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, 2011March 31, 2012
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 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, AZ85004-2189
(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.
þ Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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).       þ Yes  ¨ 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 þ         Accelerated filer ¨          Non-accelerated filer ¨         Smaller reporting company ¨

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

On October 31, 2011April 30, 2012, there were issued and outstanding 947,911,093949,116,060 shares of the registrant’s common stock, par value $0.10 per share.


FREEPORT-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 Comprehensive Income (Unaudited)
5
Consolidated Statements of Cash Flows (Unaudited)
56
  
Consolidated Statement of Equity (Unaudited)
67
  
Notes to Consolidated Financial Statements (Unaudited)
78
  
Report of Independent Registered Public Accounting Firm
1820
  
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
1921
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
6756
  
Item 4. Controls and Procedures
6756
  
Part II. Other Information
6856
  
Item 1. Legal Proceedings
6856
  
Item 1A. Risk Factors
6956
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
7057
  
Item 4. Mine Safety Disclosure
7057
  
Item 6. Exhibits
7057
  
Signature
7158
  
Exhibit Index
E-1
  
.


2
Table of Contents    


Part I.FINANCIAL INFORMATION

Item 1.
Financial Statements.

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

September 30,
2011		 December 31,
2010		March 31,
2012		 December 31,
2011
(In millions)(In millions)
ASSETS      
Current assets:      
Cash and cash equivalents$5,128
 $3,738
$4,496
 $4,822
Trade accounts receivable1,139
 2,132
1,165
 892
Other accounts receivable307
 293
272
 250
Inventories:      
Product1,231
 1,409
Materials and supplies, net1,323
 1,169
1,450
 1,354
Mill and leach stockpiles1,167
 856
1,392
 1,289
Product1,254
 1,226
Other current assets413
 254
223
 214
Total current assets10,708
 9,851
10,252
 10,047
Property, plant, equipment and development costs, net17,966
 16,785
18,986
 18,449
Long-term mill and leach stockpiles1,599
 1,425
1,747
 1,686
Long-term receivables727
 675
Intangible assets, net321
 328
326
 325
Other assets1,114
 997
867
 888
Total assets$31,708
 $29,386
$32,905
 $32,070
      
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts payable and accrued liabilities$2,580
 $2,441
$2,140
 $2,297
Dividends payable240
 240
298
 240
Current portion of reclamation and environmental obligations201
 207
253
 236
Accrued income taxes110
 648
229
 163
Rio Tinto's share of joint venture cash flows46
 132
Current portion of debt4
 95
4
 4
Total current liabilities3,181
 3,763
2,924
 2,940
Long-term debt, less current portion3,531
 4,660
3,517
 3,533
Deferred income taxes3,365
 2,873
3,413
 3,255
Reclamation and environmental obligations, less current portion2,139
 2,071
2,170
 2,138
Other liabilities1,441
 1,459
1,582
 1,651
Total liabilities13,657
 14,826
13,606
 13,517
Equity:      
FCX stockholders’ equity:      
Common stock107
 107
107
 107
Capital in excess of par value18,974
 18,751
19,043
 19,007
Retained earnings (deficit)144
 (2,590)
Retained earnings1,013
 546
Accumulated other comprehensive loss(314) (323)(453) (465)
Common stock held in treasury(3,554) (3,441)(3,575) (3,553)
Total FCX stockholders’ equity15,357
 12,504
16,135
 15,642
Noncontrolling interests2,694
 2,056
3,164
 2,911
Total equity18,051
 14,560
19,299
 18,553
Total liabilities and equity$31,708
 $29,386
$32,905
 $32,070
 
The accompanying notes are an integral part of these consolidated financial statements.

3
Table of Contents    


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

Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
(In millions, except per share amounts)(In millions, except per share amounts)
Revenues$5,195
 $5,152
 $16,718
 $13,379
$4,605
 $5,709
Cost of sales:          
Production and delivery2,570
 2,266
 7,504
 6,234
2,428
 2,377
Depreciation, depletion and amortization257
 268
 756
 788
267
 232
Total cost of sales2,827
 2,534
 8,260
 7,022
2,695
 2,609
Selling, general and administrative expenses102
 81
 323
 277
104
 114
Exploration and research expenses78
 35
 194
 104
62
 50
Environmental obligations and shutdown costs38
 3
 98
 5
10
 —
Total costs and expenses3,045
 2,653
 8,875
 7,408
2,871
 2,773
Operating income2,150
 2,499
 7,843
 5,971
1,734
 2,936
Interest expense, net(78) (103) (250) (370)(63) (98)
Losses on early extinguishment of debt—
 —
 (68) (77)(168) (7)
Other income (expense), net28
 (19) 40
 2
Other (expense) income, net(13) 10
Income before income taxes and equity in affiliated companies’
net earnings
2,100
 2,377
 7,565
 5,526
1,490
 2,841
Provision for income taxes(808) (845) (2,698) (1,956)(491) (984)
Equity in affiliated companies’ net earnings2
 1
 14
 10
2
 4
Net income1,294
 1,533
 4,881
 3,580
1,001
 1,861
Net income attributable to noncontrolling interests(241) (355) (961) (793)(237) (362)
Preferred dividends—
 —
 —
 (63)
Net income attributable to FCX common stockholders$1,053
 $1,178
 $3,920
 $2,724
$764
 $1,499
   
Net income per share attributable to FCX common stockholders:          
Basic$1.11
 $1.25
 $4.14
 $3.01
$0.81
 $1.58
Diluted$1.10
 $1.24
 $4.10
 $2.94
$0.80
 $1.57
   
Weighted-average common shares outstanding:          
Basic948
 941
 947
 906
949
 946
Diluted955
 947
 955
 947
955
 955
   
Dividends declared per share of common stock$0.25
 $0.15
 $1.25
 $0.375
$0.3125
 $0.25
 
The accompanying notes are an integral part of these consolidated financial statements.


4
Table of Contents    

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

 Three Months Ended
 March 31,
 2012 2011
 (In millions)
Net Income$1,001
 $1,861
    
Other comprehensive income, net of taxes:   
Unrealized gains on securities arising during the period—
 1
Translation adjustments arising during the period—
 1
Defined benefit plans:   
Amortization of unrecognized amounts included in net periodic benefit costs7
 3
Adjustment to deferred tax valuation allowance5
 —
Other comprehensive income12
 5
    
Comprehensive income1,013
 1,866
Comprehensive income attributable to noncontrolling interests(237) (362)
Comprehensive income attributable to FCX common stockholders$776
 $1,504

The accompanying notes are an integral part of these consolidated financial statements.




5
Table of Contents

FREEPORT-McMoRan COPPER & GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months EndedThree Months Ended
September 30,March 31,
2011 20102012 2011
(In millions)(In millions)
Cash flow from operating activities:      
Net income$4,881
 $3,580
$1,001
 $1,861
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, depletion and amortization756
 788
267
 232
Stock-based compensation92
 93
32
 43
Pension plans contributions(52) —
Charges for reclamation and environmental obligations, including accretion144
 117
35
 38
Payments of reclamation and environmental obligations(131) (139)(45) (52)
Losses on early extinguishment of debt68
 77
168
 7
Deferred income taxes419
 252
168
 127
Increase in long-term mill and leach stockpiles(174) (73)
Changes in other assets and liabilities(34) 16
(Increase) decrease in long-term mill and leach stockpiles(61) 23
Other, net(21) 36
8
 (34)
(Increases) decreases in working capital:      
Accounts receivable1,034
 (391)(482) 511
Inventories(266) (189)(248) (253)
Other current assets(152) (13)40
 (18)
Accounts payable and accrued liabilities(101) 156
(64) (264)
Accrued income and other taxes(641) (92)34
 138
Net cash provided by operating activities5,874
 4,218
801
 2,359
      
Cash flow from investing activities:      
Capital expenditures:      
North America copper mines(342) (140)(143) (119)
South America(431) (283)(152) (140)
Indonesia(463) (311)(182) (125)
Africa(89) (59)(127) (11)
Molybdenum(317) (34)(95) (71)
Other(107) (50)(8) (39)
Other, net24
 20
(7) —
Net cash used in investing activities(1,725) (857)(714) (505)
      
Cash flow from financing activities:      
Proceeds from debt37
 52
3,004
 9
Repayments of debt(1,303) (1,678)(3,159) (13)
Cash dividends and distributions paid:   
Restricted cash for early extinguishment of debt—
 (1,124)
Cash dividends paid:   
Common stock(1,186) (272)(238) (238)
Preferred stock—
 (95)
Noncontrolling interests(350) (330)(1) (133)
Contributions from noncontrolling interests27
 24
—
 5
Net proceeds from (payments for) stock-based awards2
 (3)
Net payments for stock-based awards(4) (20)
Excess tax benefit from stock-based awards23
 5
7
 21
Other, net(9) —
(22) (9)
Net cash used in financing activities(2,759) (2,297)(413) (1,502)
      
Net increase in cash and cash equivalents1,390
 1,064
Net (decrease) increase in cash and cash equivalents(326) 352
Cash and cash equivalents at beginning of year3,738
 2,656
4,822
 3,738
Cash and cash equivalents at end of period$5,128
 $3,720
$4,496
 $4,090
The accompanying notes are an integral part of these consolidated financial statements.

56
Table of Contents    


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

 FCX Stockholders’ Equity    
 Common Stock     
Accumu-
lated
Other Compre-
hensive
Loss
 
Common Stock
Held in Treasury
 
Total FCX
Stock-holders' Equity
    
 
Number
of
Shares
 
At Par
Value
 
Capital in
Excess of
Par Value
 
Retained
Earnings (Deficit)

  
Number
of
Shares
 
At
Cost
  
Non-
controlling
Interests
 
Total
Equity
 (In millions)
Balance at December 31, 20101,067
 $107
 $18,751
 $(2,590) $(323) 122
 $(3,441) $12,504
 $2,056
 $14,560
Exercised and issued stock-based awards4
 —
 48
 —
 —
 —
 —
 48
 —
 48
Stock-based compensation—
 —
 92
 —
 —
 —
 —
 92
 —
 92
Tax benefit for stock-based awards—
 —
 16
 —
 —
 —
 —
 16
 —
 16
Tender of shares for stock-based awards—
 —
 67
 —
 —
 1
 (113) (46) —
 (46)
Dividends on common stock—
 —
 —
 (1,186) —
 —
 —
 (1,186) —
 (1,186)
Dividends and distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 (350) (350)
Contributions from noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 27
 27
Comprehensive income:                   
Net income—
 —
 —
 3,920
 —
 —
 —
 3,920
 961
 4,881
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—
 —
 —
—
—
 11
 —
 —
 11
 —
 11
Other comprehensive income—
 —
 —
 —
 9
 —
 —
 9
 —
 9
Total comprehensive income—
 —
 —
 —
 —
 —
 —
 3,929
 961
 4,890
Balance at September 30, 20111,071
 $107
 $18,974
 $144
 $(314) 123
 $(3,554) $15,357
 $2,694
 $18,051
 FCX Stockholders’ Equity    
 Common Stock   Retained
Earnings		 Accumu-
lated
Other Compre-
hensive
Loss		 
Common Stock
Held in Treasury
 Total FCX
Stock-holders' Equity		    
 
Number
of
Shares
 
At Par
Value
 
Capital in
Excess of
Par Value
   
Number
of
Shares
 
At
Cost
  
Non-
controlling
Interests
 
Total
Equity
          
 (In millions)
Balance at December 31, 20111,071
 $107
 $19,007
 $546
 $(465) 123
 $(3,553) $15,642
 $2,911
 $18,553
Exercised and issued stock-based awards2
 —
 12
 —
 —
 —
 —
 12
 —
 12
Stock-based compensation—
 —
 32
 —
 —
 —
 —
 32
 —
 32
Tax benefit for stock-based awards—
 —
 3
 —
 —
 —
 —
 3
 —
 3
Tender of shares for stock-based awards—
 —
 6
 —
 —
 1
 (22) (16) —
 (16)
Dividends on common stock—
 —
 —
 (297) —
 —
 —
 (297) —
 (297)
Dividends to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 (1) (1)
Change in ownership interests for noncontrolling interests—
 —
 (17) —
 —
 —
 —
 (17) 17
 —
Comprehensive income—
 —
 —
 764
 12
 —
 —
 776
 237
 1,013
Balance at March 31, 20121,073
 $107
 $19,043
 $1,013
 $(453) 124
 $(3,575) $16,135
 $3,164
 $19,299
 
The accompanying notes are an integral part of these consolidated financial statements.


67
Table of Contents    


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

1.GENERAL INFORMATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Copper & Gold Inc.’s (FCX) consolidated financial statements and notes contained in its 20102011 Annual Report on Form 10-K. The information furnished herein reflects all adjustments that 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, 2011March 31, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 20112012.

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 
 September 30, September 30, 
 2011 2010 2011 2010 
Net income$1,294
 $1,533
 $4,881
 $3,580
 
Net income attributable to noncontrolling interests(241) (355) (961) (793) 
Preferred dividends—
 —
 —
 (63) 
Net income attributable to FCX common stockholders1,053
 1,178
 3,920
 2,724
 
Plus income impact of assumed conversion of 6¾%
     Mandatory Convertible Preferred Stocka
—
 —
 —
 63
 
Diluted net income attributable to FCX common
     stockholders
$1,053
 $1,178
 $3,920
 $2,787
 
         
Weighted-average shares of common stock outstanding948
 941
 947
 906
 
Add stock issuable upon conversion, exercise or vesting of:        
6¾% Mandatory Convertible Preferred Stocka
—
 —
 —
 34
 
 Dilutive stock optionsb
6
 4
 7
 5
 
 Restricted stock1
 2
 1
 2
 
Weighted-average shares of common stock outstanding for purposes of calculating diluted net income per share955
 947
 955
 947
 
Diluted net income per share attributable to FCX
     common stockholders
$1.10
 $1.24
 $4.10
 $2.94
 
 Three Months Ended 
 March 31, 
 2012 2011 
Net income$1,001
 $1,861
 
Net income attributable to noncontrolling interests(237) (362) 
Net income attributable to FCX common stockholders$764
 $1,499
 
     
Weighted-average shares of common stock outstanding949
 946
 
Add stock issuable upon exercise or vesting of:    
 Dilutive stock optionsa
5
 8
 
 Restricted stock units1
 1
 
Weighted-average shares of common stock outstanding    
 for purposes of calculating diluted net income per share955
 955
 
     
Diluted net income per share attributable to FCX
     common stockholders
$0.80
 $1.57
 
a.All outstanding 6¾% Mandatory Convertible Preferred Stock automatically converted on May 1, 2010, into FCX common stock.
b.
Potential additional shares of common stock that were anti-dilutive totaled approximately three million for the three months endedfirst-quarter September 30, 2011, none2012 for the three months ended September 30, 2010, and approximately two million for thefirst-quarter nine months ended September 30, 2011 and 2010..

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net income per share of common stock. Excluded amounts were approximately 59 million stock options with a weighted-average exercise price of $55.5750.63 per option for third-quarterfirst-quarter 20112012 and approximatelyless than 31 million stock options with a weighted-average exercise price of $55.7457.86 per option for the ninefirst-quarter months ended September 30, 2011. Stock options for approximately 19 million shares with a weighted-average exercise price of $37.78 were excluded for third-quarter2010, and stock options for approximately 14

78
Table of Contents    


million shares with a weighted-average exercise price of $38.32 were excluded for the nine months ended September 30, 2010.

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,
 2011 2010 2011 2010
Service cost$9
 $8
 $29
 $26
Interest cost27
 27
 81
 80
Expected return on plan assets(24) (23) (72) (70)
Amortization of net actuarial loss6
 6
 18
 17
Net periodic benefit costs$18
 $18
 $56
 $53

4.INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):
September 30,
2011		 December 31, 2010March 31,
2012		 December 31, 2011
Mining Operations:   
Mining operations:a
   
Raw materials$1
 $1
$1
 $1
Work-in-process77
 93
Finished goodsa
758
 704
Atlantic Copper, S.A. (Atlantic Copper):   
Finished goodsb
805
 769
Atlantic Copper, S.L.U. (Atlantic Copper):   
Raw materials (concentrates)146
 336
218
 260
Work-in-process247
 266
212
 187
Finished goods2
 9
18
 9
Total product inventories1,231
 1,409
1,254
 1,226
Total materials and supplies, netb
1,323
 1,169
Total materials and supplies, netc
1,450
 1,354
Total inventories, less current portion of mill and leach stockpiles$2,554
 $2,578
$2,704
 $2,580
a.
FCX's mining operations also have work-in-process inventories (i.e., mill and leach stockpiles), which have been summarized below.
b.Primarily includes molybdenum concentrates, and copper concentrates, anodes, cathodes and rod.
b.c.
Materials and supplies inventory is net of obsolescence reserves totaling $27 million at March 31, 2012, and $26 million at September 30, 2011, and December 31, 20102011.

A summary of mill and leach stockpiles follows (in millions):
September 30,
2011		 December 31, 2010March 31,
2012		 December 31, 2011
Current:      
Mill stockpiles$21
 $35
$85
 $69
Leach stockpiles1,146
 821
1,307
 1,220
Total current mill and leach stockpiles$1,167
 $856
$1,392
 $1,289
Long-term:a
      
Mill stockpiles$518
 $470
$549
 $535
Leach stockpiles1,081
 955
1,198
 1,151
Total long-term mill and leach stockpiles$1,599
 $1,425
$1,747
 $1,686
 
a.Metals in stockpiles not expected to be recovered within the next 12 months.


8
Table of Contents


5.4.INCOME TAXES
Geographic sources of FCX's provision for income taxes follow (in millions):
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
United States operations$163
 $73
 $421
 $205
$83
 $138
International operations645
 772
 2,277
 1,751
408
 846
Total$808
 $845
 $2,698
 $1,956
$491
 $984

FCX’s consolidated effective income tax rate totaled 3633 percent for the first nine months offirst-quarter 20112012 and 35 percent for the first ninefirst-quarter months of 20102011. Variations in the relative proportions of jurisdictional income can result in fluctuations to FCX’s consolidated effective income tax rate.


9
Table of Contents

6.5.DEBT AND EQUITY TRANSACTIONS
In February 2012, FCX sold $500 million of 1.40% Senior Notes due 2015, $500 million of 2.15% Senior Notes due 2017 and $2.0 billion of 3.55% Senior Notes due 2022 for total net proceeds of $2.97 billion. Interest on the 1.40% Senior Notes is payable semiannually on February 13 and August 13 commencing on August 13, 2012. Interest on the 2.15% Senior Notes and the 3.55% Senior Notes is payable semiannually on March 1 and September 1 commencing on September 1, 2012. The unsecured senior notes rank equally with FCX's other existing and future unsecured and unsubordinated indebtedness.

On April 1, 2011March 14, 2012, FCX redeemed the remaining $3.0 billion of its outstanding 8.375% Senior Notes due 2017 for which holders received 104.553 percent of the principal amount together with the accrued and unpaid interest. As a result of this redemption, FCX recorded a loss on early extinguishment of debt of $168 million ($149 million to net income attributable to FCX common stockholders or $0.16 per diluted share) in first-quarter 2012.

During the first quarter of 2011, FCX entered into a new senior unsecured revolving credit facility, which replaced the existing revolving credit facilities that were scheduled to mature on March 19, 2012. FCX recognized a loss on early extinguishment of debt totaling $7 million ($6 million to net income attributable to FCX common shareholders or $0.01 per diluted share) in first-quarter 2011 associated with this transaction.

On February 24, 2011, FCX announced its intent to redeem the remaining $1.1 billion of its outstanding 8.25% Senior Notes due 2015, for which2015. 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, 2011, holders of these senior notes received 104.125 percent of the principal amount together with accrued and unpaid interest. As a result of this redemption, FCX recorded a loss on early extinguishment of debt totaling $55 million ($49 million to net income attributable to FCX common stockholders or $0.05 per diluted share) for the first nine months of 2011.in second-quarter 2011.

During the second quarter of 2011, FCX purchased in the open market $35 million of its 9.5% Senior Notes due 2031 for $49 million, which resulted in losses on early extinguishment of debt totaling $6 million ($5 million to net income attributable to FCX common stockholders or $0.01 per diluted share) for the first nine months of 2011.

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. FCX recognized a loss on early extinguishment of debt totaling $7 million ($6 million to net income attributable to FCX common shareholders or $0.01 per diluted share) for the first nine months of2011 associated with this transaction. The new 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 September 30, 2011, FCX had no borrowings and $44 million of letters of credit issued under the revolving credit facility, resulting in availability of approximately $1.5 billion.

Interest on the revolving credit facility is generally based on the London Interbank Offered Rate (LIBOR) plus 2 percent, subject to an increase or decrease in the interest rate margin based on the credit ratings assigned to FCX’s senior unsecured debt by Standard & Poor’s Rating Services and Moody’s Investors Service.

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.

During the first nine months of 2010, 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 losses on early extinguishment of debt totaling $55 million ($48 million to net income attributable to FCX common stockholders or $0.05 per diluted share).

On April 1, 2010, FCX redeemed all of its $1 billion of outstanding Senior Floating Rates Notes due 2015, for which holders received 101 percent of the principal amount together with accrued and unpaid interest. As a result of this redemption, FCX recorded a loss on early extinguishment of debt totaling $22 million ($19 million to net income attributable to FCX common stockholders or $0.02 per diluted share) for the first nine months of 2010.


9
Table of Contents


Consolidated interest expense (excluding capitalized interest) totaled $10599 million in third-quarterfirst-quarter 20112012, and $126123 million in third-quarterfirst-quarter 2010, $325 million for the first nine months of 2011 and $409 million for the first nine months of 2010. Capitalized interest totaled $2736 million in third-quarterfirst-quarter 20112012, and $2325 million in third-quarterfirst-quarter 2010, $75 million for the first nine months of 2011 and $39 million for the first nine months of 2010.

On September 29, 2011,February 7, 2012, the Board of Directors authorized an increase in the cash dividend on FCX's common stock from an annual rate of $1.00 per share to $1.25 per share. On March 28, 2012, FCX's Board of Directors declared a quarterly dividend of $0.250.3125 per share, which was paid on NovemberMay 1, 2011,2012, to common shareholders of record at the close of business on October 15, 2011.

On May 1, 2010, the outstanding shares of FCX’s 6¾% Mandatory Convertible Preferred Stock were automatically converted into shares of FCX common stock (refer to Note 11 in FCX’s 2010 Annual Report on Form 10-K for further discussion).

Total comprehensive income attributable to FCX common stockholders totaled $1.1 billion in third-quarter2011, $1.2 billion in third-quarter2010, $3.9 billion for the first nine months of 2011 and $2.8 billion for the first nine months of 2010April 13, 2012.

7.6. 
FINANCIAL INSTRUMENTS
FCX does not purchase, hold or sell derivative financial instruments unless there are market risks associated withis 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 andthat FCX intends to offset or mitigate such risks.mitigate. 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 changes, foreign currency exchange rates and interest rate risks. The fair values of FCX’s derivative financial instruments are based on widely published market prices.rates.

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, 2011March 31, 2012, FCX had no price protection contracts relating to its mine production. A discussion of FCX’s derivative commodity contracts and programs follows.


10
Table of Contents

Derivatives Designated as Hedging Instruments – Fair Value Hedges
Copper Futures and Swap Contracts. Some of FCX’sFreeport-McMoRan Corporation’s (FMC) U.S. copper cathode and 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 significant gains or losses during the three-month and nine-monthperiods ended September 30, 2011March 31, 2012 and 20102011, resulting from hedge ineffectiveness. At September 30, 2011March 31, 2012, FCX held copper futures and swap contracts that qualified for hedge accounting for 7368 million pounds at an average contract price of $3.903.72 per pound, with maturities through December 2012April 2013.

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 Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Copper futures and swap contracts:          
Unrealized gains (losses):          
Derivative financial instruments$(62) $19
 $(72) $1
$18
 $(15)
Hedged item62
 (19) 72
 (1)(18) 15
          
Realized gains (losses):       
Realized gains:   
Matured derivative financial instruments(10) 15
 (4) 16
10
 12


10
Table of Contents


Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. As described in Note 1 to FCX’s 20102011 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 prices (copper) and the London Bullion Market Association (London PM) price (gold) 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 agreements 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 AssociationPM 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.

A summary of FCX’s embedded derivatives at September 30, 2011March 31, 2012, follows:
Open 
Average Price
Per Unit
 MaturitiesOpen 
Average Price
Per Unit
 Maturities
Positions Contract Market ThroughPositions Contract Market Through
Embedded derivatives in provisional sales contracts:              
Copper (millions of pounds)598
 $4.08
 $3.18
 February 2012326
 $3.69
 $3.82
 August 2012
Gold (thousands of ounces)216
 1,802
 1,626
 January 201253
 1,690
 1,663
 May 2012
Embedded derivatives in provisional purchase contracts:            
Copper (millions of pounds)193
 4.11
 3.18
 January 2012181
 3.69
 3.84
 June 2012
Molybdenum (thousand of pounds)42
 12.83
 12.44
 April 2012


11
Table of Contents

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 provide economic hedgeshedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in cost of sales. At September 30, 2011March 31, 2012, Atlantic Copper held net forward copper purchase contracts for 322 million pounds at an average contract price of $3.383.81 per pound, with maturities through October 2011May 2012.

