News Release Details

FCX Reports Fourth-Quarter and Year Ended December 31, 2008 Results

01/26/09

PHOENIX, Ariz.--(BUSINESS WIRE)--Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):

  • Fourth-quarter 2008 net loss was $13.9 billion, $36.78 per share, compared with net income of $414 million, $1.05 per share, for fourth-quarter 2007. After adjusting for special items totaling $14.0 billion, $36.84 per share, fourth-quarter 2008 adjusted net income totaled $23 million, $0.06 per share (see page 3).
  • During fourth-quarter 2008, FCX completed a review of the carrying values of its inventories (including mill and leach stockpiles), long-lived assets and goodwill and recorded after-tax charges totaling $13.1 billion, $34.51 per share, primarily to reduce the carrying value of inventories (including mill and leach stockpiles), long-lived assets and goodwill related to the March 2007 acquisition of Phelps Dodge.
  • Consolidated 2008 sales from mines totaled 1.2 billion pounds of copper, 462 thousand ounces of gold and 12 million pounds of molybdenum for the fourth quarter and 4.1 billion pounds of copper, 1.3 million ounces of gold and 71 million pounds of molybdenum for the year.
  • In response to weak global economic conditions and a sharp decline in copper and molybdenum prices during fourth-quarter 2008, FCX announced a series of actions and revisions to operating plans in December 2008 to reduce costs and capital expenditures, and suspended its common dividend. FCX is announcing today further revisions to its operating plans principally affecting its North America operations to improve its operating cost profile.
  • The revised operating plans result in lower copper and molybdenum sales than previously reported estimates. Copper sales are expected to approximate 3.9 billion pounds in 2009 and 3.8 billion pounds in 2010 (9 percent and 17 percent lower than the October 2008 estimates). Molybdenum sales are expected to approximate 60 million pounds in 2009 and 60 million pounds in 2010 (25 percent and 40 percent lower than the October 2008 estimates). Gold sales are not impacted by the revised plans and are expected to approximate 2.2 million ounces in both 2009 and 2010.
  • Consolidated unit net cash costs (net of by-product credits) averaged $1.04 per pound for fourth-quarter 2008 and $1.16 per pound for the year ended December 31, 2008. Based on the revised operating plans and assuming average prices of $800 per ounce for gold and $9 per pound for molybdenum, consolidated unit net cash costs are estimated to average $0.71 per pound for the year 2009.
  • Operating cash flows totaled $201 million for fourth-quarter 2008 and $3.4 billion for the year 2008. The operating cash flows for the year 2008 are net of $1.2 billion in working capital uses. Using estimated sales volumes for 2009 and assuming 2009 average prices of $1.50 per pound for copper, $800 per ounce for gold and $9 per pound for molybdenum, operating cash flows in 2009 would approximate $1.0 billion, net of $0.6 billion in working capital requirements.
  • Capital expenditures totaled $779 million for fourth-quarter 2008 and $2.7 billion for the year 2008. FCX currently expects capital expenditures to approximate $1.3 billion for 2009. Projected 2009 capital expenditures include sustaining capital of $0.6 billion and $0.7 billion in investments in the Tenke Fungurume greenfield project in Africa and underground development projects in Indonesia. Capital spending plans will continue to be reviewed and revised as market conditions warrant.
  • Total debt approximated $7.4 billion and consolidated cash was $872 million at December 31, 2008.
  • FCX’s preliminary estimate of consolidated recoverable reserves as of December 31, 2008, totaled 102.0 billion pounds of copper, 40.0 million ounces of gold and 2.48 billion pounds of molybdenum. Estimated recoverable reserves include 3.9 billion pounds of copper in mill and leach stockpiles. Reserve additions of 12.8 billion pounds of copper and 0.51 billion pounds of molybdenum replaced over 300 percent of 2008 copper production and 700 percent of 2008 molybdenum production.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported a fourth-quarter 2008 net loss applicable to common stock of $13.9 billion, $36.78 per share, compared with net income of $414 million, $1.05 per share, for the fourth quarter of 2007. For the year ended December 31, 2008, FCX reported a net loss of $11.3 billion, $29.72 per share, compared with net income of $2.8 billion, $7.50 per share, in 2007. The results for the year ended December 31, 2007, include the operations of Phelps Dodge beginning March 20, 2007.

James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer, said, “We are taking decisive actions to respond to the currently weak global economic conditions so that our company is positioned to operate on a lean, efficient and low-cost basis while preserving our valuable resources and growth opportunities for the future. We have a portfolio of assets and an experienced team which enable us to operate effectively during varying market conditions. Our long-lived reserves, leading market positions in copper and in molybdenum, significant gold production, and attractive growth opportunities in an industry where supply growth has been constrained will enable us to benefit as the world’s economies improve. Our Grasberg mine with its significant production of high-grade copper and gold ore provides the foundation for sustaining our assets for future success.”











SUMMARY FINANCIAL AND OPERATING DATA


































Years Ended


Fourth Quarter
December 31,


2008
2007
2008
2007a
Financial Data (in millions, except per share amounts)











Revenues
$2,067b,c

$4,184b,c,d

$17,796b,c

$16,939b,c,d
Operating (loss) income
$(18,292)c

$1,152c

$(12,710)c

$6,555c

(Loss) income from continuing operations applicable to common stocke


$(13,933)c,g

$423c,g

$(11,341)c,g

$2,734c,g
Net (loss) income applicable to common stocke
$(13,933)c,g

$414c,g

$(11,341)c,g

$2,769c,g
Diluted net (loss) income per share of common stock:











Continuing operations
$(36.78)c,g

$1.07c,g

$(29.72)c,g

$7.41c,g
Discontinued operations
-

(0.02)

-

0.09
Diluted net (loss) income per share of common stock
$(36.78)c,g

$1.05

$(29.72)c,g

$7.50c,g
Diluted average common shares outstanding
379

409

382

397
Operating cash flows
$201f

$1,298f

$3,370f

$6,225f
Capital expenditures
$779

$617

$2,708

$1,755













Operating Data – Sales from Mines











Copper (millions of recoverable pounds)











FCX’s consolidated share
1,197

878

4,066

3,357
Average realized price per pound
$1.55

$3.20d

$2.69

$3.29d













Gold (thousands of recoverable ounces)











FCX’s consolidated share
462

161

1,314

2,298
Average realized price per ounce
$818

$797

$861

$682













Molybdenum (millions of recoverable pounds)











FCX’s consolidated share
12

19

71

52
Average realized price per pound
$24.55

$27.84

$30.55

$26.81













a. Includes Phelps Dodge results beginning March 20, 2007.

b. Includes impacts of adjustments to provisionally priced concentrate and cathode sales recognized in prior periods (see discussion on page 14). Adjustments are quantified in note g on the following page.

c. Includes charges totaling $43 million ($28 million to net loss or $0.08 per share) in fourth-quarter 2008, $34 million ($21 million to net income or $0.05 per share) in fourth-quarter 2007, $78 million ($52 million to net loss or $0.14 per share) for the full-year 2008 and $30 million ($18 million to net income or $0.05 per share) for the full-year 2007 for unrealized losses on copper derivative contracts entered into with FCX’s U.S. copper rod customers, which will allow FCX to receive market prices in the month of shipment while the customer pays the fixed price they requested.

d. Includes credits for noncash mark-to-market accounting adjustments on the 2007 copper price protection program, which increased average realized copper prices by $0.04 per pound in fourth-quarter 2007, and charges, which decreased average realized copper prices by $0.05 per pound for the full-year 2007. FCX paid $598 million upon settlement of these contracts in January 2008. FCX does not currently intend to enter into similar hedging programs in the future. Credits (charges) are quantified in footnote g below.

e. After preferred dividends and losses on induced conversions.

f. Includes working capital sources (uses) of $384 million in fourth-quarter 2008, $406 million in fourth-quarter 2007, $(1.2) billion for the full-year 2008 and $1.0 billion for the full-year 2007.

g. Special items resulting in increases (decreases) to financial results for the 2008 and 2007 periods are included in the following tables (in millions, except per share amounts):








Fourth Quarter 2008
Fourth Quarter 2007


Pre-tax
After-tax
Per Share
Pre-tax
After-tax
Per Share

Net (loss) income applicable to common stock



N/A

$ (13,933)

$ (36.78)


N/A

$ 414

$ 1.05













Special items:











Asset impairments, excluding goodwill(1)
$ (10,863)

$ (6,616)

$ (17.47)

