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, 1999
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 1-9916
Freeport-McMoRan Copper & Gold Inc.
(Exact name of registrant as specified in its charter)
Delaware 74-2480931
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1615 Poydras Street
New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 582-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Class A Common Stock par value $0.10 per share New York Stock Exchange
Class B Common Stock par value $0.10 per share New York Stock Exchange
Depositary Shares representing 0.05 shares of
Step-Up Convertible Preferred Stock,
par value $0.10 per share New York Stock Exchange
Depositary Shares representing 0.05 shares of
Gold-Denominated Preferred Stock,
par value $0.10 per share New York Stock Exchange
Depositary Shares, Series II, representing
0.05 shares of Gold-Denominated Preferred
Stock, Series II, par value $0.10 per share New York Stock Exchange
Depositary Shares representing 0.021875 shares of
Silver-Denominated Preferred Stock,
par value $0.10 per share New York Stock Exchange
9-3/4% Senior Notes due 2001 of
P.T. ALatieF Freeport Finance
Company B.V., guaranteed by the registrant New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K 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. X
The aggregate market value of classes of common stock held
by non-affiliates of the registrant on March 13, 2000 was
approximately $1,689,000,000.
On March 13, 2000, there were issued and outstanding
62,300,723 shares of Class A Common Stock and 97,701,174 shares
of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Annual Report for the year ended December
31, 1999 are incorporated by reference into Parts II and IV of
this report and portions of the Proxy Statement for our 2000
Annual Meeting to be held on May 4, 2000 are incorporated by
reference into Part III of this report.
TABLE OF CONTENTS
Page
Part I
Items 1. and 2. Business and Properties 1
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Executive Officers of the Registrant 13
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 15
Items 7. and 7A. Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Quantitative and Qualitative Disclosures
About Market Risk 15
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
Part III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 16
Signatures S-1
Index to Financial Statements F-1
Report of Independent Public Accountants F-1
Exhibit Index E-1
i
PART I
Items 1. and 2. Business and Properties.
General
We are one of the world's largest copper and gold companies
in terms of reserves and production. We believe we are the
lowest cost copper producer in the world, after taking into
account customary credits for related gold and silver production.
Our principal operating subsidiary is PT Freeport Indonesia
Company, a limited liability company organized under the laws of
the Republic of Indonesia and domesticated in Delaware. PT
Freeport Indonesia explores for, develops, mines and processes
ore containing copper, gold and silver. Our operations are
located in the remote rugged highlands of the Sudirman Mountain
Range in the province of Irian Jaya (recently proposed to be
renamed Papua), Indonesia, which is located on the western half
of the island of New Guinea. PT Freeport Indonesia markets its
concentrates containing copper, gold and silver worldwide. We
have an 85.86 percent ownership interest in this subsidiary and
the Government of Indonesia has a 9.36 percent interest. P.T.
Nusamba Mineral Industri (Nusamba), an Indonesian company, has
most of the remaining ownership interest in PT Freeport
Indonesia. See the discussion under "Cautionary Statements"
about our guarantee of certain Nusamba debt.
PT Freeport Indonesia's operations are conducted pursuant
to an agreement, called a Contract of Work, with the Government
of Indonesia. The Contract of Work allows us to conduct extensive
exploration, mining and production activities in a 24,700-acre
area that we call Block A. In 1988 we discovered our largest
mine, Grasberg, in Block A. Grasberg contains the largest single
gold reserve and one of the largest copper reserves of any mine
in the world. The Contract of Work also allows us to explore for
minerals in a 0.5 million-acre area that we call Block B. All of
our current reserves are located in Block A.
Another of our operating subsidiaries, P.T. Irja Eastern
Minerals, which we refer to as Eastern Minerals, holds an
additional Contract of Work in Irian Jaya (Papua) covering
approximately 1.25 million acres and is conducting exploration
activities under this Contract of Work. We have a 94.9 percent
ownership interest in Eastern Minerals.
In 1996, we established joint ventures with Rio Tinto plc,
an international mining company with headquarters in England.
One joint venture covers PT Freeport Indonesia's mining
operations in Block A. This joint venture gives Rio Tinto,
through 2021, a 40 percent interest in certain assets and in
production above specified levels from operations in Block A and,
after 2021, a 40 percent interest in all production in Block A.
Under our joint venture arrangements, Rio Tinto also has a 40
percent interest in future development and exploration projects
under PT Freeport Indonesia's Contract of Work and Eastern
Minerals' Contract of Work. In addition, Rio Tinto has the
option to participate in 40 percent of any of our other future
exploration projects in Irian Jaya (Papua).
Under another joint venture agreement through PT Nabire
Bakti Mining, we conduct exploration activities in an area
covering approximately 1.0 million acres in five parcels
contiguous to PT Freeport Indonesia's Block B and one of Eastern
Minerals' blocks. Rio Tinto has elected to participate in 40
percent of our interest and cost in the venture.
We also smelt and refine copper concentrates in Spain and
market the refined copper products, through our wholly owned
subsidiary, Atlantic Copper, S.A. In addition, PT Freeport
Indonesia has a 25 percent interest in P.T. Smelting, an
Indonesian company that operates a copper smelter and refinery in
Gresik, Indonesia.
Republic of Indonesia
The Republic of Indonesia consists of more than 17,000
islands stretching 3,000 miles along the equator from Malaysia to
Australia and is the fourth most populous nation in the world
with over 200 million people. Following many years of Dutch
colonial rule, Indonesia gained independence in 1945 and now has
a presidential republic system of government.
1
Maintaining a good working relationship with the Government
of Indonesia is of particular importance to us because all of our
mining operations are located in Indonesia. Our mining complex
was Indonesia's first copper mining project and was the first
major foreign investment in Indonesia following the economic
development program instituted by the Government of Indonesia in
1967. We work closely with the central, provincial and local
governments in development efforts in the area surrounding our
operations.
In May 1998, President Suharto, Indonesia's political
leader for more than 30 years, resigned in the wake of an
economic crisis in Indonesia and other parts of Southeast Asia
and in the face of growing social unrest. Vice President B.J.
Habibie succeeded Suharto. In June 1999, Indonesia held a new
parliamentary election on a generally peaceful basis as the first
step in the process of electing a new president. In October 1999,
in accordance with the Indonesian constitution, the country's
highest political body composed of the newly elected national
parliament along with additional provincial and other
representatives elected Abdurraham Wahid as president and
Megawati Sukarnoputri as vice president.
The selection of a new president in an election that was
widely regarded as free and fair was an important milestone in
restoring political and economic stability, but Indonesia
continues to face political and economic uncertainties, including
separatist movements and civil and religious strife in a number
of provinces. Religious and ethnic differences among people in
the outlying provinces has led to violence in some areas over the
past two years, most notably in the province of East Timor
following a pro-independence vote. Subsequent United Nations
peacekeeping efforts have restored order in East Timor. Pro-
independence movements in certain areas also have become more
prominent, especially in the province of Aceh, and to a lessor
extent in Irian Jaya (Papua). The area surrounding our mining
development is sparsely populated by local tribespeople and
former residents of more populous areas of Indonesia, some of
whom have resettled in Irian Jaya (Papua) under the Government of
Indonesia's transmigration program. A segment of the local
population is opposing Indonesian rule over Irian Jaya (Papua),
and several separatist groups have sought political independence
for the province. The degree of political and economic autonomy
that might be provided to individual provinces, including Irian
Jaya (Papua), is a current issue in Indonesian politics. In
Irian Jaya (Papua), there have been sporadic attacks on civilians
by separatists and sporadic but highly publicized conflicts
between separatists and the Indonesian military. We have a
board-approved policy statement on social and human rights, and
have comprehensive and extensive social, cultural and community
development programs, to which we have committed significant
financial and managerial resources. These policies and programs
are designed to address the impact of our operations on the local
villages and tribes and to provide assistance for the development
of the local people. While we believe these efforts should serve
to avoid damage to and disruptions of our mining operations, our
operations could be damaged or disrupted by social, economic and
political forces beyond our control.
Economic conditions in Indonesia improved during 1999,
reflecting international financial assistance, positive reactions
to political developments, movements to reform financial systems,
a stronger Indonesian currency and lower interest and inflation
rates. The economy is expected to generate positive economic
growth in 2000 following a large decline in 1998.
Contracts of Work
PT Freeport Indonesia and Eastern Minerals conduct their
current exploration operations and PT Freeport Indonesia conducts
its mining operations in Indonesia by virtue of their Contracts
of Work. Both Contracts of Work govern our rights and
obligations relating to taxes, exchange controls, royalties,
repatriation and other matters. Both Contracts of Work were
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. Any disputes regarding the provisions of the
Contracts of Work are subject to international arbitration.
PT Freeport Indonesia's Contract of Work covers both Block
A, which was first included in a 1967 Contract of Work that was
replaced by a new Contract of Work in 1991, and Block B, to which
we gained rights in 1991. The initial term of our Contract of
Work expires in December 2021 but we can extend it for two 10-
year periods under certain conditions. We originally had the
rights to explore 6.5 million acres in Block B, but pursuant to
the Contract of Work we have only retained the rights to 0.5
million acres in Block B, which we believe contain the most
promising exploration opportunities following extensive
geological assessment.
2
Eastern Minerals signed its Contract of Work in August
1994. The Contract of Work originally covered approximately 2.5
million acres. The Eastern Minerals Contract of Work provides
for a four-to-seven year exploratory term and a 30-year term for
mining operations, which we can extend for two 10-year periods
under certain conditions. Like the PT Freeport Indonesia
contract, the Eastern Minerals Contract of Work requires us to
relinquish our right to 25 percent of the original 2.5 million-
acre Contract of Work area at the end of each of three specified
periods. As of December 31, 1999, we had relinquished
approximately 1.25 million acres, and we must relinquish an
approximate 0.6 million additional acres by August 2001.
PT Freeport Indonesia pays a copper royalty under its
Contact of Work that varies from 1.5 percent of copper net
revenue at a copper price of $0.90 or lesss per pound to 3.5
percent at a copper price of $1.10 or more per pound. The
Contract of Work royalty rate for gold and silver sales is 1.0
percent. Because a large part of the mineral royalties under
Government of Indonesia regulations are due to the provinces from
which the minerals are extracted, in connection with our "fourth
concentrator mill expansion," PT Freeport Indonesia agreed to pay
the Government of Indonesia voluntary additional royalties to
provide further support to the local governments and the people
of Irian Jaya (Papua). The additional royalties are paid on
metal from production above 200,000 metric tons of ore per day.