A summary of the realized and unrealized gains (losses) recognized in income before income taxes and equity in affiliated companies’ net earnings for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2011 2010 2011 2010
Embedded derivatives in provisional sales
     contractsa
$(624) $376
 $(660) $177
Embedded derivatives in provisional purchase
     contractsb
—
 —
 —
 (1)
Copper forward contractsb
4
 (10) (2) (8)
Copper futures and swap contractsa
—
 1
 —
 —
 Three Months Ended
 March 31,
 2012 2011
Embedded derivatives in provisional sales contractsa
$184
 $(47)
Copper forward contractsb
11
 —
a.Amounts recorded in revenues. 
b.Amounts recorded in cost of sales as production and delivery costs.


11
Table of Contents


Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled derivative financial instruments recorded on the consolidated balance sheets follows (in millions):
September 30,
2011		 December 31, 2010March 31,
2012		 December 31, 2011
Derivatives designated as hedging instruments      
Commodity contracts:      
Copper futures and swap contracts:a
      
Asset positionb
$—
 $18
$10
 $3
Liability positionc
(54) —
(3) (13)
      
Derivatives not designated as hedging instruments      
Commodity contracts:      
Embedded derivatives in provisional sales/purchases contracts:d
   
Embedded derivatives in provisional sales/purchase contracts:d
   
Asset position$179
 $357
$46
 $72
Liability position(581) (115)(29) (82)
Copper forward contracts:      
Liability positionc
(1) (10)
Asset positionb
1
 2
a.
FCX had paid $5512 million to brokers at September 30, 2011March 31, 2012, and $331 million at December 31, 20102011, for margin requirements (recorded in other current assets). In addition, FCX held $283 million in margin funding from customers at September 30, 2011, and $8 million from brokers at December 31, 2010,2011, associated with margin requirements (recorded in accounts payable and accrued liabilities).
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.

Foreign Currency Exchange Contracts.  As a global company, FCX transacts business in many countries and in many currencies. Foreign currency transactions atof 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, 2011March 31, 2012.


12
Table of Contents

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 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, 2011March 31, 2012.

Credit Risk.  FCX is exposed to credit loss when counterpartiesfinancial institutions with which FCX has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties. FCX does not anticipate that any of the counterparties it deals with will default on their obligations. As of September 30, 2011March 31, 2012, FCX did not have any significant credit exposure associated with derivative transactions.

Other Financial Instruments.  Other financial instruments include cash and cash equivalents, accounts receivable, trust assets, available-for-sale securities, accounts payable and accrued liabilities, dividends payable Rio Tinto's share of joint venture cash flows and long-term debt. Refer to Note 87 for the fair values of these financial instruments.

Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued Liabilities, and Dividends Payable and Rio Tinto's Share of Joint Venture Cash Flows.Payable. The financial statement amount is a reasonable estimate of the fair value because of the short maturity of these instruments and generally negligible credit losses.

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

12
Table of Contents



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

8.7.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). FCX did not have any significant transfers in or out of Levels 1, 2 or 3 for the thirdfirst quarter of 20112012.

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, 2011
 Total Level 1 Level 2 Level 3
Assets       
Cash equivalents:       
Money market funds$4,828
 $4,828
 $—
 $—
Time deposits201
 201
 —
 —
Total cash equivalents5,029
 5,029
 —
 —
        
Trust assets (current and long-term):       
U.S. core fixed income funds46
 —
 46
 —
Government mortgage-backed securities40
 —
 40
 —
Government bonds and notes22
 —
 22
 —
Corporate bonds18
 —
 18
 —
Asset-backed securities15
 —
 15
 —
Money market funds11
 11
 —
 —
Municipal bonds1
 —
 1
 —
Total trust assets153
 11
 142
 —
        
Available-for-sale securities:       
Time deposits15
 15
 —
 —
Equity securities8
 8
 —
 —
Money market funds2
 2
 —
 —
Total available-for-sale securities25
 25
 —
 —
        
Derivatives:       
Embedded derivatives in provisional sales/purchases179
 179
 —
 —
        
Total assets$5,386
 $5,244
 $142
 $—
        
Liabilities       
Derivatives:       
Embedded derivatives in provisional sales/purchases$(581) $(581) $—
 $—
Copper futures and swap contracts(54) (54) —
 —
Copper forward contracts(1) (1) —
 —
Total derivative liabilities$(636) $(636) $—
 $—


13
Table of Contents    

The carrying value for certain FCX financial instruments (i.e., cash, accounts receivable, accounts payable and accrued liabilities, and dividends payable) approximate fair value because of their short-term nature and generally negligible credit losses. A summary of the carrying amount and fair value of FCX’s other financial instruments follows (in millions):
 At March 31, 2012
 Carrying Fair Value
 Amount Total Level 1 Level 2 Level 3
Assets         
Cash equivalents:a
         
Money market funds$4,221
 $4,221
 $4,221
 $—
 $—
          
McMoRan Exploration Co. investmentb
468
 379
 —
 379
 —
          
Trust assets (long-term):a, c
         
U.S. core fixed income fund47
 47
 —
 47
 —
Government mortgage-backed securities39
 39
 —
 39
 —
Corporate bonds24
 24
 —
 24
 —
Government bonds and notes21
 21
 —
 21
 —
Asset-backed securities10
 10
 —
 10
 —
Money market funds8
 8
 8
 —
 —
Municipal bonds1
 1
 —
 1
 —
Total trust assets150
 150
 8
 142
 —
          
Available-for-sale securities (current and long-term):a, c, d
         
Equity securities8
 8
 8
 —
 —
          
Derivatives:a
         
Embedded derivatives in provisional sales/purchase         
contracts in an asset positione
46
 46
 —
 46
 —
Copper futures and swap contractsf
10
 10
 9
 1
 —
Copper forward contractsf
1
 1
 —
 1
 —
Total derivative assets57
 57
 9
 48
 —
          
Total assets  $4,815
 $4,246
 $569
 $—
          
Liabilities         
Derivatives:a
         
Embedded derivatives in provisional sales/purchase         
contracts in a liability positione
$(29) $(29) $—
 $(29) $—
Copper futures and swap contractsg
(3) (3) (2) (1) —
Total derivative liabilities(32) (32) (2) (30) —
          
Long-term debt, including current portionh
(3,521) (3,502) —
 (3,502) —
          
Total liabilities  $(3,534) $(2) $(3,532) $—


14
Table of Contents

 At December 31, 2011
 Carrying Fair Value
 Amount Total Level 1 Level 2 Level 3
Assets         
Cash equivalents:a
         
Money market funds$4,007
 $4,007
 $4,007
 $—
 $—
 
McMoRan Exploration Co. investmentb
475
 507
 —
 507
 —
          
Trust assets (long-term):a, c
         
Government mortgage-backed securities47
 47
 —
 47
 —
U.S. core fixed income fund46
 46
 —
 46
 —
Government bonds and notes21
 21
 —
 21
 —
Corporate bonds19
 19
 —
 19
 —
Money market funds9
 9
 9
 —
 —
Asset-backed securities9
 9
 —
 9
 —
Municipal bonds1
 1
 —
 1
 —
Total trust assets152
 152
 9
 143
 —
          
Available-for-sale securities (current and long-term):a, c
         
Equity securities9
 9
 9
 —
 —
Money market funds2
 2
 2
 —
 —
Total available-for-sale securities11
 11
 11
 —
 —
          
Derivatives:a
         
Embedded derivatives in provisional sales/purchase         
contracts in an asset positione
72
 72
 —
 72
 —
Copper futures and swaps contractsf
3
 3
 3
 —
 —
Copper forward contractsf
2
 2
 1
 1
 —
Total derivative assets77
 77
 4
 73
 —
          
Total assets  $4,754
 $4,031
 $723
 $—
          
Liabilities         
Derivatives:a
         
Embedded derivatives in provisional sales/purchase         
contracts in a liability positione
$(82) $(82) $—
 $(82) $—
Copper futures and swap contractsg
(13) (13) (11) (2) —
Total derivative liabilities(95) (95) (11) (84) —
          
Long-term debt, including current portionh
(3,537) (3,797) —
 (3,797) —
          
Total liabilities  $(3,892) $(11) $(3,881) $—
a.Recorded at fair value. 
b.Recorded at cost and included in other assets.
c.Current portion included in other current assets and long-term portion included in other assets. 
d.
Excluded were$17 million of time deposits at March 31, 2012.
e.Embedded derivatives are recorded in accounts receivable and/or accounts payable and accrued liabilities.
f.Included in other current assets.
g.Included in accounts payable and accrued liabilities.
h.Recorded at cost.


15
Table of Contents

Valuation Techniques

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

McMoRan Exploration Co.'s (MMR) 5¾% Convertible Perpetual Preferred Stock is not actively traded; therefore, FCX's investment in the MMR 5¾% Convertible Perpetual Preferred Stock is valued based on a pricing simulation model that uses MMR's publicly traded common stock as the most significant observable input. Therefore, this investment is classified within Level 2 of the fair value hierarchy.

Fixed income securities (government and agency securities, corporate bonds, asset-backed securities and U.S. core fixed income funds)funds, corporate bonds and asset-backed securities) 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 usinghave critical inputs of quoted market prices based on the forwardmonthly LME or COMEX forward prices (copper) and the London Bullion Market AssociationPM forward price (gold) and, as such,at each reporting date based on the month of maturity; however, FCX's contracts themselves are classified within Level 1 of the fair value hierarchy.not traded on an exchange. Likewise, FCX’s embedded derivatives on provisional molybdenum purchases are valuedhave critical inputs based on the latest average weekly Metals Week Molybdenum Dealer Oxide prices and, as such,prices; however, FCX's contracts themselves are not traded on an exchange. As a result, both of these derivatives are classified within Level 12 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted marketmonthly COMEX or LME forward prices in active marketsat each reporting date based on the month of maturity (refer to
Note 76 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy.

Long-term debt, including current portion, is not actively traded and is valued using prices obtained from a readily available pricing source and, as such, is classified within Level 2 of the fair value hierarchy.

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 September 30, 2011March 31, 2012.

The carrying value for certain FCX financial instruments (i.e., accounts receivable, accounts payable and accrued liabilities, dividends payable, and Rio Tinto’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, 2011 At December 31, 2010
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Cash and cash equivalentsa
$5,128
 $5,128
 $3,738
 $3,738
McMoRan Exploration Co. investmentb
482
 445
 500
 623
Net embedded derivatives included in accounts receivable or payablea
(402) (402) 242
 242
Trust assets (current and long-term)a, c
153
 153
 148
 148
Available-for-sale securities (current and long-term)a, c
25
 25
 34
 34
Derivative assetsa, d
—
 —
 18
 18
Derivative liabilities (current and long-term)a, e
(55) (55) (10) (10)
Long-term debt (including amounts due within one year)f
(3,535) (3,830) (4,755) (5,146)
a.8.Recorded at fair value. CONTINGENCIES AND COMMITMENTS
b.
Recorded at cost and included in other assets. At December 31, 2010, fair value was based on a bid evaluation, which was an estimated price at which a dealer would pay for a security. At September 30, 2011, these securities were not actively trading; as such, fair value was based on a convertible pricing model using McMoRan Exploration Co.'s publicly traded common stock as the principle variable.
Litigation. The following information includes a discussion of updates to a previously reported legal proceeding and a new legal proceeding since the information included in Note 13 and incorporated by reference into Part I, Item 3. “Legal Proceedings” of FCX's annual report on Form 10-K for the year ended December 31, 2011.

Blackwell. Coffey, et al., v. Freeport-McMoRan Copper & Gold, Inc., et al., Kay County, Oklahoma District Court, Case No. CJ-2008-68. Information regarding this legal proceeding is incorporated by reference to Note 13 and Part I, Item 3. “Legal Proceedings” of FCX's annual report on Form 10-K for the year ended December 31, 2011. On March 22, 2012, the court approved a settlement with the plaintiffs, which was filed and entered on March 26, 2012, to resolve this pending class action in Blackwell, Oklahoma. A number of potential class members opted out of the settlement, and a smaller number formally objected to the settlement terms. Because no objector filed an appeal by the April 25, 2012 deadline, the settlement is now final.

One Point Street. One Point Street, Inc. v. Freeport-McMoRan Corporation, et al., United States District Court, Southern District of New York, Case No. 2011 CIV 6315, filed September 9, 2011, and amended on March 1, 2012.

c.Current portion included in other current assets and long-term portion included in other assets. 
d.Included in other current assets. 
e.Current portion included in accounts payable and accrued liabilities and long-term portion included in other liabilities.

1416
Table of Contents    

From 1932 until 1984, FMC owned and operated a cable manufacturing facility on the Hudson River in Yonkers, New York. FMC sold that operation in 1984, and it was subsequently sold to BICC Cables Corporation (BICC). BICC closed the facility in 1996. One Point Street, Inc. (OPS), a real estate developer, has current title to the site.

On September 9, 2011, OPS filed a complaint in federal court in New York, which it amended on March 1, 2012. The amended complaint alleges that FMC, BICC and other third parties have failed to timely and diligently complete remediation of the site in breach of alleged obligations under federal and state law and under the contractual agreements among the parties. Due to the early stage of the proceeding, an estimate of the possible loss or range of loss cannot be made. FMC believes it has met its obligations under the contractual agreements and intends to continue doing so, and it will vigorously defend against this litigation.

f.Recorded at cost except for long-term debt acquired in the Phelps Dodge 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.
Other Contingencies. The Indonesian tax authorities issued assessments for various audit exceptions on PT Freeport Indonesia's income tax returns as follows (in millions):
Date of assessment Tax return year Tax assessment Interest assessment Total
October 2010 2005 $106
 $52
 $158
November 2011 2006 22
 10
 32
March 2012 2007 91
 44
 135
Total   $219
 $106
 $325
PT Freeport Indonesia has filed objections to the 2005 and 2006 assessments, and also intends to file objections to the 2007 assessments. During first-quarter 2012, PT Freeport Indonesia's objections to the assessments related to 2005 were substantially all rejected by the Indonesian tax authorities, and PT Freeport Indonesia is preparing to file appeals with the Indonesian Tax Court. As of March 31, 2012, PT Freeport Indonesia has paid $158 million (of which $124 million is included in long-term receivables) for the disputed tax assessments related to 2005, 2006 and 2007.

Mining contracts. Africa. Effective March 26, 2012, the Democratic Republic of Congo (DRC) government issued a Presidential Decree approving the modifications to Tenke Fungurume Mining S.A.R.L's (TFM) bylaws. As a result, FCX's effective ownership interest in the Tenke Fungurume minerals district was reduced from 57.75 percent to 56.0 percent (prospectively) and $50 million of TFM's intercompany loans were converted to equity.

9.NEW ACCOUNTING STANDARDS
In May 2011, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) in connection with guidance for fair value measurements and disclosures. This ASU clarifies the FASB's intent on current guidance, modifies and changes certain guidance and principles, and expands disclosures concerning Level 3 fair value measurements in the fair value hierarchy (including quantitative information about significant unobservable inputs within Level 3 of the fair value hierarchy). In addition, this ASU requires disclosure of the fair value hierarchy for assets and liabilities not measured at fair value in the statement of financial position, but whose fair value is required to be disclosed. This ASU is effective for interim and annual reporting periods beginning after December 15, 2011, and early application is not permitted. FCX adopted this guidance effective January 1, 2012.


17
Table of Contents

In June 2011, FASB issued an ASU in connection with guidance on the presentation of comprehensive income. The objective of this ASU is to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. This ASU requires an entity to present the components of net income and other comprehensive income and total comprehensive income (includes net income) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of equity, but does not change the items that must be reported in other comprehensive income. This ASU is effective for interim and annual reporting periods beginning after December 15, 2011, and early adoption is permitted. Effective January 1, 2012, FCX isadopted this ASU and presented total comprehensive income in a separate statement. Additionally, in December 2011, FASB deferred the processeffective date in this ASU for presenting reclassification adjustments for each component of determining which presentation it will choose (single statement or two separate statements)accumulated other comprehensive income in both net income and when it will adopt this ASU.other comprehensive income on the face of the financial statements.

10.SUBSEQUENT EVENTS
FCX evaluated events after September 30, 2011March 31, 2012, 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.

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.mines or operations. Operating segments that meet certain thresholds are reportable segments.

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 its operating divisions and individual segments. However, not all costs and expenses applicable to a mine or operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level, whereas internationalforeign income taxes are recorded and managed withinat the applicable 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.





1518
Table of Contents    


Business Segments
(In millions)North America Copper Mines South America Indonesia Africa          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 TotalMorenci Mines Total Verde Mines Total Grasberg Tenke denum Refining & Refining nations Total
Three Months Ended September 30, 2011                         
Three Months Ended March 31, 2012                         
Revenues:                                                  
Unaffiliated customers$78
 $44
 $122
 $396
 $570
 $966
 $1,275
a 
$275
 $332
 $1,389
 $834
 $2
 $5,195
$13
 $17
 $30
 $449
 $526
 $975
 $953
a 
$303
 $340
 $1,298
 $704
 $2
 $4,605
Intersegment450
 847
 1,297
 105
 (18) 87
 87
 1
 —
 7
 3
 (1,482) —
513
 913
 1,426
 127
 152
 279
 (3) 2
 —
 6
 8
 (1,718) —
Production and delivery252
 412
 664
 196
 282
 478
 503
 142
 260
 1,390
 826
 (1,693) 2,570
256
 451
 707
 193
 270
 463
 495
 132
 262
 1,297
 695
 (1,623) 2,428
Depreciation, depletion and amortization27
 40
 67
 32
 32
 64
 62
 32
 14
 2
 11
 5
 257
31
 62
 93
 30
 32
 62
 46
 32
 15
 2
 10
 7
 267
Selling, general and administrative expenses—
 1
 1
 1
 1
 2
 29
 1
 3
 —
 5
 61
 102
—
 1
 1
 1
 1
 2
 33
 2
 3
 —
 5
 58
 104
Exploration and research expenses3
 —
 3
 —
 —
 —
 —
 —
 1
 —
 —
 74
 78
—
 —
 —
 —
 —
 —
 —
 —
 1
 —
 —
 61
 62
Environmental obligations and shutdown costs1
 (15) (14) —
 —
 —
 —
 —
 —
 —
 —
 52
 38
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 10
 10
Operating income (loss)245
 453
 698
 272
 237
 509
 768
 101
 54
 4
 (5) 21
 2,150
239
 416
 655
 352
 375
 727
 376
 139
 59
 5
 2
 (229) 1,734
                                                  
Interest expense, net—
 1
 1
 —
 —
 —
 7
 2
 —
 —
 4
 64
 78
—
 1
 1
 5
 —
 5
 —
 —
 —
 —
 3
 54
 63
Provision for income taxes—
 —
 —
 154
 48
 202
 342
 20
 —
 —
 —
 244
 808
—
 —
 —
 123
 117
 240
 150
 29
 —
 —
 —
 72
 491
Total assets at September 30, 20111,981
 4,966
 6,947
 4,886
 3,475
 8,361
 5,437
 3,791
 2,342
 323
 955
 3,552
 31,708
Total assets at March 31, 20122,146
 5,255
 7,401
 5,300
 4,127
 9,427
 5,613
 4,138
 2,543
 328
 1,033
 2,422
 32,905
Capital expenditures21
 117
 138
 64
 110
 174
 162
 49
 155
 2
 5
 32
 717
44
 99
 143
 69
 83
 152
 182
 127
 95
 3
 3
 2
 707
                                                  
Three Months Ended September 30, 2010                         
Three Months Ended March 31, 2011                         
Revenues:                                                  
Unaffiliated customers$10
 $15
 $25
 $606
 $696
 $1,302
 $1,458
a 
$307
 $293
 $1,174
 $592
 $1
 $5,152
$136
 $16
 $152
 $668
 $595
 $1,263
 $1,372
a 
$309
 $374
 $1,481
 $756
 $2
 $5,709
Intersegment364
 609
 973
 84
 79
 163
 416
 —
 —
 7
 3
 (1,562) —
386
 823
 1,209
 60
 79
 139
 358
 —
 —
 6
 6
 (1,718) —
Production and delivery185
 351
 536
 194
 268
 462
 528
 141
 199
 1,172
 590
 (1,362) 2,266
210
 378
 588
 175
 236
 411
 526
 124
 240
 1,481
 763
 (1,756) 2,377
Depreciation, depletion and amortization33
 34
 67
 42
 24
 66
 72
 34
 13
 2
 9
 5
 268
28
 30
 58
 34
 23
 57
 57
 28
 14
 2
 10
 6
 232
Selling, general and administrative expenses—
 —
 —
 —
 —
 —
 25
 —
 2
 —
 4
 50
 81
—
 1
 1
 1
 1
 2
 43
 2
 4
 —
 8
 54
 114
Exploration and research expenses—
 —
 —
 —
 —
 —
 —
 —
 1
 —
 —
 34
 35
—
 —
 —
 —
 —
 —
 —
 —
 1
 —
 —
 49
 50
Environmental obligations and shutdown costs—
 —
 —
 —
 —
 —
 —
 —
 —
 1
 —
 2
 3
Operating income (loss)156
 239
 395
 454
 483
 937
 1,249
 132
 78
 6
 (8) (290) 2,499
284
 430
 714
 518
 414
 932
 1,104
 155
 115
 4
 (19) (69) 2,936
                                                  
Interest expense, net1
 2
 3
 —
 —
 —
 —
 2
 —
 —
 2
 96
 103
1
 1
 2
 —
 —
 —
 1
 2
 —
 —
 4
 89
 98
Provision for income taxes—
 —
 —
 147
 151
 298
 499
 32
 —
 —
 —
 16
 845
—
 —
 —
 163
 143
 306
 496
 40
 —
 —
 —
 142
 984
Total assets at September 30, 20101,919
 4,271
 6,190
 4,308
 3,245
 7,553
 5,712
 3,540
 1,837
 335
 1,201
 1,583
 27,951
Total assets at March 31, 20111,991
 4,623
 6,614
 4,573
 3,427
 8,000
 5,440
 3,630
 2,068
 384
 1,437
 3,435
 31,008
Capital expenditures13
 46
 59
 32
 97
 129
 116
 9
 22
 2
 4
 9
 350
29
 90
 119
 24
 116
 140
 125
 11
 71
 3
 8
 28
 505
a.
Includes PT Freeport Indonesia’s sales to PT Smelting totaling $665589 million in third-quarterfirst-quarter 20112012 and $603680 million in third-quarterfirst-quarter 20102011.


16
Table of Contents


Business Segments (Continued)
(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
Nine Months Ended September 30, 2011                         
Revenues:                         
Unaffiliated customers$371
 $154
 $525
 $1,662
 $1,803
 $3,465
 $4,112
a 
$959
 $1,119
 $4,291
 $2,241
 $6
 $16,718
Intersegment1,274
 2,540
 3,814
 303
 135
 438
 544
 4
 —
 19
 11
 (4,830) —
Production and delivery719
 1,204
 1,923
 569
 761
 1,330
 1,547
 422
 786
 4,292
 2,274
 (5,070) 7,504
Depreciation, depletion and amortization85
 111
 196
 102
 85
 187
 179
 98
 44
 6
 30
 16
 756
Selling, general and administrative expenses1
 2
 3
 3
 2
 5
 100
 6
 11
 —
 18
 180
 323
Exploration and research expenses4
 —
 4
 —
 —
 —
 —
 —
 3
 —
 —
 187
 194
Environmental obligations and shutdown costs4
 (15) (11) —
 —
 —
 —
 —
 —
 1
 —
 108
 98
Operating income (loss)832
 1,392
 2,224
 1,291
 1,090
 2,381
 2,830
 437
 275
 11
 (70) (245) 7,843
                          
Interest expense, net2
 4
 6
 1
 —
 1
 9
 5
 —
 —
 12
 217
 250
Provision for income taxes—
 —
 —
 476
 353
 829
 1,241
 100
 —
 —
 —
 528
 2,698
Capital expenditures69
 273
 342
 120
 311
 431
 463
 89
 317
 7
 29
 71
 1,749
                          
Nine Months Ended September 30, 2010                         
Revenues:                         
Unaffiliated customers$20
 $31
 $51
 $1,338
 $1,646
 $2,984
 $3,490
a 
$763
 $893
 $3,363
 $1,830
 $5
 $13,379
Intersegment1,107
 1,958
 3,065
 275
 124
 399
 770
 —
 —
 20
 14
 (4,268) —
Production and delivery509
 1,048
 1,557
 513
 714
 1,227
 1,430
 347
 574
 3,360
 1,823
 (4,084) 6,234
Depreciation, depletion and amortization110
 110
 220
 109
 77
 186
 192
 94
 38
 6
 28
 24
 788
Selling, general and administrative expenses—
 —
 —
 —
 —
 —
 77
 —
 8
 —
 14
 178
 277
Exploration and research expenses—
 —
 —
 —
 —
 —
 —
 —
 2
 —
 —
 102
 104
Environmental obligations and shutdown costs—
 —
 —
 —
 —
 —
 —
 —
 —
 1
 —
 4
 5
Operating income (loss)508
 831
 1,339
 991
 979
 1,970
 2,561
 322
 271
 16
 (21) (487) 5,971
                          
Interest expense, net3
 8
 11
 —
 —
 —
 —
 4
 —
 —
 7
 348
 370
Provision for income taxes—
 —
 —
 320
 309
 629
 1,069
 75
 —
 —
 —
 183
 1,956
Capital expenditures28
 112
 140
 63
 220
 283
 311
 59
 34
 4
 16
 30
 877
a.
Includes PT Freeport Indonesia's sales to PT Smelting totaling $2.0 billion in the first nine months of2011 and $1.5 billion in the first nine months of2010.