$ -

$ -

$ -
Goodwill impairment(1)

(5,987)


(5,987)


(15.81)


-


-


-

Lower of cost or market (LCM) inventory adjustments(1)



(760)


(466)


(1.23)


-


-


-
Restructuring costs and other

(111)


(67)


(0.18)


-


-


-
Reduction of performance-related benefits

126


74


0.20


-


-


-
Adjustments to prior period copper sales

(745)


(343)


(0.91)


(257)


(119)


(0.29)
Deferred tax asset valuation

N/A


(359)


(0.95)


-


-


-
Copper price protection program

-


-


-


37


23


0.06
Losses on early extinguishment of debt

-


-


-


(2)


(2)


-

Losses on induced conversion of preferred stock(2)



N/A


(22)


(0.06)


-


-


-
Purchase accounting impacts to: (3)











Operating income

(248)


(154)


(0.41)


(232)


(143)


(0.35)
Non-operating income

(24)


(16)


(0.04)


(3)


-


-
Total special items
$ (18,612)

$ (13,956)

$ (36.84)

$ (457)

$ (241)

$ (0.59)













Adjusted net income

N/A

$ 23

$ 0.06


N/A

$ 655

$ 1.60




























Year Ended December 31, 2008
Year Ended December 31, 2007


Pre-tax
After-tax
Per Share
Pre-tax
After-tax
Per Share

Net (loss) income applicable to common stock



N/A

$ (11,341)

$ (29.72)


N/A

$ 2,769

$ 7.50













Special items:











Asset impairments, excluding goodwill(1)
$ (10,867)

$ (6,618)

$ (17.34)

$ -

$ -

$ -
Goodwill impairment(1)

(5,987)


(5,987)


(15.69)


-


-


-
LCM inventory adjustments(1)

(782)


(479)


(1.26)


-


-


-
Restructuring costs and other

(111)


(67)


(0.18)


-


-


-
Reduction of performance-related benefits

33


20


0.05


-


-


-
Adjustments to prior period copper sales

268


114


0.30


(42)


(18)


(0.05)
Deferred tax asset valuation

N/A


(359)


(0.94)


-


-


-
Copper price protection program

-


-


-


(175)


(106)


(0.27)
Losses on early extinguishment of debt

(6)


(5)


(0.01)


(173)


(132)


(0.33)

Losses on induced conversion of preferred stock(2)



N/A


(22)


(0.06)


-


-


-
Gains on sales of assets

13


8


0.02


85


52


0.13
Purchase accounting impacts to: (3)











Operating income

(1,009)


(622)


(1.63)


(1,256)


(785)


(1.98)
Non-operating income

(93)


(57)


(0.15)


(8)


(8)


(0.02)
Total special items
$ (18,541)

$ (14,074)

$ (36.88)

$ (1,569)

$ (997)

$ (2.51)













Adjusted net income

N/A

$ 2,733

$ 7.16


N/A

$ 3,766

$ 9.48













(1) FCX’s impairment evaluations and LCM inventory adjustments at December 31, 2008, were based on price assumptions reflecting prevailing copper futures prices approximating $1.40 to $1.50 per pound for three years and a long-term average price of $1.60 per pound. Molybdenum prices were assumed to average $8.00 per pound. See discussion of the impairments and LCM inventory adjustments beginning on page 13.

(2) Reflects privately negotiated transactions to induce conversion of approximately 0.3 million shares of FCX’s 5½% Convertible Perpetual Preferred Stock with a liquidation preference of $268 million into 5.8 million shares of FCX common stock. To induce conversion of these shares, FCX issued an additional aggregate 1.0 million shares of common stock.

(3) For additional information regarding the impacts of these adjustments to production and delivery costs and depreciation, depletion and amortization refer to the supplemental schedule, “Business Segments,” beginning on page XXVI, which is available on FCX’s web site, “www.fcx.com.”

REVISED OPERATING PLANS

Commodity prices declined dramatically during the fourth quarter of 2008. After averaging $3.61 per pound for the first nine months of 2008, London Metal Exchange (LME) copper prices declined to a four-year low of $1.26 per pound in December 2008 and experienced unprecedented volatility over the last few months. The LME copper price was $1.38 per pound at January 23, 2009. Molybdenum prices averaged approximately $33 per pound in the first nine months of 2008. Slowing demand for molybdenum, principally in the metallurgical sector during the fourth quarter of 2008 resulted in a sudden and sharp decline in molybdenum prices. The Metals Week Dealer Oxide price declined to a multi-year low of $8.75 per pound in November 2008 and was $9.30 per pound as of January 26, 2009.

While FCX’s long-term strategy of developing its resources to their full potential remains in place, the severity of the decline in commodity prices and the present economic and credit environment limits FCX’s ability to invest in growth projects and required adjustments to its near-term plans. FCX announced a series of actions in December 2008 and is today announcing further changes to its near-term operating plans to reduce costs and enhance cash flow performance in the context of weak economic conditions and low commodity prices. FCX views the long-term outlook for its business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy; however, FCX is responding aggressively to the sudden downturn in the copper and molybdenum markets and the uncertain economic outlook.

The following tables summarize the actual results for the year 2008 and the current estimates for the years 2009 and 2010 for sales volumes, capital expenditures and unit net cash costs compared with the October and December 2008 estimates.












2008
Estimates as of


Actual
October
December
January


Results
2008
2008
2009
Consolidated 2008 sales volumes







Copper (billion pounds)

4.1

4.0

4.0

N/A
Gold (million ounces)

1.3

1.2

1.3

N/A
Molybdenum (million pounds)

71

74

72

N/A









Consolidated 2009 sales volumes







Copper (billion pounds)

N/A

4.3

4.1

3.9
Gold (million ounces)

N/A

2.2

2.2

2.2
Molybdenum (million pounds)

N/A

80

70

60









Consolidated 2010 sales volumes







Copper (billion pounds)

N/A

4.6

4.1

3.8
Gold (million ounces)

N/A

2.2

2.2

2.2
Molybdenum (million pounds)

N/A

100

70

60









Consolidated capital expenditures (in billions)







2008


$ 2.7
$ 2.7
$ 2.7

N/A

2009



N/A
$ 2.3
$ 1.1
$ 1.3

2010



N/A
$ 1.3
$ 1.3
$ 1.0
















2008
2009 Estimates as of


Actual
December
January


Results
2008a
2009b
Consolidated unit net cash costs





per pound of copper:





Site production and delivery, after adjustments
$ 1.51

$ 1.26

$ 1.11
By-product credits

(0.53)


(0.52)


(0.56)
Treatment charges

0.15


0.13


0.14
Royalties

0.03


0.02


0.02
Unit net cash costs
$ 1.16

$ 0.89

$ 0.71







a. December 2008 estimates included average price assumptions of $10 per pound for molybdenum and $750 per ounce for gold.

b. Assuming average prices of $9 per pound of molybdenum and $800 per ounce for gold, each $1 per pound change in molybdenum prices would impact unit costs by $0.01 per pound and each $50 per ounce change in gold prices would impact unit costs by $0.025 per pound.

The revised operating plans reflect reductions in costs associated with lower operating rates and the effects of declines on energy prices and other commodity-based input costs, and FCX’s fourth-quarter 2008 LCM inventory adjustments. In addition, FCX has initiated significant reductions in exploration, research and administrative costs and suspended its common stock dividend and share purchase program.

FCX will continue to adjust its operating strategy as market conditions change.








OPERATIONS













Years Ended


Fourth Quarter
December 31,


2008
2007
2008
2007a
FCX Operating Data









Copper (millions of recoverable pounds)









Production

1,185

926


4,030

3,884
Salesb

1,197

878


4,066

3,862
Average realized price per pound
$ 1.55
$ 3.20c

$ 2.69
$ 3.22c
Site production and delivery unit costsd
$ 1.37
$ 1.32

$ 1.51
$ 1.17
Unit net cash costsd
$ 1.04
$ 1.08

$ 1.16
$ 0.75
Gold (thousands of recoverable ounces)









Production

466

186


1,291

2,329
Salesb

462

161


1,314

2,320
Average realized price per ounce
$ 818
$ 797

$ 861
$ 682
Molybdenum (millions of recoverable pounds)









Production

16

17


73

70
Salesb

12

19


71

69
Average realized price per pound
$ 24.55
$ 27.84

$ 30.55
$ 25.87











a. For comparative purposes, amounts reflect the combination of FCX’s historical data with Phelps Dodge pre-acquisition data for the period January 1, 2007, through March 19, 2007.

b. Excludes sales of purchased metal.

c. Includes increase of $0.04 per pound for fourth-quarter 2007 and reduction of $0.05 per pound for full-year 2007 for mark-to-market accounting adjustments on the 2007 copper price protection program.

d. Reflects per pound weighted average site production and delivery unit costs and unit net cash costs, net of by-product credits, for all mines. For reconciliations of unit costs per pound by operating division to production and delivery costs reported in FCX’s consolidated financial statements or pro forma consolidated financial results, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page IX, which is available on FCX’s web site, “www.fcx.com.”