The additional royalty for copper equals the Contract of Work
royalty rate and for gold and silver equals twice the Contract of
Work royalty rates. Therefore, our royalty rate on copper net
revenues from production above 200,000 metric tons of ore per day
is double the Contract of Work royalty rate, and our royalty
rates on gold and silver sales from production above 200,000
metric tons of ore per day are triple the Contract of Work
royalty rates.
The additional royalties became effective January 1, 1999.
The combined royalties totaled $23.0 million in 1999, $16.2
million in 1998 and $31.4 million in 1997.
Ore Reserves
All of our proved and probable reserves lie within Block A.
Our joint venture with Rio Tinto gives them a 40 percent
interest in production above specified levels from operations in
Block A and, after 2021, a 40 percent interest in all production
from Block A. Net of Rio Tinto's share, PT Freeport Indonesia's
share of proved and probable recoverable copper, gold and silver
reserves was 38.7 billion pounds of copper, 49.5 million ounces
of gold and 115.3 million ounces of silver as of December 31,
1999. We estimated recoverable reserves using a copper price of
$0.90 per pound and a gold price of $325 per ounce. Using prices
of $0.75 per pound of copper and $280 per ounce of gold would
reduce estimated recoverable reserves by approximately 9 percent
for copper, 7 percent for gold and 9 percent for silver.
The Grasberg deposit contains the largest single gold
reserve and is one of the largest copper reserves of any mine in
the world. Aggregate Grasberg open pit and underground proved and
probable ore reserves as of December 31, 1999 are shown below
along with those of our other deposits.
Average Ore Grade per Ton Recoverable Reserves
Metric tons --------------------- -----------------------------
of ore Copper Gold Silver Copper Gold Silver
----------- ------ ------- ------- --------- --------- ---------
(%) (Ounce) (Ounce) (Billions (Millions (Millions
of Lbs.) of Ozs.) of Ozs.)
Grasberg 1,800,500,000 1.04 .033 .098 34.5 45.9 89.7
Kucing Liar 320,457,000 1.41 .045 .170 8.2 10.3 25.5
Deep Ore Zone 185,250,000 1.16 .027 .168 4.1 4.0 16.4
Big Gossan 37,349,000 2.69 .033 .528 1.8 0.9 9.9
DOM 30,892,000 1.67 .014 .310 0.9 0.3 4.7
Intermediate
Ore Zone 20,727,000 1.05 .013 .245 0.4 0.2 2.6
------------- ---- ---- ---- ---- ---- -----
Total 2,395,175,000 1.13 .034 .124 49.9 61.6 148.8
Independent Mining Consultants, Inc., experts in mining,
geology and reserve determination, has verified our reserve
information as of December 31, 1998 and 1999, which is included
elsewhere in this report. See "Cautionary Statements."
3
Mining Operations
Mines in Production. We currently have two mines in
operation: the Grasberg and the Intermediate Ore Zone. We began
open-pit mining of the Grasberg ore body in January 1990 and
increased mine output to 75.8 million metric tons of ore in 1999,
which provided 92 percent of our mill feed. The underground
Grasberg reserves will be mined once open-pit mining is completed
in approximately 2014. The Intermediate Ore Zone is an
underground block cave operation that began production in the
first half of 1994. Production is at the 3,475 meter elevation
level and totaled 6.5 million metric tons of ore in 1999.
Mines in Development. Four other significant ore bodies,
referred to as the Deep Ore Zone, the DOM, Big Gossan and Kucing
Liar are located in Block A. These ore bodies are at various
stages of development, and are included in our proved and
probable reserves. See "Cautionary Statements."
The Deep Ore Zone ore body lies vertically below the
Intermediate Ore Zone. We began production from the Deep Ore Zone
ore body in 1989 but we suspended production in 1991 in favor of
production from the Grasberg deposit. We anticipate restarting
Deep Ore Zone production in mid-2000 as the overlying
Intermediate Ore Zone reserve declines toward depletion. The
Deep Ore Zone will ramp up to a full production rate of 25,000
metric tons of ore per day by 2004.
The DOM ore body lies approximately 1,500 meters southeast
of the depleted Ertsberg open-pit deposit. We completed pre-
production development at the DOM including all maintenance,
warehouse and service facilities just as Grasberg began open-pit
production in 1990. We have deferred production at the DOM ore
body until after completion of open-pit mining as a result of the
increasing reserves and production capabilities of the Grasberg
ore body.
The Big Gossan ore body is located approximately 1,000
meters southwest of the original Ertsberg open-pit deposit. We
began the initial underground development of the ore body in 1993
when we drove tunnels from the mill area into the ore zone at the
2,900 meter elevation level. We will use a variety of stoping
methods to mmiinne the deposit, with production expected to commence
within the next ten years as other underground mines are
depleted.
The Kucing Liar ore body lies on the southern flank of and
underneath the southern portion of the Grasberg open pit at the
2,500-2,900 meter elevation level. Recent drilling to the west
indicates that we may be reaching the end of the mineralization
in that direction, but additional reserves are possible,
especially toward the Grasberg deposit. We are reviewing
development plans for Kucing Liar as we continue drilling to
define the ore body.
Exploration
We continue drilling in Block A to better define the ore
bodies continues at Kucing Liar (as discussed above), Grasberg
Underground and the Deep Ore Zone. Drilling from the Amole drift
is designed to delineate the Grasberg Underground deposit below
our current block cave reserves. The extent of the copper and
gold mineralization is decreasing in size at the lower
elevations. Drilling in 1999 and 2000 is designed to fully
define the ultimate geometry of the mineralized zone, which
extends for over 1,500 meters vertically from the original ore
intercepts at the 4,200 meter elevation. Drilling at the Deep
Ore Zone continues to return positive results, indicating the
potential for reserve increases. Other targets yet to be
evaluated in Block A include the DOM Deep, fault systems parallel
to the Kucing Liar/Idenberg #1 fault system and other intrusive
centers and fault intersections.
Exploration activities continue in Block B, which includes
the Wabu Ridge gold prospect, as well as in the other Contract of
Work areas of Eastern Minerals and PT Nabire Bakti Mining
discussed below. Activities are primarily focused on prospects
that potentially could lead to the discovery of significant
copper and gold deposits. Presently, exploration including
drilling is ongoing at several sites. As a result of our joint
venture arrangements with Rio Tinto, they are paying for 40
percent of our exploration and drilling costs in Irian Jaya
(Papua).
In June 1998, we entered into an exploration joint venture
agreement to conduct exploration activities in PT Nabire Bakti
Mining's Contract of Work area covering approximately 1.0 million
acres in several blocks contiguous to PT Freeport Indonesia's
Block B and one of Eastern Minerals' blocks in Irian Jaya
(Papua). Rio Tinto is sharing in 40
4
percent of our interest and
costs in this exploration joint venture. To earn up to a 62
percent interest in the Contract of Work, we and Rio Tinto must
spend a total of up to $21 million on exploration and other
activities in the joint venture areas by June 2003 ($11.6 million
of which had been incurred through December 31, 1999).
Exploration including drilling is ongoing on a number of
identified geological anomalies within this acreage including
Komopa where we have encountered copper and gold mineralization
which may or may not be commercially recoverable.
Milling and Production
The ore from our mines moves by a conveyor system to a
series of ore passes through which it drops to our milling and
concentrating complex located approximately 2,900 meters above
sea level. At the mill, the ore is crushed and ground and mixed
in tanks with water and small amounts of flotation reagents where
it is continuously agitated with air. During this physical
separation process, copper-, gold- and silver-bearing particles
rise to the top of the tanks and are collected and thickened into
a concentrate. The concentrate leaves the mill complex as a
slurry, consisting of approximately 65 percent solids by weight,
and is pumped through three parallel 115 kilometer pipelines to
our coastal port site facility at Amamapare where it is filtered,
dried and stored for shipping. Ships are loaded at dock
facilities at the port until they draw their maximum water, then
move to deeper water, where loading is completed from shuttling
barges.
In early 1998, PT Freeport Indonesia completed construction
on the fourth concentrator mill expansion. Pursuant to the
expansion joint venture agreement, in addition to funding its 40
percent share of all expansion costs including the fourth
concentrator mill expansion, Rio Tinto provided a $450 million
nonrecourse loan to PT Freeport Indonesia for PT Freeport
Indonesia's share of the cost of the expansion. PT Freeport
Indonesia began sharing incremental cash flow attributable to the
expansion effective January 1, 1998 on the basis of 60 percent to
PT Freeport Indonesia and 40 percent to Rio Tinto. PT Freeport
Indonesia assigned its share of incremental cash flow to Rio
Tinto until PT Freeport Indonesia repays the amount loaned to it,
plus interest based on Rio Tinto's cost of borrowing. Through
December 31, 1999, PT Freeport Indonesia's share of incremental
cash flow totaled $471.8 million. PT Freeport Indonesia paid
$440.9 million to Rio Tinto in 1998 and 1999, and paid $30.9
million in 2000 through February. Operating, nonexpansion capital
and administrative costs are shared proportionately between
incremental revenues from production from the expansion and total
revenues from production from Block A, including production from
PT Freeport Indonesia's previously existing operations. PT
Freeport Indonesia will continue to receive 100 percent of the
cash flow from specified annual amounts of copper, gold and
silver production through 2021 and 60 percent of all remaining
cash flow.
Our production results for 1998 and 1999 follow:
Years Ended
December 31,
------------------- Percentage
1999 1998 Change
--------- -------- ----------
Mill throughput (metric tons
of ore per day) 220,700 196,400 12%
Copper production, net to
PT Freeport Indonesia (000 pounds) 1,428,100 1,427,300 *
Gold production, net to
PT Freeport Indonesia (ounces) 2,379,100 2,227,700 7%
Average net cash production costs
per pound of copper $0.09 $0.11 (18)%
* Less than 1 percent.
For more information regarding our operating and financial
results, see our Annual Report incorporated herein by reference
as part of "Item 6. Selected Financial Data" and "Items 7. and
7A. Management's Discussion and Analysis of Financial Condition
and Results of Operations and Quantitative and Qualitative
Disclosures About Market Risk."