1719
Table of Contents    


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, 2011March 31, 2012, and the related consolidated statements of income, comprehensive income and cash flows for the three- and nine-month periods ended September 30, 2011March 31, 2012 and 2010, the consolidated statements of cash flows for the nine-month periods ended September 30, 2011 and 2010, and the consolidated statement of equity for the ninethree-month period ended September 30, 2011March 31, 2012. 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, 20102011, and the related consolidated statements of operations,income, cash flows, and equity for the year then ended (not presented herein), and in our report dated February 25, 2011,27, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 20102011, 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
NovemberMay 4, 20112012

1820
Table of Contents    


Item 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, 20102011, 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.results (refer to "Cautionary Statement" for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements. Throughout Management's Discussion and Analysis of Financial Condition and Results of Operations all references to earnings or losses per share are on a diluted basis, unless otherwise noted, and have been retroactively adjusted to reflect the February 1, 2011, two-for-one stock split.noted.

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.

Our results for the thirdfirst-quarter2012 quarter and, compared with first nine months offirst-quarter 2011, compared with the 2010 periods, primarily reflected higher realized copper and gold prices and lower copper and gold sales volumes. Third-quarter 2011volumes and lower realized copper prices. First-quarter 2012 results also reflect unfavorable impacts from provisional price adjustments.included losses on early extinguishment of debt of $168 million ($149 million to net income attributable to common stock or $0.16 per share). Refer to “Consolidated Results” for further discussion of our consolidated financial results for the quarter and ninefirst quarters-month periods ended
September 30, 2011of 2012 and 20102011.

Third-quarter 2011Our first-quarter2012 results also reflectreflected the impactsimpact of labor disruptionslabor-related work interruptions and the related temporary suspension of operations at PT Freeport Indonesia. Operations and productivity at PT Freeport Indonesia includinghave improved, and full operations, which are dependent on maintaining security and productivity in the eight-day strike in July 2011 and the ongoing strike that commenced on September 15, 2011. The union has notified PT Freeport Indonesia that it intendsworkplace, are expected to extend the strike to December 15, 2011. PT Freeport Indonesia continues to seek to end the strike, which has no legal basis, and to conclude negotiations, on a fair and reasonable basis, of the bi-annual renewal of its collective labor agreement. PT Freeport Indonesia's compensation practices are highly competitive in Indonesia, and PT Freeport Indonesia has agreed to accept the recommendations of the government-appointed mediator for a generous increase in wages and other benefits. PT Freeport Indonesia has developed revised operating plansbe restored during the strike.second-quarter 2012. Refer to "Consolidated Results" and "Operations - Indonesia Mining" for further discussion of the impacts from the labor disruptions at PT Freeport Indonesia.

During third-quarter 2011, Cerro Verde's union workforce also commenced a serieswork interruptions and temporary suspension of strike actions, with the latest strike commencing on September 29, 2011. Efforts are ongoing to reach a mutually satisfactory renewal of Cerro Verde's collective bargaining agreement. Production of copper and molybdenum has not been materially affected by the strike.operations in first-quarter 2012.

At September 30, 2011March 31, 2012, we had $5.14.5 billion in consolidated cash and cash equivalents and $3.5 billion in total debt. During the first nine months of 2011first-quarter2012, we repaid $1.2 billion in debt, including the April 2011 redemption of $1.1sold $3.0 billion of outstanding 8.25%senior notes in three tranches with a weighted average interest rate of approximately three percent. We used the proceeds from this offering, plus cash on hand, to redeem the remaining $3.0 billion of our 8.375% Senior Notes (referNotes. Refer to Note 6 for further discussion), and paid common stock dividends totaling $1.2 billion. We have no significant debt maturities in the near term; however, we may consider additional opportunities to prepay debt in advance of scheduled maturities. Refer to5 “Capital Resources and Liquidity – Financing Activities” for further discussion.

In December 2010,February 2012, our Board of Directors (the Board) authorized a two-for-onean increase in the cash dividend on our common stock split effected on February 1, 2011 (refer to Note 1 for further discussion)an annual rate of $1.25 per share ($0.3125 per share quarterly). Refer to “Capital"Capital Resources and Liquidity –- Financing Activities”Activities" for further discussion ofdiscussion.

At current copper prices we expect to produce substantial operating cash flows in 2012, and plan to focus on using our cash to invest in our development projects and return cash to shareholders through common stock dividends.

dividends and/or share repurchases.

1921
Table of Contents    


OUTLOOK
 
While the near-term economic outlook is uncertain and has resulted in a decline in copper prices during the third quarter, weWe view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy.

We will continue to adjust our operating strategy as market conditions change. Our financial results vary as a result ofwith fluctuations in metal market prices includingfor copper, gold and molybdenum.molybdenum and other factors. 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 that 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. OurConsolidated sales from mines for the year 2012 are expected to approximate 3.7 billion pounds of copper, 1.1 million ounces of gold and 81 million pounds of molybdenum, including 895 million pounds of copper, 235 thousand ounces of gold and 20 million pounds of molybdenum for second-quarter2012. Sales estimates for the year 2012 have been revised from the estimates provided in our annual report on Form 10-K for the year ended December 31, 2011, by approximately 100 million pounds of copper and 100 thousand ounces of gold because of reduced operations at PT Freeport Indonesia. The achievement of projected2012 sales volumes dependis dependent on thea number of factors, including returning to normal operations at Grasberg during second-quarter 2012, achievement of targeted mining rates, the successful operation of production facilities, the impact of weather conditions and other factors. On October 19, 2011, we reported that our consolidated sales from mines for the year 2011 are expected to approximate 3.8 billion pounds of copper, 1.6 million ounces of gold and 78 million pounds of molybdenum, including 915 million pounds of copper, 305 thousand ounces of gold and 18 million pounds of molybdenum for fourth-quarter2011. We also reported that the impact of the labor disruptions at PT Freeport Indonesia for the year 2011, which is subject to change based on operating rates, mine plans, the extent to which PT Freeport Indonesia can operate using a reduced workforce, and the timing of the resumption of normal operations, is estimated to approximate 100 million pounds of copper and 100 thousand ounces of gold. Fourth-quarter 2011 sales estimates reflect reduced operations resulting from the current strike conditions, and include an assumption that operations are conducted on average at the reduced rates (mill throughput averaging approximately 175,000 metric tons of ore per day) throughout fourth-quarter 2011.

PT Freeport Indonesia is operating the Grasberg open pit and the Deep Ore Zone (DOZ) underground mine at reduced rates using non-striking employees and contractors. Since October 22, 2011, milling operations have been temporarily suspended pending repairs to concentrate pipelines damaged as a result of civil unrest which occurred during the course of the strike. PT Freeport Indonesia has initiated repairs to the damaged pipelines but has not been able to gain full access to the affected areas of the pipelines because of road blockages by striking workers. PT Freeport Indonesia is working with local authorities to restore access to the road and the pipelines so that repairs can be completed and milling operations restarted. During October 2011, mill throughput of approximately 120,000 metric tons of ore per day was below forecast because of the currently on-going suspension of milling and concentrate delivery operations since October 22, 2011.

We will provide further updates on the status of operations and revised estimates of fourth quarter production when access is restored and repairs are completed.

Unit Net Cash Costs. Assuming average prices of $1,600 per ounce of gold and $14 per pound of molybdenum for fourth-quarterthe remainder of 20112012, and achievement of current 2011 sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mining operations are expected to average approximately $0.951.43 per pound of copper for the year 20112012. Quarterly unit net cash costs vary with fluctuations in sales volumes and average realized prices for gold and molybdenum. Fourth-quarter 2011Second-quarter 2012 unit net cash costs are expected to be higher than first-quarter 2012 and the average for the year primarily reflecting lower gold volumes in Indonesia. The impact of price changes on consolidated unit net cash costs would approximate $0.0060.01 per pound for each $50 per ounce change in the average price of gold during fourth-quarterthe remainder of 20112012, and $0.0040.015 per pound for each $2 per pound change in the average price of molybdenum during fourth-quarterthe remainder of 20112012. 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 projected consolidated sales volumes and unit net cash costs for 20112012, and assuming average prices of $3.253.50 per pound of copper, $1,600 per ounce of gold and $14 per pound of molybdenum for fourth-quarterthe remainder of 20112012, consolidated operating cash flows are estimated to approximate $74.2 billion for the year 20112012, net (net of an estimated $0.3$1.1 billion for in working capital requirements.uses). Projected operating cash flows for the year 20112012 also reflect estimated taxes of $3.3$1.9 billion (refer to “Consolidated Results – Provision for Income Taxes” for further discussion of our projected annual consolidated effective annual tax rate for 20112012). The impact of price changes for fourth-quarterthe remainder of 20112012 on operating cash flows would approximate $75110 million for each $0.100.05 per pound change in the average price of copper, $1035 million for each $50 per ounce change in the average price of gold and $1070 million for each $2 per pound change in the average price of molybdenum.

2022
Table of Contents    


COPPER, GOLD AND MOLYBDENUM MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 20012002 through October 2011,April 2012, the London Metal Exchange (LME) spot copper price varied from a low of $0.600.64 per pound in 20012002 to a record high of $4.60 per pound in February 2011, the London p.m.Bullion Market Association (London) gold price fluctuated from a low of $256278 per ounce in 20012002 to a record high of $1,895 per ounce in September 2011, and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $2.192.43 per pound in 20012002 to a record 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, 20102011.

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

This graph presents LME spot copper prices and the combined reported stocks of copper at the LME and the New York Mercantile Exchange (COMEX) from January 20012002 through October 2011.April 2012. From 2006 through most of 2008, limited supplies, combined with growing demand from China and other emerging economies, resulted in high copper prices and low levels of inventories. In late 2008, slowing consumption, turmoil in the U.S. financial markets and concerns about the global economy led to a sharp decline in copper prices, which reached a low of $1.26 per pound in December 2008. Copper prices have since improved from 2008 lows, attributable to a combination of strong demand from emerging markets and limitations on available supply. During third-quarterfirst-quarter 20112012, LME spot copper prices were volatile rangingranged from $3.163.39 per pound to $4.463.93 per pound, averagingaveraged $4.073.77 per pound and closingclosed at $3.23$3.85 per pound on SeptemberMarch 30, 2011. Copper and other commodity prices fell sharply in September on heightened concerns over the European sovereign debt crisis, economic conditions in the U.S. and Chinese monetary policy.2012. Combined LME and COMEX inventories have risenfallen somewhat in 2011,2012, compared to year-end 20102011 levels, primarily as a result of reducedincreased Chinese imports.

We believe the underlying fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy and limited supplies from existing mines and the absence of significant new development projects.supplies. Future copper prices are expected to be volatile and are likely to be influenced by demand from China and emerging markets, 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 $3.583.87 per pound on October 31, 2011April 30, 2012.



2123
Table of Contents    


This graph presents London p.m. gold prices from January 20012002 through October 2011.April 2012. During third-quarterfirst-quarter 20112012, gold prices were volatile rangingranged from $1,4831,598 per ounce to a record high of $1,8951,781 per ounce, averagingaveraged $1,7021,691 per ounce and closingclosed at $1,620$1,663 per ounce on SeptemberMarch 30, 2011. Market sentiment2012. We believe the outlook for gold remains positive, which we believe is supported by fiscal issues affecting the U.S.continued macroeconomic uncertainty and Europe, weakness in the U.S. dollar and prospects for future inflation.elevated sovereign debt levels. Gold prices closed at $1,7221,651 per ounce on October 31, 2011April 30, 2012.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average prices from January 20012002 through October 2011.April 2012. In late 2008, molybdenum prices declined significantly as a result of the financial market turmoil and a decline in demand; however, molybdenum prices have increased from the 2008 lows, whichand we believe isprices are being supported by improved economic conditions and resulting demand increases. During third-quarterfirst-quarter 20112012, the weekly average price of molybdenum ranged from $14.4013.45 per pound to $15.0514.80 per pound, averaged $14.17 per pound and averaged $14.62closed at $14.00 per pound.pound on March 30, 2012. The Metals Week Molybdenum Dealer Oxide weekly average price was $12.7014.18 per pound on October 31, 2011April 30, 2012.


2224
Table of Contents    


CONSOLIDATED RESULTS
Three Months Ended Nine Months Ended Three Months Ended 
September 30, September 30, March 31, 
2011 2010 2011 2010 2012 2011 
Financial Data (in millions, except per share amounts)
            
Revenuesa,b
$5,195
 $5,152
 $16,718
 $13,379
 $4,605
 $5,709
 
Operating incomeb
$2,150
 $2,499
 $7,843
 $5,971
 
Operating incomeb,c
$1,734
 $2,936
 
Net income attributable to FCX common stockholders$1,053
c 
$1,178
 $3,920
c,d 
$2,724
d 
$764
d 
$1,499
d 
Diluted net income per share attributable to FCX common stockholders$1.10
c 
$1.24
e 
$4.10
c,d 
$2.94
d,e 
$0.80
d 
$1.57
d 
Diluted weighted-average common shares outstanding955
 947
e 
955
 947
e 
955
 955
 
            
Mining Operating Data            
Copper (millions of recoverable pounds)
            
Production951
 1,042
 2,868
 2,901
 833
 950
 
Sales, excluding purchases947
 1,081
 2,875
 2,955
 827
 926
 
Average realized price per pound$3.60
 $3.50
 $3.94
 $3.33
 $3.82
 $4.31
 
Site production and delivery costs per poundf
$1.71
 $1.38
 $1.65
 $1.38
 
Unit net cash costs per poundf
$0.80
 $0.82
 $0.84
 $0.87
 
Site production and delivery costs per pounde
$1.96
 $1.61
 
Unit net cash costs per pounde
$1.26
 $0.79
 
Gold (thousands of recoverable ounces)
            
Production385
 492
 1,202
 1,257
 252
 466
 
Sales, excluding purchases409
 497
 1,245
 1,273
 288
 480
 
Average realized price per ounce$1,693
 $1,266
 $1,565
 $1,204
 $1,694
 $1,399
 
Molybdenum (millions of recoverable pounds)
            
Production23
 19
 65
 53
 21
 20
 
Sales, excluding purchases19
 17
 60
 50
 21
 20
 
Average realized price per pound$16.34
 $16.06
 $17.57
 $16.43
 $15.34
 $18.10
 
a.Includes the impact of adjustments to provisionally priced concentrate and cathode sales recognized in prior periodsyears (refer to “Revenues” below for further discussion). 
b.
Refer to Note 11 for a summary of revenues and operating income by business segment.
c.Includes additional taxesWe defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to "Operations - Atlantic Copper Smelting & Refining" for a summary of $50 million, net of noncontrolling interests, ($0.05 per share) associated with Peru's new mining tax and royalty regime (refer to "Provision for Income Taxes" for further discussion).impacts from changes in these deferrals.
d.
Includes losses on early extinguishment of debt totaling $60149 million ($0.060.16 per share) for the first nine months offirst-quarter 20112012 associated with the redemption of our 8.375% Senior Notes and $676 million ($0.070.01 per share) for the first nine months offirst-quarter 20102011. Refer associated with the revolving credit facilities that were replaced in March 2011 (Refer to Note 65 for further discussion.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, 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.”

Revenues
Consolidated revenues totaled $5.24.6 billion in third-quarterfirst-quarter 2011 and $16.7 billion for the first nine months of20112012, compared with $5.25.7 billion in third-quarterfirst-quarter 2010 and $13.4 billion for the first nine months of20102011. Consolidated revenues include the sale of copper concentrates, copper cathodes, copper rod, gold, molybdenum and other metals by our North and South America mines, the sale of copper concentrates (which also contain significant quantities of gold and also silver) by our Indonesia mining operations, the sale of copper cathodes and cobalt hydroxide by our Africa mining 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.


2325
Table of Contents    



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 - 2010 periods$5,152
 $13,379
Higher (lower) price realizations from mining operations:   
First-quarter 2011 consolidated revenues$5,709
(Lower) higher price realizations from mining operations: 
Copper95
 1,754
(405)
Gold175
 449
85
Molybdenum5
 69
(58)
Silver44
 121
(6)
Cobalt(10) (15)(13)
Higher (lower) sales volumes from mining operations:   
(Lower) higher sales volumes from mining operations: 
Copper(469) (266)(427)
Gold(111) (34)(269)
Molybdenum42
 177
23
Silver9
 24
(16)
Cobalt66
 150
(9)
Unfavorable impact of net adjustments to prior period/year provisionally priced sales(368) (5)
(Lower) higher purchased copper(48) 323
Higher Atlantic Copper revenues242
 408
Favorable impact of net adjustments to prior year provisionally priced sales139
Lower purchased copper(239)
Other, including intercompany eliminations371
 184
91
Consolidated revenues - 2011 periods$5,195
 $16,718
First-quarter 2012 consolidated revenues$4,605

Price Realizations
Our consolidated revenues vary as a result of fluctuations in the market prices of copper, gold, molybdenum, silver and cobalt. Consolidated revenues in the first-quarter2012, compared with first-quarter2011 periods, compared to the 2010 periods,, reflected higherlower price realizations primarily associated with copper and gold.molybdenum, partly offset by higher gold realizations. Realized copper prices averaged $3.603.82 per pound in third-quarterfirst-quarter 20112012 (compared, compared with $3.504.31 per pound in third-quarter2010) and $3.94 per pound for the first nine months offirst-quarter 2011 (compared with $3.33 per pound for the first nine months of2010). Realized gold prices averaged $1,6931,694 per ounce in third-quarterfirst-quarter 20112012 (compared, compared with $1,2661,399 per ounce in third-quarter2010) and $1,565 per ounce for the first nine months offirst-quarter 2011 (compared. Realized molybdenum prices averaged $15.34 per pound in first-quarter2012, compared with $1,20418.10 per ounce for thepound in first nine months offirst-quarter 20102011).

Sales Volumes
Consolidated copper sales volumes oftotaled 947827 million pounds of copper, 288 thousand ounces of gold and 21 million pounds of molybdenum in third-quarterfirst-quarter2012, compared with 926 million pounds of copper, 480 thousand ounces of gold and 20 million pounds of molybdenum in first-quarter 2011. Lower consolidated copper and 2.9 billion pounds for the first nine months of2011, were lower than coppergold sales volumes in first-quarter 2012 primarily reflect lower volumes in Indonesia reflecting lower anticipated ore grades combined with work interruptions and the related temporary suspension of 1.1 billion pounds in third-quarter2010 and 3.0 billion pounds for the first nine months of2010.operations. Lower copper sales volumes in the 2011 periods primarily reflect lower sales volumes in Indonesia and South America,were partly offset by higher sales volumes in North America. Consolidated gold sales volumesThe estimated impact of 409 thousand ounces in third-quarter2011the work interruptions and 1.2the related temporary suspension of operations at PT Freeport Indonesia during first-quarter 2012 totaled approximately 80 million ounces for the first nine months of2011 were lower than consolidated gold sales volumes of 497 thousand ounces in third-quarter2010 and 1.3 million ounces for the first nine months of2010. Lower gold sales volumes in the 2011 periods primarily reflect lower Grasberg production. Third-quarter 2011 production pounds of copper and gold were adversely affected by labor disruptions at PT Freeport Indonesia. PT Freeport Indonesia has developed revised operating plans to produce and ship concentrates at modified levels with a reduced workforce and sold concentrate from inventory during third-quarter 2011, which partly mitigated the lower production levels.

Consolidated molybdenum sales volumes125 thousand ounces of 19 million pounds in third-quarter2011 and 60 million pounds for the first nine months of2011 were higher than molybdenum sales volumes of 17 million pounds in third-quarter2010 and 50 million pounds for the first nine months of2010. Higher molybdenum sales volumes primarily reflected improved demand.

gold. Refer to “Operations” for further discussion of sales volumes at our operating divisions and for further discussion of the impacts from labor disruptions at PT Freeport Indonesia.divisions.


24
Table of Contents


Provisionally Priced Copper Sales
During the first nine months of 2011first-quarter2012, 5541 percent of our mined copper was sold in concentrate, 2231 percent as rod (from our North America operations) and 2328 percent as cathodes.cathode. Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average spot copper 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 provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until the date of final pricing. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments 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.


26
Table of Contents

At June 30,December 31, 2011, we had provisionally priced copper sales at our copper mining operations, primarily South America and Indonesia, totaling 435252 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $4.273.44 per pound. LowerHigher prices during third-quarterfirst-quarter 20112012 resulted in adjustments to these provisionally priced copper sales and unfavorablyfavorably impacted consolidated revenues by $213109 million ($10047 million to net income attributable to common stockholders or $0.110.05 per share) in third-quarterfirst-quarter 20112012, compared with adjustments to the June 30,December 31, 2010, provisionally priced copper sales that favorablyunfavorably impacted third-quarterfirst-quarter 20102011 consolidated revenues by $19110 million ($854 million to net income attributable to common stockholders or $0.09less than $0.01 per share). Adjustments to the December 31, 2010, provisionally priced copper sales unfavorably impacted consolidated revenues by $12 million ($5 million to net income attributable to common stockholders or $0.01 per share) for the first nine months of2011, compared with adjustments to the December 31, 2009, provisionally priced copper sales that unfavorably impacted consolidated revenues by $23 million ($9 million to net income attributable to common stockholders or $0.01 per share) for the first nine months of2010.

At September 30, 2011March 31, 2012, we had provisionally priced copper sales at our copper mining operations, primarily South America and Indonesia, totaling 406214 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.183.83 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, 2011March 31, 2012, provisional price recorded would have a net impact on our 20112012 consolidated revenues of approximately $2715 million ($138 million to net income attributable to common stockholders). The LME spot copper price closed at $3.583.87 per pound on October 31, 2011April 30, 2012.

Purchased Copper and Molybdenum
From time to time we purchase copper cathode to be processed by our Rod & Refining operations when production from our North America copper mines does not meet customer demand. The increasedecrease in purchased copper in the nine-month 2011 period resulted from the timing of purchases and higher production at our North America copper prices.mines in first-quarter 2012, compared with first-quarter 2011.

Atlantic Copper Revenues
The increase in Atlantic Copper’s revenues in the 2011 periods primarily reflected higher copper and gold prices. Refer to “Operations - Atlantic Copper Smelting & Refining” for further discussion.We also purchase molybdenum concentrates when customer demand requires it.

Production and Delivery Costs
Consolidated production and delivery costs totaled $2.62.4 billion in the first quarters of third-quarter20112012 and $7.5 billion2011. Production and delivery costs for the first nine months offirst-quarter 20112012, compared with $2.3 billion in third-quarterfirst-quarter 20102011 and $6.2 billion for the first nine months of2010. Higher production and delivery costs for the 2011 periods primarily, reflected increased mining and milling activities in North America, higher input costs at our North and South America mining operations, and higher costs of concentrate purchases at Atlantic Copper associated with higher copper and gold prices. The first nine months of 2011 also reflected higheroffset by lower costs of copper cathode purchases in North America and lower costs of concentrate purchases at Atlantic Copper, both associated with higherlower copper prices.

Consolidated unit site production and delivery costs for our copper mining operations averaged $1.711.96 per pound of copper in third-quarterfirst-quarter 2011 and $1.65 per pound of copper for the first nine months of20112012, compared with $1.381.61 per pound of copper in the third quarter and first nine months of2010first-quarter. 2011. Higher site production and delivery costs in the 2011 periodsfirst-quarter 2012 primarily reflected lower copper sales volumes in Indonesia and South America and increased mining and milling activitiesinput costs in North and South America. Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions, and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements.

25
Table of Contents



Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas. For the year 20112012, energy costs are expected to approximate 2122 percent of our consolidated copper production costs, which reflects projected purchases of approximately 240260 million gallons of diesel fuel; 6,5857,085 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); 735750 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 20102011 approximated 2021 percent of our consolidated copper production costs.

