FCX Continues To Execute Strong Operating Performance 
 

PHOENIX, AZ - James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer of Freeport-McMoRan Copper & Gold Inc. (FCX) said, "Our second-quarter results reflect strong operating performance and favorable pricing for our products. FCX's global team continues to execute our operating plans in an impressive fashion, producing significant quantities of copper, gold and molybdenum to meet growing global demand. Our large resource position and successful exploration program provide significant opportunities for growth. We are advancing projects expeditiously to increase our production while generating attractive returns for shareholders. Our strong financial position and cash flow generation provide the financial resources required for investment as well as substantial cash returns for shareholders."

Second-quarter 2011 consolidated copper sales of 1.0 billion pounds were higher than the April 2011 estimate of 965 million pounds primarily because of the timing of shipments, principally in North America. Second-quarter 2011 consolidated copper sales were also higher than second-quarter 2010 sales of 914 million pounds reflecting increased production in North America and the timing of shipments in South America and Africa.

Second-quarter 2011 consolidated gold sales of 356 thousand ounces were slightly lower than the April 2011 estimate of 365 thousand ounces but higher than second-quarter 2010 sales of 298 thousand ounces. These variances primarily reflect timing of mine sequencing at Grasberg.

Second-quarter 2011 consolidated molybdenum sales of 21 million pounds were higher than the April 2011 estimate of 17 million pounds and second-quarter 2010 sales of 16 million pounds primarily reflecting improved demand.

Consolidated sales from mines for the year 2011 are expected to approximate 3.9 billion pounds of copper, 1.6 million ounces of gold and 77 million pounds of molybdenum, including 940 million pounds of copper, 415 thousand ounces of gold and 18 million pounds of molybdenum in third-quarter 2011.

Consolidated average unit net cash costs (net of by-product credits) of $0.93 per pound of copper in second-quarter 2011 were lower than unit net cash costs of $0.97 per pound in second-quarter 2010 primarily because of higher gold and molybdenum credits in second-quarter 2011, partly offset by higher site production and delivery costs as a result of increased mining and milling activities and higher input costs, including materials, energy and currency exchange rate impacts.

Assuming average prices of $1,500 per ounce of gold and $15 per pound of molybdenum for the second half of 2011 and achievement of current 2011 sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for FCX's copper mining operations are expected to average approximately $1.01 per pound of copper for the year 2011. The impact of price changes on consolidated unit net cash costs would approximate $0.01 per pound for each $50 per ounce change in the average price of gold during the second half of 2011 and $0.01 per pound for each $2 per pound change in the average price of molybdenum during the second half of 2011. Quarterly unit net cash costs vary with fluctuations in sales volumes.

FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. All of the North America mining operations are wholly owned, except for Morenci. FCX records its 85 percent joint venture interest in Morenci using the proportionate consolidation method. In addition to copper, the Morenci, Bagdad and Sierrita mines also produce molybdenum concentrates.

At Morenci, FCX completed its project to ramp up mining rates to 635,000 metric tons of ore per day and milling rates to approximately 50,000 metric tons per day, resulting in an increase of 125 million pounds of copper per year.

FCX is advancing a feasibility study to expand mining and milling capacity at Morenci to process additional sulfide ores identified through positive exploratory drilling over the last few years. This project, which would require significant investment, would increase milling rates to approximately 115,000 metric tons of ore per day and target incremental annual copper production of approximately 225 million pounds within three years, following completion of the feasibility study, expected by year-end 2011.

The ramp up of mining activities at the Miami mine continues. FCX expects production at Miami to ramp up to approximately 100 million pounds of copper per year by 2012.

During second-quarter 2011, FCX successfully restarted mining and milling activities at the Chino mine. 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. Costs for the project associated with equipment and mill refurbishment are expected to approximate $150 million.

Consolidated copper sales volumes from North America of 331 million pounds in second-quarter 2011 were higher than second-quarter 2010 sales of 289 million pounds primarily reflecting higher production at the Morenci and Miami mines.

FCX expects sales from the North America copper mines to approximate 1.2 billion pounds of copper for the year 2011, compared with 1.1 billion pounds of copper in 2010. The restart of the Miami and Chino mines and potential expansion of the Morenci mine are expected to further increase production in future periods.

As anticipated, average unit net cash costs (net of by-product credits) for the North America copper mines of $1.36 per pound of copper in second-quarter 2011 were higher than unit net cash costs of $1.17 per pound in second-quarter 2010, primarily reflecting increased mining and milling activities and higher input costs. Higher molybdenum credits partly offset the increased site production and delivery costs.

