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, 1996
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
incorporation or organization) Indentification No.)
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 New York Stock Exchange
$0.10 per share
Class B Common Stock par value New York Stock Exchange
$0.10 per share
Depositary Shares representing New York Stock Exchange
0.05 shares of Step-Up
Convertible Preferred Stock,
par value $0.10 per share
Depositary Shares representing New York Stock Exchange
0.05 shares of Gold-Denominated
Preferred Stock, par value
$0.10 per share
Depositary Shares, Series II, New York Stock Exchange
representing 0.05 shares of Gold-
Denominated Preferred Stock,
Series II, par value $0.10 per share
Depositary Shares representing New York Stock Exchange
0.025 shares of Silver-
Denominated Preferred Stock,
par value $0.10 per share
9-3/4% Senior Notes due 2001 of New York Stock Exchange
P.T. ALatieF Freeport Finance
Company B.V., guaranteed by the
registrant
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 voting stock
(common and preferred) held by non-affiliates of the registrant on
March 14, 1996 was approximately $5,766,600,000.
On March 14, 1996 there were issued and outstanding
83,043,544 shares of Class A Common Stock and 117,616,548 shares
of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to stockholders
for the year ended December 31, 1996 are incorporated by reference
into Parts II and IV of this Report and portions of the Proxy
Statement dated March 20, 1997 submitted to the registrant's
stockholders in connection with its 1997 Annual Meeting to be held
on April 29, 1997 are incorporated by reference into Part III of
this Report.
[COVER]
TABLE OF CONTENTS
Page
Part I
Items 1. and 2. Business and Properties..........................1
Item 3. Legal Proceedings.....................................12
Item 4. Submission of Matters to a Vote of Security Holders...12
Executive Officers of the Registrant..................13
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.......................14
Item 6. Selected Financial Data...............................14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................14
Item 8. Financial Statements and Supplementary Data...........14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................14
Part III
Item 10. Directors and Executive Officers of the Registrant....14
Item 11. Executive Compensation................................15
Item 12. Security Ownership of Certain Beneficial Owners
and Management........................................15
Item 13. Certain Relationships and Related Transactions........15
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K..............................................15
Signatures.....................................................S-1
Index to Financial Statements..................................F-1
Report of Independent Public Accountants.......................F-1
Exhibit Index..................................................E-1
[PAGE] i
PART I
Items 1. and 2. Business and Properties.
General
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
("FCX" or the "Company"), is one of the world's largest copper and
gold companies in terms of reserves and production, and believes
that it has one of the lowest cost copper producing operations in
the world, taking into account customary credits for related gold
and silver production.
FCX's principal operating subsidiary is P.T. Freeport
Indonesia Company ("PT-FI"), a limited liability company organized
under the laws of the Republic of Indonesia and domesticated in
Delaware. PT-FI engages in the exploration for and development,
mining and processing of ore containing copper, gold and silver in
Irian Jaya, Indonesia pursuant to an agreement (a "Contract of
Work" or "COW") with the government of the Republic of Indonesia
(the "Indonesian Government") and in the worldwide marketing of
concentrates containing those metals. FCX owns directly an 81.28%
interest in PT-FI. Of the remaining 18.72%, 9.36% is owned by
each of the Indonesian Government and P.T. Indocopper Investama
Corporation, an Indonesian limited liability company ("PT-II"), in
which FCX owns a 49% interest, giving FCX an aggregate 85.87%
ownership interest in PT-FI. PT-FI's operations are located in the
remote rugged highlands of the Sudirman Mountain Range in the
province of Irian Jaya, Indonesia, located on the western half of
the island of New Guinea. The PT-FI COW permits extensive
exploration, mining and production activities in an original
24,700 acre area, referred to as "Block A," and an exploration
area originally consisting of approximately 6.5 million acres
referred to as "Block B." PT-FI's largest mine, Grasberg, was
discovered in Block A in 1988 and contains the largest single gold
reserve and one of the three largest open-pit copper reserves of
any mine in the world. In 1996, FCX and The RTZ-CRA Group ("RTZ-
CRA") established joint ventures pursuant to which RTZ-CRA will
acquire an undivided 40% interest in future production expansions
and certain development activities in the areas covered by the PT-
FI COW.
Through P.T. IRJA Eastern Minerals Corporation ("Eastern
Mining"), FCX holds an additional COW in Irian Jaya originally
covering an approximately 2.5 million acre exploration area.
Eastern Mining was formed in 1994 for the purpose of acquiring,
holding and developing the Eastern Mining COW. FCX owns 90% of the
outstanding common stock of Eastern Mining through a wholly owned
subsidiary, and the remaining 10% is owned by PT-II, giving FCX an
aggregate 94.9% ownership interest in Eastern Mining. In 1996,
FCX and RTZ-CRA established a joint venture pursuant to which RTZ-
CRA will acquire an undivided 40% interest in certain development
activities in areas covered by the Eastern Mining COW.
In February 1997, subject to certain conditions described
below, FCX agreed to acquire a 15% interest in two Indonesian
companies that are expected to be granted COWs to explore and
develop minerals in the Busang II and Busang III exploration areas
in East Kalimantan, Indonesia. Each company will be owned 45% by
BRE-X Minerals Ltd. ("BRE-X"), 40% by Indonesian interests,
including the Indonesian Government, and 15% by FCX. The
participants have appointed FCX as the operator of the Busang II
and Busang III properties. FCX has agreed to provide 25% of the
total estimated cost of delineating a proven reserve and
constructing the initial Busang mine complex, up to $400 million.
Additionally, FCX has agreed to arrange up to a $1.2 billion
project financing commitment for the remaining estimated costs of
the initial Busang mine complex. The transactions are subject to
the confirmation to the satisfaction of FCX of the existence of
one or more commercially viable gold or other mineral resources,
the receipt of COWs and other approvals from the Indonesian
Government, the approval of a feasibility study by the
commissioners and directors of the Indonesian companies to be
formed to own the Busang II and Busang III COWs and the board of
directors of FCX, and to certain other conditions. FCX has
commenced a due diligence review of the Busang properties and on
March 26, 1997, announced that it had drilled seven core holes
within the Busang II project area to confirm the results of core
holes previously drilled by BRE-X. To date, analyses of these
cores, which remain incomplete, indicate insignificant amounts of
gold. Representatives of BRE-X met with FCX's technical team in
Jakarta, Indonesia on March 26, 1997, at which time all
information available to FCX was presented to the BRE-X
representatives. FCX was informed by BRE-X that, based on the
recommendation of BRE-X's independent technical consultants, BRE-X
was undertaking a review that includes drilling additional core
holes in the Busang II area. In addition, BRE-X advised FCX that
its independent technical consultants had informed BRE-X that
there appears to be a strong possibility that the potential gold
resources
[PAGE] 1
on the Busang project as previously reported by BRE-X
have been overstated because of invalid samples and assaying of
those samples.
FCX is also engaged in the smelting and refining of copper
concentrates in Spain through its indirect, wholly owned
subsidiary, Atlantic Copper Holding, S.A. ("Atlantic"), formerly
Rio Tinto Minera, S.A. Atlantic completed the expansion of its
smelter from 150,000 to 270,000 metric tons of metal per year and
reached full capacity in June 1996. PT-FI also has a 25% joint
venture interest in a copper smelter being constructed in Gresik,
East Java, Indonesia having a design capacity of 200,000 metric
tons of copper cathode per year. The smelter is expected to be
fully operational during the second half of 1998 and it is
anticipated that PT-FI will provide all of the smelter's copper
concentrate.
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
almost 200 million citizens. Following many years of Dutch
colonial rule, Indonesia gained independence in 1945 and now has a
presidential republic system of government in which parliamentary
and presidential elections are held every five years. President
Suharto, who assumed power in 1966 and is now 75, was re-elected
in 1993 to a sixth consecutive five-year term.
Maintaining a good relationship with the Indonesian
Government is of particular importance to the Company because all
of its mining operations are located in Indonesia. PT-FI's 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 Suharto administration in
1967. PT-FI works closely with the central, provincial and local
governments in development efforts in the vicinity of its
operations. The Company's current mining operations in Indonesia
are conducted through PT-FI by virtue of the PT-FI COW and through
Eastern Mining by virtue of the Eastern Mining COW, both of which
have 30-year terms, provide for two 10-year extensions under
certain conditions, and govern PT-FI's and Eastern Mining's rights
and obligations relating to taxes, exchange controls, repatriation
and other matters. Both COWs 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.
