Edgar Filing: FREEPORT MCMORAN COPPER & GOLD INC

fcx123110-10k.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
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)

Delaware	74-2480931
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

333 North Central Avenue
Phoenix, Arizona	85004-2189
(Address of principal executive offices)	(Zip Code)

(602) 366-8100
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.10 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act R Yes 0 No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 0 Yes R No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. R Yes 0 No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). R Yes 0 No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. R Large accelerated filer 0 Accelerated filer 0 Non-accelerated filer 0 Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 0 Yes R No

The aggregate market value of common stock held by non-affiliates of the registrant was $50.2 billion on February 11, 2011, and $27.6 billion on June 30, 2010.

Common stock issued and outstanding was 946,498,251 shares on February 11, 2011, and 940,810,756 shares on June 30, 2010 (amounts have been adjusted to reflect the February 1, 2011, two-for-one stock split).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statement for our 2011 annual meeting of stockholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

FREEPORT-McMoRan COPPER & GOLD INC.

TABLE OF CONTENTS

	Page
Part I	1
Items 1. and 2. Business and Properties	1
Item 1A. Risk Factors	40
Item 1B. Unresolved Staff Comments	57
Item 3. Legal Proceedings	57
Item 4. Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant	60
Item 4B. Mine Safety Disclosure	60

Part II	61
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities	61
Item 6. Selected Financial Data	63
Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results
of Operations and Quantitative and Qualitative Disclosures about Market Risk	67
Item 8. Financial Statements and Supplementary Data	116
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	180
Item 9A. Controls and Procedures	180
Item 9B. Other Information	180

Part III	180
Item 10. Directors, Executive Officers and Corporate Governance	180
Item 11. Executive Compensation	180
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters	180
Item 13. Certain Relationships and Related Transactions, and Director Independence	181
Item 14. Principal Accounting Fees and Services	181

Part IV	182
Item 15. Exhibits, Financial Statement Schedules	182

Signatures	S-1

Index to Financial Statements	F-1

Exhibit Index	E-1

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PART I

Items 1. and 2. Business and Properties.

All of our periodic reports filed with the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, through our web site, www.fcx.com, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports and amendments are available through our web site as soon as reasonably practicable after we electronically file or furnish such material to the SEC.

References to “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold Inc. (FCX) and its consolidated subsidiaries, including, except as otherwise stated, Phelps Dodge Corporation (Phelps Dodge) and its subsidiaries, which we acquired on March 19, 2007. In 2008, we changed Phelps Dodge’s legal name to Freeport-McMoRan Corporation (FMC); therefore, references to “FMC” and “Phelps Dodge” represent the same entity. References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (see Item 8. “Financial Statements and Supplementary Data”).

GENERAL

We are a leading international mining company with headquarters in Phoenix, Arizona. We are one of the world’s largest copper, gold and molybdenum mining companies in terms of reserves and production. Prior to the March 2007 acquisition of Phelps Dodge, our principal asset was the Grasberg minerals district in Indonesia, which contains the largest single recoverable copper reserve and the largest single gold reserve of any mine in the world based on the latest available reserve data provided by third-party industry consultants. Following the acquisition of Phelps Dodge, our portfolio of assets also includes significant mining operations in North and South America and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC).

We have significant reserves, resources and future development opportunities within our portfolio of assets. At December 31, 2010, consolidated recoverable proven and probable reserves totaled 120.5 billion pounds of copper, 35.5 million ounces of gold, 3.39 billion pounds of molybdenum, 325.0 million ounces of silver and 0.75 billion pounds of cobalt. Approximately 35 percent of our copper reserves are in North America, 31 percent are in South America, 27 percent are in Indonesia and 7 percent are in Africa. Approximately 95 percent of our gold reserves are in Indonesia, with our remaining gold reserves primarily in South America. Approximately 81 percent of our molybdenum reserves are in North America, with our remaining molybdenum reserves in South America. Refer to “Ore Reserves” for further discussion.

We currently operate seven copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. Molybdenum concentrate is also produced by Bagdad and Sierrita.

We operate four copper mines in South America – Cerro Verde in Peru, and El Abra, Candelaria and Ojos del Salado in Chile. In addition to copper, the Cerro Verde mine also produces molybdenum concentrate and the Candelaria and Ojos del Salado mines produce gold and silver.

In Indonesia, PT Freeport Indonesia operates the mines in the Grasberg minerals district. In addition to copper, the Grasberg minerals district also produces gold and silver. PT Freeport Indonesia also owns 25 percent of PT Smelting, a smelting and refining company in Gresik, Indonesia.

In Africa, Tenke Fungurume S.A.R.L. (TFM) operates the Tenke Fungurume (Tenke) mine. In addition to copper, the Tenke mine produces cobalt hydroxide.

During 2010, 60 percent of our consolidated copper production was from our Grasberg, Morenci and Cerro Verde mines. The Grasberg minerals district also accounted for 95 percent of our consolidated gold production for 2010.

We produce molybdenum at our Henderson molybdenum mine in Colorado. During 2010, 56 percent of our consolidated molybdenum production was from the Henderson molybdenum mine, 34 percent was produced at our Bagdad and Sierrita copper mines and 10 percent was produced at our Cerro Verde copper mine.

For information about our operating segments and financial data by geographic area refer to Note 18. The locations of our operating mines are shown on the map below.

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The diagram below shows our ownership interest in our operating mines at December 31, 2010.

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COPPER, GOLD AND MOLYBDENUM

Our mines primarily produce copper, gold and molybdenum. A brief discussion of these metals appears below. For further discussion of the markets and prices of these metals refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Copper

Copper is an internationally traded commodity, and its prices are determined by the major metals exchanges – New York Mercantile Exchange (COMEX), the London Metals Exchange (LME) and the Shanghai Futures Exchange (SHFE). Prices on these exchanges generally reflect the worldwide balance of copper supply and demand and can be volatile and cyclical. During 2010, LME spot copper prices averaged $3.42 per pound and ranged from $2.76 per pound to $4.42 per pound.

In general, demand for copper reflects the rate of underlying world economic growth, particularly in industrial production and construction. According to Brook Hunt, a widely followed independent metals market consultant, copper’s end-use markets (and their estimated shares of total consumption) are:

Construction	33%
Electrical applications	33%
Industrial machinery	13%
Transportation	13%
Consumer products	8%

Gold

Gold is used for jewelry, coinage and bullion as well as various industrial and electronic applications. Gold can be readily sold on numerous markets throughout the world. Benchmark prices are generally based on London Bullion Market Association quotations. During 2010, London gold prices averaged $1,225 per ounce and ranged from $1,058 per ounce to $1,421 per ounce.

Molybdenum

Molybdenum is a key alloying element in steel and the raw material for several chemical-grade products used in catalysts, lubrication, smoke suppression, corrosion inhibition and pigmentation. Molybdenum, as a high-purity metal, is also used in electronics such as flat-panel displays and in super alloys used in aerospace. Molybdenum’s end-use markets (and their estimated shares of total consumption) are:

Construction steel	35%
Stainless steel	25%
Chemicals	14%
Tool and high-speed steel	9%
Cast iron	6%
Molybdenum metal	6%
Super alloys	5%

Reference prices for molybdenum are available in several publications, including Metals Week, Ryan’s Notes and Metal Bulletin. During 2010, the weekly average price of molybdenum quoted by Metals Week averaged $15.71 per pound and ranged from $11.75 per pound to $18.60 per pound.

PRODUCTS AND SALES

FCX’s mining revenues for 2010 included sales of copper (78 percent), gold (12 percent) and molybdenum (6 percent). PT Freeport Indonesia’s sales to PT Smelting represented 12 percent of our consolidated revenues for 2010, 13 percent in 2009 and 8 percent in 2008. No other customer accounted for more than 10 percent of our consolidated revenues in any of the past three years.

Copper Products

We are one of the world’s leading producers of copper concentrate, cathode and continuous cast copper rod. During 2010, 52 percent of our mined copper was sold in concentrate, 26 percent as cathodes and 22 percent as rod (principally from our North America operations).

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Our copper ores are generally processed either by smelting and refining or by solution extraction and electrowinning (SX/EW). Before being subject to the smelting and refining process, ore is crushed and treated to produce a copper concentrate with copper content of approximately 20 to 30 percent. Copper concentrate is then smelted (subjected to extreme heat) to produce copper anodes, which weigh between 800 and 900 pounds each and have an average copper content of 99.5 percent. The anodes are further treated by electrolytic refining to produce copper cathodes, which weigh between 100 and 350 pounds each and have a copper content of 99.99 percent. Our copper cathodes are used as the raw material input for copper rod, brass mill products and for other uses.

For ore subject to the SX/EW process, copper is extracted from the ore by dissolving it with a weak sulphuric acid solution. The copper content of the solution is increased in two additional solution-extraction stages and then the copper-bearing solution undergoes an electrowinning process to produce cathode that is 99.99 percent copper.

Copper Concentrate. We produce copper concentrate at seven of our mines, of which PT Freeport Indonesia is our largest producer. In North America, copper concentrate is produced at our Morenci, Bagdad and Sierrita mines, and is generally shipped to our Miami smelter in Arizona. In South America, we produce copper concentrate at our Cerro Verde, Candelaria and Ojos del Salado mines.

Copper Cathode. We produce copper cathode at two electrolytic refineries (located in El Paso, Texas, and Huelva, Spain) and at ten of our mines. In North America, SX/EW cathode is produced from our Morenci, Bagdad, Safford, Sierrita, Miami, Tyrone and Chino mines; in South America from our Cerro Verde and El Abra mines; and from our Tenke mine in Africa. PT Smelting also produces copper cathode.

Continuous Cast Copper Rod. We manufacture continuous cast copper rod at our facilities in El Paso, Texas; Norwich, Connecticut; and Miami, Arizona, primarily using copper cathode produced at our North America mines.

Other Copper Products. We produce specialty copper products at our Bayway operations in Elizabeth, New Jersey. These products include specialty copper alloys in the forms of rod, bar and strip. We manufacture electrode wire for use in welding steel cans at our Norwich, Connecticut and El Paso, Texas, facilities. We also produce copper sulfate pentahydrate for use in agricultural and industrial applications at our facility in Sierrita, Arizona. All of these facilities primarily use copper cathode produced at our North America mines to manufacture their end products.

Copper Sales

North America. The majority of the copper produced at our North America copper mines and refined in our El Paso, Texas, refinery is consumed at our rod plants. The remainder of our North America copper production is sold in the form of copper cathode or copper concentrate to third parties. Generally, copper rod and cathode are sold to wire and cable fabricators and brass mills under United States (U.S.) dollar-denominated, annual contracts. Cathode and rod contract prices are generally based on the prevailing COMEX monthly average spot price for the month of shipment and include a premium.

South America. Production from our South America mines is sold as copper concentrate or copper cathode to third parties under U.S. dollar-denominated, annual and multi-year contracts. Our South America mines sell approximately 60 percent of their copper production in concentrate and the rest as cathode. During 2010, 16 percent of our South America mines concentrate was sold at market rates to Atlantic Copper, our wholly owned copper smelting and refining unit in Spain.

Substantially all of South America’s copper concentrate and cathode sales provide final copper pricing in a specified future period (generally one to four months from the shipment date) based on quoted LME monthly average spot prices. Revenues from South America’s concentrate sales are recorded net of treatment and refining charges, which represent fees paid to smelters and refiners that are generally negotiated annually. In addition, because a portion of the metals contained in copper concentrates is unrecoverable from the smelting process, revenues from South America’s concentrate sales are also recorded net of allowances for unrecoverable metals. These allowances are a negotiated term of our contracts and vary by customer.