Infrastructure Improvements
The location of our mining operations in a remote area
requires that our operations be virtually self-sufficient. In
addition to the mining facilities described above, in the course
of the development of our project we have constructed ourselves
or participated with others in the construction of an airport, a
port, a 119 kilometer road, an aerial tramway, a hospital and
related medical facilities, and two town sites with housing,
schools and other facilities sufficient to support more than
17,000 persons.
5
In 1996, we completed a significant infrastructure program,
which includes various residential, community and commercial
facilities. We designed the program to provide the
infrastructure needed for our operations, to enhance the living
conditions of our employees, and to develop and promote the
growth of local and other third party activities and enterprises
in Irian Jaya (Papua). We have developed the facilities through
joint ventures or direct ownership involving local Indonesian
interests and other investors.
In September 1998, PT Freeport Indonesia reacquired for $30
million an aggregate one-third interest in certain infrastructure
asset joint ventures owned by P.T. ALatieF Nusakarya Corporation,
an Indonesian investor. The joint ventures had purchased $270.0
million of infrastructure assets from PT Freeport Indonesia
during the period from December 1993 to March 1997 and PT
Freeport Indonesia had sold its one-third interest in the joint
ventures in March 1997. We are consolidating the joint ventures
for financial reporting purposes because the financing
arrangements provide the joint venture partners with a guaranteed
15 percent minimum annual return on their investment.
In December 1997, we sold the new power plant facilities
associated with the fourth concentrator mill expansion for $366.4
million to the joint venture that owns the power plants that
already provided electricity to us. The purchase price included
$123.2 million for Rio Tinto's share of the new power plant
facilities. Asset sales to the power joint venture totaled
$581.4 million through 1997, including $458.2 million of assets
we owned. We subsequently sold our 30 percent interest in the
joint venture to the other partners and we purchase power under
infrastructure asset financing arrangements pursuant to a power
sales agreement.
Marketing
PT Freeport Indonesia sells its copper concentrates, which
contain significant quantities of gold and silver, under United
States dollar-denominated sales agreements, mostly to companies
in Asia and Europe and to international trading companies. We
sell substantially all of our budgeted production of copper
concentrates under long-term contracts with the selling price
based on world metals prices (generally the London Metal Exchange
settlement prices for Grade A copper) less certain allowances.
Under these contracts, initial billing occurs at the time of
shipment and final settlement on the copper portion is generally
based on average prices for a specified future period. Gold
generally is sold at the London Bullion Market Association
average price for the month of shipment. Revenues from
concentrate sales are recorded net of royalties, treatment and
refining costs and the impact of derivative financial
instruments, if any, used to hedge against risks from copper and
gold price fluctuations. Treatment and refining costs represent
payments to smelters and refiners and are either fixed or in
certain cases vary with the price of copper. We sell some copper
concentrates in the spot market. See "Cautionary Statements."
We have commitments, including commitments from Atlantic
Copper and PT Smelting, for essentially all of our estimated 2000
production at market prices. We expect our share of sales for
2000 to approximate 1.4 billion pounds of copper and 1.9 million
ounces of gold. Projected 2000 copper and gold sales reflect the
expectation of higher average mill throughput rates than in 1999,
offset by lower average ore grades and the impact of the
specified sharing arrangement with Rio Tinto which will result in
a smaller proportion of production being attributed to PT
Freeport Indonesia. See "Cautionary Statements."
PT Freeport Indonesia has a long-term contract through 2004
to provide Atlantic Copper with approximately 60 percent of its
copper concentrate requirements at market prices. PT Freeport
Indonesia is providing 100 percent of PT Smelting's copper
concentrate requirements at market prices; however, for the first
15 years of operations the treatment and refining charges will
not fall below a specified minimum rate, currently $0.23 per
pound, which was the rate for 1999 and is expected to be the rate
for 2000. After PT Smelting's operations reach design capacity,
we anticipate that PT Freeport Indonesia will sell at least 50
percent of its annual concentrate production to Atlantic Copper
and PT Smelting.
Atlantic Copper, S.A.
Atlantic Copper's smelter has a design capacity of 290,000
metric tons of metal per year. During 1999, Atlantic Copper
treated 949,400 metric tons of concentrate and produced a record
293.5 metric tons of new copper
6
anodes. Atlantic Copper purchased
approximately 63 percent of its 1999 concentrate requirements
from PT Freeport Indonesia at market prices.
In December 1999, we made a $40.0 million equity
contribution to Atlantic Copper and we plan to make at least an
additional $10.0 million equity contribution in 2000. The funds
are intended to strengthen Atlantic Copper's financial structure
during this period of extremely low treatment and refining charge
rates, and to allow them to continue with their growth and
development strategy.
P.T. Smelting
PT Smelting successfully concluded its "first-stage
completion" testing during the third quarter of 1999 and
continues on schedule to operate at a full design capacity of
200,000 metric tons of copper per year in the second half of
2000. PT Smelting operated at an average rate of approximately 94
percent of design capacity during the fourth quarter of 1999, but
production rates are expected to fluctuate in the first half of
2000 during which time PT Smelting plans to tie-in a third anode
furnace. In 1999, its first full year of operations, PT Smelting
treated 436,000 metric tons of concentrate and produced 126.7
metric tons of new copper anodes. PT Smelting is a joint venture
among PT Freeport Indonesia, Mitsubishi Materials Corporation,
Mitsubishi Corporation and Nippon Mining & Metals Co., Ltd.,
which own 25 percent, 60.5 percent, 9.5 percent and 5 percent,
respectively, of the outstanding PT Smelting stock. PT Freeport
Indonesia agreed to assign, if necessary, its earnings in PT
Smelting to support a 13 percent cumulative annual return to the
other owners for the first 20 years of operations.
Competition
We compete with other mining companies in the sale of our
mineral concentrates and the recruitment and retention of
qualified personnel. Some competing companies possess financial
resources equal to or greater than ours. We believe, however,
that we are the lowest cost copper producer in the world, taking
into account customary credits for related gold and silver
production, which we believe gives us a significant competitive
advantage.
Social Development
We have a social and human rights policy to ensure that we
operate in compliance with the laws in the areas of our
operations, and in a manner that respects basic human rights and
the culture of the people who are indigenous to the area. We
continue to incur significant costs on social and cultural
activities, primarily in Irian Jaya (Papua). These activities
include comprehensive job training programs, basic education
programs, several public health programs, including extensive
malaria control, agricultural assistance programs, a business
incubator program to encourage the local people to establish
their own small scale businesses, cultural preservation programs
and charitable donations. In 1996, PT Freeport Indonesia agreed
to commit at least one percent of its revenues for the following
10 years to support village-based, "bottom-up" health, education,
and economic and social development programs in the area of our
mining operations through the Freeport Fund for Irian Jaya
Development. This commitment replaced our community development
programs in which we spent a similar amount of money each year.
We contributed $14.4 million in 1999, $13.5 million in 1998 and
$15.1 million in 1997 to the Freeport Fund for Irian Jaya
Development.
In 1996, the international consulting firm of LABAT-
Anderson performed a comprehensive independent audit of our
social programs in Irian Jaya (Papua). In 1997, the LABAT-
Anderson team submitted its final report to the Government of
Indonesia and us, which noted that we had gone beyond the usual
role and responsibilities of a private company in providing
assistance for the development of the local people. The report
also made a number of recommendations designed to make our
programs more effective, including restructuring our
participation in the Government of Indonesia's development plan
for the area to provide for more direct input by local people
through their leaders. At the end of 1998, discussions with
local and church leaders, government representatives and members
of interested non-governmental organizations successfully
culminated with the restructuring of the Freeport Fund for Irian
Jaya Development. The new umbrella structure is called the
Lembaga Pengembangan Masyarakat-Irian Jaya, or the People's
Development Foundation-Irian Jaya. The foundation's board of
directors is made up of the head of the local government,
currently a Kamoro, a leader of the Amungme tribespeople, a
leader of the Kamoro tribespeople, leaders of the three local
churches and a representative of PT Freeport Indonesia. The
board of directors makes grants from the Freeport Fund for Irian
Jaya Development and oversees implementation of local
developmental programs through an
7
implementation board, which is headed by an Amungme leader and
is composed of representatives of all local indigenous groups.
The foundation's board of directors has approved a
1999/2000 operational plan and has selected a number of yayasans,
or foundations, to implement funded projects. The operational
plan provides some type of assistance for all 71 villages in the
area of our operations, with the greatest support going to the 29
villages defined by the Amungme and Kamoro as most affected. The
team that accomplished the restructuring took care to socialize
and communicate the results in all affected villages before
implementing any new programs or projects. The foundation's
first major project was the construction of a full-service
hospital in Timika. The hospital was constructed using funds
provided by the Freeport Fund for Irian Jaya Development and is
owned by the foundation, representing the people. The 75-bed
hospital opened in stages beginning in June 1999, and is
considered the premier medical facility in eastern Indonesia and
one of the finest in the country. Emergency cases are still
referred to PT Freeport Indonesia's Tembagapura hospital.
We believe that our social and economic development
programs are responsive to the issues raised by the local
villages and tribes and should help us to avoid disruptions of
mining operations. Nevertheless, social and political
instability in the area may adversely impact our mining
operations.
Environmental Matters
We have an environmental policy that commits us not only to
compliance with applicable federal, state and local environmental
statutes and regulations, but also to continuous improvement of
our environmental performance at every operational site. We
believe that we conduct our Indonesian operations pursuant to all
necessary permits and are in compliance in all material respects
with applicable Indonesian environmental laws, rules and
regulations. Mining operations on the scale of our operations in
Irian Jaya (Papua) involve significant environmental challenges,
primarily related to the disposition of tailings, which are the
crushed and ground rock material resulting from the physical
separation of commercially valuable minerals from the ore. We
have an extensive, ongoing management system for the disposal of
tailings resulting from our milling operations. In 1997, we
completed an engineered levee system, as part of our Government
of Indonesia-approved tailings management plan, to minimize the
impact of the tailings on the environment through a controlled
deposition area that ultimately we will reclaim.