PT-FI's current mining operations are located in the
Indonesian province of Irian Jaya, which occupies the western half
of the island of New Guinea and became part of Indonesia during
the early 1960s. The area surrounding PT-FI's mining development
is sparsely populated by primitive local tribes and former
residents of more populous areas of Indonesia, some of whom have
resettled in Irian Jaya under the Indonesian Government's
transmigration program. Certain members of the local population
oppose Indonesian rule over Irian Jaya, and several small
separatist groups seek political independence for the province.
Sporadic attacks on civilians by the separatists and sporadic but
highly publicized conflicts between separatists and the Indonesian
military have led to allegations of human rights violations. PT-FI
personnel have not been involved in those conflicts. The
Indonesian military occasionally has exercised its right to
appropriate transportation and other equipment of PT-FI to use in
its security operations.
PT-FI's policy has been to operate in Irian Jaya in
compliance with all Indonesian laws and in a manner that improves
the lives of the local population. PT-FI incurs significant costs
associated with its social and cultural activities. Such
activities include comprehensive job training programs, basic
education programs, extensive malaria control and several public
health programs, 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 March 1996, there were disturbances in
the mining town of Tembagapura and the lowlands town of Timika in
which area tribesmen engaged in acts of vandalism that resulted in
approximately $3 million of damage to Company property and a
three-day closure of PT-FI's mine and mill as a precautionary
measure. Concentrate shipments to customers were not interrupted
and there have been no further disruptions since the March 1996
event. Following these disturbances and as a result of subsequent
meetings with tribal leaders, the Company, in cooperation with the
Indonesian Government, agreed to redistribute and refocus its
community development programs by dedicating 1% of PT-FI's annual
revenues over the next ten years to fund these activities and,
among other things, to increase the number of local Irianese in
its work force. The Indonesian Government agreed as part of its
development efforts in Irian Jaya to create an integrated
development plan calling for the participation of the local tribes
in the creation and administration of community development
projects
[PAGE] 2
funded by the Company. While management believes that
its efforts to be responsive to the issues relating to the impact
of its operations on the local tribes should serve to avoid
further disruptions of mining operations, social and political
instability in the area may, in the future, have an adverse impact
on PT-FI's mining operations.
As described under "Environmental Matters," the Company has
elected to terminate all political risk insurance.
Contracts of Work
The PT-FI COW covers both Block A, which was originally the
subject of a 1967 COW between PT-FI's predecessor and the
Indonesian Government, and Block B, to which PT-FI gained rights
in 1991. The initial term of the PT-FI COW expires in December
2021 with provisions for two 10-year extensions under certain
conditions. Pursuant to the PT-FI COW, PT-FI is required to
relinquish its rights to portions of Block B in amounts equal to
25% of the original 6.5 million acres at the end of each of three
specified periods during a span of four to seven years, depending
on extensions requested by PT-FI and granted by the Indonesian
Government. The acreage to be released is determined by PT-FI and
need not be contiguous. PT-FI relinquished approximately 1.7
million acres in December 1994 and approximately 1.6 million acres
in December 1995. The final 25% relinquishment will occur no
later than December 1998 depending on extensions requested by PT-
FI and granted by the Indonesian Government. In order to
determine which acreage to relinquish pursuant to these
requirements, PT-FI has conducted an active exploration program
since 1989, focusing on what PT-FI believes to be the most
promising exploration opportunities in Block B.
In August 1994, Eastern Mining was granted the Eastern
Mining COW originally covering approximately 2.5 million acres in
three separate blocks. The Eastern Mining COW provides for a
four-to-seven year exploratory term and a 30-year term for actual
mining operations with provisions for two 10-year extensions under
certain conditions. Like the PT-FI COW, the Eastern Mining COW
requires Eastern Mining to relinquish its right to portions of the
Eastern Mining COW area determined by Eastern Mining in amounts
equal to 25% of the original approximately 2.5 million acres at
the end of each of three specified periods. The first
relinquishment, of approximately 0.7 million acres, occurred in
August 1996. Eastern Mining must relinquish an additional 1.2
million acres in two approximately equal installments no later
than August 1998 and August 2001.
Ore Reserves
All of PT-FI's proved and probable reserves, including the
Grasberg deposit, lie within Block A. In 1996, PT-FI increased
its proved and probable reserves by approximately 161 million
metric tons of ore. As a result, PT-FI's total estimated proved
and probable recoverable reserves as of December 31, 1996
increased over the December 31, 1995 level, net of 1996
production, by 2.9 billion pounds of copper (7%), 3.2 million
ounces of gold (6%) and 7.6 million ounces of silver (7%). PT-
FI's estimated proved and probable recoverable reserves, on a 100%
basis, as of December 31, 1996 were 43.2 billion pounds of copper,
55.3 million ounces of gold and 118.7 million ounces of silver.
Under its agreements with RTZ-CRA, PT-FI is entitled to receive
specified quantities of copper, gold and silver produced annually
from the first 118,000 MTPD of ore mined each year through
approximately 2021. Upon completion of the ongoing expansion,
RTZ-CRA will be entitled to receive, with limited exceptions, 40%
of any production in excess of these amounts produced within the
PT-FI COW and Eastern Mining COW areas pursuant to the joint
ventures described under "Exploration."
Of the increase in proved and probable reserves in 1996,
approximately one-half resulted from initial delineation drilling
at the Kucing Liar ore body. As of December 31, 1996, the Kucing
Liar deposit contained 82.3 million metric tons of proved and
probable ore reserves at an average grade of 1.28% copper, 1.42
grams of gold per metric ton and 3.14 grams of silver per metric
ton.
The Grasberg deposit contains the largest single gold
reserve and is one of the three largest open-pit copper reserves
of any mine in the world. The Grasberg deposit contains combined
open pit and underground proved and probable ore reserves as of
December 31, 1996 of 1.73 billion metric tons at an average grade
of 1.13% copper, 1.22 grams of gold per metric ton and 3.21 grams
of silver per metric ton.
[PAGE] 3
The Company's reserves as of December 31, 1995 and 1996
included herein have been verified by Independent Mining
Consultants, Inc., and such reserve information has been included
herein in reliance upon the authority of such firm as experts in
mining, geology and reserve determination. See "Cautionary
Statement."
Mining Operations
Mines in Production. PT-FI currently has two mines in
operation: the Grasberg and the Intermediate Ore Zone (the "IOZ"),
both within Block A. Open pit mining of the Grasberg ore body
commenced in January 1990, and in 1996 the Grasberg mine output
totaled approximately 42.4 million metric tons of ore, providing
approximately 92% percent of PT-FI's total ore production in 1996.
The IOZ is an underground block cave operation that came into
production in the first half of 1994. The production level is at
the 3,550 meter elevation level, approximately 150 meters below
the Ertsberg East deposit, which was depleted in the second half
of 1994. In 1996, output from the IOZ mine totaled approximately
3.7 million metric tons of ore.
Mines in Development. Four other significant ore bodies,
referred to as the Deep Ore Zone ("DOZ"), the DOM, the Big Gossan
and Kucing Liar are located in Block A. These ore bodies are
currently at various stages of development, and are carried as
proved and probable reserves. See "Cautionary Statement."
The DOZ ore body lies vertically below the IOZ. Initial
production from the DOZ ore body commenced in 1989 but was
suspended in favor of production from the Grasberg deposit.
Production is anticipated to recommence as the overlying IOZ
reserve is depleted.
The DOM ore body lies approximately 1,200 meters southeast
of the depleted Ertsberg East deposit. Pre-production development
was completed as the Grasberg began open pit production in 1990,
and all maintenance, warehouse and service facilities are in
place. Production at the DOM ore body was deferred as a result of
the increasing reserves and production capabilities of the
Grasberg.
The Kucing Liar ore body lies on the southern flank of and
underneath the southern portion of the Grasberg open pit. The
Kucing Liar ore body as indicated by drilling, is an extensive
skarn-type copper and gold mineralization that, based on current
information, could represent as much as a 250 million metric ton
geologic resource at an average grade of greater than 2% copper
equivalent.