Indonesia. PT Freeport Indonesia sells its production in the form of copper concentrate, which contains significant quantities of gold and silver, under U.S. dollar-denominated, long-term contracts. PT Freeport Indonesia also sells a small amount of copper concentrates in the spot market.

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PT Freeport Indonesia and our South America mines provide Atlantic Copper with approximately 50 to 60 percent of its current concentrate requirements at market prices. PT Freeport Indonesia also has a contract to provide PT Smelting with the supply of 100 percent of the copper concentrate requirements necessary to produce 205,000 metric tons of copper annually on a priority basis (refer to “Smelting Facilities” for further discussion).

During 2010, 57 percent of PT Freeport Indonesia’s concentrate was sold to PT Smelting and Atlantic Copper. We anticipate that PT Freeport Indonesia will sell approximately 60 percent of its concentrate to PT Smelting and Atlantic Copper in 2011. A summary of PT Freeport Indonesia’s aggregate percentage concentrate sales to PT Smelting, Atlantic Copper and to other third parties for the last three years follows:

	2010	2009	2008
PT Smelting	36%	32%	41%
Atlantic Copper	21%	18%	15%
Third parties	43%	50%	44%
	100%	100%	100%

Substantially all of PT Freeport Indonesia’s concentrate sales provide final copper pricing in a specified future period (generally one to four months from the shipment date) based on quoted LME monthly average spot prices. Revenues from PT Freeport Indonesia’s concentrate sales are recorded net of royalties and treatment and refining charges (including price participation charges, if applicable, based on the market prices of metals). PT Freeport Indonesia’s concentrate sales are also net of allowances for unrecoverable metals.

Africa. Production from our Tenke mine is sold as copper cathode under U.S. dollar-denominated contracts. Substantially all of Tenke’s cathode sales provide final copper pricing in the month after the shipment date based on quoted LME monthly average spot prices. Revenues from Tenke’s cathode sales are recorded net of royalties and also include adjustments for point-of-sale transportation cost that are negotiated in customer contracts.

Europe. Atlantic Copper sells copper cathode directly to rod and brass mills, primarily located in Europe. Atlantic Copper has occasionally sold copper cathode to merchants. Copper cathode is generally sold under annual contracts and priced based on the LME average spot price for the month of arrival at the buyer’s facilities.

Gold Products and Sales

We also produce gold, primarily at the Grasberg minerals district, which accounted for 95 percent of our consolidated gold production in 2010. Gold is primarily sold as a component of our copper concentrate or in slimes, which are a by-product of the smelting and refining process. Gold generally is priced at the average London Bullion Market Association price for a specified month near the month of shipment. Revenues from gold sold as a component of our copper concentrate are recorded net of treatment and refining charges. Revenues from gold sold in slimes are recorded net of refining charges.

Molybdenum Products and Sales

We are the world’s largest producer of molybdenum and molybdenum-based chemicals. In addition to production from our Henderson molybdenum mine, we produce molybdenum concentrate primarily at our Bagdad and Sierrita copper mines in North America, and at our Cerro Verde copper mine in South America. During 2010, 56 percent of our consolidated molybdenum production was from the Henderson molybdenum mine, 34 percent was from the North America copper mines and 10 percent was produced in South America.

The majority of our molybdenum concentrates are processed in our own conversion facilities. Technical-grade oxide is produced from molybdenum concentrates in Sierrita, Arizona; Fort Madison, Iowa and Rotterdam, the Netherlands. Ferromolybdenum is produced from technical-grade oxide in Stowmarket, United Kingdom, through a metallothermic reduction process. High-quality molybdenum concentrates are converted into molybdenum chemicals at Fort Madison and Rotterdam. Molybdenum generally is priced based on the average Metals Week price for the month prior to the month of shipment. Approximately 90 percent of our expected 2011 molybdenum sales are expected to be priced at prevailing market prices.

Cobalt, Silver and Other Products and Sales

We produce cobalt hydroxide at the Tenke mine. Cobalt hydroxide is priced at a discount to the average monthly low price published by Metal Bulletin for a specified month near the month of shipment. We produce silver as a component of our copper concentrate or in slimes. Silver generally is priced at the average London Bullion Market Association price for a specified month near the month of shipment. Sales of cobalt hydroxide, silver and other

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metals, such as rhenium and magnetite, do not represent a significant component of our total revenues.

For an allocation of our consolidated revenues by geographic area, refer to Note 18.

MINES

Following are maps and descriptions of our mining operations in North America (including both copper and molybdenum operations), South America, Indonesia and Africa.

North America

In the U.S., most of the land occupied by our copper and molybdenum mines, concentrators, SX/EW facilities, smelter, refinery, rod mills, molybdenum roasters and processing facilities is generally owned by us or is located on unpatented mining claims owned by us. Certain portions of our Bagdad, Sierrita, Miami, Tyrone, Chino, Cobre and Henderson operations are located on government-owned land and are operated under a Mine Plan of Operations or other use permit. Various federal and state permits or leases on government land are held for purposes incidental to mine operations.

Morenci

We own an 85 percent undivided interest in Morenci, with the remaining 15 percent owned by affiliates of Sumitomo Corporation. Each partner takes in kind its share of Morenci’s production.

Morenci is an open-pit copper mining complex that has been in continuous operation since 1939 and previously was mined through underground workings. Morenci is located in Greenlee County, Arizona, approximately 50 miles northeast of Safford on U.S. Highway 191. The site is accessible by a paved highway and a railway spur.

The Morenci mine is a porphyry copper deposit that has oxide and secondary sulfide mineralization, and primary sulfide mineralization. The predominant oxide copper mineral is chrysocolla. Chalcocite is the most important secondary copper sulfide mineral with chalcopyrite as the dominant primary copper sulfide.

The Morenci operation consists of a 50,000 metric ton-per-day concentrator, that produces copper and molybdenum concentrate; a 68,000 metric ton-per-day crushed-ore leach pad and stacking system; a low-grade run-of-mine (ROM) leaching system; four SX plants; and three EW tank houses that produce copper cathode. Total EW tank house capacity is approximately 900 million pounds of copper per year. Morenci’s concentrate leach, direct-electrowinning facility was commissioned in third-quarter 2007 and processed copper concentrate until early 2009 when it was placed on care-and-maintenance status. The available mining fleet consists of 102 235-metric ton haul trucks loaded by 11 shovels with bucket sizes ranging from 47 to 55 cubic meters, which are capable of moving over 750,000 metric tons of material per day.

In March 2010, we restarted the Morenci mill to process available sulfide material currently being mined. Mill throughput averaged 42,200 metric tons of ore per day in fourth-quarter 2010 and 26,000 metric tons of ore per day during the year 2010 and is expected to increase to approximately 50,000 metric tons of ore per day in 2011. We have also commenced a staged ramp up at the Morenci mine from the 2009 rate of 450,000 metric tons of ore

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per day to 635,000 metric tons of ore per day. The mining rate averaged 566,000 metric tons of ore per day in fourth-quarter 2010 and over 480,000 metric tons of ore per day during the year 2010. These activities are expected to enable Morenci’s copper production to increase by approximately 125 million pounds of copper per year in 2011.

Morenci’s copper production, including our joint venture partner’s share, totaled 514 million pounds in 2010, 504 million pounds in 2009 and 737 million pounds in 2008.

Morenci is located in a desert environment with rainfall averaging 13 inches per year. The highest bench elevation is 2,000 meters above sea level and the ultimate pit bottom is expected to have an elevation of 840 meters above sea level. The Morenci operation encompasses approximately 56,697 acres, comprising 50,200 acres of patented mining claims and other fee lands, 6,002 acres of unpatented mining claims, and 495 acres of land held by state or federal permits, easements and rights-of-way.

Morenci receives electrical power from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility in Deming, New Mexico (in which we own a one-third interest). Although we believe the Morenci operation has sufficient water sources to support current operations, we are a party to litigation that may set legal precedents, which could adversely affect our water rights at Morenci and at our other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for information concerning the status of these proceedings.

Bagdad

Our wholly owned Bagdad mine is an open-pit copper and molybdenum mining complex located in Yavapai County in west-central Arizona. It is approximately 60 miles west of Prescott and 100 miles northwest of Phoenix. The property can be reached by Arizona Highway 96, which ends at the town of Bagdad. The closest railroad is at Hillside, Arizona, approximately 24 miles southeast on Arizona Highway 96. The open-pit mining operation has been ongoing since 1945, and prior mining was conducted through underground workings.

The Bagdad mine is a porphyry copper deposit containing both sulfide and oxide mineralization. Chalcopyrite and molybdenite are the dominant primary sulfides and are the primary economic minerals in the mine. Chalcocite is the most common secondary copper sulfide mineral, and the predominant oxide copper minerals are chrysocolla, malachite and azurite.

The Bagdad operation consists of a 75,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates, an SX/EW plant that can produce up to 25 million pounds per year of copper cathode from solution generated by low-grade stockpile leaching and a pressure leach plant to process molybdenum concentrate. The available mining fleet has the capacity to move in excess of 180,000 metric tons of material per day using twenty-four 235-metric ton haul trucks loaded by five shovels with bucket sizes ranging from 40 to 56 cubic meters.

Bagdad’s production totaled 203 million pounds of copper and 7 million pounds of molybdenum in 2010, 225 million pounds of copper and 6 million pounds of molybdenum in 2009, and 227 million pounds of copper and 8 million pounds of molybdenum in 2008.

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Bagdad is located in a desert environment with rainfall averaging 15 inches per year. The highest bench elevation is 1,200 meters above sea level and the ultimate pit bottom is expected to be 310 meters above sea level. The Bagdad operation encompasses approximately 21,743 acres, comprising 21,143 acres of patented mining claims and other fee lands, and 600 acres of unpatented mining claims.

Bagdad receives electrical power from Arizona Public Service Company. Although we believe the Bagdad operation has sufficient water resources to support current operations, we are a party to litigation that may set legal precedents, which could adversely affect our water rights at Bagdad and at our other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for information concerning the status of these proceedings.

Safford

Our wholly owned Safford mine has been in operation since 2007 and is an open-pit copper mining complex located in Graham County, Arizona, approximately eight miles north of the town of Safford and 170 miles east of Phoenix. The site is accessible by paved county road off U.S. Highway 70.

The Safford mine includes two copper deposits that have oxide mineralization overlaying primary copper sulfide mineralization. The predominant oxide copper minerals are chrysocolla and copper-bearing iron oxides with the predominant copper sulfide material being chalcopyrite.

The property is a mine-for-leach project and produces copper cathodes. The operation consists of two open pits feeding a crushing facility with a capacity of 103,000 metric tons per day of crushed ore. The crushed ore is delivered to a single leach pad by a series of overland and portable conveyors. Leach solutions feed an SX/EW facility with a capacity of 240 million pounds of copper per year. The available mining fleet consists of twenty 235-metric ton haul trucks loaded by five shovels with bucket sizes ranging from 31 to 34 cubic meters, which are capable of moving an average of approximately 285,000 metric tons of material per day.

We are completing construction of a sulphur burner at Safford, which will provide a more cost-effective source of sulphuric acid used in SX/EW operations and lower transportation costs. This project is expected to be completed in second-quarter 2011.

Safford’s copper production totaled 143 million pounds in 2010, 184 million pounds in 2009 and 133 million pounds in 2008.

Safford is located in a desert environment with rainfall averaging 10 inches per year. The highest bench elevation is 1,250 meters above sea level and the ultimate pit bottom is expected to have an elevation of 750 meters above sea level. The Safford operation encompasses approximately 24,957 acres, comprising 20,994 acres of patented lands, 3,932 acres of unpatented lands and 31 acres of land held by federal permit.

