  1,073 1,067 2 
Atlantic Copper Smelting & Refining 495  493  9  633 628 10 
Corporate, other & eliminations (1,279) (1,200) 7  (1,449) (1,387) 10 
As reported in FCX’s consolidated financial statements$4,144 $1,715 $252 $4,363 $1,918 $271 
 
a.Revenues and costs were adjusted to include freight and downstream conversion costs in net cash costs; gross profit was not affected by these adjustments.
b.  Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum segmentdivision 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.
 
c.
b.  		Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced as a by-product atby our North and South America copper mines.
 
 
64
Henderson Molybdenum Mine Product Revenues and Production Costs (continued)


 
Nine Months Ended
September 30,
    
(In millions)2010 
2009a
    
Revenues, excluding adjustments$478 $258    
          
Site production and delivery, before net noncash         
and other costs shown below 141  111    
Treatment charges and other 33  22    
Net cash costs 174  133    
Depreciation, depletion and amortization 25  20    
Noncash and other costs, net 1  1    
Total costs 200  154    
Gross profitb
$278 $104    
          
 
Reconciliation to Amounts Reported
   Production Depreciation, 
(In millions)   and Depletion and 
  Revenues Delivery Amortization 
Nine Months Ended September 30, 2010         
Totals presented above$478 $141 $25 
Treatment charges and other per above (33) N/A  N/A 
Net noncash and other costs per above N/A  1  N/A 
Henderson mine 445  142  25 
Other molybdenum operations and eliminationsc
 448  432  13 
Molybdenum 893  574  38 
North America copper mines 3,088  1,529  220 
South America mining 3,383  1,227  186 
Indonesia mining 4,260  1,430  192 
Africa mining 763  347  94 
Rod & Refining 3,383  3,361  6 
Atlantic Copper Smelting & Refining 1,844  1,823  28 
Corporate, other & eliminations (4,235) (4,052) 24 
As reported in FCX’s consolidated financial statements$13,379 $6,239 $788 
          
Nine Months Ended September 30, 2009         
Totals presented above$258 $111 $20 
Treatment charges and other per above (22) N/A  N/A 
Net noncash and other costs per above N/A  1  N/A 
Henderson mine 236  112  20 
Other molybdenum operations and eliminationsc
 354  365d 15 
Molybdenum 590  477  35 
North America copper mines 2,241  1,465  209 
South America mining 2,604  1,112  201 
Indonesia mining 4,388  1,134  207 
Africa mining 170  197  37 
Rod & Refining 2,329  2,314  6 
Atlantic Copper Smelting & Refining 1,202  1,205  26 
Corporate, other & eliminations (3,094) (2,799) 19 
As reported in FCX’s consolidated financial statements$10,430 $5,105c$740 
a.  Revenues and costs were adjusted to include freight and downstream conversion costs in net cash costs; gross profit was not affected by these adjustments.
b.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.
c.  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.
d.  Includes LCM molybdenum inventory adjustments totaling $19 million.
6551
 
CAUTIONARY STATEMENT

Our discussion and analysis contains forward-looking statements in which we discuss factors we believe may affect our expectations regarding potential future performance.  Forward-looking statements are all statements other than statements of historical facts, such as those statements regarding anticipatedprojected ore grades and milling rates, projected production volumes,and sales volumes, projected unit net cash costs, ore grades, milling rates, commodity prices, developmentprojected operating cash flows, projected capital expenditures, exploration efforts and other capital expenditures,results, mine production and development plans, environmental liabilities, potential future dividend payments, reserve estimates, projected exploration effortsthe impact of deferred intercompany profits on earnings, liquidity, other financial commitments and results, operating cash flows,tax rates, the impact of copper, gold, molybdenum and cobalt price changes, the impactpotential prepayments of deferred intercompany profits on earnings, anticipated closing of the investment in MMR, liquidity, other financial commitmentsdebt, future dividend payments and tax rates.potential share purchases.  The words “ant icipates,“anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “intends,” “likely,” “will,” “should,” “to be”be,” and any similar expressions are intended to identify those assertions as forward-looking statements.  The declaration of dividends is at the discretion of our Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

In making any forward lookingforward-looking statements, the person making them believeswe believe 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 violence in Indonesia, documentation fo the outcome of the contract review process and the resolution of administrative disputes in the DRC, risks related to the investment in MMR,Democratic Republic of Congo, 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 Annual Report on Form 10-K for the year ended December 31, 2009.2010, filed with the SEC.

Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after our forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may or may not be able to control. Further, during the quarter, we may make changes to our business plans that could or will affect our results for the quarter.results. We caution investors that we do not intend to update our forward-looking statements more frequently than quarterly, notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes, and we undertake no obligation to update any forward-looking statements more frequently than quarterly.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our market risks during the ninethree months ended September 30, 2010.March 31, 2011. 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, 2009.2010. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “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 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) 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 quarter ended September 30, 2010,March 31, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
6652

PART II.  OTHER INFORMATION

IIttemem 1.  Legal Proceedings.

Newtown Creek.   Information regarding thisWe are involved in various legal proceeding is incorporated by reference to Item 1. Legal Proceedings of Part IIproceedings that arise in the ordinary course of our quarterlybusiness or are associated with environmental issues arising from legacy operations conducted over the years by Phelps Dodge Corporation and its affiliates.  We are also involved from time to time in other reviews, investigations and proceedings by government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. There have been no new material legal proceedings and no material changes to the information included in Part I, Item 3. “Legal Proceedings,” of our report on Form 10-Q10-K for the quarteryear ended MarchDecember 31, 2010.
On September 29, Management does not believe, based on currently available information, that the outcome of any proceeding reported in “Legal Proceedings” in our report on Form 10-K for the year ended December 31, 2010, the U.S. Environmental Protection Agency listed Newtown Creekwill have a material adverse effect on our financial condition, although individual outcomes could be material to our operating results for a particular period, depending on the National Priorities List.nature and magnitude of the outcome and the operating results for the period.

IIttemem 1A.  Risk Factors.

There have been no material changes to our risk factors during the ninethree months ended September 30, 2010.March 31, 2011. For additional information on risk factors, refer to “Risk Factors” included in Part I, Item 1A of1A. “Risk Factors” in our report on Form 10-K for the year ended December 31, 2009.2010.

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

(c)  The following table sets forth information with respect to shares of Freeport-McMoRan Copper & Gold Inc. (FCX) common stock purchased by us during the three months ended September 30, 2010:March 31, 2011:

       (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 Purchased Per Share 
Plans or Programsa
 
the Plans or Programsa
July 1-31, 2010 – $– – 23,685,500
August 1-31, 2010 – $– – 23,685,500
September 1-30, 2010 – $– – 23,685,500
Total – $– – 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
January 1-31, 2011 - $- - 23,685,500
February 1-28, 2011 328,497 $56.26 - 23,685,500
March 1-31, 2011 - $- - 23,685,500
Total 328,497 $56.26 - 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.
 
a.b.  On July 21, 2008, our Board of Directors approved an increase in our open-market share purchase program for up to 30 million shares. This program does not have an expiration date.

Item 5. Other Information4. Mine Safety Disclosure.

Mine Safety

The safety and health of all FCXour employees are of the highest priority. Management believes that safety and health considerations are integral to, and compatible with, all other functions in the organization and that proper safety and health management will enhance production and reduce costs. Our approach towards the health and safety of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs.

Dodd-Frank Act Disclosure of Mine Safety and Health Administration Safety Data

Our U.S. mining operations are subject Refer to regulation by the Mine Safety and Health Administration (MSHA) under the U.S. Federal Mine Safety and Health Act of 1977 (the Mine Act). MSHA inspects our mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Whenever MSHA issues a citation or order, it also generally proposes a civil penalty, or fine, related to the alleged violation. Citations or orders can be contested and appealed, and as part of that process, are often reduced in severity and amount, and are sometimes dismissed. The number of citations, orders and proposed assessments varies depending on the size and type (underground or surface) of the mine, among other factors.

We believe the followingExhibit 99.1 for mine safety disclosures meet the requirements of sectionrequired to be disclosed in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). However, as of the date of this report, the U.S. Securities and Exchange Commission (the SEC) has not issued rules and regulations under these provisions; therefore, it is possible that any final rules adopted by the SEC will require disclosures to be presented in a different form.

Act.
67

Mine Safety Data. The table and other data below present mine safety information related to our U.S. mining operations as required by section 1503(a)(1) of the Dodd-Frank Act. The following data reflects citations and orders received from MSHA during the three month period ended September 30, 2010, as reflected in the MSHA system on October 29, 2010, and the proposed penalties received from MSHA during the three month period ended September 30, 2010.