The Big Gossan ore body is located approximately 1,000
meters southwest of the original Ertsberg deposit. Initial
underground development of the ore body began in 1993 when tunnels
were driven from the mill area into the ore zone at the 2,900
meter elevation level. A variety of stopping methods will be used
to mine the deposit, with production expected to commence as other
underground mines are depleted.
Exploration
In addition to continued delineation of the Grasberg deposit
and other deposits discussed under "Ore Reserves" and "Mining
Operations," PT-FI is continuing its exploration program within
Block A. The Company's continuing exploration of areas underneath
and around the Grasberg complex has also intersected the fringes
of "heavy sulfide" skarn-type mineralization that the Company
believes may surround the Grasberg complex. As the Amole adit
progresses into the Grasberg ore body, additional exploration
drilling will be conducted to test the western and northern flanks
of the Grasberg complex for Kucing Liar type mineralization as
well as for "heavy sulfide" skarn-type mineralization around the
fringes of the Grasberg ore body. Drilling in Lembah Tembaga,
approximately one kilometer southwest of the Grasberg deposit, has
identified an inferred resource that may contain up to 100 million
metric tons with an average grade of approximately 1.25% copper
and 0.5 grams of gold per metric ton. Exploration drilling
continues at other targets including the IOZ/DOZ Extensions, Guru
East, Idenberg, West Grasberg, DOM-SE and Kay, while surface
geological evaluations continue to develop targets at the South
Wanagon, Zaagkam Ridge, VN and Wanagon prospects.
Exploration of Block B has indicated more than 70
exploration targets, and follow-up exploration of these anomalies
is now in progress. PT-FI has focused its Block B drilling in an
area 35 kilometers north of the Grasberg deposit at a prospect
called Wabu, which lies within the Hitalipa District. Although the
area requires additional
[PAGE] 4
exploratory drilling, initial results
indicate a large mineralized district that covers approximately
75,000 acres, as compared to the original 24,700-acre Block A.
Because of its size and number of geologic leads, the Hitalipa
District is likely to be explored for many years. Drilling results
are being interpreted, and no assurance can be given that any of
these new areas contain commercially exploitable mineral deposits.
Aggregate 1996 exploration expenditures within the PT-FI COW
and Eastern Mining COW areas were $39.2 million. These costs are
not reflected as an expense in the Company's income statement
because RTZ-CRA has funded its $100 million commitment for
exploration costs. Exploration costs in excess of RTZ-CRA's $100
million commitment will be shared 60% by FCX and 40% by RTZ-CRA.
Through 1996, the joint venture had incurred approximately $70
million of exploration costs covered by the RTZ-CRA funding,
including $17.8 million in Block A, $27.5 million in Block B and
$24.7 million in the Eastern Mining COW area.
Milling and Production
The ore from PT-FI's mines moves by a conveyor system to a
series of ore passes through which it drops to the mill complex
located at 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 chemical reagents where it is continuously
agitated with air. During this physical separation process,
copper-bearing particles rise to the top of the tanks and are
collected and thickened. The concentrate leaves the mill complex
as a thickened concentrate slurry, consisting of approximately 65%
solids by weight, and is pumped through two 115 kilometer
pipelines to the 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 1996, FCX produced 1.12 billion pounds of copper,
approximately 14% more than in 1995, and 1,695,200 ounces of
gold, approximately 29% more than in 1995, resulting from record
average ore throughput of 127,400 MTPD, as compared to an average
of 111,900 MTPD for 1995. Average cash production costs in 1996,
net of customary gold and silver credits, were $0.168 per pound
of copper, 30% less than the comparable 1995 average.
During 1996, recovery rates averaged 83.8% of the copper
content, 77.1% of the gold content and 64.6% of the silver content
of the ore processed, compared to 85.0%, 74.3% and 63.2%,
respectively, during 1995.
FCX and RTZ-CRA have begun construction on the "fourth
concentrator mill expansion" of PT-FI's facilities. The optimum
rate following the expansion is expected to be at least 190,000-
200,000 MTPD, which will be subject to the approval of the
Indonesian Government. Completion is expected during mid-1998.
Costs for the expansion are expected to approximate $960 million,
including both working capital and $300 million for a coal-fired
power plant and related facilities. The new power facilities are
expected to be sold in 1998 to the joint venture that owns the
assets that presently provide electricity to PT-FI. Following
commencement of concentrate production from PT-FI's expanded
mining and milling capacity financed by RTZ-CRA, RTZ-CRA will have
a 40% interest in future production exceeding specified annual
amounts of copper, gold and silver estimated to be produced from
the first 118,000 MTPD of ore mined each year through
approximately 2021. To finance the expansion, subsidiaries of
RTZ-CRA will provide up to $750 million for defined costs, of
which 40% will be funded directly and 60% will be loaned to PT-FI
on a nonrecourse basis. The parties will share incremental cash
flow attributable to such expansion projects on the basis of 60%
to PT-FI and 40% to RTZ-CRA. PT-FI will assign to RTZ-CRA its
interest in such incremental cash flow until RTZ-CRA has received
an amount of funds from such assigned interest equal to the funds
lent to PT-FI plus interest based on RTZ-CRA's cost of borrowing.
In 1996, RTZ-CRA funded $125.6 million of expansion costs ($75.4
million of which was loaned to PT-FI).
Gresik Smelter
In July 1996, construction commenced on a copper smelter in
Gresik, East Java, Indonesia having a design capacity of 200,000
metric tons of copper cathode per year. PT-FI, Mitsubishi
Materials Corporation ("Mitsubishi Materials"), Mitsubishi
Corporation ("Mitsubishi") and Nippon Mining & Metals Co., Ltd.
("Nippon") own 25%, 60.5%, 9.5% and 5% interests, respectively, in
the smelter. The estimated aggregate project cost, before working
capital requirements, is approximately $625 million. The joint
venture has a $300 million nonrecourse term loan and a $110
million working capital facility with a group of banks. The
remainder of the required funding will be provided by PT-FI,
[PAGE] 5
Mitsubishi Materials, Mitsubishi and Nippon in accordance with
their interests. Construction is expected to be completed in
mid-1998 and the smelter is expected to be fully operational
during the second half of 1998. It is anticipated that PT-FI will
provide all of the smelter's copper concentrate requirements at
market rates subject to a floor during the first 15 years of
operations. PT-FI has also agreed to assign, if necessary, its
share of any dividends from the joint venture to support a 13%
annual return to Mitsubishi Materials, Mitsubishi and Nippon for
the first 20 years of commercial operations.
Infrastructure Improvements
The location of PT-FI's current operations in a remote area
requires that such operations be virtually self-sufficient. In
addition to the mining facilities described above, the facilities
originally constructed by or with the participation of PT-FI
include an airport, a port, a 119 kilometer road, an aerial
tramway, a hospital and two town sites with housing, schools and
other facilities sufficient to support more than 17,000 persons.
In 1996, PT-FI completed the first phase of the Enhanced
Infrastructure Program ("EIP"), which includes various
residential, community and commercial facilities. The EIP is
designed to provide the infrastructure needed for PT-FI's
operations, to enhance the living conditions of PT-FI's employees,
and to develop and promote the growth of local and other third
party activities and enterprises in Irian Jaya. The full EIP
includes plans for various commercial, residential, educational,
retail, medical, recreational, environmental and other
infrastructure facilities to be constructed over a ten-to-twenty
year period. The facilities constructed through the EIP have been
and are expected to continue to be developed by PT-FI through
joint ventures or direct ownership involving local Indonesian
interests and other investors. In 1996, the Company also
dedicated 1% of PT-FI's annual revenues over the next ten years to
continue related initiatives as part of the Indonesian
Government's integrated development plan for continuing community
development projects.
Marketing
PT-FI supplies copper concentrates, which contain
significant quantities of gold and silver, primarily to Asian and
European smelters and international trading companies. All of PT-
FI's concentrate sales are made in United States dollars.