The Safford operation’s electrical power is provided by The Morenci Water & Electric Company, a wholly owned subsidiary of FCX, through the transmission systems of Southwest Transmission Cooperative, a subsidiary of Arizona Electric Power Cooperative, Inc., with most of the power sourced from the Luna Energy facility. Although

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we believe the Safford operation has sufficient water resources to support current operations, we are a party to litigation that may set legal precedents, which could adversely impact the water rights at Safford and at our other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for information concerning the status of these proceedings.

Sierrita

Our wholly owned Sierrita mine has been in operation since 1959 and is an open-pit copper and molybdenum mining complex located in Pima County, Arizona, approximately 20 miles southwest of Tucson and seven miles west of the town of Green Valley and Interstate Highway 19. The site is accessible by a paved highway and by rail.

The Sierrita mine is a porphyry copper deposit that has oxide and secondary sulfide mineralization, and primary sulfide mineralization. The predominant oxide copper minerals are malachite, azurite and chrysocolla. Chalcocite is the most important secondary copper sulfide mineral, and chalcopyrite and molybdenite are the dominant primary sulfides.

The Sierrita operation includes a 102,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates. Sierrita also produces copper from a ROM oxide-leaching system. Cathode copper is plated at the Twin Buttes EW facility, which has a design capacity of approximately 50 million pounds of copper per year. In 2004, a copper sulfate crystal plant began production, which has the capacity to produce 40 million pounds of copper sulfate per year. The Sierrita operation also has molybdenum facilities consisting of a leaching circuit, two molybdenum roasters and a packaging facility. The molybdenum facilities process Sierrita concentrate, concentrate from our other mines and concentrate from third-party sources. The available mining fleet has the capacity to move an average of 200,000 metric tons of material per day using twenty-four 235-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 34 to 56 cubic meters.

Sierrita’s production totaled 147 million pounds of copper and 18 million pounds of molybdenum in 2010, 170 million pounds of copper and 19 million pounds of molybdenum in 2009, and 188 million pounds of copper and 20 million pounds of molybdenum in 2008.

Sierrita is located in a desert environment with rainfall averaging 12 inches per year. The highest bench elevation is 1,160 meters above sea level and the ultimate pit bottom is expected to be 440 meters above sea level. The Sierrita operation, including the adjacent Twin Buttes site which we acquired in December 2009, encompasses approximately 27,000 acres, comprising 13,282 acres of patented mining claims and other fee lands, 11,694 acres of unpatented mining claims and 2,024 acres of leased lands.

Sierrita receives electrical power through long-term contracts with the Tucson Electric Power Company. Although we believe the Sierrita operation has sufficient water resources to support current operations, we are a party to litigation that may set legal precedents, which could adversely affect our water rights at Sierrita and at our other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for information concerning the status of these proceedings.

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Miami

Our wholly owned Miami mine is an open-pit copper mining complex located in Gila County, Arizona, approximately 90 miles east of Phoenix and six miles west of the city of Globe on U.S. Highway 60. The site is accessible by a paved highway and by rail.

The Miami mine is developed on a porphyry copper deposit that has leachable oxide and secondary sulfide mineralization. The predominant oxide copper minerals are chrysocolla, copper-bearing clays, malachite and azurite. Chalcocite and covellite are the most important secondary copper sulfide minerals.

Since about 1915, the Miami mining operation had processed copper ore using both flotation and leaching technologies. Currently, operations consist of residual leaching of stockpiles with copper recovered (from solution) by the SX/EW process. The design capacity of the SX/EW plant is 200 million pounds of copper per year. We initiated limited mining activities at the Miami mine to improve efficiencies of ongoing reclamation projects associated with historical mining operations at the site. During an approximate 5-year mine life, we expect to ramp up production to approximately 100 million pounds of copper per year by 2012. The available mining fleet consists of twenty-four 227-metric ton haul trucks loaded by 3 shovels with bucket sizes ranging from 31 to 34 cubic meters, which are capable of moving an average of approximately 155,000 metric tons of material per day.

Miami’s copper production totaled 18 million pounds in 2010, 16 million pounds in 2009 and 19 million pounds in 2008.

Miami is located in a desert environment with rainfall averaging 18 inches per year. The highest bench elevation is 1,390 meters above sea level, and the ultimate pit bottom will have an elevation of 810 meters above sea level. The Miami operation encompasses approximately 9,058 acres comprising 8,725 acres of patented mining claims and other fee lands and 333 acres of unpatented mining claims.

Miami receives electrical power through long-term contracts with the Salt River Project and natural gas through long-term contracts with El Paso Natural Gas as the transporter. Although we believe the Miami operation has sufficient water resources to support current operations, we are a party to litigation that may set legal precedents, which could adversely affect our water rights at Miami and at our other properties in Arizona. Refer to Item 3. “Legal Proceedings,” for information concerning the status of these proceedings.

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Tyrone and Chino

Tyrone

Our wholly owned Tyrone mine is an open-pit copper mining complex which has been in operation since 1967. It is located in southwestern New Mexico in Grant County, approximately 10 miles south of Silver City, New Mexico, along State Highway 90. The site is accessible by paved road and will have rail access in 2011.

The Tyrone mine is a porphyry copper deposit. Mineralization is predominantly secondary sulfide consisting of chalcocite with leachable oxide mineralization consisting of chrysocola.

Copper processing facilities consist of an SX/EW operation with a maximum capacity of 168 million pounds of copper cathodes per year. The available mining fleet has the capacity to move an average of 130,000 metric tons of material per day using 19 240-metric ton haul trucks loaded by three shovels with bucket sizes ranging from 17 to 42 cubic meters.

Tyrone’s copper production totaled 82 million pounds in 2010, 86 million pounds in 2009 and 76 million pounds in 2008.

Tyrone is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,000 meters above sea level and the ultimate pit bottom is expected to have an elevation of 1,500 meters above sea level. The Tyrone operation encompasses approximately 35,200 acres, comprising 18,755 acres of patented mining claims and other fee lands, and 16,445 acres of unpatented mining claims (including 1,116 acres overlaying federal minerals on previously counted fee lands).

Tyrone receives electrical power from the Luna Energy facility and from the open market. Tyrone also has the ability to self-generate power. We believe the Tyrone operation has sufficient water resources to support current operations.

Chino

Our wholly owned Chino mine is an open-pit copper mining complex located in southwestern New Mexico in Grant County, approximately 15 miles east of the town of Silver City off of State Highway 180. The mine is accessible by paved roads and by rail. Chino has been in operation since 1910.

The Chino mine is a porphyry copper deposit with adjacent copper skarn deposits. There is leachable oxide and secondary sulfide mineralization, and millable primary sulfide mineralization. The predominant oxide copper minerals are chrysocolla and azurite. Chalcocite is the most important secondary copper sulfide mineral, and chalcopyrite and molybdenite the dominant primary sulfides.

The Chino operation consists of a 39,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates, and a 150 million pound-per-year SX/EW plant that produces copper cathode from solution generated by ROM leaching.

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We have initiated a restart of mining and milling activities at Chino, which were suspended in late 2008. The ramp up of mining and milling activities will significantly increase copper production at Chino, which is currently producing small amounts of copper from existing leach stockpiles. Planned mining and milling rates are expected to be achieved by the end of 2013. Incremental annual copper production is expected to be 100 million pounds in 2012 and 2013 and 200 million pounds in 2014.

Chino’s copper production totaled 34 million pounds in 2010, 36 million pounds in 2009 and 155 million pounds in 2008.

Chino is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,250 meters above sea level, and the ultimate pit bottom is expected to be 1,500 meters above sea level. The Chino operation encompasses approximately 118,024 acres comprising 113,220 acres of patented mining claims and other fee lands, and 4,804 acres of unpatented mining claims (including 22,907 acres overlaying federal and state minerals on previously counted fee lands).

Chino receives power from the Luna Energy Facility and from the open market. It also has the ability to self-generate power. We believe Chino has sufficient water resources to support current operations.

Henderson

Our wholly owned Henderson molybdenum mine has been in operation since 1976 and is located approximately 42 miles west of Denver, Colorado, off U.S. Highway 40. Nearby communities include the towns of Empire, Georgetown and Idaho Springs. The Henderson mill site is located approximately 15 miles west of the mine and is accessible from Colorado State Highway 9. The Henderson mine and mill are connected by a 10-mile conveyor tunnel under the Continental Divide and an additional five-mile surface conveyor. The tunnel portal is located five miles east of the mill.

The Henderson mine is a porphyry molybdenum deposit with molybdenite as the primary sulfide mineral.

The Henderson operation consists of a large block-cave underground mining complex feeding a concentrator with a current capacity of approximately 29,000 metric tons-per-day. Henderson has the capacity to produce approximately 40 million pounds of molybdenum per year. The majority of the molybdenum concentrate produced is shipped to our Fort Madison, Iowa, processing facility. The available underground mining equipment fleet consists of 13 nine-metric ton load-haul-dump (LHD) units and seven 36- and 73-metric ton haul trucks, which feed a gyratory crusher feeding a series of three overland conveyors to the mill stockpiles.

As a result of weakened molybdenum markets, Henderson operated at reduced rates during 2009; however, substantially improved market conditions have resulted in an increase in Henderson’s operating rates during 2010. Henderson’s molybdenum production totaled 40 million pounds in 2010, 27 million pounds in 2009 and 40 million pounds in 2008.

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The Henderson mine is located in a mountain region with the main access shaft at 3,180 meters above sea level. The main production levels are currently at elevations of 2,200 and 2,350 meters above sea level. This region experiences significant snowfall during the winter months.

The Henderson mine and mill operations encompass approximately 11,878 acres, comprising 11,843 acres of patented mining claims and other fee lands, and a 35-acre easement with the U.S. Forest Service for the surface portion of the conveyor corridor.

Henderson operations receive electrical power through long-term contracts with Xcel Energy and natural gas through long-term contracts with Anadarko Energy Services Company, with Xcel Energy as the transporter. We believe the Henderson operation has sufficient water resources to support current operations.

Other North America Mines

In addition to the currently operating mines described above, we have four non-operating copper mines: Ajo, Bisbee and Tohono in Arizona, and Cobre in New Mexico; and the Climax molybdenum mine in Colorado.

Our four non-operating copper mines have been on care-and-maintenance status for several years and would require significant capital investment to return them to operating status.

Construction activities are ongoing at our Climax molybdenum mine, which was placed on care-and-maintenance status in 1995. Recent activities include the completion of concrete foundations for various equipment installations and commencement of the ball mill shell assembly. We plan to advance construction and conduct mine preparation activities during 2011. The timing for start up of mining and milling activities is dependent on market conditions. The Climax molybdenum mine would have an initial annual design capacity of 30 million pounds with significant expansion options. Total estimated costs for the project approximate $700 million, of which $254 million has been incurred as of December 31, 2010.

South America

At our operations in South America, mine properties and facilities are controlled through mining claims or concessions under the general mining laws of the relevant country. The claims or concessions are owned or controlled by the operating companies in which we or our subsidiaries have a controlling ownership interest. Roads, power lines and aqueducts are controlled by easements.

Cerro Verde

We have a 53.56 percent ownership interest in Cerro Verde, with the remaining 46.44 percent held by SMM Cerro Verde Netherlands B.V. (21.0 percent), Compañia de Minas Buenaventura S.A.A. (19.3 percent) and other stockholders whose shares are publicly traded on the Lima Stock Exchange (6.14 percent).