Fourth-quarter 2008 consolidated copper sales of 1,197 million pounds were 36 percent higher than fourth-quarter 2007 sales of 878 million pounds and slightly higher than December 2008 estimates of 1,165 million pounds. Fourth-quarter 2008 consolidated gold sales of 462 thousand ounces were nearly three times higher than fourth-quarter 2007 gold sales of 161 thousand ounces and 16 percent higher than December 2008 estimates of 400 thousand ounces. Fourth-quarter 2008 consolidated sales of copper and gold were higher than the year-ago period primarily because of higher ore grades at Grasberg and were higher than December 2008 estimates because of slightly higher production and the timing of shipments. Consolidated molybdenum sales of 12 million pounds in the fourth quarter of 2008 were lower than fourth-quarter 2007 sales of 19 million pounds because of slowing demand and revised mine plans for molybdenum production.

Consolidated unit net cash costs averaged $1.04 per pound in the fourth quarter of 2008 and $1.16 for the year 2008. Cash costs increased significantly during 2008, principally for energy and sulfuric acid. Commodity-based input costs began to decrease in the fourth quarter of 2008 as a result of the recent sharp declines in prices of energy and other commodity-based input costs.

North America Copper Mines. FCX operates five open-pit copper mines in North America (Morenci, Bagdad, Sierrita and Safford in Arizona and Tyrone in New Mexico). By-product molybdenum is produced primarily at Sierrita and Bagdad. All of the North America mining operations are wholly owned, except for Morenci. FCX records its 85 percent joint venture interest in Morenci using the proportionate consolidation method.













Years Ended


Fourth Quarter
December 31,
North America Copper Mining Operations
2008
2007
2008
2007a











Copper (millions of recoverable pounds)









Production

379

327


1,430

1,320
Salesb

387

316


1,434

1,332
Average realized price per pound
$ 1.84
$ 3.46c

$ 3.07
$ 3.10c











Molybdenum (millions of recoverable pounds)d









Production

8

7


30

30











a. For comparative purposes, reflects the combination of FCX’s historical data beginning March 20, 2007, with Phelps Dodge pre-acquisition data through March 19, 2007.

b. Excludes sales of purchased metal.

c. Amount was $3.34 per pound for fourth-quarter 2007 and $3.25 per pound for full-year 2007 before mark-to-market accounting adjustments on the 2007 copper price protection program.

d. Represents by-product production. Sales of by-product molybdenum are reflected in the molybdenum division discussion that begins on page 10.

Consolidated copper sales in North America totaled 387 million pounds in the fourth quarter of 2008, 22 percent higher than fourth-quarter 2007 sales primarily because of additional production from the Safford mine, which began operations in December 2007.

In response to weak market conditions, during the fourth quarter of 2008 and in January 2009, FCX revised its operating plans at its North America copper mines. FCX’s revised operating plans reflect a 50 percent reduction in the mining and crushed leach rates at Morenci, a 50 percent reduction in the mining and stacking rates at the newly commissioned Safford mine, a 50 percent reduction in the mining rate at the Tyrone mine and a suspension of mining and milling activities at the Chino mine. The revised plans also include capital cost reductions, including deferrals of incremental expansion projects at the Sierrita and Bagdad mines and the planned restart of the Miami mine. The revised plans at each of the operations incorporate the impacts of lower energy, acid and other consumables; reduced labor costs and a significant reduction in capital spending plans. These plans will continue to be reviewed and additional adjustments may be made as market conditions warrant.

For the year 2009, FCX expects sales from North America copper mines to approximate 1.1 billion pounds of copper. By-product molybdenum production is expected to total 28 million pounds in 2009. The effect of curtailed production rates in North America is estimated to approximate 400 million pounds of copper in 2009, an approximately 30 percent reduction compared to October 2008 estimates. If FCX continues to operate at reduced rates, production in 2010 would be expected to decline by approximately an additional 200 million pounds because of impacts of 2009 mining activities to 2010 leaching operations.

Unit Net Cash Costs. The following table summarizes unit net cash costs at the North America copper mines.
















Years Ended


Fourth Quarter
December 31,


2008
2007
2008
2007a
Per pound of copper:







Site production and delivery, after adjustments
$ 1.93

$ 1.56

$ 1.88

$ 1.43
By-product credits, primarily molybdenum

(0.44)


(0.69)


(0.64)


(0.66)
Treatment charges

0.09


0.11


0.09


0.09
Unit net cash costsb
$ 1.58

$ 0.98

$ 1.33

$ 0.86









a. For comparative purposes, amounts have been presented on a combined basis, which reflects FCX’s historical data beginning March 20, 2007, and the Phelps Dodge pre-acquisition data through March 19, 2007.

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to actual or pro forma sales reported in FCX’s consolidated financial statements or pro forma consolidated financial results, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page IX, which is available on FCX’s web site, “www.fcx.com.”

North America unit net cash costs were higher in the 2008 periods as compared with the 2007 periods primarily because of increases in energy, labor, sulfuric acid, maintenance and other input costs, combined with higher unit costs at Safford as the mine began production in December 2007. In addition, unit net cash costs for the year 2008 were impacted by higher mining rates and lower grades at Morenci. A sharp decline in molybdenum prices in the fourth quarter of 2008 resulted in lower by-product credits.

FCX’s five operating North America copper mines have varying cost structures because of differences in ore grades and ore characteristics, processing costs, by-products and other factors. During the fourth quarter of 2008, North America’s unit net cash costs at its operating copper mines ranged from less than $0.05 per pound at one mine to approximately $1.95 per pound at the Morenci mine, which comprised about 45 percent of North America copper production. The revised operating plans and reduced input costs are expected to result in significantly lower costs in 2009.

Based on current operating plans and assuming achievement of current 2009 sales estimates, an average molybdenum price of $9 per pound for 2009 and estimates for commodity-based input costs, FCX estimates that its average unit net cash costs, including molybdenum credits, for its North America copper mines would approximate $1.17 per pound of copper for 2009 (unit net cash costs for individual mines would range from approximately $0.90 per pound to $1.25 per pound of copper). The 2009 estimate is benefiting from the operating plan revisions and revised input costs, partly offset by draw downs of inventory with higher average costs, which add approximately $0.04 per pound, and incremental pension costs, which add approximately $0.03 per pound. Unit net cash costs for 2009 would change by approximately $0.02 per pound for each $1 per pound change in the average price of molybdenum for 2009.

South America Copper Mines. FCX operates four copper mines in South America – Cerro Verde in Peru and Candelaria, Ojos del Salado and El Abra in Chile. These operations are consolidated in FCX’s financial statements, with outside ownership reported as minority interests. FCX owns a 53.56 percent interest in Cerro Verde, an open-pit mine producing both electrowon copper cathodes and copper and molybdenum concentrates.

FCX owns 80 percent of the Candelaria and Ojos del Salado mining complexes, which include the Candelaria open-pit and underground mines and the Ojos del Salado underground mines. These mines use common processing facilities to produce copper concentrates. FCX owns a 51 percent interest in El Abra, an open-pit mine producing electrowon copper cathodes.










Years Ended


Fourth Quarter
December 31,
South America Copper Mining Operations
2008
2007
2008
2007a









Copper (millions of recoverable pounds)







Production

390

391

1,506

1,413
Sales

399

379

1,521

1,399
Average realized price per pound
$ 1.44
$ 3.06
$ 2.57
$ 3.25









Gold (thousands of recoverable ounces)







Production

31

33

114

116
Sales

33

30

116

114
Average realized price per ounce
$ 812
$ 790
$ 853
$ 683









Molybdenum (millions of recoverable pounds)b







Production

1

1

3

1









a. For comparative purposes, reflects the combination of FCX’s historical data beginning March 20, 2007, with Phelps Dodge pre-acquisition data through March 19, 2007.

b. Represents by-product production. Sales of by-product molybdenum are reflected in the molybdenum division discussion that begins on page 10.