Depreciation, Depletion and Amortization
Consolidated depreciation, depletion and amortization expense totaled $257267 million in third-quarterfirst-quarter 2011 and $756 million for the first nine months of20112012, compared with $268232 million in third-quarterfirst-quarter 2010 and $788 million for the first nine months of20102011. LowerDepreciation will vary under the unit of production (UOP) method as a result of increases and decreases in sales volumes and the related UOP rates at our mining operations. Higher depreciation, depletion and amortization expense for the first-quarter2012, compared with first-quarter2011 periods, primarily reflects the ramp up of production and asset additions in North America, partly offset by lower expense under the units-of-production method as a result ofdepreciation in Indonesia associated with lower copper sales volumes.

Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled $102104 million in third-quarterfirst-quarter 2011 and $323 million for the first nine months of20112012, compared with $81114 million in third-quarterfirst-quarter 2010 and $277 million for the first nine months of20102011, primarily reflecting higher estimatedlower incentive compensation costs associated with improved operating results and higher charitable contributions.costs.


27
Table of Contents

Exploration and Research Expenses
Consolidated exploration and research expenses totaled $7862 million in third-quarterfirst-quarter 20112012 and $194 million for the first nine months of2011, compared with $3550 million in third-quarterfirst-quarter 2010 and $104 million for the first nine months of20102011. We are actively conducting exploration activities near our existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where we currently operate. Favorable exploration results indicate opportunities for what we believe could be significant future potential reserve additions in North and South America and in the Tenke minerals district. The drilling data in North America continues to indicate the potential for expanded sulfide production.

For the year 20112012, exploration and research expenditures are expected to total approximately $300$330 million, including approximately $250275 million for exploration. Exploration activities will continue to focus primarily on the potential for future reserve additions in our existing mineral districts.

Environmental Obligations and Shutdown Costs
Environmental obligation costs consist ofreflect net revisions to our long-term environmental obligations, as further describedwhich will vary from period to period because of changes to environmental laws and regulations and/or circumstances affecting our operations that could result in Note 13 ofsignificant changes in our annual report on Form 10-K for the year ended December 31, 2010.estimates. Shutdown costs include care and maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations. The increase in

During first-quarter2012, there were no revisions to our environmental obligations, and shutdown costs totaled $10 million. See "Contingencies" for the 2011 periods, compared with the 2010 periods, primarily reflects net revisions tofurther discussion of environmental obligations based on updated assumptions (refer to "Environmental and Reclamation Matters" for further discussion). The nine month period also reflects second-quarter 2011 adjustments to accruals for future shutdown costs.litigation matters associated with closed facilities or operations.

Interest Expense, Net
Consolidated interest expense excluding capitalized interest,(before capitalization) totaled $10599 million in third-quarterfirst-quarter 2011 and $325 million for the first nine months of20112012, compared with $126123 million in third-quarterfirst-quarter 2010 and $409 million for the first nine months of20102011. Lower interest expense in the 2011 periodsfirst-quarter 2012 primarily reflected the impact of debt repayments during 2010 and the first nine months of 2011.

Capitalized interest is primarily related to our development projects and totaled $2736 million in third-quarterfirst-quarter 2011 and $75 million for the first nine months of20112012, compared with $2325 million in third-quarterfirst-quarter 2010 and $39 million for the first nine months of20102011. Refer to “Operations” for further discussion of current development projects.

Losses on Early Extinguishment of Debt
We recorded losses on early extinguishment of debt of $68168 million ($60149 million to net income attributable to common stockholders or $0.060.16 per share) for the first nine months offirst-quarter 20112012 associated with the redemption of our 8.25%remaining 8.375% Senior Notes in AprilNotes.

We recorded losses on early extinguishment of debt totaling $7 million ($6 million to net income attributable to common stockholders or $0.01 per share) for first-quarter 2011 related to the revolving credit facilities that were replaced in March 2011 by a new senior unsecured revolving credit facility and open-market purchases of our 9.5% Senior Notes.facility.

Refer to Note 5 for further discussion of these transactions.

2628
Table of Contents    


We recorded losses on early extinguishment of debt totaling $77 million ($67 million to net income attributable to common stockholders or $0.07 per share) for the first nine months of2010 associated with redemption of our Senior Floating Rate Notes and open-market purchases of our 8.25% and 8.375% Senior Notes.

Refer to Note 6 for further discussion of these transactions.

Provision for Income Taxes
Following is a summary of the approximate amounts in the calculation of our consolidated provision for income taxes for the 2011first quarters of 2012 and 2010 periods2011 (in millions, except percentages):
Nine Months Ended Nine Months EndedThree Months Ended Three Months Ended
September 30, 2011 September 30, 2010March 31, 2012 March 31, 2011
Incomea
 
Effective
Tax Rate
 
Income Tax
(Provision) Benefit
 
Incomea (Loss)
 
Effective
Tax Rate
 
Income Tax
(Provision) Benefit
Incomea
 
Effective
Tax Rate
 
Income Tax
(Provision) Benefit
 
Incomea
 
Effective
Tax Rate
 
Income Tax
(Provision) Benefit
U.S.$1,772
 24% $(421) $905
 23% $(205)$339
 24% $(83) $647
 21% $(138)
South America2,326
 36%
b 
(829) 1,926
 33% (629)691
 35% (240) 914
 33% (306)
Indonesia2,870
 43% (1,241) 2,569
 42% (1,069)351
 43% (150) 1,161
 43% (496)
Africa293
 34% (100) 251
 30% (75)89
 33% (29) 104
 38% (40)
Eliminations and other304
 N/A (127) (125) N/A 43
20
 N/A 9
 15
 N/A (11)
Annualized rate adjustmentc
N/A
 N/A 20
 N/A
 N/A (21)
Annualized rate adjustmentb
N/A
 N/A 2
 N/A
 N/A 7
Consolidated FCX$7,565
 36%
d 
$(2,698) $5,526
 35% $(1,956)$1,490
 33%
c 
$(491) $2,841
 35% $(984)
a.Represents income (loss) by geographic location before income taxes and equity in affiliated companies’ net earnings.
b.On September 29, 2011, Peru enacted its new mining tax and royalty regime. Under the new regime, companies that do not have stability agreements will be subject to a revised royalty and a special mining tax. Cerro Verde operates under a stability agreement and therefore, is not subject to the revised royalty and special mining tax until its stability agreement expires on December 31, 2013. The Peruvian government has also created a special mining burden that companies with stability agreements can elect to pay. The special mining burden is based on a sliding scale of 4 to 13 percent, with a maximum effective tax rate of 8.79 percent. Cerro Verde has elected to pay this special mining burden during the remaining term of its stability agreement. As a result , Cerro Verde recognized additional current and deferred tax expense of $57 million ($50 million net of noncontrolling interests) in third-quarter 2011. The deferred portion of this accrual relates primarily to the assets recorded in connection with the 2007 acquisition of Phelps Dodge.
c.In accordance with applicable accounting rules, we adjust our interim provision for income taxes equal to our estimated annualized tax rate.
d.c.
Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. Accordingly, variations in the relative proportions of jurisdictional income can result in fluctuations to our consolidated effective income tax rate. Assuming average prices of $3.253.50 per pound for copper, $1,600 per ounce for gold and $14 per pound for molybdenum for fourth-quarterthe remainder of 20112012 and achievement of current 2011 sales volume and cost estimates, we estimate our annual consolidated effective tax rate will approximate 3633 percent.
 
OPERATIONS

North America Copper Mines
We currently operate seven copper mines in North America – Morenci, 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. Molybdenum concentrate is also produced by Morenci,certain of our North America copper mines (primarily Sierrita, Bagdad and SierritaMorenci). A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining operations. The remainder of our North America copper sales is primarily in the form of copper cathode or copper concentrate.

Operating and Development Activities. During 2011 and 2010, we initiated plans to increaseincreased production at our North America copper mines, which had been curtailed in late 2008 because of weak market conditions. Further discussion of thesemines. The projects is presented below.


27
Table of Contents


included restarting milling operations and increasing mining rates at Morenci and Chino and restarting the Miami mine. We also havecontinue to evaluate a number of opportunities to invest in additional production capacity at several of our North America copper mines. Positive explorationExploration results in recent years indicate the potential for significant additional sulfide development in North America. Further discussion of current development projects at our North America copper mines is presented below.

Morenci Mine Ramp-up and Mill Restart.Expansion. During second-quarter 2011, weWe recently completed the ramp up of Morenci's mining rates to 635,000 metric tons of ore per day and milling rates to approximately 50,000 metric tons of ore per day, resulting in increased copper production of approximately 125 million pounds of copper per year.

We are advancing a feasibility study to expand mining and milling capacity at Morenci to process additional sulfide oreores identified through positive exploratory drilling. ThisThe approximate $1.4 billion project which would require significant investment, would increase milling rates from the current level of 50,000 metric tons of ore per day to approximately 115,000 metric tons of ore per day, and mining rates from the current level of 700,000 short tons per day to 900,000 short tons per day and target incremental annual copper production of approximately 225 million pounds within a three year timeframe. Completion of the feasibility study is expected in early 2012.

Miami Restart. The ramp up of mining activities at the Miami mine continues. Production at Miami currently approximates 60 million pounds of copper per year for 2011,in 2014. We expect to commence engineering, procurement and is expected to ramp up to approximately 70 million pounds of copper per year byinitial construction activities during 2012.


29
Table of Contents

Chino Restart. During 2011, mining and milling activities were restarted at the Chino mine. Production at Chino currently approximates 70totaled 69 million pounds of copper per year for 2011 and is expected to increase to approximately 200250 million pounds of copper per year byin 2014. Costs for the project associated with equipment and mill refurbishment are expected to approximate $175 million. Project costs of $106$109 million have been incurred as of September 30, 2011March 31, 2012 ($964 million during the first nine months offirst-quarter 20112012).

Twin 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. We are conducting drilling on the property and metallurgical studies to support a feasibility study expected to commence in 2012.

Other Matters. During August 2011, we successfully negotiated a new three-year labor contract with our union-represented employees at the Chino mine.


28
Table of Contents


Operating Data. Following is summary operating data for the North America copper mines for the thirdfirst quarters andof first nine months of20112012 and 20102011:
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Operating Data, Net of Joint Venture Interest          
Copper (millions of recoverable pounds)
          
Production322
 259
 917
 786
337
 282
Sales, excluding purchases307
 267
 914
 847
338
 276
Average realized price per pound$4.05
 $3.32
 $4.19
 $3.28
$3.82
 $4.40
          
Molybdenum (millions of recoverable pounds)
          
Productiona
10
 7
 27
 18
10
 7
          
100% Operating Data          
SX/EW operations          
Leach ore placed in stockpiles (metric tons per day)872,200
 653,400
 841,700
 634,000
1,032,900
 811,700
Average copper ore grade (percent)0.25
 0.22
 0.25
 0.24
0.23
 0.24
Copper production (millions of recoverable pounds)199
 179
 582
 563
218
 182
          
Mill operations          
Ore milled (metric tons per day)225,800
 190,500
 220,100
 183,000
236,000
 213,400
Average ore grade (percent):          
Copper0.38
 0.32
 0.37
 0.31
0.37
 0.36
Molybdenum0.03
 0.03
 0.03
 0.02
0.03
 0.03
Copper recovery rate (percent)84.5
 82.6
 83.5
 83.0
80.0
 81.8
Production (millions of recoverable pounds):       
Copper146
 100
 404
 280
Molybdenum10
 7
 27
 18
Copper production (millions of recoverable pounds)142
 122
a.Reflects molybdenum production from certain of the North America copper mines. Sales of molybdenum are reflected in the Molybdenum division.

Copper sales volumes from our North America copper mines increased to 307338 million pounds in third-quarterfirst-quarter 2011 and 914 million pounds for the first nine months of20112012, compared with 267276 million pounds in third-quarterfirst-quarter 2010 and 847 million pounds for the first nine months of20102011, primarily reflecting increased production atassociated with the Morenci, Miamiramp up of mining and Chino mines.milling activities.

For the year 20112012, copper sales volumes from our North America copper mines are expected to approximate 1.21.3 billion pounds, compared with 1.11.2 billion pounds of copper in 20102011. Molybdenum production from our North America copper mines is expected to approximate 3531 million pounds for the year 20112012, compared with 2535 million pounds in 2010.2011.


30
Table of Contents

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 reported by other companies.


29
Table of Contents


Gross Profit per Pound of Copper and Molybdenum

The following tables summarize unit net cash costs and gross profit per pound at theour North America copper mines for the thirdfirst quarters andof first nine months of20112012 and 20102011. 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 Three Months Ended
Three Months Ended Three Months Ended
September 30, 2011 September 30, 2010March 31, 2012 March 31, 2011
By- Product Method Co-Product Method By- Product Method Co-Product MethodBy- Product Method Co-Product Method By- Product Method Co-Product Method
 Copper 
Molyb-
denuma
 Copper 
Molyb-
denuma
 Copper 
Molyb-
denuma
 Copper 
Molyb-
denuma
Revenues, excluding adjustments$4.05
 $4.05
 $15.22
 $3.32
 $3.32
 $15.10
$3.82
 $3.82
 $14.16
 $4.40
 $4.40
 $16.87
                      
Site production and delivery, before net noncash and other costs shown below1.86
 1.65
 6.68
 1.62
 1.45
 8.18
1.80
 1.74
 3.04
 1.75
 1.57
 7.08
By-product creditsa
(0.55) —
 —
 (0.36) —
 —
(0.41) —
 —
 (0.49) —
 —
Treatment charges0.11
 0.11
 —
 0.10
 0.10
 —
0.12
 0.11
 —
 0.11
 0.10
 —
Unit net cash costs1.42
 1.76
 6.68
 1.36
 1.55
 8.18
1.51
 1.85
 3.04
 1.37
 1.67
 7.08
Depreciation, depletion and amortization0.21
 0.19
 0.34
 0.24
 0.22
 0.51
0.27
 0.26
 0.18
 0.20
 0.19
 0.43
Noncash and other costs, net0.04
 0.04
 0.02
 0.11
 0.11
 (0.12)0.06
 0.06
 0.01
 0.18
 0.18
 0.14
Total unit costs1.67
 1.99
 7.04
 1.71
 1.88
 8.57
1.84
 2.17
 3.23
 1.75
 2.04
 7.65
Revenue adjustments(0.04) (0.04) —
 —
 —
 —
Idle facility and other non-inventoriable costs(0.06) (0.06) (0.04) (0.10) (0.10) (0.04)
Revenue adjustments, primarily for pricing on prior period open sales0.03
 0.03
 —
 —
 —
 —
Gross profit per pound$2.28
 $1.96
 $8.14
 $1.51
 $1.34
 $6.49
$2.01
 $1.68
 $10.93
 $2.65
 $2.36
 $9.22
                      
Copper sales (millions of recoverable pounds)307
 307
   266
 266
  337
 337
   275
 275
  
Molybdenum sales (millions of recoverable pounds)b
    10
     7
    10
     7
 Nine Months Ended Nine Months Ended
 September 30, 2011 September 30, 2010
 By- Product Method Co-Product Method By- Product Method Co-Product Method
  Copper 
Molyb-
denuma
  Copper 
Molyb-
denuma
Revenues, excluding adjustments$4.19
 $4.19
 $16.30
 $3.28
 $3.28
 $15.49
            
Site production and delivery, before net noncash and other costs shown below1.80
 1.61
 6.77
 1.46
 1.31
 8.06
By-product creditsa
(0.52) —
 —
 (0.33) —
 —
Treatment charges0.10
 0.10
 —
 0.09
 0.09
 —
Unit net cash costs1.38
 1.71
 6.77
 1.22
 1.40
 8.06
Depreciation, depletion and amortization0.20
 0.19
 0.38
 0.24
 0.23
 0.59
Noncash and other costs, net0.08
 0.07
 0.05
 0.13
 0.12
 (0.01)
Total unit costs1.66
 1.97
 7.20
 1.59
 1.75
 8.64
Revenue adjustments—
 —
 —
 —
 —
 —
Idle facility and other non-inventoriable costs(0.05) (0.05) (0.02) (0.08) (0.08) (0.02)
Gross profit per pound$2.48
 $2.17
 $9.08
 $1.61
 $1.45
 $6.83
            
Copper sales (millions of recoverable pounds)912
 912
   845
 845
  
Molybdenum sales (millions of recoverable pounds)b
    27     18
a.Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita. 
b.Reflects molybdenum produced by certain of our North America copper mines.

Our operating North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-products and other factors. Average unitUnit net cash costs (net of by-product credits) for our North America copper mines totaledaveraged $1.421.51 per pound of copper in third-quarterfirst-quarter 2011 and $1.38 per pound of copper for the first nine months of20112012, compared with $1.361.37 per pound of copper in third-quarterfirst-quarter 2010

30
Table of Contents


and $1.22 per pound of copper for the first nine months of20102011, primarily reflecting higher site production and delivery costs ($0.24 per pound for the quarter and $0.34 per pound for the nine-month period) resulting from increased mining and milling activities, andpartly offset by higher input costs. Partly offsetting higher site production and deliverycopper sales volumes. North America copper mines' average unit net cash costs were higheralso reflected lower molybdenum credits ($0.19 per pound for both the quarter andin ninefirst-quarter2012-month periods) resulting from higher molybdenum volumes..

Assuming achievement of current sales volume and cost estimates and an average price of $14 per pound of molybdenum for fourth-quarterthe remainder of 20112012, we estimate that average unit net cash costs (net of by-product credits) for our North America copper mines would approximate $1.421.68 per pound of copper for the year 20112012, compared with $1.241.41 per pound of copper in 20102011. North America's average unit net cash costs for 20112012 would change by approximately $0.010.03 per pound for each $2 per pound change in the average price of molybdenum during fourth-quarterthe remainder of 20112012.


31
Table of Contents

South America Mining
We operate four copper mines in South America – Cerro Verde in Peru, and El Abra, Candelaria and Ojos del Salado 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.

South America mining includes open-pit and underground mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or copper cathode under long-term contracts. Our South America mines ship a portion of their copper concentrate and cathode inventories to Atlantic Copper, an affiliated smelter. In addition to copper, the Cerro Verde mine produces molybdenum concentrates, and the Candelaria and Ojos del Salado mines produce gold and silver.

Operating and Development Activities.
El Abra Sulfide. During 2011, we commenced production from El Abra’s newly commissioned stacking and leaching facilities to transition from oxide to sulfide ores. Production from the sulfide ore is expected to approximate 300 million pounds of copper per year, replacing the currently depleting oxide copper production. The aggregate capital investment for this project is expected to total $725approximate $800 million through 2015, of which includes approximately $580 million is for the nearly completed initial phase of the project expected to be complete by the end of 2011.project. Project costs of $494$531 million have been incurred as of September 30, 2011March 31, 2012 ($13318 million during the first nine months offirst-quarter 20112012).

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. Positive exploration results at El Abra indicate the potential for a significant sulfide resource. Exploration activities are continuing.

Cerro Verde Expansion. At Cerro Verde, plans for a large-scale concentrator expansion continue to be advanced. The approximate $4 billion project would expand the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day and provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016. We filed anAn environmental impact assessment was filed in fourth-quarter 2011.2011, permitting is being advanced and engineering and procurement of long-lead items are in progress.

An agreement has been reached with the Regional Government of Arequipa, the National Government, Servicio de Agua Potable y Alcantarillado de Arequipa S.A. (SEDAPAR) and other local institutions to allow Cerro Verde to finance the engineering and construction of a wastewater treatment plant for Arequipa, should Cerro Verde proceed with the expansion. Once Cerro Verde obtains a license for the treated water it would be used to supplement its existing water supplies to support the potential concentrator expansion.  

Candelaria Water. As part of our overall strategy to supply water to the Candelaria mine, we completed construction of a pipeline to bring water from a nearby water treatment facility. In addition, we have completed engineering and began construction for a desalination plant and pipeline that will supply Candelaria’s longer term water needs. The plant is expected to be completed in early 2013 at a capital investment of $280approximately $300 million. Project costs of $84$180 million have been incurred as of September 30, 2011March 31, 2012 ($7854 million during the first nine months offirst-quarter 20112012).


31
Table of Contents


Other Matters. As reported in Note 13 of our annual report on Form 10-K for the year ended December 31, 2010, Cerro Verde has received assessments from SUNAT, the Peruvian national tax authority, in connection with claims for mining royalties related to the minerals processed by its concentrator, which was added to Cerro Verde’s processing facilities in late 2006. These assessments relate to the period from October 2006 through December 2007, and to the years 2008 and 2009. SUNAT issued rulings denying Cerro Verde’s protest of the assessments, and Cerro Verde has appealed these decisions to the Peruvian Tax Tribunal. Cerro Verde is challenging these royalties because its stability agreement with the Peruvian government exempts from assessments all minerals extracted from its mining concession, irrespective of the method used for processing those minerals. If Cerro Verde is ultimately found responsible for these royalties, it will also be liable for interest, which accrues at rates that range from approximately 7 to 18 percent based on the year accrued and the currency in which the amounts would be payable. At September 30, 2011, the aggregate amount of the assessments, including interest and penalties, approximated $184 million. This amount will continue to increase at varying interest rates until this matter is resolved. SUNAT may continue to assess mining royalties annually until this matter is resolved by the Tax Tribunal.

As 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). Cerro Verde's final contribution to these funds was made in early 2011. In September 2011, Peru enacted a new mining tax and royalty regime. As a result, Cerro Verde recognized additional current and deferred income tax expense in third-quarter 2011. Refer to "Consolidated Results - Provision for Income Taxes" for further discussion.

In July 2011, the Chilean senate passed legislation regulating mine closure, which establishes new requirements for closure plans. Our Chilean operations will be required to update closure plans and provide financial assurance for these obligations.

During third-quarter 2011, Cerro Verde's union workforce commenced a series of strike actions. The most recent strike commenced on September 29, 2011. Efforts are ongoing to reach a mutually satisfactory renewal of Cerro Verde's collective bargaining agreement. Production of copper and molybdenum has not been materially affected.


32
Table of Contents    


Operating Data. Following is summary operating data for our South America mining operations for the thirdfirst quarters andof first nine months of20112012 and 20102011:
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Copper (millions of recoverable pounds)
          
Production325
 356
 969
 1,007
293
 317
Sales322
 377
 965
 995
286
 312
Average realized price per pound$3.45
 $3.55
 $3.82
 $3.36
$3.83
 $4.31
          
Gold (thousands of recoverable ounces)
          
Production25
 29
 73
 68
19
 24
Sales23
 30
 72
 69
19
 24
Average realized price per ounce$1,664
 $1,265
 $1,556
 $1,211
$1,680
 $1,394
          
Molybdenum (millions of recoverable pounds)
          
Productiona
2
 2
 8
 5
2
 3
          
SX/EW operations          
Leach ore placed in stockpiles (metric tons per day)244,100
 281,000
 249,500
 261,500
196,300
 262,200
Average copper ore grade (percent)0.54
 0.39
 0.48
 0.42
0.55
 0.43
Copper production (millions of recoverable pounds)111
 122
 314
 385
118
 90
          
Mill operations          
Ore milled (metric tons per day)185,700
 193,800
 192,300
 187,100
186,000
 191,800
Average ore grade:          
Copper (percent)0.66
 0.69
 0.66
 0.64
0.55
 0.68
Gold (grams per metric ton)0.12
 0.11
 0.12
 0.10
0.09
 0.12
Molybdenum (percent)0.02
 0.02
 0.02
 0.02
0.02
 0.02
Copper recovery rate (percent)89.1
 90.7
 90.0
 90.0
89.2
 91.4
Production (recoverable):       
Copper (millions of pounds)214
 234
 655
 622
Gold (thousands of ounces)25
 29
 73
 68
Molybdenum (millions of pounds)2
 2
 8
 5
Copper production (millions of recoverable pounds)175
 227
a.Reflects molybdenum production from Cerro Verde. Sales of molybdenum are reflected in the Molybdenum division.

Copper sales from our South America mining operations declined to 322286 million pounds in third-quarterfirst-quarter 2011 and 965 million pounds for the first nine months of20112012, compared with 377312 million pounds in third-quarterfirst-quarter 2010 and 995 million pounds for the first nine months of20102011, primarily reflecting the timing of shipments. Third-quarter 2011 was also impactedanticipated lower ore grades at Cerro Verde and Candelaria, partly offset by lowerhigher production at Candelaria and the first nine months of 2011 was impacted by anticipated lower mining rates at El Abra as it transitioned from oxide to sulfide ores.Abra.

For the year 2011,2012, consolidated sales volumes from South America mining are expected to approximate 1.3 billion pounds of copper and 100 thousand ounces of gold, similar to 20102011 sales of 1.3 billion pounds of copper and 93101 thousand ounces of gold. Molybdenum production from Cerro Verde is expected to approximate 109 million pounds for the year 20112012, compared with 710 million pounds in 2010.2011.

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.