In 1995, we participated in a voluntary independent
environmental audit of our Irian Jaya (Papua) operations under a
program monitored by the Government of Indonesia. The
environmental audit report was completed and released in 1996 and
included 33 principal recommendations, all of which we have
implemented. The audit team identified the disposal of tailings
as the most critical environmental issue we face, requiring
significant study, engineering and monitoring over the life of
the mine. The audit concluded that our tailings management plan
represented the most suitable option for tailings disposal
considering the engineering and environmental challenges in Irian
Jaya (Papua). The audit also confirmed that the tailings from
our mining operations are non-toxic; that the mining operations
do not pose any significant risk to Irian Jaya's (Papua)
biodiversity; and that our operations are being conducted in
compliance with applicable Indonesian environmental laws, rules
and regulations in all material respects.
We have committed to independent external environmental
audits by qualified experts every three years, with the results
to be made public. The second such audit was completed in 1999.
The second audit reported that we continue to be in material
compliance with Indonesian environmental laws and regulations and
that we had fulfilled the recommendations in the 1996 audit
report. The 1999 external audit report made some additional
environmental management recommendations that will be
implemented. The report concluded that our environmental
management systems achieve the standard of practice for world-
class mines. The auditors also found our environmental
management systems to be exemplary and a showcase for the mining
industry. We also are continuing our annual internal audits,
through the life of our mining operations, so that our
environmental management and monitoring programs will remain
sound and our operations will remain in material compliance with
local laws.
In December 1997, the Minister of Environment gave us
environmental approval to expand our milling rate up to a maximum
of 300,000 metric tons of ore per day from our previously
approved rate of 160,000 metric tons of ore per day. In 1999 we
averaged 220,700 metric tons of ore per day.
8
We cannot currently project with precision the ultimate
amount of reclamation and closure costs we will incur. Our best
estimate at this time is that ultimate reclamation and closure
costs may require as much as $100 million but are not expected to
exceed $150 million. However, these estimates are subject to
revision over time as we perform more complete studies and
formulate more definitive plans. We will incur some reclamation
costs throughout the life of the mine, while we will incur most
closure costs and the remaining reclamation costs at the end of
our mining activities, which is currently estimated to exceed 30
years. We had $14.1 million accrued on a unit-of-production basis
at December 31, 1999 for mine closure and reclamation costs,
included in other liabilities.
In 1996, we began contributing to a cash fund ($1.7 million
balance at December 31, 1999) designed to accumulate at least
$100 million by the end of our Indonesian mining activities. We
plan to use this fund, including accrued interest, to pay for
mine closure and reclamation costs. An increasing emphasis on
environmental issues and future changes in regulations could
require us to incur additional costs that would be charged
against future operations. Estimates involving environmental
matters are by their nature imprecise and changes in government
regulations, operations, technology and inflation could require
us to revise them over time.
We believe that Atlantic Copper's facilities and operations
are in compliance in all material respects with all applicable
Spanish environmental laws, rules and regulations. In 1997,
Atlantic Copper successfully completed an environmental
improvement project in conjunction with expansion activities at
its copper smelter in Huelva. New technology substantially
reduced atmospheric emissions from its operations even with an
approximate doubling of production capacity. In addition, we
decreased dust emissions as a result of installing new facilities
for handling ore concentrates and adding additional filtering
capacity.
The Indonesian and Spanish governments may periodically
revise their environmental laws and regulations or adopt new
ones, and we cannot predict the effects on our operations of new
or revised regulations. We have expended significant resources,
both financial and managerial, to comply with environmental
regulations and permitting and approval requirements, and we
anticipate that we will continue to do so in the future. There
can be no assurance that we will not incur additional significant
costs and liabilities to comply with such current and future
regulations or that such regulations will not have a material
effect on our operations. See "Cautionary Statements."
For additional information on our environmental and social
efforts, see our annual report incorporated herein by reference
as part of "Items 7. and 7A. Management's Discussion and Analysis
of Financial Condition and Results of Operations and Quantitative
and Qualitative Disclosures About Market Risk."
Employees and Relationship with FM Services Company
As of December 31, 1999, PT Freeport Indonesia had 6,357
employees (approximately 97 percent Indonesian). In addition, as
of December 31, 1999, PT Freeport Indonesia had 1,851 contract
workers, the vast majority of whom were Indonesian.
Approximately 55 percent of our Indonesian employees are members
of the All Indonesia Workers' Union, which operates under
Government of Indonesia supervision. During 1999, PT Freeport
Indonesia and the union agreed to a new labor agreement that
became effective June 1, 1999 and expires September 30, 2001. PT
Freeport Indonesia's relations with the workers' union have
generally been positive.
As of December 31, 1999, Atlantic Copper had 780 employees,
of which approximately 33 percent are covered by union contracts
which expired December 31, 1999. Atlantic Copper expects to
negotiate new contracts during 2000. Atlantic Copper experienced
no work stoppages in 1999 and relations with these unions have
also generally been good.
Since January 1, 1996, FM Services Company, a Delaware
corporation 45 percent owned by us, has furnished executive,
administrative, financial, accounting, legal, tax and similar
services to us. We reimburse FM Services at its cost, including
allocated overhead, for these services on a monthly basis. As of
December 31, 1999, FCX had 32 employees and FM Services had 189
employees. FM Services employees also provide services to two
other publicly traded companies.
9
Cautionary Statements
This report contains forward-looking statements in which we
discuss factors we believe may affect our performance in the
future. Forward-looking statements are all statements other than
statements of historical facts, such as statements regarding
anticipated production volumes, sales volumes, ore grades,
commodity prices, development and capital expenditures,
environmental reclamation and closure costs, reserve estimates,
political, economic and social conditions in our areas of
operations, treatment charge rates, our financial position and
liquidity, payment of dividends, strategic growth initiatives,
the availability of financing, PT Smelting operating levels and
exploration efforts and results. We caution you that these
statements are not guarantees of future performance, and our
actual results may differ materially from those projected,
anticipated or assumed in the forward-looking statements.
Important factors that can cause our actual results to differ
materially from those anticipated in the forward-looking
statements include the following:
Our net income can vary significantly with fluctuations in the
market prices of copper and gold.
Our revenues are derived primarily from the sale of copper
concentrates, which also contain significant amounts of gold, and
from the sale of copper cathodes, copper wire rod and copper
wire. Most of our copper concentrates are sold under long-term
contracts, but the selling price is based on world metal prices
at or near the time of shipment and delivery. World metal prices
for copper and gold historically have fluctuated widely and are
affected by numerous factors beyond our control.
The volume and grade of the reserves we recover and our rates of
production may be more or less than anticipated.
Our reserve amounts are determined in accordance with
established mining industry practices and standards, but are
estimates only. Our mines may not conform to standard geological
expectations. Because ore bodies do not contain uniform grades
of minerals, our metal recovery rates will vary from time to
time, which will result in variations in the volumes of minerals
that we can sell from period to period. Some of our reserves may
become unprofitable to develop if there are unfavorable long-term
market price fluctuations in copper and gold, or if there are
significant increases in our operating and capital costs. In
addition, our exploration programs may not result in the
discovery of additional mineral deposits that we can mine
profitably.
Because our primary operating assets are located in the Republic
of Indonesia, our business can be adversely affected by
Indonesian political, economic and social events.
Maintaining a good working relationship with the Indonesian
government is important to us because all of our mining
operations are located in Indonesia and are conducted pursuant to
Contracts of Work with the Indonesian government. PT Freeport
Indonesia's and Eastern Minerals' Contracts of Work were entered
into under Indonesia's 1967 Foreign Capital Investment Law, which
provides guarantees of remittance rights and protection against
nationalization. These contracts also specifically provide that
the Indonesian government will not nationalize or expropriate PT
Freeport Indonesia's or Eastern Minerals' mining operations and
that disputes with the Indonesian government must be submitted to
international arbitration.
In May 1998, President Suharto, Indonesia's political
leader for more than 30 years, resigned in the wake of an
economic crisis in Indonesia and other parts of Southeast Asia
and in the face of growing social unrest. Vice President B.J.
Habibie succeeded Suharto. In June 1999 Indonesia held a new
parliamentary election on a generally peaceful basis as the first
step in the process of electing a new president. In October
1999, in accordance with the Indonesian constitution, the
country's highest political body composed of the newly elected
national parliament along with additional provincial and other
representatives elected Abdurrahman Wahid as the new president
and Megawati Sukarnoputri as vice president. A new cabinet was
also announced in October 1999. The selection of a new president
in an election that was widely regarded as free and fair was an
important milestone in restoring political and economic
stability.
Recently, certain government officials and others in
Indonesia have called into question the validity of contracts
entered into by the Government of Indonesia prior to October
1999, including PT Freeport Indonesia's
10
Contract of Work signed
in December 1991. The president of Indonesia and several cabinet
members have publicly stated that the Government of Indonesia
will honor previously existing contracts and that they have no
intention of revoking or unilaterally amending such contracts,
specifically including PT Freeport Indonesia's Contract of Work.
Indonesian government officials have also raised questions
regarding PT Freeport Indonesia's compliance with Indonesian
environmental laws and regulations and the terms of the Contract
of Work. In order to address these questions, the Government of
Indonesia is forming a _fact-finding_ team to review PT Freeport
Indonesia's compliance with all aspects of its Contract of Work.
We support this initiative as a means for the Government of
Indonesia to verify PT Freeport Indonesia's compliance with its
Contract of Work, including its environmental requirements. We
believe that we are in material compliance with all provisions of
PT Freeport Indonesia's Contract of Work.
Despite the progress towards increased stability, Indonesia
continues to face political and economic uncertainties, including
separatist movements and civil and religious strife in a number
of provinces. In particular, social, economic and political
instability in the province of Irian Jaya (Papua), where our
primary operations are located, could have a material adverse
impact on our mining operations if it results in damage to our
property or interruption of our activities. For example, we
voluntarily suspended our exploration field activities for three
months, from May 15 through August 15, 1999, as a precaution
during the Indonesian national election period. In August 1998,
we suspended operations for three days at our Grasberg mine in
response to a wildcat work stoppage (not authorized by the
workers' union) by a group of workers, a majority of whom were
employees of our contractors. The workers, who voluntarily
returned to work, cited employment issues as the reasons for
their work stoppage. The actions of the workers were peaceful,
there was no personal injury or property damage, and our
concentrate shipments were not interrupted. In March 1996, local
tribespeople engaged in acts of vandalism that caused
approximately $3 million of damages to our property and caused us
to close the Grasberg mine and mill for three days as a
precautionary measure, although our concentrate shipments were
not interrupted.