Cerro Verde is an open-pit copper and molybdenum mining complex that has been in operation since 1976 and is located 20 miles southwest of Arequipa, Peru. The site is accessible by paved highway. Approximately one-third of Cerro Verde’s copper cathode production is sold locally and the remaining copper cathodes and concentrate production are transported approximately 70 miles by truck and rail to the Pacific Port of Matarani for shipment to international markets.

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The Cerro Verde mine is a porphyry copper deposit that has oxide and secondary sulfide mineralization, and primary sulfide mineralization. The predominant oxide copper minerals are brochantite, chrysocolla, malachite and copper “pitch.” Chalcocite and covellite are the most important secondary copper sulfide minerals. Chalcopyrite and molybdenite are the dominant primary sulfides.

Cerro Verde’s current operation consists of an open-pit copper mine, concentrator and SX/EW leaching facilities. Leach copper production is derived from a 39,000 metric ton-per-day crushed leach facility and a ROM leach system. This leaching operation has a capacity of approximately 200 million pounds of copper per year. A 108,000 metric ton-per-day concentrator was completed and began processing of sulfide ore in 2006. During 2010, we completed a project to increase throughput of the concentrator to approximately 120,000 metric tons of ore per day. The available fleet consists of twenty-eight 180-metric ton and 230-metric ton haul trucks loaded by five shovels with bucket sizes ranging in size from 21 to 53 cubic meters, which are capable of moving an average of approximately 308,000 metric tons of material per day.

Cerro Verde’s production totaled 668 million pounds of copper and 7 million pounds of molybdenum in 2010, 662 million pounds of copper and 2 million pounds of molybdenum in 2009, and 694 million pounds of copper and 3 million pounds of molybdenum in 2008.

Cerro Verde is located in a desert environment with rainfall averaging 1.5 inches per year and is in an active seismic zone. The highest bench elevation is 2,900 meters above sea level and the ultimate pit bottom is expected to be 2,000 meters above sea level. Cerro Verde has a mining concession covering approximately 157,007 acres plus 24 acres of owned property and 79 acres of rights-of-way outside the mining concession area.

Cerro Verde receives electrical power under long-term contracts with Kallpa Generación SA and Empresa de Generación Eléctrica de Arequipa. Water for our Cerro Verde processing operations comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collect water primarily from seasonal precipitation. Cerro Verde’s participation in the Pillones Reservoir Project has secured water rights that we believe will be sufficient to support Cerro Verde’s current operations. For a discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”

El Abra

We own a 51 percent interest in El Abra, and the remaining 49 percent interest is held by the state-owned copper enterprise Corporación Nacional del Cobre de Chile (CODELCO).

El Abra is an open-pit copper mining complex that has been in operation since 1996 and is located 47 miles north of Calama in Chile’s El Loa province, Region II. The site is accessible by paved highway and by rail.

The El Abra mine is a porphyry copper deposit that has sulfide and oxide mineralization. The predominant primary sulfide copper minerals are bornite and chalcopyrite. There is a minor amount of secondary sulfide mineralization

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as chalcocite. The oxide copper minerals are chrysocolla and pseudomalachite. There are lesser amounts of copper-bearing clays and tenorite.

The El Abra operation consists of an open-pit copper mine and an SX/EW facility with a capacity of 500 million pounds of copper cathode per year from a 115,000 metric ton-per-day crushed leach circuit and a similar-sized, ROM leaching operation. The available fleet consists of thirty-five 220-metric ton haul trucks loaded by four shovels with buckets ranging in size from 26 to 41 cubic meters, which are capable of moving an average of 223,000 metric tons of material per day.

We are completing construction activities associated with the development of a large sulfide deposit at El Abra to extend its mine life by over 10 years. Construction activities for the initial phase of the project are approximately 80 percent complete. Production from the sulfide ore, which is projected to ramp up to approximately 300 million pounds of copper per year, is expected to replace the current depleting oxide copper production. The aggregate capital investment for this project is expected to total $725 million through 2015, of which approximately $565 million is for the initial phase of the project that is expected to be completed in second-quarter 2011.

El Abra’s copper production totaled 320 million pounds in 2010, 358 million pounds in 2009 and 366 million pounds in 2008.

El Abra is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 4,180 meters above sea level and the ultimate pit bottom is expected to be 3,410 meters above sea level. El Abra controls a total of 110,268 acres of mining claims covering the ore deposit, stockpiles, process plant, and water wellfield and pipeline. In addition, El Abra has acquired land surface rights for the road between the processing plant and the mine, the water wellfield, power transmission lines and for the water pipeline from the Salar de Ascotán.

El Abra currently receives electrical power under a contract with Electroandina. Water for our El Abra processing operations comes from pumping of groundwater from the Salar de Ascotán pursuant to regulatory approval. We believe El Abra has sufficient water rights to support current operations. For a discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”

Candelaria and Ojos del Salado

Candelaria

We have an 80 percent ownership interest in Candelaria, with the remaining 20 percent interest owned by affiliates of Sumitomo Corporation.

Candelaria’s open-pit copper mine has been in operation since 1993 and the underground mine has been in operation since 2005. The Candelaria copper mining complex is located approximately 12 miles south of Copiapó in northern Chile’s Atacama province, Region III. The site is accessible by two maintained dirt roads, one coming through the Tierra Amarilla community and the other off of Route 5 of the International Pan-American Highway. Copper concentrates are transported by truck to the Punta Padrones port facility located in Caldera, approximately 50 miles northwest of the mine.

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The Candelaria mine is an iron oxide, copper and gold deposit. Primary sulfide mineralization consists of chalcopyrite.

The Candelaria operation consists of an open-pit copper mine and a 6,000 metric ton-per-day underground copper mine, which is mined by sublevel stoping, feeding a 75,000 metric ton-per-day concentrator. The available fleet consists of forty-four 225-metric ton haul trucks loaded by six shovels with bucket sizes ranging from 13 to 43 cubic meters, which are capable of moving 235,000 metric tons of material per day.

Candelaria’s production totaled 300 million pounds of copper and 76 thousand ounces of gold in 2010, 296 million pounds of copper and 74 thousand ounces of gold in 2009, and 383 million pounds of copper and 98 thousand ounces of gold in 2008.

Candelaria is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 675 meters above sea level and the ultimate pit bottom is expected to be 30 meters below sea level. The Candelaria property encompasses approximately 13,390 acres, including approximately 125 acres for the port facility in Caldera. The remaining property consists of mineral rights owned by us in which the surface is not owned but controlled by us, which is consistent with Chilean law.

Candelaria receives electrical power through long-term contracts with Empresa Eléctrica Guacolda S.A., a local energy company. Candelaria’s water supply comes from well fields in the area of Tierra Amarilla and Copiapó that draw water from the Copiapó River aquifer. Because of rapid depletion of that aquifer in recent years, Candelaria is expanding its sources of water supply. We have recently completed construction of a pipeline to bring water from a nearby water treatment facility, and have also started engineering for a desalination plant that will supply all of Candelaria’s longer term water needs. The plant is expected to be completed by the end of 2012 at an aggregate capital investment of approximately $280 million. For further discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”

Ojos del Salado

We have an 80 percent ownership interest in Ojos del Salado, with the remaining 20 percent interest owned by affiliates of Sumitomo Corporation.

The Ojos del Salado operation began commercial production in 1929 and consists of two underground copper mines (Santos and Alcaparrosa) and a 3,800 metric ton-per-day concentrator. The operation is located approximately 10 miles east of Copiapó in northern Chile’s Atacama province, Region III, and is accessible by paved highway. The Ojos del Salado mines are iron oxide and copper and gold deposits. Primary sulfide mineralization consists of chalcopyrite.

The Ojos del Salado operation has a capacity of 3,800 metric tons per day of ore from the Santos underground mine and 4,000 metric tons of ore per day from the Alcaparrosa underground mine. The ore from both mines is mined by sublevel stoping since both the ore and enclosing rocks are competent. The broken ore is removed from the stopes using scoops and loaded into an available fleet of twenty-six 28-metric ton trucks, which transport the ore to the surface. The ore from the Santos mine is hauled directly to the Ojos del Salado mill for processing, and the ore from the Alcaparrosa mine is reloaded into six 54-metric ton trucks and hauled seven miles to the Candelaria mill for processing. The Ojos del Salado concentrator has the capacity to produce over 30 million pounds of copper and 9,000 ounces of gold per year. Tailings from the Ojos del Salado mill are pumped to the Candelaria tailings facility for final deposition. The Candelaria facility has sufficient capacity for the remaining Ojos del Salado tailings.

Ojos del Salado’s production totaled 66 million pounds of copper and 17 thousand ounces of gold in 2010, 74 million pounds of copper and 18 thousand ounces of gold in 2009, and 63 million pounds of copper and 16 thousand ounces of gold in 2008.

Ojos del Salado is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest underground level is at an elevation of 500 meters above sea level, with the lowest underground level at 150 meters above sea level. The Ojos del Salado mineral rights encompass approximately 15,815 acres, which includes approximately 6,784 acres of owned land in and around the Ojos del

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Salado underground mines and plant site. The remaining property consists of mineral rights owned by us in which the surface is not owned but controlled by us, which is consistent with Chilean law.

Ojos del Salado receives electrical power through long-term contracts with Empresa Eléctrica Guacolda S.A. Ojos del Salado’s water supply comes from well fields in the area of Tierra Amarilla and Copiapó that draw water from the Copiapó River aquifer. For a discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”

Indonesia

Ownership. PT Freeport Indonesia is a limited liability company organized under the laws of the Republic of Indonesia and incorporated in Delaware. We directly own 81.28 percent of PT Freeport Indonesia, 9.36 percent indirectly through our wholly owned subsidiary, PT Indocopper Investama, and the Government of Indonesia owns the remaining 9.36 percent.

We have established certain unincorporated joint ventures with Rio Tinto plc (Rio Tinto). Pursuant to the joint venture agreement, Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver through 2021 in Block A of PT Freeport Indonesia’s Contract of Work, and, after 2021, a 40 percent interest in all production from Block A (refer to Note 2 for further discussion).

Contract of Work (COW). Through a COW with the Government of Indonesia, PT Freeport Indonesia conducts its current exploration and mining operations in Indonesia. The COW governs our rights and obligations relating to taxes, exchange controls, royalties, repatriation and other matters, and was concluded pursuant to the 1967 Foreign Capital Investment Law, which expresses Indonesia’s foreign investment policy and provides basic guarantees of remittance rights and protection against nationalization, a framework for economic incentives and basic rules regarding other rights and obligations of foreign investors. Specifically, the COW provides that the Government of Indonesia will not nationalize or expropriate PT Freeport Indonesia’s mining operations. Any disputes regarding the provisions of the COW are subject to international arbitration. We have experienced no disputes requiring arbitration during the more than 40 years we have operated in Indonesia.

PT Freeport Indonesia’s original COW was entered into in 1967 and was replaced by a new COW in 1991. The initial term of the current COW expires in 2021, but can be extended for two 10-year periods subject to Indonesian government approval, which cannot be withheld or delayed unreasonably. The COW allows us to conduct exploration, mining and production activities in the 24,700-acre Block A area, which is where all of PT Freeport Indonesia’s proven and probable mineral reserves and current mining operations are located. Under the COW, PT Freeport Indonesia also conducts exploration activities in the approximate 500,000-acre Block B area.

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As further discussed in Note 14, PT Freeport Indonesia pays copper royalties under its COW, and has agreed to pay additional royalties to the Government of Indonesia that are not required under its COW. The additional royalties provide further support to the local governments and to the people of the Indonesian province of Papua. PT Freeport Indonesia’s share of the combined royalties totaled $156 million in 2010, $147 million in 2009 and $113 million in 2008.