33
Table of Contents    



Gross Profit per Pound of Copper

The following tables summarize unit net cash costs and gross profit per pound at the South America mining operations for the thirdfirst quarters andof first nine months of20112012 and 20102011. 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 Three Months EndedThree Months Ended Three Months Ended
September 30, 2011 September 30, 2010March 31, 2012 March 31, 2011
By-Product
Method
 
Co-Product
Method
 
By-Product
Method
 
Co-Product
Method
By-Product
Method
 
Co-Product
Method
 
By-Product
Method
 
Co-Product
Method
Revenues, excluding adjustments$3.45
 $3.45
 $3.55
 $3.55
$3.83
 $3.83
 $4.31
 $4.31
              
Site production and delivery, before net noncash and other costs shown below1.38
 1.25
 1.16
 1.09
1.53
 1.42
 1.30
 1.20
By-product credits(0.36) —
 (0.21) —
(0.29) —
 (0.36) —
Treatment charges0.13
 0.13
 0.18
 0.18
0.16
 0.16
 0.19
 0.19
Unit net cash costs1.15
 1.38
 1.13
 1.27
1.40
 1.58
 1.13
 1.39
Depreciation, depletion and amortization0.20
 0.19
 0.17
 0.17
0.22
 0.21
 0.18
 0.17
Noncash and other costs, net0.02
 0.01
 0.02
 0.02
0.07
 0.04
 0.06
 0.05
Total unit costs1.37
 1.58
 1.32
 1.46
1.69
 1.83
 1.37
 1.61
Revenue adjustments, primarily for pricing on prior period open sales(0.45) (0.45) 0.28
 0.28
0.38
 0.38
 0.03
 (0.03)
Other non-inventoriable costs(0.07) (0.06) (0.04) (0.03)
Gross profit per pound$1.56
 $1.36
 $2.47
 $2.34
$2.52
 $2.38
 $2.97
 $2.67
              
Copper sales (millions of recoverable pounds)322
 322
 377
 377
286
 286
 312
 312
 Nine Months Ended Nine Months Ended
 September 30, 2011 September 30, 2010
 
By-Product
Method
 
Co-Product
Method
 
By-Product
Method
 
Co-Product
Method
Revenues, excluding adjustments$3.82
 $3.82
 $3.36
 $3.36
        
Site production and delivery, before net noncash and other costs shown below1.31
 1.20
 1.19
 1.12
By-product credits(0.36) —
 (0.19) —
Treatment charges0.17
 0.17
 0.15
 0.15
Unit net cash costs1.12
 1.37
 1.15
 1.27
Depreciation, depletion and amortization0.19
 0.18
 0.19
 0.18
Noncash and other costs, net0.02
 0.02
 0.01
 0.01
Total unit costs1.33
 1.57
 1.35
 1.46
Revenue adjustments, primarily for pricing on prior period open sales0.01
 (0.01) (0.01) (0.01)
Other non-inventoriable costs(0.05) (0.04) (0.03) (0.03)
Gross profit per pound$2.45
 $2.20
 $1.97
 $1.86
        
Copper sales (millions of recoverable pounds)965
 965
 995
 995

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-products and other factors. Average unit net cash costs (net of by-product credits) for our South America mining operations averaged $1.151.40 per pound of copper in third-quarterfirst-quarter 20112012, compared with $1.13 per pound in third-quarterfirst-quarter 20102011. Higher average unit net cash costs in third-quarter 2011first-quarter2012 primarily reflected higher site production and delivery costs ($0.22 per pound) associated with increased input costs and lower copper sales volumes, partly offset by higher gold,and also reflected lower molybdenum and silver credits ($0.15 per pound) and lower treatment charges ($0.05 per pound).


34
Table of Contents


Average unit net cash costs at our South America mining operations averaged $1.12 per pound for the first nine months of2011, compared with $1.15 for the first nine months of2010. Lower unit net cash costs for the first nine months of 2011 primarily reflected higher molybdenum, gold and silver credits ($0.17 per pound), that more than offset higher site production and delivery costs ($0.12 per pound).credits.

Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. To the extent 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, lowerhigher copper prices at the end of third-quarterduring first-quarter 2012 resulted in favorable revenue adjustments to December 31, 2011, provisionally priced copper sales, whereas, decreasing prices in first-quarter 2011 resulted in unfavorable revenue adjustments to June 30, 2011, provisionally priced copper sales, whereas, increasing prices in third-quarter 2010 resulted in favorable revenue adjustments to June 30,December 31, 2010, provisionally priced copper sales. Refer to “Consolidated Results - Revenues” for further discussion.

Assuming achievement of current 2011 sales volume and cost estimates and average prices of $1,600 per ounce of gold and $14 per pound of molybdenum for fourth-quarterthe remainder of 20112012, we estimate that average unit net cash costs (net of by-product credits) for our South America mining operations would approximate $1.171.44 per pound of copper for the year 20112012, compared with $1.151.20 per pound in 20102011.

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 also 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.


34
Table of Contents

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. Refer to Note 2 in our annual report on Form 10-K for the year ended December 31, 2011, for discussion of our joint ventures with Rio Tinto plc.

Development Activities. We have several projects in progress in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016. Over the next five years, aggregate capital spending on these projects is expected to average $635$700 million per year ($500550 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.

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 and development of the Deep Mill Level Zone (DMLZ) ore body, that lies below the DOZDeep Ore Zone (DOZ) underground mine.

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 reachedwas completed to the Big Gossan terminal and development of the lower Big Gossan infrastructure is ongoing.mine was brought into production in fourth-quarter 2010. We have also advanced development of both the DMLZ and Grasberg spurspurs, and have completed the tunneling required to reach the Grasbergthese underground ore body. Development continues on the Grasberg Block Cave terminal infrastructure and mine access.bodies.

The Grasberg Block Cave underground mine 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-2016.2016. The timing of the transition to underground Grasberg Block Cave mine development will continue to be assessed. 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.


35
Table of Contents


Aggregate mine development capital for the Grasberg Block Cave mine and associated Common Infrastructure is expected to approximate $3.9$4.2 billion (incurred between 2008 and 2021), with PT Freeport Indonesia’s share totaling approximately $3.5$3.8 billion. Aggregate project costs totaling $485$634 million have been incurred through September 30, 2011March 31, 2012 ($22565 million during the first nine months of2011)first-quarter 2012).

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. Production, which began in fourth-quarter 2010, is designed to ramp up to 7,000 metric tons of ore per day by the end of 2012in 2013 (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)gold). The aggregate capital investment for this project is currently estimated at approximately $550 million, with PT Freeport Indonesia’s share totaling approximately $515$518 million. Aggregate project costs of $483$501 million have been incurred through September 30, 2011March 31, 2012 ($397 million during the first nine months of2011)first-quarter 2012).

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. We plan to mine the ore body using a block-cave method with production beginning in 2015, near completion of mining at the DOZ mine. 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 continued on terminal infrastructure and mine access in 2010. Aggregate mine development capital costs for the DMLZ mine are expected to approximate $2.0$2.2 billion (incurred from 2009 to 2020), with PT Freeport Indonesia’s share totaling approximately $1.2$1.3 billion. Aggregate project costs totaling $217$321 million have been incurred through September 30, 2011March 31, 2012 ($11452 million during the first nine months of2011)first-quarter 2012). Targeted production rates once the DMLZ mining operation reaches full capacity are expected to approximate 80,000 metric tons of ore per day.


35
Table of Contents

Other Matters. As 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 from the Indonesian tax authorities for additional taxes of $106 million and interest of $52 million related to various audit exceptions for 2005. PT Freeport Indonesia has filed objections to these assessments because it believes that it has properly paid taxes for the year 2005. In October 2011, PT Freeport Indonesia also received an assessment from the Indonesian tax authorities for additional taxes of $22 million and interest of $10 million related to various audit exceptions for 2006. PT Freeport Indonesia plans to file objections to these assessments. PT Freeport Indonesia is working with the Indonesian tax authorities to resolve these matters.

As 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 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 annual report on Form 10-K for the year ended December 31, 2010, betweenBetween July 2009 and January 2010, a series ofApril 2012, there were 33 shooting incidents in and around the Grasberg minerals district, including along the road leading to our mining and milling operations, at the Grasberg mining complexwhich resulted in three15 fatalities and several injuries. In early April 2011, two additional incidents resulted in two fatalities and two injuries to PT Freeport Indonesia employees. In October 2011, additional shooting incidents in our tailings area and along the access road to the Grasberg mining complex resulted in six fatalities and several56 injuries. The investigation of these matters is continuing. We have taken precautionary measures, including limiting use of the road to secured convoys and theconvoys. The Indonesian government has responded with additional security forces and expressed a strong commitment to protect the safety of the community and our operations. Our mining and milling activities have not been interrupted by these incidents; however, prolongedProlonged limitations on access to the road could adversely affect operations at the mine. Refer to Part II, Item 1A. “Risk Factors.”

During third-quarter 2011, PT Freeport Indonesia was adversely affected by labor disruptions, including the eight-day strike in July 2011 and the ongoing strike that commenced September 15, 2011. The union has notified PT Freeport Indonesia that it intends to extend the strike to December 15, 2011. PT Freeport Indonesia continues to

36
Table of Contents


seek an end to the strike, which has no legal basis, and to conclude negotiations, on a fair and reasonable basis, of the bi-annual renewal of its collective labor agreement. PT Freeport Indonesia's compensation practices are highly competitive in Indonesia, and PT Freeport Indonesia has agreed to accept the recommendations of the government appointed mediator for a generous increase in wages and other benefits. However, the union has declined to accept these recommendations, and on October 10, 2011, PT Freeport Indonesia filed its case with the Industrial Court. We cannot predict when the strike will end or what the outcomesafety of our labor negotiations will be.

Asworkforce is a result of the reduced production levels caused by the labor disruptions, PT Freeport Indonesia declared force majeure on certain of its concentrate sales contracts. Since October 22, 2011, milling operations have been temporarily suspended pending repairs to concentrate pipelines damaged as a result of civil unrest which occurred during the course of the strike. PT Freeport Indonesia has initiated repairs to the damaged pipelines but has not been able to gain full access to the affected areas because of road blockages by striking workers.critical concern, and PT Freeport Indonesia is working cooperatively with local authoritiesthe Government of Indonesia to restore access to the road and the pipelines so that repairs can be completed and milling operations restarted.address security issues. Refer to "Risk Factors" contained in Part II,I, Item 1A. “Risk Factors”1A of our annual report on Form 10-K for the year ended December 31, 2011, for further discussion of operational risks associated with labor disputes at our mining operations.discussion.

Operating Data. Following is summary operating data for our Indonesia mining operations for the thirdfirst quarters andof first nine months of20112012 and 20102011:
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Operating Data, Net of Joint Venture Interest          
Copper (millions of recoverable pounds)
          
Production233
 358
 778
 913
123
 284
Sales253
 364
 796
 919
134
 278
Average realized price per pound$3.29
 $3.60
 $3.82
 $3.36
$3.81
 $4.26
          
Gold (thousands of recoverable ounces)
          
Production357
 462
 1,123
 1,185
229
 441
Sales384
 466
 1,168
 1,200
266
 454
Average realized price per ounce$1,695
 $1,266
 $1,565
 $1,204
$1,695
 $1,400
          
100% Operating Data          
Ore milled (metric tons per day):a
          
Grasberg open pit107,000
 150,400
 137,200
 150,300
80,500
 140,300
DOZ underground mine43,900
 78,500
 58,900
 78,500
33,100
 80,100
Big Gossan underground mine1,300
 —
 1,800
 —
1,200
 1,800
Total152,200
 228,900
 197,900
 228,800
114,800
 222,200
Average ore grade:          
Copper (percent)0.90
 0.92
 0.80
 0.84
0.64
 0.77
Gold (grams per metric ton)1.14
 0.92
 0.92
 0.81
0.84
 0.89
Recovery rates (percent):          
Copper89.8
 89.1
 88.2
 88.8
89.6
 87.3
Gold82.4
 83.6
 81.3
 80.6
82.1
 82.0
Production (recoverable):          
Copper (millions of pounds)237
 362
 803
 975
123
 284
Gold (thousands of ounces)408
 513
 1,261
 1,298
229
 459
a.Amounts represent the approximate average daily throughput processed at PT Freeport Indonesia’s mill facilities from each producing mine.

Sales volumes from our Indonesia mining operations declined to 134 million pounds of copper and 266 thousand ounces of gold in first-quarter2012, compared with 278 million pounds of copper and 454 thousand ounces of gold in first-quarter2011, primarily reflecting anticipated lower ore grades combined with work interruptions and the related temporary suspension of operations during first-quarter 2012.

The terms of a new two-year labor agreement for PT Freeport Indonesia's employees were reached in mid-December 2011 and production began ramping up following repairs to damaged concentrate and fuel pipelines, which resulted from civil unrest that occurred during the course of the approximate three-month strike. During first-quarter 2012, PT Freeport Indonesia experienced work interruptions in connection with its efforts to resume normal operations, and temporarily suspended operations, which had an estimated impact of approximately 80 million pounds of copper and 125 thousand ounces of gold. Operations and productivity at PT Freeport Indonesia have improved recently. For the month of April 2012, mill throughput rates averaged approximately 194,000 metric tons of ore per day, compared with the first-quarter 2012 average of 114,800 metric tons of ore per day and the projected

36
Table of Contents

average for the year 2012 of 184,000 metric tons of ore per day. Full operations, which are dependent on maintaining security and productivity in the workplace, are expected to be restored during second-quarter 2012.

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. SalesConsolidated sales volumes from our Indonesia mining operations declinedare expected to approximate 253800 million pounds of copper and 384 thousand1.0 million ounces of gold infor third-quarter20112012 and, compared with 796846 million pounds of copper and 1.2 million ounces of gold for the first nine months of2011, compared with 364 million pounds of copper and 466 thousand ounces of gold in third-quarter2010 and 919 million

37
Table of Contents


pounds of copper and 1.2 million ounces of gold for the first nine months of2010, primarily because of planned sequencing of mining in a lower ore-grade section of the Grasberg open pit. The estimated impact from labor disruptions on third-quarter 2011 production, including the eight-day strike in July 2011 and the ongoing strike that commenced on September 15, 2011, totaled approximately 70 million pounds of copper and 100 thousand ounces of gold. PT Freeport Indonesia has developed revised operating plans during the strike and also sold concentrates from inventory during third-quarter 2011, which partly mitigated the lower production levels.

On October 19, 2011, we reported that for the year 2011, we expect sales from our Indonesia mining operations to approximate 1.0 billion pounds of copper and 1.45 million ounces of gold, compared with 1.2 billion pounds of copper and 1.81.3 million ounces of gold in 20102011. We also reported thatThese estimates reflect the impact of labor disruptions for the year 2011, which is subjectwork interruptions experienced during first-quarter 2012 and returning to change based on operating rates, mine plans, the extent to which we can operate using a reduced workforce, and the timing of resumption of normal operations is estimated to approximate 100 million pounds of copper and 100 thousand ounces of gold. Fourth-quarter 2011at Grasberg during second-quarter 2012. Gold sales estimatesin 2012 also reflect reduced operations resulting from the current strike conditions, and include an assumption that operations are conducted on average at the reduced rates (mill throughput averaging approximately 175,000 metric tons of ore per day) throughout fourth-quarter 2011. During October 2011, mill throughput of approximately 120,000 metric tons of ore per day was below forecast becausemining in a lower grade section of the currently on-going suspension of milling and concentrate delivery operations since October 22,Grasberg open pit in 2012, compared with 2011. We will update our estimates of fourth quarter sales when repairs to the concentrate pipelines are completed.

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.

Gross Profit per Pound of Copper and per Ounce of Gold

The following tables summarize the unit net cash costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the thirdfirst quarters andof first nine months of20112012 and 20102011. 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 Three Months EndedThree Months Ended Three Months Ended
September 30, 2011 September 30, 2010March 31, 2012 March 31, 2011
By-Product Method Co-Product Method By-Product Method Co-Product MethodBy-Product Method Co-Product Method By-Product Method Co-Product Method
 Copper Gold Copper Gold Copper Gold Copper Gold
Revenues, excluding adjustments$3.29
 $3.29
 $1,695
 $3.60
 $3.60
 $1,266
$3.81
 $3.81
 $1,695
 $4.26
 $4.26
 $1,400
                      
Site production and delivery, before net noncash and other costs shown below1.98
 1.09
 561
 1.43
 0.98
 344
3.51
 1.83
 814
 1.84
 1.18
 386
Gold and silver credits(2.80) —
 —
 (1.67) —
 —
(3.51) —
 —
 (2.34) —
 —
Treatment charges0.18
 0.10
 53
 0.22
 0.15
 53
0.19
 0.10
 44
 0.18
 0.11
 37
Royalty on metals0.16
 0.09
 46
 0.12
 0.08
 29
0.14
 0.07
 32
 0.16
 0.10
 34
Unit net cash (credits) costs(0.48) 1.28
 660
 0.10
 1.21
 426
Unit net cash costs (credits)0.33
 2.00
 890
 (0.16) 1.39
 457
Depreciation and amortization0.25
 0.13
 69
 0.20
 0.14
 48
0.34
 0.18
 80
 0.21
 0.13
 43
Noncash and other costs, net0.01
 0.01
 4
 0.02
 0.01
 4
0.18
 0.10
 43
 0.05
 0.04
 12
Total unit (credits) costs(0.22) 1.42
 733
 0.32
 1.36
 478
Total unit costs0.85
 2.28
 1,013
 0.10
 1.56
 512
Revenue adjustments, primarily for pricing on prior period open sales(0.35) (0.35) 74
 0.22
 0.22
 (10)0.10
 0.10
 10
 (0.03) (0.03) (38)
Gross profit per pound/ounce$3.16
 $1.52
 $1,036
 $3.50
 $2.46
 $778
$3.06
 $1.63
 $692
 $4.13
 $2.67
 $850
                      
Copper sales (millions of recoverable pounds)253
 253
   364
 364
  134
 134
   278
 278
  
Gold sales (thousands of recoverable ounces)    384
     466
    266
     454

38
Table of Contents


 Nine Months Ended Nine Months Ended
 September 30, 2011 September 30, 2010
 By-Product Method Co-Product Method By-Product Method Co-Product Method
  Copper Gold  Copper Gold
Revenues, excluding adjustments$3.82
 $3.82
 $1,565
 $3.36
 $3.36
 $1,204
            
Site production and delivery, before net noncash and other costs shown below1.91
 1.17
 480
 1.52
 1.02
 367
Gold and silver credits(2.39) —
 —
 (1.63) —
 —
Treatment charges0.18
 0.11
 46
 0.23
 0.16
 56
Royalty on metals0.16
 0.10
 41
 0.12
 0.08
 29
Unit net cash (credits) costs(0.14) 1.38
 567
 0.24
 1.26
 452
Depreciation and amortization0.23
 0.14
 56
 0.21
 0.14
 50
Noncash and other costs, net0.04
 0.02
 8
 0.03
 0.03
 8
Total unit costs0.13
 1.54
 631
 0.48
 1.43
 510
Revenue adjustments, primarily for pricing on prior period open sales(0.01) (0.01) (15) (0.01) (0.01) 1
Gross profit per pound/ounce$3.68
 $2.27
 $919
 $2.87
 $1.92
 $695
            
Copper sales (millions of recoverable pounds)796
 796
   919
 919
  
Gold sales (thousands of recoverable ounces)    1,168
     1,200

Because of the fixed nature of a large portion of PT Freeport Indonesia’s costs, unit costs vary significantly from period to period depending on volumes of copper and gold sold during the period, and realized gold prices. Unit net cash costs (net of gold and silver credits) for our Indonesia mining operations averaged a net credit oftotaled $0.480.33 per pound of copper in third-quarterfirst-quarter 2011 and net credit of $0.14 per pound of copper for the first nine months of20112012, compared with a net costcredit of $0.100.16 per pound of copper in third-quarterfirst-quarter 2010 and a net cost of $0.24 per pound of copper for the first nine months of20102011. LowerHigher unit net cash costs primarily reflected higher gold and silver credits ($1.13 per pound for the quarter and $0.76 for the nine-month period) that more than offset higher site production and delivery costs ($0.55 per pound for the quarter and $0.39 per pound for the nine-month period) primarily from lower coppersales volumes.

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

37
Table of Contents

varies with the level of copper production and sales.

Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. To the extent 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, lowerhigher copper prices at the end of third-quarterfirst-quarter 2012 resulted in favorable revenue adjustments to December 31, 2011, provisionally priced copper sales, whereas, decreasing prices in first-quarter 2011 resulted in unfavorable revenue adjustments to June 30, 2011, provisionally priced copper sales, whereas, increasing prices in third-quarter 2010 resulted in favorable revenue adjustments to June 30,December 31, 2010, provisionally priced copper sales. Refer to “Consolidated Results - Revenues” for further discussion.

Assuming achievement of current sales volume and cost estimates, and an average gold price of $1,600 per ounce for fourth-quarterthe remainder of 20112012, we estimate that average unit net cash costs for PT Freeport Indonesia (net of gold and silver credits) would approximate $0.031.11 per pound of copper for the year 20112012, compared with a net credit of $0.040.09 per pound in 20102011. Indonesia's unit net cash costs for 20112012 would change by $0.0250.05 per pound for each $50 per ounce change in the average price of gold during fourth-quarterthe remainder of 20112012. Fourth-quarter 2011Compared with first-quarter 2012, unit site production and delivery costs are expected to decline for the remainder of 2012 because of higher projected copper volumes. However, unit net cash costs for PT Freeport Indonesia are expected to be higher than the average for the year primarilyremainder of 2012 because of lower gold credits. Quarterly unit net cash costs are expected to vary significantly with variations in quarterly metal sales volumes, as well as average realized gold prices during the period. Indonesia's unit net cash costs are expected to decline significantly in future years, compared with the year 2012, because of higher projected copper and gold volumes.

Africa Mining
Africa mining includes the Tenke copper and cobalt mining concessions in the Katanga province of the DRC. The Tenke mine includes surface 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. All Africa mining operations are conducted by Tenke Fungurume Mining S.A.R.L. (TFM).

In October 2010,We hold an effective 56 percent interest in the governmentTenke copper and cobalt mining concessions and are the operator of Tenke. Effective March 26, 2012, the DRC concluded its review of TFM’s existing mining contracts and confirmed that they are in good standing. 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 (refer to Note

39
Table of Contents


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, andgovernment issued a Presidential Decree signed by the President and Prime Minister of the DRC was issued in April 2011. After receiving the required government approval of theapproving modifications to TFM's bylaws that reflect the agreement with the government of the DRC, our effectivebylaws. As a result, we and Lundin Mining Corporation's ownership interest in the project will be reduced to 56.0Tenke totals 80 percent prospectively, compared to our current(previously 82.5 percent) and Gecamines' ownership interest of 57.75 percent.totals 20 percent (previously 17.5 percent).

Operating and Development Activities. Pursuant 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 project. Of the approximate $2 billion we investedOur investment in the initial project approximated $2 billion, and we have received paymentsloan repayments, including interest, of approximately $700$840 million through September 30, 2011March 31, 2012.

The milling facilities at Tenke, which were designed to process ore at a rate of 8,000 metric tons per day, continue to perform above capacity, with throughput averaging 12,00012,200 metric tons of ore per day in third-quarterfirst-quarter 2011 and 10,800 metric tons of ore per day for the first nine months of20112012. Mining rates have been increased to enable additional copper production from the initial project capacity of 250 million pounds of copper per year to ramp up to approximately 290 million pounds of copper per year.

We are undertakingconstructing a second phase of the project, which would include optimizing the current plant and increasing capacity. As part of the second phase, weWe plan to expand the mill rate to 14,000 metric tons of ore per day and to constructare constructing related processing facilities that would target the addition of approximately 150 million pounds of copper per year.year in 2013. The approximate $850 million project which includes mill upgrades, additional mining equipment, and a new tankhousetank house and sulphuric acid plant expansion, is targeted for completion in 2013.expansion. The second phase of the project will be funded with cash generated from operations, and should additional funds be required, we will fund 70 percent and Lundin Mining Corporation will fund 30 percent.

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. Future expansions are subject to a number of factors, including economic and market conditions and the business and investment climate in the DRC.


38
Other Matters. During second-quarter 2011, we successfully revised the Collective Labor Agreement (CLA) with union-represented employees at TFM to conform provisions to recent changes in DRC law. The revisions did not contain any material modifications and will come up for review in August 2013. Salary scale, which is negotiated outside
Table of the CLA on a bi-annual basis, is up for review in August 2012.Contents

Operating Data. Following is summary operating data for our Africa mining operations for the thirdfirst quarters andof first nine months of20112012 and 20102011:
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Copper (millions of recoverable pounds)
          
Production71
 69
 204
 195
80
 67
Sales65
 73
 200
 194
69
 60
Average realized price per pounda
$3.46
 $3.36
 $3.89
 $3.22
$3.74
 $4.19
          
Cobalt (millions of contained pounds)
          
Production6
 5
 18
 14
6
 6
Sales6
 6
 19
 13
5
 6
Average realized price per pound$10.05
 $11.93
 $10.71
 $11.51
$8.46
 $10.99
          
Ore milled (metric tons per day)12,000
 11,800
 10,800
 10,100
12,200
 10,800
Average ore grade (percent):          
Copper3.21
 3.20
 3.42
 3.55
3.61
 3.42
Cobalt0.41
 0.39
 0.40
 0.40
0.38
 0.38
Copper recovery rate (percent)91.4
 90.5
 92.0
 91.0
91.2
 91.7
a.Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
 

40
Table of Contents


Copper sales volumes from our Africa mining operations totaled 6569 million pounds of copper in third-quarterfirst-quarter 2011 and 200 million pounds of copper for the first nine months of20112012, compared with 7360 million pounds in third-quarterfirst-quarter 20102011, primarily reflecting higher mining and 194 million pounds for the first nine months of2010. Lower copper sales volumes in third-quarter 2011 primarily reflected the timing of shipments.milling rates.