A segment of the local population is opposing Indonesian
rule over Irian Jaya (Papua), and several separatist groups have
sought political independence for the province. The degree of
political and economic autonomy that might be provided to
individual provinces, including Irian Jaya (Papua), is a current
issue in Indonesian politics. In Irian Jaya (Papua), there have
been sporadic attacks on civilians by separatists and sporadic
but highly publicized conflicts between separatists and the
Indonesian military. We have a board-approved policy statement on
social and human rights, and have comprehensive and extensive
social, cultural and community development programs, to which we
have committed significant financial and managerial resources.
These policies and programs are designed to address the impact of
our operations on the local villages and tribes and to provide
assistance for the development of the local people. While we
believe these efforts should serve to avoid damage to and
disruptions of our mining operations, our operations could be
damaged or disrupted by social, economic and political forces
beyond our control.
In addition to the specific risks described above, we are
also subject to the usual risks associated with conducting
business in a foreign country. These risks include the risk of
war, revolution, civil unrest, expropriation, forced modification
of existing contracts, changes in the country's laws or policies,
including laws or policies relating to taxation, royalties,
imports, exports and currency, and the risk of having to submit
to the jurisdiction of a foreign court or having to enforce the
judgement of a foreign court or arbitration against a sovereign
nation within its own territory.
In addition to the usual risks encountered in the mining
industry, we face additional risks because our operations are
located in difficult terrain in a very remote area of the world.
Our mining operations are located in steeply mountainous
terrain in a very remote area in Indonesia. These conditions
have required us to overcome special engineering difficulties and
to develop extensive infrastructure facilities. In addition, the
area receives considerable rainfall, which has led to periodic
floods and mud slides. The mine site is also in an active
seismic area, and has experienced earth tremors from time to
time. In addition to these special risks, we are also subject to
the usual risks associated with the mining industry, such as the
risk of encountering unexpected geological conditions which may
result in cave-ins and flooding of mine areas. We have insurance
involving amounts and types of coverage we believe are
appropriate for our activities, but our insurance may not be
sufficient to cover an unexpected natural or operating disaster.
11
Our mining operations create difficult and costly environmental
challenges, and future changes in environmental laws, or
unanticipated environmental impacts from our operations, could
require us to incur increased costs.
Mining operations on the scale of our operations in Irian
Jaya (Papua) involve significant environmental challenges. Our
primary challenge is to dispose of the large amount of crushed
and ground rock material, called tailings, that results from the
process by which we physically separate the copper, gold and
silver from the ore that we mine. Under our tailings management
plan, the river system near our mine transports the tailings to
the lowlands where deposits of the tailings and natural sediments
are controlled through a levee system for future revegetation and
reclamation. This plan has been approved by the Government of
Indonesia. Another of our major environmental challenges is
managing overburden, which is the rock that must be moved aside
in order to reach the ore in the mining process. Some overburden
in the presence of air, water and naturally occurring bacteria
can cause acid rock drainage, or acidic water containing
dissolved metals, which, if not properly managed, can have a
negative impact on the environment. Our overburden management
plan, which has been approved by the Government of Indonesia, is
designed to minimize these impacts, although we cannot assure
that it will do so.
Our environmental management programs, which include
independent external environmental audits, are designed to manage
and minimize the impact on the environment. We have expended
significant financial and managerial resources to comply with
Indonesian environmental regulations and permitting and approval
requirements, and anticipate that we will continue to do so in
the future. If there are changes in Indonesian environmental
laws, or unanticipated environmental impacts from our operations,
we could be required to incur significant additional costs.
We have guaranteed an obligation of an Indonesian entity, and
have lent funds to the entity, and the value of the entity's
assets may not be sufficient to cover the debts.
As discussed in our Securities and Exchange Commission
filings, in 1997 we guaranteed a $254 million loan from a
commercial bank to Nusamba. Nusamba borrowed the funds to
purchase stock in PT Indocopper Investama Corporation (PT
Indocopper Investama), a company whose only significant asset is
9.36 percent of PT Freeport Indonesia's stock, for $315 million.
Nusamba owns approximately 51 percent of PT Indocopper
Investama's stock and we own approximately 49 percent. The loan
is secured by a pledge of the PT Indocopper Investama stock owned
by Nusamba and is due in March 2002. We also agreed to lend
Nusamba any amounts necessary to cover shortfalls between the
interest payments on the loan and the dividends received by
Nusamba on the PT Indocopper Investama stock. At December 31,
1999, we had loaned Nusamba $43.7 million, due March 2002, for
this purpose.
The PT Indocopper Investama stock is the only significant
asset of Nusamba, and the estimated fair market value of the
stock is currently significantly below the $297.7 million
aggregate principal amount of the loans. Our estimate of the
fair market value of PT Indocopper Investama's stock is based on
the current market value of our common stock. If Nusamba does
not pay the loans when due, and we are obligated to pay the loan
to the commercial bank, we will seek to recover the PT Indocopper
Investama stock as provided by the financing documents, which are
governed by Indonesian law.
Movements in foreign currency exchange rates could have a
negative effect on our operating results.
All of our revenues are denominated in United States
dollars. However, some of our costs and some of our asset and
liability accounts are denominated in Indonesian rupiah,
Australian dollars or Spanish pesetas. Generally, our results
are adversely affected when the U.S. dollar weakens against these
foreign currencies and positively affected when the U.S. dollar
strengthens against these foreign currencies. Since 1997, the
Indonesian rupiah exchange rate has been volatile. From time to
time we have in the past and may in the future implement currency
hedges intended to reduce our exposure to changes in foreign
currency exchange rates. Our hedging strategies may, however,
not be successful, and any of our unhedged foreign exchange
payment requirements will continue to be subject to market
fluctuations.
12
Because we are primarily a holding company, our ability to pay
our debts and to pay dividends on our preferred and common stock
depends upon the ability of our subsidiaries to pay us dividends
and to advance us funds. In addition, our ability to participate
in any distribution of our subsidiaries' assets is generally
subject to the prior claims of the subsidiaries' creditors.
Because we conduct business primarily through our
subsidiaries, our ability to pay our debts and to pay dividends
on our preferred and common stock depends upon the earnings and
cash flow of our subsidiaries and their ability to pay us
dividends and to advance us funds. Contractual and legal
restrictions applicable to our subsidiaries could also limit our
ability to obtain cash from them. Our rights to participate in
any distribution of our subsidiaries' assets upon their
liquidation, reorganization or insolvency would generally be
subject to the prior claims of the subsidiaries' creditors,
including trade creditors and preferred stockholders, if any.
Item 3. Legal Proceedings.
Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La.
filed June 19, 1996). The plaintiff alleges environmental, human
rights and social/cultural violations in Indonesia and seeks
unspecified monetary damages and other equitable relief. In
February 1997, the Civil District Court of the Parish of Orleans,
State of Louisiana dismissed this purported class action for lack
of subject matter jurisdiction because the alleged conduct and
damages occurred in Indonesia. In March 1998, the Louisiana
Fourth Circuit Court of Appeal reversed the trial court's
dismissal and found that subject matter jurisdiction existed over
some claims. In July 1998, the Louisiana Supreme Court denied
without comment our writ application in which we sought a review
of the Fourth Circuit's earlier ruling. The plaintiff has
amended its complaint. We have additional legal defenses to the
action that we are pursuing. We will continue to defend this
action vigorously.
In addition to the foregoing proceedings, we are involved
from time to time in various legal proceedings of a character
normally incident to the ordinary course of our business. We
believe that potential liability in such proceedings would not
have a material adverse effect on our financial condition or
results of operations. We maintain liability insurance to cover
some, but not all, potential liabilities normally incident to the
ordinary course of our business as well as other insurance
coverage customary in our business, with coverage limits that we
deem prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
Certain information as of March 1, 2000 about our executive
officers, including their position or office with FCX, PT
Freeport Indonesia and Atlantic Copper, is set forth in the
following table and accompanying text:
Name Age Position or Office
- ---- --- -------------------
Richard C. Adkerson 53 President and Chief Operating
Officer of FCX. Director and
Executive Vice President of PT
Freeport Indonesia. Chairman of
Atlantic Copper.
Michael J. Arnold 47 Senior Vice President of FCX.
Director and Executive Vice
President of PT Freeport Indonesia.
Stephen M. Jones 41 Senior Vice President, Chief
Financial Officer and Secretary of
FCX. Director and Executive Vice
President of PT Freeport Indonesia.
Director of Atlantic Copper.
W. Russell King 50 Senior Vice President of FCX.
Adrianto Machribie 58 President Director of PT Freeport
Indonesia.
13
John A. Macken 48 Senior Vice President of FCX.
Executive Vice President of PT
Freeport Indonesia.
James R. Moffett 61 Director, Chairman of the
Board and Chief Executive Officer
of FCX. President Commissioner of
PT Freeport Indonesia.
Paul S. Murphy 56 Senior Vice President of FCX.
Commissioner of PT Freeport Indonesia.
Steven D. Van Nort 59 Senior Vice President of FCX.
Director and Executive Vice
President of PT Freeport Indonesia.
Richard C. Adkerson has served as FCX's President and Chief
Operating Officer since April 1997. Mr. Adkerson is also
Executive Vice President and a director of PT Freeport Indonesia,
Chairman of Atlantic Copper, and Co-Chairman of the Board,
President and Chief Executive Officer of McMoRan Exploration Co.
(McMoRan). From April 1994 to November 1998 he was Co-Chairman of
the Board and Chief Executive Officer of McMoRan Oil & Gas Co.
(McMoRan Oil & Gas), and from November 1997 to November 1998 he
was Vice Chairman of the Board of Freeport-McMoRan Sulphur Inc.
(Freeport Sulphur). Mr. Adkerson served as Executive Vice
President of FCX from July 1995 to April 1997, as Senior Vice
President from February 1994 to July 1995 and as Chief Financial
Officer from July 1995 to November 1998. He also served as
Chairman of the Board of Stratus Properties Inc., a real estate
development company, from March 1992 to August 1998, as President
from August 1995 to May 1996 and as Chief Executive Officer from
August 1995 to May 1998. Mr. Adkerson served as Vice Chairman of
the Board of Freeport-McMoRan Inc. until December 1997 and as
Senior Vice President and Chief Financial Officer of Freeport-
McMoRan Inc. from May 1992 to August 1995.