PT Irja Eastern Minerals (Eastern Minerals), of which we own 100 percent, conducts exploration through a joint venture agreement, under a separate COW in an area covering approximately 450,000 acres in Papua.

Under a joint venture agreement through PT Nabire Bakti Mining (PTNBM), we conduct exploration activities under a separate COW in an area covering approximately 500,000 acres in five parcels contiguous to PT Freeport Indonesia’s Block B and one of Eastern Minerals’ blocks.

In 2008, Indonesia enacted a new mining law, which will operate under a licensing system as opposed to the COW system that applies to PT Freeport Indonesia, Eastern Minerals and PTNBM. In 2010, the Government of Indonesia promulgated regulations under the 2008 mining law and certain provisions address existing COWs. The regulations provide that COWs will continue to be honored until their expiration. However, the regulations attempt to apply certain provisions of the new law to existing COWs and to convert any existing COWs to licenses for any extension periods provided by the applicable COW even though our COWs provide for two 10-year extension periods under the existing terms of our COWs.

Grasberg Minerals District. PT Freeport Indonesia operates in the remote highlands of the Sudirman Mountain Range in the province of Papua, Indonesia, which is on the western half of the island of New Guinea. We and our predecessors have conducted exploration and mining operations in Block A since 1967 and have been the only operator of these operations. The Grasberg minerals district currently has three mines in operation: the Grasberg open pit, the Deep Ore Zone (DOZ) underground block cave and the Big Gossan open stoping mine. We also have significant development projects in the Grasberg minerals district, which are discussed in more detail in “Development Projects and Exploration” and in Item 7. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.”

PT Freeport Indonesia’s production, including our joint venture partner’s share, totaled 1.3 billion pounds of copper and 2.0 million ounces of gold in 2010, 1.6 billion pounds of copper and 3.0 million ounces of gold in 2009 and 1.1 billion pounds of copper and 1.2 million ounces of gold in 2008.

Our principal source of power for all our Indonesian operations is a coal-fired power plant that we built in conjunction with our fourth concentrator mill expansion. Diesel generators supply peaking and backup electrical power generating capacity. A combination of naturally occurring mountain streams and water derived from our underground operations provides water for our operations. Our Indonesian operations are in an active seismic zone and experience average annual rainfall of approximately 200 inches.

Grasberg Open Pit

We began open-pit mining of the Grasberg ore body in 1990. Open-pit operations are expected to continue through mid 2016, at which time underground mining operations are scheduled to begin at our Grasberg Block Cave mine, which is currently in development. Production in the open-pit is currently at the 3,265- to 3,940- meter elevation level and totaled 53 million metric tons of ore in 2010 and 57 million metric tons of ore in 2009, which provided 63 percent of our 2010 mill feed and 70 percent of our 2009 mill feed. Remaining mill feed comes from our DOZ and Big Gossan mines.

The current equipment fleet consists of over 500 units. The larger mining equipment directly associated with production includes an available fleet of 163 haul trucks with payloads ranging from approximately 215 metric tons to 330 metric tons and 18 shovels with bucket sizes ranging from 30 cubic meters to 42 cubic meters, which during 2010 moved an average of 701,000 metric tons per day.

Grasberg crushing and conveying systems are integral to the mine and provide the capacity to transport up to 225,000 metric tons per day of Grasberg ore to the mill and 135,000 metric tons per day of overburden to the overburden stockpiles. The remaining ore and overburden is moved by haul trucks.

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Deep Ore Zone (DOZ)

The DOZ ore body lies vertically below the now depleted Intermediate Ore Zone. We began production from the DOZ ore body in 1989 using open stope mining methods, but suspended production in 1991 in favor of production from the Grasberg deposit. Production resumed in September 2000 using the block-cave method. Production is at the 3,110-meter elevation level and totaled 29 million metric tons of ore in 2010 and 26 million metric tons in 2009. Production at the DOZ mine is expected to continue through 2019. Beginning in 2015, we plan to ramp up production at our Deep Mill Level Zone (DMLZ) block cave mine, which is currently under development.

During 2010, we completed over 10,000 meters of development drifting in support of the block-cave mining method for the DOZ mine. The expansion of the DOZ operation to 80,000 metric tons of ore per day is complete. The success of the development of the DOZ mine, one of the world’s largest underground mines, provides confidence in the future development of PT Freeport Indonesia’s large-scale undeveloped underground ore bodies.

The DOZ mine fleet consists of over 195 pieces of mobile heavy equipment, which in 2010 moved an average of 80,000 metric tons of ore per day. The primary mining equipment directly associated with production and development includes an available fleet of 52 LHD units and 25 haul trucks. Our production LHD units typically carry approximately 11 metric tons of ore. Using ore passes and chutes, the LHD units transfer ore into 55-ton capacity haul trucks. The trucks dump into two gyratory crushers and the ore is then conveyed to the surface stockpiles.

Big Gossan

The Big Gossan mine lies underground and adjacent to the current mill site and is a skarn hosted copper, gold and silver deposit. It is a tabular, near vertical ore body with approximate dimensions of 1,200 meters along strike and 800 meters down dip with varying thicknesses from 20 meters to 120 meters. The mine utilizes a blasthole stoping method with delayed paste backfill. Stopes of varying sizes are mined and the ore dropped down passes to a truck haulage level. Trucks are chute loaded and transport the ore to a jaw crusher. The crushed ore is then hoisted vertically via a two skip production shaft to a level where it is loaded onto a conveyor belt. The belt carries the ore to one of the main underground conveyors where the ore is transferred and carried to the surface mill stockpile for processing.

Production began in fourth-quarter 2010 and is designed to ramp up to 7,000 metric tons per day by late 2012, which will result in average annual aggregate incremental production of 125 million pounds of copper and 65 thousand ounces of gold (with PT Freeport Indonesia receiving 60 percent of these amounts).

Description of Ore Bodies. Our Indonesia ore bodies are located within and around two main igneous intrusions, the Grasberg monzodiorite and the Ertsberg diorite. The host rocks of these ore bodies include both carbonate and clastic rocks that form the ridge crests and upper flanks of the Sudirman Range, and the igneous rocks of monzonitic to dioritic composition that intrude them. The igneous-hosted ore bodies (the Grasberg open pit and block cave, and portions of the DOZ block cave) occur as vein stockworks and disseminations of copper sulfides, dominated by chalcopyrite and, to a much lesser extent, bornite. The sedimentary-rock hosted ore bodies (portions of the DOZ and all of the Big Gossan) occur as “magnetite-rich, calcium/magnesian skarn” replacements, whose location and orientation are strongly influenced by major faults and by the chemistry of the carbonate rocks along the margins of the intrusions.

The copper mineralization in these skarn deposits is dominated by chalcopyrite, but higher bornite concentrations are common. Moreover, gold occurs in significant concentrations in all of the district’s ore bodies, though rarely visible to the naked eye. These gold concentrations usually occur as inclusions within the copper sulfide minerals, though, in some deposits, these concentrations can also be strongly associated with pyrite.

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The following diagram indicates the relative elevations (in meters) of our reported ore bodies.

The following map, which encompasses an area of approximately 42 square kilometers (approximately 16 square miles), indicates the relative positions and sizes of our reported ore bodies and their locations.

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Africa

We currently own an effective 57.75 percent interest in the Tenke Fungurume minerals district. The remaining ownership interests are held by Lundin Mining Corporation (Lundin) (currently an effective 24.75 percent interest) and La Générale des Carrières et des Mines (Gécamines), which is wholly owned by the Government of the DRC (currently 17.5 percent non-dilutable interest).

We are entitled to mine in the DRC under the Amended and Restated Mining Convention (ARMC) between TFM and the government of the DRC. The original Mining Convention was entered into in 1996 and was replaced with the ARMC in 2005. As further discussed in Note 14, in October 2010, the government of the DRC announced the conclusion of the review of TFM’s contracts, and confirmed that the existing mining contracts are in good standing and acknowledged the rights and benefits granted under those contracts. In connection with the review, TFM made several commitments that have been reflected in amendments to its mining contracts (refer to Note 14 for further discussion). In December 2010, the addenda to TFM’s ARMC and Amended and Restated Shareholders’ Agreement were signed by the parties and are pending a Presidential Decree. TFM’s existing mining contracts will be in effect until the Presidential Decree is obtained. After giving effect to the amendments and obtaining approval of the modification to TFM’s bylaws, our effective ownership interest in the project will be 56.0 percent.

TFM pays a royalty of 2 percent of net revenues under the ARMC, which totaled $20 million in 2010 and $7 million in 2009.

The Tenke Fungurume deposits are located in the Katanga province of the DRC approximately 110 miles northwest of Lubumbashi. The deposits are accessible by unpaved roads and by rail. The Tenke Fungurume deposits are sediment-hosted copper and cobalt deposits with oxide, mixed oxide-sulfide and sulfide mineralization. The dominant oxide minerals are malachite, pseudomalachite and heterogenite. Important sulfide minerals consist of bornite, carrollite, chalcocite and chalcopyrite.

Initial copper production commenced at the Tenke Fungurume mine in late March 2009. Targeted copper production rates were achieved in September 2009 and the cobalt and sulphuric acid plants were commissioned in third-quarter 2009. Copper and cobalt are recovered through an agitation-leach plant. The milling facilities at Tenke, which were designed to produce at a capacity rate of 8,000 metric tons of ore per day, have been performing above capacity, with mill throughput averaging 10,300 metric tons of ore per day in 2010. The current equipment fleet includes one twelve-cubic meter front-end loader, ten 5-cubic meter front-end loaders, four 91-metric ton haul trucks, twenty-nine 45-metric ton haul trucks, surface miners, production drills, sampling machines and crawler dozers.

We are planning a second phase of the project, which would include optimizing the current plant and increasing capacity. As part of the second phase, a range of near-term expansion options are being considered, which have the potential of adding 100 million to 200 million pounds of copper per year over the next two to three years. Future expansions are subject to a number of factors, including economic and market conditions and the business and investment climate in the DRC.

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Tenke’s production totaled 265 million pounds of copper and 20 million pounds of cobalt in 2010 and 154 million pounds of copper in 2009.

Tenke Fungurume is located in a tropical region; however, temperatures are moderated by its higher altitudes. Weather in this region is characterized by a dry season and a wet season, each lasting about six months with average rainfall of 47 inches per year. The highest bench elevation is expected to be 1,490 meters above sea level and the ultimate pit bottom is expected to be 1,270 meters above sea level. The Tenke Fungurume deposits are located within four concessions totaling 394,455 acres.

Tenke Fungurume has entered into long-term power supply and infrastructure funding agreements with La Société Nationale d’Electricité, the state-owned electric utility company serving the region. The results of a recent water exploration program, as well as the regional geological and hydro-geological conditions, indicate that adequate water is available for the project, and for hydro-electric generation during the expected life of the operation.

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For comparative purposes, production and sales data shown below for the years ended December 31, 2007 and 2006, combines our historical data with Phelps Dodge pre-acquisition data. As the pre-acquisition operating data represent the results of these operations under Phelps Dodge management, such combined data is not necessarily indicative of what past results would have been under FCX management or of future operating results.