FCX estimates that average unit net cash costs (net of by-product credits) for the North America copper mines would approximate $1.42 per pound of copper for the year 2011, based on current sales volume and cost estimates and assuming an average molybdenum price of $15 per pound for the second half of 2011. North America's average unit net cash costs for 2011 would change by approximately $0.025 per pound for each $2 per pound change in the average price of molybdenum during the second half of 2011.

FCX operates four copper mines in South America - Cerro Verde in Peru and El Abra, Candelaria and Ojos del Salado in Chile. FCX owns a 53.56 percent interest in Cerro Verde, a 51 percent interest in El Abra, and 80 percent of the Candelaria and Ojos del Salado mining complexes. All operations in South America are consolidated in FCX's financial statements. South America mining includes open-pit and underground mining. In addition to copper, the Cerro Verde mine produces molybdenum concentrates, and the Candelaria and Ojos del Salado mines produce gold and silver.

During first-quarter 2011, FCX commenced production from El Abra's newly commissioned stacking and leaching facilities to transition from oxide to sulfide ores. Production from the sulfide ore, which is projected to reach design levels in the second half of 2011, is expected to approximate 300 million pounds of copper per year, replacing the currently depleting oxide copper production. The aggregate capital investment for this project is expected to total $725 million through 2015, including $565 million for the initial phase of the project expected to be completed in 2011.

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

At Cerro Verde, the feasibility study for a large-scale concentrator expansion was completed in second-quarter 2011. The $3.5 billion project would expand the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day and provide incremental annual production of approximately 600 million pounds of copper beginning in 2016. FCX expects to file an environmental impact assessment in the second half of 2011.

Copper sales from South America mining of 331 million pounds in second-quarter 2011 were higher than second-quarter 2010 sales of 311 million pounds primarily reflecting higher ore grades at Candelaria and timing of shipments at Cerro Verde, partly offset by lower mining rates at El Abra as it transitions from oxide to sulfide ores.

FCX expects South America's sales to approximate of 1.3 billion pounds of copper and 100 thousand ounces of gold for the year 2011, similar to 2010 sales of 1.3 billion pounds of copper and 93 thousand ounces of gold.

Average unit net cash costs (net of by-product credits) for South America of $1.08 per pound of copper in second-quarter 2011 were lower than unit net cash costs of $1.14 per pound in second-quarter 2010 primarily reflecting higher molybdenum, gold and silver credits, partly offset by higher treatment charges and higher site production and delivery costs, including materials, energy and currency exchange rate impacts.

FCX estimates that average unit net cash costs (net of by-product credits) for South America mining would approximate $1.21 per pound of copper for the year 2011, based on current sales volume and cost estimates and assuming average prices of $15 per pound of molybdenum and $1,500 per ounce of gold during the second half of 2011.

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

FCX has several projects in process in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016.

The Deep Ore Zone (DOZ) mine, one of the world's largest underground mines, has been expanded to a capacity of 80,000 metric tons of ore per day; and a feasibility study for the Deep Mill Level Zone (DMLZ) has been completed. The high-grade Big Gossan mine, which began producing in fourth-quarter 2010, is expected to reach full rates of 7,000 metric tons of ore per day by the end of 2012. Substantial progress has been made in developing infrastructure and underground workings that will enable access to the underground ore bodies. Development of the terminal infrastructure and mine access for the Grasberg Block Cave and DMLZ ore bodies is in progress. Over the next five years, estimated aggregate capital spending is expected to average approximately $635 million ($500 million net to PT-FI) per year on underground development activities.

At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold. Copper sales from Indonesia of 265 million pounds in second-quarter 2011 were slightly above second-quarter 2010 sales of 259 million pounds. Gold sales of 330 thousand ounces in second-quarter 2011 were higher than second-quarter 2010 sales of 276 thousand ounces.

During July 2011, PT-FI union workers commenced an eight-day labor strike, which led to a temporary suspension of mining, milling and concentrate shipments. On July 11, 2011, PT-FI reached an agreement with the union to end the strike and operations have resumed. PT-FI estimates the aggregate impact on 2011 production to approximate 35 million pounds of copper and 60 thousand ounces of gold. PT-FI has commenced negotiations with the union for its bi-annual renewal of the collective labor agreement, which is scheduled for renewal in October 2011.

FCX expects sales from Indonesia to approximate 1.0 billion pounds of copper and 1.45 million ounces of gold for the year 2011, compared with 1.2 billion pounds of copper and 1.8 million ounces of gold for the year 2010.

Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on volumes of copper and gold sold during the period. Unit net cash costs (net of gold and silver credits) for Indonesia of $0.22 per pound of copper in second-quarter 2011 were lower than unit net cash costs of $0.58 per pound in second-quarter 2010 as higher gold credits more than offset increases in site production and delivery costs.