Michael J. Arnold has served as Senior Vice President of FCX
since November 1996. Mr. Arnold is also Executive Vice President
and a director of PT Freeport Indonesia, and Senior Vice
President of McMoRan. From July 1994 to November 1996, Mr.
Arnold was Vice President and Controller - Operations of FCX.
Mr. Arnold also served as a Senior Vice President of Freeport-
McMoRan Inc. from November 1996 until December 1997. From
October 1991 to November 1996, he was Vice President of Freeport-
McMoRan Inc., serving as Controller - Operations from May 1993 to
November 1996.
Stephen M. Jones has served as Senior Vice President and Chief
Financial Officer of FCX since November 1998 and as Secretary
since February 2000. Mr. Jones has also served as Executive Vice
President and a director of PT Freeport Indonesia since December
1994.
W. Russell King has served as Senior Vice President of FCX since
July 1994. Mr. King served as Senior Vice President of Freeport-
McMoRan Inc. from November 1993 to December 1997.
Adrianto Machribie has served as President Director of PT
Freeport Indonesia since March 1996. From September 1992 to
March 1996, Mr. Machribie was a director and Executive Vice
President of PT Freeport Indonesia.
John A. Macken has served as Senior Vice President of FCX since
December 1997. He is also Executive Vice President of PT
Freeport Indonesia. From April 1996 to December 1997, Mr. Macken
was a Vice President of FCX. From April 1995 to March 1996, Mr.
Macken served as a director of PT Freeport Indonesia and from
April 1993 to April 1995, he served as a Vice President of PT
Freeport Indonesia.
James R. Moffett has served as Chairman of the Board and Chief
Executive Officer of FCX since July 1995 and has served as
Chairman of the Board of FCX since May 1992. He is also
President Commissioner of PT Freeport Indonesia and Co-Chairman
of the Board of McMoRan. From November 1994 to November 1998 he
was Co-Chairman of the Board of McMoRan Oil & Gas and from
November 1997 to November 1998 he was Co-Chairman of the Board of
Freeport Sulphur. Mr. Moffett served as Chairman of the Board of
Freeport-McMoRan Inc. from September 1982 to December 1997.
14
Paul S. Murphy has served as Senior Vice President of FCX since
March 1998. Mr. Murphy has also served as a Commissioner of PT
Freeport Indonesia since May 1998. Mr. Murphy served as a
director and Executive Vice President of PT Freeport Indonesia
from September 1992 to May 1998.
Steven D. Van Nort has served as Senior Vice President of FCX
since December 1997. Mr. Van Nort has served as director since
May 1997 and Executive Vice President of PT Freeport Indonesia
since June 1997. From March 1995 to December 1997, Mr. Van Nort
was a Vice President of FCX and from June 1992 to June 1997, he
served as a Senior Vice President of PT Freeport Indonesia.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The information set forth under the captions "FCX Class A
Common Shares," "FCX Class B Common Shares" and "Common Share
Dividends," on the inside back cover of our 1999 Annual Report is
incorporated herein by reference. As of March 8, 2000, there
were 7,110 and 11,590 holders of record of our Class A and Class
B common stock, respectively.
Item 6. Selected Financial Data.
The information set forth under the caption "Selected
Financial and Operating Data," on pages 18 and 19 of our Annual
Report is incorporated herein by reference.
Years Ended December 31,
------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Ratio of earnings to fixed charges 5.9x 4.5x 3.8x 2.5x 2.9x
Ratio of earnings to fixed charges
and preferred stock dividends 3.0x 2.6x 2.8x 1.9x 2.2x
For the ratio of earnings to fixed charges calculation,
earnings consist of income from continuing operations before
income taxes, minority interests and fixed charges. Fixed
charges include interest and that portion of rent deemed
representative of interest. For the ratio of earnings to fixed
charges and preferred stock dividends calculation, we assumed
that our preferred stock dividend requirements were equal to the
pre-tax earnings that would be required to cover those dividend
requirements. We computed those pre-tax earnings using actual
tax rates for each year.
Items 7. and 7A. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Quantitative
and Qualitative Disclosures About Market Risk.
The information set forth under the caption "Management's
Discussion and Analysis" on pages 20 through 30, as well as the
"Working Toward Sustainable Development" report on pages 6
through 17, of our 1999 Annual Report, are incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data.
Our financial statements and the notes thereto appearing on
pages 31 through 51, the report thereon of Arthur Andersen LLP
appearing on page 51, and the report of management on page 30 of
our 1999 Annual Report are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
15
PART III
Items 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Information
About Nominees and Directors" of our Proxy Statement submitted to
our stockholders in connection with our 2000 Annual Meeting to be
held on May 4, 2000 is incorporated herein by reference.
Items 11. Executive Compensation.
The information set forth under the captions "Director
Compensation" and "Executive Officer Compensation" of our Proxy
Statement submitted to our stockholders in connection with our
2000 Annual Meeting to be held on May 4, 2000 is incorporated
herein by reference.
Items 12. Security Ownership of Certain Beneficial Owners and
Management.
The information set forth under the captions "Stock
Ownership of Directors and Executive Officers" and "Stock
Ownership of Certain Beneficial Owners" of our Proxy Statement
submitted to our stockholders in connection with our 2000 Annual
Meeting to be held on May 4, 2000 is incorporated herein by
reference.
Items 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Certain
Transactions" of our Proxy Statement submitted to our
stockholders in connection with our 2000 Annual Meeting to be
held on May 4, 2000 is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1). Financial Statements.
Reference is made to the Index to Financial Statements appearing on
page F-1 hereof.
(a)(2). Financial Statement Schedules.
Reference is made to the Index to Financial Statements appearing on
page F-1 hereof.
(a)(3). Exhibits.
Reference is made to the Exhibit Index beginning on page E-1 hereof.
(b). Reports on Form 8-K.
During the last quarter of the period covered by this report, we did
not file any Current Reports on Form 8-K.
16
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 17, 2000.
Freeport-McMoRan Copper & Gold Inc.
By: /s/ James R. Moffett
----------------------------
James R. Moffett
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated on March 17, 2000.
Signatures
Chairman of the Board, Chief Executive
/s/James R. Moffet Officer and Director (Principal
------------------- Executive Officer)
James R. Moffett
* President and Chief Operating Officer
-------------------
Richard C. Adkerson
Senior Vice President, Chief Financial
Officer and Secretary (Principal Financial
* Officer)
----------------
Stephen M. Jones
Vice President and Controller-Financial
* Reporting (Principal Accounting Officer)
------------------
C. Donald Whitmire
* Director
-------------------
Robert W. Bruce III
* Director
-----------------
R. Leigh Clifford
* Director
-------------
Robert A. Day
* Director
--------------
Gerald J. Ford
S-1
* Director
--------------------
H. Devon Graham, Jr.
* Director
----------------------
Oscar Y. L. Groeneveld
* Director
-------------------
J. Bennett Johnston
* Director
------------------
Henry A. Kissinger
* Director
----------------
Bobby Lee Lackey
* Director
-----------------
Rene L. Latiolais
* Director
---------------------
Gabrielle K. McDonald
* Director
----------------
George A. Mealey
* Director
-----------------
B. M. Rankin, Jr.
* Director
-----------------
J. Taylor Wharton
*By: /s/ James R. Moffett
----------------------
James R. Moffett
Attorney-in-Fact
S-2
FREEPORT-McMoRan COPPER & GOLD INC.
INDEX TO FINANCIAL STATEMENTS
Our financial statements and the notes appearing on pages 35
through 51, and the report of Arthur Andersen LLP appearing on
page 51 of our 1999 Annual Report to stockholders are
incorporated herein by reference.
The financial statements in schedule I listed below should
be read in conjunction with our financial statements in our 1999
Annual Report to stockholders.
Page
Report of Independent Public Accountants F-1
Schedule I-Condensed Financial Information of Registrant F-2
Schedule II-Valuation and Qualifying Accounts F-3
Schedules other than the ones listed above have been omitted
since they are either not required, not applicable or the
required information is included in the financial statements or
notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted
auditing standards, the financial statements as of December 31,
1999 and 1998 and for each of the three years in the period ended
December 31, 1999 included in Freeport-McMoRan Copper & Gold
Inc.'s Annual Report to stockholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January
18, 2000. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedules
listed in the index above are the responsibility of the Company's
management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of
the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
New Orleans, Louisiana,
January 18, 2000
F-1
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
December 31,
--------------------------
1999 1998
---------- ----------
(In Thousands)
Assets:
Cash and cash equivalents $ 832 $ 802
Interest receivable 7,746 7,996
Due from affiliates 16,862 41,766
Notes receivable from PT Freeport Indonesia 779,991 832,492
Note receivable from Nusamba 43,702 25,438
Investment in PT Freeport Indonesia
and PT Indocopper Investama 824,513 610,234
Investment in Atlantic Copper 97,518 51,418
Other assets 41,616 43,118
---------- ----------
Total assets $1,812,780 $1,613,264
========== ==========
Liabilities and Stockholders' Equity:
Accounts payable and accrued liabilities $ 23,173 $ 17,300
Long-term debt 1,060,411 967,251
Other liabilities and deferred credits - 2,457
Deferred income taxes 44,809 22,833
Redeemable preferred stock 487,507 500,007
Stockholders' equity 196,880 103,416
---------- ----------
Total liabilities and
stockholders' equity $1,812,780 $1,613,264
========== ==========
STATEMENTS OF INCOME
Years Ended December 31,
-----------------------------
1999 1998 1997
--------- -------- --------
(In Thousands)
Income from investment in PT Freeport
Indonesia and PT Indocopper Investama,
net of PT Freeport Indonesia tax provision $237,630 $211,232 $218,752
Net income from investment in Atlantic Copper 4,066a 4,674 3,391
Intercompany charges and eliminations (27,505)a,b (7,700)b 53,117b
Exploration expenses (7,079) (8,958) (11,198)
General and administrative expenses (8,643) (7,082) (8,855)
Depreciation and amortization (4,468) (4,384) (3,873)
Interest expense, net (76,246) (66,141) (59,626)
Interest income on PT Freeport Indonesia
notes receivable:
Promissory notes 28,461 29,273 47,219
8.235% debenture - 8,101 11,723
Step-up debenture - - 3,083
Gold and silver production payment loans 17,568 19,212 20,451
Other income (expense), net (379) 1,326 878
Provision for income taxes (26,938) (25,705 (29,954)
-------- -------- --------
Net income 136,467 153,848 245,108
Preferred dividends (35,680) (35,531) (36,567)
-------- -------- --------
$100,787 $118,317 $208,541
======== ======== ========
a. Includes $23.0 million for the forgiveness of an
intercompany receivable from Atlantic Copper.
b. Includes amounts for deferral of intercompany profit
totaling $(4.5) million in 1999, $(7.7) million in
1998 and $9.3 million in 1997. The 1997 amount
includes $43.8 million for intercompany charges related
to stock-based incentive compensation.