South America copper sales in the fourth quarter of 2008 were slightly higher than in fourth-quarter 2007 primarily because of the timing of shipments.

During the fourth quarter of 2008 and January 2009, FCX revised its operating plans at its South America copper mines in response to weak market conditions. The revised operating plans for 2009 principally reflect the incorporation of reduced input costs and the impacts of favorable foreign exchange rates on operating costs; reduced mining rates at the Candelaria and Ojos del Salado mines to reduce costs and improve average ore grades; a significant reduction in capital spending plans, including a deferral of the planned incremental expansion at Cerro Verde and a delay in the sulfide project at El Abra; and reduced spending for discretionary items. These items do not have a significant effect on estimated 2009 production volumes but impact 2010 production by approximately 100 million pounds. In response to market conditions, FCX plans to temporarily curtail the molybdenum circuit at Cerro Verde, which produced 3 million pounds of molybdenum in 2008.

For 2009, FCX expects South America sales of 1.4 billion pounds of copper and 100 thousand ounces of gold. Volumes in 2009 are lower than 2008 because of the impact of previously anticipated mining of lower ore grades at Candelaria.

Unit Net Cash Costs. The following table summarizes unit net cash costs at the South America copper mines.
















Years Ended


Fourth Quarter
December 31,


2008
2007
2008
2007a
Per pound of copper:







Site production and delivery, after adjustments
$ 1.05

$ 0.96

$ 1.13

$ 0.91
By-product credits, primarily gold and molybdenum

(0.10)


(0.12)


(0.13)


(0.09)
Treatment charges

0.07


0.18


0.14


0.20
Unit net cash costsb
$ 1.02

$ 1.02

$ 1.14

$ 1.02









a. For comparative purposes, amounts have been presented on a combined basis, which reflects FCX’s historical data beginning March 20, 2007, and the Phelps Dodge pre-acquisition data through March 19, 2007.

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to actual or pro forma sales reported in FCX’s consolidated financial statements or pro forma consolidated financial results, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page IX, which is available on FCX’s web site, “www.fcx.com.”

South America unit net cash costs for the fourth quarter of 2008 totaled $1.02 per pound, reflecting higher site production and delivery costs offset by lower treatment charges compared with the fourth quarter of 2007. South America unit net cash costs were higher for the year 2008 compared with the year 2007 primarily because of higher input costs, including energy, labor and supplies. These increases were partly offset by increased production, favorable by-product credits and lower treatment charges.

FCX’s four South America copper mines have varying cost structures because of differences in ore grades and ore characteristics, processing costs, by-products and other factors. During the fourth quarter of 2008, unit net cash costs for FCX’s South America copper mines ranged from $0.85 per pound to $1.45 per pound. The Cerro Verde mine, which comprises approximately 45 percent of South America production, had a unit net cash costs of $0.85 per pound in the fourth quarter of 2008.

Assuming achievement of current 2009 sales estimates and estimates for commodity-based input costs, FCX estimates that its average unit net cash costs, including gold and molybdenum credits, for its South America copper mines would approximate $1.00 per pound of copper for 2009 (unit net cash costs for individual mines would range from approximately $0.90 per pound to $1.25 per pound of copper). South America unit site production and delivery costs for 2009 reflect reduced input costs and currency exchange rates partly offset by the mining of lower ore grades in 2009 compared with 2008.

Indonesia Mining. Through its 90.64 percent owned subsidiary PT Freeport Indonesia (PT-FI), FCX operates the world’s largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia.










Years Ended


Fourth Quarter
December 31,
Indonesia Mining Operations
2008
2007
2008
2007









Copper (millions of recoverable pounds)







Production

416

208

1,094

1,151
Sales

411

183

1,111

1,131
Average realized price per pound
$ 1.39
$ 3.03
$ 2.36
$ 3.32









Gold (thousands of recoverable ounces)







Production

432

147

1,163

2,198
Sales

425

124

1,182

2,185
Average realized price per ounce
$ 819
$ 807
$ 861
$ 681









Indonesia copper and gold sales in the fourth quarter of 2008 were higher than in the fourth quarter of 2007 as a result of mining in a higher ore grade section of the Grasberg open pit, as planned. 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. After mining in a relatively low-grade section of the open pit in the last half of 2007 and first half of 2008, FCX is currently mining in a high-grade section which is expected to continue throughout 2009.

FCX expects Indonesia sales of 1.3 billion pounds of copper and 2.1 million ounces of gold for the year 2009, compared with 1.1 billion pounds of copper and 1.2 million ounces of gold for 2008.

Unit Net Cash Costs. The following table summarizes PT-FI’s unit net cash costs.
















Years Ended


Fourth Quarter
December 31,


2008
2007
2008
2007
Per pound of copper:







Site production and delivery, after adjustments
$ 1.16

$ 1.66

$ 1.59

$ 1.19
Gold and silver credits

(0.85)


(0.64)


(0.97)


(1.36)
Treatment charges

0.18


0.29


0.24


0.34
Royalties

0.06


0.08


0.10


0.12
Unit net cash costsa
$ 0.55

$ 1.39

$ 0.96

$ 0.29









a. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX’s consolidated financial statements, refer to the supplemental schedule, “Product Revenues and Production Costs,” beginning on page IX, which is available on FCX’s web site, “www.fcx.com.”

PT-FI’s unit net cash costs, including gold and silver credits, averaged $0.55 per pound for the fourth quarter of 2008, compared with $1.39 per pound for the fourth quarter of 2007. The lower unit net cash costs in 2008 primarily reflected higher copper and gold volumes and higher gold prices. Unit site production and delivery costs will vary with fluctuations in production volumes because of the primarily fixed nature of PT-FI’s cost structure.

FCX expects PT-FI’s 2009 unit net cash costs to be significantly lower than 2008 levels because of higher gold volumes and reduced commodity-based input costs. Assuming achievement of current 2009 sales estimates, average gold prices of $800 per ounce for 2009 and revised estimates for energy, currency exchange rates and other cost factors, FCX expects PT-FI’s average unit net cash costs per pound to approximate zero for 2009. Unit net cash costs for 2009 would change by approximately $0.08 per pound for each $50 per ounce change in the average price of gold for 2009.

Molybdenum. FCX is the world’s largest producer of molybdenum. FCX conducts molybdenum mining operations at the Henderson underground mine in Colorado in addition to sales of by-product molybdenum from FCX’s North and South America copper mines. FCX also has a development opportunity to restart the Climax open-pit molybdenum mine in Colorado. These mining operations are wholly owned.














Years Ended


Fourth Quarter
December 31,
Molybdenum Mining Operations
2008
2007
2008
2007a









Molybdenum (millions of recoverable pounds)







Productionb

7

9

40

39
Salesc

12

19

71

69
Average realized price per pound
$ 24.55
$ 27.84
$ 30.55
$ 25.87













a. For comparative purposes, reflects the combination of FCX’s historical data beginning March 20, 2007, with Phelps Dodge pre-acquisition data through March 19, 2007.

b. Amounts reflect production at Henderson.

c. Includes sales of molybdenum produced as a by-product at the North America and South America copper mines. Excludes sales of purchased metal.

In the fourth quarter of 2008, consolidated molybdenum sales from the Henderson mine and by-product mines totaled 12 million pounds, 7 million pounds lower than the fourth quarter of 2007 primarily resulting from lower demand and FCX’s revised operating plans to reduce production at Henderson.

FCX has revised operating plans at its Henderson primary molybdenum mine to operate at a curtailed rate, reflecting an approximate 25 percent reduction in Henderson’s annual production. Additional reductions at Henderson may be considered if market conditions warrant. FCX has also made adjustments to its molybdenum production plans at certain by-product mines. In November 2008, FCX announced the suspension of construction activities associated with the restart of the Climax molybdenum mine near Leadville, Colorado, previously expected to start up in 2010.

For the year 2009, FCX expects molybdenum sales from its mines to approximate 60 million pounds, compared with 71 million pounds of molybdenum for 2008. FCX continues to closely monitor market conditions and may make further reductions to its molybdenum production and sales plans. For 2009, approximately 90 percent of molybdenum sales are expected to be priced at prevailing market prices. The Metals Week Dealer Oxide closing price for molybdenum as of January 26, 2009, was $9.30 per pound.