  Three Months Ended September 30, 2010
            Proposed
  
§104(a)(2)
 
§104(b)(3)
 
§104(d)(4)
 
§110(b)(2)(5)
 
§107(a)(6)
 
Penalties(7)
Mine or Operation(1):
             
Bagdad 52 – – – – $20,782
Chino 6 – – – – $–
Climax 1 – – – – $150
Cobre – – – – – $–
Copper Queen 3 – – – – $350
Henderson 27 – – – – $5,694
Miami – – – – – $–
Morenci 77 – – – – $–
Safford 24 – – – – $4,844
Sierrita 63 – – – – $59,716
Tohono 1 – – – – $100
Twin Buttes – – – – – $–
Tyrone 17 – – – – $2,391
Chieftain 2100 Screening Plant – – – – – $–
Warrior 1800 Screening Plant – – – – – $–

(1)  MSHA assigns an identification number to each mine or operation and may or may not assign separate identification numbers to related facilities. The information provided in this table is presented by mine (producing and non-producing) or operation rather than MSHA identification number because that is how we manage and operate our business, and we believe that this presentation is more useful to investors.
(2)  Represents the total number of citations issued by MSHA under section 104 of the Mine Act, for violations of heath or safety standards that could significantly and substantially contribute to a serious injury if left unabated.
(3)  Represents the total number of orders issued under section 104(b) of the Mine Act, which represents a failure to abate a citation under section 104(a) within the period prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.
(4)  Represents the total number of citations and orders issued by MSHA under section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards.
(5)  Represents the total number of flagrant violations identified by MSHA under section 110(b)(2) of the Mine Act.
(6)  Represents the total number of imminent danger orders issued under section 107(a) of the Mine Act.
(7)  Amounts represent the total dollar value of proposed assessments received from MSHA during the three months ended September 30, 2010, and do not necessarily relate to the citations or orders issued by MSHA during the same period, or to the pending legal actions reported below.

During the three months ended September 30, 2010, we had no mining related fatalities, and none of our mining operations received written notice from MSHA of a pattern of, or the potential to have a pattern of, violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of mine health or safety hazards under section 104(e) of the Mine Act.

Pending Legal Actions. The Federal Mine Safety and Health Review Commission (the Commission) is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. These cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under section 105 of the Mine Act. As of September 30, 2010, we have a total of 188 matters pending before the Commission. This includes legal actions that were initiated prior to September 30, 2010, and therefore do not necessarily relate to the citations, orders or proposed assessments issued by MSHA during the c urrent quarterly period.

Item 6.  Exhibits.

The exhibits to this report are listed in the Exhibit Index beginning on Page E-1 hereof.
 
 
6853

FREEPORT-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/ C. Donald Whitmire, Jr.                                                      
C. Donald Whitmire, Jr.
Vice President and
Controller – Financial Reporting
(authorized signatory and
Principal Accounting Officer)


Date:  November 5, 2010May 6, 2011

 
6954

FREEPORT-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. 10-Q001-11307-0108/06/2010
3.2Amended and Restated By-Laws of FCX, as amended through February 2, 2010. 8-K001-11307-0102/05/2010
10.1
Stock PurchaseCredit Agreement dated September 19, 2010,as of March 30, 2011, among FCX, the Lenders party thereto, the Issuing Banks party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent and Bank of America, N.A., as Syndication Agent.X
10.2*Amendment to Amended and Restated Executive Employment Agreement by and amongbetween Freeport-McMoRan Copper & Gold Inc. and Richard C. Adkerson.8-K001-11307-0104/28/2011
10.3*Amendment to Amended and Restated Executive Employment Agreement by and between Freeport-McMoRan Copper & Gold Inc. and Kathleen L. Quirk.8-K001-11307-0104/28/2011
10.4
Addendum No. 1 to the Amended and Restated Shareholders Agreement dated as of September 28, 2005, among La Générale des Carrières et des Mines and TF Holdings Limited, Chui Ltd., Freeport-McMoRan Preferred LLCFaru Ltd., Mboko Ltd., Mofia Ltd., Tembo Ltd., and McMoRan Exploration Co.Tenke Fungurume Mining S.A.R.L., dated as of December 11, 2010.X
10.5
Addendum No. 1 to the Amended and Restated Mining Convention dated as of September 28, 2005, among the Democratic Republic of Congo, La Générale des Carrières et des Mines, TF Holdings Limited and Tenke Fungurume Mining S.A.R.L., dated as of December 11, 2010.X
10.6*
FCX Director Compensation.X   
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   
99.1
Mine Safety and Health Administration Safety Data.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   
 
(*) Indicates management contract or compensatory plan or arrangement.
E-1