The footnotes to the consolidated financial statements of FCX
contained in FCX's 1999 Annual Report to stockholders
incorporated by reference herein are an integral part of
these statements.
F-2
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOW
Years Ended December 31,
------------------------------
1999 1998 1997
-------- -------- --------
(In Thousands)
Cash flow from operating activities:
Net income $136,467 $153,848 $245,108
Adjustments to reconcile net income
to net cash provided by
operating activities:
Income from investment in PT Freeport
Indonesia and PT Indocopper Investama (237,630) (211,232) (218,293)
Deferred income taxes 21,976 16,613 1,400
Net income from investment in
Atlantic Copper (4,066) (4,674) (3,391)
Elimination of intercompany profit 4,457 7,700 (9,271)
Dividends received from PT Freeport
Indonesia and PT Indocopper Investama 18,361 48,832 205,092
Depreciation and amortization 4,468 4,384 3,873
Decrease (increase) in interest
receivable and due from affiliates 25,936 50,933 (44,358)
Increase (decrease) in accounts
payable and accrued liabilities 2,320 (1,699) (1,898)
Other 776 3,208 7,536
-------- -------- --------
Net cash provided by (used in)
operating activities (26,935) 67,913 185,798
-------- -------- --------
Cash flow from investing activities:
Investment in Atlantic Copper (40,000) - -
Other (2,403) (9,583) (11,895)
-------- -------- --------
Net cash used in investing activities (42,403) (9,583) (11,895)
-------- -------- --------
Cash flow from financing activities:
Cash dividends paid:
Class A common stock - (14,157) (73,309)
Class B common stock - (21,225) (105,032)
Step-up convertible preferred stock (24,500) (24,500) (24,642)
Mandatory redeemable preferred stock (13,520) (14,657) (15,901)
Proceeds from debt 104,673 161,506 180,000
Repayment of debt (11,514) (19,504) (17,310)
Partial redemption of preferred stock (11,946) - -
Repayment from PT Freeport Indonesia 51,946 150,000 325,320
Loans to Nusamba (18,264) (17,824) (7,614)
Purchase of FCX common shares (7,921) (259,213) (438,388)
Other 414 545 4,232
-------- -------- --------
Net cash provided by (used in)
financing activities 69,368 (59,029) (172,644)
Net increase (decrease) in cash and cash
equivalents 30 (699) 1,259
Cash and cash equivalents at beginning
of year 802 1,501 242
-------- -------- --------
Cash and cash equivalents at end of year $ 832 $ 802 $ 1,501
======== ======== ========
Interest paid $ 76,804 $ 68,950 $ 59,798
======== ======== ========
Taxes paid $ 5,281 $ 8,629 $ 28,286
======== ======== ========
The footnotes to the consolidated financial statements of FCX
contained in FCX's 1999 Annual Report to stockholders
incorporated by reference herein are an integral part of these
statements.
F-3
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
---------------------
Balance at Charged to Charged to Other Balance at
Beginning Costs and Other Add End of
of Period Expense Accounts (Deduct) Period
---------- --------- -------- --------- ---------
(In Thousands)
Reserves and allowances
deducted from asset
accounts:
1999
- ----
Materials and supplies
reserves $24,633 $ 1,500 $ - $(7,382)a $ 18,751
Allowance for uncollectible
value-added taxes 5,491 - - - 5,491
1998
- ----
Materials and supplies
reserves 29,513 3,000 - (7,880)a 24,633
Allowance for uncollectible
value-added taxes 3,825 833 833 - 5,491
1997
- ----
Materials and supplies
reserves 19,340 12,000 - (1,827)a 29,513
Allowance for uncollectible
value-added taxes 5,337 1,809 289 (3,610)b 3,825
Reclamation and mine
shutdown reserves:
1999
- ----
PT Freeport Indonesia $ 9,229 $ 4,856 $ - $ - $14,085
1998
- ----
PT Freeport Indonesia 5,466 3,763 - - 9,229
1997
- ----
PT Freeport Indonesia 500 4,966 - - 5,466
a. Primarily represents write-offs of obsolete materials and
supplies inventories.
b. Represents write-offs of uncollectible amounts.
F-4
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2.1 Agreement, dated as of May 2, 1995 by and between Freeport-
McMoRan Inc. (FTX) and FCX and The RTZ Corporation PLC, RTZ
Indonesia Limited, and RTZ America, Inc. (the Rio Tinto
Agreement). Incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of FTX dated as of May 26, 1995.
2.2 Amendment dated May 31, 1995 to the Rio Tinto Agreement.
Incorporated by reference to Exhibit 2.1 to the Quarterly
Report on Form 10-Q of FTX for the quarter ended June 30,
1995.
2.3 Distribution Agreement dated as of July 5, 1995 between FTX
and FCX. Incorporated by reference to Exhibit 2.1 to the
Quarterly Report on Form 10-Q of FTX for the quarter ended
September 30, 1995 (the FTX 1995 Third Quarter Form 10-Q).
3.1 Composite copy of the Certificate of Incorporation of FCX.
Incorporated by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q of FCX for the quarter ended June 30,
1995 (the FCX 1995 Second Quarter Form 10-Q).
3.2 Amended By-Laws of FCX dated as of March 12, 1999.
Incorporated by reference to Exhibit 3.2 to the Annual
Report on Form 10-K of FCX for the fiscal year ended
December 31, 1998 (the 1998 FCX Form 10-K).
4.1 Certificate of Designations of the Step-Up Convertible
Preferred Stock of FCX. Incorporated by reference to
Exhibit 4.2 to the FCX 1995 Second Quarter Form 10-Q.
4.2 Deposit Agreement dated as of July 1, 1993 among FCX,
ChaseMellon Shareholder Services, L.L.C. (ChaseMellon), as
Depositary, and holders of depositary receipts (Step-Up
Depositary Receipts) evidencing certain Depositary Shares,
each of which, in turn, represents 0.05 shares of Step-Up
Convertible Preferred Stock. Incorporated by reference to
Exhibit 4.5 to the Annual Report on Form 10-K of FCX for the
fiscal year ended December 31, 1993 (the FCX 1993 Form 10-
K).
4.3 Form of Step-Up Depositary Receipt. Incorporated by
reference to Exhibit 4.6 to the FCX 1993 Form 10-K.
4.4 Certificate off Designations of the Gold-Denominated
Preferred Stock of FCX. Incorporated by reference to
Exhibit 4.3 to the FCX 1995 Second Quarter Form 10-Q.
4.5 Deposit Agreement dated as of August 12, 1993 among FCX,
ChaseMellon, as Depositary, and holders of depositary
receipts (Gold-Denominated Depositary Receipts) evidencing
certain Depositary Shares, each of which, in turn,
represents 0.05 shares of Gold-Denominated Preferred Stock.
Incorporated by reference to Exhibit 4.8 to the FCX 1993
Form 10-K.
4.6 Form of Gold-Denominated Depositary Receipt. Incorporated
by reference to Exhibit 4.9 to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the Gold-Denominated
Preferred Stock, Series II (the Gold-Denominated Preferred
Stock II) of FCX. Incorporated by reference to Exhibit 4.4
to the FCX 1995 Second Quarter Form 10-Q.
4.8 Deposit Agreement dated as of January 15, 1994, among FCX,
ChaseMellon, as Depositary, and holders of depositary
receipts (Gold-Denominated II Depositary Receipts)
evidencing certain Depositary Shares, each of which, in
turn, represents 0.05 shares of Gold-Denominated Preferred
Stock II. Incorporated by reference to Exhibit 4.2 to the
Quarterly Report on Form 10-Q of FCX for the quarter ended
March 31, 1994 (the FCX 1994 First Quarter Form 10-Q).
E-1
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
4.9 Form of Gold-Denominated II Depositary Receipt.
Incorporated by reference to Exhibit 4.3 to the FCX 1994
First Quarter Form 10-Q.
4.10 Certificate of Designations of the Silver-Denominated
Preferred Stock of FCX. Incorporated by reference to
Exhibit 4.5 to the FCX 1995 Second Quarter Form 10-Q.
4.11 Deposit Agreement dated as of July 25, 1994 among FCX,
ChaseMellon, as Depositary, and holders of depositary
receipts (Silver-Denominated Depositary Receipts) evidencing
certain Depositary Shares, each of which, in turn, initially
represents 0.025 shares of Silver-Denominated Preferred
Stock. Incorporated by reference to Exhibit 4.2 to the July
15, 1994 Form 8-A.
4.12 Form of Silver-Denominated Depositary Receipt. Incorporated
by reference to Exhibit 4.1 to the July 15, 1994, Form 8-A.
4.13 $550 million Composite Restated Credit Agreement dated as of
July 17, 1995 (the PT Freeport Indonesia Credit Agreement)
among PT Freeport Indonesia, FCX, the several financial
institutions that are parties thereto, First Trust of New
York, National Association, as PT Freeport Indonesia
Trustee, Chemical Bank, as administrative agent and FCX
collateral agent, and The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by
reference to Exhibit 4.16 to the Annual Report of FCX on
Form 10-K for the year ended December 31, 1995 (the FCX 1995
Form 10-K).
4.14 Amendment dated as of July 15, 1996 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, Chemical Bank, as administrative
agent and FCX collateral agent, and The Chase Manhattan Bank
(National Association), as documentary agent. Incorporated
by reference to Exhibit 4.2 to the Quarterly Report of FCX
on Form 10-Q for the quarter ended September 30, 1996 (the
FCX 1996 Third Quarter Form 10-Q).
4.15 Amendment dated as of October 9, 1996 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, The Chase Manhattan Bank
(formerly Chemical Bank), as administrative agent, security
agent and JAA security agent, and The Chase Manhattan Bank
(as successor to The Chase Manhattan Bank (National
Association)), as documentary agent. Incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K
of FCX dated and filed November 13, 1996 (the FCX November
13, 1996 Form 8-K).