FCX estimates Indonesia's average unit net cash costs (net of gold and silver credits) would approximate $0.28 per pound of copper for the year 2011, based on current sales volume and cost estimates and assuming an average gold price of $1,500 per ounce during the second half 2011. Indonesia's unit net cash costs for 2011 would change by approximately $0.04 per pound for each $50 per ounce change in the average price of gold during the second half of 2011.

Africa Mining. FCX currently holds an effective 57.75 percent interest in the Tenke Fungurume (Tenke) copper and cobalt mining concessions in the Katanga province of the Democratic Republic of Congo (DRC), which is consolidated in FCX's financial statements. FCX's interest in Tenke will be reduced to 56 percent after receiving the required government approval of the modifications to Tenke Fungurume Mining's bylaws that reflect the agreement with the DRC government. In addition to copper, the Tenke mine produces cobalt hydroxide.

Operating and Development Activities. The milling facilities at Tenke, which were designed to produce at a capacity rate of 8,000 metric tons of ore per day, have performed above capacity, with throughput averaging 9,700 metric tons of ore per day in second-quarter 2011 and 10,200 metric tons of ore per day for the first six months of 2011. Mining rates have been increased to enable additional copper production from the initial project capacity of 250 million pounds per year to approximately 290 million pounds per year.

FCX is planning a second phase of the project, which would include optimizing the current plant and increasing capacity. As part of the second phase, FCX is completing studies to expand the mill rate to 14,000 metric tons of ore per day and to construct related processing facilities that would target the addition of approximately 150 million pounds of copper per year in an approximate two-year timeframe. FCX expects production volumes from the project to expand significantly over time.

FCX continues to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective minerals district at Tenke. These analyses are being incorporated in future plans to evaluate opportunities for expansion.

Copper sales from Africa of 75 million pounds in second-quarter 2011 were higher than second-quarter 2010 copper sales of 55 million pounds, primarily reflecting the timing of shipments.

FCX expects Africa's sales to approximate 275 million pounds of copper and over 20 million pounds of cobalt for the year 2011, compared with 262 million pounds of copper and 20 million pounds of cobalt for the year 2010.

Unit net cash costs (net of cobalt credits) for Africa of $0.94 per pound of copper were higher than unit net cash costs of $0.79 per pound in second-quarter 2010, primarily reflecting increased mining and milling activity and higher input costs. Higher cobalt credits partly offset the increased production and delivery costs.

FCX estimates Africa's average unit net cash costs would approximate $0.97 per pound of copper for the year 2011, based on current sales volume and cost estimates and assuming an average cobalt price of $14 per pound for the second half of 2011. Africa's unit net cash costs for 2011 would change by approximately $0.05 per pound for each $2 per pound change in the average price of cobalt during the second half of 2011.

Molybdenum. FCX is the world's largest producer of molybdenum. FCX conducts molybdenum mining operations at its wholly owned Henderson underground mine in Colorado, is developing the Climax molybdenum mine and sells molybdenum produced from its North and South America copper mines. Construction activities at the Climax molybdenum mine are approximately 75 percent complete. Construction is expected to be complete in early 2012, and FCX plans to commence production during 2012. Production from the Climax molybdenum mine is expected to ramp up to a rate of 20 million pounds per year during 2013 and, depending on market conditions, may be increased to 30 million pounds per year. FCX intends to operate its Climax and Henderson molybdenum mines in a flexible manner to meet market requirements. FCX believes that Climax is one of the most attractive primary molybdenum development projects in the world, with large-scale production capacity, attractive cash costs and future growth options. Estimated remaining costs for the initial phase of the project approximate $250 million. Consolidated molybdenum sales of 21 million pounds were higher than the April 2011 estimate of 17 million pounds and second-quarter 2010 sales of 16 million pounds primarily reflecting improved demand. For the year 2011, FCX expects molybdenum sales to approximate 77 million pounds (including production of approximately 45 million pounds from the North and South America copper mines), compared with 67 million pounds in 2010 (including production of 32 million pounds from the North and South America copper mines). Unit net cash costs at the Henderson mine of $6.21 per pound of molybdenum in second-quarter 2011 were higher than unit net cash costs of $5.73 per pound in second-quarter 2010, primarily reflecting higher input costs, including labor and materials. Based on current sales volume and cost estimates, FCX expects average unit net cash costs for the Henderson mine would approximate $7.00 per pound of molybdenum for the year 2011. The company's address is 333 N. Central Ave., Phoenix, AZ 85004, 602.366.8100, email:fcx_communications@fmi.com.