For the year 20112012, we expect sales volumes from our Africa mining operations to approximate 275300 million pounds of copper and 25 million pounds of cobalt, compared with 262283 million pounds of copper and 2025 million pounds of cobalt in 20102011.
 
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.


39
Table of Contents

Gross Profit per Pound of Copper and Cobalt

The following tables summarize the unit net cash costs and gross profit per pound of copper and cobalt at our Africa mining operations for the thirdfirst quarters andof first nine months of20112012 and 20102011. 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 Three Months EndedThree Months Ended Three Months Ended
September 30, 2011 September 30, 2010March 31, 2012 March 31, 2011
By-Product Method Co-Product Method By-Product Method Co-Product MethodBy-Product Method Co-Product Method By-Product Method Co-Product Method
 Copper Cobalt Copper Cobalt Copper Cobalt Copper Cobalt
Revenues, excluding adjustmentsa
$3.46
 $3.46
 $10.05
 $3.36
 $3.36
 $11.93
$3.74
 $3.74
 $8.46
 $4.19
 $4.19
 $10.99
                      
Site production and delivery, before net noncash and other costs shown below1.55
 1.40
 5.71
 1.44
 1.19
 6.05
1.50
 1.44
 5.14
 1.51
 1.35
 5.45
Cobalt creditsb
(0.51) —
 —
 (0.65)
—
 —
(0.33) —
 —
 (0.75)
—
 —
Royalty on metals0.08
 0.06
 0.15
 0.07
 0.06
 0.19
0.08
 0.07
 0.13
 0.10
 0.07
 0.19
Unit net cash costs1.12
 1.46
 5.86
 0.86
 1.25
 6.24
1.25
 1.51
 5.27
 0.86
 1.42
 5.64
Depreciation and amortization0.48
 0.41
 0.88
 0.46
 0.39
 0.89
0.46
 0.42
 0.66
 0.47
 0.40
 0.78
Noncash and other costs, net0.24
 0.20
 0.44
 0.20
 0.16
 0.37
0.11
 0.10
 0.15
 0.21
 0.17
 0.34
Total unit costs1.84
 2.07
 7.18
 1.52
 1.80
 7.50
1.82
 2.03
 6.08
 1.54
 1.99
 6.76
Revenue adjustments, primarily for pricing on prior period open sales(0.01) (0.01) (0.10) 0.03
 0.03
 (0.89)0.12
 0.12
 0.46
 (0.01) (0.01) 0.39
Other non-inventoriable costs(0.05) (0.05) (0.09) (0.04) (0.04) (0.09)
Gross profit per pound$1.56
 $1.33
 $2.68
 $1.83
 $1.55
 $3.45
$2.04
 $1.83
 $2.84
 $2.64
 $2.19
 $4.62
                      
Copper sales (millions of recoverable pounds)65
 65
   73
 73
  69
 69
   60
 60
  
Cobalt sales (millions of contained pounds)    6
     6
    5
     6

41
Table of Contents


 Nine Months Ended Nine Months Ended
 September 30, 2011 September 30, 2010
 By-Product Method Co-Product Method By-Product Method Co-Product Method
  Copper Cobalt  Copper Cobalt
Revenues, excluding adjustmentsa
$3.89
 $3.89
 $10.71
 $3.22
 $3.22
 $11.51
            
Site production and delivery, before net noncash and other costs shown below1.57
 1.37
 5.62
 1.37
 1.23
 5.88
Cobalt creditsb
(0.68) —
 —
 (0.54) —
 —
Royalty on metals0.09
 0.07
 0.18
 0.07
 0.06
 0.19
Unit net cash costs0.98
 1.44
 5.80
 0.90
 1.29
 6.07
Depreciation and amortization0.49
 0.41
 0.82
 0.49
 0.40
 1.24
Noncash and other costs, net0.16
 0.14
 0.27
 0.09
 0.07
 0.22
Total unit costs1.63
 1.99
 6.89
 1.48
 1.76
 7.53
Revenue adjustments, primarily for pricing on prior period open sales(0.01) (0.01) 0.12
 —
 —
 0.28
Other non-inventoriable costs(0.04) (0.04) (0.09) (0.08) (0.07) (0.21)
Gross profit per pound$2.21
 $1.85
 $3.85
 $1.66
 $1.39
 $4.05
            
Copper sales (millions of recoverable pounds)200
 200
   194
 194
  
Cobalt sales (millions of contained pounds)    19
     13
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 our Africa mining operations ofaveraged $1.121.25 per pound of copper in third-quarterfirst-quarter 20112012 and $0.98 per pound of copper for the first nine months of2011 were higher than unit net cash costs of, compared with $0.86 per pound of copper in third-quarterfirst-quarter 2010 and $0.90 per pound of copper for the first nine months of20102011. Higher unit net cash costs in the 2011 periodsfirst-quarter 2012 primarily reflected higher site production and deliveryinput costs ($0.11 per pound for the quarter and $0.20 for the nine-month period) mostly associated with increasedfrom higher mining and milling activityrates and higher input costs. Lowerlower cobalt credits, in third-quarter 2011 ($0.14 per pound) also added to higher unit net cash costs, while for the first nine months of 2011 higher cobalt credits ($0.14 per pound) partly offset by higher site production and delivery costs.copper sales volumes.

Assuming achievement of current sales volumes and cost estimates and an average market cobalt price of $1412 per pound for fourth-quarterthe remainder of 20112012, we estimate that average unit net cash costs (net of cobalt credits) would approximate $1.031.13 per pound of copper for the year 20112012, compared with $0.901.07 per pound in 20102011. Africa's unit net cash costs for 20112012 would change by $0.030.08 per pound for each $2 per pound change in the average price of cobalt during fourth-quarterthe remainder of 20112012.

Molybdenum
We 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. Our molybdenum operations include the wholly owned Henderson molybdenumunderground mine and Climax open-pit mine in Colorado and related conversion facilities. The Henderson underground mine produces high-purity, chemical-grade molybdenum concentrates, which are typically further processed into value-added molybdenum chemical products. The Molybdenum operations also include the wholly owned Climax molybdenum mine in Colorado (refer to further discussion below); a sales company that purchases and sells molybdenum from our Henderson mine and from certain of our North and South America mines that produce molybdenum; and related conversion facilities that, at times, roast and/or process material on a toll basis for 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.

40
Table of Contents


Development Activities. During first-quarter 2012, we commenced operations at our newly constructed Climax molybdenum mine. Construction activities atfrom the Climax molybdenum minefirst phase of the project are approximately 80 percentsubstantially complete. We plan to commenceFirst production during 2012. Production from the Climax mine is expected in second-quarter 2012 and is expected to ramp up to a rate of 20 million pounds of molybdenum per year during 2013, and depending on market conditions, may be increased to 30 million pounds of molybdenum per year. We intend to operate our Climax and Henderson

42
Table of Contents


molybdenum mines in a flexible manner to meet market requirements. Total estimatedThe cost of the initial costs forphase of the project approximate $710 million plus an additional approximate $200 million for tailings dam and water treatment facilities to be completed after startup. Project cost of $577 million have been incurred through September 30, 2011 ($304 million during the first nine months of2011).approximates $760 million.

Other Matters. During second-quarter 2011, we successfully negotiated a new three-year labor agreement covering union-represented employees at Stowmarket, our molybdenum conversion facility in the United Kingdom. We are also negotiating the renewal of the labor agreement covering union-represented 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 andof first nine months of20112012 and 20102011:
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Molybdenum (millions of recoverable pounds)
          
Productiona
11
 10
 30
 30
9
 10
Sales, excluding purchasesb
19
 17
 60
 50
21
 20
Average realized price per pound$16.34
 $16.06
 $17.57
 $16.43
$15.34
 $18.10
          
Henderson molybdenum mine          
Ore milled (metric tons per day)24,500
 23,000
 23,300
 23,000
19,900
 23,400
Average molybdenum ore grade (percent)0.24
 0.25
 0.24
 0.25
0.25
 0.24
Molybdenum production (millions of recoverable pounds)11
 10
 30
 30
9
 10
a.Reflects production at the Henderson molybdenum mine. 
b.Includes sales of molybdenum produced at our North and South America copper mines.

Consolidated molybdenum sales volumes increased tototaled 1921 million pounds in third-quarterfirst-quarter 2011 and 60 million pounds for the first nine months of20112012, compared with 1720 million pounds in third-quarterfirst-quarter 2010 and 50 million pounds for the first nine months of20102011.

For the year 2011,2012, we expect molybdenum sales volumes to approximate 7881 million pounds (of which approximately 4540 million pounds represents molybdenum production from our North and South America copper mines), compared with 6779 million pounds in 20102011 (of which 3245 million pounds represented molybdenum production from our North and South America copper 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.


4341
Table of Contents    


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 andof first nine months of20112012 and 20102011. 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 Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2011 2010 2011 20102012 2011
Revenues, excluding adjustments$15.38
 $15.42
 $16.66
 $15.84
$15.03
 $17.37
          
Site production and delivery, before net noncash and other costs shown below5.21
 4.87
 5.26
 4.67
6.00
 5.25
Treatment charges and other1.03
 1.07
 0.93
 1.08
0.88
 0.88
Unit net cash costs6.24
 5.94
 6.19
 5.75
6.88
 6.13
Depreciation, depletion and amortization0.94
 0.83
 0.90
 0.83
0.90
 0.88
Noncash and other costs, net0.03
 0.03
 0.04
 0.03
0.05
 0.03
Total unit costs7.21
 6.80
 7.13
 6.61
7.83
 7.04
Gross profita
$8.17
 $8.62
 $9.53
 $9.23
$7.20
 $10.33
          
Molybdenum sales (millions of recoverable pounds)b
11
 10
 30
 30
9
 10
a.Gross profit reflects sales of Henderson production based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum division includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.
b.Reflects production at the Henderson molybdenum mine.

Henderson’s unit net cash costs were $6.246.88 per pound of molybdenum in third-quarterfirst-quarter 2011 and $6.19 per pound of molybdenum for the first nine months of20112012, compared with $5.946.13 per pound of molybdenum in third-quarterfirst-quarter 2010 and $5.75 per pound of molybdenum for the first nine months of20102011, primarily reflecting higher input costs, including labor and materials.

Assuming achievement of current 20112012 sales volume and cost estimates, we estimate that unit net cash costs for Henderson to approximate $6.507.00 per pound of molybdenum for the year 20112012, compared with $5.906.34 per pound in 20102011.

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. During the first nine months offirst-quarter 20112012, Atlantic Copper purchased approximately 3241 percent of its concentrate requirements from our IndonesiaSouth America mining operations and approximately 2221 percent from our SouthNorth America copper mining operations. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.

Smelting and refining charges consist of a base rate and, in certain contracts, price participation based on copper prices. Treatment charges for smelting and refining copper concentrates represent a cost to our Indonesia, South America and our SouthNorth America mining operations, and income to Atlantic Copper and PT Smelting, PT Freeport Indonesia's 25 percent owned smelter and refinery. Thus, higher treatment and refining charges benefit our smelter operations and adversely affect our mining operations in Indonesia, South America and SouthNorth America. Our North America copper mines are notless significantly affected by changes in treatment and refining charges because these operations are largely integrated with our wholly owned Miami smelter located in Arizona.

In May 2011, Atlantic Copper successfully completed a scheduled 26-day maintenance turnaround, which had a $30 million impact on production and delivery costs for the first nine months of 2011. Atlantic Copper's major maintenance turnarounds typically occur approximately every eight years, with short-term maintenance turnarounds in the interim.

Atlantic Copper had operating lossesincome of $52 million in third-quarterfirst-quarter 2011 and $70 million for the first nine months of20112012, compared with an operating loss of $819 million in third-quarterfirst-quarter 20102011. Atlantic Copper’s improved operating results primarily reflects higher production and higher gold credits in first-quarter 2012. Atlantic Copper's first-quarter2011 and $21 millionoperating results also included additional operating costs associated with accelerated costs for the first nine months of2010. The decline in

44
Table of Contents


Atlantic Copper’s operating results for the nine month period primarily reflects the impact of the MayApril 2011 scheduled maintenance turnaround, lower gold credits and currency exchange rate impacts.shutdown.

We defer recognizing profits on sales from our Indonesia, South America and SouthNorth America mining operations to Atlantic Copper and on 25 percent of Indonesia mining sales to PT Smelting until final sales to third parties occur. Our net deferred profits on our Indonesia, and South America mining operationsand North America concentrate inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income after taxes and noncontrolling interests totaled $10187 million at September 30, 2011March 31, 2012. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additionsreductions to net income attributable to common stockholders totaling $8432 million ($0.090.03 per share)

42
Table of Contents

in third-quarterfirst-quarter 2011 and $82 million ($0.09 per share) for the first nine months of20112012, compared with net reductionsadditions of $381 million ($0.04(less than $0.01 per share) in third-quarterfirst-quarter 2010 and $66 million ($0.07 per share) for the first nine months of20102011. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings. Additionally, as PT Freeport Indonesia's operations return to full operating rates, we expect to defer a significant amount of PT Freeport Indonesia's profit on intercompany sales until sales to third parties occur.

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. Strong operating performance and favorable copper and gold prices have enabled us to enhance our financial and liquidity position, reduce debt and pay cash dividends to shareholders, while pursuing future growth opportunities. While the near-term economic outlook is uncertain and has resulted in recent declines in copper prices, weWe 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, 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 year 2011 to be greater than our budgeted capital expenditures, expected debt payments, dividends, noncontrolling interest distributions and other cash requirements.

Cash and Cash Equivalents
At September 30, 2011March 31, 2012, we had consolidated cash and cash equivalents of $5.14.5 billion. The following table reflects the U.S. and international components of consolidated cash and cash equivalents at September 30, 2011March 31, 2012, and December 31, 20102011 (in billions):
September 30, 2011 December 31, 2010March 31, 2012 December 31, 2011
Cash at domestic companiesa
$2.5
 $1.9
$1.9
 $2.4
Cash at international operations2.6
 1.8
2.6
 2.4
Total consolidated cash and cash equivalents5.1
 3.7
4.5
 4.8
Less: Noncontrolling interests’ share(0.8) (0.4)(0.9) (0.8)
Cash, net of noncontrolling interests’ share4.3
 3.3
3.6
 4.0
Less: Withholding taxes and other(0.1) (0.2)(0.2) (0.1)
Net cash available to FCX$4.2
 $3.1
$3.4
 $3.9
a.Includes cash at our parent company and other North America operations.

Cash held at our international operations is generally used to support our foreign operations' capital expenditures, operating expenses, working capital or other cash needs. At September 30, 2011March 31, 2012, management believed that sufficient liquidity was available in the U.S. With the exception of Tenke Fungurume, we have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends, which are subject to applicable withholding taxes and noncontrolling interests' share.


45
Table of Contents


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 $5.9 billion801 million for the first nine months offirst-quarter 20112012, net of $126720 million for working capital uses, compared with operating cash flows totaling $4.22.4 billion for the first nine months offirst-quarter 20102011, net ofincluding $529114 million forfrom working capital uses. Highersources. Lower operating cash flows for first-quarter2012, compared with first-quarter2011, primarily reflected lower copper and gold sales volumes and lower copper price realizations.

Based on current mine plans and subject to future copper, gold and molybdenum prices, we expect estimated operating cash flows for the year first nine months of20112012, compared with plus available cash to be sufficient to fund our budgeted capital expenditures, dividends, noncontrolling interest distributions and other cash requirements for the first nine months of2010, primarily reflected higher copper and gold price realizations.

year. Refer to “Outlook” for further discussion of projected operating cash flows for the year 20112012.

Investing Activities
Capital expenditures, including capitalized interest, increased tototaled $1.7 billion707 million for the first nine months offirst-quarter 20112012, compared with $877505 million for the first nine months offirst-quarter 20102011, primarily reflecting higher capital spending in the 2011 periodfirst-quarter 2012 associated with our development projects, including increased spending for construction on the Climax molybdenum mine, the underground development projects at Grasberg and the restart of miningexpansion projects at Tenke, Cerro Verde and milling activities at the Chino mine in North America.Morenci. Refer to “Operations” for further discussion.

43
Table of Contents


Capital expenditures for the year 20112012 are expected to approximate $2.64.3 billion, including $1.42.7 billion for major projects. Major projects for 20112012 primarily include underground development activities at Grasberg construction activitiesand the expansion projects at the Climax molybdenum mineTenke, Cerro Verde and completion of the initial phase of the sulfide ore project at El Abra.Morenci. We are also considering additional investments at several of our sites. Capital spending plans will continue to be reviewed and adjusted in response to changes in market conditions and other factors.

Financing Activities
Debt and Equity Transactions. At September 30, 2011March 31, 2012, total debt approximated $3.5 billion, and we had 948 million common shares outstanding.have no significant debt maturities through 2014.

In April 2011,During first-quarter 2012, we redeemedsold $3.0 billion of senior notes in three tranches with a weighted-average interest rate of approximately three percent. Proceeds from this offering, plus cash on hand, were used to redeem the remaining $1.1$3.0 billion of our outstanding 8.25% Senior Notes. In addition, during the first nine months of2011, we made open-market purchases of $35 million of our 9.5% Senior Notes and repaid the remaining $85 million of our 8.75% Senior Notes. Refer to Note 6 for further discussion.

In April 2010, we redeemed all of our $1 billion of outstanding Senior Floating Rate Notes. In addition, during the first nine months of2010, we made open-market purchases of $547 million of our 8.25% and 8.375% Senior Notes. Refer to Note 65 for further discussion.

Since Annual interest savings associated with this refinancing approximates $160 million. The annual interest cost savings associated with this transaction and debt repayments since January 1, 2009, we have repaid approximately $3.8 billion of our outstanding debt resulting in estimated annual interest savings of approximately $260approximate $420 million per year, based on current interest rates. We have no significant debt maturities through 2016; however, we may consider opportunities to prepay debt in advance of scheduled maturities. We have $3.0 billion in 8.375% Senior Notes that are redeemable in whole or in part, at our option, at make-whole redemption prices prior to April 2012, and afterwards at stated redemption prices.

On March 30, 2011, we entered into a new senior unsecured 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 September 30, 2011March 31, 2012, we had no borrowings and $44 million in letters of credit issued under theour revolving credit facility, resulting in availability of approximately $1.5 billion. Refer to Note 6 ($956 million of which could be used for further discussion.additional letters of credit).

We have an open-market share purchase program for up to 30 million shares, of which 23.7 million shares remain available. There have been no purchases since 2008. 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.

Dividends. Common stock dividends paid for the first nine months of2011totaled $1.2 billion, which included $474238 million for the supplemental dividend paid on June 1, 2011. Common stock dividends for the first nine months of2010 totaledin both the first quarters of $272 million2012 and 2011.

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,February 2012, the Board authorized an increase in the annual cash dividend toon our common stock from an annual rate of $0.60 per share ($0.15 per share quarterly) and in October 2010, the

46
Table of Contents


Board authorized another increase in the cash dividend to the current annual rate of $1.00 per share ($0.25to $1.25 per share ($0.3125 per share quarterly). The Board also authorized supplemental common stock dividends, with the first quarterly dividend of $0.50$0.3125 per share, paid in December 2010 and $0.50 per share paid in June 2011.

On September 29, 2011, the Board declared a regular quarterly dividend of $0.25 per share, which was paid on NovemberMay 1, 2011.2012. The declaration of dividends is at the discretion of the Board. The amount of cash dividends on our common stock is dependentBoard and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by the Board. The Board will continue to review our financial policy on an ongoing basis.

During 2010, our 6¾% Mandatory Convertible Preferred Stock automatically converted into 78.9 million shares of our common stock (refer to Note 11 of our annual report on Form 10-K for the year ended December 31, 2010, for further discussion). As a result, we no longer have requirements to pay preferred stock dividends. Preferred stock dividends paid totaled $95 million for the first nine months of2010.

Cash dividends paid to noncontrolling interests totaled $350 million for the first nine months of2011 and $330 million for the first nine months of2010, reflectinginclude dividends paid primarily to the noncontrolling interest owners of PT Freeport Indonesia and our South America mines.mines, which totaled $1 million for first-quarter2012 and $133 million for first-quarter2011.

CONTRACTUAL OBLIGATIONS

There have been no material changes in our contractual obligations since year-end 20102011. Refer to Item 7 in our annual report on Form 10-K for the year ended December 31, 20102011, for further information regarding our contractual obligations.


44
ENVIRONMENTAL AND RECLAMATION MATTERS
Table of Contents

CONTINGENCIES

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. We review changes in facts and circumstances associated with our environmental and reclamation obligations at least quarterly. There have been no material changes to our environmental and reclamation obligations since year-end 2010.2011. However, updated cost assumptions, including increases and decreases to cost estimates and changes in the anticipated scope and timing of remediation activities, resultedcould result in future revisions to certain of our environmental obligationsobligations.

Refer to Note 13 in our annual report on Form 10-K for the year ended December 31, 2011, for further information regarding our environmental and resultedreclamation obligations.

Litigation and Other Contingencies
Other than as disclosed in a net chargeNote 8 and Part II, Item 1. "Legal Proceedings" of $31 millionthis quarterly report on Form 10-Q for the period ended March 31, 2012, there have been no material changes to environmental obligationsour contingencies associated with legal proceedings and shutdown costs in third-quarterother matters since year-end 2011. Refer to Note 13 in our annual report on Form 10-K for the year ended December 31, 2010,2011, for further information regarding environmentallegal proceedings and reclamation obligations.other matters.

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.


47
Table of Contents


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 measures 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 and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by our management and 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 adjustments for prior period open sales as separate line items. Because these 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, 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.



4845
Table of Contents    


North America Copper Mines Product Revenues and Production Costs

Three Months Ended September 30, 2011   
Three Months Ended March 31, 2012   
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper 
Molybdenuma
 
Otherb
 TotalMethod Copper 
Molybdenuma
 
Otherb
 Total
Revenues, excluding adjustments$1,240
 $1,240
 $146
 $40
 $1,426
$1,287
 $1,287
 $136
 $21
 $1,444
                  
Site production and delivery, before net noncash and other costs shown below569
 506
 64
 15
 585
607
 584
 29
 12
 625
By-product creditsa
(170) —
 —
 —
 —
(139) —
 —
 —
 —
Treatment charges36
 34
 —
 2
 36
41
 39
 —
 2
 41
Net cash costs435
 540
 64
 17
 621
509
 623
 29
 14
 666
Depreciation, depletion and amortization64
 59
 4
 1
 64
89
 86
 2
 1
 89
Noncash and other costs, net12
 12
 —
 —
 12
21
 21
 —
 —
 21
Total costs511
 611
 68
 18
 697
619
 730
 31
 15
 776
Revenue adjustments(11) (11) —
 —
 (11)
Idle facility and other non-inventoriable costs(19) (19) —
 —
 (19)
Revenue adjustments, primarily for pricing on prior period open sales9
 9
 —
 —
 9
Gross profit$699
 $599
 $78
 $22
 $699
$677
 $566
 $105
 $6
 $677
                  
Reconciliation to Amounts Reported                  
Revenues Production and Delivery Depreciation, Depletion and Amortization    Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$1,426
 $585
 $64
    $1,444
 $625
 $89
    
Treatment chargesN/A
 36
 N/A
    N/A
 41
 N/A
    
Net noncash and other costsN/A
 12
 N/A
    N/A
 21
 N/A
    
Revenue adjustments(11) N/A
 N/A
    
Idle facility and other non-inventoriable costsN/A
 19
 N/A
    
Revenue adjustments, primarily for pricing on prior period open sales9
 N/A
 N/A
    
Eliminations and other4
 12
 3
    3
 20
 4
    
North America copper mines1,419
 664
 67
    1,456
 707
 93
    
South America mining1,053
 478
 64
    1,254
 463
 62
    
Indonesia mining1,362
 503
 62
    950
 495
 46
    
Africa mining276
 142
 32
    305
 132
 32
    
Molybdenum332
 260
 14
    340
 262
 15
    
Rod & Refining1,396
 1,390
 2
    1,304
 1,297
 2
    
Atlantic Copper Smelting & Refining837
 826
 11
    712
 695
 10
    
Corporate, other & eliminations(1,480) (1,693) 5
    (1,716) (1,623) 7
    
As reported in FCX’s consolidated financial statements$5,195
 $2,570
 $257
    $4,605
 $2,428
 $267
    
a.Molybdenum 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.