4.16 Amendment dated as of March 7, 1997 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, The Chase Manhattan Bank, as
administrative agent, security agent and JAA security agent,
and The Chase Manhattan Bank, as documentary agent.
Incorporated by reference to Exhibit 4.16 to the Annual
Report of FCX on Form 10-K for the year ended December 31,
1997 (the FCX 1997 Form 10-K).
4.17 Amendment dated as of July 24, 1997 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT
Freeport Indonesia Trustee, The Chase Manhattan Bank, as
administrative agent, security agent and JAA security agent,
and The Chase Manhattan Bank, as documentary agent.
Incorporated by reference to Exhibit 4.17 to the FCX 1997
Form 10-K.
E-2
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.18 $200 million Credit Agreement dated as of June 30, 1995 (the
CDF) among PT Freeport Indonesia, FCX, the several financial
institutions that are parties thereto, First Trust of New
York, National Association, as PT Freeport Indonesia
Trustee, Chemical Bank, as administrative agent and FCX
collateral agent, The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by
reference to Exhibit 4.2 to the FCX 1995 Third Quarter Form
10-Q.
4.19 Amendment dated as of July 15, 1996 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, Chemical
Bank, as administrative agent and FCX collateral agent, and
The Chase Manhattan Bank (National Association), as
documentary agent. Incorporated by reference to Exhibit 4.1
to the FCX 1996 Third Quarter Form 10-Q.
4.20 Amendment dated as of October 9, 1996 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PTFreeport Indonesia Trustee, The Chase
Manhattan Bank (formerly Chemical Bank), as administrative
agent, security agent and JAA security agent, and The Chase
Manhattan Bank (as successor to The Chase Manhattan Bank
(National Association)), as documentary agent. Incorporated
by reference to Exhibit 10.1 to the FCX November 13, 1996
Form 8-K.
4.21 Amendment dated as of March 7, 1997 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank, as administrative agent, security agent and
JAA security agent, and The Chase Manhattan Bank, as
documentary agent. Incorporated by reference to Exhibit
4.21 to the FCX 1997 Form 10-K.
4.22 Amendment dated as of July 24, 1997 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank, as administrative agent, security agent and
JAA security agent, and The Chase Manhattan Bank, as
documentary agent. Incorporated by reference to Exhibit
4.22 to the FCX 1997 Form 10-K.
4.23 Senior Indenture dated as of November 15, 1996 from FCX to
The Chase Manhattan Bank, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K
of FCX dated November 13, 1996 and filed November 15, 1996.
4.24 First Supplemental Indenture dated as of November 18, 1996
from FCX to The Chase Manhattan Bank, as Trustee, providing
for the issuance of the Senior Notes and supplementing the
Senior Indenture dated November 15, 1996 from FCX to such
Trustee, providing for the issuance of Debt Securities.
Incorporated by reference to Exhibit 4.20 to the FCX 1996
Form 10-K.
10.1 Contract of Work dated December 30, 1991 between the
Government of the Republic of Indonesia and PT Freeport
Indonesia. Incorporated by reference to Exhibit 10.2 to the
FCX 1995 Form 10-K.
10.2 Contract of Work dated August 15, 1994 between the
Government of the Republic of Indonesia and PT Irja Eastern
Minerals Corporation. Incorporated by reference to Exhibit
10.2 to the FCX 1995 Form 10-K.
10.3 Agreement dated as of October 11, 1996 to Amend and Restate
Trust Agreement among PT Freeport Indonesia, FCX, the RTZ
Corporation PLC, P.T. RTZ-CRA Indonesia, RTZ Indonesian
Finance Limited and First Trust of New York, National
Association, and The Chase Manhattan Bank, as Administrative
Agent, JAA Security Agent and Security Agent. Incorporated
by reference to Exhibit 10.3 to the FCX November 13, 1996
Form 8-K.
E-3
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.4 Credit Agreement dated October 11, 1996 between PT Freeport
Indonesia and RTZ Indonesian Finance Limited. Incorporated
by reference to Exhibit 10.4 to the FCX November 13, 1996
Form 8-K.
10.5 Participation Agreement dated as of October 11, 1996 between
PT Freeport Indonesia and P.T. RTZ-CRA Indonesia with
respect to a certain contract of work. Incorporated by
reference to Exhibit 10.5 to the FCX November 13, 1996 Form
8-K.
10.6 Second Amended and Restated Joint Venture and Shareholders'
Agreement dated as of December 11, 1996 among Mitsubishi
Materials Corporation, Nippon Mining and Metals Company,
Limited and PT Freeport Indonesia. Incorporated by
reference to Exhibit 10.3 of the FCX 1996 Form 10-K.
10.7 Put and Guaranty Agreement dated as of March 21, 1997
between FCX and The Chase Manhattan Bank. Incorporated by
reference to Exhibit 10.7 to the FCX 1997 Form 10-K.
10.8 Subordinated Loan Agreement dated as of March 21, 1997
between FCX and PT Nusamba Mineral Industri. Incorporated
by reference to Exhibit 10.8 to the FCX 1997 Form 10-K.
10.9 Amended and Restated Power Sales Agreement dated as of
December 18, 1997 between PT Freeport Indonesia and P.T.
Puncakjaya Power. Incorporated by reference to Exhibit 10.9
to the FCX 1997 Form 10-K.
10.10Option, Mandatory Purchase and Right of First Refusal
Agreement dated as of December 19, 1997 among PT Freeport
Indonesia, P.T. Puncakjaya Power, Duke Irian Jaya, Inc.,
Westcoast Power, Inc. and P.T. Prasarana Nusantara Jaya.
Incorporated by reference to Exhibit 10.10 to the FCX 1997
Form 10-K.
Executive Compensation Plans and Arrangements (Exhibits
10.11 through 10.33)
10.11Annual Incentive Plan of FCX as amended effective
February 2, 1999. Incorporated by reference to Exhibit
10.11 to the 1998 FCX Form 10-K.
10.121995 Long-Term Performance Incentive Plan of FCX.
Incorporated by reference to Exhibit 10.9 to the FCX 1996
Form 10-K.
10.13FCX Performance Incentive Awards Program as amended
effective February 2, 1999. Incorporated by reference to
Exhibit 10.13 to the 1998 FCX Form 10-K.
10.14FCX President's Award Program. Incorporated by
reference to Exhibit 10.8 to the FCX 1995 Form 10-K.
10.15FCX Adjusted Stock Award Plan, as amended.
Incorporated by reference to Exhibit 10.15 to the 1997 FCX
Form 10-K.
10.16FCX 1995 Stock Option Plan. Incorporated by reference
to Exhibit 10.13 to the FCX 1996 Form 10-K.
10.17FCX 1995 Stock Option Plan for Non-Employee Directors,
as amended. Incorporated by reference to Exhibit 10.17 to
the FCX 1997 Form 10-K.
10.18FCX 1999 Stock Incentive Plan. Incorporated by reference to
Exhibit 10.18 to the Quarterly Report on Form 10-Q of FCX
for the quarter ended June 30, 1999.
10.19FCX 1999 Long-Term Performance Incentive Plan.
10.20Financial Counseling and Tax Return Preparation and
Certification Program of FCX. Incorporated by reference to
Exhibit 10.12 to the FCX 1995 Form 10-K.
E-4
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.21FM Services Company Performance Incentive Awards
Program as amended effective February 2, 1999. Incorporated
by reference to Exhibit 10.19 to the 1998 FCX Form 10-K.
10.22FM Services Company Financial Counseling and Tax Return
Preparation and Certification Program. Incorporated by
reference to Exhibit 10.14 to the FCX 1995 Form 10-K.
10.23Consulting Agreement dated as of December 22, 1988
between FTX and Kissinger Associates, Inc. (Kissinger
Associates). Incorporated by reference to Exhibit 10.21 to
the FCX 1997 Form 10-K.
10.24Letter Agreement dated May 1, 1989 between FTX and Kent
Associates, Inc. (Kent Associates, predecessor in interest
to Kissinger Associates). Incorporated by reference to
Exhibit 10.22 to the FCX 1997 Form 10-K.
10.25Letter Agreement dated January 27, 1997 among Kissinger
Associates, Kent Associates, FTX, FCX and FMS. Incorporated
by reference to Exhibit 10.20 to the FCX 1996 Form 10-K.
10.26Agreement for Consulting Services between FTX and B. M.
Rankin, Jr. effective as of January 1, 1991 (assigned to FMS
as of January 1, 1996). Incorporated by reference to Exhibit
10.24 to the FCX 1997 Form 10-K.
10.27Supplemental Agreement between FMS and B. M. Rankin Jr.
dated December 15, 1997. Incorporated by reference to
Exhibit 10.25 to the FCX 1997 Form 10-K.
10.28Supplemental Agreement between FMS and B.M. Rankin Jr.
dated December 7, 1998. Incorporated by reference to Exhibit
10.26 to the 1998 FCX Form 10-K.
10.29Letter Agreement effective as of January 7, 1997
between Senator J. Bennett Johnston, Jr. and FMS.
Incorporated by reference to Exhibit 10.25 of the FCX 1996
Form 10-KK.
10.30Supplemental Letter Agreement dated November 30, 1999
between J. Bennett Johnston, Jr. and FMS.
10.31Letter Agreement dated January 25, 1999 between FMS and
Rene L. Latiolais. Incorporated by reference to Exhibit
10.30 to the 1998 FCX Form 10-K.
10.32Supplemental Letter Agreement dated August 4, 1999
between FMS and Rene L. Latiolais.
10.33Letter Agreement dated November 1, 1999 between FMS and
Gabrielle K. McDonald.
10.34Concentrate Purchase and Sales Agreement dated effective
December 11, 1996 between PT Freeport Indonesia and P T
Smelting.
12.1 FCX Computation of Ratio of Earnings to Fixed Charges.
13.1 Those portions of the 1999 Annual Report to stockholders of
FCX that are incorporated herein by reference.
21.1 Subsidiaries of FCX.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Independent Mining Consultants, Inc.
E-5
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
24.1 Certified resolution of the Board of Directors of FCX
authorizing this report to be signed on behalf of any
officer or director pursuant to a Power of Attorney.
24.2 Powers of Attorney signed on behalf of certain officers and directors of
FCX.
27.1 FCX Financial Data Schedule.
E-6