Unit Net Cash Costs. Unit net cash costs at the Henderson molybdenum mine averaged $6.95 per pound of molybdenum for the fourth quarter of 2008, $4.68 per pound for the fourth quarter of 2007, $5.36 per pound for the year 2008 and $4.32 per pound for the year 2007. Fourth-quarter 2008 unit net cash costs were higher, compared with the fourth quarter of 2007, primarily because of lower production and costs to repair a conveyor during the fourth quarter of 2008. In addition, unit net cash costs for the 2008 periods were higher, compared with the 2007 periods, because of higher input costs, including outside services, supplies and energy. Assuming achievement of current 2009 sales estimates, FCX estimates 2009 average unit net cash costs for its Henderson mine of approximately $5.50 per pound of molybdenum.

PROVEN AND PROBABLE RESERVES

FCX’s estimated consolidated recoverable reserves include 102.0 billion pounds of copper, 40.0 million ounces of gold, 2.48 billion pounds of molybdenum, 266.6 million ounces of silver and 0.7 billion pounds of cobalt. Estimated recoverable reserves at December 31, 2008, were determined using a copper price of $1.60 per pound, a gold price of $550 per ounce and a molybdenum price of $8.00 per pound, compared with FCX’s 2007 assumptions of $1.20 per pound for copper, $450 per ounce for gold and $6.50 per pound for molybdenum.






Preliminary Recoverable Reservesa
at December 31, 2008



Copper
Gold
Molybdenum


(billions of lbs)
(millions of ozs)
(billions of lbs)
North America
28.3
0.2
2.08
South America
32.2
1.3
0.40
Indonesia
35.6
38.5
-
Africa
5.9
-
-
Consolidated Basisb
102.0
40.0
2.48







Net Equity Interestc
82.4
36.2
2.30







a. Proven and probable recoverable reserves are estimated metal quantities from which FCX expects to be paid after application of estimated metallurgical recovery rates and smelter recovery rates, where applicable. Recoverable reserves are that part of a mineral deposit, which FCX estimates can be economically and legally extracted or produced at the time of the reserve determination.

b. Consolidated basis represents estimated metal quantities after reduction for joint venture partner interests at the Morenci mine in North America and the Grasberg mining complex in Indonesia.

c. Net equity interest represents estimated consolidated basis metal quantities further reduced for minority interest ownership.

Net additions to recoverable copper reserves totaled approximately 12.8 billion pounds, including additions of 3.9 billion pounds at the North America mines, 7.5 billion pounds at the Cerro Verde mine in South America and approximately 1.6 billion pounds at the Tenke Fungurume project in the Democratic Republic of Congo (DRC). The additions reflect positive results of drilling programs undertaken during 2007 and 2008. The increases in reserves replaced over 300 percent of FCX’s 2008 copper production and 700 percent of FCX’s 2008 molybdenum production.






Consolidated Reserves Rollforward


Copper
Gold
Molybdenum


(billions of lbs)
(millions of ozs)
(billions of lbs)
Reserves at December 31, 2007
93.2

41.0

2.04
Net additions/revisions
12.8

0.3

0.51
Production
(4.0)

(1.3)

(0.07)
Reserves at December 31, 2008
102.0

40.0

2.48










DEVELOPMENT AND EXPLORATION ACTIVITIES

Development Activities. FCX has a number of projects and potential opportunities to expand its production volumes, extend its mine lives and develop large-scale underground ore bodies. In response to weak market conditions, FCX deferred most of its project development activities, including incremental expansions in North America and South America, the Climax molybdenum mine and the El Abra sulfide project, and reduced capital spending programs at the Tenke Fungurume project in the DRC and in Indonesia.

North America. As previously announced, FCX has suspended construction activities associated with the restart of the Climax molybdenum mine near Leadville, Colorado. Approximately $180 million of the $500 million project has been incurred through December 31, 2008 and remaining near-term commitments total approximately $12 million. The project was previously expected to commence production in 2010 ramping up to a rate of 30 million pounds per annum. Once a decision is made to resume construction activities, the project would be capable of starting up within a 12-18 month timeframe.

South America. FCX has the opportunity to develop a large sulfide deposit at El Abra that will extend the mine life by over ten years. Copper production from the sulfides is estimated to average approximately 325 million pounds of copper per year replacing depleting oxide production. In response to current market conditions, FCX is deferring construction activities. The project was previously expected to commence in 2010 with full production in 2012. FCX will continue to assess the timing of this project and will be prepared to proceed with construction activities when market conditions improve. Total initial capital for the project is estimated to approximate $450 million. FCX has also delayed the $70 million incremental expansion project for the Cerro Verde concentrator, which is designed to add 30 million pounds per annum of additional production.

Indonesia. PT-FI has several projects in progress throughout the Grasberg district, including developing its large-scale underground ore bodies located beneath and adjacent to the Grasberg open pit. Other projects include the development of the high-grade Big Gossan mine, designed to ramp up to full production of 7,000 metric tons per day, and the continued development of the Common Infrastructure project, which will provide access to the Grasberg underground ore body, the Kucing Liar ore body and future development of the mineralized areas below the Deep Ore Zone (DOZ) mine. FCX is deferring capital spending in the Grasberg district where practicable.

Africa. FCX holds an effective 57.75 percent interest in the Tenke Fungurume copper and cobalt mining concession in the Katanga province of the DRC. FCX is the operator of the project. FCX continues to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of this highly prospective district and expects its ore reserves to increase significantly over time.

Approximately $1.4 billion in aggregate project costs have been incurred through December 31, 2008. Construction activities are being advanced and initial production is targeted during the second half of 2009. FCX is responsible for funding 70 percent of the project development costs and is also responsible for financing its partner’s share of certain project overruns. FCX estimates remaining costs to complete the initial project will be slightly below its previous estimate of $1.75 billion.

Annual production in the initial years of the project is expected to approximate 250 million pounds of copper and 18 million pounds of cobalt. The initial project at Tenke Fungurume is based on mining and processing ore reserves approximating 120 million metric tons with average ore grades of 2.6 percent copper and 0.35 percent cobalt. FCX expects the results of drilling activities will enable significant future expansion of initial production rates. The timing of these expansions will be dependent on a number of factors, including general economic and market conditions.

FCX continues to engage in discussion with representatives of the DRC government regarding the ongoing contract review. FCX believes its contracts are fair and equitable, comply with Congolese law and are enforceable without modifications. FCX is continuing to work cooperatively with the government to resolve these matters promptly while continuing with its project development activities.

Exploration Activities. FCX is conducting exploration activities near its existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where it currently operates. Drilling activities were significantly expanded over the last year, which identified additional ore adjacent to existing ore bodies.

Results to date have been positive, providing opportunities for significant future potential reserve additions at Morenci, Bagdad and Sierrita in North America; Cerro Verde in South America and in the high potential Tenke Fungurume district.

The number of drill rigs in operation, which expanded from 26 in March 2007 to approximately 100 in the third quarter of 2008, declined to 44 drill rigs at year-end 2008 in response to weak market conditions. Exploration expenses in 2008 totaled $248 million and are estimated to approximate $75 million in 2009. FCX plans to incorporate the significant information obtained through these exploration activities in its future plans during 2009, enabling a significant reduction in 2009 exploration costs, as FCX analyzes drilling results to further define its significant resources.

IMPAIRMENTS AND PROVISIONAL PRICING ADJUSTMENTS

Impairments. FCX allocated the $25.8 billion purchase price to the estimated fair value of assets acquired and liabilities assumed in the acquisition of Phelps Dodge, with $39.6 billion allocated to assets acquired including $6.2 billion allocated to goodwill. Metal price projections used to estimate fair values of the net assets acquired in the acquisition of Phelps Dodge ranged from near-term prices of approximately $3.00 per pound for copper declining over an approximate eight-year period to $1.20 per pound and $26 per pound for molybdenum declining over an approximate five-year period to $8.00 per pound, reflecting price expectations at that time. During the fourth quarter of 2008, FCX completed a review of the carrying values of its long-lived assets. FCX’s impairment evaluations at December 31, 2008, were based on price assumptions reflecting prevailing copper futures prices approximating $1.40 to $1.50 per pound for three years and a long-term average price of $1.60 per pound. Molybdenum prices were assumed to average $8.00 per pound. In addition, during the fourth quarter of 2008, FCX completed its required annual impairment evaluation of goodwill. For the 2008 periods, these evaluations resulted in the recognition of impairment charges to reduce the carrying values of long-lived assets, other than goodwill, by $10.9 billion ($6.6 billion to net loss or $17.47 per share for fourth quarter and $17.34 per share for the year) and to eliminate the carrying value of goodwill of $6.0 billion ($6.0 billion to net loss or $15.81 per share for fourth quarter and $15.69 per share for the year).