4946
Table of Contents    


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

Three Months Ended March 31, 2011   
(In millions)By-Product Co-Product Method
 Method Copper 
Molybdenuma
 
Otherb
 Total
Revenues, excluding adjustments$1,211
 $1,211
 $124
 $21
 $1,356
          
Site production and delivery, before net noncash and other costs shown below481
 432
 52
 8
 492
By-product creditsa
(134) —
 —
 —
 —
Treatment charges29
 28
 —
 1
 29
Net cash costs376
 460
 52
 9
 521
Depreciation, depletion and amortization56
 52
 3
 1
 56
Noncash and other costs, net52
 51
 1
 —
 52
Total costs484
 563
 56
 10
 629
Revenue adjustments, primarily for pricing on prior period open sales1
 1
 —
 —
 1
Gross profit$728
 $649
 $68
 $11
 $728
          
Reconciliation to Amounts Reported         
 Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$1,356
 $492
 $56
    
Treatment chargesN/A
 29
 N/A
    
Net noncash and other costsN/A
 52
 N/A
    
Revenue adjustments, primarily for pricing on prior period open sales1
 N/A
 N/A
    
Eliminations and other4
 15
 2
    
North America copper mines1,361
 588
 58
    
South America mining1,402
 411
 57
    
Indonesia mining1,730
 526
 57
    
Africa mining309
 124
 28
    
Molybdenum374
 240
 14
    
Rod & Refining1,487
 1,481
 2
    
Atlantic Copper Smelting & Refining762
 763
 10
    
Corporate, other & eliminations(1,716) (1,756) 6
    
As reported in FCX’s consolidated financial statements$5,709
 $2,377
 $232
    
Three Months Ended September 30, 2010   
(In millions)By-Product Co-Product Method
 Method Copper 
Molybdenuma
 
Otherb
 Total
Revenues, excluding adjustments$881
 $881
 $96
 $13
 $990
          
Site production and delivery, before net noncash and other costs shown below429
 384
 52
 7
 443
By-product creditsa
(95) —
 —
 —
 —
Treatment charges27
 26
 —
 1
 27
Net cash costs361
 410
 52
 8
 470
Depreciation, depletion and amortization63
 59
 3
 1
 63
Noncash and other costs, net30
 31
 (1) —
 30
Total costs454
 500
 54
 9
 563
Revenue adjustments—
 —
 —
 —
 —
Idle facility and other non-inventoriable costs(26) (25) (1) —
 (26)
Gross profit$401
 $356
 $41
 $4
 $401
          
Reconciliation to Amounts Reported         
 Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$990
 $443
 $63
    
Treatment chargesN/A
 27
 N/A
    
Net noncash and other costsN/A
 30
 N/A
    
Revenue adjustments—
 N/A
 N/A
    
Idle facility and other non-inventoriable costsN/A
 26
 N/A
    
Eliminations and other8
 10
 4
    
North America copper mines998
 536
 67
    
South America mining1,465
 462
 66
    
Indonesia mining1,874
 528
 72
    
Africa mining307
 141
 34
    
Molybdenum293
 199
 13
    
Rod & Refining1,181
 1,172
 2
    
Atlantic Copper Smelting & Refining595
 590
 9
    
Corporate, other & eliminations(1,561) (1,362) 5
    
As reported in FCX’s consolidated financial statements$5,152
 $2,266
 $268
    
 
a.Molybdenum 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.

50
Table of Contents


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

Nine Months Ended September 30, 2011   
(In millions)By-Product Co-Product Method
 Method Copper 
Molybdenuma
 
Otherb
 Total
Revenues, excluding adjustments$3,820
 $3,820
 $429
 $84
 $4,333
          
Site production and delivery, before net noncash and other costs shown below1,637
 1,466
 178
 33
 1,677
By-product creditsa
(473) —
 —
 —
 —
Treatment charges97
 93
 —
 4
 97
Net cash costs1,261
 1,559
 178
 37
 1,774
Depreciation, depletion and amortization185
 173
 10
 2
 185
Noncash and other costs, net70
 68
 1
 1
 70
Total costs1,516
 1,800
 189
 40
 2,029
Revenue adjustments(1) (1) —
 —
 (1)
Idle facility and other non-inventoriable costs(47) (46) (1) —
 (47)
Gross profit$2,256
 $1,973
 $239
 $44
 $2,256
          
Reconciliation to Amounts Reported         
 Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$4,333
 $1,677
 $185
    
Treatment chargesN/A
 97
 N/A
    
Net noncash and other costsN/A
 70
 N/A
    
Revenue adjustments(1) N/A
 N/A
    
Idle facility and other non-inventoriable costsN/A
 47
 N/A
    
Eliminations and other7
 32
 11
    
North America copper mines4,339
 1,923
 196
    
South America mining3,903
 1,330
 187
    
Indonesia mining4,656
 1,547
 179
    
Africa mining963
 422
 98
    
Molybdenum1,119
 786
 44
    
Rod & Refining4,310
 4,292
 6
    
Atlantic Copper Smelting & Refining2,252
 2,274
 30
    
Corporate, other & eliminations(4,824) (5,070) 16
    
As reported in FCX’s consolidated financial statements$16,718
 $7,504
 $756
    
a.Molybdenum 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
Table of Contents


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

Nine Months Ended September 30, 2010   
(In millions)By-Product Co-Product Method
 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 below1,231
 1,109
 144
 21
 1,274
By-product creditsa
(278) —
 —
 —
 —
Treatment charges75
 73
 —
 2
 75
Net cash costs1,028
 1,182
 144
 23
 1,349
Depreciation, depletion and amortization207
 195
 10
 2
 207
Noncash and other costs, net107
 107
 —
 —
 107
Total costs1,342
 1,484
 154
 25
 1,663
Revenue adjustments(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         
 Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$3,092
 $1,274
 $207
    
Treatment chargesN/A
 75
 N/A
    
Net noncash and other costsN/A
 107
 N/A
    
Revenue adjustments(2) N/A
 N/A
    
Idle facility and other non-inventoriable costsN/A
 65
 N/A
    
Eliminations and other26
 36
 13
    
North America copper mines3,116
 1,557
 220
    
South America mining3,383
 1,227
 186
    
Indonesia mining4,260
 1,430
 192
    
Africa mining763
 347
 94
    
Molybdenum893
 574
 38
    
Rod & Refining3,383
 3,360
 6
    
Atlantic Copper Smelting & Refining1,844
 1,823
 28
    
Corporate, other & eliminations(4,263) (4,084) 24
    
As reported in FCX’s consolidated financial statements$13,379
 $6,234
 $788
    
a.Molybdenum 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.





5247
Table of Contents    


South America Mining Product Revenues and Production Costs

Three Months Ended September 30, 2011       
Three Months Ended March 31, 2012       
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper Other TotalMethod Copper Other Total
Revenues, excluding adjustments$1,112
 $1,112
 $124
a 
$1,236
$1,098
 $1,098
 $90
a 
$1,188
              
Site production and delivery, before net noncash and other costs shown below445
 402
 50
 452
439
 405
 40
 445
By-product credits(117) —
 —
 —
(84) —
 —
 —
Treatment charges43
 43
 —
 43
47
 47
 —
 47
Net cash costs371
 445
 50
 495
402
 452
 40
 492
Depreciation, depletion and amortization64
 60
 4
 64
62
 59
 3
 62
Noncash and other costs, net5
 4
 1
 5
21
 13
 8
 21
Total costs440
 509
 55
 564
485
 524
 51
 575
Revenue adjustments, primarily for pricing on prior period open sales(147) (147) —
 (147)110
 109
 1
 110
Other non-inventoriable costs(22) (18) (4) (22)
Gross profit$503
 $438
 $65
 $503
$723
 $683
 $40
 $723
              
Reconciliation to Amounts Reported              
Revenues Production and Delivery Depreciation, Depletion and Amortization  Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$1,236
 $452
 $64
  $1,188
 $445
 $62
  
Treatment charges(43) N/A
 N/A
  (47) N/A
 N/A
  
Net noncash and other costsN/A
 5
 N/A
  N/A
 21
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales(147) N/A
 N/A
  110
 N/A
 N/A
  
Other non-inventoriable costsN/A
 22
 N/A
  
Eliminations and other7
 (1) —
  3
 (3) —
  
South America mining1,053
 478
 64
  1,254
 463
 62
  
North America copper mines1,419
 664
 67
  1,456
 707
 93
  
Indonesia mining1,362
 503
 62
  950
 495
 46
  
Africa mining276
 142
 32
  305
 132
 32
  
Molybdenum332
 260
 14
  340
 262
 15
  
Rod & Refining1,396
 1,390
 2
  1,304
 1,297
 2
  
Atlantic Copper Smelting & Refining837
 826
 11
  712
 695
 10
  
Corporate, other & eliminations(1,480) (1,693) 5
  (1,716) (1,623) 7
  
As reported in FCX’s consolidated financial statements$5,195
 $2,570
 $257
  $4,605
 $2,428
 $267
  
 
a.
Includes gold sales of 2319 thousand ounces ($1,6641,680 per ounce average realized price), silver sales of 698 thousand ounces ($30.32 per ounce average realized price) and silver sales of 834 thousand ounces ($40.75 per ounce average realized price); also includes molybdenum sales of 2 million pounds ($13.5312.35 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.


5348
Table of Contents    


South America Mining Product Revenues and Production Costs (continued)

Three Months Ended September 30, 2010       
Three Months Ended March 31, 2011       
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper Other TotalMethod Copper Other Total
Revenues, excluding adjustments$1,341
 $1,341
 $85
a 
$1,426
$1,345
 $1,345
 $119
a 
$1,464
              
Site production and delivery, before net noncash and other costs shown below439
 413
 30
 443
406
 375
 37
 412
By-product credits(81) —
 —
 —
(113) —
 —
 —
Treatment charges68
 68
 —
 68
59
 59
 —
 59
Net cash costs426
 481
 30
 511
352
 434
 37
 471
Depreciation, depletion and amortization65
 62
 3
 65
57
 53
 4
 57
Noncash and other costs, net7
 7
 —
 7
19
 18
 1
 19
Total costs498
 550
 33
 583
428
 505
 42
 547
Revenue adjustments, primarily for pricing on prior period open sales106
 106
 —
 106
11
 (8) 19
 11
Other non-inventoriable costs(16) (15) (1) (16)
Gross profit$933
 $882
 $51
 $933
$928
 $832
 $96
 $928
              
Reconciliation to Amounts Reported              
Revenues Production and Delivery Depreciation, Depletion and Amortization  Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$1,426
 $443
 $65
  $1,464
 $412
 $57
  
Treatment charges(68) N/A
 N/A
  (59) N/A
 N/A
  
Net noncash and other costsN/A
 7
 N/A
  N/A
 19
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales106
 N/A
 N/A
  11
 N/A
 N/A
  
Other non-inventoriable costsN/A
 16
 N/A
  
Eliminations and other1
 (4) 1
  (14) (20) —
  
South America mining1,465
 462
 66
  1,402
 411
 57
  
North America copper mines998
 536
 67
  1,361
 588
 58
  
Indonesia mining1,874
 528
 72
  1,730
 526
 57
  
Africa mining307
 141
 34
  309
 124
 28
  
Molybdenum293
 199
 13
  374
 240
 14
  
Rod & Refining1,181
 1,172
 2
  1,487
 1,481
 2
  
Atlantic Copper Smelting & Refining595
 590
 9
  762
 763
 10
  
Corporate, other & eliminations(1,561) (1,362) 5
  (1,716) (1,756) 6
  
As reported in FCX’s consolidated financial statements$5,152
 $2,266
 $268
  $5,709
 $2,377
 $232
  
 
a.
Includes gold sales of 3024 thousand ounces ($1,2651,394 per ounce average realized price), silver sales of 708 thousand ounces ($33.78 per ounce average realized price) and silver sales of 883 thousand ounces ($18.98 per ounce average realized price); also includes molybdenum sales of 23 million pounds ($13.84 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.

54
Table of Contents


South America Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2011       
(In millions)By-Product Co-Product Method
 Method Copper Other Total
Revenues, excluding adjustments$3,688
 $3,688
 $372
a 
$4,060
        
Site production and delivery, before net noncash and other costs shown below1,268
 1,159
 128
 1,287
By-product credits(353) —
 —
 —
Treatment charges164
 164
 —
 164
Net cash costs1,079
 1,323
 128
 1,451
Depreciation, depletion and amortization187
 175
 12
 187
Noncash and other costs, net15
 14
 1
 15
Total costs1,281
 1,512
 141
 1,653
Revenue adjustments, primarily for pricing on prior period open sales14
 (6) 20
 14
Other non-inventoriable costs(53) (46) (7) (53)
Gross profit$2,368
 $2,124
 $244
 $2,368
        
Reconciliation to Amounts Reported       
 Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$4,060
 $1,287
 $187
  
Treatment charges(164) N/A
 N/A
  
Net noncash and other costsN/A
 15
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales14
 N/A
 N/A
  
Other non-inventoriable costsN/A
 53
 N/A
  
Eliminations and other(7) (25) —
  
South America mining3,903
 1,330
 187
  
North America copper mines4,339
 1,923
 196
  
Indonesia mining4,656
 1,547
 179
  
Africa mining963
 422
 98
  
Molybdenum1,119
 786
 44
  
Rod & Refining4,310
 4,292
 6
  
Atlantic Copper Smelting & Refining2,252
 2,274
 30
  
Corporate, other & eliminations(4,824) (5,070) 16
  
As reported in FCX’s consolidated financial statements$16,718
 $7,504
 $756
  
a.
Includes gold sales of 72 thousand ounces ($1,556 per ounce average realized price) and silver sales of 2.3 million ounces ($38.70 per ounce average realized price); also includes molybdenum sales of 8 million pounds ($14.59 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.

55
Table of Contents


South America Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2010       
(In millions)By-Product Co-Product Method
 Method Copper Other Total
Revenues, excluding adjustments$3,343
 $3,343
 $201
a 
$3,544
        
Site production and delivery, before net noncash and other costs shown below1,185
 1,118
 79
 1,197
By-product credits(189) —
 —
 —
Treatment charges148
 148
 —
 148
Net cash costs1,144
 1,266
 79
 1,345
Depreciation, depletion and amortization184
 176
 8
 184
Noncash and other costs, net14
 13
 1
 14
Total costs1,342
 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       
 Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$3,544
 $1,197
 $184
  
Treatment charges(148) N/A
 N/A
  
Net noncash and other costsN/A
 14
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales(15) N/A
 N/A
  
Other non-inventoriable costsN/A
 30
 N/A
  
Eliminations and other2
 (14) 2
  
South America mining3,383
 1,227
 186
  
North America copper mines3,116
 1,557
 220
  
Indonesia mining4,260
 1,430
 192
  
Africa mining763
 347
 94
  
Molybdenum893
 574
 38
  
Rod & Refining3,383
 3,360
 6
  
Atlantic Copper Smelting & Refining1,844
 1,823
 28
  
Corporate, other & eliminations(4,263) (4,084) 24
  
As reported in FCX’s consolidated financial statements$13,379
 $6,234
 $788
  
a.
Includes gold sales of 69 thousand ounces ($1,211 per ounce average realized price) and silver sales of 2.0 million ounces ($18.26 per ounce average realized price); also includes molybdenum sales of 5 million pounds ($13.1015.65 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.





5649
Table of Contents    


Indonesia Mining Product Revenues and Production Costs

Three Months Ended September 30, 2011   
Three Months Ended March 31, 2012   
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper Gold Silver TotalMethod Copper Gold Silver Total
Revenues, excluding adjustments$831
 $831
 $650
 $27
a 
$1,508
$511
 $511
 $451
 $15
a 
$977
                  
Site production and delivery, before net noncash and other costs shown below499
 275
 215
 9
 499
470
 245
 217
 8
 470
Gold and silver credits(707) —
 —
 —
 —
(469) —
 —
 —
 —
Treatment charges47
 26
 20
 1
 47
25
 13
 12
 —
 25
Royalty on metals41
 23
 17
 1
 41
18
 10
 8
 —
 18
Net cash (credits) costs(120) 324
 252
 11
 587
Net cash costs44
 268
 237
 8
 513
Depreciation and amortization62
 34
 27
 1
 62
46
 24
 21
 1
 46
Noncash and other costs, net4
 2
 2
 —
 4
25
 13
 12
 —
 25
Total (credits) costs(54) 360
 281
 12
 653
Total costs115
 305
 270
 9
 584
Revenue adjustments, primarily for pricing on prior period open sales(88) (88) 28
 2
 (58)13
 13
 3
 —
 16
Gross profit$797
 $383
 $397
 $17
 $797
$409
 $219
 $184
 $6
 $409
                  
Reconciliation to Amounts Reported                  
Revenues Production and Delivery Depreciation, Depletion and Amortization    Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$1,508
 $499
 $62
    $977
 $470
 $46
    
Treatment charges(47) N/A
 N/A
    (25) N/A
 N/A
    
Royalty on metals(41) N/A
 N/A
    (18) N/A
 N/A
    
Net noncash and other costsN/A
 4
 N/A
    N/A
 25
 N/A
    
Revenue adjustments, primarily for pricing on prior period open sales(58) N/A
 N/A
    16
 N/A
 N/A
    
Indonesia mining1,362
 503
 62
    950
 495
 46
    
North America copper mines1,419
 664
 67
    1,456
 707
 93
    
South America mining1,053
 478
 64
    1,254
 463
 62
    
Africa mining276
 142
 32
    305
 132
 32
    
Molybdenum332
 260
 14
    340
 262
 15
    
Rod & Refining1,396
 1,390
 2
    1,304
 1,297
 2
    
Atlantic Copper Smelting & Refining837
 826
 11
    712
 695
 10
    
Corporate, other & eliminations(1,480) (1,693) 5
    (1,716) (1,623) 7
    
As reported in FCX’s consolidated financial statements$5,195
 $2,570
 $257
    $4,605
 $2,428
 $267
    

a.
Includes silver sales of 807449 thousand ounces ($34.0533.08 per ounce average realized price).

5750
Table of Contents    


Indonesia Mining Product Revenues and Production Costs (continued)

Three Months Ended September 30, 2010   
Three Months Ended March 31, 2011   
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper Gold Silver TotalMethod Copper Gold Silver Total
Revenues, excluding adjustments$1,310
 $1,310
 $590
 $22
a 
$1,922
$1,184
 $1,184
 $636
 $32
a 
$1,852
                  
Site production and delivery, before net noncash and other costs shown below522
 356
 160
 6
 522
511
 327
 175
 9
 511
Gold and silver credits(609) —
 —
 —
 —
(650) —
 —
 —
 —
Treatment charges79
 54
 24
 1
 79
49
 31
 17
 1
 49
Royalty on metals45
 31
 14
 —
 45
45
 29
 16
 —
 45
Net cash costs37
 441
 198
 7
 646
Net cash (credits) costs(45) 387
 208
 10
 605
Depreciation and amortization72
 49
 22
 1
 72
57
 36
 20
 1
 57
Noncash and other costs, net6
 4
 2
 —
 6
15
 10
 4
 1
 15
Total costs115
 494
 222
 8
 724
27
 433
 232
 12
 677
Revenue adjustments, primarily for pricing on prior period open sales79
 79
 (5) 2
 76
(10) (10) (17) (1) (28)
Gross profit$1,274
 $895
 $363
 $16
 $1,274
$1,147
 $741
 $387
 $19
 $1,147
                  
Reconciliation to Amounts Reported                  
Revenues Production and Delivery Depreciation, Depletion and Amortization    Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$1,922
 $522
 $72
    $1,852
 $511
 $57
    
Treatment charges(79) N/A
 N/A
    (49) N/A
 N/A
    
Royalty on metals(45) N/A
 N/A
    (45) N/A
 N/A
    
Net noncash and other costsN/A
 6
 N/A
    N/A
 15
 N/A
    
Revenue adjustments, primarily for pricing on prior period open sales76
 N/A
 N/A
    (28) N/A
 N/A
    
Indonesia mining1,874
 528
 72
    1,730
 526
 57
    
North America copper mines998
 536
 67
    1,361
 588
 58
    
South America mining1,465
 462
 66
    1,402
 411
 57
    
Africa mining307
 141
 34
    309
 124
 28
    
Molybdenum293
 199
 13
    374
 240
 14
    
Rod & Refining1,181
 1,172
 2
    1,487
 1,481
 2
    
Atlantic Copper Smelting & Refining595
 590
 9
    762
 763
 10
    
Corporate, other & eliminations(1,561) (1,362) 5
    (1,716) (1,756) 6
    
As reported in FCX’s consolidated financial statements$5,152
 $2,266
 $268
    $5,709
 $2,377
 $232
    

a.
Includes silver sales of 1.1 million897 thousand ounces ($20.9335.98 per ounce average realized price).

58
Table of Contents


Indonesia Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2011   
(In millions)By-Product Co-Product Method
 Method Copper Gold Silver Total
Revenues, excluding adjustments$3,040
 $3,040
 $1,829
 $92
a 
$4,961
          
Site production and delivery, before net noncash and other costs shown below1,521
 932
 561
 28
 1,521
Gold and silver credits(1,903) —
 —
 —
 —
Treatment charges145
 89
 53
 3
 145
Royalty on metals130
 79
 48
 3
 130
Net cash (credits) costs(107) 1,100
 662
 34
 1,796
Depreciation and amortization179
 110
 66
 3
 179
Noncash and other costs, net26
 16
 10
 —
 26
Total costs98
 1,226
 738
 37
 2,001
Revenue adjustments, primarily for pricing on prior period open sales(12) (12) (17) (1) (30)
Gross profit$2,930
 $1,802
 $1,074
 $54
 $2,930
          
Reconciliation to Amounts Reported         
 Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$4,961
 $1,521
 $179
    
Treatment charges(145) N/A
 N/A
    
Royalty on metals(130) N/A
 N/A
    
Net noncash and other costsN/A
 26
 N/A
    
Revenue adjustments, primarily for pricing on prior period open sales(30) N/A
 N/A
    
Indonesia mining4,656
 1,547
 179
    
North America copper mines4,339
 1,923
 196
    
South America mining3,903
 1,330
 187
    
Africa mining963
 422
 98
    
Molybdenum1,119
 786
 44
    
Rod & Refining4,310
 4,292
 6
    
Atlantic Copper Smelting & Refining2,252
 2,274
 30
    
Corporate, other & eliminations(4,824) (5,070) 16
    
As reported in FCX’s consolidated financial statements$16,718
 $7,504
 $756
    

a.
Includes silver sales of 2.5 million ounces ($36.44 per ounce average realized price).

59
Table of Contents


Indonesia Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2010   
(In millions)By-Product Co-Product Method
 Method Copper Gold Silver Total
Revenues, excluding adjustments$3,085
 $3,085
 $1,445
 $59
a 
$4,589
          
Site production and delivery, before net noncash and other costs shown below1,400
 941
 441
 18
 1,400
Gold and silver credits(1,505) —
 —
 —
 —
Treatment charges213
 144
 67
 2
 213
Royalty on metals109
 73
 34
 2
 109
Net cash costs217
 1,158
 542
 22
 1,722
Depreciation and amortization192
 129
 60
 3
 192
Noncash and other costs, net30
 20
 10
 —
 30
Total costs439
 1,307
 612
 25
 1,944
Revenue adjustments, primarily for pricing on prior period open sales(8) (8) 1
 —
 (7)
Gross profit$2,638
 $1,770
 $834
 $34
 $2,638
          
Reconciliation to Amounts Reported         
 Revenues Production and Delivery Depreciation, Depletion and Amortization    
Totals presented above$4,589
 $1,400
 $192
    
Treatment charges(213) N/A
 N/A
    
Royalty on metals(109) N/A
 N/A
    
Net noncash and other costsN/A
 30
 N/A
    
Revenue adjustments, primarily for pricing on prior period open sales(7) N/A
 N/A
    
Indonesia mining4,260
 1,430
 192
    
North America copper mines3,116
 1,557
 220
    
South America mining3,383
 1,227
 186
    
Africa mining763
 347
 94
    
Molybdenum893
 574
 38
    
Rod & Refining3,383
 3,360
 6
    
Atlantic Copper Smelting & Refining1,844
 1,823
 28
    
Corporate, other & eliminations(4,263) (4,084) 24
    
As reported in FCX’s consolidated financial statements$13,379
 $6,234
 $788
    

a.
Includes silver sales of 3.2 million ounces ($18.90 per ounce average realized price).