Substantially all of PT-FI's budgeted production of copper
concentrates is sold under long-term contracts, pursuant to which
the selling price is based on world metals prices (generally the
London Metal Exchange ("LME") 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 generally occurs three months after arrival based
on average LME prices for that month. 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. Per unit royalty
payments to the Indonesian Government increase with increased
copper values and range from 1.5% to 3.5% of copper prices at the
time of shipment, net of delivery costs and treatment and refining
charges. A 1% royalty is paid to the Indonesian Government on gold
and silver sales. Treatment and refining costs represent payments
to smelters and refiners and are either fixed or in certain cases
float with the price of copper. A small portion of PT-FI's
budgeted production of copper concentrates, and any production in
excess of budgeted amounts, is sold in the spot market. See
"Cautionary Statement."
PT-FI has obtained commitments, including commitments from
Atlantic, for essentially all of its expected 1997 concentrate
sales, which are currently estimated to yield approximately 1.1
billion pounds of copper and 1.65 million ounces of gold. 1997
sales are anticipated to reflect management's expectation of
producing higher than mine life average grades during the year;
however, first-quarter 1997 production will be adversely affected
by the anticipated mining of lower grade ore. In addition, at
December 31, 1996, copper sales totaling 301.2 million pounds,
which were recorded in 1996 at an average price of $0.96 per
pound, remained to be contractually priced and are subject to
price adjustments during 1997.
Approximately 12% and 25% of PT-FI's total concentrate sales
in 1995 and 1996, respectively, were to Atlantic. PT-FI has a
long-term contract to provide Atlantic with approximately 50% of
its copper concentrate requirements at market prices. Upon
completion of the Gresik smelter discussed under "Gresik Smelter,"
FCX anticipates that approximately 25% of PT-FI's copper
concentrates (based upon assumed production of 190,000 MTPD) will
be sold to the Gresik smelter at market prices.
[PAGE] 6
Competition
PT-FI competes with other mining companies in the sale of
its mineral concentrates and the recruitment and retention of
qualified personnel. Some competing companies possess financial
resources equal to or greater than those of PT-FI. Management
believes, however, that PT-FI is one of the lowest cost copper
producers in the world, taking into account credits for related
gold and silver production.
Environmental Matters
Mining operations on the scale of PT-FI's operations in
Irian Jaya 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. The Company has an
extensive, ongoing management system for the disposal of tailings
in connection with discharging them into a river system downstream
from its milling operations. In January 1997, PT-FI completed a
levee system, as part of its Indonesian Government-approved
Tailings and River Management Plan, to minimize the impact of the
tailings on the environment by containing them in a controlled
deposition area that ultimately will be reclaimed and revegetated.
The Company also has performed an environmental impact
assessment of a proposed production expansion of mining and
milling operations to 160,000 MTPD and related infrastructure
improvements. The assessment was conducted, and the management
and monitoring plans were developed, by a team of independent
environmental experts and were approved by the Indonesian
Government. The Indonesian Government's approval process for the
management and monitoring plans was challenged by an Indonesian
environmental activist group in early 1995, but an Indonesian
administrative court ruled against the challenge in October 1995,
and the ruling is now on appeal. Management believes that the
challenge is without merit and will have no material effect upon
FCX, PT-FI or any of their respective assets or operations. The
Company and RTZ-CRA have commenced construction activities in
connection with the expansion to 160,000 MTPD and have commenced
activities in connection with the further expansion to at least
190,000-200,000 MTPD, which will require a separate environmental
impact assessment, environmental management plan and environmental
monitoring plan, as well as Indonesian Governmental approval.
Management believes that all necessary approvals can be obtained
although no assurance can be given that such approvals will be
granted on acceptable terms or at all.
Management believes that PT-FI operations are being
conducted pursuant to all necessary permits and in compliance in
all material respects with applicable Indonesian environmental
laws, rules and regulations. Management also believes that its
current operations have not had, and that its expanded operation
will not have, a significant adverse impact on the environment.
However, in the last two years various groups have expressed
heightened concerns about the environmental impact of PT-FI's
operations, and in October 1995, the Overseas Private Investment
Corporation ("OPIC"), a quasi-governmental agency of the United
States, sought to terminate the Company's $100 million political
risk insurance, citing, among other things, environmental concerns
about PT-FI's expanded operations. The Company believed that
there was neither a factual nor a legal basis for OPIC's action,
and the matter was submitted to arbitration even though the
availability of the insurance is not financially material to the
Company. In April 1996, the Company and OPIC agreed to terminate
the arbitration proceedings. As part of this settlement, OPIC
agreed to reinstate the political risk insurance until December
31, 1996, and the Company agreed to create a trust fund that it
will manage to finance environmental reclamation initiatives. The
Company will make annual contributions to the trust fund
accumulating to a total of $100 million at the end of mining
operations. In September 1996, FCX notified OPIC and certain
other insurers that it elected to terminate all of its political
risk insurance.
In 1995, PT-FI participated in an independent environmental
audit of its Irian Jaya operations under a program monitored by
the Indonesian Government. The environmental audit report was
released in April 1996 and included a total of 33 recommendations,
22 of which have already been implemented or are in the process of
being implemented by PT-FI and 11 of which are under various
phases of study. PT-FI is committed to carrying out the full
scope of the recommendations from the audit and all are expected
to be implemented by the end of 1997. The audit team identified
the disposal of tailings as the most critical environmental issue
facing PT-FI, requiring significant study, engineering and
monitoring over the life of the mine. The audit concluded that
PT-FI's Tailings and River Management Plan represented
[PAGE] 7
the most suitable option for tailings disposal considering the
engineering and environmental challenges in Irian Jaya. The audit
also confirmed that the tailings from PT-FI's mining operations are
non-toxic, the mining operations do not pose any significant risk
to Irian Jaya's bio-diversity and PT-FI's operations are being
conducted in all material respects in compliance with applicable
Indonesian environmental laws, rules and regulations. PT-FI
intends to implement a program of independent external audits and
continue its internal audits through the life of its mining
operations so that PT-FI's environmental management and monitoring
programs remain sound to ensure compliance in all material
respects with applicable Indonesian environmental laws, rules and
regulations and to preserve and protect the environment in its
area of operations.
In 1995, PT-FI also began to participate in an independent
social/cultural audit of its Irian Jaya operations under a program
monitored by the Indonesian Government. The audit is being
conducted by Labatt Anderson, which is an internationally
recognized consulting firm based in the United States. The
social/cultural audit is continuing, but the interim results were
submitted to the Indonesian Government in the second quarter of
1996. Labatt Anderson made 17 recommendations in its interim
report, all of which had previously been implemented by PT-FI or
have been implemented since the interim report was submitted.
Management believes that Atlantic's facilities and
operations are in compliance in all material respects with all
applicable Spanish environmental laws, rules and regulations.
Atlantic recently completed modifications to and expanded its
sulfuric acid plants, which has resulted in significant reductions
in air emissions. In addition, Atlantic expects to realize
significant additional environmental improvements upon completion
of other projects currently under way.
The Indonesian and Spanish governments may periodically
revise their environmental laws and regulations or adopt new ones,
and the effects on the Company's operations of new or revised
regulations cannot be predicted.
The Company has expended significant resources, both
financial and managerial, to comply with environmental regulations
and permitting and approval requirements, and anticipates that it
will continue to do so in the future. There can be no assurance
that additional significant costs and liabilities will not be
incurred to comply with such current and future regulations or
that such regulations will not have a material effect on the
Company's operations. See "Cautionary Statement."
Sale of PT-II Stock
PT Nusamba Mineral Industri ("Nusamba"), a special purpose
subsidiary of PT Nusantara Ampera Bakti, acquired in March 1997
approximately 51% of the capital stock of PT-II not owned by FCX.
Nusamba financed $254 million of the $315 million purchase price
with a commercial loan. FCX has agreed that if Nusamba defaults
on the loan, FCX will purchase the PT-II stock or the lenders'
interest in the commercial loan for the amount then due by Nusamba
under the loan. FCX also agreed to lend to Nusamba any amounts to
cover any differences between the interest payments due on the
commercial loan and the dividends received by Nusamba from PT-II.