The following table summarizes the final purchase price allocation and compares these amounts to the related fourth-quarter 2008 impairment charges (amounts in billions).












Phelps Dodge
Historical
Balances


Fair Value
Adjustments

Final Purchase
Price Allocation

Fourth-Quarter
2008
Impairments
Cash and cash equivalents
$ 4.2

$ -

$ 4.2

$ -

Inventories, including mill & leach stockpiles



0.9


2.8


3.7


(0.8)
Property, plant and equipment

6.0


16.2


22.2


(10.8)
Other assets

3.1


0.2


3.3


(0.1)
Allocation to goodwill

-


6.2


6.2


(6.0)
Total assets

14.2


25.4


39.6


(17.7)









Deferred income taxes

(0.7)


(6.3)


(7.0)


4.6
Other liabilities

(4.1)


(1.5)


(5.6)


-
Minority interests

(1.2)


-


(1.2)


-
Total net assets
$ 8.2

$ 17.6

$ 25.8

$ (13.1)









In connection with FCX’s March 2007 acquisition of Phelps Dodge, product inventories and mill and leach stockpiles were recorded at fair values based on market prices and the outlook at the time for future prices. Financial accounting standards require that inventories be recorded at the lower of cost or market. As a result of the recent sharp declines in metals prices, FCX recorded charges to operating income for lower of cost or market inventory adjustments totaling $760 million ($466 million to net loss or $1.23 per share) in fourth-quarter 2008 and $782 million ($479 million to net loss or $1.26 per share) in 2008. LCM inventory adjustments were based on price assumptions reflecting prevailing copper futures prices approximating $1.40 to $1.50 per pound for three years and a long-term price of $1.60 per pound. Molybdenum prices were assumed to average $8.00 per pound. Without offsetting reductions in production costs, further declines in metals prices could result in additional LCM charges in future periods.

Provisional Pricing Adjustments. For 2008, approximately 54 percent of FCX’s mined copper was sold in concentrate, 27 percent as rod (principally from North America operations) and 19 percent as cathodes. Under the long-established structure of sales agreements prevalent in the industry, substantially all of FCX’s concentrate sales and some of its cathode sales are provisionally priced at the time of shipment. The provisional prices are finalized in a contractually specified future period (generally one to four months from the shipment date) primarily based on quoted LME prices. The sales subject to final pricing are generally settled in a subsequent month or quarter. Because a significant portion of FCX’s concentrate and cathode sales in any quarterly period usually remain subject to final pricing, the quarter-end forward price is a major determinant of recorded revenues and the average recorded copper price for the period.

LME copper prices averaged $1.78 per pound during the fourth quarter of 2008, compared with FCX’s recorded average price of $1.55 per pound. The applicable forward copper price at the end of the quarter was $1.39 per pound.

At September 30, 2008, 467 million pounds of copper (net of minority interests) were provisionally priced at $2.89 per pound. Adjustments to these prior period copper sales decreased consolidated revenues by $745 million ($343 million to net loss or $0.91 per share) in the fourth quarter of 2008, compared with a decrease of $257 million ($119 million to net income or $0.29 per share) in the fourth quarter of 2007. Adjustments to prior year copper sales in 2008 resulted in an increase in consolidated revenues of $268 million ($114 million to net loss or $0.30 per share), compared with a decrease of $42 million ($18 million to net income or $0.05 per share) in 2007.

Approximately half of FCX’s consolidated copper sales during the fourth quarter were provisionally priced at the time of shipment and are subject to final pricing in 2009. At December 31, 2008, FCX had copper sales of 508 million pounds of copper (net of minority interests) priced at an average of $1.39 per pound, subject to final pricing over the next several months. Each $0.05 change in the price realized from the December 31, 2008, price would have an approximate $16 million effect on FCX’s 2009 net income. The LME closing settlement price for copper on January 23, 2009, was $1.38 per pound.

CASH, DEBT AND FINANCING TRANSACTIONS

At December 31, 2008, FCX had consolidated cash of $872 million. Net of minority interests’ share, taxes and other costs, cash available to parent company is $454 million as shown below (in millions):






December 31,


2008
Cash at domestic companies
$112a
Cash from international operations
760
Total consolidated cash
872
Less: Minority interests’ share
(267)
Cash, net of minority interests’ share
605
Taxes and other costs if distributed
(151)
Net cash available to parent company
$454




a. Includes cash at FCX’s parent and North America mining operations.

At December 31, 2008, FCX had $7.4 billion in debt. At December 31, 2008, FCX had $150 million of borrowings and $74 million of letters of credit issued under its revolving credit facilities, resulting in total availability of approximately $1.3 billion. FCX plans to use its credit facility from time to time during 2009 for working capital and short-term funding requirements but does not intend to use the facility for long-term funding items.

FCX has no significant debt maturities in the near-term as indicated in the table below (in millions).





Year


2009
$ 67
2010

10
2011

135
Total 2009 - 2011
$ 212




In December 2008, in privately negotiated transactions, FCX induced conversion of 0.3 million shares of its 5½% Convertible Perpetual Preferred Stock with a liquidation preference of $268 million into 5.8 million shares of FCX common stock. To induce the conversion of these shares, FCX issued to the holders an additional aggregate 1.0 million shares of FCX common stock valued at $22 million. FCX recorded a $22 million charge to preferred dividends in the fourth quarter of 2008. Preferred dividend savings resulting from these transactions will total approximately $15 million per annum.

OUTLOOK

FCX’s revised operating plans result in reductions of 400 million pounds of copper in 2009 (9 percent) and 800 million pounds of copper in 2010 (17 percent) compared to October 2008 estimates.

Projected sales volumes for the first quarter of 2009 approximate 990 million pounds of copper, 500 thousand ounces of gold and 13 million pounds of molybdenum. The achievement of FCX’s sales estimates will be dependent on the achievement of targeted mining rates, the successful operation of production facilities, the impact of weather conditions and other factors.

Using estimated sales volumes for 2009 and assuming 2009 average prices of $1.50 per pound of copper, $800 per ounce of gold and $9 per pound of molybdenum, FCX’s consolidated operating cash flows, net of an estimated $0.6 billion of working capital requirements, would approximate $1.0 billion in 2009. Working capital requirements principally involve the timing of settlements with customers on 2008 provisionally priced sales. The impact on FCX’s 2009 operating cash flows would approximate $260 million for each $0.10 per pound change for copper, $60 million for each $50 per ounce change for gold and $50 million for each $1 per pound change for molybdenum. FCX’s capital expenditures are currently estimated to approximate $1.3 billion for 2009 and $1.0 billion for 2010.

FCX expects to fund its capital spending programs and working capital requirements through operating cash flows, available cash and credit facilities. In addition, FCX may raise additional debt and/or equity capital depending on terms and market conditions.

FINANCIAL POLICY

FCX has a long-standing tradition of seeking to build shareholder values through pursuing development projects with high rates of return and returning cash to shareholders through common stock dividends and share purchases. FCX is committed to maintaining a strong balance sheet.

During September 2008, FCX suspended its share purchase program in response to market conditions. The timing of future purchases is dependent upon many factors including the company’s operating results, its cash flow and financial position, its future expansion plans, copper prices, the market price of the common shares and general economic and market conditions.

Because of the recent sharp decline in commodity prices and current uncertain economic conditions, FCX’s Board has suspended its annual common stock dividend. The Board will continue to review FCX’s financial policy on an ongoing basis.

FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the world’s largest producer of molybdenum.

The company’s portfolio of assets includes the Grasberg mining complex, the world’s largest copper and gold mine in terms of recoverable reserves, significant mining operations in the Americas, including the large scale Morenci and Safford minerals districts in North America and the Cerro Verde and El Abra operations in South America, and the potential world-class Tenke Fungurume development project in the Democratic Republic of Congo. Additional information about FCX is available on FCX’s web site at “www.fcx.com.”

Cautionary Statement and Regulation G Disclosure: This press release contains forward-looking statements in which we discuss factors we believe may affect our performance in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding projected sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, the impact of copper, gold and molybdenum price changes, and potential future dividend payments and open market purchases of FCX common stock. Accuracy of the forward-looking statements depends on assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments. FCX cautions readers that it assumes no obligation to update or publicly release any revisions to the forward-looking statements in this press release and, except to the extent required by applicable law, does not intend to update or otherwise revise the forward-looking statements more frequently than quarterly. Additionally, important factors that might cause future results to differ from these projections include mine sequencing, production rates, industry risks, commodity prices, political risks, weather-related risks, labor relations, currency translation risks and other factors described in FCX's Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission (SEC).