PRODUCTION DATA

	Years Ended December 31,
COPPER (millions of recoverable pounds)	2010	2009	2008		2007a		2006a

(FCX’s net interest in %)
North America
Morenci (85%)b	437	428	626		687		693
Bagdad (100%)	203	225	227		202		165
Safford (100%)	143	184	133		1		-
Sierrita (100%)	147	170	188		150		162
Tyrone (100%)	82	86	76		50		64
Chino (100%)	34	36	155		190		186
Miami (100%)	18	16	19		20		19
Other (100%)	3	2	6		20		16
Total North America	1,067	1,147	1,430		1,320	c	1,305

South America
Cerro Verde (53.56%)	668	662	694		594		222
El Abra (51%)	320	358	366		366		482
Candelaria/Ojos del Salado (80%)	366	370	446		453		429
Total South America	1,354	1,390	1,506		1,413	c	1,133

Indonesia
Grasberg (90.64%)d	1,222	1,412	1,094		1,151		1,201

Africa
Tenke Fungurume (57.75%)	265	154	-		-		-
Consolidated	3,908	4,103	4,030		3,884		3,639

Less noncontrolling interests	766	754	693		653		537
Net	3,142	3,349	3,337		3,231		3,102

GOLD (thousands of recoverable ounces)

(FCX’s net interest in %)
North America (100%)b	7	4	14		15		19
South America (80%)	93	92	114		116	e	112
Indonesia (90.64%)d	1,786	2,568	1,163		2,198		1,732
Consolidated	1,886	2,664	1,291		2,329		1,863

Less noncontrolling interests	186	258	132		229		184
Net	1,700	2,406	1,159		2,100		1,679

MOLYBDENUM (millions of recoverable pounds)

(FCX’s net interest in %)
Henderson (100%)	40	27	40		39	f	37
North America copper mines (100%)	25	25	30	b	30	b	31	b
Cerro Verde (53.56%)	7	2	3		1		-
Consolidated	72	54	73		70		68

Less noncontrolling interest	3	1	1		-		-
Net	69	53	72		70		68

For comparative purposes, operating data for the years ended December 31, 2007 and 2006, combines our historical data with Phelps Dodge pre-acquisition data. As the pre-acquisition data represent the results of these operations under Phelps Dodge management, such combined data is not necessarily indicative of what past results would have been under FCX management or of future operating results.

b.	Amounts are net of Morenci’s 15 percent joint venture partner interest.

c.	Includes North America copper production of 258 million pounds and South America copper production of 259 million pounds for Phelps Dodge’s pre-acquisition results.

d.	Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with terms of the joint venture agreement.

e.	Includes gold production of 21 thousand ounces for Phelps Dodge’s pre-acquisition results.

f.	Includes molybdenum production of 14 million pounds for Phelps Dodge’s pre-acquisition results.

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SALES DATA

	Years Ended December 31,
COPPER (millions of recoverable pounds)	2010	2009	2008	2007a		2006a

MINED COPPER (FCX’s net interest in %)
North America
Morenci (85%)b	434	459	646	693		692
Bagdad (100%)	206	225	226	200		165
Safford (100%)	155	176	107	-		-
Sierrita (100%)	152	172	184	157		161
Tyrone (100%)	83	85	71	53		64
Chino (100%)	35	52	174	186		186
Miami (100%)	17	16	20	24		19
Other (100%)	3	2	6	19		16
Total North America	1,085	1,187	1,434	1,332	c	1,303

South America
Cerro Verde (53.56%)	654	667	701	587		214
El Abra (51%)	315	361	365	365		487
Candelaria/Ojos del Salado (80%)	366	366	455	447		425
Total South America	1,335	1,394	1,521	1,399	c	1,126

Indonesia
Grasberg (90.64%)d	1,214	1,400	1,111	1,131		1,201

Africa
Tenke Fungurume (57.75%)	262	130	-	-		-
Consolidated	3,896	4,111	4,066	3,862		3,630

Less noncontrolling interests	756	746	699	647		535
Net	3,140	3,365	3,367	3,215		3,095

Consolidated sales from mines	3,896	4,111	4,066	3,862		3,630
Purchased copper	182	166	483	650		736
Total copper sales, including purchases	4,078	4,277	4,549	4,512		4,366

Average realized price per pound	$3.59	$2.60	$2.69	$3.22	e	$2.80	e

GOLD (thousands of recoverable ounces)

MINED GOLD (FCX’s net interest in %)

North America (100%)b	5	6	16	21		19
South America (80%)	93	90	116	114	f	111
Indonesia (90.64%)d	1,765	2,543	1,182	2,185		1,736
Consolidated	1,863	2,639	1,314	2,320		1,866

Less noncontrolling interests	184	256	134	228		185
Net	1,679	2,383	1,180	2,092		1,681

Consolidated sales from mines	1,863	2,639	1,314	2,320		1,866
Purchased gold	1	1	2	6		12
Total gold sales, including purchases	1,864	2,640	1,316	2,326		1,878

Average realized price per ounce	$1,271	$993	$861	$682		$566	g

MOLYBDENUM (millions of recoverable pounds)

MINED MOLYBDENUM	67	58	71	69	h	69

Less noncontrolling interests	3	1	1	-		-
Net	64	57	70	69		69

Consolidated sales from mines	67	58	71	69		69
Purchased molybdenum	2	6	8	9		8
Total molybdenum sales, including purchases	69	64	79	78		77

Average realized price per pound	$16.47	$12.36	$30.55	$25.87		$21.87

b.	Amounts are net of Morenci’s joint venture partner’s 15 percent interest.

c.	Includes North America copper sales of 283 million pounds and South America copper sales of 222 million pounds for Phelps Dodge’s pre-acquisition results.

d.	Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with terms of the joint venture agreement.

e.	Before charges for hedging losses related to copper price protection programs, amounts were $3.27 per pound for 2007 and $3.08 per pound for 2006.

f.	Includes gold sales of 18 thousand ounces for Phelps Dodge’s pre-acquisition results.

g.	Amount was approximately $606 per ounce before a loss on redemption of our Gold-Denominated Preferred Stock, Series II.

h.	Includes molybdenum sales of 17 million pounds for Phelps Dodge’s pre-acquisition results.

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DEVELOPMENT PROJECTS AND EXPLORATION

We are increasing near-term production at several of our copper mines and also have several projects and potential opportunities to expand production volumes, extend mine lives and develop large-scale underground ore bodies. Major development projects currently include the development of the massive underground ore bodies in the Grasberg minerals district, the El Abra sulfide reserves and the development of the Climax molybdenum mine. Studies are under way to evaluate a large-scale concentrator expansion at Cerro Verde, a major mill project at El Abra, various mill projects to process sulfide ore in North America and staged expansion options at Tenke. For further discussion of these and our other development projects and exploration activities, refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In addition to the development projects in progress in the Grasberg minerals district, we also have an additional long-term underground mine development project in the Grasberg minerals district for the Kucing Liar ore body, which lies on the southern flank of and underneath the southern portion of the Grasberg open pit at the 2,605-meter elevation level. We expect to mine the Kucing Liar ore body using the block-cave method. Aggregate capital cost estimates for development of the Kucing Liar ore body are expected to approximate $2 billion.

Over the next five years, we estimate aggregate capital spending for underground mine development in the Grasberg minerals district to average approximately $600 million per year. These costs will be shared with Rio Tinto in accordance with our joint venture agreement. Considering the long-term nature and large size of these projects, actual costs could differ materially from these estimates.

In addition to the mine development costs above, our current mine development plans include approximately $3 billion of capital expenditures at our processing facilities to optimize the handling of underground ore types once Grasberg open-pit operations cease. Substantially all of these expenditures will be made between 2016 and 2030. We continue to review our mine development and processing plans to maximize the value of our reserves.

SMELTING FACILITIES

Atlantic Copper, S.A. Our wholly owned Atlantic Copper smelter and refinery is located on land concessions from the Huelva, Spain port authorities, which expire in 2027.

The design capacity of the smelter is 290,000 metric tons of copper per year and the refinery currently has a capacity of 265,000 metric tons of copper per year. During 2010, Atlantic Copper treated 980,700 metric tons of concentrate and scrap and produced 255,000 metric tons of copper anodes and 253,100 metric tons of copper cathodes. During 2009, Atlantic Copper treated 1,000,700 metric tons of concentrate and scrap and produced 269,000 metric tons of copper anodes and 256,600 metric tons of copper cathodes.

Atlantic Copper has a 21-day maintenance turnaround scheduled in April 2011. Atlantic Copper’s last shutdown was in 2007, when it completed a scheduled 23-day maintenance turnaround. Major maintenance turnarounds typically occur approximately every 12 years for Atlantic Copper, with significantly shorter term maintenance turnarounds occurring in the interim.

During 2010, Atlantic Copper purchased 28 percent of its concentrate requirements from PT Freeport Indonesia and 25 percent from our South America mines at market prices.

We made no capital contributions to Atlantic Copper from 2005 through 2010. We loan funds to Atlantic Copper from time to time, and at December 31, 2010, these loans totaled $411 million. Our net investment in Atlantic Copper was approximately $22 million at December 31, 2010.

PT Smelting. PT Freeport Indonesia’s 1991 COW required us to construct or cause to be constructed a smelter in Indonesia if we and the Indonesian government determined that such a project would be economically viable. In 1995, following the completion of a feasibility study, we entered into agreements relating to the formation of PT Smelting, an Indonesian company, and the construction of the copper smelter and refinery in Gresik, Indonesia. PT Freeport Indonesia, Mitsubishi Materials Corporation (Mitsubishi Materials), Mitsubishi Corporation Unimetals Ltd. (Mitsubishi) and Nippon Mining & Metals Co., Ltd. (Nippon) own 25 percent, 60.5 percent, 9.5 percent, and 5 percent, respectively, of the outstanding PT Smelting common stock. PT Smelting owns and operates the smelter and refinery in Gresik, Indonesia.

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PT Freeport Indonesia’s contract with PT Smelting provides for the supply of 100 percent of the copper concentrate requirements necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT Freeport Indonesia also sells copper concentrate to PT Smelting at market rates, which are not subject to a minimum or maximum rate, for quantities in excess of 205,000 metric tons of copper annually. Refer to Note 2 for further discussion of our investment in PT Smelting.

During 2006, PT Smelting completed an expansion of its production capacity to 275,000 metric tons of copper per year. During 2010, PT Smelting treated 1,034,800 metric tons of concentrate and produced 262,700 metric tons of copper anodes and 277,500 metric tons of copper cathodes. During 2009, PT Smelting treated 1,073,900 metric tons of concentrate and produced 310,200 metric tons of copper anodes and 286,000 metric tons of copper cathodes.

In 2008, PT Smelting completed a scheduled 25-day maintenance turnaround. Major maintenance turnarounds typically occur approximately every four years for PT Smelting, with significantly shorter term maintenance turnarounds in the interim.

Miami Smelter. We own and operate a smelter at our Miami, Arizona mining operation. The smelter has been in production for over 80 years and has been upgraded during that period to implement new technologies, to improve production and to comply with air quality requirements. Additionally, there are new air regulations that may require the Miami smelter to implement new technologies to meet these requirements (refer to Item 1A. “Risk Factors” for further discussion).

The Miami smelter processes concentrate primarily from our Arizona copper mines. Concentrate processed through the smelter totaled approximately 625,000 metric tons in 2010 and 619,000 metric tons in 2009. In addition, because sulphuric acid is a by-product of smelting concentrates, the Miami smelter is also the most significant source of sulphuric acid for our North America leaching operations.

The Miami smelter has a 30-day maintenance shutdown scheduled in June 2011. Major maintenance turnarounds typically occur approximately every 14 months for the Miami smelter, with significantly shorter term maintenance turnarounds in the interim.