Distribution of FCX Class B Common Stock
Until mid-1995, FCX was a majority-owned subsidiary of
Freeport-McMoRan Inc. ("FTX"). In July 1995, FTX's Board of
Directors declared and paid a distribution to holders of its
common stock of all of the shares of FCX Class B Common Stock
owned by FTX. Prior to the distribution, the FCX stockholders
approved changes to FCX's capital structure and voting rights
that, among other things, provided holders of FCX Class B Common
Stock with the right to elect 80% of the FCX directors and
provided holders of FCX Class A Common Stock and holders of FCX
preferred stock, voting together, with the right to elect the
balance of such directors. Except for voting rights, the two
classes of FCX common stock are identical. The distribution was
the final step in a restructuring of FTX, as a result of which FTX
no longer owns any interest in FCX.
In order to ensure the tax free nature of the distribution
of FCX Class B Common Stock, FCX has agreed that, unless it
obtains an opinion of tax counsel or supplemental letter ruling
from the Internal Revenue Service that the tax free nature of the
distribution would not be adversely affected, (a) until July 17,
2000 it will not initiate or support any action that would change
the manner in which its directors are elected and (b) until July
17, 1997 it will (i) not issue any shares
[PAGE] 8
of any class of
preferred stock that would not entitle its holders to vote
together with the Class A Common Stock and the existing classes of
preferred stock in the election of directors, (ii) not dispose of
any PT-FI common stock, subordinated promissory notes or
production payment loans held by FCX on July 17, 1995, (iii) take
no affirmative step to merge, liquidate or, except in the ordinary
course of business, sell any of its assets, (iv) use its best
efforts to cause PT-FI to remain the operator under the PT-FI COW
and continue its business in a substantially unchanged manner, or
(v) subject to certain permitted conditions, not redeem or
reacquire shares of Class B Common Stock.
Employees of PT-FI and Relationship with FM Services Company
As of December 31, 1996, PT-FI had approximately 8,300
employees (approximately 96% Indonesian). In addition, as of
December 31, 1996, PT-FI had approximately 8,100 contract workers,
most of whom were Indonesian. Approximately 51% of PT-FI's
Indonesian employees are members of the All Indonesia Workers'
Union, which operates under Indonesian Government supervision and
is party to a labor agreement covering PT-FI's hourly-paid
Indonesian employees that expires on September 30, 1997. Other
than the work stoppage to March, as described under "Republic of
Indonesia," PT-FI experienced no work stoppages in 1996, and
relations with the union have generally been good. As of December
31, 1996, Atlantic had approximately 775 employees, of which
approximately 82% are covered by union contracts. Atlantic
experienced no work stoppages in 1996 and relations with these
unions have also generally been good.
Prior to January 1, 1996, FCX had no employees. Until mid-
1995, FCX was a majority-owned subsidiary of FTX, and in order to
permit United States citizens engaged full time in PT-FI's and
Atlantic's businesses to participate in FTX's employee benefit
plans, such persons were employed by a United States subsidiary of
FTX. Prior to January 1, 1996, FCX, PT-FI and FTX were parties to
a Management Services Agreement (the "Management Agreement")
pursuant to which FTX furnished executive, administrative,
financial, accounting, legal, tax, sales and similar services to
FCX and PT-FI. Since January 1, 1996, with limited exceptions,
former employees of FTX engaged full-time in the business of FCX,
PT-FI or Atlantic have become employees of FCX, and former
employees of FTX providing the services formerly provided by FTX
under the Management Agreement have become employees of FM
Services Company, a Delaware corporation 50% owned by each of FTX
and FCX ("FMS"). Since January 1, 1996, FMS has furnished
services to FCX similar to those historically provided by FTX to
FCX. FCX reimburses FMS, at its cost, including allocated
overhead, for such services on a monthly basis.
Cautionary Statement
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements other
than statements of historical fact included in this report,
including, without limitation, the statements under the headings
"Business and Properties," "Market for Registrant's Common Equity
and Related Stockholder Matters," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
regarding FCX's financial position and liquidity, payment of
dividends, FCX's strategic growth initiatives, future capital
needs, development and capital expenditures (including the amount
and nature thereof), exploration efforts, reserve estimates and
additions, production levels, business strategies, and other plans
and objectives of management of the Company for future operations
and activities, are forward-looking statements. These statements
are based on certain assumptions and analyses made by the Company
in light of its experience and its perception of historical
trends, current conditions, expected future developments and other
factors it believes are appropriate under the circumstances. Such
statements are subject to a number of assumptions, risks and
uncertainties, including the risk factors discussed below and in
the Company's other filings with the Securities and Exchange
Commission, general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company,
changes in laws or regulations and other factors, many of which
are beyond the control of the Company. Readers are cautioned that
any such statements are not guarantees of future performance, and
the actual results or developments may differ materially from
those projected, predicted or assumed in the forward-looking
statements. All subsequent written and oral forward-looking
statements attributable to FCX or persons acting on its behalf
are expressly qualified in their entirety by these cautionary
statements. Important factors that could cause actual results to
differ materially include, among others:
. Fluctuations in the market prices of copper and gold
[PAGE] 9
. The political, social and economic risks associated
with operations in Indonesia, Spain and other countries
where FCX may conduct operations
. General domestic and international economic and
political conditions
. Fluctuations in foreign currency exchange rates
(particularly the Spanish peseta and Indonesian rupiah)
. The availability of smelting capacity in relation to
the worldwide supply of concentrates, and the ability
of FCX to retain and obtain favorable concentrate sales
contracts with customers
. Unexpected geological conditions or rock stability
conditions resulting in cave-ins, floodings, rock-
bursts or rock slides
. Difficulties associated with managing complex
operations in a remote and rugged mountainous area
. Unanticipated declines in the average grades of ore
mined
. Unanticipated milling and other processing problems
. The speculative nature of mineral exploration
. Environmental risks
. Changes in laws and government regulations, including
those relating to taxes and the environment
. The availability and timing of receipt of necessary
governmental permits and approvals relating to
operations, expansion of operations, and financing of
operations
. Difficulties in reaching agreements, or resolving
disputes, with joint venture partners, government
officials, suppliers or customers
. Fluctuations in interest rates and other adverse
financial market conditions
. Other unanticipated difficulties in obtaining necessary
financing
. The failure of equipment or processes to operate in
accordance with specifications or expectations
. Labor relations
. Accidents
. Unusual weather or operating conditions
. Force majeure events
. Other risk factors described from time to time in FCX's
filings with the Securities and Exchange Commission
Many of these factors are beyond FCX's ability to control or
predict. Investors are cautioned not to place undue reliance on
forward-looking statements. FCX disclaims any intent or
obligation to update its forward-looking statements, whether as a
result of receiving new information, the occurrence of future
events or otherwise.
A more detailed discussion of certain of the foregoing
factors follows.
Prices of Minerals. Because FCX's revenues are derived
primarily from the sale of concentrates containing copper and
gold, FCX's earnings are directly related to market prices for
copper and gold. Prices for such minerals historically have
fluctuated widely and are affected by numerous factors beyond
FCX's control.
Location and Industry Risks. PT-FI's mining operations are
located in steeply mountainous terrain in a very remote area of
Indonesia, which makes the conduct of its operations difficult and
has required PT-FI to overcome special engineering difficulties
and develop extensive infrastructure facilities. The area is
subject to considerable rainfall, which has led to periodic floods
and mud slides. The mine site is also in an active seismic area,
and earth tremors have been experienced from time to time. PT-FI
also is subject to the usual risks encountered in the mining
industry, including unexpected geological conditions resulting in
cave-ins, floodings and rock-bursts and unexpected changes in rock
stability conditions. None of these factors have caused any
significant interruptions to production or significant property
damage, although no assurance can be given that delays or damage
will not occur in the future. PT-FI has substantial insurance
involving such amounts and types of coverage as it believes are
appropriate for its exploration, development, mining and
processing activities in Indonesia.
Political Factors. Maintaining a good working relationship
with the Indonesian Government is of particular importance to the
Company because its principal operations are located in Indonesia.
PT-FI's 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 Suharto
administration in 1967. PT-FI works closely with the central,
provincial and local governments in development efforts in the
vicinity of its operations. The Company operates in Indonesia
through
[PAGE] 10
PT-FI by virtue of the PT-FI COW and through Eastern
Mining by virtue of the Eastern Mining COW, both of which have 30-
year terms, provide for two 10-year extensions under certain
conditions, and govern PT-FI's and Eastern Mining's rights and
obligations relating to taxes, exchange controls, repatriation and
other matters. Both COWs 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.