This press release also contains certain financial measures such as unit net cash costs per pound of copper and per pound of molybdenum. As required by SEC Regulation G, reconciliations of these measures to amounts reported in FCX’s consolidated financial statements or pro forma consolidated financial results are in the supplemental schedule, “Product Revenues and Production Costs,” beginning on page IX, which is available on FCX’s web site, “www.fcx.com.”

A copy of this press release is available on FCX’s web site, “www.fcx.com.” A conference call with securities analysts about fourth-quarter 2008 results is scheduled for today at 10:00 a.m. EDT. The conference call will be broadcast on the Internet along with slides. Interested parties may listen to the webcast live and view the slides by accessing “www.fcx.com.” A replay of the webcast will be available through Friday, February 20, 2009.






FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA
















Three Months Ended December 31,

COPPER


Production
Sales
(millions of recoverable pounds)
2008
2007
2008
2007
MINED COPPER (FCX’s net interest in %)











North America













Morenci (85%)
162a

159a


168a


159a
Bagdad (100%)
62

51


62


49
Sierrita (100%)
52

37


52


36
Chino (100%)
28

56


35


49
Safford (100%)
44

1


41


-
Tyrone (100%)
24

14


22


13
Miami (100%)
5

5


6


5
Tohono (100%)
1

-


-


1
Other (100%)
1

4


1


4
Total North America
379

327


387


316













South America













Cerro Verde (53.56%)
175

169


179


168
Candelaria/Ojos del Salado (80%)
121

127


129


117
El Abra (51%)
94

95


91


94
Total South America
390

391


399


379













Indonesia













Grasberg (90.64%)
416bb

208b


411b


183b
Consolidated
1,185

926


1,197


878













Less minority participants’ share
190

169


192


165
Net
995

757


1,005


713













Consolidated sales from mines







1,197


878
Purchased copper







60


126
Total consolidated sales







1,257


1,004













Average realized price per pound






$ 1.55

$ 3.20c













GOLD













(thousands of recoverable ounces)











MINED GOLD (FCX’s net interest in %)











North America (100%)
3

6


4


7
South America (80%)
31

33


33


30
Indonesia (90.64%)
432b

147b


425b


124b
Consolidated
466

186


462


161













Less minority participants’ share
47

20


47


18
Net
419

166


415


143













Consolidated sales from mines







462


161
Purchased gold







1


-
Total consolidated sales







463


161













Average realized price per ounce






$ 818

$ 797













MOLYBDENUM













(millions of recoverable pounds)











MINED MOLYBDENUM (FCX’s net interest in %)











Henderson (100%)
7

9


N/A


N/A
By-product – North America (100%)
8a

7


N/A


N/A
By-product – Cerro Verde (53.56%)
1

1


N/A


N/A
Consolidated
16

17


12


19













Less minority participants’ share
-d

-


-d


-
Net
16

17


12


19













Consolidated sales from mines







12


19
Purchased molybdenum







2


2
Total consolidated sales







14


21













Average realized price per pound






$ 24.55

$ 27.84













a. Amounts are net of Morenci’s joint venture partner’s 15 percent interest.
b. Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with the terms of the joint venture agreement.
c. Includes an addition of $0.04 per pound for mark-to-market accounting adjustment on copper price protection program.
d. Amount rounds to less than 1 million.













FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA (continued)




























Years Ended December 31,

COPPER


Production
Sales
(millions of recoverable pounds)
2008

2007a


2008
2007a
MINED COPPER (FCX’s net interest in %)











North America













Morenci (85%)
626b

687b


646b


693b
Bagdad (100%)
227

202


226


200
Sierrita (100%)
188

150


184


157
Chino (100%)
155

190


174


186
Safford (100%)
133

1


107


-
Tyrone (100%)
76

50


71


53
Miami (100%)
19

20


20


24
Tohono (100%)
2

3


2


3
Other (100%)
4

17


4


16
Total North America
1,430

1,320c


1,434


1,332c













South America













Cerro Verde (53.56%)
694

594


701


587
Candelaria/Ojos del Salado (80%)
446

453


455


447
El Abra (51%)
366

366


365


365
Total South America
1,506

1,413c


1,521


1,399c













Indonesia













Grasberg (90.64%)
1,094d

1,151d


1,111d


1,131d
Consolidated
4,030

3,884


4,066


3,862













Less minority participants’ share
693

653


699


647
Net
3,337

3,231


3,367


3,215













Consolidated sales from mines







4,066


3,862
Purchased copper







483


650
Total consolidated sales







4,549


4,512













Average realized price per pound






$ 2.69

$ 3.22e













GOLD













(thousands of recoverable ounces)











MINED GOLD (FCX’s net interest in %)











North America (100%)
14

15


16


21
South America (80%)
114

116f


116


114f
Indonesia (90.64%)
1,163d

2,198d


1,182d


2,185d
Consolidated
1,291

2,329


1,314


2,320













Less minority participants’ share
132

229


134


228
Net
1,159

2,100


1,180


2,092













Consolidated sales from mines







1,314


2,320
Purchased gold







2


6
Total consolidated sales







1,316


2,326













Average realized price per ounce






$ 861

$ 681













MOLYBDENUM













(millions of recoverable pounds)











MINED MOLYBDENUM (FCX’s net interest in %)











Henderson (100%)
40

39


N/A


N/A
By-product – North America (100%)
30b

30b


N/A


N/A
By-product – Cerro Verde (53.56%)
3

1


N/A


N/A
Consolidated
73

70g


71


69g













Less minority participants’ share
1

-


1


-
Net
72

70


70


69













Consolidated sales from mines







71


69
Purchased molybdenum







8


9
Total consolidated sales







79


78













Average realized price per pound






$ 30.55

$ 25.87













a. For comparative purposes, the year ended December 31, 2007, data combines FCX’s historical data with Phelps Dodge’s pre-acquisition data.
b. Amounts are net of Morenci’s joint venture partner’s 15 percent interest.
c. Includes Phelps Dodge pre-acquisition North America copper production of 258 million pounds and sales of 283 million pounds and South America copper production of 259 million pounds and sales of 222 million pounds.
d. Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with the terms of the joint venture agreement.
e. Includes reduction of $0.05 per pound for mark-to-market accounting adjustment on Phelps Dodge’s 2007 copper price protection program.
f. Includes Phelps Dodge pre-acquisition gold production of 21 thousand ounces and sales of 18 thousand ounces.
g. Includes Phelps Dodge pre-acquisition molybdenum production of 14 million pounds and sales of 17 million pounds.









FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED OPERATING DATA (continued)




















Three Months Ended
Years Ended


December 31,
December 31,


2008
2007
2008

2007 a










100% North America Copper Mines Operating Data, Including Joint Venture Interest
















Solution Extraction/Electrowinning (SX/EW) Operations









Leach ore placed in stockpiles (metric tons per day)
1,080,000
971,800
1,095,200
798,200
Average copper ore grade (percent)
0.24
0.24
0.22
0.23
Copper production (millions of recoverable pounds)
260
218
943
940









Mill Operations









Ore milled (metric tons per day)
248,700
232,300
249,600
223,800
Average ore grades (percent):







Copper
0.40
0.40
0.40
0.35
Molybdenum
0.02
0.02
0.02
0.02
Copper recovery rate (percent)
82.6
82.9
82.9
84.5
Production (millions of recoverable pounds):







Copper
149
137
599
501
Molybdenum (by-product)
8
7
30
30









100% South America Copper Mines Operating Data
















SX/EW Operations









Leach ore placed in stockpiles (metric tons per day)
280,000
289,600
279,700
289,100
Average copper ore grade (percent)
0.48
0.42
0.45
0.43
Copper production (millions of recoverable pounds)
142
139
560
569









Mill Operations









Ore milled (metric tons per day)
188,000
180,300
181,400
167,900
Average ore grades (percent):







Copper
0.76
0.80
0.75
0.74
Molybdenum
0.02
0.02
0.02
0.02
Copper recovery rate (percent)
88.9
88.7
89.2
87.1
Production (millions of recoverable pounds):







Copper
248
252
946
844
Molybdenum
1
1
3
1









100% Indonesia Mining Operating Data, Including Joint Venture Interest
















Ore milled (metric tons per day)
215,149
208,600
192,884
212,600









Average ore grades:







Copper (percent)
1.01
0.65
0.83
0.82
Gold (grams per metric ton)
0.85
0.52
0.66
1.24









Recovery rates (percent):







Copper
90.8
88.8
90.1
90.5
Gold
82.2
76.5
79.9
86.2









Production (recoverable):







Copper (millions of pounds)
384
227
1,109
1,211
Gold (thousands of ounces)
432
246
1,163
2,608









100% Molybdenum Operating Data
















Henderson Molybdenum Mine Operations









Ore milled (metric tons per day)
16,900
24,000
24,100
24,000
Average molybdenum ore grade (percent)
0.25
0.23
0.23
0.23
Molybdenum production (millions of recoverable pounds)
7
9
40
39









a. For comparative purposes, the year ended December 31, 2007, data combines FCX’s historical data with Phelps Dodge’s pre-acquisition data.