OTHER PROPERTIES AND INVESTMENTS

Rod & Refining Operations. Our Rod & Refining operations consist of conversion facilities located in North America including a refinery in El Paso, Texas; rod mills in El Paso, Texas, Norwich, Connecticut and Miami, Arizona; and a specialty copper products facility in Bayway, New Jersey. We refine our copper anode production from our Miami smelter, along with purchased anodes, at our El Paso refinery. The El Paso refinery has the potential to operate at an annual production capacity of about 900 million pounds of copper cathode, which is sufficient to refine all of the copper anode we produce at Miami. Our El Paso refinery also produces nickel carbonate, copper telluride, and autoclaved slimes material containing gold, silver, platinum and palladium.

Molybdenum Conversion Facilities. We process molybdenum concentrates at our conversion plants in the U.S. and Europe into such products as technical-grade molybdic oxide, ferromolybdenum, pure molybdic oxide, ammonium molybdates, molybdenum disulfide and molybdenum metal powder. We operate molybdenum roasters in Sierrita, Arizona; Fort Madison, Iowa; and Rotterdam, the Netherlands.

The conversion facility located at our Sierrita mine consists of two molybdenum roasters that process molybdenum concentrates produced at our mines and on a toll basis for third parties. The facility produces molybdenum oxide and related products.

The Fort Madison, facility consists of two molybdenum roasters, a sulphuric acid plant, a metallurgical (technical oxide) packaging facility, and a chemical conversion plant, which includes a wet-chemicals plant, sublimation equipment and molybdenum disulfide processing and packaging. In the chemical plant, molybdic oxide is further refined into various high-purity molybdenum chemicals for a wide range of uses by chemical and catalyst manufacturers. In addition to metallurgical oxide products, the Fort Madison facility produces ammonium dimolybdate, pure molybdic oxide, ammonium heptamolybdate, ammonium octamolybdate, sodium molybdate, sublimed pure molybdic oxide and molybdenum disulfide.

The Rotterdam conversion facility consists of a molybdenum roaster, sulphuric acid plant, metallurgical packaging

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facility and chemical conversion plant. The plant produces metallurgical products primarily for third parties. Ammonium dimolybdate and pure molybdic oxide are produced in the wet-chemicals plant.

We also produce ferromolybdenum for worldwide customers at our conversion plant located in Stowmarket, United Kingdom. The plant is operated both as an internal and external customer tolling facility.

McMoRan Exploration Co. (MMR). In December 2010, we completed the purchase of 500,000 shares of MMR’s 5¾% Convertible Perpetual Preferred Stock (the Preferred Stock) for an aggregate purchase price of $500 million. The Preferred Stock is initially convertible into 62.5 shares of MMR common stock per share of Preferred Stock (an aggregate of 31.25 million shares or approximately 14 percent of MMR’s common stock on a fully converted basis at December 31, 2010), or an initial conversion price of $16 per share of MMR common stock. In connection with the completion of the purchase, we entered into a registration rights agreement and a stockholder agreement with MMR.

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

Several of our directors and executive officers also serve as directors or executive officers of MMR.

In addition, our wholly owned subsidiary FM Services Company (FM Services) provides certain executive, technical administrative, accounting, financial, tax and other services to us and to MMR on a cost-reimbursement basis. Refer to Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence,” for additional information.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Our copper mining operations require significant energy, principally electricity, diesel, coal and natural gas. Most of our energy is obtained from third parties under long-term contracts. For additional information, refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Sulphuric acid is used in the SX/EW process and is produced as a by-product of the smelting process at our smelters and from our sulphur burner at the Tenke mine. In addition, we are completing construction of a sulphur burner at our Safford mine, which will provide a more cost-effective source of sulphuric acid used in our North America SX/EW operations. Sulphuric acid needs in excess of the sulphuric acid produced by our operations are purchased from third parties as required.

Our mining operations also require significant quantities of water for mining, ore processing and related support facilities. Although we believe our mining operations have sufficient water rights, the loss of water rights for any of our mines, in whole or in part, or shortages of water to which we have rights, could require us to curtail or shut down mining operations. For a further discussion of risks and legal proceedings associated with the availability of water, refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings.”

COMPETITION

The top 10 producers of copper comprise approximately 50 percent of total worldwide mined copper production. We currently rank second among those producers at approximately 9 percent of total worldwide estimated mined copper production. Our competitive position is based on the quality and grade of our ore bodies and our ability to manage costs compared with other producers. We have a diverse portfolio of mining operations with varying ore grades and cost structures. Our costs are driven by the location, grade and nature of our ore bodies and the level of input costs, including energy, labor and equipment. The metals markets are cyclical and our ability to maintain our competitive position over the long term is based on our ability to acquire and develop quality deposits, hire and retain a skilled workforce and to manage our costs.

LABOR MATTERS

At December 31, 2010, we employed approximately 29,700 people (approximately 12,200 in Indonesia, 9,700 in North America, 4,500 in South America, 2,400 in Africa and 900 in Europe and other locations). Additionally, we have contractors that have personnel at many of our operations, including approximately 9,500 at our Grasberg

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minerals district, 9,100 at our South America mining operations, 1,700 at our Tenke Fungurume minerals district, 1,600 in North America and 400 at Atlantic Copper. Employees represented by unions are listed below, with the approximate number of employees represented and the expiration date of the applicable union agreements.

		Number of
		Union-
	Number of	Represented
Location	Unions	Employees	Expiration Date
PT Freeport Indonesia – Indonesia	1	7,197	September 2011
Tenke Fungurume – DRC	6	2,379	March 2013
Cerro Verde – Peru	1	1,096	August 2011
El Abra – Chile	2	811	July 2012
Candelaria – Chile	2	560	July 2013
Atlantic Copper – Spain	2	396	December 2011
Bayway – New Jersey	1	44	April 2013
Stowmarket – United Kingdom	1	41	May 2011
Aurex – Chile	1	33	December 2013
Rotterdam – The Netherlands	2	55	March 2011
Chino – New Mexico	1	131	November 2009a

a.	Negotiations are in progress while employees continue to work under the provisions of the expired contract.

FM Services, our wholly owned subsidiary, furnishes certain executive, administrative, financial, accounting, legal, tax and similar services to FCX, as well as to two other publicly traded companies. At December 31, 2010, FM Services had 175 employees.

ENVIRONMENTAL AND RECLAMATION MATTERS

The cost of complying with environmental laws is a fundamental and substantial cost of our business. For information about environmental regulation, litigation and related costs, refer to Item 1A. “Risk Factors”, Item 3. “Legal Proceedings”, and Notes 1 and 13.

COMMUNITY AND HUMAN RIGHTS

We have adopted policies that govern our working relationships with the communities where we operate that are designed to guide our practices and programs in a manner that respects basic human rights and the culture of the local people impacted by our operations. We continue to make significant expenditures on community development, education, training and cultural programs, which include:

· comprehensive job training programs

· basic education programs

· public health programs, including malaria control

· agricultural assistance programs

· small and medium enterprise development programs

· cultural preservation programs

· water and sewage treatment projects

· clean water access

· charitable donations

In December 2000, we endorsed the joint U.S. State Department-British Foreign Office Voluntary Principles on Human Rights and Security (Voluntary Principles). Several major natural resources companies and international human rights organizations participated in developing the Voluntary Principles and have endorsed them. We participated in developing these principles and they are incorporated into our human rights policy.

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We believe that our social and economic development programs are responsive to the issues raised by the local communities near our areas of operation and should help us maintain good relations with the surrounding communities and avoid disruptions of mining operations. Nevertheless, social and political instability in the areas of our operations may adversely impact our mining operations. Refer to Item 1A. “Risk Factors” for further discussion.

South America. Cerro Verde has provided a variety of community support projects over the years. During 2006, as a result of discussions with local mayors in the Arequipa region, Cerro Verde agreed to contribute to the design and construction of domestic water and sewage treatment plants for the benefit of the region. These facilities are being designed in a modular fashion so that initial installations can be readily expanded in the future. Refer to Note 14 for further discussion.

Also 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 5-year period (covering the years 2006 through 2010) when copper prices exceed certain levels that are adjusted annually. The contribution was equal to 3.75 percent of after-tax profits, of which 2.75 percent was contributed to a local mining fund and 1.00 percent to a regional mining fund. Cerro Verde’s contributions totaled $41 million in 2010 and $28 million in both 2009 and 2008. It is uncertain whether the contribution will be extended, abandoned or replaced by a tax or different mechanism.

Indonesia. In 1996, PT Freeport Indonesia established the Freeport Partnership Fund for Community Development (the Partnership Fund), through which PT Freeport Indonesia has made available funding and technical assistance to support the economic, health, education and social development of the area. PT Freeport Indonesia has committed through 2011 to provide one percent of its annual revenue for the development of the local people in its area of operation through the Partnership Fund. Our share of contributions to the Partnership Fund totaled $64 million in 2010, $59 million in 2009 and $34 million in 2008.

The Amungme and Kamoro Community Development Organization (Lembaga Pembangunan Masyarakat Amungme dan Kamoro or LPMAK) oversees disbursement of the program funds we contribute to the Partnership Fund. LPMAK is governed by a board of commissioners and a board of directors, which are comprised of representatives from the local Amungme and Kamoro tribal communities, government leaders, church leaders, and one representative of PT Freeport Indonesia on each board. The Amungme and Kamoro people are original inhabitants of the land in our area of operations.

Security Matters. Consistent with our COW in Indonesia and the requirement to protect our employees and property, we have taken appropriate steps to provide a safe and secure working environment. As part of its security program, PT Freeport Indonesia maintains its own internal security department, which is unarmed and performs functions such as protecting company facilities, monitoring the shipment of company supplies and products, assisting in traffic control and aiding in emergency response operations. The security department has received human rights training and each member is required to certify his or her compliance with our human rights policy.

Between July 2009 and January 2010, there were a series of shooting incidents along the road leading to our mining and milling operations at the Grasberg mining complex. In connection with these incidents, there were three fatalities (refer to Item 1A. “Risk Factors” for further discussion). PT Freeport Indonesia’s share of costs for its internal civilian security department totaled $28 million for 2010, $18 million for 2009 and $22 million for 2008.

PT Freeport Indonesia, and all businesses and residents of Indonesia, rely on the Government of Indonesia for the maintenance of public order, upholding the rule of law and the protection of personnel and property. The Grasberg minerals district has been designated by the Government of Indonesia as one of Indonesia’s vital national assets. This designation results in the police and to a lesser extent, the military, playing a significant role in protecting the area of our operations. The Government of Indonesia is responsible for employing police and military personnel and directing their operations.

From the outset of PT Freeport Indonesia’s operations, the government has looked to PT Freeport Indonesia to provide logistical and infrastructure support and assistance for these necessary services because of the limited resources of the Indonesian government and the remote location of and lack of development in Papua. PT Freeport Indonesia’s financial support for the Indonesian government security institutions assigned to the operations area represents a prudent response to its requirements to protect its workforce and property, better

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ensuring that personnel are properly fed and lodged, and have the logistical resources to patrol PT Freeport Indonesia’s roads and secure its operating area. In addition, the provision of such support is consistent with PT Freeport Indonesia’s obligations under the COW, reflects our philosophy of responsible corporate citizenship, and is in keeping with our commitment to pursue practices that will promote human rights.

PT Freeport Indonesia’s share of support costs for the government-provided security was $14 million for 2010, $10 million for 2009 and $8 million for 2008. This supplemental support consists of various infrastructure and other costs, such as food, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police.

Africa. TFM has committed to assist the communities living within its concession in the Katanga province of the DRC. Initiatives that have commenced over the past three years include a malaria control program, construction and operational support for six elementary schools, installation of over 40 clean water wells throughout the concession as well as five villages outside the concession, a public sanitation (latrines and hand washing) program reaching over 2,000 households, a mobile clinic for rural villages, and economic development programs supporting local entrepreneurs, farmers and women’s income generation, and literacy groups. We have also made significant investments in infrastructure in the region that will have lasting benefits to the country, including upgrading a national road and the regional power generation and transmission systems.