PT-FI's mining operations are located in the Indonesian
province of Irian Jaya, which occupies the western half of the
island of New Guinea and became part of Indonesia during the early
1960s. The area surrounding PT-FI's mining development is sparsely
populated by primitive local tribes and former residents of more
populous areas of Indonesia, some of whom have resettled in Irian
Jaya under the Indonesian Government's transmigration program.
Certain members of the local population oppose Indonesian rule
over Irian Jaya, and several small separatist groups seek
political independence for the province. Sporadic attacks on
civilians by the separatists and sporadic but highly publicized
conflicts between separatists and the Indonesian military have led
to allegations of human rights violations. PT-FI personnel have
not been involved in those conflicts. The Indonesian military
occasionally has exercised its right to appropriate transportation
and other equipment of PT-FI.
PT-FI's policy has been to operate in Irian Jaya in
compliance with Indonesian laws and in a manner that improves the
lives of the local population. PT-FI incurs significant costs
associated with its social and cultural activities. Such
activities include comprehensive job training programs, basic
education programs, extensive malaria control and general public
health programs, 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.
Following civil disturbances in the mining town of
Tembagapura and the lowlands town of Timika in early 1996 and as a
result of subsequent meetings with tribal leaders, the Company, in
cooperation with the Indonesian Government, agreed to redistribute
and refocus its community development programs by dedicating 1% of
PT-FI's revenues over the next ten years to fund these efforts
and, among other things, to increase the number of local Irianese
in its work force. The Indonesian Government agreed as part of
its development efforts in Irian Jaya to create an integrated
development plan calling for the participation of the local tribes
in creating and developing the community development projects
funded by the Company. While management believes that its efforts
to be responsive to the issues relating to the impact of its
operations on the local tribes should ensure that mining
operations will not be disrupted, social and political instability
in the area may, in the future, have an adverse impact on PT-FI's
mining operations.
Reserves. FCX reserve amounts, which are determined in
accordance with established mining industry practices and
standards, are estimates only. PT-FI's mines, whether in the
production or development stages, may not conform to geological
concepts or other expectations, so that the volume and grade of
reserves recovered and the rates of production may be more or less
than anticipated. Because ore bodies do not contain uniform
grades of minerals, ore recovery rates will vary from time to
time, resulting in variations in volumes of minerals sold from
period to period. Further, market price fluctuations in copper,
gold and, to a lesser extent, silver, and changes in operating and
capital costs may render certain ore reserves uneconomic to
develop. No assurance can be given that FCX's exploration
programs will result in the discovery of commercially exploitable
mineral deposits.
Environmental and Government Regulation. The Company's
exploration and mining activities in Irian Jaya involve
significant engineering and environmental challenges that relate
primarily to the location of the mine in remote, rugged highlands
and the disposition of tailings through discharge into a river
that deposits them in a controlled deposition area near the sea.
The Company has sought to preserve and protect the environment in
its area of operations.
The Company has expended significant resources, both
financial and managerial, to comply with environmental regulations
and permitting and approval requirements and anticipates that it
will continue to do so in the future. There can be no assurance
that additional significant costs and liabilities will not be
incurred in order to comply with such current and future
regulations.
Holding Company Structure. Because FCX is primarily a
holding company, conducting business through its subsidiaries, its
ability to meet its financial obligations and to pay dividends on
its preferred and common stock will
[PAGE] 11
depend on the earnings and
cash flow of its subsidiaries and the ability of its subsidiaries
to pay dividends and to advance funds to the Company. Under
certain circumstances, contractual and legal restrictions, as well
as the financial condition and operating requirements of PT-FI and
the Company's other subsidiaries, could limit the Company's
ability to obtain cash from its subsidiaries for the purpose of
meeting its debt service obligations and to pay dividends. Any
right of the Company to participate in any distribution of the
assets of PT-FI and its other subsidiaries upon the liquidation,
reorganization or insolvency thereof would, with certain
exceptions, be subject to the claims of creditors (including trade
creditors) and preferred stockholders (if any) of such
subsidiaries.
Item 3. Legal Proceedings.
Tom Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29,
1996). The plaintiff alleges environmental, human rights and
social/cultural violations in Indonesia. He seeks $6 billion in
monetary damages and other equitable relief. The Company denies
these allegations, which it believes are inconsistent with the
findings of a series of independent examinations of the Indonesian
mining operations of PT-FI. The Company believes the action is
baseless and will vigorously defend such action. The Company has
filed a motion to dismiss all claims, which motion is pending.
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). This purported class action was dismissed
by the Civil District Court of the Parish of Orleans, State of
Louisiana on February 21, 1997 for lack of subject matter
jurisdiction because the alleged conduct and damages occurred in
Indonesia. The Court also held that venue was not proper in any
Louisiana court. On March 11, 1997, the Court ruled that an
amended complaint filed by the plaintiff did not cure the lack of
subject matter jurisdiction. The plaintiff had alleged
substantially similar violations as those alleged in the Beanal
suit and sought unspecified monetary damages and other equitable
relief.
In addition to the foregoing proceedings, FCX may be from
time to time involved in various legal proceedings of a character
normally incident to the ordinary course of its business.
Management believes that potential liability in any such or
threatened proceedings would not have a material adverse effect on
the financial condition or results of operations of FCX. FCX
maintains liability insurance to cover some, but not all,
potential liabilities normally incident to the ordinary course of
its business as well as other insurance coverages customary in its
business, with such coverage limits as management deems prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
[PAGE] 12
Executive Officers of the Registrant.
Certain information as of March 14, 1997 about the executive
officers of FCX, including their position or office with FCX and
PT-FI, is set forth in the following table and accompanying text:
Name Age Position or Office
---- --- ------------------
Richard C. Adkerson 50 Executive Vice President and
Chief Financial Officer of FCX.
Director and Executive Vice
President of PT-FI.
Michael J. Arnold 44 Senior Vice President of FCX.
Thomas J. Egan 52 Senior Vice President of FCX.
W. Russell King 47 Senior Vice President of
FCX.
Rene L. Latiolais 54 Director and Vice Chairman
of the Board of FCX. Commissioner
of PT-FI.
Adrianto Machribie 55 President Director of PT-FI.
James R. Moffett 58 Director, Chairman of the
Board and Chief Executive Officer of
FCX. President Commissioner of
PT-FI.
Richard C. Adkerson has served as Executive Vice President
and Chief Financial Officer of the Company since July 1995. Mr.
Adkerson has been Executive Vice President and a Director of PT-FI
since April 1995. Mr. Adkerson is Vice Chairman of the Board and
a Director of FTX. He is Co-Chairman of the Board, Chief
Executive Officer and a Director of MOXY. In addition, he is
Chairman of the Board, Chief Executive Officer and a Director of
FM Properties Inc. ("FMPO"). From 1992 to August 1995, Mr.
Adkerson was a Senior Vice President of FTX.
Michael J. Arnold has served as Senior Vice President of the
Company since November 1996. From July 1994 to November 1996,
Mr. Arnold was Vice President and Controller - Operations of the
Company. Mr. Arnold is Senior Vice President of FTX. From
October 1991 to November 1996, he was Vice President of FTX,
serving as Controller - Operations from May 1993 to November 1996.
Thomas J. Egan has served as Senior Vice President of the
Company since July 1994. Mr. Egan has also been Senior Vice
President of FTX since November 1993. From November 1987 to
November 1993, Mr. Egan was Vice President of FTX.
W. Russell King has served as Senior Vice President of the
Company since July 1994. Mr. King has also been Senior Vice
President of FTX since November 1993. From October 1984 to
November 1993, Mr. King was Vice President of FTX.
Rene L. Latiolais has served as Vice Chairman of the Board of
the Company since July 1994 and as a Director of the Company since
July 1993. Mr. Latiolais has served as Commissioner of PT-FI
since August 1993. Mr. Latiolais is President, Chief Executive
Officer and a Director of FTX. Mr. Latiolais was Chief Operating
Officer of FTX until 1995 and Executive Vice President of FTX
until 1993. He is also President and Chief Executive Officer of
Freeport-McMoRan Resource Partners, Limited Partnership.
Adrianto Machribie has served as President Commissioner of
PT-FI since March 1996. From September 1992 to March 1996, Mr.
Machribie was a Director and Executive Vice President of PT-FI.