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















Three Months Ended
Years Ended


December 31,
December 31,


2008
2007
2008
2007a


(In Millions, Except Per Share Amounts)
Revenues
$ 2,067b

$ 4,184b

$ 17,796b

$ 16,939b
Cost of sales:











Production and delivery

2,126c


2,422c


10,416c


8,527c
Depreciation, depletion and amortization

460c


400c


1,782c


1,246c
Lower of cost or market inventory adjustments

760


-


782


-
Total cost of sales

3,346


2,822


12,980


9,773
Selling, general and administrative expenses

(31)d


152


269d


466
Exploration and research expenses

83


58


292


145
Asset impairments and other charges

16,961e


-


16,965e


-
Total costs and expenses

20,359


3,032


30,506


10,384
Operating (loss) income

(18,292)


1,152


(12,710)


6,555
Interest expense, net

(140)f


(127


(584)f


(513
Losses on early extinguishment of debt

-


(2)


(6)


(173)
Gains on sales of assets

-


-


13g


85g
Other (expense) income, net

(19)


47


(22)


157

(Loss) income from continuing operations before income taxes, minority interests and equity in affiliated companies’ net (losses) earnings



(18,451)


1,070


(13,309)


6,111
Benefit from (provision for) income taxes

4,471


(525)


2,844


(2,400)
Minority interests in consolidated subsidiaries

131


(63)


(617)


(791)
Equity in affiliated companies’ net (losses) earnings

(1)


5


15


22
(Loss) income from continuing operations

(13,850)


487


(11,067)


2,942
(Loss) income from discontinued operations, net of taxes

-


(9)h


-


35h
Net (loss) income

(13,850)


478


(11,067)


2,977
Preferred dividends and losses on induced conversions

(83)i


(64


(274)i


(208
Net (loss) income applicable to common stock
$ (13,933)

$ 414

$ (11,341)

$ 2,769













Basic net (loss) income per share of common stock:











Continuing operations
$ (36.78)

$ 1.10

$ (29.72)

$ 8.02
Discontinued operations

-


(0.02)h


-


0.10h
Basic net (loss) income per share of common stock
$ (36.78)

$ 1.08

$ (29.72)

$ 8.12













Diluted net (loss) income per share of common stock:











Continuing operations
$ (36.78)

$ 1.07

$ (29.72)

$ 7.41
Discontinued operations

-


(0.02)h


-


0.09h
Diluted net (loss) income per share of common stock
$ (36.78)

$ 1.05j

$ (29.72)

$ 7.50j













Average common shares outstanding:











Basic

379k


382k


382k


341k
Diluted

379


409j


382


397j













Dividends declared per share of common stock
$ -

$ 0.4375

$ 1.375

$ 1.375




FREEPORT-McMoRan COPPER & GOLD INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(continued)



a.

Includes Phelps Dodge results beginning March 20, 2007.
b.

Includes positive (negative) adjustments to prior period copper sales totaling $(745) million in fourth-quarter 2008, $(257) million in fourth-quarter 2007, $268 million in year 2008 and $(42) million in year 2007. In addition, mark-to-market accounting adjustments on the 2007 copper price protection program totaled $37 million in fourth-quarter 2007 and $(175) million in year 2007.
c.

Includes impact of purchase accounting adjustments related to the Phelps Dodge acquisition, which increased production and delivery costs by $32 million in fourth-quarter 2008, $126 million in fourth-quarter 2007, $124 million in year 2008 and $781 million in year 2007, and increased depreciation, depletion and amortization by $213 million in fourth-quarter 2008, $226 million in fourth-quarter 2007, $888 million in year 2008 and $595 million in year 2007.
d.

Includes adjustments to compensation expense attributable to 2008 financial results resulting in a reduction of general & administrative expenses totaling $105 million in fourth-quarter 2008 and $33 million in 2008.
e.

Includes asset impairments of $10.9 billion, goodwill impairments of $6.0 billion, and restructuring and other charges of $111 million.
f.

Includes net interest expense of $31 million in fourth-quarter 2008 and $101 million in year 2008 primarily associated with accretion on the fair values (discounted cash flow basis) of environmental liabilities assumed in the acquisition of Phelps Dodge.
g.

Primarily represents gains on sales of other assets in the year 2008 and gains on sales of marketable equity securities in the 2007 periods.
h.

Relates to the operations of Phelps Dodge International Corporation (PDIC), which FCX sold on October 31, 2007.
i.

Includes a charge of $22 million to reflect privately negotiated transactions to induce conversion of approximately 0.3 million shares of FCX’s 5½% Convertible Perpetual Preferred Stock with a liquidation preference of $268 million into 5.8 million shares of FCX common stock. To induce conversion of these shares, FCX issued an additional aggregate 1.0 million shares of common stock.
j.

Reflects assumed conversion of FCX’s 5½% Convertible Perpetual Preferred Stock, resulting in the exclusion of dividends totaling $15 million in fourth-quarter 2007 and $60 million in year 2007. Also includes assumed conversion of FCX’s 6¾% Mandatory Convertible Preferred Stock, of which FCX sold 28.75 million shares on March 28, 2007, reflecting exclusion of dividends totaling $147 million in year 2007. This instrument was not dilutive for fourth-quarter 2007. The assumed conversions result in the inclusion of 23 million common shares in fourth-quarter 2007 and 53 million common shares in year 2007.
k.

On March 19, 2007, FCX issued 136.9 million shares to acquire Phelps Dodge; and on March 28, 2007, FCX sold 47.15 million common shares in a public offering.





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












December 31,


2008
2007


(In Millions)
ASSETS



Current assets:



Cash and cash equivalents
$ 872

$ 1,626
Trade accounts receivable

374


1,099
Other accounts receivable

838


196
Inventories:



Product

1,068


1,360
Materials and supplies, net

1,124


818
Mill and leach stockpiles

571


707
Other current assets

304


97
Total current assets

5,151


5,903
Property, plant, equipment and development costs, net

16,002


25,715
Goodwill

-


6,105
Long-term mill and leach stockpiles

1,145


1,106
Intangible assets, net

364


472
Trust assets

142


606
Other assets

467


754
Total assets
$ 23,271

$ 40,661





LIABILITIES AND STOCKHOLDERS’ EQUITY



Current liabilities:



Accounts payable and accrued liabilities
$ 2,715

$ 2,345
Accrued income taxes

163


420
Current portion of reclamation and environmental liabilities

162


263
Current portion of long-term debt and short-term borrowings

67


31
Dividends payable

44


212
Copper price protection program

-


598
Total current liabilities

3,151


3,869
Long-term debt, less current portion:



Senior notes

6,884


6,928
Project financing, equipment loans and other

250


252
Revolving credit facility

150


-
Total long-term debt, less current portion

7,284


7,180
Deferred income taxes

2,241


7,300
Reclamation and environmental liabilities, less current portion

1,951


1,733
Other liabilities

1,526


1,106
Total liabilities

16,153


21,188
Minority interests in consolidated subsidiaries

1,328


1,239
Stockholders’ equity:



5½% Convertible Perpetual Preferred Stock

832


1,100
6¾% Mandatory Convertible Preferred Stock

2,875


2,875
Common stock

51


50
Capital in excess of par value

13,989


13,407
Retained earnings (accumulated deficit)

(8,267)


3,601
Accumulated other comprehensive income (loss)

(288)


42
Common stock held in treasury

(3,402)


(2,841)
Total stockholders’ equity

5,790


18,234
Total liabilities and stockholders’ equity
$ 23,271

$ 40,661





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












Years Ended December 31,


2008
2007


(In Millions)





Cash flow from operating activities:



Net (loss) income
$ (11,067)