TFM has also committed to contribute 0.3 percent of net sales revenue from production to a community development fund to assist the local communities with development of local infrastructure and related services. This fund will be a platform to work jointly with the local government and community to further assist them to fulfill their local development plans, meet basic community needs and promote good governance. Community development fund contributions totaled approximately $3 million in 2010 and $1 million in 2009.

Security Matters. TFM also engages government security to assist with security matters at its concession area. Unarmed security personnel (including administration and guard forces) along with government security provide security for the mine site. TFM provides food, housing, monetary allowances and logistical support as well as direct payments to the government for the provision of the security assigned to the concession area. The total cost to TFM for this support, including in-kind support, totaled less than $1 million for the years 2010 and 2009.

TFM also participates in monthly security coordination meetings with host country security personnel, other mining companies, and representatives from the United Nations to discuss security issues and concerns.

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ORE RESERVES

Recoverable proven and probable reserves summarized below and detailed on the following pages have been calculated as of December 31, 2010, in accordance with Industry Guide 7 as required by the Securities Exchange Act of 1934. Proven and probable reserves may not be comparable to similar information regarding mineral reserves disclosed in accordance with the guidance of other countries. Proven and probable reserves were determined by the use of mapping, drilling, sampling, assaying and evaluation methods generally applied in the mining industry, as more fully discussed below. The term “reserve,” as used in the reserve data presented here, means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term “proven reserves” means reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (2) grade and/or quality are computed from the results of detailed sampling; and (3) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established. The term “probable reserves” means reserves for which quantity and grade are computed from information similar to that used for proven reserves but the sites for sampling are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

Our reserve estimates are based on the latest available geological and geotechnical studies. We conduct ongoing studies of our ore bodies to optimize economic values and to manage risk. We revise our mine plans and estimates of recoverable proven and probable mineral reserves as required in accordance with the latest available studies. Our estimates of recoverable proven and probable reserves are prepared by and are the responsibility of our employees; a majority of these estimates are reviewed and verified by independent experts in mining, geology and reserve determination.

Estimated recoverable proven and probable reserves at December 31, 2010, were determined using long-term average prices of $2.00 per pound for copper, $750 per ounce for gold, $10.00 per pound for molybdenum, $15.00 per ounce for silver and $10.00 per pound for cobalt. For the three year period ended December 31, 2010, LME spot copper prices averaged $2.97 per pound, London gold prices averaged $1,023 per ounce, and the weekly average price of molybdenum quoted by Metals Week averaged $18.76 per pound. The recoverable proven and probable reserves presented in the table below represent the estimated metal quantities from which we expect to be paid after application of estimated metallurgical recovery rates and smelter recovery rates, where applicable. Recoverable reserves are the part of a mineral deposit that we estimate can be economically and legally extracted or produced at the time of the reserve determination.

	Recoverable Proven and Probable Reserves at December 31, 2010
	Coppera	Gold	Molybdenum	Silver	Cobalt
	(billion pounds)	(million ounces)	(billion pounds)	(million ounces)	(billion pounds)
North America	42.2	0.4	2.75	94.6	-
South America	37.5	1.4	0.64	107.5	-
Indonesia	32.7	33.7	-	122.9	-
Africa	8.1	-	-	-	0.75
Consolidated basisb	120.5	35.5	3.39	325.0	0.75

Net equity interestc	98.0	32.0	3.10	270.0	0.43

a.	Recoverable copper reserves include 2.6 billion pounds in leach stockpiles and 1.3 billion pounds in mill stockpiles (refer to “Mill and Leach Stockpiles” for further discussion).

b.	Consolidated basis reserves represent estimated metal quantities after reduction for joint venture partner interests at the Morenci mine in North America and at the Grasberg minerals district in Indonesia.

c.	Net equity interest reserves represent estimated consolidated basis metal quantities further reduced for noncontrolling interest ownership.

Table of Contents

Recoverable Proven and Probable Reserves
Estimated at December 31, 2010

		Proven Reserves							Probable Reserves
			Average Ore Grade							Average Ore Grade
	Processing	Million	Copper	Gold		Moly	Silver	Cobalt	Million	Copper	Gold		Moly	Silver	Cobalt
	Method	metric tons	%	g/t		%	g/t	%	metric tons	%	g/t		%	g/t	%
North America
Morenci	Mill	485	0.46	-		0.024	-	-	6	0.47	-		0.024	-	-
	Crushed leach	658	0.58	-		-	-	-	6	0.49	-		-	-	-
	ROM leach	3,477	0.18	-		-	-	-	124	0.16	-		-	-	-
Bagdad	Mill	978	0.37	-	b	0.022	1.75	-	176	0.36	-	b	0.029	1.70	-
	ROM leach	122	0.14	-		-	-	-	778	0.12	-		-	-	-
Safford	Crushed leach	132	0.44	-		-	-	-	82	0.44	-		-	-	-
Sierrita	Mill	2,385	0.24	-	b	0.026	1.43	-	359	0.22	-	b	0.021	1.97	-
	ROM leach	11	0.18	-		-	-	-	6	0.17	-		-	-	-
Tyrone	ROM leach	163	0.29	-		-	-	-	20	0.19	-		-	-	-
Chino	Mill	112	0.58	0.04		0.010	0.52	-	69	0.56	0.04		0.006	0.50	-
	ROM leach	164	0.36	-		-	-	-	58	0.31	-		-	-	-
Miami	ROM leach	66	0.45	-		-	-	-	13	0.36	-		-	-	-
Henderson	Mill	126	-	-		0.177	-	-	3	-	-		0.186	-	-
Climaxa	Mill	75	-	-		0.189	-	-	112	-	-		0.137	-	-
Cobrea	ROM leach	71	0.40	-		-	-	-	2	0.23	-		-	-	-
		9,025	0.27	-	b	0.015	0.58	-	1,814	0.20	-	b	0.016	0.57	-

South America
Cerro Verde	Mill	904	0.42	-		0.017	1.82	-	2,424	0.39	-		0.015	1.21	-
	Crushed leach	102	0.52	-		-	-	-	65	0.45	-		-	-	-
	ROM leach	43	0.25	-		-	-	-	33	0.23	-		-	-	-
El Abra	Crushed leach	427	0.56	-		-	-	-	141	0.49	-		-	-	-
	ROM leach	223	0.31	-		-	-	-	149	0.29	-		-	-	-
Candelaria	Mill	417	0.54	0.11		-	1.94	-	31	0.56	0.13		-	2.18	-
Ojos del Salado	Mill	4	1.12	0.28		-	3.65	-	2	1.10	0.28		-	3.40	-
		2,120	0.46	0.02		0.007	1.16	-	2,845	0.39	-	b	0.013	1.06	-

Indonesia
Grasberg open pit	Mill	207	0.90	1.05		-	2.30	-	131	0.75	0.74		-	1.98	-
Deep Ore Zone	Mill	73	0.57	0.66		-	2.56	-	159	0.56	0.67		-	2.42	-
Big Gossan	Mill	12	2.64	1.20		-	17.30	-	44	2.25	1.08		-	14.35	-
Grasberg Block Cavea	Mill	317	1.20	1.08		-	3.49	-	699	0.91	0.63		-	3.21	-
Kucing Liara	Mill	154	1.30	1.14		-	7.84	-	269	1.20	1.07		-	6.58	-
Deep Mill Level Zonea	Mill	62	0.95	0.76		-	4.70	-	448	0.83	0.71		-	4.13	-
		825	1.09	1.03		-	4.22	-	1,750	0.93	0.74		-	4.08	-

Africa
Tenke Fungurume	Agitation leach	59	3.10	-		-	-	0.348	78	2.84	-		-	-	0.262

Total		12,029	0.38	0.08		0.012	0.93	0.002	6,487	0.51	0.20		0.010	1.72	0.003

a. Undeveloped reserves requiring significant capital investment to bring into production.
b. Grade not shown because of rounding.

The reserve table above and the tables on the following pages utilize the abbreviations described below:

·	g/t – grams per metric ton

·	Moly – Molybdenum

·	ROM – Run of Mine

Table of Contents




Recoverable Proven and Probable Reserves
Estimated at December 31, 2010
(continued)

			Average Ore Grade						Recoveriesa
		Proven and
		Probable
	Processing	Million	Copper	Gold		Moly	Silver	Cobalt	Copper	Gold	Moly	Silver	Cobalt
	Method	metric tons	%	g/t		%	g/t	%	%	%	%	%	%
North America
Morenci	Mill	491	0.46	-		0.024	-	-	79.3	-	38.4	-	-
	Crushed leach	664	0.58	-		-	-	-	77.9	-	-	-	-
	ROM leach	3,601	0.18	-		-	-	-	42.1	-	-	-	-
Bagdad	Mill	1,154	0.37	-	b	0.023	1.74	-	84.7	59.1	69.3	49.3	-
	ROM leach	900	0.12	-		-	-	-	25.0	-	-	-	-
Safford	Crushed leach	214	0.44	-		-	-	-	70.2	-	-	-	-
Sierrita	Mill	2,744	0.24	-	b	0.025	1.50	-	83.1	55.1	80.7	46.3	-
	ROM leach	17	0.17	-		-	-	-	54.5	-	-	-	-
Tyrone	ROM leach	183	0.28	-		-	-	-	61.1	-	-	-	-
Chino	Mill	181	0.57	0.04		0.008	0.51	-	82.5	58.1	38.6	39.0	-
	ROM leach	222	0.35	-		-	-	-	42.0	-	-	-	-
Miami	ROM leach	79	0.44	-		-	-	-	66.4	-	-	-	-
Henderson	Mill	129	-	-		0.177	-	-	-	-	85.4	-	-
Climax	Mill	187	-	-		0.158	-	-	-	-	88.7	-	-
Cobre	ROM leach	73	0.39	-		-	-	-	50.7	-	-	-	-
		10,839

South America
Cerro Verde	Mill	3,328	0.40	-		0.016	1.38	-	86.0	-	54.4	54.9	-
	Crushed leach	167	0.49	-		-	-	-	79.9	-	-	-	-
	ROM leach	76	0.24	-		-	-	-	42.2	-	-	-	-
El Abra	Crushed leach	568	0.54	-		-	-	-	54.7	-	-	-	-
	ROM leach	372	0.30	-		-	-	-	24.8	-	-	-	-
Candelaria	Mill	448	0.54	0.12		-	1.95	-	88.6	71.9	-	76.3	-
Ojos del Salado	Mill	6	1.11	0.28		-	3.57	-	89.7	60.2	-	66.6	-
		4,965

Indonesia
Grasberg open pit	Mill	338	0.84	0.93		-	2.18	-	82.4	79.9	-	42.7	-
Deep Ore Zone	Mill	232	0.56	0.66		-	2.46	-	84.7	76.4	-	59.2	-
Big Gossan	Mill	56	2.34	1.11		-	14.99	-	91.6	66.7	-	63.8
Grasberg Block Cave	Mill	1,016	1.00	0.77		-	3.30	-	85.2	67.0	-	60.1	-
Kucing Liar	Mill	423	1.24	1.10		-	7.04	-	85.8	46.8	-	39.3	-
Deep Mill Level Zone	Mill	510	0.84	0.71		-	4.20	-	86.8	77.8	-	63.8	-
		2,575

Africa
Tenke Fungurume	Agitation leach	137	2.95	-		-	-	0.298	89.1	-	-	-	75.3

Total		18,516