James R. Moffett has served as Chairman of the Board and
Chief Executive Officer of the Company since July 1995 and has
served as a Director of the Company since May 1992. Mr. Moffett
has served as President Commissioner
[PAGE] 13
of PT-FI since June 1992.
Mr. Moffett is Chairman of the Board and a Director of FTX. He is
Co-Chairman of the Board and a Director of McMoRan Oil & Gas Co.
("MOXY").
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 the Annual Report is
incorporated herein by reference. As of March 14, 1997, there
were 10,923 and 16,217 holders of record of FCX's 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 page 18 of the Annual Report is
incorporated herein by reference.
FCX's ratio of earnings to fixed charges for each of the
years 1992 through 1996, inclusive, was 6.5x, 3.6x, 7.5x, 5.9x and
4.5x, respectively. For this 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. FCX's
ratio of earnings to fixed charges, preferred stock dividends and
minimum distributions for each of the years 1992 through 1996,
inclusive, was 3.5x, 1.2x, 2.1x, 3.0x and 2.6x, respectively. For
this calculation, the preferred stock dividend requirements were
assumed to be equal to the pre-tax earnings which would be
required to cover such dividend requirements. The amount of such
pre-tax earnings required to cover preferred stock dividends was
computed using tax rates for the applicable years. "Minimum
Distributions" for purposes of calculating this ratio consist of
the required minimum distribution for the Company's Class A Common
Stock that expired May 1, 1993.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information set forth under the caption "Management's
Discussion and Analysis" on pages 19 through 24, inclusive, 27, 29
and 31, as well as the "Environmental/Social Responsibility
Report" on pages 11 through 17, inclusive, of the Annual Report
are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements of FCX appearing on pages 26, 28, 30
and 32, the notes thereto appearing on pages 33 through 45, the
report thereon of Arthur Andersen LLP appearing on page 25, and
the report of management on page 25 of the Annual Report are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Items 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Information
About Nominees and Directors" of the Proxy Statement submitted to
the stockholders of the registrant in connection with its 1997
Annual Meeting to be held on April 29, 1997 is incorporated herein
by reference.
[PAGE] 14
Items 11. Executive Compensation.
The information set forth under the captions "Director
Compensation" and "Executive Officer Compensation" of the Proxy
Statement submitted to the stockholders of the registrant in
connection with its 1997 Annual Meeting to be held on April 29,
1997 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 the Proxy Statement submitted to the
stockholders of the registrant in connection with its 1997 Annual
Meeting to be held on April 29, 1997 is incorporated herein by
reference.
Items 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Certain
Transactions" of the Proxy Statement submitted to the stockholders
of the registrant in connection with its 1997 Annual Meeting to be
held on April 29, 1997 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, FCX filed six reports on Forms 8-K dated (i)
November 8, 1996 reporting an event under Item 5; (ii)
November 13, 1996 filing exhibits under Item 7; (ii)
November 13, 1996 reporting an event under Item 5 and
filing exhibits under Item 7; (iv) November 27, 1996
reporting an event under Item 5; (v) December 20, 1996
reporting an event under Item 5; and (vi) December 30,
1996 reporting an event under Item 5. No financial
statements were filed in connection with such reports.
[PAGE] 15
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 27, 1996.
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 27, 1996.
Signature Title
--------- -----
/s/James R. Moffett Chairman of the Board, Chief
------------------- Executive Officer and Director
James R. Moffett (Principal Executive Officer)
* Executive Vice President and
------------------- Chief Financial Officer
Richard C. Adkerson (Principal Financial Officer)
* Controller - Financial
------------------- Reporting (Principal
Michael A. Weaver Accounting Officer)
* Director
--------------------
Robert W. Bruce III
* Director
--------------------
R. Leigh Clifford
* Director
--------------------
Leon A. Davis
* Director
--------------------
Robert A. Day
* Director
---------------------
William B. Harrison, Jr.
* Director
----------------------
J. Bennett Johnston
[PAGE] S-1
* Director
----------------------
Henry A. Kissinger
* Director
----------------------
Bobby Lee Lackey
* Director
----------------------
Rene L. Latiolais
* Director
-----------------------
Gabrielle K. McDonald
* Director
-----------------------
George A. Mealey
* Director
------------------------
George Putnam
* Director
------------------------
B.M. Rankin, Jr.
* Director
------------------------
Wolfgang F. Siegel
* Director
------------------------
J. Taylor Wharton
* Director
-------------------------
Ward W. Woods, Jr.
*By: /s/ James R. Moffett
----------------------
James R. Moffett
Attorney-in-Fact
[PAGE] S-2
INDEX TO FINANCIAL STATEMENTS
The financial statements of FCX appearing on pages 26, 28, 30,
and 32, the notes thereto appearing on pages 33 through 45,
inclusive, and the report thereon of Arthur Andersen LLP appearing
on page 25 of FCX's 1996 Annual Report to stockholders are
incorporated by reference.
The financial statements in the schedule listed below should be
read in conjunction with such financial statements contained in
FCX's 1996 Annual Report to stockholders.
Page
Report of Independent Public Accountants F-1
III-Condensed Financial Information of Registrant F-2
Schedules other than the one 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, 1996 and 1995
and for each of the three years in the period ended December 31,
1996 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 21, 1997. Our audits
were made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed in the index above is the
responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's
rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion,
fairly states 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 21, 1997
[PAGE] F-1
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
December 31,
--------------------------
1996 1995
---------- ----------
(In Thousands)
Assets
Cash and cash equivalents $ 242 $ 93
Interest receivable 12,610 11,885
Notes receivable from PT-FI 1,307,812 1,208,007
Investment in PT-FI and PTII 427,115 386,956
Investment in Atlantic Copper 43,077 67,374
Other assets 80,843 47,201
---------- ----------
Total assets $1,871,699 $1,721,516
========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 19,938 $ 14,883
Long-term debt 662,561 318,000
Other liabilities and deferred credits 13,814 6,952
Mandatory redeemable preferred stock 500,007 500,007
Stockholders' equity 675,379 881,674
---------- ----------
Total liabilities and stockholders'
equity $1,871,699 $1,721,516
========== ==========
STATEMENTS OF INCOME
Years Ended December 31,
-----------------------------------------
1996 1995 1994
---------- ---------- ---------
(In Thousands)
Income from investment
in PT-FI and PTII, net
of PT-FI tax
provision $ 253,895 $ 293,279 $ 111,822
Net loss from investment
in Atlantic Copper (24,258) (37,787) (6,309)
Elimination of
intercompany profit 7,244 (24,851) 3,005
General and administrative
expenses (9,141) (7,534) (7,253)
Depreciation and
amortization (3,590) (3,819) (3,711)
Interest expense, net (21,191) (15,027) (10,259)
Interest income on PT-FI notes receivable:
Zero coupon exchangeable
notes - - 352
Promissory notes 29,150 28,130 21,094
8.235% debenture 12,353 13,333 14,033
Step-up debenture 6,327 20,203 26,256
Gold and silver production
payment loans 23,696 23,636 20,222
Other expense, net (1,698) (3,664) (7,424)
Provision for income
taxes (46,538) (32,281) (31,587)
---------- ---------- ----------
Net income 226,249 253,618 130,241
Preferred dividends (51,569) (54,153) (51,838)
---------- ---------- ----------
$ 174,680 $ 199,465 $ 78,403
========== ========== ==========
The footnotes contained in FCX's 1996 Annual Report to stockholders
are an integral part of these statements.