6051
Table of Contents    


Africa Mining Product Revenues and Production Costs

Three Months Ended September 30, 2011       
Three Months Ended March 31, 2012       
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper Cobalt TotalMethod Copper Cobalt Total
Revenues, excluding adjustmentsa
$226
 $226
 $56
 $282
$257
 $257
 $43
 $300
              
Site production and delivery, before net noncash and other costs shown below101
 92
 31
 123
103
 99
 26
 125
Cobalt creditsb
(34) —
 —
 —
(23) —
 —
 —
Royalty on metals5
 4
 1
 5
5
 5
 —
 5
Net cash costs72
 96
 32
 128
85
 104
 26
 130
Depreciation, depletion and amortization32
 27
 5
 32
32
 29
 3
 32
Noncash and other costs, net16
 13
 3
 16
7
 6
 1
 7
Total costs120
 136
 40
 176
124
 139
 30
 169
Revenue adjustments, primarily for pricing on prior period open sales(1) (1) —
 (1)8
 8
 2
 10
Other non-inventoriable costs(3) (2) (1) (3)
Gross profit$102
 $87
 $15
 $102
$141
 $126
 $15
 $141
              
Reconciliation to Amounts Reported              
Revenues Production and Delivery Depreciation, Depletion and Amortization  Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$282
 $123
 $32
  $300
 $125
 $32
  
Royalty on metals(5) N/A
 N/A
  (5) N/A
 N/A
  
Net noncash and other costsN/A
 16
 N/A
  N/A
 7
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales(1) N/A
 N/A
  10
 N/A
 N/A
  
Other non-inventoriable costsN/A
 3
 N/A
  
Africa mining276
 142
 32
  305
 132
 32
  
North America copper mines1,419
 664
 67
  1,456
 707
 93
  
South America mining1,053
 478
 64
  1,254
 463
 62
  
Indonesia mining1,362
 503
 62
  950
 495
 46
  
Molybdenum332
 260
 14
  340
 262
 15
  
Rod & Refining1,396
 1,390
 2
  1,304
 1,297
 2
  
Atlantic Copper Smelting & Refining837
 826
 11
  712
 695
 10
  
Corporate, other & eliminations(1,480) (1,693) 5
  (1,716) (1,623) 7
  
As reported in FCX’s consolidated financial statements$5,195
 $2,570
 $257
  $4,605
 $2,428
 $267
  
a.Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
b.Net of cobalt downstream processing and freight costs.


6152
Table of Contents    


Africa Mining Product Revenues and Production Costs (continued)

Three Months Ended September 30, 2010       
Three Months Ended March 31, 2011       
(In millions)By-Product Co-Product MethodBy-Product Co-Product Method
Method Copper Cobalt TotalMethod 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 below104
 87
 36
 123
90
 80
 32
 112
Cobalt creditsb
(48) —
 —
 —
(45) —
 —
 —
Royalty on metals6
 5
 1
 6
6
 5
 1
 6
Net cash costs62
 92
 37
 129
51
 85
 33
 118
Depreciation, depletion and amortization34
 28
 6
 34
28
 23
 5
 28
Noncash and other costs, net14
 12
 2
 14
12
 10
 2
 12
Total costs110
 132
 45
 177
91
 118
 40
 158
Revenue adjustments, primarily for pricing on prior period open sales2
 2
 (5) (3)(1) (1) 3
 2
Other non-inventoriable costs(3) (2) (1) (3)
Gross profit$133
 $112
 $21
 $133
$157
 $130
 $27
 $157
              
Reconciliation to Amounts Reported              
Revenues Production and Delivery Depreciation, Depletion and Amortization  Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$316
 $123
 $34
  $313
 $112
 $28
  
Royalty on metals(6) N/A
 N/A
  (6) N/A
 N/A
  
Net noncash and other costsN/A
 14
 N/A
  N/A
 12
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales(3) N/A
 N/A
  2
 N/A
 N/A
  
Other non-inventoriable costsN/A
 3
 N/A
  
Eliminations and other—
 1
 —
  
Africa mining307
 141
 34
  309
 124
 28
  
North America copper mines998
 536
 67
  1,361
 588
 58
  
South America mining1,465
 462
 66
  1,402
 411
 57
  
Indonesia mining1,874
 528
 72
  1,730
 526
 57
  
Molybdenum293
 199
 13
  374
 240
 14
  
Rod & Refining1,181
 1,172
 2
  1,487
 1,481
 2
  
Atlantic Copper Smelting & Refining595
 590
 9
  762
 763
 10
  
Corporate, other & eliminations(1,561) (1,362) 5
  (1,716) (1,756) 6
  
As reported in FCX’s consolidated financial statements$5,152
 $2,266
 $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.


62
Table of Contents


Africa Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2011       
(In millions)By-Product Co-Product Method
 Method Copper Cobalt Total
Revenues, excluding adjustmentsa
$779
 $779
 $201
 $980
        
Site production and delivery, before net noncash and other costs shown below313
 275
 105
 380
Cobalt creditsb
(136) —
 —
 —
Royalty on metals18
 14
 4
 18
Net cash costs195
 289
 109
 398
Depreciation, depletion and amortization98
 83
 15
 98
Noncash and other costs, net32
 27
 5
 32
Total costs325
 399
 129
 528
Revenue adjustments, primarily for pricing on prior period open sales(1) (1) 2
 1
Other non-inventoriable costs(10) (8) (2) (10)
Gross profit$443
 $371
 $72
 $443
        
Reconciliation to Amounts Reported       
 Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$980
 $380
 $98
  
Royalty on metals(18) N/A
 N/A
  
Net noncash and other costsN/A
 32
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales1
 N/A
 N/A
  
Other non-inventoriable costsN/A
 10
 N/A
  
Africa mining963
 422
 98
  
North America copper mines4,339
 1,923
 196
  
South America mining3,903
 1,330
 187
  
Indonesia mining4,656
 1,547
 179
  
Molybdenum1,119
 786
 44
  
Rod & Refining4,310
 4,292
 6
  
Atlantic Copper Smelting & Refining2,252
 2,274
 30
  
Corporate, other & eliminations(4,824) (5,070) 16
  
As reported in FCX’s consolidated financial statements$16,718
 $7,504
 $756
  
a.Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
 
b.Net of cobalt downstream processing and freight costs.

63
Table of Contents


Africa Mining Product Revenues and Production Costs (continued)

Nine Months Ended September 30, 2010       
(In millions)By-Product Co-Product Method
 Method Copper Cobalt Total
Revenues, excluding adjustmentsa
$623
 $623
 $150
 $773
        
Site production and delivery, before net noncash and other costs shown below264
 238
 76
 314
Cobalt creditsb
(104) —
 —
 —
Royalty on metals14
 11
 3
 14
Net cash costs174
 249
 79
 328
Depreciation, depletion and amortization94
 78
 16
 94
Noncash and other costs, net18
 15
 3
 18
Total costs286
 342
 98
 440
Revenue adjustments, primarily for pricing on prior period open sales—
 —
 4
 4
Other non-inventoriable costs(15) (12) (3) (15)
Gross profit$322
 $269
 $53
 $322
        
Reconciliation to Amounts Reported       
 Revenues Production and Delivery Depreciation, Depletion and Amortization  
Totals presented above$773
 $314
 $94
  
Royalty on metals(14) N/A
 N/A
  
Net noncash and other costsN/A
 18
 N/A
  
Revenue adjustments, primarily for pricing on prior period open sales4
 N/A
 N/A
  
Other non-inventoriable costsN/A
 15
 N/A
  
Africa mining763
 347
 94
  
North America copper mines3,116
 1,557
 220
  
South America mining3,383
 1,227
 186
  
Indonesia mining4,260
 1,430
 192
  
Molybdenum893
 574
 38
  
Rod & Refining3,383
 3,360
 6
  
Atlantic Copper Smelting & Refining1,844
 1,823
 28
  
Corporate, other & eliminations(4,263) (4,084) 24
  
As reported in FCX’s consolidated financial statements$13,379
 $6,234
 $788
  
 
a.Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.
b.Net of cobalt downstream processing and freight costs.



6453
Table of Contents    


Henderson Molybdenum Mine Product Revenues and Production Costs

Three Months Ended September 30,  Three Months Ended March 31,  
(In millions)2011 2010  2012 2011  
Revenues, excluding adjustments$163
 $162
  $134
 $172
  
          
Site production and delivery, before net noncash and other costs shown below55
 51
  53
 52
  
Treatment charges and other11
 12
  8
 9
  
Net cash costs66
 63
  61
 61
  
Depreciation, depletion and amortization10
 9
  8
 9
  
Noncash and other costs, net—
 —
  1
 —
  
Total costs76
 72
  70
 70
  
Gross profita
$87
 $90
  $64
 $102
  
          
Reconciliation to Amounts ReportedRevenues Production and Delivery Depreciation, Depletion and AmortizationRevenues Production and Delivery Depreciation, Depletion and Amortization
Three Months Ended September 30, 2011     
Three Months Ended March 31, 2012     
Totals presented above$163
 $55
 $10
$134
 $53
 $8
Treatment charges and other(11) N/A
 N/A
(8) N/A
 N/A
Net noncash and other costsN/A
 —
 N/A
N/A
 1
 N/A
Henderson mine152
 55
 10
126
 54
 8
Other molybdenum operations and eliminationsb
180
 205
 4
214
 208
 7
Molybdenum332
 260
 14
340
 262
 15
North America copper mines1,419
 664
 67
1,456
 707
 93
South America mining1,053
 478
 64
1,254
 463
 62
Indonesia mining1,362
 503
 62
950
 495
 46
Africa mining276
 142
 32
305
 132
 32
Rod & Refining1,396
 1,390
 2
1,304
 1,297
 2
Atlantic Copper Smelting & Refining837
 826
 11
712
 695
 10
Corporate, other & eliminations(1,480) (1,693) 5
(1,716) (1,623) 7
As reported in FCX’s consolidated financial statements$5,195
 $2,570
 $257
$4,605
 $2,428
 $267
          
Three Months Ended September 30, 2010     
Three Months Ended March 31, 2011     
Totals presented above$162
 $51
 $9
$172
 $52
 $9
Treatment charges and other(12) N/A
 N/A
(9) N/A
 N/A
Net noncash and other costsN/A
 —
 N/A
N/A
 —
 N/A
Henderson mine150
 51
 9
163
 52
 9
Other molybdenum operations and eliminationsb
143
 148
 4
211
 188
 5
Molybdenum293
 199
 13
374
 240
 14
North America copper mines998
 536
 67
1,361
 588
 58
South America mining1,465
 462
 66
1,402
 411
 57
Indonesia mining1,874
 528
 72
1,730
 526
 57
Africa mining307
 141
 34
309
 124
 28
Rod & Refining1,181
 1,172
 2
1,487
 1,481
 2
Atlantic Copper Smelting & Refining595
 590
 9
762
 763
 10
Corporate, other & eliminations(1,561) (1,362) 5
(1,716) (1,756) 6
As reported in FCX’s consolidated financial statements$5,152
 $2,266
 $268
$5,709
 $2,377
 $232
a.Gross profit reflects sales of Henderson production based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum division includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.
b.Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced by our North and South America copper mines.
b.Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced by our North and South America copper mines.

65
Table of Contents


Henderson Molybdenum Mine Product Revenues and Production Costs (continued)

 Nine Months Ended September 30,  
(In millions)2011 2010  
Revenues, excluding adjustments$499
 $478
  
      
Site production and delivery, before net noncash and other costs shown below158
 141
  
Treatment charges and other28
 33
  
Net cash costs186
 174
  
Depreciation, depletion and amortization27
 25
  
Noncash and other costs, net1
 1
  
Total costs214
 200
  
Gross profita
$285
 $278
  
      
Reconciliation to Amounts ReportedRevenues Production and Delivery Depreciation, Depletion and Amortization
Nine Months Ended September 30, 2011     
Totals presented above$499
 $158
 $27
Treatment charges and other(28) N/A
 N/A
Net noncash and other costsN/A
 1
 N/A
Henderson mine471
 159
 27
Other molybdenum operations and eliminationsb
648
 627
 17
Molybdenum1,119
 786
 44
North America copper mines4,339
 1,923
 196
South America mining3,903
 1,330
 187
Indonesia mining4,656
 1,547
 179
Africa mining963
 422
 98
Rod & Refining4,310
 4,292
 6
Atlantic Copper Smelting & Refining2,252
 2,274
 30
Corporate, other & eliminations(4,824) (5,070) 16
As reported in FCX’s consolidated financial statements$16,718
 $7,504
 $756
      
Nine Months Ended September 30, 2010     
Totals presented above$478
 $141
 $25
Treatment charges and other(33) N/A
 N/A
Net noncash and other costsN/A
 1
 N/A
Henderson mine445
 142
 25
Other molybdenum operations and eliminationsb
448
 432
 13
Molybdenum893
 574
 38
North America copper mines3,116
 1,557
 220
South America mining3,383
 1,227
 186
Indonesia mining4,260
 1,430
 192
Africa mining763
 347
 94
Rod & Refining3,383
 3,360
 6
Atlantic Copper Smelting & Refining1,844
 1,823
 28
Corporate, other & eliminations(4,263) (4,084) 24
As reported in FCX’s consolidated financial statements$13,379
 $6,234
 $788
a.Gross profit reflects sales of Henderson production based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum division includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.
b.Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced by our North and South America copper mines.


6654
Table of Contents    


CAUTIONARY STATEMENT

Our discussion and analysis contains forward-looking statements in which we discuss factors we believe may affect our future performance.  Forward-looking statements are all statements other than statements of historical facts, such as those statements regarding projected ore grades and milling rates, projected production and sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, exploration efforts and results, mine production and development plans, the impact of deferred intercompany profits on earnings, liquidity, other financial commitments and tax rates, the impact of copper, gold, molybdenum and cobalt price changes, potential prepayments of debt, future dividend payments and potential share purchases.  The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “intends,” “likely,” “will,” “should,” “to 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 of Directors and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

We caution readers that forward-looking 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, the resolution of administrative disputes in the Democratic Republic of Congo,DRC, weather- and climate-related risks, labor relations, including the resolution of labor negotiations and strikes in Indonesia and Peru, environmental risks, litigation results, currency translation risks and other factors described in more detail under the heading “Risk Factors” in our annual reportAnnual Report on Form 10-K for the year ended December 31, 20102011, filed with the SEC as updated by our subsequent filings 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, we may make changes to our business plans that could or will affect our 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.statements.


55
Table of Contents

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our market risks during the three monthsthree-month period ended September 30, 2011March 31, 2012. For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Item 7A7A. of our annual report on Form 10-K for the year ended December 31, 20102011. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook” in Part I, Item 22. of this quarterly report on Form 10-Q;10-Q for the period ended March 31, 2012; for projected sensitivities of our provisionally priced copper sales to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 22. of this quarterly report on Form 10-Q.10-Q for the period ended March 31, 2012.

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.March 31, 2012.

(b)
Changes in internal control.control over financial reporting. During second-quarter 2011, we began a phased implementation of a new enterprise resource planning (ERP) information technology system to upgrade our information technology infrastructure and enhance operating efficiency and effectiveness.  Implementation has been completed at our North America and South America mining operations and is ongoing.currently in progress at our Africa mining operations. We expect implementation of the ERP system to be completed at all of our operations over an approximate two-year period.  During each phase of the implementation, an appropriate level of training of employees, testing of the system and monitoring of the financial results recorded in the system is conducted. Management has updated our system of internal control over financial reporting for the impacted operating business units.


67
Table of Contents


With the exception of the ERP implementation described above, there has been no change in our internal control over financial reporting that occurred induring the quarterly period covered by this reportquarter ended March 31, 2012, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II.OTHER INFORMATION

Item 1.Legal Proceedings.

We are involved in variousnumerous legal proceedings that arise in the ordinary course of our business or are associated with environmental issues arising from legacy operations conducted over the years by Freeport-McMoRan Corporation (FMC - formerly Phelps Dodge CorporationCorporation) 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 since the information included in Part I, Item 3. “Legal Proceedings,” of our annual report on Form 10-K for the year ended December 31, 2010.

Management does not believe, based on currently available information, that the outcome of any proceeding reported in Note 13 and incorporated by reference into Part I, Item 3. “Legal Proceedings” inof our annual report on Form 10-K for the year ended December 31, 2010,2011, as updated by ourthis quarterly report on Form 10-Q for the period ended June 30, 2011 and this quarterly report,March 31, 2012, will have a material adverse effect on our financial condition,condition; although individual outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period.

The following presents material changes to the litigation and environmental proceedings included in Part I, Item 3. "Legal Proceedings" of our annual report on Form 10-K for the year ended December 31, 2010:

Litigation

Blackwell, Oklahoma Litigation. Information regarding theseRefer to Note 8 for further discussion of updates to a previously reported legal proceedings isproceeding and a new legal proceeding since the information included in Note 13 and incorporated by reference tointo Part I, Item 3. “Legal Proceedings” of our annual report on Form 10-K for the year ended December 31, 2010, as updated by Part II, Item 1. “Legal Proceedings” of our quarterly report on Form 10-Q for the quarter ended June 30, 2011. At a mediation session in September 2011 we reached agreements in principle with the plaintiffs' counsel to settle each of the following matters: Coffey, et al., v. Freeport-McMoRan Copper & Gold, Inc., et al.., United States District Court for the Western District of Oklahoma, Case No. CIV-10-295-HE, and Brown et al. v. Freeport-McMoRan Copper & Gold Inc., et al., Kay County Oklahoma District Court, Case No. lCJ-2009-213. The agreements in principle did not have, and the settlements (if effected in accordance with the agreements in principle) will not have a material effect on our financial condition, results of operations or cash flow. Both agreements in principle are subject to negotiation and execution of definitive settlement agreements, and the agreement to settle the Coffey case is subject to a hearing at which the court must determine whether the settlement is "fair, adequate and reasonable." We do not expect the hearing to occur before the first quarter of 2012.

Environmental Proceedings

Arizona Department of Environmental Quality - Morenci. Information regarding this legal proceeding is incorporated by reference to Part I, Item 3. "Legal Proceedings" of our annual report on Form 10-K for the year ended December 31, 2010, as updated by Part II, Item 1. “Legal Proceedings” of our quarterly report on Form 10-Q for the quarter ended June 30, 2011.  On August 1, 2011, the Maricopa County Superior Court approved the consent judgment with the State of Arizona formalizing the agreed-upon settlement.

Tax Proceeding

Cerro Verde Tax Proceeding. Information regarding this proceeding contained in Note 13 of our annual report on Form 10-K for the year ended December 31, 2010, as updated by the information regarding this proceeding contained in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our quarterly reports on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011, under the heading “Operations - South America Mining,” is incorporated herein by reference.

Sociedad Minera Cerro Verde S.A.A. (Cerro Verde) received assessments from SUNAT, the Peruvian national tax authority, in connection with claims for mining royalties related to the minerals processed by its concentrator, which was added to Cerro Verde's processing facilities in late 2006. These assessments relate to the period from October

68
Table of Contents


2006 through December 2007, and to the years 2008 and 2009. SUNAT issued rulings denying Cerro Verde's protests of the assessments. On May 12, 2010, Cerro Verde filed a claim with the Peruvian Tax Tribunal appealing SUNAT's decision for the period from October 2006 through December 2007. On March 10, 2011, Cerro Verde filed a claim with the Peruvian Tax Tribunal appealing SUNAT's decision for the year 2008. Cerro Verde is challenging these assessments 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. If Cerro Verde is ultimately found responsible for these royalties, it will also be liable for interest, which accrues at rates that range from approximately 7 to 18 percent based on the year accrued and the currency in which the amounts would be payable. At September 30, 2011, the aggregate amount of the assessments, including interest and penalties, approximated $184 million. This amount will continue to increase at varying interest rates until this matter is resolved. SUNAT may continue to assess mining royalties annually until this matter is resolved by the Tax Tribunal.

Item 1A. Risk Factors.

The followingThere have been no material changes to our risk factors included induring the three-month period ended March 31, 2012. For additional information on risk factors, refer to Part I, Item 1A. “Risk Factors” inof our annual report on Form 10-K for the year ended December 31, 20102011, and Part II, Item 1A. "Risk Factors" in our quarterly report on Form 10-Q for the period ended June 30, 2011, respectively, have been updated:.

Operational Risks

Labor unrest and activism could disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects.

As further described in Part 1. Items 1 and 2. “Business and Properties” in our annual report on Form 10-K for the year ended December 31, 2010, we are party to labor agreements with various unions that represent employees at our operations. Labor agreements are generally negotiated on a periodic basis, and the risk exists that labor agreements may not be renewed on reasonably satisfactory terms to us or at all. We cannot predict what issues may be raised by the collective bargaining units representing our employees and, if raised, whether negotiations concerning those issues will be successfully concluded. Our production and sales volumes could be significantly reduced and our business, financial condition and results of operations adversely affected by significant reductions in productivity or protracted work stoppages at one or more of our operations. Additionally, if we enter into a new labor agreement with any union that significantly increases our labor costs relative to our competitors, our ability to compete may be materially adversely affected.

During July 2011, PT Freeport Indonesia union workers commenced an eight-day labor strike, which led to a temporary suspension of mining, milling and concentrate shipments. On September 15, 2011, PT Freeport Indonesia union workers commenced another labor strike that is ongoing. The union has notified PT Freeport Indonesia that it intends to extend the strike to December 15, 2011. PT Freeport Indonesia continues to seek an end to the strike, which has no legal basis, and to conclude negotiations, on a fair and reasonable basis, of the bi-annual renewal of its collective labor agreement. PT Freeport Indonesia's compensation practices are highly competitive in Indonesia, and PT Freeport Indonesia has agreed to accept the recommendations of the government-appointed mediator for a generous increase in wages and other benefits. However, the union has declined to accept these recommendations, and on October 10, 2011, PT Freeport Indonesia filed its case with the Industrial Court. We cannot predict when the strike will end or what the outcome of our labor negotiations will be.

During third-quarter 2011, Cerro Verde's union workforce commenced a series of labor strikes, the most recent of which commenced on September 29, 2011. Efforts are ongoing to reach a mutually satisfactory renewal of Cerro Verde's collective bargaining agreement.

If we do not successfully negotiate new collective bargaining agreements with our union workers, including those employed by PT Freeport Indonesia and Cerro Verde, we may incur prolonged strikes and other work stoppages at our mining operations.


6956
Table of Contents    


The following risk factor contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2010, has been updated:

International risks

Because our Grasberg minerals district in Papua, Indonesia remains our most significant operating asset, our business may continue to be adversely affected by Indonesian political, economic and social uncertainties.

The information regarding incidents occurring at our Indonesian mining operations during 2011 contained in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of this quarterly report on Form 10-Q for the quarter ended September 30, 2011, under the heading "Operations - Indonesia Mining" is incorporated herein by reference.

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, 2011March 31, 2012:
Period
(a) Total Number
of Shares Purchased
(b) Average
Price Paid Per Share
(c) Total Number of
Shares Purchased as Part
of Publicly Announced Plans or Programsa
(d) Maximum Number
of Shares That May
Yet Be Purchased Under the Plans or Programsa
July 1-31, 2011—
——
23,685,500
August 1-31, 2011—
——
23,685,500
September 1-30, 2011—
——
23,685,500
Total—
——
23,685,500
 Period 
(a) Total Number
of Shares Purchased
 
(b) Average
Price Paid Per Share
 
(c) Total Number of
Shares Purchased as Part
of Publicly Announced Plans or Programsa
 
(d) Maximum Number
of Shares That May
Yet Be Purchased Under the Plans or Programsa
 
 January 1-31, 2012 —
 — —
 23,685,500
 February 1-29, 2012 138,710
 44.32 —
 23,685,500
 March 1-31, 2012 —
 — —
 23,685,500
 Total 138,710
 44.32 —
 23,685,500
a.On July 21, 2008, our Board of Directors approved an increase in our open-market share purchase program for up to 30 million shares, of which 23.7 million shares remain available for purchase. There have been no purchases under this program since 2008. This program does not have an expiration date.
 
Item 4.Mine Safety Disclosure.

The safety and health of all employees is our 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 healthsafety and safetyhealth of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs. Refer to Exhibit 99.1 forThe information concerning mine safety disclosuresviolations or other regulatory matters required in accordance withby Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report on Form 10-Q.
 
Item 6.Exhibits.

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

7057
Table of Contents    


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:  NovemberMay 4, 20112012

7158
Table of Contents    


FREEPORT-McMoRan COPPER & GOLD INC.
EXHIBIT INDEX
  Filed 
Exhibit with thisIncorporated by Reference
NumberExhibit TitleForm 10-QFormFile No.Date Filed
3.1Composite Certificate of Incorporation of FCX. 10-Q001-11307-018/6/2010
3.2Amended and Restated By-Laws of FCX, as amended through February 2, 2010. 8-K001-11307-012/5/2010
4.1Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as trustee.8-K001-11307-012/13/2012
4.2First Supplemental Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as trustee.8-K001-11307-012/13/2012
4.3Second Supplemental Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as trustee.8-K001-11307-012/13/2012
4.4Third Supplemental Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as trustee.8-K001-11307-012/13/2012
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   
99.195.1
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   


E-1