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INVENTORIES:

6 Months Ended

Jun. 30, 2011

NOTE 5 - INVENTORIES:

Inventories were as follows:

(in millions)	At June 30, 2011		At December 31, 2010
Inventory, current:
Metals at lower of average cost or market:
Finished goods	$	101.3	$	67.9
Work-in-process	248.0		227.6
Supplies at average cost	260.1		245.5
Total current inventory	$	609.4	$	541.0

Inventory, long-term
Long-term leach stockpiles	$	60.0	$	29.7

LONG-TERM INVENTORY:

In prior years the Company capitalized the production cost of leachable material with low copper content at the Buenavista mine in Mexico. In 2011, the Company extended this practice of recognizing inventories for costs associated with leaching activities at the La Caridad mine in Mexico and the Toquepala and Cuajone mines in Peru in order to conform to evolving mine production plans at these mines. As a result of changing market conditions and mining processes, mineral extraction through leaching has become integral to the mining operations carried out at La Caridad, Toquepala and Cuajone. Accordingly, the process and sale of mineral content in leaching dumps is reasonably assured and the costs associated with leaching activities at such mines are now recognized as inventories. As the production cycle of the leaching process is significantly longer than the conventional process of concentrating, smelting and electrolytic refining, the Company includes on its balance sheet, current leach inventory (included in work-in-process inventories) and long-term leach inventory. The cost attributed to the leach material is charged to cost of sales generally over a five-year period (the average estimated recovery period based on the recovery percentages of each mine).

During the six months ended June 30, 2011 total leaching costs capitalized as long-term inventory of leachable material amounted to $54.1 million. There was no capitalization during the six months ended June 30, 2010. Long-term leaching inventories recognized as cost of sales amounted to $23.6 million and $21.0 million for the six months ended June 30, 2011 and 2010, respectively.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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