[PAGE] F-2
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOW
Years Ended December 31,
-----------------------------------------
1996 1995 1994
---------- ---------- ---------
(In Thousands)
Cash flow from operating activities:
Net income $ 226,249 $ 253,618 $ 130,241
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Income from investment
in PT-FI and PTII (253,895) (293,279) (111,822)
Net loss from investment
in Atlantic Copper 24,258 37,787 6,309
Elimination of
intercompany profit (7,244) 24,851 (3,005)
Dividends received
from PT-FI and PTII 220,916 161,144 147,465
Depreciation and
amortization 3,590 3,819 3,711
(Increase) decrease in
accounts receivable (5,214) (4,501) (24,240)
Increase (decrease) in
accounts payable 4,501 (296) (4,648)
Other 3,733 (3,755) 1,654
---------- ---------- ----------
Net cash provided by
operating activities 216,894 179,388 145,665
---------- ---------- ----------
Cash flow from investing activities:
Received from Government
of Indonesia - - 2,247
Investment in Atlantic
Copper - (23,622) (36,365)
Investment in Freeport
Copper Company - (25,000) -
Other (11,138) (26,860) (8)
---------- ---------- ----------
Net cash used in
investing activities (11,138) (75,482) (34,126)
---------- ---------- ----------
Cash flow from financing activities:
Cash dividends paid:
Class A common stock (69,425) (51,318) (38,316)
Class B common stock (106,341) (86,245) (85,187)
Convertible exchangeable
preferred stock (15,498) (15,673) (15,708)
Step-up convertible
preferred stock (19,250) (17,500) (17,500)
Mandatory redeemable
preferred stock (17,689) (17,418) (13,614)
Proceeds from sale of:
Senior notes 445,570 - 116,276
Preferred Stock - - 252,985
Proceeds from debt 31,561 128,000 70,000
Repayment of debt (137,000) - -
Proceeds from FTX - - 88,280
Repayment to FTX - (800) (99,750)
Loans to PT-FI (244,682) - (369,261)
Repayment from PT-FI 147,315 124,485 -
Purchase of FCX common
shares (220,997) (177,755) -
Other 829 10,240 -
---------- ---------- ----------
Net cash used in financing
activities (205,607) (103,984) (111,795)
---------- ---------- ----------
Net decrease in cash and
cash equivalents 149 (78) (256)
Cash and cash equivalents at
beginning of year 93 171 427
---------- ---------- ----------
Cash and cash equivalents
at end of year $ 242 $ 93 $ 171
========== ========== ==========
Interest paid $ 28,249 $ 23,237 $ 7,788
========== ========== ==========
Taxes paid $ 41,586 $ 34,871 $ 29,871
========== ========== ==========
The footnotes contained in FCX's 1996 Annual Report to stockholders
are an integral part of these statements.
[PAGE] F-3
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number
--------
2.1 Agreement, dated as of May 2, 1995 by and between
FTX and FCX and The RTZ Corporation PLC, RTZ
Indonesia Limited, and RTZ America, Inc. (the "RTZ
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 RTZ 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 By-Laws of FCX, as amended.
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, Chase Mellon Shareholder Services, L.L.C., 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 of 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, Chase Mellon Shareholder Services, L.L.C., 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, Chase Mellon Shareholder Services,
L.L.C., 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").
[PAGE] E-1
Exhibit
Number
-------
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, Chase Mellon Shareholder Services, L.L.C., 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-FI Credit
Agreement") among PT-FI, FCX, the several financial
institutions that are parties thereto, First Trust
of New York, National Association, as PT-FI 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-FI
Credit Agreement among PT-FI, FCX, the several
financial institutions that are parties thereto,
First Trust of New York, National Association, as
PT-FI 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-FI
Credit Agreement among PT-FI, FCX, the several
financial institutions that are parties thereto,
First Trust of New York, National Association, as
PT-FI 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 $200 million Credit Agreement dated as of June 30,
1995 (the "CDF") among PT-FI, FCX, the several
financial institutions that are parties thereto,
First Trust of New York, National Association, as
PT-FI 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 FCX 1995 Third Quarter Form 10-Q.
4.17 Amendment dated as of July 15, 1996 to the CDF among
PT-FI, FCX, the several financial institutions that
are parties thereto, First Trust of New York,
National Association, as PT-FI 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.
4.18 Amendment dated as of October 9, 1996 to the CDF
among PT-FI, FCX, the several financial institutions
that are parties thereto, First Trust of New York,
National Association, as PT-FI 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.
[PAGE] E-2
Exhibit
Number
-------
4.19 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 (the "FCX November
15, 1996 Form 8-K").
4.20 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.
10.1 Contract of Work dated December 30, 1991 between The
Government of the Republic of Indonesia and PT-FI.
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 P.T.
IRJA Eastern Minerals Corporation. Incorporated by
reference to Exhibit 10.2 to the FCX 1995 Form 10-K.
10.3 The 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-FI
("Gresik Joint Venture Agreement").
10.4 Agreement dated as of October 11, 1996 to Amend and
Restate Trust Agreement among PT-FI, 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.
10.5 Credit Agreement dated October 11, 1996 between PT-
FI and RTZ Indonesian Finance Limited. Incorporated
by reference to Exhibit 10.4 to the FCX November 13,
1996 Form 8-K.
10.6 Participation Agreement dated as of October 11, 1996
between PT-FI 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.
10.7 Agreement dated effective as of February 26, 1997,
among FCX, Bre-X Minerals Ltd., on behalf of itself
and its subsidiaries, including, without limitation,
Dorchester Holdings B.V. and Bre-X Minerals
Amsterdam B.V., P.T. Askatindo Karya Mineral, on
behalf of itself and all persons or entities
claiming under or through any arrangement with it,
and PT Amsya Lyna, on behalf of itself and all
persons or entities claiming under or through any
arrangement with it.
Executive Compensation Plans and Arrangements
(Exhibits 10.8 through 10.25)
10.8 Annual Incentive Plan of FCX, as amended.
10.9 1995 Long-Term Performance Incentive Plan of FCX, as
amended.
10.10 FCX Performance Incentive Awards Program.
Incorporated by reference to Exhibit 10.7 to the FCX
1995 Form 10-K.
10.11 FCX President's Award Program. Incorporated by
reference to Exhibit 10.8 to the FCX 1995 Form 10-K.
10.12 FCX Adjusted Stock Award Plan, as amended.
10.13 FCX 1995 Stock Option Plan, as amended.
10.14 FCX 1995 Stock Option Plan for Non-Employee
Directors, as amended.
[PAGE] E-3
Exhibit
Number
-------
10.15 Financial Counseling and Tax Return Preparation and
Certification Program of FCX. Incorporated by
reference to Exhibit 10.12 to the FCX 1995 Form 10-
K.
10.16 FM Services Company Performance Incentive Awards
Program. Incorporated by reference to Exhibit 10.13
to the FCX 1995 Form 10-K.
10.17 FM 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.
10.18 Consulting Agreement dated as of December 22, 1988
between FTX and Kissinger Associates, Inc.
("Kissinger Associates"). Incorporated by reference
to Exhibit 10.35 to the Annual Report on Form 10-K
of FTX for the fiscal year ended December 31, 1992
(the "FTX 1992 Form 10-K").
10.19 Letter Agreement dated May 1, 1989 between FTX and
Kent Associates, Inc. ("Kent Associates,"
predecessor in interest to Kissinger Associates).
Incorporated by reference to Exhibit 10.36 to the
FTX 1992 Form 10-K.
10.20 Letter Agreement dated January 27, 1997 among
Kissinger Associates, Kent Associates, FTX, FCX and
FMS.
10.21 Agreement for Consulting Services between FTX and
B.M. Rankin, Jr. effective as of January 1, 1990
(assigned to FMS as of January 1, 1996).
Incorporated by reference to Exhibit 19.2 to the
Quarterly Report on Form 10-Q of FTX for the quarter
ended March 31, 1990.
10.22 Letter Agreement dated March 8, 1996 between George
A. Mealey and FCX.
10.23 Letter Agreement dated December 18, 1996 among
Charles W. Goodyear, IV, FCX, FTX, FMS and certain
other entities.
10.24 Letter Agreement dated December 18, 1996 between
Goodyear Capital Corporation and FMS.
10.25 Letter Agreement effective as of January 4, 1997
between Senator J. Bennett Johnston, Jr. and FCX.
11.1 FCX Computation of Net Income Per Common and Common
Equivalent Share.
12.1 FCX Computation of Ratio of Earnings to Fixed
Charges.
13.1 Those portions of the 1996 Annual Report to
stockholders of FCX that are incorporated herein by
reference.
21.1 Subsidiaries of FCX.
23.1 Consent of Arthur Andersen LLP dated March 27, 1997.
23.2 Consent of Independent Mining Consultants, Inc.
dated March 27, 1997.
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 pursuant to which this report has
been signed on behalf of certain officers and
directors of FCX.
27.1 FCX Financial Data Schedule.
[PAGE] E-4